SHAREHOLDER LETTER
Dear Shareholder:
This semiannual report for Franklin Tax-Free Trust covers the period ended
August 31, 1999.
During the six months under review, the U.S. bond markets continued to
experience challenging times. The yield on the benchmark 30-year Treasury bond
steadily increased, from 5.57% on February 28, 1999, to 6.07% on August 31,
1999 -- reaching a high of 6.25% on August 10, 1999. Although many of the
uncertainties associated with hedge funds and 1998's financial stresses on Asia,
Latin America and Eastern Europe either dissipated or stabilized, the Federal
Reserve Board's (the Fed's) position toward domestic inflationary tendencies
renewed investor concern. At its June 30 meeting, the Federal Open Market
Committee (FOMC) raised the federal funds target rate to 5.00%, while announcing
a neutral bias toward further increases, which most investors initially viewed
as positive. However, most bond investors became cautious as they perceived Alan
Greenspan's testimony before the U.S. House of Representatives on July 22, 1999,
as a change by the Fed from a neutral bias to one of possibly raising rates.
Indeed, the FOMC raised its target for the federal funds rate another
quarter-percentage point to 5.25% and again adopted a neutral bias at its August
24, 1999, meeting, which appeared to stabilize the bond markets for the short
term.
The economy's future direction and its effect on inflationary pressures will
ultimately determine the level of volatility that impacts the bond markets in
the near future. During the period under review, many investors
uncharacteristically reacted very swiftly to new releases of economic data or
Fed announcements, and in many instances the market overcorrected. Investors
with short-term investment horizons may view such instability as unfavorable.
However, we prefer to take a long-term approach toward investing and find that
recent market conditions afforded us opportunities not only to increase the
funds' income-earning potential, but also to enhance the portfolios' overall
structure. Our conservative, long-term, buy-and-hold philosophy enables us to
produce comparatively high credit-quality portfolios that distribute favorable
tax-free income.(1) We do not purchase exotic derivative products or use
everage as part of our investment strategy to increase yield because we
also strive to maintain low share-price volatility. We encourage you to examine
the credit quality of your tax-free fund, as well as its yield when evaluating
your investment needs.
CONTENTS
Shareholder Letter 1
Special Feature:
Uncovering Tax-Free
Opportunities 5
Fund Reports
Franklin Arizona Insured
Tax-Free Income Fund 8
Franklin Florida Insured
Tax-Free Income Fund 12
Franklin Insured
Tax-Free Income Fund 16
Franklin Massachusetts Insured
Tax-Free Income Fund 19
Franklin Michigan Insured
Tax-Free Income Fund 23
Franklin Minnesota Insured
Tax-Free Income Fund 26
Franklin Ohio Insured
Tax-Free Income Fund 30
Municipal Bond Ratings 33
Financial Highlights &
Statement of Investments 35
Financial Statements 84
Notes to Financial Statements 92
[PYRAMID GRAPH]
1. For investors subject to the federal or state 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.
With municipal bond insurance prevalent over the past few years, the difference
in yields between high- and lower-rated bonds has narrowed compared to
historical levels. As a result, many of our funds in recent years chose to
invest in high-rated bonds because of the risk versus return characteristics in
the marketplace. At the end of this reporting period, many of our tax-free funds
held a large percentage of AAA-rated bonds, reflecting the portfolios' high
quality. Our disciplined, long-term, income-oriented investment approach, along
with our ability to recognize value, enables us to offer funds providing
attractive tax-free yields while enjoying excellent credit quality
characteristics compared to their peers. Historically more than 85% of total
return for municipal bonds is derived from the income component. In light of
this, we choose to concentrate on income and risk-adjusted total return in
managing our funds, and on this basis, most of our tax-free funds compare very
favorably to their peers.
As the interest-rate outlook stabilizes and inflationary concerns diminish, we
expect the fixed-income markets to become more stable. Overall, we expect
municipal bonds to perform well, as at the end of the reporting period the ratio
of yields for the Bond Buyer 40 Municipal Index versus the 30-year Treasury bond
approached 95%, considerably higher than the historical average of 89%, which
means municipal bonds are relatively inexpensive. Furthermore, municipal bond
supply for 1999 is expected to be approximately 18% less than in 1998, with
about $230 billion coming to market. The reduced supply should enhance the
performance of municipal bonds going forward.
Please keep in mind that interest rates and thus, bond prices, rise and fall
depending on the economy. Such fluctuations are a normal part of investing, and
one should expect this when investing in any security, including municipal
bonds. Municipal bond funds can help lower such volatility, as they offer a
level of diversification that is difficult for individual investors to achieve
on their own. They continue to be an attractive investment for those investors
seeking tax-free income as well as providing an opportunity to reduce risk in
their portfolios. Depending on your federal and state tax rates, a taxable
investment would need to offer a higher yield than the taxable equivalent yield
of a tax-free investment. We encourage you to discuss your financial goals with
an investment representative. As always, we appreciate your support, welcome
your questions and look forward to serving your investment needs in the years
ahead.
Sincerely,
/s/ Charles B. Johnson
- ------------------------------
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
/s/ Thomas J. Kenny
- ------------------------------
Thomas J. Kenny
Director
Franklin Municipal Bond Department
- --------------------------------------------------------------------------------
WHAT DOES "TAXABLE EQUIVALENT" MEAN FOR YOU?
For yield and distribution rate, the taxable equivalent is the amount a taxable
investment would have to earn to match a tax-free investment such as municipal
bonds.(1) You can find your fund's taxable equivalent distribution rate and
yield in the Performance Summary that follows your fund's report.
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OVERALL MORNINGSTART RATINGS (TM)
- --------------------------------------------------------------------------------
These funds in Franklin Tax-Free Trust were rated against a universe of 1,591;
1,210 and 372 municipal bond funds for the 3-, 5- and 10-year periods,
respectively, ended August 31, 1999.
- --------------------------------------------------------------------------------
FRANKLIN MUNICIPAL BOND FUNDS ARE STAR QUALITY
You may be pleased to know how well your Franklin Tax-Free Income Fund compares
with the competition. Morningstar, a leading mutual fund rating company, awarded
33 Franklin municipal bond funds their highest ratings, four or five stars. With
one of the largest municipal bond departments in the industry, Franklin
Templeton has the resources needed to identify attractive municipal bond
opportunities and the know-how to purchase them at favorable prices. We offer
investors more high-quality choices than any other fund group followed by
Morningstar.
[4 STARS]
FOUR-STAR FRANKLIN TAX-FREE INCOME FUNDS (1),(2)
- --------------------------------------------------------------------------------
FRANKLIN INSURED TAX-FREE INCOME FUND - CLASS A
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND - CLASS A
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND - CLASS A
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND - CLASS A
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND - CLASS A
(1.) For investors subject to federal or state alternative minimum tax, all or a
portion of the dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
(2.) For the 3-, 5- and 10-year periods ended August 31, 1999, the respective
Morningstar ratings were as follows: Insured Tax-Free Income 4, 4, 4;
Massachusetts Insured Tax-Free Income 3, 4, 4; Michigan Insured Tax-Free Income
4, 4, 4; Minnesota Insured Tax-Free Income 4, 4, 4; Ohio Insured Tax-Free Income
4, 4, 4.
Morningstar proprietary ratings reflect historical risk-adjusted performance and
can change monthly. They are calculated from the fund's 3-, 5- and 10-year
average annual returns in excess of 90-day Treasury bill returns with
appropriate sales charge adjustments, and a risk factor reflecting performance
below 90-day T-bill returns. The top 10% of funds in a broad asset class receive
five stars, the next 22.5% four stars, the next 35% three stars, the next 22.5%
two stars, and the bottom 10% one star. Ratings are for Class A shares only;
other classes may vary. Past performance does not guarantee future results.
You have previously received a prospectus for Franklin Tax-Free Trust in which
you are a shareholder. Franklin Templeton Distributors, Inc. is the principal
underwriter of the Trust.
This page is not part of the shareholder report.
UNCOVERING TAX-FREE OPPORTUNITIES
[PHOTO - RAFAEL COSTAS]
Rafael Costas, Senior Vice President and Director of Franklin's Municipal
Research Department, discusses how research is an integral part of Franklin's
tax-free income funds' success.
Q: Could you provide an overview of Franklin's research department?
RAFAEL COSTAS: We have one of the industry's largest municipal research staffs,
allowing us to routinely analyze more than 2,000 debt issuers a year. The
research department analysts work closely with our portfolio managers, who rely
on these analysts when making buy and sell decisions. With a focus on in-depth
research and the discipline to buy when others are selling, we often are able to
find exciting opportunities at temporarily depressed prices. Generally, we
concentrate on investment-grade issues. Of course, for our high yield funds, we
also look for below investment-grade bonds that we feel offer appropriate
rewards for the increased risk.
Q: What are some advantages of Franklin's size and reputation?
RAFAEL: Today, Franklin is one of the nation's leading tax-free fund managers.
Our size, with approximately $50 billion of tax-free investments, often enables
us to purchase investments at advantageous prices, which in turn, can help keep
investment costs low. We pass on these savings to shareholders in the form of
higher tax-free yields.(1) In addition, our size often makes us a favorite of
new issuers, as many prefer to work with a minimum number of investors.
Q: What type of tax-free bonds do you favor?
RAFAEL: We typically look for investment-grade bonds, as we try to provide our
shareholders high, current income with a relatively low level of risk. Most of
our investment-grade tax-free bond funds are composed of a high percentage of
securities rated AAA or AA, the highest ratings bonds can receive from national
credit rating agencies.(2) In addition, many of our purchases are insured
because of the prevalence of insurance in the municipal bond marketplace in the
past few years. Insured securities normally are rated AAA, further improving the
quality of our funds. For our high yield funds, we look for bonds which may be
out of favor but, in our view, still have solid fundamentals and the potential
to be upgraded. In fact, we devote much of our research efforts to finding such
bonds in the low investment-grade, high yield sectors.
(1.)For investors subject to the federal or state 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.
(2.)Ratings can change.
Q: How do you research a bond?
RAFAEL: We emphasize detailed, high-quality research, which often enables us to
uncover attractive investments that others may have overlooked. When presented
with an opportunity, our analysts carefully consider such factors as the bond's
purpose, who will repay the bond, if the projections are reasonable, the payment
schedule and the issuer's credit history. We incorporate all of the numerical
findings in our internal, proprietary databases and spreadsheets created by our
analysts. With the processed information and analysis, we meet with our
portfolio managers to discuss the merits of each individual issue. The portfolio
manager's decision to buy a security will depend largely on our analysis of the
bond's credit quality and price. We continue to monitor our investments closely
after the purchase, looking for signs of potential problems as well as
additional opportunities.
Q: Do you feel it is important to personally meet management and municipal
officials?
RAFAEL: Very much so. Each year Franklin's analysts and portfolio managers visit
hundreds of sites to garner an understanding that can be obtained only through
personal inspection. They meet face-to-face with the project's management and
municipal officials to discuss firsthand any potential problems. Our analysts
also can use these meetings to discover new opportunities, often before they are
widely known.
Q: Do issuers and investment bankers ever come to Franklin?
RAFAEL: Our sizable presence in the municipal bond market frequently means that
issuers and their bankers come to us with new issues. In a typical day, we may
receive between 50 and 100 calls from brokers offering new and secondary issues.
Approximately three times a week, investment bankers visit our offices, usually
as part of an issue's road show. We view these as excellent opportunities not
only to buy issues at favorable prices, but also to propose changes to the
issue, enhancing its quality and appeal to our distinct standards.
[PHOTO - TWO WOMEN LOOKING AT PC MONITOR]
Municipal research analyst Molly Butler discusses a bond issue with portfolio
manager Stella Wong.
Q: How can Franklin's research influence the portfolio managers' investment
decisions?
RAFAEL: Our extensive research allows us to use a contrarian approach to
investing, because we firmly believe that near-term volatility can create
opportunities for greater long-term yields. For example, when Moody's, Standard
& Poor's or Fitch, three national credit rating agencies, downgrade a bond, many
investors sell the issue, sometimes reducing prices to what we believe are
attractive levels. As we evaluate our investments based on our internal
assessments, we can use these valuable opportunities to purchase what we believe
are high-quality issues at temporarily depressed prices.
External events can also lead to situations where bonds become undervalued. Over
the past few years, for example, Medicare reform negatively affected the
hospital bond sector, even for those hospitals in strong financial shape. As
many hospitals' credit profiles weakened, we were able to find value selectively
through our analysts' expertise. Seeking to take advantage of this, we
recommended such bonds to our portfolio managers who purchased them at a time
when the market seemed to be shunning these issues.
Q: Could you provide an example of a successful outcome of your research?
RAFAEL: Sure. A perfect example is Tucson Electric Power (TEP). It issued $579
million in tax-exempt debt in 1997-98. However, the utility had a long, troubled
history and its debt was rated below investment grade. So, Molly Butler, our
electric utility analyst, and I flew to Tucson and spent an entire day with
TEP's top executives and division heads. We discussed their history, current
position and future plans as well as challenged and questioned many of their
projections and assumptions. At the end of the day, we were satisfied that their
management team had a clear vision and a realistic plan for the future.
Q: How is TEP doing today?
RAFAEL: Since then, the rating agencies have raised TEP's credit rating and the
bonds have seen a significant increase in value. Of course, the ratings can
change again in the future. However, the bonds are still offering above-market
yields for our shareholders, because we were able to purchase the securities
when they were unpopular. We have an excellent relationship with management and
they often call Ms. Butler to discuss the latest releases of information.
THANK YOU, RAFAEL.
WHAT IS A ROAD SHOW?
Before a new issue is brought to the public, the issuer and its investment
bankers travel around the country making presentations to potential investors
concerning the issuer's financial information and outlook.
FRANKLIN ARIZONA INSURED
TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Arizona Insured Tax-Free Income Fund 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.(1)
- --------------------------------------------------------------------------------
STATE UPDATE
[MAP - ARIZONA]
Arizona's economy continues to surpass optimistic forecasts, driven by
employment growth, population increases, a favorable business environment, new
home construction and six consecutive years of tax reductions. The job base
began dramatically diversifying several years ago, within the expanding
high-tech manufacturing and international trade sectors, along with the more
traditional mining, agriculture, tourism and retirement industries. The state
saw increased but more limited job growth during the reporting period. The state
boasts an unemployment rate below the national average, at 4.2% in July 1999,
which is even more impressive given the massive influx of new residents.(2)
Such growth is extremely important to the state's economic health. The number of
companies interested in relocating to Arizona is soaring, while many existing
companies have announced major expansions. In the Phoenix area alone, almost
2,000 new jobs were created in June 1999.(3) Furthermore, these new residents
need somewhere to live, fueling the important construction industry. Home
building permits in 1999 may break 1998's record of 36,001.(4) The state has
seen its personal income figures increase more than 65% since 1990.(5) Arizona,
not immune to world economic problems, struggled as three of Arizona's largest
copper producers laid off 2,850 workers during the reporting period, as the
price of copper remains depressed due to oversupply caused by the Asian
crisis.(6) However, these job losses should be easily offset by continued new
job growth. One concern for Arizona's economy is that rising interest rates
could cause a slowdown in construction spending. Arizona's future looks very
bright. Presently, Arizona has the second fastest-growing population of any
state. The favorable climate should continue to draw retiring baby-boomers, and
the broad-based economy's ample supply of new jobs should add to the state's
younger population.
(1.) 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.
Fund shares are not insured by any U.S. or other government agency, are subject
to market risks and will fluctuate in value. Insurance relates only to the
payment of principal and interest on the portfolio's insured securities and the
terms of the insurance as outlined in the prospectus. No representation is made
as to any insurer's ability to meet its commitments.
A non-diversified fund may be subject to greater risk of adverse economic or
regulatory developments in that state than a fund with broader geographical
diversification.
(2.) Source: Bureau of Labor Statistics, 8/99.
(3.) Source: Arizona Dept. of Commerce, The Gold Sheet, 8/99.
(4.) Source: The Arizona Republic, Arizona Boom Still Booming, 8/99.
(5.) Source: Arizona Dept. of Commerce, The Gold Sheet, 7/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 36 of
this report.
PORTFOLIO NOTES
Franklin Arizona Insured Tax-Free Income Fund participated in the largest
Arizona deal of the year, the $366 million Mesa Arizona Industrial and
Development Agency Revenue (IDAR) bonds for Discovery Health Systems, during the
reporting period. We made this issue one of the portfolio's core positions. The
bonds were insured and offered at extremely attractive yields for Arizona, which
is considered a "specialty state." Arizona bonds typically trade at yield levels
below the national average for municipal bonds due to supply and demand
characteristics. Such purchases gave us the opportunity to restructure the
portfolio, and we sold other bonds to book tax losses that can be carried
forward and used to help offset future capital gains and reduce our
shareholders' tax liabilities. Some of the fund's other purchases during the
reporting period were Phoenix Civic Improvement Corp. and McDowell Mountain
Ranch Community Facilities District general obligation (GO) bonds.
The fund's dividend came under pressure during the reporting period resulting in
two decreases. At the end of the reporting period, the dividend was relatively
stable and will continue to be for the upcoming quarter. The rise in interest
rates during the period resulted in decreasing bond prices. For the six months
ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond
Buyer 40, a reasonable proxy for the types of securities in the fund's
portfolio, was off 8.25%.(7) By comparison, your fund's Class A share price, as
measured by net asset value, declined only 5.7%. The fund's total net assets
increased 4.2% during the reporting period, from $80.7 million on February 28,
1999, to $84.1 million on August 31, 1999. As always, your fund invested
primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1)
PORTFOLIO BREAKDOWN
Franklin Arizona Insured
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ------ -----------
General Obligation 28.0%
Hospital & Health Care 22.0%
Utilities 17.9%
Prerefunded 7.3%
Housing 6.6%
Transportation 4.9%
Tax Supported Debt 4.8%
Subject to Government
Appropriation 3.9%
Higher Education 3.5%
Other Revenue 1.1%
(6.) Source: Tucson Citizen, Copper Down, But Hopes Rise, 7/99.
(7.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in
an index.
DIVIDEND DISTRIBUTIONS*
Franklin Arizona Insured
Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND
MONTH PER SHARE
- ----- ---------
<S> <C>
March 4.2 cents
April 4.2 cents
May 4.2 cents
June 4.0 cents
July 4.0 cents
August 4.0 cents
- ------ ---------
Total 24.6 cents
</TABLE>
Arizona's new bond issuance for the first half of 1999 was $1.34 billion, down
43.6% from the same period last year. This reduced new-issue supply combined
with strong retail demand for Arizona municipal bonds should help support the
value of the portfolio's holdings.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
*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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.62 $10.22 $10.84
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99-8/31/99)
------------------------------
<S> <C>
Dividend Income $0.246
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR (4/30/93)
- ------- ------- ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return (1) -3.45% -1.39% +36.63% +40.91%
Average Annual Total Return (2) -7.55% -5.56% +5.52% +4.85%
Distribution Rate (3) 4.50%
Taxable Equivalent
Distribution Rate (4) 7.85%
30-Day Standardized Yield (5) 4.36%
Taxable Equivalent Yield (4) 7.60%
</TABLE>
FRANKLIN ARIZONA INSURED
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a higher initial sales charge; thus actual
total returns may be slightly lower. Past expense reductions by the fund's
manager increased the fund's total return.
(1.) Cumulative total return represents 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 current,
applicable, maximum sales charge. Six-month return has not been annualized.
(3.) Distribution rate is based on an annualization of the current 4.0 cent per
share monthly dividend and the maximum offering price of $10.67 on August 31,
1999.
(4.) Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Arizona state personal income tax bracket of 42.6%, based
on the federal income tax rate of 39.6%.
(5.) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 INSURED
TAX-FREE INCOME FUND
PORTFOLIO BREAKDOWN
Franklin Florida Insured
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ------ -----------
<S> <C>
Utilities 37.2%
Other Revenue 13.5%
Hospital & Health Care 12.4%
Tax Supported Debt 11.8%
Prerefunded 11.6%
Housing 6.9%
Subject to Government
Appropriation 3.9%
Transportation 1.9%
General Obligation 0.8%
</TABLE>
Your Fund's Goal: Franklin Florida Insured Tax-Free Income Fund seeks to provide
high, current income exempt from regular federal income tax through a portfolio
consisting primarily of insured Florida municipal bonds. (1) In addition, the
fund's shares are free from Florida's annual intangibles tax.
STATE UPDATE (2)
[MAP - FLORIDA]
Florida continues to be one of the fastest growing states in the nation. Its
personal income has grown 6.2% per year since 1994, compared with 5.6%
nationally for the same period, ranking 20th among the states. Non-agricultural
job growth for 1998 was 4.1%, compared with 2.6% nationally. This trend should
continue through 1999 with an expected 4% increase over 1998. Florida's
double-digit population growth for each of the past two decades is expected to
continue as aging baby-boomers begin to retire and move to the state. Such
strong population growth has been the main fuel of the state's economy, but has
also driven the need for expanded government services including education,
corrections, transportation and health and human services.
The state's debt has risen with its growth, and both are expected to continue
expanding. 1999 debt per capita was $863 compared with $505 for the national
state median. Florida decreased its intangible personal property tax during the
reporting period. The new tax rate will reduce the levy from $2 million
currently to $1.5 million. The net effect will have only a small impact on the
future revenues relative to the state's total income.
(1.) 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.
Fund shares are not insured by any U.S. or other government agency, are subject
to market risks and will fluctuate in value. Insurance relates only to the
payment of principal and interest on the portfolio's insured securities and the
terms of the insurance as outlined in the prospectus. No representation is made
as to any insurer's ability to meet its commitments.
A non-diversified fund may be subject to greater risk of adverse economic or
regulatory developments in that state than a fund with broader geographical
diversification.
(2.) Source: Moody's Investors Service, 8/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 39 of
this report.
Projections for general revenue growth indicate a slowdown to 5.0% in 1999 from
a strong 7.6% in 1998. The state enacted a constitutional amendment adding a
Budget Stabilization Fund, which is required to be funded at 5% of the previous
year's General Fund receipts. Additionally, the state has constitutionally
enacted a revenue limitation to control spending growth by limiting the amount
of taxes and other revenue that can be raised in any given year. Exempt from
this cap are monies pledged to existing and new bond issues, to mitigate risk to
bondholders.
As of July 1999, Florida's state agency computer systems are 99% Year-2000
compliant, with the remaining 1% anticipated to be by October 1999.
Florida's outlook remains stable because of ample revenues from the state's
rapid population growth, a strong Budget Stabilization Fund and a proven
willingness by the state government to deal with economic weakening, by
maintaining budget balance during past recessions.
PORTFOLIO NOTES
Municipal bond new issuance in Florida declined 12.8% for the first half of
1999. Many issuers enhanced their debt's credit quality by purchasing insurance
for their upcoming issues, giving them greater access to new money or better
opportunities to refinance existing debt. However, as interest rates rose,
prerefunding activity decreased because there was less opportunity for issuers
to find interest rate savings. The rise in interest rates during the period
resulted in decreasing bond prices. For the six months ended August 31, 1999,
the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable
proxy for the types of securities in the fund's portfolio, was off 8.25%.(3) By
comparison, your fund's Class A share price, as measured by net asset value,
declined only 5.2%.
During the reporting period, the fund sought to generate tax losses, which can
be carried forward in the portfolio to help offset current or future taxable
capital gains and potentially lower shareholders' tax liabilities. The fund sold
prerefunded bonds to capture the premium and decrease the fund's call exposure.
Some of the fund's purchases during the six-month period were Florida Housing
Finance Corporation Revenue - Housing Logans Pointe Apartments; Saint Lucie West
Services District Special Assessment Revenue - Water Management Benefit; Alachua
County Public Improvement Revenue; Lakeland Utilities Tax Revenue; and
Miami-Dade County Water and Sewer Revenue bonds.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share
value.
(3.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
DIVIDEND DISTRIBUTIONS*
Franklin Florida Insured
Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND
MONTH PER SHARE
- ----- ---------
<S> <C>
March 4.10 cents
April 4.10 cents
May 4.10 cents
June 3.95 cents
July 3.95 cents
August 3.95 cents
- ------ -----------
Total 24.15 cents
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
The fund intends to maintain the investment strategy of buying current coupon
bonds at a slight discount as we seek to provide shareholders with high,
current, tax-free income. As always, your fund invested primarily in insured
municipal bonds guaranteed by AAA-rated bond insurers.(1)
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.55 $9.98 $10.53
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2415
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR (4/30/93)
- ------- ------- ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return (1) -2.92% -0.65% +37.51% +37.58%
Average Annual Total Return (2) -7.07% -4.89% +5.65% +4.45%
Distribution Rate (3) 4.55%
Taxable Equivalent
Distribution Rate (4) 7.53%
30-Day Standardized Yield (5) 4.42%
Taxable Equivalent Yield (4) 7.32%
</TABLE>
FRANKLIN FLORIDA INSURED
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a higher initial sales charge; thus actual
total returns may be slightly lower. The fund's manager agreed in advance to
waive a portion of its management fees, which reduces operating expenses and
increases yield, distribution rate and total return to shareholders. Without
these reductions, the fund's distribution rate and total return would have been
lower, and yield for the period would have been 4.41%. The fee waiver may be
discontinued at any time upon notification to the fund's Board of Trustees.
(1.) Cumulative total return represents 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 current,
applicable, maximum sales charge. Six-month return has not been annualized.
(3.) Distribution rate is based on an annualization of the current 3.95 cent per
share monthly dividend and the maximum offering price of $10.42 on August 31,
1999.
(4.) Taxable equivalent distribution rate and yield assume the 1999 maximum
federal income tax rate of 39.6%.
(5.) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 INSURED TAX-FREE INCOME FUND
Your Fund's Goal: Franklin Insured Tax-Free Income Fund seeks to provide high,
current income exempt from regular federal income tax through a portfolio
consisting primarily of insured municipal bonds.(1)
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the types of securities in the fund's portfolio, was off 8.25%.(2) By
comparison, your fund's Class A share price, as measured by net asset value,
declined only 5.1%.
Franklin Insured Tax-Free Income Fund sought to take advantage of the recent
volatility in the municipal bond marketplace to purchase "specialty state" bonds
at national yield levels. Specialty states are those that generally trade at
lower yields than other states due to supply or demand characteristics. As the
market stabilizes, the yield ratios between the specialty states and the
national levels should return to normal, so we expect that the specialty state
names will outperform other states' bonds going forward. Some of the fund's
purchases were Atlanta, Georgia, Water and Wastewater Revenue; University of
Colorado Hospital Authority Revenue; Minneapolis and St. Paul Metropolitan
Airport Commission Revenue; and Mesa, Arizona, Industrial Development Authority
Revenue (IDAR) - Discovery Health Systems.
Most of our purchases during the reporting period were in the new-issue market
as many deals were priced attractively. Furthermore, we sold bonds in the
secondary market attempting to take tax losses that can be used to help offset
current or future capital gains, possibly lowering shareholders' tax
liabilities. In general, our strategy worked very well for the fund, and we were
able to restructure the portfolio with more specialty state bonds as well as
purchase bonds at relatively higher yields. As always, your fund invested
primarily in insured municipal bonds guaranteed by AAA-rated bond insurers. (1)
(1.) Dividend income is generally subject to state and local taxes, if any. For
investors subject to federal or state alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
Fund shares are not insured by any U.S. or other government agency, are subject
to market risks and will fluctuate in value. Insurance relates only to the
payment of principal and interest on the portfolio's insured securities and the
terms of the insurance as outlined in the prospectus. No representation is made
as to any insurer's ability to meet its commitments.
(2.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 42 of
this report.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Insured Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
MONTH CLASS A CLASS C
- ----- ------- -------
<S> <C> <C>
March 5.10 cents 4.47 cents
April 5.10 cents 4.47 cents
May 5.10 cents 4.47 cents
June 5.05 cents 4.50 cents
July 5.05 cents 4.50 cents
August 5.05 cents 4.50 cents
Total 30.45 cents 26.91 cents
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
PORTFOLIO BREAKDOWN
Franklin Insured
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ------ -----------
<S> <C>
Hospital &
Health Care 28.5%
Prerefunded 19.1%
Utilities 19.0%
Transportation 8.3%
General Obligation 6.4%
Higher Education 6.1%
Housing 3.8%
Subject to Government
Appropriation 3.3%
Tax Supported Debt 2.6%
Other Revenue 2.1%
Corporate Backed 0.8%
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
(1.) Cumulative total return represents 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 current,
applicable, maximum sales charge(s) for that class. Six-month return has not
been annualized.
(3.) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
(4.) Taxable equivalent distribution rate and yield assume the 1999 maximum
federal income tax rate of 39.6%.
(5.) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.62 $11.64 $12.26
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.3045
Long-Term Capital Gain $0.0179
Short-Term Capital Gain $0.0032
Total $0.3256
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
<S> <C> <C> <C>
Net Asset Value -$0.61 $11.72 $12.33
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2691
Long-Term Capital Gain $0.0179
Short-Term Capital Gain $0.0032
Total $0.2902
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85)
- ------- ------- ------ -------------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return (1) -2.39% -0.29% +30.60% +91.08% +196.15%
Average Annual Total Return (2) -6.50% -4.54% +4.58% +6.23% +7.50%
Distribution Rate (3) 4.98%
Taxable Equivalent Distribution Rate (4) 8.25%
30-Day Standardized Yield (5) 4.49%
Taxable Equivalent Yield (4) 7.43%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.58% -0.76% +14.41% +23.41%
Average Annual Total Return(2) -4.46% -2.72% +4.25% +4.73%
Distribution Rate (3) 4.59%
Taxable Equivalent
Distribution Rate (4) 7.60%
30-Day Standardized Yield (5) 4.08%
Taxable Equivalent Yield (4) 6.75%
</TABLE>
Past performance is not predictive of future results.
FRANKLIN MASSACHUSETTS INSURED
TAX-FREE INCOME FUND
Your Fund's Goal: Franklin Massachusetts Insured Tax-Free Income Fund 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.(1)
COMMONWEALTH UPDATE(2)
[MASSACHUSETTS MAP]
Massachusetts continued to have the strongest economy in New England, as it has
for the past five years. The commonwealth had the third-highest per-capita
income nationally, at 124% of the national average for 1998, the most recent
annual figure available. Personal income rose 5.6%, also above national gains.
Employment growth weathered recent declines in manufacturing, which were mostly
offset by gains in construction and services, with a 1.8% growth rate in 1998.
The commonwealth has developed a reputation for highly responsible fiscal
operations after a very difficult economic period during the early 1990s. It has
built up its financial reserves every year since 1992, to be in the position to
enact $900 million in tax cuts in 1999 with more planned for next year. One
factor impairing Massachusetts' strong credit rating is its high debt load. It
has a per capita debt load of $2,511, compared with $505 nationally, and debt as
a percent of income was 7.7%, compared with the 2.0% national median.
The commonwealth's outlook remains stable due to its diverse economy, high
wealth level, strong fiscal control, sound budget performance and a strong
balance sheet.
(1.) 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. Fund shares are not insured by any U.S. or other government agency, are
subject to market risks and will fluctuate in value. Insurance relates only to
the payment of principal and interest on the portfolio's insured securities and
the terms of the insurance as outlined in the prospectus. No representation is
made as to any insurer's ability to meet its commitments.
(2.) Source: Moody's Investors Service, 5/17/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 59 of
this report.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share
value.
PORTFOLIO NOTES
The rise in interest rates during the reporting period resulted in decreasing
bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond
price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of
securities in the fund's portfolio, was off 8.25%.3 By comparison, your fund's
Class A share price, as measured by net asset value, declined only 5.0%.
However, the rise in interest rates created an excellent opportunity for
Franklin Massachusetts Insured Tax-Free Income Fund to take tax losses by
selling some holdings and reinvesting the proceeds at significantly higher
yields. We continued to buy municipal securities with current coupons at a
slight discount in our effort to maximize the tax-free income paid out to
shareholders. The fund also sought bonds with at least ten-year call protection
in an attempt to protect the fund's long-term income stream. As a result, our
disciplined investment approach helped protect the fund's share value and
maintain a competitive yield. Additionally, we continued to manage the fund's
exposure to prerefunded bonds, now only 15.9% of total long-term investments as
of August 31, 1999.
Some of the fund's purchases during the reporting period include Dudley
Charleston Regional School District general obligation (GO), Plymouth County
Certificate of Participation (COP) - Correctional Facility Project,
Massachusetts State Port Authority Revenue Bonds, and Massachusetts State
Industrial Finance Agency Assisted Living Facility Revenue - Arbors at Taunton
Project. These purchases maintained diversification in a broad range of credits,
which help reduce the fund's exposure to risk and volatility that might affect
any one credit. As always, your fund invested primarily in insured municipal
bonds guaranteed by AAA-rated bond insurers.(1)
(3.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
We closely monitor the supply of Massachusetts' tax-exempt municipal bonds. For
the first six months of 1999 the commonwealth issued $4.3 billion, a 17.7%
decrease from the same period last year. Going forward, we expect Massachusetts'
growing need for infrastructure should result in further borrowing.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Massachusetts Insured Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
MONTH CLASS A CLASS C
- ----- ------- -------
<S> <C> <C>
March 4.75 cents 4.18 cents
April 4.75 cents 4.18 cents
May 4.75 cents 4.18 cents
June 4.75 cents 4.24 cents
July 4.75 cents 4.24 cents
August 4.75 cents 4.24 cents
- ------ ----------- -----------
Total 28.50 cents 25.26 cents
</TABLE>
PORTFOLIO BREAKDOWN
Franklin Massachusetts Insured
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ------ -----------
<S> <C>
Hospital &
Health Care 27.5%
Transportation 17.2%
Prerefunded 15.9%
Higher Education 15.4%
General Obligation 11.2%
Housing 5.1%
Utilities 3.8%
Other Revenue 3.0%
Subject to Government
Appropriation 0.9%
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
FRANKLIN MASSACHUSETTS
INSURED TAX-FREE
INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
(1.) Cumulative total return represents 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 current,
applicable, maximum sales charge(s) for that class. Six-month return has not
been annualized.
(3.) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
(4.) Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Massachusetts state personal income tax bracket of 43.2%,
based on the federal income tax rate of 39.6%.
(5.) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.59 $11.12 $11.71
</TABLE>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<TABLE>
<S> <C>
Dividend Income $0.285
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.58 $11.18 $11.76
</TABLE>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<TABLE>
<S> <C>
Dividend Income $0.2526
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85)
- ------- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.59% -0.68% +30.71% +87.90% +170.76%
Average Annual
Total Return(2) -6.73% -4.88% +4.60% +6.05% +6.84%
Distribution Rate(3) 4.91%
Taxable Equivalent
Distribution Rate(4) 8.64%
30-Day Standardized
Yield(5) 4.37%
Taxable Equivalent
Yield(4) 7.69%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ------- ------- ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.77% -1.15% +13.01% +22.91%
Average Annual Total Return(2) -4.70% -3.08% +3.80% +4.64%
Distribution Rate(3) 4.50%
Taxable Equivalent
Distribution Rate(4) 7.92%
30-Day Standardized Yield(5) 3.94%
Taxable Equivalent Yield(4) 6.94%
</TABLE>
Past performance is not predictive of future results.
FRANKLIN MICHIGAN INSURED
TAX-FREE INCOME FUND
Your Fund's Goal: Franklin Michigan Insured Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF THE STATE OF MICHIGAN]
Michigan's economy has remained strong through recent times despite its reliance
on cyclical industries such as durable goods manufacturing. Its employment base
has diversified away from durable goods manufacturing toward trade and services.
Although still strongly dependent on the auto industry, corporate actions in
that industry have made it less susceptible to cyclical swings. The state also
maintains a relatively strong Rainy Day Fund for fiscal shortfalls and future
uncertainties.
Continuing the pattern of the past few years, the state's unemployment rate has
remained below the national average. Projections for personal income growth are
4.2% for 1999.(2) The state traditionally has had, and still maintains, low debt
levels, although they have increased recently due to school funding needs.
Michigan eliminated overspending of appropriations, which created a sizable
deficit in 1990, and has balanced the state's budget.
Michigan's strong economy, conservative budget practices, traditionally low debt
levels and high reserve levels have earned the state an AA+ rating from Standard
& Poor's, a national credit rating agency.(3)
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the types of securities in the fund's portfolio, was off 8.25%.(4) By
comparison, your fund's Class A share price, as measured by net asset value,
declined only 4.6%.
(1.) 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.
Fund shares are not insured by any U.S. or other government agency, are subject
to market risks and will fluctuate in value. Insurance relates only to the
payment of principal and interest on the portfolio's insured securities and the
terms of the insurance as outlined in the prospectus. No representation is made
as to any insurer's ability to meet its commitments.
(2.) Source: Standard & Poor's, CreditWeek Municipal, 4/99.
(3.) This does not indicate Standard & Poor's rating for the fund.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 64 of
this report.
PORTFOLIO BREAKDOWN
FRANKLIN MICHIGAN INSURED
TAX-FREE INCOME FUND
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ------ -----------
<S> <C>
Prerefunded 34.7%
General Obligation 24.6%
Hospital &
Health Care 19.0%
Utilities 11.2%
Transportation 4.6%
Higher Education 2.2%
Other Revenue 1.6%
Tax Supported Debt 1.0%
Housing 0.5%
Subject to Government
Appropriation 0.5%
Corporate Backed 0.1%
</TABLE>
Franklin Michigan Insured Tax-Free Income Fund sought to take advantage of the
recent volatility in the municipal bond marketplace by attempting to purchase on
the dips in the market. Most of our purchases were in the new-issue market, as
many deals were priced attractively. Furthermore, we sold bonds in the secondary
market attempting to take tax losses that can be used to help offset current or
future capital gains, possibly reducing shareholders' tax liabilities. In
general, our strategy worked very well for the fund, and we were able to
purchase some bonds at relatively higher yields.
Some of the fund's purchases during the six-month period were Charlotte Public
School District general obligation (GO), Detroit Sewage Disposal Revenue, Kent
County Building Authority GO, and Wayne Charter County Airport Revenue - Detroit
Metropolitan Wayne County. As always, your fund invested primarily in insured
municipal bonds guaranteed by AAA-rated bond insurers.(1)
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Michigan Insured Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
MONTH CLASS A CLASS C
- ----- ------- -------
<S> <C> <C>
March 4.95 cents 4.32 cents
April 4.95 cents 4.32 cents
May 4.95 cents 4.32 cents
June 4.95 cents 4.36 cents
July 4.95 cents 4.36 cents
August 4.95 cents 4.36 cents
- ------ ---------- ----------
Total 29.70 cents 26.04 cents
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
(4.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The
index is unmanaged and includes reinvested dividends. One cannot invest directly
in an index.
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.56 $11.72 $12.28
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2970
Long-Term Capital Gain $0.0003
Total $0.2973
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.56 $11.80 $12.36
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2604
Long-Term Capital Gain $0.0003
Total $0.2607
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85)
- ------- ------- ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.11% 0.47% 32.10% 91.79% 186.11%
Average Annual Total Return(2) -6.31% -3.84% 4.82% 6.27% 7.25%
Distribution Rate(3) 4.85%
Taxable Equivalent Distribution
Rate(4) 8.40%
30-Day Standarized Yield(5) 4.33%
Taxable Equivalent Yield(4) 7.50%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ------- ------- ------ ------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -2.40% -0.08% 15.69% 24.86%
Average Annual Total Return(2) -4.28% -1.99% 4.63% 5.01%
Distribution Rate(3) 4.44%
Taxable Equivalent Distribution
Rate(4) 7.69%
30-Day Standarized Yield(5) 3.90%
Taxable Equivalent Yield(4) 6.75%
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
(1.) Cumulative total return represents 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 current,
applicable, maximum sales charge(s) for that class. Six-month return has not
been annualized.
(3.) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
(4.) Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Michigan state personal income tax bracket of 42.3%, based
on the federal income tax rate of 39.6%.
(5.) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 Goal: Franklin Minnesota Insured Tax-Free Income Fund 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.(1)
State Update(2)
[GRAPHIC OF THE STATE OF MINNESOTA]
Moody's, a national credit rating agency, has assigned Minnesota its highest
rating of Aaa for the state's strong financial performance, robust and diverse
economic base and moderate debt levels. Audited 1998 financial statements show a
remarkable 8.6% growth for the state's General Fund while expenditures increased
only 2.2% for the same period. This strong performance gave Minnesota the
opportunity to reduce sales and income taxes while significantly increasing
education spending.
Income growth has been one of the main drivers behind the state's fiscal
performance. Income tax receipts increased 8.2% in fiscal 1998, giving the state
more money than expected. Minnesota's debt structure is relatively simple and
moderate, $527 per capita compared with the national median of $505. Diverse
employment is one of the state's best assets. Mirroring the nation's employment
mix, this diversity strengthens the state's economy and buffers it from economic
volatility.
The outlook for the state remains positive. Institutionalized financial
practices enacted to maintain a balanced budget, such as formalized four- and
six-year planning cycles, coupled with healthy economic performance, should help
Minnesota continue to prosper.
(1.) For investors subject to the federal alternative minimum tax, a small
portion of this income may be subject to such tax. Distributions of capital
gains and of ordinary income from accrued market discount, if any, are generally
taxable. The fund seeks to comply with Minnesota requirements for the
pass-through of tax-exempt income dividends
Fund shares are not insured by any U.S. or other government agency, are subject
to market risks and will fluctuate in value. Insurance relates only to the
payment of principal and interest on the portfolio's insured securities and the
terms of the insurance as outlined in the prospectus. No representation is made
as to any insurer's ability to meet its commitments.
(2.) Source: Moody's Investors Service, 7/29/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 72 of
this report.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the types of securities in the fund's portfolio, was off 8.25%.(3) By
comparison, your fund's Class A share price, as measured by net asset value,
declined only 5.0%.
Franklin Minnesota Insured Tax-Free Income Fund sought to take advantage of the
recent volatility in the municipal bond marketplace by attempting to purchase on
the dips in the market. Most of our purchases were in the new-issue market, as
many deals were priced attractively. Furthermore, we sold bonds in the secondary
market attempting to take tax losses that can be used to help offset current or
future capital gains, possibly reducing shareholders' tax liabilities. In
general, our strategy worked very well for the fund, and we were able to
purchase some bonds at relatively higher yields. Some of the fund's purchases
were Minnesota Agriculture and Economic Development Board Revenue, Dakota County
Housing and Redevelopment Authority Multi-Family Housing Revenue, Park Rapids
Independent School District No. 309, and Minnesota State Housing and Finance
Authority Single Family Housing Revenue bonds. As always, your fund invested
primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1)
We also sold $10 million in Puerto Rico Commonwealth general obligation (GO)
bonds, reducing the percentage of Puerto Rico bonds held in the portfolio. The
state of Minnesota limits the fund to territory holdings of 5%, so the reduction
in Puerto Rico bonds provides the fund more flexibility to take advantage of
market opportunities in the future. During a period of limited diversification
choices, a fund may choose to purchase Puerto Rico issues, which enjoy tax-free
status in a majority of states and are in general highly liquid and
well-received in the marketplace.
PORTFOLIO BREAKDOWN
Franklin Minnesota Insured
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ------ -----------
<S> <C>
General Obligation 24.8%
Hospital & Health Care 22.9%
Housing 14.0%
Utilities 11.3%
Prerefunded 9.6%
Transportation 9.4%
Subject to Government
Appropriation 3.2%
Tax Supported Debt 2.4%
Higher Education 1.3%
Other Revenue 1.1%
</TABLE>
(3.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond
Index. The index is unmanaged and includes reinvested dividends. One cannot
invest directly in an index.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Minnesota Insured Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
Dividend per Share
------------------
Month Class A Class C
- ----- ------- -------
<S> <C> <C>
March 5.0 cents 4.42 cents
April 5.0 cents 4.42 cents
May 5.0 cents 4.42cents
June 4.9 cents 4.36 cents
July 4.9 cents 4.36 cents
August 4.9 cents 4.36 cents
- ------ --------- ----------
Total 29.7 cents 26.34 cents
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
FRANKLIN MINNESOTA
INSURED TAX-FREE
INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.61 $11.53 $12.14
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2970
Long-Term Capital Gain $0.0237
TOTAL $0.3207
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ------- ------ ------- -------
<S> <C> <C> <C>
Net Asset Value -$0.61 $11.58 $12.19
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2634
Long-Term Capital Gain $0.0237
TOTAL $0.2871
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85)
- ------- ------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.37% -0.36% +28.01% +82.86% +180.78%
Average Annual Total Return(2) -6.53% -4.58% +4.15% +5.76% +7.11%
Distribution Rate(3) 4.83%
Taxable Equivalent Distribution Rate(4) 8.74%
30-Day Standardized Yield(5) 4.44%
Taxable Equivalent Yield(4) 8.03%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.64% -0.93% +13.10% +20.87%
Average Annual Total Return(2) -4.53% -2.83% +3.84% +4.23%
Distribution Rate(3) 4.41%
Taxable Equivalent Distribution Rate(4) 7.98%
30-Day Standardized Yield(5) 4.03%
Taxable Equivalent Yield(4) 7.29%
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
(1.) Cumulative total return represents 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 current,
applicable, maximum sales charge(s) for that class. Six-month return has not
been annualized.
(3.) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
(4.) Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Minnesota state personal income tax bracket of 44.7%, based
on the federal income tax rate of 39.6%.
(5.) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 Goal: Franklin Ohio Insured Tax-Free Income Fund seeks to provide
high, current income exempt from regular federal and Ohio state personal income
taxes through a portfolio consisting primarily of insured Ohio municipal
bonds.(1)
STATE UPDATE(2)
[GRAPHIC OF THE STATE OF OHIO]
Ohio's employment trends mirror the nation's as it has a developed industrial
base with growth in the services and construction sectors. The state's
unemployment rate, lower than the nation's for 1998, remains so in 1999, with
the May 1999 rate at 3.7%, compared with 4.0% nationally. Ohio's personal income
is slightly below the national average, estimated at 95% for 1998. Ohio has a
moderate per capita debt level of $683, compared with the national median of
$505. One area of concern for the state is the Ohio State Supreme Court decision
requiring major changes to the state's school funding arrangements, which most
likely will increase education spending.
Ohio's general obligation bonds are rated Aa1 by Moody's, a national credit
rating agency, for the state's stable outlook, large and diverse economy,
moderate debt levels and prudent financial management.(3) The state has strong
control over its financial expenditures, which, coupled with steady economic
growth, has produced a seven-year trend of large operating surpluses for the
state. Its Budget Stabilization Fund's balance has reached $906 million for
fiscal 1999 and is expected to increase further through the calendar year.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the types of securities in the fund's portfolio, was off 8.25%.(4) By
comparison, your fund's Class A share price, as measured by net asset value,
declined only 4.9%.
(1.) 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.
Fund shares are not insured by any U.S. or other government agency, are subject
to market risks and will fluctuate in value. Insurance relates only to the
payment of principal and interest on the portfolio's insured securities and the
terms of the insurance as outlined in the prospectus. No representation is made
as to any insurer's ability to meet its commitments.
(2.) Source: Moody's Investors Service, 7/23/99.
(3.) This does not indicate Moody's rating for the fund.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 77 of
this report.
Franklin Ohio Insured Tax-Free Income Fund sought to take advantage of the
recent volatility in the municipal bond marketplace by attempting to purchase on
the dips in the market. Most of our purchases were in the new-issue market, as
many deals were priced attractively. Furthermore, we sold bonds in the secondary
market attempting to take tax losses that can be used to help offset current or
future capital gains, possibly reducing shareholders' tax liabilities. In
general, our strategy worked very well for the fund, and we were able to
purchase some bonds at relatively higher yields. Some of the fund's purchases
during the reporting period were University of Akron General Receipts, Medina
City School District general obligation (GO), Edgewood City School District GO,
Ohio State Air Quality Development Authority Revenue, and Lorain County Hospital
Revenue - Catholic Healthcare Partners. As always, your fund invested primarily
in insured municipal bonds guaranteed by AAA-rated bond insurers.(1)
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Ohio Insured Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
March 5.1 cents 4.50 cents
April 5.1 cents 4.50 cents
May 5.1 cents 4.50 cents
June 5.0 cents 4.44 cents
July 5.0 cents 4.44 cents
August 5.0 cents 4.44 cents
- --------------------------------------------------------------------------------
TOTAL 30.3 CENTS 26.82 CENTS
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
PORTFOLIO BREAKDOWN
Franklin Ohio Insured Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
General Obligation 26.7%
Utilities 25.7%
Prerefunded 15.7%
Hospital & Health Care 12.5%
Higher Education 5.9%
Housing 3.7%
Transportation 3.6%
Corporate Backed 3.1%
Subject to Government Appropriation 2.2%
Other Revenue 0.6%
Tax Supported Debt 0.3%
</TABLE>
(4.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.61 $11.88 $12.49
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.3030
Long-Term Capital Gain $0.0171
TOTAL $0.3201
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.61 $11.95 $12.56
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2682
Long-Term Capital Gain $0.0171
TOTAL $0.2853
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.31% +0.16% +31.31% +90.79% +185.16%
Average Annual Total Return(2) -6.43% -4.06% +4.69% +6.21% +7.22%
Distribution Rate(3) 4.83%
Taxable Equivalent Distribution Rate(4) 8.58%
30-Day Standardized Yield(5) 4.45%
Taxable Equivalent Yield(4) 7.91%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.57% -0.41% +14.89% +24.12%
Average Annual Total Return(2) -4.51% -2.37% +4.39% +4.86%
Distribution Rate(3) 4.41%
Taxable Equivalent Distribution Rate(4) 7.83%
30-Day Standardized Yield(5) 4.02%
Taxable Equivalent Yield(4) 7.14%
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
(1.) Cumulative total return represents 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 current,
applicable, maximum sales charge(s) for that class. Six-month return has not
been annualized.
(3.) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
(4.) Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Ohio state personal income tax bracket of 43.7%, based on
the federal income tax rate of 39.6%.
(5.) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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.
MUNICIPAL BOND RATINGS
MOODY'S
Aaa: Best quality. They carry the smallest degree of investment risk and
generally are referred to as "gilt-edged." Interest payments are protected by a
large or exceptionally stable margin, and principal is secure. Although the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: High quality by all standards. Together with the Aaa group, they comprise
what generally are known as high-grade bonds. Aa bonds are rated lower than Aaa
because margins of protection may not be as large, fluctuation of protective
elements may be of greater amplitude, or there may be other elements which make
the long-term risks appear larger.
A: Possess many favorable investment attributes and are considered upper
medium-grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa: Medium-grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Ba: Contain speculative elements. Often the protection of interest and principal
payments may be very moderate and, thereby, not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa: Poor standing. Such issues may be in default, or elements of danger with
respect to principal or interest may be present.
Ca: Obligations that are highly speculative. Such issues are often in default or
have other marked shortcomings.
C: Lowest-rated class of bonds. Issues rated C can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
S&P(R)
AAA: The highest rating assigned by S&P to a debt obligation and indicates the
ultimate degree of protection as to principal and interest.
AA: Also qualify as high-grade obligations, and, in the majority of instances,
differ from AAA issues only in a small degree.
A: Generally regarded as upper medium-grade. They have considerable investment
strength but are not entirely free from adverse effects of changes in economic
and trade conditions. Interest and principal are regarded as safe.
BBB: Regarded as having an adequate capacity to pay principal and interest.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for bonds
in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds likely will have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: Reserved for income bonds on which no interest is being paid.
D: Debt rated "D" is in default and payment of interest and/or repayment of
principal is in arrears.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
(UNAUDITED)*** 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
NET ASSET VALUE, BEGINNING OF PERIOD ............... $10.84 $10.77 $10.36 $10.36 $9.80 $10.28
---------------------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .24 .53 .54 .55 .55 .55
Net realized and unrealized gains (losses) ........ (.61) .07 .42 -- .57 (.48)
---------------------------------------------------------------------------
Total from investment operations ................... (.37) .60 .96 .55 1.12 .07
---------------------------------------------------------------------------
Less distributions from net investment income ...... (.25)(1) (.53) (.55) (.55) (.56) (.55)
---------------------------------------------------------------------------
Net asset value, end of period ..................... $10.22 $10.84 $10.77 $10.36 $10.36 $9.80
===========================================================================
Total return* ...................................... (3.45)% 5.75% 9.53% 5.55% 11.64% .94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................. $84,095 $80,684 $58,059 $39,693 $38,199 $20,794
Ratios to average net assets:
Expenses .......................................... .80%** .37% .30% .25% .16% .10%
Expenses excluding waiver and payments by affiliate .80%** .84% .82% .86% .86% .96%
Net investment income ............................. 4.48%** 4.87% 5.11% 5.45% 5.51% 5.80%
Portfolio turnover rate ............................ 12.96% 10.68% 17.44% 18.27% 4.12% 44.61%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)Includes distributions in excess of net investment income in the amount of
$.004.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.9%
Arizona Health Facilities Authority Hospital System Revenue,
Northern Arizona Healthcare System,
AMBAC Insured, 5.00%, 10/01/23 ................................................................ $3,500,000 $3,181,080
Refunding, AMBAC Insured, 4.75%, 10/01/30 ..................................................... 1,000,000 845,760
Arizona State University Revenue, Refunding, Series A, MBIA Insured, 5.50%, 7/01/19 .............. 1,000,000 992,760
Arizona State Wastewater Management Authority Wastewater Financial Assistance Revenue,
AMBAC Insured, 5.75%, 7/01/15 ................................................................. 750,000 762,210
Casa Grande Excise Tax Revenue, FGIC Insured, 6.00%, 4/01/10 ..................................... 400,000 419,836
Douglas Municipal Property Corp. Municipal Facilities Excise Tax Revenue,
MBIA Insured, 5.75%, 7/01/15 .................................................................. 525,000 532,639
Gilbert GO, Projects of 1988, Series C, MBIA Insured, 5.50%, 7/01/23 ............................. 1,000,000 982,970
Glendale IDA, Midwestern University, Series A, MBIA Insured, 5.375%, 5/15/28 ..................... 2,000,000 1,927,640
La Paz County School District No. 4, Quartzsite Elementary School Improvement,
MBIA Insured, 5.70%, 7/01/16 .................................................................. 480,000 485,400
Marana Municipal Property Corp. Municipal Facilities Revenue, Refunding,
MBIA Insured, 5.25%, 7/01/22 .................................................................. 1,100,000 1,054,746
Maricopa County GO,
Hospital District No. 1, AMBAC Insured, 5.00%, 6/01/21 ........................................ 1,250,000 1,156,263
School District No. 8, Osborn, Refunding, Series A, FGIC Insured, 5.875%, 7/01/14 ............. 500,000 520,915
School District No. 11, Peoria Unified, Refunding, AMBAC Insured, 6.10%, 7/01/10 .............. 700,000 737,814
School District No. 28, Kyrene Elementary, Series B, FGIC Insured, 6.00%, 7/01/14 ............. 500,000 516,625
School District No. 31, Series A, AMBAC Insured, Pre-Refunded, 6.20%, 7/01/13 ................. 570,000 616,700
School District No. 66, Roosevelt Elementary, Projects of 1996, Series B,
FGIC Insured, 5.30%, 7/01/13 ............................................................... 1,540,000 1,538,383
School District No. 68, Alhambra Elementary, Refunding and Improvement,
AMBAC Insured, 5.125%, 7/01/13 ............................................................. 500,000 490,980
School District No. 98, Fountain Hills Unified, AMBAC Insured, 5.75%, 7/01/12 ................. 500,000 518,870
School District No. 98, Fountain Hills Unified, Series A, MBIA Insured,
Pre-Refunded, 6.20%, 7/01/10 ............................................................... 235,000 254,254
USD No. 9, Wickenburg Projects of 1997, AMBAC Insured, 5.55%, 7/01/14 ......................... 1,000,000 1,011,940
USD No. 9, Wickenburg Projects of 1997, AMBAC Insured, 5.65%, 7/01/16 ......................... 1,055,000 1,069,548
USD No. 80, Chandler, FGIC Insured, 5.85%, 7/01/13 ............................................ 435,000 451,991
USD No. 80, Chandler, Projects of 1995, Series E, FGIC Insured, 5.00%, 7/01/13 ................ 1,750,000 1,693,878
USD No. 95, Queens Creek, Series A, AMBAC Insured, 5.70%, 7/01/14 ............................. 400,000 409,852
Maricopa County IDA,
MFHR, Metro Gardens, Mesa Ridge Project, Series A, MBIA Insured, 5.15%, 7/01/29 ............... 2,350,000 2,143,576
MFHR, Stanford Court Apartments Project, Series A, MBIA Insured, 5.30%, 7/01/28 ............... 1,000,000 951,760
MFHR, Villas De Merced Apartment Project, Series A, GNMA Secured, 5.50%, 12/20/37 ............. 570,000 537,938
Water System Revenue Improvement, Chaparral Water Co., Series A, AMBAC
Insured, 5.40%, 12/01/22 ................................................................... 1,000,000 956,570
Water System Revenue, Series B, AMBAC Insured, 5.30%, 12/01/22 ................................ 515,000 486,067
Maricopa County School District No 3, Tempe Elementary,
AMBAC Insured, Pre-Refunded, 6.00%, 7/01/13 ................................................... 255,000 275,760
Refunding, AMBAC Insured, 6.00%, 7/01/13 ...................................................... 445,000 466,244
McDowell Mountain Ranch Community Facilities District GO, Refunding,
AMBAC Insured, 5.00%, 7/15/22 ................................................................. 3,745,000 3,452,441
Mesa GO, FGIC Insured, 5.00%, 7/01/18 ............................................................ 500,000 466,980
Mesa IDAR,
(b)Discovery Health Systems, Series A, MBIA Insured, 5.75%, 1/01/25 ............................ 5,000,000 5,011,900
(b)Discovery Health Systems, Series A, MBIA Insured, 5.625%, 1/01/29 ........................... 2,000,000 1,970,160
Lutheran Health Systems, Refunding, Series A-1, MBIA Insured, 5.00%, 1/01/19 .................. 1,490,000 1,371,932
Mesa Street and Highway Revenue, FGIC Insured, 5.00%, 7/01/17 .................................... 1,000,000 933,870
Mesa Utility System Revenue, FGIC Insured,
5.25%, 7/01/16 ................................................................................ 500,000 489,575
5.375%, 7/01/17 ............................................................................... 500,000 493,475
Mohave County GO Hospital District No. 1, Kingman Regional Medical Center Project,
FGIC Insured, 6.50%, 6/01/15 .................................................................. 610,000 640,219
Navajo County PCR, Arizona Public Service Co., Series A,
AMBAC Insured, 5.50%, 8/15/28 ................................................................. 2,400,000 2,355,600
MBIA Insured, 5.875%, 8/15/28 ................................................................. 2,450,000 2,479,915
Oro Valley Municipal Property Corp. Excise Tax Revenue, Refunding, FGIC Insured,
5.00%, 7/01/19 ................................................................................ 1,035,000 959,952
Oro Valley Municipal Property Corp. Revenue, Municipal Water System, MBIA Insured,
5.55%, 7/01/17 ................................................................................ 700,000 703,332
Phoenix Civic Improvement Corp. Airport Revenue, senior lien, Series A, FSA Insured,
5.00%, 7/01/25 ................................................................................ 1,500,000 1,370,145
Phoenix Civic Improvement Corp. Municipal Facilities Excise Tax Revenue,
MBIA Insured, Pre-Refunded, 6.90%, 7/01/21 .................................................... 1,000,000 1,120,080
Phoenix Civic Improvement Corp. Water System Revenue, junior lien,
AMBAC Insured, 5.50%, 7/01/21 ................................................................. 500,000 494,945
FGIC Insured, 5.50%, 7/01/24 .................................................................. 1,000,000 985,270
MBIA Insured, 5.375%, 7/01/22 ................................................................. 1,000,000 972,380
Phoenix IDA, SFMR, Statewide, Series C, GNMA Secured, 5.30%, 4/01/20 ............................. 1,500,000 1,420,830
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Pima County IDA, SFMR, GNMA Secured, 6.625%, 11/01/14 ........................................... $540,000 $562,156
Pima County USD, No. 6, Marana Projects of 1995, Series B, FGIC Insured, 5.00%, 7/01/17 ......... 1,600,000 1,507,984
Pinal County USD, No. 43, Apache Junction, Series C, FGIC Insured, 5.00%, 7/01/15 ............... 1,000,000 954,650
Prescott Municipal Property Corp. Municipal Facility Revenue, FGIC Insured, 5.125%, 1/01/18 ..... 1,000,000 948,120
Puerto Rico Commonwealth GO, MBIA Insured, Pre-Refunded, 6.45%, 7/01/17 ......................... 845,000 930,590
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Puerto Rico State Infrastructure, MBIA Insured, 5.00%, 7/01/28 .............................. 1,960,000 1,784,776
Puerto Rico Electric Power Authority Revenue, Series R, FSA Insured,
Pre-Refunded, 6.25%, 7/01/17 ................................................................. 800,000 854,576
Puerto Rico Industrial Tourist Educational Medical and Environmental Control
Facilities Financing Authority Hospital Revenue,
Hospital Auxilio Mutuo Obligation, Series A, MBIA Insured, 6.25%, 7/01/24 .................... 840,000 894,104
Puerto Rico PBA Revenue, Government Facilities, Series B, AMBAC Insured, 5.00%, 7/01/27 ......... 1,800,000 1,634,364
Salt River Project Agricultural Improvement and Power District Electric System Revenue,
Refunding, Series D, 5.50%, 1/01/25 .......................................................... 1,000,000 990,470
Series D, 6.25%, 1/01/27 ..................................................................... 1,205,000 1,259,635
Series D, Pre-Refunded, 6.25%, 1/01/27 ....................................................... 295,000 313,140
Santa Cruz County USD No. 1, Nogales, Series B, AMBAC Insured, Pre-Refunded, 6.10%, 7/01/14 ..... 250,000 267,390
Sierra Vista Municipal Property Corp. Facilities Revenue, AMBAC Insured,
6.15%, 1/01/15 ............................................................................... 360,000 377,759
5.00%, 1/01/18 ............................................................................... 1,250,000 1,160,588
Tucson GO,
Series A, MBIA Insured, 5.375%, 7/01/19 ...................................................... 500,000 488,345
Series 1984-G, FGIC Insured, Pre-Refunded, 6.25%, 7/01/18 .................................... 650,000 704,652
Tucson Water Revenue, Refunding, FGIC Insured, 5.125%, 7/01/20 .................................. 2,000,000 1,879,220
University of Arizona COP,
Administrative and Packaging Facility Project, Series B, MBIA Insured, 6.00%, 7/15/16 ........ 500,000 521,640
Administrative and Packaging Facility Project, Series B, MBIA Insured, 6.00%, 7/15/23 ........ 1,625,000 1,680,201
Residence Life Project, Series A, FSA Insured, 5.80%, 9/01/13 ................................ 1,000,000 1,033,030
Yavapai County GO,
Elementary School District No. 6 Cottonwood-Oak Creek, Project of 1993, Series B,
AMBAC Insured, 6.70%, 7/01/09 ................................................................ 250,000 270,425
USD No. 22 Humboldt, Project of 1995, Series C, FGIC Insured, 5.40%, 7/01/14 ................. 575,000 576,691
USD No. 28 Camp Verde, Refunding, FGIC Insured, 6.00%, 7/01/09 ............................... 775,000 821,136
Yavapai County IDA, Residential Care Facility Revenue, Margaret T. Morris Center,
Series A, GNMA Secured, 5.40%, 2/20/38 ....................................................... 1,585,000 1,490,074
Yuma County GO, Elementary School District No. 1,
MBIA Insured, 5.50%, 7/01/14 ................................................................. 1,000,000 1,010,510
Series A, MBIA Insured, 5.75%, 7./01/14 ...................................................... 500,000 515,305
Yuma County Jail District Revenue, AMBAC Insured, 5.25%, 7/01/12 ................................ 1,000,000 1,001,630
Yuma IDA, Hospital Revenue,
Regency Apartments, Refunding, Series A, GNMA Secured, 5.50%, 12/20/32 ....................... 920,000 883,338
Yuma Regional Medical Center, Refunding, MBIA Insured, 5.50%, 8/01/17 ........................ 1,000,000 995,438
-----------
TOTAL LONG TERM INVESTMENTS (Cost $84,898,590) .................................................. 83,995,907
-----------
(a)SHORT TERM INVESTMENTS 2.5%
Maricopa County PCC, PCR, Arizona Public Service Co., Refunding, Series D,
Daily VRDN and Put, 2.75%, 5/01/29 ............................................................. 1,800,000 1,800,000
Maricopa County PCR, El Paso Electric Co. Project, Series A, Weekly VRDN and Put,
3.30%, 7/01/14 ................................................................................. 350,000 350,000
-----------
TOTAL SHORT TERM INVESTMENTS (COST $2,150,000) ................................................. 2,150,000
-----------
TOTAL INVESTMENTS (COST $87,048,590) 102.4% .................................................... 86,145,907
OTHER ASSETS, LESS LIABILITIES (2.4%) .......................................................... (2,050,722)
-----------
NET ASSETS 100.0% .............................................................................. $84,095,185
===========
</TABLE>
See glossary of terms on page 83.
(a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest at
specified dates.
(b)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
(UNAUDITED)*** 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............... $10.53 $10.43 $9.99 $10.02 $9.53 $10.07
---------------------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .24 .51 .53 .53 .53 .52
Net realized and unrealized gains (losses) ........ (.54) .10 .44 (.03) .49 (.53)
---------------------------------------------------------------------------
Total from investment operations ................... (.30) .61 .97 .50 1.02 (.01)
---------------------------------------------------------------------------
Less distributions from net investment income ...... (.25)(1) (.51) (.53) (.53) (.53) (.53)
---------------------------------------------------------------------------
Net asset value, end of period ..................... $9.98 $10.53 $10.43 $9.99 $10.02 $9.53
===========================================================================
Total return* ...................................... (2.92)% 6.01% 9.94% 5.17% 10.95% .21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................. $120,590 $124,488 $101,506 $77,177 $69,583 $46,847
Ratios to average net assets:
Expenses .......................................... .75%** .42% .35% .35% .35% .35%
Expenses excluding waiver and payments by affiliate .77%** .79% .80% .80% .82% .88%
Net investment income ............................. 4.60%** 4.88% 5.16% 5.36% 5.37% 5.61%
Portfolio turnover rate ............................ 9.32% 1.81% 8.08% 32.23% 24.36% 43.71%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)Includes distributions in excess of net investment income in the amount of
$.004.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.1%
Alachua County Public Improvement Revenue, AMBAC Insured, 5.25%, 8/01/29 .......................... $2,500,000 $2,342,650
Alachua County School Board COP, AMBAC Insured, 5.00%, 7/01/18 .................................... 1,000,000 927,360
Bay Medical Center Hospital Revenue, Bay Medical Center Project, AMBAC Insured,
5.00%, 10/01/27 ................................................................................ 2,025,000 1,824,930
Broward County HFA, FSA Insured,
5.60%, 11/01/17 ................................................................................ 630,000 615,220
5.65%, 11/01/22 ................................................................................ 885,000 861,530
5.70%, 11/01/29 ................................................................................ 1,345,000 1,292,545
Canaveral Port Authority Revenue, Refunding, Series B, FGIC Insured, 5.625%, 6/01/21 .............. 1,000,000 999,280
Celebration CDD, Special Assessment, Series A, MBIA Insured, 5.50%, 5/01/18 ....................... 535,000 531,255
Citrus County PCR, Florida Power Corp., Refunding, MBIA Insured, 6.625%, 1/01/27 .................. 2,435,000 2,571,847
Cocoa Beach Improvement Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/20 ........................ 1,000,000 996,170
Cocoa Water and Sewer Improvement Revenue, FGIC Insured, Pre-Refunded, 5.875%, 10/01/22 ........... 1,000,000 1,078,060
Dade County HFA, MFMR, Siesta Pointe Apartments, Series A, FSA Insured, 5.75%, 9/01/29 ............ 1,890,000 1,868,681
Dade County Water and Sewer System Revenue, FGIC Insured, 5.25%, 10/01/21 ......................... 1,000,000 953,480
Escambia County Utilities Authority Utility System Revenue, FGIC Insured, 5.625%, 1/01/27 ......... 1,500,000 1,502,100
First Florida Governmental Financing Commission Revenue, Refunding, AMBAC Insured,
5.375%, 7/01/18 ................................................................................ 1,475,000 1,443,273
Florida HFA, Spinnaker Cove Apartments, Series G, AMBAC Insured, 6.50%, 7/01/36 ................... 1,600,000 1,675,360
(b)Florida Housing Finance Corp. Revenue, Housing Logans Pointe Apartments, Series F-1,
FSA Insured, 5.90%, 12/01/19 ................................................................... 1,205,000 1,208,000
(b)Florida State Department of General Services Division Facilities Management Revenue,
Florida Facilities Pool, Series B, FSA Insured, 5.50%, 9/01/28 ................................. 550,000 540,760
Gainesville Public Improvements, Refunding, AMBAC Insured, 5.50%, 8/01/17 ......................... 1,000,000 996,560
Gulf Breeze Revenue, Local Government Loan Program, FGIC Insured, 6.05%, 12/01/13 ................. 1,915,000 2,033,577
Hernando County Water and Sewer Revenue, FGIC Insured,
6.00%, 6/01/19 ................................................................................. 1,035,000 1,078,584
Pre-Refunded, 6.00%, 6/01/19 ................................................................... 965,000 1,024,917
Hillsborough County IDA, PCR, Tampa Electric Co. Project, Refunding, MBIA Insured,
6.25%, 12/01/34 ................................................................................ 1,500,000 1,580,040
Hillsborough County IDAR, University Community Hospital, MBIA Insured, 5.80%, 8/15/24 ............. 2,000,000 2,025,000
Indian River County Water and Sewer Revenue, FGIC Insured, 5.50%, 9/01/26 ......................... 1,250,000 1,232,700
Indian Trace CDD, Water Management Special Benefit Assessment, MBIA Insured,
5.00%, 5/01/27 ................................................................................. 1,000,000 901,780
Indian Trail Water Control District Improvement Bonds, MBIA Insured,
5.75%, 8/01/16 ................................................................................. 1,090,000 1,110,470
5.60%, 8/01/17 ................................................................................. 1,000,000 1,004,820
5.50%, 8/01/22 ................................................................................. 500,000 494,835
Jacksonville Sales Tax Revenue, River City Renaissance Project, FGIC Insured,
5.375%, 10/01/18 ............................................................................... 1,000,000 978,370
Jacksonville Water and Sewer Revenue, United Water Project, AMBAC Insured, 6.35%, 8/01/25 ......... 1,000,000 1,060,450
Lake Clarke Shores Utility Systems Revenue, Refunding and Improvement,
FGIC Insured, 5.80%, 10/01/18 .................................................................. 1,415,000 1,434,569
Lake Mary Public Improvement Revenue, FGIC Insured, 5.25%, 9/01/15 ................................ 1,000,000 989,340
Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding,
MBIA Insured, 5.25%, 11/15/16 .................................................................. 2,000,000 1,942,500
Lakeland Utilities Tax Revenue, Refunding and Improvement, Series A,
FGIC Insured, 6.00%, 10/01/17 .................................................................. 500,000 523,110
Lee County Capital and Transportation Facilities Revenue, Refunding, Series A,
MBIA Insured, 5.55%, 10/01/18 .................................................................. 3,000,000 2,996,340
Lee County IDA Utilities Revenue, Bonita Springs Utilities Project, Refunding,
MBIA Insured, 6.05%,
11/01/15 ....................................................................................... 2,000,000 2,091,440
11/01/20 ....................................................................................... 1,500,000 1,563,540
Lee County Solid Waste System Revenue, MBIA Insured, 5.375%, 10/01/15 ............................. 2,000,000 1,963,000
Lynn Haven Capital Improvement Revenue, Series A, MBIA Insured, 5.75%, 12/01/16 ................... 1,000,000 1,017,620
Martin County Consolidated Utilities System Revenue,
FGIC Insured, Pre-Refunded, 6.00%, 10/01/24 .................................................... 685,000 742,732
Refunding, FGIC Insured, 6.00%, 10/01/24 ....................................................... 215,000 223,004
Martin County Health Facilities Authority Hospital Revenue,
Martin Memorial Medical Center Project, AMBAC Insured, 5.00%, 11/15/28 ......................... 3,000,000 2,698,800
Martin County Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/14 ...................... 1,000,000 1,057,730
Martin County Utilities System Revenue, Refunding, FGIC Insured, 5.00%, 10/01/24 .................. 1,500,000 1,360,725
Miami-Dade County School Board COP, Refunding, Series C, FSA Insured, 5.00%, 8/01/25 .............. 2,000,000 1,811,540
Miami-Dade County Water and Sewer Revenue, Series A, FGIC Insured, 5.00%, 10/01/29 ................ 1,800,000 1,622,016
Miramar Wastewater Improvement Assessment Revenue, FGIC Insured, Pre-Refunded,
6.75%, 10/01/25 ................................................................................ 2,000,000 2,220,040
Ocoee Water and Sewer System Revenue, AMBAC Insured, 5.625%, 10/01/26 ............................. 5,220,000 5,228,926
Okaloosa County Gas District Revenue, Gas System, MBIA Insured,
5.50%, 10/01/21 ................................................................................ 2,795,000 2,749,274
Okeechobee Utility Authority Utility System Revenue, Capital Improvement,
Refunding, FSA Insured, 5.00%, 10/01/25 ........................................................... 2,000,000 1,811,020
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Orange County Capital Improvement Revenue,
AMBAC Insured, Pre-Refunded, 6.00%, 10/01/22 ................................................. $500,000 $533,460
Refunding, AMBAC Insured, 6.00%, 10/01/22 .................................................... 490,000 511,266
Orange County Health Facilities Authority Revenue,
Adventist/Sunbelt, Series B, FSA Insured, 6.75%, 11/15/21 .................................... 1,000,000 1,059,470
Orlando Regional Healthcare, Refunding, Series A, MBIA Insured, 6.00%, 11/01/24 .............. 2,400,000 2,505,576
Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ........................ 1,000,000 1,038,150
Orange County Sales Tax Revenue, FGIC Insured, 5.375%,
1/01/24 ...................................................................................... 1,000,000 965,070
Orange County School Board COP, Series A, MBIA Insured, 5.375%, 8/01/22 ......................... 875,000 851,918
Osceola County HFA, MFHR, Tierra Vista Apartment Project, Series A, FSA Insured,
5.70%, 12/01/17 .............................................................................. 630,000 624,998
Osceola County School Board COP, Series A, AMBAC Insured, Pre-Refunded, 6.00%, 6/01/19 .......... 1,900,000 2,052,855
Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured,
6.10%, 4/01/17 ............................................................................... 1,225,000 1,271,869
Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured, 6.00%, 6/01/15 ............. 1,000,000 1,048,980
Pinellas County Sewer Revenue, FGIC Insured, Pre-Refunded, 6.00%, 10/01/24 ...................... 1,250,000 1,333,650
Port Orange Water and Sewer Revenue, junior lien, Refunding, AMBAC Insured,
5.25%, 10/01/21 .............................................................................. 1,500,000 1,430,220
Port St.Lucie Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured,
5.125%, 9/01/27 .............................................................................. 4,000,000 3,706,440
Puerto Rico Commonwealth GO, FSA Insured, Pre-Refunded, 6.00%, 7/01/22 .......................... 1,000,000 1,061,620
Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured, 5.50%, 7/01/25 ......... 1,000,000 997,180
Saint Lucie West Services District Special Assessment Revenue, Port Saint Lucie,
Water Management Benefit, Refunding, senior lien,
Series A, MBIA Insured, 5.25%, 5/01/25 ....................................................... 5,000,000 4,756,300
Sarasota County Utilities System Revenue, FGIC Insured, 5.75%, 10/01/27 ......................... 520,000 525,918
Seminole County School Board COP, Series A, MBIA Insured, Pre-Refunded, 6.125%,
7/01/14 ...................................................................................... 1,000,000 1,086,780
7/01/19 ...................................................................................... 1,000,000 1,086,780
South Miami Health Facilities Authority Hospital Revenue,
Baptist Health System Obligation Group, MBIA Insured, 5.00%, 11/15/28 ........................... 3,000,000 2,698,800
St. John's County IDA, IDR, Series A, MBIA Insured,
5.25%, 3/01/11 ............................................................................... 1,250,000 1,256,488
5.50%, 3/01/17 ............................................................................... 1,000,000 991,130
St. Lucie County Water and Sewer Revenue, Refunding, AMBAC Insured, 5.50%, 10/01/17 ............. 500,000 498,275
Stuart Utilities Revenue, FGIC Insured, Pre-Refunded,
6.70%, 10/01/14 .............................................................................. 500,000 541,895
6.80%, 10/01/24 .............................................................................. 500,000 543,745
Sunrise Utilities System Revenue, Refunding, AMBAC Insured, 5.20%, 10/01/22 ..................... 2,000,000 1,901,960
Tampa Occupational License Tax, Refunding, Series B, FGIC Insured, 5.50%, 10/01/27 .............. 1,000,000 985,880
Tampa Sports Authority Revenue, Tourist Development, FSA Insured, 5.25%, 1/01/27 ................ 2,000,000 1,889,120
Titusville Water and Sewer Revenue, MBIA Insured, Pre-Refunded, 6.20%, 10/01/14 ................. 490,000 535,702
Vero Beach Electric Revenue, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ................ 1,500,000 1,444,320
Village Center CDD, Recreational Revenue, Refunding, Series A, MBIA Insured, 5.00%, 11/01/21 .... 1,000,000 913,630
West Melbourne Water and Sewer Revenue, Refunding and Improvement, FGIC Insured,
6.75%, 10/01/14 ............................................................................... 500,000 544,555
West Palm Beach Utilities System Revenue, Series B, FGIC Insured, 5.40%, 10/01/23 ............... 1,500,000 1,452,824
------------
TOTAL LONG TERM INVESTMENTS (Cost $119,111,902) ................................................. 119,448,694
------------
(a)SHORT TERM INVESTMENTS .9%
Jacksonville Educational Facilities Revenue, Jacksonville University Project,
Weekly VRDN and Put, 3.25%, 10/01/22 ............................................................ 800,000 800,000
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured,
Weekly VRDN and Put, 2.85%, 12/01/15 ............................................................ 300,000 300,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,100,000) .................................................. 1,100,000
------------
TOTAL INVESTMENTS (COST $120,211,902) 100.0% .................................................... 120,548,694
OTHER ASSETS, LESS LIABILITIES .................................................................. 41,502
------------
NET ASSETS 100.0% ............................................................................... $120,590,196
============
</TABLE>
See glossary of terms on page 83.
(a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest at
specified dates.
(b)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $12.26 $12.31 $12.15 $12.27 $11.97 $12.45
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .30 .63 .66 .69 .71 .71
Net realized and unrealized gains (losses) ... (.58) .06 .29 (.11) .30 (.48)
-------------------------------------------------------------------------------
Total from investment operations .............. (.28) .69 .95 .58 1.01 .23
-------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.30) (.63) (.66) (.70) (.71) (.71)
In excess of net investment income ........... (.01) (.01) (.01) -- -- --
Net realized gains ........................... (.02) (.10) (.12) -- -- --
-------------------------------------------------------------------------------
Total distributions ........................... (.33) (.74) (.79) (.70) (.71) (.71)
-------------------------------------------------------------------------------
Net asset value, end of period ................ $11.65 $12.26 $12.31 $12.15 $12.27 $11.97
===============================================================================
Total return* ................................. (2.39)% 5.72% 8.09% 4.88% 8.66% 2.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $1,613,824 $1,727,014 $1,685,260 $1,662,087 $1,705,038 $1,683,234
Ratios to average net assets:
Expenses ..................................... .62%** .62% .61% .60% .60% .59%
Net investment income ........................ 5.08%** 5.11% 5.44% 5.68% 5.81% 6.00%
Portfolio turnover rate ....................... 11.56% 13.16% 27.77% 18.66% 13.52% 14.42%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $12.33 $12.38 $12.21 $12.31 $11.98
-----------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .27 .57 .60 .62 .54
Net realized and unrealized gains (losses) ... (.58) .05 .29 (.09) .32
-----------------------------------------------------------------------
Total from investment operations .............. (.31) .62 .89 .53 .86
-----------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.27) (.57)(2) (.60) (.63) (.53)
In excess of net investment income ........... (.01) -- -- -- --
Net realized gains ........................... (.02) (.10) (.12) -- --
-----------------------------------------------------------------------
Total distributions ........................... (.30) (.67) (.72) (.63) (.53)
-----------------------------------------------------------------------
Net asset value, end of period ................ $11.72 $12.33 $12.38 $12.21 $12.31
=======================================================================
Total return* ................................. (2.58)% 5.12% 7.52% 4.42% 7.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $65,137 $65,166 $38,057 $21,521 $8,152
Ratios to average net assets:
Expenses ..................................... 1.18%** 1.18% 1.18% 1.17% 1.18%**
Net investment income ........................ 4.52%** 4.54% 4.86% 5.10% 5.21%**
Portfolio turnover rate ....................... 11.56% 13.16% 27.77% 18.66% 13.52%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C.
(2)Includes distributions in excess of net investment income in the amount of
$.004.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 100.3%
ALABAMA 3.4%
Alabama State Board Educational Revenue, Southern Union State Junior College,
MBIA Insured, Pre-Refunded, 6.50%, 7/01/12 ...................................................... $1,000,000 $1,065,420
Alabama Water Pollution Control Authority Revolving Fund Loan,
AMBAC Insured, 6.25%, 8/15/14 ................................................................... 100,000 102,422
Series A, AMBAC Insured, 5.60%, 8/15/16 ......................................................... 2,000,000 2,005,920
Anniston Regional Medical Center Board, Series A, AMBAC Insured,
5.25%, 6/01/18 .................................................................................. 5,000,000 4,798,050
5.125%, 6/01/28 ................................................................................. 3,000,000 2,757,270
Auburn Governmental Utility Services Corp. Wastewater Treatment Revenue,
Merscot-Auburn LP Project, FGIC Insured, 7.30%, 1/01/12 ......................................... 1,420,000 1,457,133
Bessemer Governmental Utility Services Corp., Water Supply Revenue,
MBIA Insured, 5.25%, 6/01/32 .................................................................... 5,000,000 4,674,500
Birmingham Airport Authority Revenue, MBIA Insured, 5.625%, 7/01/26 ................................ 2,000,000 2,000,520
Birmingham Baptist Medical Center Special Care Facilities Financing Authority Revenue,
Baptist Health System Inc.,Refunding, MBIA Insured, 5.875%, 11/15/19 ............................ 3,500,000 3,266,655
Daphne Utilities Board Water Gas and Sewer Revenue,
Capital Improvement Bonds, Series B, FGIC Insured, 7.35%, 6/01/20 ............................... 2,000,000 2,069,720
Refunding, Series B, FGIC Insured, 7.30%, 6/01/10 ............................................... 4,030,000 4,188,379
East Alabama Health Care Authority Health Care Facilities Revenue, Tax Anticipation Bond,
Series A, MBIA Insured, 5.25%, 9/01/28 .......................................................... 8,500,000 7,769,935
Fort Payne Waterworks Board of Water Revenue, MBIA Insured, 5.45%, 7/01/21 ......................... 3,550,000 3,496,289
Huntsville Health Care Authority Facilities Revenue, Series A, MBIA Insured, 6.375%, 6/01/22 ....... 300,000 315,471
Huntsville Health Care Authority, Series A, MBIA Insured, 5.00%, 6/01/23 ........................... 2,000,000 1,797,300
Jefferson County Sewer Revenue, wts., Series D, FGIC Insured, 5.75%, 2/01/22 ....................... 5,000,000 4,962,350
Montgomery Medical Clinic Board Health Care Facilities Revenue, Jackson Hospital and Clinic,
Refunding, AMBAC Insured, 6.00%, 3/01/26 ....................................................... 4,000,000 4,131,520
Pelham GO, AMBAC Insured, 5.50%, 12/01/26 .......................................................... 2,000,000 1,947,500
University of Alabama Hospital Revenues, Huntsville, Refunding, Series A, MBIA Insured,
5.50%, 5/01/18 ..................................................................................... 4,000,000 3,944,600
----------
56,750,954
----------
ALASKA 3.2%
Alaska Energy Authority Power Revenue,
Bradley Lake Hydro Project, Series 1, MBIA Insured, 7.25%, 7/01/21 .............................. 5,795,000 6,028,481
Bradley Lake Project, BIG Insured, 6.25%, 7/01/21 ............................................... 5,000 5,018
Alaska Energy Authority Utilities Revenue, Refunding, FSA Insured,
5.20%, 7/01/17 .................................................................................. 3,000,000 2,859,030
5.375%, 7/01/20 ................................................................................. 5,000,000 4,832,450
Alaska Industrial Development and Export Authority, Refunding, Series A,
MBIA Insured, 6.125%, 4/01/27 ................................................................... 5,000,000 5,103,100
Alaska State HFC, Refunding, Series A, MBIA Insured,
6.00%, 6/01/27 .................................................................................. 5,000,000 5,062,000
5.875%, 12/01/30 ................................................................................ 485,000 488,254
6.10%, 12/01/37 ................................................................................. 5,000,000 5,083,850
Anchorage Electric Utility Revenue, senior lien,
Municipal Light and Power, Series C, AMBAC Insured, 5.125%, 12/01/26 ............................ 5,000,000 4,559,300
Series B, MBIA Insured, 5.50%, 2/01/26 ............................................................. 4,000,000 3,854,280
Anchorage GO,
General Purpose, AMBAC Insured, Pre-Refunded, 7.30%, 8/01/10 .................................... 2,765,000 2,855,250
Refunding, AMBAC Insured, 7.20%, 6/01/17 ........................................................ 5,000,000 5,062,500
Refunding, AMBAC Insured, 6.25%, 6/01/23 ........................................................ 3,505,000 3,546,359
University of Alaska COP, Series 1990, FSA Insured, 7.375%, 10/01/07 ............................... 500,000 529,270
University of Alaska Revenues,
Series B, AMBAC Insured, 6.50%, 10/01/17 ........................................................ 250,000 265,910
Series G, FSA Insured, 5.45%, 10/01/22 .......................................................... 3,155,000 3,118,118
----------
53,253,170
----------
ARIZONA 3.6%
Arizona State Municipal Financing Program COP, Series 1986-20, BIG Insured,
ETM, 7.70%, 8/01/10 ............................................................................. 6,000,000 7,104,420
Chandler Water and Sewer Revenue, Refunding, FGIC Insured, 7.00%, 7/01/12 .......................... 2,200,000 2,305,292
Cochise County USD, No. 68, Sierra Vista,
Refunding, FGIC Insured, 7.50%, 7/01/10 ......................................................... 500,000 603,025
Series B, FGIC Insured, Pre-Refunded, 7.625%, 7/01/10 ........................................... 3,000,000 3,126,000
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
ARIZONA (CONT.)
Maricopa County GO,
UHSD, No. 216, FGIC Insured, 6.70%, 7/01/11 .................................................... $325,000 $334,604
UHSD, No. 216, FGIC Insured, Pre-Refunded, 6.70%, 7/01/11 ...................................... 675,000 698,315
USD No. 80, Chandler, FGIC Insured, Pre-Refunded, 7.20%, 7/01/07 ............................... 775,000 804,892
USD No. 80, Chandler, FGIC Insured, Pre-Refunded, 7.20%, 7/01/08 ............................... 825,000 856,820
USD No. 80, Chandler, FGIC Insured, Pre-Refunded, 7.25%, 7/01/09 ............................... 500,000 519,490
Maricopa County IDA, Hospital Facility Revenue, Samaritan Health Service Hospital,
Refunding, Series A, MBIA Insured, 7.00%, 12/01/16 ............................................. 300,000 352,644
(b)Mesa IDAR, Discovery Health Systems, Series A, MBIA Insured,
5.75%, 1/01/25 ................................................................................. 25,000,000 25,059,500
5.625%, 1/01/29 ................................................................................ 7,400,000 7,289,592
Navajo County PCR, Arizona Public Service Co., Series A, MBIA Insured, 5.875%, 8/15/28 ............ 3,925,000 3,972,924
Pima County Sewer Revenue, Refunding, FGIC Insured, 6.75%, 7/01/15 ................................ 270,000 282,577
Salt River Project Agricultural Improvement and Power District Electric System Revenue,
Refunding, Series A, FGIC Insured, 5.50%, 1/01/19 .............................................. 1,150,000 1,141,789
Tucson Water Revenue, Series 1994-A, MBIA Insured, Pre-Refunded, 6.00%, 7/01/21 ................... 5,000,000 5,411,900
----------
59,863,784
----------
ARKANSAS .1%
Arkansas State Development Finance Authority Water Revenue, Refunding, Series A,
MBIA Insured, 6.50%, 7/01/10 ................................................................... 2,000,000 2,225,300
Pulaski County Health Facilities Board Hospital Revenue, St. Vincent's Infirmary,
MBIA Insured, Pre-Refunded, 10.00%, 9/01/12 .................................................... 25,000 25,000
----------
2,250,300
----------
CALIFORNIA 2.9%
California Statewide CDA Revenue, COP, John Muir/Mt. Diablo Health System, MBIA Insured,
5.25%, 8/15/27 ................................................................................. 3,085,000 2,883,827
Corona COP, Corona Community Hospital Project, Pre-Refunded, 9.425%, 9/01/20 ...................... 15,000,000 19,693,500
El Centro Financing Authority Water and Wastewater Revenue, Series A, AMBAC Insured,
5.125%, 10/01/27 ............................................................................... 1,800,000 1,658,160
Lancaster RDA, Tax Allocation, Lancaster Residential Redevelopment, Refunding, MBIA Insured,
6.10%, 8/01/19 ................................................................................. 1,515,000 1,568,843
Los Angeles County MTA, Sales Tax Revenue, Proposition C, Series B-2, AMBAC Insured,
5.25%, 7/01/23 ................................................................................. 2,000,000 1,898,280
Oakland RDA, Central District Redevelopment, Refunding, AMBAC Insured, 5.50%,
2/01/14 250,000 255,743 Sacramento MUD, Electric Revenue, Refunding, Series D,
MBIA Insured, 5.25%, 11/15/20 4,000,000 3,827,160 San Francisco BART District
Sales Tax Revenue, FGIC Insured, 5.50%, 7/01/20 1,035,000 1,026,047 San Joaquin
Hills Transportation Corridor Agency Toll Road Revenue, Refunding, Series A,
MBIA Insured,
5.375%, 1/15/29 ................................................................................ 5,000,000 4,810,600
5.25%, 1/15/30 ................................................................................. 5,000,000 4,662,900
San Jose-Santa Clara Water Financing Authority Sewer Revenue, Series A, FGIC Insured,
5.375%, 11/15/20 ............................................................................... 2,670,000 2,605,466
Stockton East Water District COP, 1990 Project, Series A, AMBAC Insured, 6.40%, 4/01/22 ........... 1,460,000 1,538,139
Yuba City USD, COP, Refunding, Series A, MBIA Insured, 5.25%, 2/01/22 ............................. 1,750,000 1,665,825
----------
48,094,490
----------
COLORADO 5.8%
Arapahoe County COP,
Arapahoe County Building Finance Corp., FSA Insured, Pre-Refunded, 7.50%, 12/01/10 ............. 1,000,000 1,043,600
Refunding, FSA Insured, 6.625%, 12/01/16 ....................................................... 8,695,000 9,232,177
Castle Pines Metropolitan District GO, Refunding and Improvement, FSA Insured, Pre-Refunded,
7.625%, 12/01/15 ............................................................................... 1,500,000 1,596,255
Centennial Water and Sanitation District, Water and Sewer Revenue, Refunding, Series A,
FSA Insured, 5.125%, 12/01/17 .................................................................. 5,000,000 4,724,800
Colorado Association of School Boards COP, Pueblo School District No. 60 Project, Series A,
MBIA Insured, Pre-Refunded, 7.25%, 12/01/09 .................................................... 2,400,000 2,444,928
Colorado Health Facilities Authority Revenue, Community Provider Pooled Loan Program,
Series A, FSA Insured, 7.25%, 7/15/17 .......................................................... 1,174,000 1,237,302
Colorado Public Highway Authority Revenue, Highway E-470, Refunding, Senior Series A,
MBIA Insured, 5.00%, 9/01/21 ................................................................... 5,000,000 4,535,250
Colorado Springs Hospital Revenue, Refunding, MBIA Insured, 6.00%, 12/15/24 ....................... 2,455,000 2,527,324
Colorado Springs Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured,
5.125%, 11/15/18 ............................................................................... 1,000,000 936,650
Colorado State Board of Agriculture Revenue, MBIA Insured, 6.40%,
3/01/11 ........................................................................................ 350,000 367,052
3/01/17 ........................................................................................ 440,000 457,851
Colorado Water Resource and Power Development Authority Small Water Resource Revenue,
Series A, FGIC Insured, 6.70%, 11/01/12 ........................................................ 2,000,000 2,137,880
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
COLORADO (CONT.)
Denver City and County Airport Revenue,
Series A, MBIA Insured, 5.50%, 11/15/25 ....................................................... $7,250,000 $7,043,665
Series C, MBIA Insured, 6.125%, 11/15/25 ...................................................... 4,410,000 4,528,761
Series C, MBIA Insured, ETM, 6.125%, 11/15/25 ................................................. 3,590,000 3,867,758
Series D, MBIA Insured, 5.50%, 11/15/25 ....................................................... 3,900,000 3,783,858
Series E, MBIA Insured, 5.50%, 11/15/25 ....................................................... 5,000,000 4,857,700
Denver City and County Board of Water Commissioners COP, FGIC Insured, 6.625%, 11/15/11 .......... 545,000 574,953
Pre-Refunded, 6.625%, 11/15/11 ................................................................... 955,000 1,013,484
Denver City and County Revenue, Children's Hospital Association Project,
FGIC Insured, 6.00%, 10/01/15 ................................................................. 3,000,000 3,095,190
El Paso County SFMR, Series A, GNMA Secured, 8.00%, 9/01/22 ...................................... 210,000 216,497
Garfield, Pitkin and Eagle Counties Reorganized School District No. 1, MBIA Insured,
Pre-Refunded, 6.60%, 12/15/14 ................................................................. 3,600,000 3,954,132
Goldsmith Metropolitan District, Refunding, MBIA Insured, 6.125%, 12/01/12 ....................... 2,000,000 2,077,960
Jefferson County COP, Refunding, MBIA Insured, 6.65%, 12/01/08 ................................... 5,000,000 5,367,950
Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ....................... 170,000 177,630
La Plata County School District No. R-9, Durango City, FGIC Insured, 6.55%, 11/01/12 ............. 490,000 520,385
Morgan County PCR, First Mortgage, Public Service Co., Refunding, Series A,
MBIA Insured, 5.50%, 6/01/12 .................................................................. 1,000,000 1,014,480
Mountain College Residence Hall Revenue Authority, MBIA Insured,
5.625%, 6/01/12 ............................................................................... 1,900,000 1,956,867
5.75%, 6/01/23 ................................................................................ 3,000,000 3,020,190
Parker Water and Sanitation District Water and Sewer Revenue, Refunding,
FGIC Insured, 6.20%, 10/01/15 .................................................................... 275,000 283,685
Postsecondary Educational Facilities Authority Revenue, University of Denver Project,
Refunding, Connie Lee Insured, 6.00%, 3/01/10 ................................................. 1,000,000 1,034,270
Regional Transportation District Sales Tax Revenue, FGIC Insured, 6.25%, 11/01/12 ................ 235,000 249,159
University of Colorado Hospital Authority Revenue,
Refunding, Series A, AMBAC Insured, 5.20%, 11/15/17 ........................................... 5,675,000 5,398,855
Refunding, Series A, AMBAC Insured, 5.25%, 11/15/22 ........................................... 8,800,000 8,260,824
Series A, AMBAC Insured, 5.00%, 11/15/29 ...................................................... 5,000,000 4,413,250
----------
97,952,572
----------
CONNECTICUT .5%
Connecticut State Health and Educational Facilities Authority Revenue,
Danbury Hospital, Series E, MBIA Insured, 6.50%, 7/01/14 ...................................... 2,000,000 2,094,240
Mansfield Nursing Home, AMBAC Insured, 6.00%, 11/01/22 ........................................ 2,450,000 2,522,079
Trinity College, Series D, FGIC Insured, Pre-Refunded, 6.125%, 7/01/24 ........................ 2,000,000 2,178,120
New Haven Air Rights Parking Facility Revenue, Refunding, MBIA Insured, 6.50%, 12/01/15 .......... 2,000,000 2,114,780
----------
8,909,219
----------
DELAWARE .3%
Delaware State EDA Revenue, PCR, Refunding, Series B, AMBAC Insured, 6.75%, 5/01/19 .............. 1,000,000 1,061,060
Delaware State Health Facilities Authority Revenue, Medical Center, MBIA Insured,
Pre-Refunded, 7.00%, 10/01/15 ................................................................. 2,900,000 3,199,309
----------
4,260,369
----------
FLORIDA 2.9%
Bay Medical Center Hospital Revenue, Bay Medical Center Project, Refunding,
AMBAC Insured, 5.65%, 10/01/26 ................................................................ 2,500,000 2,499,875
Cape Coral Franchise Fees Revenue, AMBAC Insured, 5.40%, 12/01/13 ................................ 1,800,000 1,832,706
Celebration CDD, Special Assessment, Series B, MBIA Insured, 5.50%, 5/01/19 ...................... 2,375,000 2,352,295
Dade County Seaport Revenue, Refunding, Series E, MBIA Insured, 8.00%, 10/01/08 .................. 200,000 244,818
Fort Myers Utility Revenue, Refunding, Series A, 6.00%, 10/01/19 ................................. 25,000 25,029
Greater Orlando Aviation Authority Orlando Airport Facilities Revenue, Series B,
FGIC Insured, 5.25%, 10/01/28 ................................................................. 2,500,000 2,381,875
Hillsborough County IDA, PCR, Tampa Electric Co. Project, Refunding, MBIA Insured,
6.25%, 12/01/34 ............................................................................... 1,000,000 1,053,360
Hillsborough County IDAR, University Community Hospital, MBIA Insured, 5.80%, 8/15/24 ............ 3,000,000 3,037,500
Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding,
MBIA Insured, 5.25%, 11/15/25 ................................................................. 1,250,000 1,173,838
Lee County IDA Utilities Revenue, Bonita Springs Utilities Project, Refunding,
MBIA Insured, 6.05%,
11/01/15 ...................................................................................... 1,000,000 1,045,720
11/01/20 ...................................................................................... 1,000,000 1,042,360
Lee County Solid Waste System Revenue, MBIA Insured, 5.375%, 10/01/15 ............................ 2,000,000 1,963,000
Manatee County School Board COP, MBIA Insured, Pre-Refunded, 6.125%, 7/01/21 ..................... 5,000,000 5,484,450
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
FLORIDA (CONT.)
Opa-Locka Capital Improvement Revenue, FGIC Insured, 6.125%, 1/01/24 .............................. $1,000,000 $1,040,510
Orange County Health Facilities Authority Revenue,
Orlando Regional Healthcare, Refunding, Series A, MBIA Insured, 6.00%, 11/01/24 ................ 1,000,000 1,043,990
South Central Nursing, Series A, FSA Insured, 5.50%, 7/01/32 ................................... 3,000,000 2,941,650
Orlando and Orange County Expressway Authority Expressway Revenue, junior lien,
FGIC Insured, 6.50%,
7/01/10 ........................................................................................ 100,000 112,773
7/01/12 ........................................................................................ 225,000 251,888
Orlando Utilities Commission Water and Electric Revenue, Series A, AMBAC Insured,
5.50%, 10/01/26 ................................................................................... 2,535,000 2,499,764
Osceola County School Board COP, Refunding, Series A, AMBAC Insured, 5.50%, 6/01/19 ............... 1,000,000 990,400
Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured,
6.10%, 4/01/17 .................................................................................... 1,000,000 1,038,260
Panama City Water and Sewer Revenue, Refunding and Improvement, AMBAC Insured,
5.625%, 6/01/19 ................................................................................... 1,000,000 1,001,760
Polk County IDAR, Winter Haven Hospital, Series 2, MBIA Insured, 6.25%, 9/01/15 ................... 985,000 1,051,172
Polk County School Board COP, Series A, FSA Insured, 5.00%, 1/01/24 ............................... 5,000,000 4,542,000
Reedy Creek ID, Utilities Revenue, Refunding, Series 1, MBIA Insured, 5.00%, 10/01/19 ............. 3,500,000 3,232,705
Sumter County School District Revenue, Multi-District Loan Program, FSA Insured,
7.15%, 11/01/15 ................................................................................... 250,000 299,768
Sunrise Utilities System Revenue, Refunding, AMBAC Insured, 5.20%, 10/01/22 ....................... 2,000,000 1,901,960
Volusia County Educational Facility Authority Revenue,
Embry Riddle Aeronautical University, Refunding, Series B, 5.25%, 10/15/19 ..................... 3,500,000 3,361,190
----------
49,446,616
----------
GEORGIA 3.8%
Atlanta GO, Refunding, FGIC Insured, 5.00%,
12/01/20 ....................................................................................... 4,775,000 4,398,969
12/01/23 ....................................................................................... 6,000,000 5,465,940
Atlanta Water and Wastewater Revenue, Refunding, Series A, FGIC Insured, 5.00%, 11/01/29 .......... 10,000,000 8,904,700
Brunswick Water and Sewer Revenue, Refunding and Improvement, MBIA Insured, 6.10%, 10/01/14 ....... 1,535,000 1,657,462
Burke County Development Authority PCR, Georgia Power Co. Plant Vogtle,
7th Series, MBIA Insured, 6.625%, 10/01/24 ..................................................... 2,000,000 2,042,520
Refunding, 2nd Series, AMBAC Insured, 5.25%, 5/01/34 ........................................... 5,450,000 5,019,178
Cherokee County Water and Sewage Authority Revenue,
FGIC Insured, 5.00%, 8/01/27 ................................................................... 1,500,000 1,334,970
Refunding, MBIA Insured, 6.90%, 8/01/18 ........................................................ 1,000,000 1,053,680
Columbia County Water and Sewage Revenue, Refunding, AMBAC Insured, 6.25%, 6/01/12 ................ 1,500,000 1,578,510
Fitzgerald Housing Authority Mortgage Revenue, Bridge Creek, Refunding, Series A,
MBIA Insured, 6.50%, 7/01/24 ................................................................... 1,020,000 1,045,918
Macon-Bibb County Urban Development Authority Revenue, MF Housing, Refunding,
Series A, MBIA Insured, 5.55%, 1/01/24 ......................................................... 1,590,000 1,564,846
(b)Medical Center Hospital Authority Revenue, Anticipation Certificates,
Columbus Regional Healthcare System, MBIA Insured, 5.50%, 8/01/19 ................................. 15,000,000 14,557,950
8/01/25 ........................................................................................ 10,000,000 9,625,700
Municipal Electric Authority, Project One, Refunding, Sub Series A, MBIA Insured,
5.375%, 1/01/19 ................................................................................ 5,000,000 4,822,050
Upper Oconee Basin Water Authority Revenue, FGIC Insured, 5.25%, 7/01/27 .......................... 1,340,000 1,256,237
----------
64,328,630
----------
Hawaii 1.7%
Hawaii County GO, Refunding and Improvement, Series A, FGIC Insured, 5.60%,
5/01/12 ........................................................................................ 1,000,000 1,028,270
5/01/13 ........................................................................................ 1,000,000 1,023,930
Hawaii State Airports System Revenue, Second Series 1990, FGIC Insured, 7.50%, 7/01/20 ............ 5,000,000 5,202,250
Hawaii State Department of Budget and Finance Special Purpose Mortgage Revenue,
Hawaiian Electric Co. and Subsidiaries, MBIA Insured, 6.55%, 12/01/22 .......................... 3,000,000 3,196,890
St. Francis Medical Centers, Refunding, FSA Insured, 6.50%, 7/01/22 ............................ 4,000,000 4,240,880
Hawaii State Department of Budget and Finance Special Purpose Revenue,
Hawaiian Electric Co. Project, Series A, MBIA Insured, 5.65%, 10/01/27 ............................ 5,000,000 4,923,650
Series B, MBIA Insured, 5.875%, 12/01/26 ....................................................... 2,000,000 2,008,980
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
HAWAII (CONT.)
Hawaii State Harbor Capital Improvement Revenue, FGIC Insured, 6.40%,
7/01/05 ........................................................................................ $535,000 $568,454
7/01/06 ........................................................................................ 605,000 642,831
7/01/07 ........................................................................................ 610,000 647,308
Honolulu City and County GO, Series C, FGIC Insured, 5.00%, 7/01/20 ............................... 6,250,000 5,677,563
-----------
29,161,006
-----------
IDAHO .1%
Boise State University Revenues, Student Fee, MBIA Insured, Pre-Refunded,
6.50%, 4/01/19 ................................................................................. 1,000,000 1,093,060
-----------
ILLINOIS 3.2%
Aurora SFMR, GNMA Secured, AMBAC Insured, 7.80%, 12/01/15 .......................................... 265,000 271,622
Blue Island Waterworks and Sewer Revenue, MBIA Insured, 5.55%, 12/01/24 ........................... 2,270,000 2,186,305
Chicago Board of Education GO, Chicago School Reform, Series A, AMBAC Insured, 5.25%, 12/01/30 .... 2,000,000 1,815,280
Chicago Board of Education Lease COP, Refunding, Series A, MBIA Insured, 6.25%, 1/01/09 ........... 320,000 346,771
Chicago Heights GO, MBIA Insured, Pre-Refunded, 7.40%, 12/01/03 ................................... 100,000 106,733
Cicero GO, FSA Insured, 6.90%, 12/01/12 ........................................................... 1,500,000 1,624,365
Cook County Community College District No. 508 COP, FGIC Insured,
8.50%, 1/01/02 ................................................................................. 7,470,000 8,139,910
8.75%, 1/01/05 ................................................................................. 5,000,000 5,936,300
Illinois Health Facilities Authority Revenue,
Community Provider Pooled Loan Program, Series A, FSA Insured, 7.35%, 8/15/10 .................. 4,452,000 4,736,794
Michael Reese Hospital, Series A, FSA Insured, ETM, 7.60%, 2/15/05 ............................. 4,280,000 4,631,260
Northwestern Medical Facility Foundation, Refunding, MBIA Insured, 5.125%, 11/15/28 ............ 5,000,000 4,475,750
Refunding, Series B, MBIA Insured, ETM, 7.90%, 8/15/03 ......................................... 403,000 441,837
Series 1990, FSA Insured, 7.75%, 8/15/10 ....................................................... 2,525,000 2,642,514
Series 1990, FSA Insured, ETM, 7.75%, 8/15/10 .................................................. 105,000 128,321
Series B, MBIA Insured, 7.90%, 8/15/03 ............................................................ 1,695,000 1,701,187
Silver Cross Hospital, MBIA Insured, Pre-Refunded, 7.00%, 8/15/21 .............................. 1,000,000 1,071,880
Illinois State COP, FSA Insured, Pre-Refunded, 6.95%, 7/01/13 ..................................... 5,750,000 6,258,013
Macon County and Decatur COP, Decatur Public Building Commission, FGIC Insured,
6.50%, 1/01/06 ................................................................................. 300,000 326,670
Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue,
McCormick Place Expansion Project, Refunding,Series A, AMBAC Insured, 5.25%, 6/15/27 ........... 4,225,000 3,922,237
Onterie Center HFC, Mortgage Revenue, Refunding, MBIA Insured, 7.05%, 7/01/27 ..................... 2,000,000 2,098,360
Regional Transportation Authority Revenue, Series A, AMBAC Insured, 7.20%, 11/01/20 ............... 300,000 352,968
-----------
53,215,077
-----------
INDIANA .2%
Fort Wayne Hospital Authority Hospital Revenue, Ancillary System Inc.,
Parkview Memorial Hospital, Series A, FGIC Insured, Pre-Refunded, 7.50%, 11/15/11 .............. 250,000 256,885
Indiana Health Facility Financing Authority Hospital Revenue, Community Hospital Project,
Refunding and Improvement, MBIA Insured, 6.40%, 5/01/12 ........................................ 250,000 264,720
Indianapolis Gas Utility Revenue, Refunding, Series B, FGIC Insured, 4.00%, 6/01/15 ............... 500,000 421,170
Jasper County PCR, Northern Indiana Public Service Co., Refunding,
MBIA Insured, 7.10%, 7/01/17 ................................................................... 500,000 527,215
Patoka Lake Regional Water and Sewer District Waterworks Revenue, Series A,
AMBAC Insured, Pre-Refunded, 6.45%, 1/01/15 .................................................... 1,500,000 1,624,275
Rockport PCR, Michigan Power Co., Refunding, Series B, FGIC Insured, 7.60%, 3/01/16 ............... 185,000 196,274
-----------
3,290,539
-----------
IOWA .1%
Davenport Hospital Revenue, St. Lukes Hospital, Series A, AMBAC Insured,
Pre-Refunded, 7.40%, 7/01/20 ................................................................... 200,000 209,978
Greater Kentucky Housing Assistance Corp. Mortgage Revenue, Logan Park Project,
Refunding, Series B, MBIA Insured, 6.50%, 1/01/24 .............................................. 2,110,000 2,167,244
-----------
2,377,222
-----------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
KANSAS .5%
Burlington PCR, Kansas Gas and Electric Co. Project, Refunding, MBIA Insured,
7.00%, 6/01/31 .................................................................................. $3,350,000 $3,539,644
Cowley and Shawnee Counties SFMR, AMBAC Insured, GNMA Secured, 7.35%, 12/01/11 ..................... 795,000 824,820
Kansas State Development Finance Authority Health Facility Revenue, MBIA Insured,
5.80%, 11/15/21 ................................................................................. 1,330,000 1,357,292
Wichita Hospital Revenue, St., Francis, Refunding and Improvement, MBIA Insured,
6.25%, 10/01/10 ................................................................................. 2,000,000 2,120,080
Wichita Water and Sewer Utility Revenue, Refunding and Improvement, Series B,
FGIC Insured, Pre-Refunded, 6.00%, 10/01/12 ..................................................... 1,000,000 1,033,980
----------
8,875,816
----------
KENTUCKY 1.9%
Jefferson County Capital Projects Corp. Lease Revenue, MBIA Insured,
5.375%, 6/01/22 ................................................................................. 2,000,000 1,942,340
5.50%, 6/01/28 ................................................................................. 2,750,000 2,664,860
Jefferson County Health Facilities Revenue,
Alliant Health System Inc., Refunding, MBIA Insured, 5.125%, 10/01/27 ........................... 10,000,000 9,056,600
Jewish Hospital Healthcare Services Inc., AMBAC Insured, 6.55%, 5/01/22 ......................... 1,000,000 1,053,060
Jefferson County Health System Revenue, Alliant Health System Inc., MBIA Insured,
5.20%, 10/01/28 ................................................................................. 7,000,000 6,486,760
Kenton County Water District No. 001 Waterworks Revenue, Series B, FGIC Insured,
5.70%, 2/01/20 .................................................................................. 1,250,000 1,265,025
Kentucky Economic Development Finance Authority Hospital Facilities Revenue,
Baptist Healthcare System, Refunding, MBIA Insured, 5.00%, 8/15/24 .............................. 2,000,000 1,792,740
St. Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%, 12/01/22 ................... 2,375,000 2,447,794
Kentucky Economic Development Finance Authority Medical Center Revenue,
Ashland Hospital Corp., Refunding and Improvement, Series A, FSA Insured, 6.125%, 2/01/12 ....... 1,000,000 1,055,600
Louisville and Jefferson County Metropolitan Sewer District Sewer and Drain System Revenue,
Series A, AMBAC Insured, Pre-Refunded, 6.75%, 5/15/25 ........................................... 2,000,000 2,240,120
Northern Kentucky University COP, Student Housing Facilities, FSA Insured,
Pre-Refunded, 7.25%, 1/01/12 .................................................................... 2,000,000 2,119,160
----------
32,124,059
----------
LOUISIANA .3%
Jefferson Parish Hospital Service District No. 2 Hospital Revenue, FSA Insured,
5.00%, 7/01/28 .................................................................................. 5,000,000 4,429,900
New Orleans GO, Public Improvement, FGIC Insured, Pre-Refunded, 7.50%, 9/01/21 ..................... 500,000 544,215
4,974,115
MAINE .5%
Maine State Health and Higher Educational Facilities Authority Revenue,
Eastern Maine Health Care, FGIC Insured, Pre-Refunded, 6.625%, 10/01/11 ......................... 2,000,000 2,135,460
Series B, FSA Insured, Pre-Refunded, 7.00%, 7/01/24 ............................................. 2,000,000 2,248,760
Series C, FSA Insured, 6.20%, 7/01/25 ........................................................... 2,015,000 2,107,468
Old Orchard Beach GO, MBIA Insured, Pre-Refunded, 6.65%,
9/01/11 ......................................................................................... 1,180,000 1,267,827
9/01/12 ......................................................................................... 535,000 584,578
----------
8,344,093
----------
MARYLAND .4%
Maryland State CDA, Department of Housing and Community Development,
Infrastructure Financing, Series A, AMBAC Insured, 6.625%, 6/01/12 .............................. 245,000 259,607
Pre-Refunded, 6.625%, 6/01/12 ................................................................... 1,755,000 1,894,452
Pre-Refunded, 6.70%, 6/01/22 .................................................................... 820,000 886,732
Maryland State Health and Higher Educational Facilities Authority Revenue,
University of Maryland Medical System, Refunding, FGIC Insured, 5.00%, 7/01/20 .................. 3,000,000 2,762,790
Series B, FGIC Insured, 7.00%, 7/01/22 .......................................................... 200,000 232,644
----------
6,036,225
----------
MASSACHUSETTS 7.2%
Boston Water and Sewer Commission Revenue, Series A, FGIC Insured, Pre-Refunded,
6.00%, 11/01/21 ................................................................................. 3,700,000 3,846,076
Central Berkshire Religious School District GO, Series B, FSA Insured, 5.125%, 3/01/18 ............. 1,125,000 1,058,996
Massachusetts Municipal Wholesale Electric Co. Power Supply System Revenue,
Refunding, Series A, AMBAC Insured, 6.00%, 7/01/18 .............................................. 4,455,000 4,560,138
Massachusetts State Health and Educational Facilities Authority Revenue,
Bay State Medical Center, Series E, FSA Insured, 6.00%, 7/01/26 ................................. 10,000,000 10,156,400
Beverly Hospital, Series E, MBIA Insured, Pre-Refunded, 7.70%, 7/01/20 .......................... 1,500,000 1,579,110
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
MASSACHUSETTS (CONT.)
Massachusetts State Health and Educational Facilities Authority Revenue, (cont.)
Boston Medical Center, Series A, MBIA Insured, 5.00%, 7/01/29 ................................ $2,785,000 $2,441,972
Caregroup Issue, Refunding, Series A, MBIA Insured, 5.00%, 7/01/18 ........................... 2,000,000 1,837,320
Caregroup Issue, Refunding, Series A, MBIA Insured, 5.00%, 7/01/25 ........................... 5,000,000 4,412,750
Central New England Health, Series B, AMBAC Insured, 5.20%, 8/01/28 .......................... 5,000,000 4,568,500
Harvard Pilgrim Health, Series A, FSA Insured, 5.00%, 7/01/18 ................................ 3,000,000 2,755,980
Lahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 7/01/23 ......................... 1,000,000 947,870
Massachusetts General Hospital, Series F, AMBAC Insured, Pre-Refunded, 6.25%, 7/01/20 ........ 9,220,000 9,994,111
Massachusetts Medical Center, Series A, AMBAC Insured, Pre-Refunded, 7.10%, 7/01/21 .......... 1,000,000 1,071,350
McLean Hospital, Series C, FGIC Insured, Pre-Refunded, 6.625%, 7/01/15 ....................... 1,085,000 1,173,069
Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ............................. 8,500,000 9,042,215
Partners Healthcare System, Series A, MBIA Insured, 5.375%, 7/01/24 .......................... 12,200,000 11,521,192
Simmons College, Series C, MBIA Insured, 5.125%, 10/01/28 .................................... 8,000,000 7,224,480
Stonehill College, Series E, MBIA Insured, 6.60%, 7/01/20 .................................... 1,120,000 1,192,206
Stonehill College, Series E, MBIA Insured, Pre-Refunded, 6.60%, 7/01/20 ...................... 880,000 950,849
Youville Hospital, Refunding, Series B, MBIA Insured, 6.00%, 2/15/25 ......................... 2,000,000 2,036,240
Massachusetts State Industrial Finance Agency Revenue,
Babson College, Series A, MBIA Insured, Pre-Refunded, 6.50%, 10/01/22 ........................ 3,000,000 3,248,130
Combined Jewish Philanthropies, Refunding, Series A, AMBAC Insured, 6.375%, 2/01/15 .......... 5,000,000 5,355,450
Suffolk University, AMBAC Insured, 5.25%, 7/01/17 ............................................ 3,000,000 2,895,420
Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ................................. 690,000 704,966
Brandeis University, Series C, MBIA Insured, Pre-Refunded, 6.80%, 10/01/19 ................... 4,310,000 4,406,846
Massachusetts State Port Authority Revenue,
Refunding, Series A, FGIC Insured, 6.00%, 7/01/23 ............................................ 4,000,000 4,112,240
Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/20 ........................... 1,590,000 1,562,127
Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/21 ........................... 1,560,000 1,526,304
Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/23 ........................... 2,155,000 2,098,302
Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/24 ........................... 2,910,000 2,831,983
Massachusetts State Turnpike Authority Metropolitan Highway System Revenue, sub. lien,
Refunding, Series B, MBIA Insured, 5.125%, 1/01/37 ........................................... 2,100,000 1,869,819
Massachusetts State Water Resources Authority Revenue, Series A, FGIC Insured,
Pre-Refunded, 5.50%, 11/01/21 ................................................................ 3,000,000 3,175,200
Monson GO, School District, Series 1990, MBIA Insured, Pre-Refunded, 7.70%, 10/15/10 ............ 2,000,000 2,122,260
Palmer GO, Series B, AMBAC Insured, Pre-Refunded, 7.70%, 10/01/10 ............................... 2,300,000 2,443,750
-----------
120,723,621
-----------
MICHIGAN 4.2%
Chippewa Valley Schools GO, Refunding, AMBAC Insured, 5.00%, 5/01/27 ............................ 1,000,000 896,680
Detroit Sewage Disposal Revenue, MBIA Insured, 5.00%, 7/01/25 ................................... 6,000,000 5,375,700
Ecorse Public School District, FGIC Insured, 5.50%, 5/01/27 ..................................... 7,250,000 6,999,875
Jackson County Hospital Finance Authority Hospital Revenue, W.A. Foote Memorial Hospital,
Series A, AMBAC Insured, 5.25%, 6/01/17 ...................................................... 750,000 721,463
Kalamazoo Hospital Finance Authority Hospital Facility Revenue, Bronson Methodist Hospital,
Refunding and Improvement, MBIA Insured, 5.875%, 5/15/26 ..................................... 5,500,000 5,579,805
Series A, MBIA Insured, Pre-Refunded, 6.375%, 5/15/17 ........................................ 2,000,000 2,168,840
Kent Hospital Finance Authority Health Care Revenue, Butterworth Health System, Series A,
MBIA Insured, Pre-Refunded, 5.625%, 1/15/26 .................................................. 10,000,000 10,652,100
Marquette City Hospital Finance Authority Revenue, Marquette General Hospital,
Refunding, Series D, FSA Insured, 6.10%, 4/01/19 ............................................. 5,000,000 5,223,550
Michigan State Hospital Finance Authority Revenue,
Hospital Botsford Obligation, Refunding, Series A, MBIA Insured, 5.25%, 2/15/22 .............. 2,000,000 1,877,120
Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.125%, 8/15/25 .................. 6,725,000 6,077,988
Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.00%, 8/15/31 ................... 10,000,000 8,725,100
St. John's Hospital and Medical Center, AMBAC Insured, 5.25%, 5/15/26 ........................ 3,000,000 2,784,720
St. John's Hospital, Refunding, Series A, AMBAC Insured, 6.00%, 5/15/13 ...................... 2,500,000 2,588,625
Michigan State Strategic Fund Limited Obligation Revenue, Detroit Edison Co.,
Pollution Project, Refunding, FGIC Insured, 6.875%, 12/01/21 ................................. 200,000 211,384
Series BB, AMBAC Insured, 7.00%, 5/01/21 ..................................................... 250,000 293,230
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
MICHIGAN (CONT.)
Saginaw Valley State University Revenue, AMBAC Insured, 5.30%, 7/01/28 ............................. $3,400,000 $3,203,752
Yale Public Schools District GO, FSA Insured, 5.375%, 5/01/27 ...................................... 3,845,000 3,646,175
Zeeland Public Schools GO, Refunding, MBIA Insured, 5.25%, 5/01/24 ................................. 3,180,000 2,979,501
----------
70,005,608
----------
MINNESOTA 2.3%
Eden Prairie MFHR, Olympic Ridge, Refunding, Series A, GNMA Secured, 6.25%, 1/20/31 ................ 2,000,000 2,064,400
Minneapolis and St. Paul Metropolitan Airport Commission Airport Revenue, Series A,
FGIC Insured, 5.125%, 1/01/25 ................................................................... 5,000,000 4,648,300
Minnesota Agriculture and Economic Development Board Revenue, Health Care System,
Fairview Hospital, Refunding, Series A, MBIA Insured, 5.75%, 11/15/26 ........................... 5,000,000 5,007,150
Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured, 6.00%, 2/01/22 ............. 2,085,000 2,124,907
Northern Municipal Power Agency Electric System Revenue, Refunding, Series B,
AMBAC Insured, 5.50%, 1/01/18 ................................................................... 2,100,000 2,085,447
Southern Minnesota Municipal Power Agency Power Supply System Revenue, Series A,
AMBAC Insured, 5.75%, 1/01/18 ................................................................... 2,870,000 2,894,596
St. Louis Park Health Care Facilities Revenue, Health System of Minnesota Obligated Group,
Refunding, Series A, AMBAC Insured, 5.20%, 7/01/16 .............................................. 8,200,000 7,905,456
Washington County GO,
Governmental Housing, Scandia II Project, Series B, FGIC Insured, 6.30%, 7/01/24 ................ 1,200,000 1,239,672
Raymie Johnson Apartments, Refunding, Series C, FGIC Insured, 6.30%, 1/01/20 .................... 2,415,000 2,498,607
Western Minnesota Municipal Power Agency Power Supply Revenue, Series A, MBIA Insured,
6.125%, 1/01/16 ................................................................................. 8,350,000 8,373,965
----------
38,842,500
----------
MISSISSIPPI
Harrison County Wastewater Management District Revenue, Wastewater Treatment Facilities,
Refunding, Series A, FGIC Insured, 8.50%, 2/01/13 ............................................... 200,000 264,992
----------
MISSOURI .9%
Kansas City IDA, Mortgage Revenue, Presidential Gardens, Refunding, Series A,
FNMA Insured, 5.55%, 8/01/25 .................................................................... 1,000,000 982,420
Missouri State HDC, SFMR, Series B, GNMA Secured, 7.75%, 6/01/22 ................................... 730,000 751,951
Missouri State Health and Educational Facilities Authority Health Facilities Revenue,
Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 ................................. 1,000,000 1,053,710
Richmond Heights COP, Capital Improvement Projects, Series A, MBIA Insured,
5.30%, 8/15/17 .................................................................................. 2,000,000 1,943,560
St. Charles County Public Facilities Authority Leasehold Revenue, FGIC Insured,
6.375%, 3/15/07 ................................................................................. 2,850,000 3,004,271
St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 9/01/19 ................................... 265,000 268,315
St. Louis Municipal Finance Corp. Leasehold Revenue,
City Justice Center, Refunding, Series A, AMBAC Insured, 5.95%, 2/15/16 ......................... 2,000,000 2,076,520
Refunding and Improvement, FGIC Insured, Pre-Refunded, 6.25%, 2/15/12 ........................... 2,025,000 2,182,363
St. Louis School District GO, Refunding, FGIC Insured, 6.00%, 4/01/12 .............................. 2,950,000 3,068,915
----------
15,332,025
----------
MONTANA 1.2%
Forsyth County PCR, Puget Sound Power and Light Co. Project, AMBAC Insured,
6.80%, 3/01/22 .................................................................................. 4,475,000 4,734,326
Forsyth PCR, Washington Water Co., Refunding, Series A, MBIA Insured,
7.125%, 12/01/13 ................................................................................ 5,000,000 5,129,300
Helena Water Revenue, Series C, FGIC Insured, 6.65%, 11/01/12 ...................................... 750,000 801,878
Montana State Board Workers Compensation Investment Program, MBIA Insured,
ETM, 6.875%, 6/01/20 ............................................................................ 8,500,000 8,953,305
Montana State University Revenue, Higher Education Facilities, Acquisition and Improvement,
Series C, MBIA Insured, 6.00%, 11/15/14 ......................................................... 1,000,000 1,001,150
----------
20,619,959
----------
NEBRASKA 1.2%
Lancaster County Hospital Authority Revenue, Bryan Memorial Hospital Project No. 1,
MBIA Insured, ETM, 6.70%, 6/01/22 ............................................................... 2,500,000 2,768,450
Series A, MBIA Insured, 5.375%, 6/01/19 ......................................................... 2,715,000 2,614,083
Series B, MBIA Insured, 5.375%, 6/01/17 ......................................................... 5,000,000 4,852,150
Lincoln Hospital Revenue, Lincoln General Hospital, Series A, FSA Insured,
Pre-Refunded, 6.20%, 12/01/14 ................................................................... 2,000,000 2,100,020
Municipal Energy Agency of Nebraska Power Supply System Revenue, Refunding, Series A,
AMBAC Insured, 6.00%,
4/01/15 ......................................................................................... 2,000,000 2,083,380
4/01/17 ......................................................................................... 1,350,000 1,402,326
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
NEBRASKA (CONT.)
Nebraska Educational Finance Authority Revenue, Creighton University Project, AMBAC Insured,
5.95%, 1/01/11 ................................................................................... $1,000,000 $1,056,350
Nebraska Investment Finance Authority Health Facilities Revenue, Children's Healthcare Services,
AMBAC Insured, 5.50%, 8/15/27 .................................................................... 2,000,000 1,922,740
Nebraska Investment Finance Authority SFMR, Refunding, Series B, FGIC Insured, 8.00%, 7/15/17 ....... 1,575,000 1,591,947
----------
20,391,446
----------
NEVADA .5%
Carson City Hospital Revenue, Series B, AMBAC Insured, 5.40%, 3/01/17 ............................... 1,000,000 971,360
Clark County GO, Series A, AMBAC Insured, 6.50%, 6/01/17 ............................................ 250,000 278,070
Clark County School District, Series A, MBIA Insured, 7.00%, 6/01/10 ................................ 4,000,000 4,618,720
Sparks GO, AMBAC Insured, Pre-Refunded, 7.50%, 10/01/09 ............................................. 1,695,000 1,733,917
----------
7,602,067
----------
NEW HAMPSHIRE 1.2%
New Hampshire Higher Education and Health Facilities Authority Revenue,
Concord Hospital, Refunding, AMBAC Insured, 6.00%, 10/01/26 ...................................... 4,300,000 4,411,628
Mary Hitchcock Memorial Hospital, FGIC Insured, 5.75%, 8/15/23 ................................... 11,000,000 11,030,800
University System, Refunding, MBIA Insured, 6.25%, 7/01/20 ....................................... 4,000,000 4,202,800
----------
19,645,228
----------
NEW JERSEY 1.2%
Essex County Improvement Authority Lease, Jail and Youth House Projects,
AMBAC Insured, Pre-Refunded, 7.00%, 12/01/24 ..................................................... 3,000,000 3,397,140
Refunding, AMBAC Insured, 5.35%, 12/01/24 ........................................................ 4,000,000 3,834,080
Essex County Improvement Authority Revenue, Garden State Cancer Center Project,
AMBAC Insured, 6.00%, 12/01/20 ................................................................... 2,525,000 2,597,417
Mantua Township School District COP, MBIA Insured, Pre-Refunded, 7.25%, 6/30/10 ..................... 1,700,000 1,782,603
Middlesex County COP, MBIA Insured, 5.30%, 6/15/29 .................................................. 3,575,000 3,356,246
Mount Laurel Township Municipal Utilities Authority System Revenue, Refunding,
Series A, MBIA Insured, 6.00%, 7/01/15 ........................................................... 2,000,000 2,057,920
New Jersey Health Care Facilities Financing Authority Revenue,
Muhlenberg Regional Medical Center, Series B, AMBAC Insured, 8.00%, 7/01/18 ...................... 3,000,000 3,045,900
New Jersey State Housing and Mortgage Finance Agency Revenue, Home Buyer, Series C,
MBIA Insured, 7.375%, 10/01/17 ................................................................... 485,000 495,384
New Jersey State Turnpike Authority Revenue, Refunding, Series C, AMBAC Insured,
6.50%, 1/01/16 ................................................................................... 300,000 334,629
----------
20,901,319
----------
NEW MEXICO .5%
Farmington PCR, Public Service Co. of New Mexico, Refunding, Series A, AMBAC Insured,
6.375%, 12/15/22 ................................................................................. 5,000,000 5,268,550
Gallup PCR, Plains Electric Generation, Refunding, MBIA Insured, 6.65%, 8/15/17 ..................... 2,000,000 2,032,680
New Mexico Mortgage Finance Authority SFM Program, Series C, FGIC Insured,
8.625%, 7/01/17 .................................................................................. 650,000 656,747
----------
7,957,977
----------
NEW YORK 7.4%
Central Square GO, Central School District, FGIC Insured, 6.50%, 6/15/10 ............................ 900,000 1,007,406
Dutchess County IDA, Civic Facilities Revenue, Bard College Project, AMBAC Insured,
5.375%, 6/01/27 .................................................................................. 3,945,000 3,782,900
New York City GO, Series C, Sub Series C-1, MBIA Insured, Pre-Refunded, 6.625%, 8/01/12 ............. 105,000 113,239
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Series A, MBIA Insured, Pre-Refunded, 7.25%, 6/15/15 ............................................. 2,000,000 2,085,380
New York City Trust Cultural Resources Revenue, New York Botanical Garden, MBIA Insured,
5.80%, 7/01/26 ................................................................................... 2,000,000 2,024,900
New York State Dormitory Authority Revenue,
Brooklyn Law School, FSA Insured, 6.40%, 7/01/11 ................................................. 4,000,000 4,192,360
City University, Series C, FGIC Insured, 7.00%, 7/01/14 .......................................... 6,110,000 6,373,524
City University, Series C, FGIC Insured, Pre-Refunded, 7.00%, 7/01/14 ............................ 2,545,000 2,664,844
Mount Sinai School of Medicine, Refunding, MBIA Insured, 6.75%, 7/01/15 .......................... 1,500,000 1,577,715
Pace University, MBIA Insured, 5.70%, 7/01/22 .................................................... 7,500,000 7,578,000
Pace University, Refunding, MBIA Insured, 5.75%, 7/01/26 ......................................... 2,500,000 2,527,825
Pooled Capital Program, FGIC Insured, 7.80%, 12/01/05 ............................................ 1,010,000 1,026,110
St. John's University, MBIA Insured, 5.70%, 7/01/26 .............................................. 15,000,000 15,102,000
Vassar Brothers Hospital, FSA Insured, 5.375%, 7/01/25 ........................................... 4,000,000 3,799,120
New York State Energy Research and Development Authority Electric Facilities Revenue,
Consolidated Edison Project, Series A, MBIA Insured, 6.75%, 1/15/27 .............................. 5,000,000 5,162,550
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
NEW YORK (CONT.)
New York State Energy Research and Development Authority PCR,
Central Hudson Gas, Series A, FGIC Insured, Pre-Refunded, 7.375%, 10/01/14 ....................... $2,000,000 $2,064,780
Niagara Mohawk Power Corp., Refunding, Series A, FGIC Insured, 6.625%, 10/01/13 .................. 3,500,000 3,691,695
Rochester Gas and Electric Project, Refunding, Series B, MBIA Insured, 6.50%, 5/15/32 ............ 5,000,000 5,249,650
New York State Medical Care Facilities Finance Agency Revenue, North Shore University Hospital,
Mortgage Project, Series A, MBIA Insured, Pre-Refunded, 7.20%, 11/01/20 .......................... 3,000,000 3,171,300
New York State Tollway Authority General Revenue,
Series B, MBIA Insured, 5.00%, 1/01/20 ........................................................... 6,635,000 6,072,153
Series C, FGIC Insured, Pre-Refunded, 6.00%, 1/01/25 ............................................. 7,815,000 8,460,441
Niagara Frontier Transportation Authority Airport Revenue, Greater Buffalo International Airport,
Series A, AMBAC Insured, 6.25%, 4/01/24 .......................................................... 9,000,000 9,367,830
Port Authority of New York and New Jersey Revenue, Consolidated,
102nd Series, MBIA Insured, 5.625%, 10/15/17 ..................................................... 5,000,000 5,062,750
102nd Series, MBIA Insured, 5.875%, 10/15/27 ..................................................... 10,000,000 10,291,000
109th Series, FGIC Insured, 5.375%, 7/15/22 ...................................................... 10,000,000 9,748,900
Upper Mohawk Valley Regional Water Finance Authority Water System Revenue, Refunding,
Series A, FSA Insured, 5.125%, 10/01/26 .......................................................... 1,495,000 1,363,619
-----------
123,561,991
-----------
NORTH CAROLINA 1.9%
Asheville Water System Revenue, FGIC Insured, 5.70%, 8/01/25 ........................................ 1,000,000 1,009,680
Catawba County Hospital Revenue, Catawba Memorial Hospital Project, Refunding,
AMBAC Insured, 5.00%, 10/01/17 ................................................................... 1,125,000 1,041,593
New Hanover County Hospital Revenue, New Hanover Regional Medical Center Project,
AMBAC Insured, 5.75%, 10/01/26 ................................................................... 1,150,000 1,156,394
MBIA Insured, 5.00%, 10/01/28 .................................................................... 7,000,000 6,235,180
North Carolina Medical Care Commission Health Care Facilities Revenue, Novant Health Project,
Series B, MBIA Isured, 5.00%, 10/01/28 ........................................................... 11,300,000 10,065,362
North Carolina Medical Care Commission Hospital Revenue,
Rex Healthcare Project, AMBAC Insured, 5.00%, 6/01/17 ............................................ 5,000,000 4,617,300
Wyne Memorial Hospital Project, Refunding, AMBAC Insured, 5.00%, 10/01/21 ........................ 5,000,000 4,545,750
North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue, MBIA Insured,
6.50%, 1/01/10 ................................................................................... 80,000 82,024
ETM, 6.50%, 1/01/10 .............................................................................. 20,000 21,938
Wilmington COP, Series A, MBIA Insured, 5.35%, 6/01/24 .............................................. 3,300,000 3,168,627
-----------
31,943,848
-----------
NORTH DAKOTA .3%
Grand Forks Health Care System Revenue, Altru Health System Obligation Group,
MBIA Insured, 5.625%, 8/15/27 .................................................................... 5,500,000 5,419,810
North Dakota State Building Authority Revenue, Refunding, Series A, AMBAC Insured, 6.75%, 6/01/11 ... 300,000 313,383
-----------
5,733,193
-----------
OHIO 4.1%
Clermont County Building and Road Improvement, Refunding, AMBAC Insured, 5.60%, 9/01/14 ............. 2,000,000 2,032,520
Cleveland Airport Systems Revenue, Series A, FSA Insured, 5.125%, 1/01/27 ........................... 6,000,000 5,424,840
Cleveland Waterworks Revenue,
Refunding and Improvement, Series I, FSA Insured, 5.00%, 1/01/23 ................................. 2,750,000 2,499,805
Series F, AMBAC Insured, Pre-Refunded, 6.50%, 1/01/11 ............................................ 1,625,000 1,733,826
Cuyahoga County Hospital Revenue, University Hospitals Health System Inc.,
Refunding, AMBAC Insured, 5.50%, 1/15/30 ............................................................ 5,000,000 4,821,100
Elyria GO, FGIC Insured, 5.40%, 12/01/17 ............................................................ 2,400,000 2,340,000
Hamilton County Sales Tax, Hamilton County Football, Project B, MBIA Insured, 5.00%, 12/01/27 ....... 3,250,000
2,911,285
Hamilton Wastewater System Revenue, Series A, FSA Insured, 5.15%, 10/15/17 .......................... 3,015,000 2,874,803
Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ....................... 1,750,000 1,821,890
Lucas County Hospital Revenue, Promedia Healthcare Obligation Group, AMBAC Insured,
5.375%, 11/15/29 ................................................................................. 5,000,000 4,752,900
Medina City School District GO, FGIC Insured, 5.25%, 12/01/28 ....................................... 7,500,000 6,971,400
Ohio HFA, SFMR, Series D, GNMA Secured, 7.05%, 9/01/16 .............................................. 2,915,000 3,012,886
Ohio Municipal Electric Generation Agency Joint Venture 5, Certificates of Beneficial Interest,
AMBAC Insured, 5.375%, 2/15/24 ................................................................... 5,500,000 5,386,260
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
OHIO (CONT.)
Ohio State Turnpike Commission Turnpike Revenue, Series A, MBIA Insured, Pre-Refunded,
5.50%, 2/15/26 ........................................................................................$15,900,000 $16,835,874
University of Cincinnati COP, University Center Project, MBIA Insured, 5.125%, 6/01/24 ................ 2,950,000 2,737,276
West Holmes Local School District GO, MBIA Insured, 5.375%, 12/01/17 .................................. 3,100,000 3,013,727
----------
69,170,392
----------
OKLAHOMA .4%
Grady County HFA, SFMR, Refunding, Series A, FGIC Insured, 6.70%, 1/01/12 ............................. 595,000 618,979
McGee Creek Authority Water Revenue, MBIA Insured, 6.00%, 1/01/23 ..................................... 300,000 313,890
Muskogee County, HFAR, SFMR, Refunding, Series A, FGIC Insured, 7.60%, 12/01/10 ....................... 290,000 297,746
Oklahoma State Turnpike Authority Turnpike Revenue, First Senior, Series A, AMBAC Insured,
6.00%, 1/01/12 ..................................................................................... 2,000,000 2,097,040
Pottawatomie County Development Authority Water Revenue, North Deer Creek Reservoir Project,
AMBAC Insured, Pre-Refunded, 7.375%, 7/01/26 ....................................................... 250,000 262,423
Tulsa County Home Finance Authority Mortgage Revenue, Series D, GNMA Secured, 6.95%, 12/01/22 ......... 230,000 237,349
Tulsa Industrial Authority Revenue, Holland Hall School Project, FSA Insured,
Pre-Refunded, 6.75%, 12/01/14 ......................................................................... 3,270,000 3,665,081
----------
7,492,508
----------
OREGON 1.9%
Chemeketa Community College District, FGIC Insured, Pre-Refunded, 5.95%, 6/01/16 ...................... 3,000,000 3,214,350
Clackamas Community College District, MBIA Insured, Pre-Refunded, 5.80%, 6/01/26 ...................... 2,500,000 2,657,175
Deschutes and Jefferson Counties School District No. 2-J, Redmond, MBIA Insured, 5.60%, 6/01/09 ....... 1,500,000
1,528,725
Josephine County School District No. 7, FGIC Insured, Pre-Refunded, 5.70%, 6/01/13 .................... 5,000,000 5,141,200
Medford Hospital Facilities Authority Revenue, Asante Health System, Series A, MBIA Insured,
5.00%, 8/15/24 ..................................................................................... 2,250,000 2,047,163
Northern Wasco County Peoples Utilities District Electric Revenue, FGIC Insured, 5.625%, 12/01/22 ..... 1,000,000
1,008,480
Ontario Catholic Health Revenue, Holy Rosary Medical Center, MBIA Insured, 5.50%, 11/15/12 ............ 700,000 716,163
Oregon Health Sciences University Revenue, Series B, MBIA Insured, 5.25%, 7/01/15 ..................... 1,500,000 1,482,420
Oregon State Department of Administrative Services COP, Series A,
AMBAC Insured, Pre-Refunded, 5.80%, 5/01/24 ........................................................ 5,000,000 5,351,750
MBIA Insured, 5.70%, 5/01/17 ....................................................................... 1,000,000 1,019,790
Port of Portland International Airport Revenue, Portland International Airport, Series 11,
FGIC Insured, 5.625%, 7/01/26 ......................................................................... 1,000,000 974,920
Washington County Unified Sewer Agency Revenue,
Senior lien, FGIC Insured, 5.50%, 10/01/16 ......................................................... 1,845,000 1,854,077
Senior lien, Series A, AMBAC Insured, Pre-Refunded, 6.125%, 10/01/12 ............................... 1,000,000 1,073,930
Western Lane Hospital District Hospital Facilities Authority Revenue,
Sisters of St. Joseph of Peace Health and Hospital Services, Refunding, MBIA Insured,
5.875%, 8/01/12 .................................................................................... 3,000,000 3,135,600
----------
31,205,743
----------
PENNSYLVANIA 1.7%
Beaver County GO, Series A, MBIA Insured, Pre-Refunded, 5.90%, 10/01/26 ............................... 2,000,000 2,143,000
Cambria County HDA, Hospital Revenue, Conemaugh Valley Memorial Hospital, Refunding,
Series B, Pre-Refunded, Connie Lee Insured, 6.375%, 7/01/18 ........................................ 5,000,000 5,352,050
Lehigh County General Purpose Authority Revenue, Hospital Healtheast Inc., Refunding,
Series A, MBIA Insured, 7.00%, 7/01/15 ............................................................. 100,000 103,753
Montgomery County IDAR, PCR, Philadelphia Electric Co., Series B, MBIA Insured, 6.70%,
12/01/21 ........................................................................................... 8,000,000 8,484,000
Pennsylvania Convention Center Authority Revenue, Series A, FGIC Insured, ETM, 6.00%, 9/01/19 ......... 500,000 533,870
Pennsylvania State Turnpike Oil Commission Franchise Tax Revenue, Refunding, Series P,
AMBAC Insured, 6.00%, 12/01/17 ..................................................................... 500,000 518,110
Philadelphia Airport Revenue, Philadelphia Airport System, Series A, AMBAC Insured,
6.10%, 6/15/25 ..................................................................................... 4,000,000 4,144,800
Philadelphia Water and Wastewater Revenue, Refunding, FSA Insured, 5.50%, 6/15/15 ..................... 1,000,000 996,780
Pittsburgh and Allegheny County Public Auditorium Revenue, Regional Asset District Sales Tax,
AMBAC Insured, 5.25%, 2/01/31 ...................................................................... 6,000,000 5,476,860
Pittsburgh Water and Sewer System Authority Revenue, Refunding, FGIC Insured, ETM, 7.25%, 9/01/14 ..... 90,000 104,135
----------
27,857,358
----------
RHODE ISLAND 1.3%
Kent County Water Authority General Revenue, Series A, MBIA Insured, 6.35%, 7/15/14 ................... 2,100,000 2,255,883
Providence GO, Series A, FSA Insured, 5.70%, 7/15/19 .................................................. 3,000,000 3,017,760
Rhode Island Clean Water Financing Agency Revenue, Cranston Wastewater Treatment System,
MBIA Insured, 5.80%, 9/01/22 ....................................................................... 10,000,000 10,045,100
Rhode Island Port Authority and EDC Revenue, Shepard Building Project, Series B, AMBAC Insured,
Pre-Refunded, 6.75%, 6/01/25 ....................................................................... 2,000,000 2,219,800
Rhode Island State GO, Series A, FGIC Insured, 6.25%, 6/15/07 ......................................... 175,000 185,390
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
RHODE ISLAND (CONT.)
Rhode Island State Health and Educational Building Corp. Revenue,
Higher Educational Facilities, Roger Williams Facility, Connie Lee Insured, Pre-Refunded,
7.25%, 11/15/24 ................................................................................ $2,000,000 $2,281,020
Hospital Financing Lifespan Obligation Group, MBIA Insured, 5.75%, 5/15/23 ..................... 1,750,000 1,749,825
----------
21,754,778
----------
SOUTH CAROLINA .4%
Charleston Waterworks and Sewer Revenue, Refunding and Improvement, AMBAC Insured,
6.00%, 1/01/16 .................................................................................... 250,000 258,815
Edgefield County School District, Refunding, FSA Insured, ETM, 8.50%, 2/01/01 ..................... 250,000 265,025
Lexington Water and Sewer Revenue, FSA Insured, 5.45%, 4/01/19 .................................... 2,320,000 2,276,106
Piedmont Municipal Power Agency Electric Revenue, Refunding, FGIC Insured, 6.25%, 1/01/21 ......... 200,000 217,886
Richland County Hospital Facilities Revenue, Community Provider, Pooled Loan Program,
Series A, FSA Insured, ETM, 7.125%, 7/01/17 .................................................... 3,000,000 3,423,210
Spartanburg Sanitation Sewer District Sewer System Revenue, Implementation,
MBIA Insured, Pre-Refunded, 5.50%, 6/01/27 ..................................................... 500,000 525,840
----------
6,966,882
----------
SOUTH DAKOTA 1.0%
Brookings COP, AMBAC Insured, 5.10%, 12/01/18 ..................................................... 5,000,000 4,607,800
Grant County PCR, Refunding, MBIA Insured, 5.90%, 6/01/23 ......................................... 4,800,000 4,867,056
Lawrence County COP, Courthouse, FSA Insured, Pre-Refunded, 7.65%, 7/01/10 ........................ 2,000,000 2,103,820
Sioux Falls Medical Clinic Revenue, AMBAC Insured, 8.00%, 9/01/08 ................................. 2,095,000 2,131,788
South Dakota Lease Revenue, Series A, FSA Insured, 6.75%, 12/15/16 ................................ 2,720,000 3,105,723
South Dakota State University Revenue, Housing and Auxiliary Facilities,
Refunding, Series A, MBIA Insured, 5.50%, 4/01/17 .............................................. 20,000 19,799
----------
16,835,986
----------
TENNESSEE .9%
Cleveland Public Improvement, GO, FGIC Insured, 5.25%, 6/01/24 .................................... 1,655,000 1,560,897
Greater Tennessee Housing Assistance Revenue, Section 8, Refunding, Series A,
MBIA Insured, 6.00%, 7/01/24 ................................................................... 1,410,000 1,427,174
Johnson City Health and Educational Revenue, Medical Center Hospital,
Refunding and Improvement, MBIA Insured,
5.125%, 7/01/25 ................................................................................ 5,000,000 4,544,400
5.25%, 7/01/28 ................................................................................. 8,500,000 7,770,870
Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%, 7/01/15 .......... 200,000 210,926
----------
15,514,267
----------
TEXAS 10.1%
Austin Combined Utility System Revenue,
BIG Insured, Pre-Refunded, 8.625%, 11/15/17 .................................................... 1,000,000 1,109,850
Series A, BIG Insured, Pre-Refunded, 8.00%, 11/15/16 ........................................... 3,000,000 3,191,490
(b)Austin Hotel Occupancy Tax Revenue, Refunding, sub. lien, AMBAC Insured,
5.625%, 11/15/21 ............................................................................... 2,355,000 2,323,938
5.80%, 11/15/29 ................................................................................ 13,750,000 13,769,663
Austin Utility System Revenue,
FGIC Insured, Pre-Refunded, 6.00%, 5/15/15 ..................................................... 35,000 35,568
Refunding, FGIC Insured, 6.00%, 5/15/15 ........................................................ 15,000 15,108
Bell County Health Facilities Development Corporate Revenue, Hospital Cook Children's Medical,
Refunding, FSA Insured, 5.30%, 12/01/23 ........................................................ 5,000,000 4,707,200
Bexar County HFC Revenue, Series A, GNMA Secured, 8.20%, 4/01/22 .................................. 2,510,000 2,560,326
Brazos River Authority Revenue, Houston Light and Power Co. Project, Refunding,
Series A, AMBAC Insured, 6.70%, 3/01/17 ........................................................ 2,000,000 2,113,200
Coastal Bend Health Facilities Development Corp., Series B, AMBAC Insured, ETM,
6.30%, 1/01/17 ................................................................................. 12,230,000 12,824,745
Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 ................................................... 645,000 668,859
East Texas HFC, SFMR, Series 1990, GNMA Secured, 7.85%, 12/01/10 .................................. 475,000 493,311
Faulkey Gully MUD GO, AMBAC Insured,
6.625%, 3/01/07 ................................................................................ 295,000 307,868
Pre-Refunded, 6.625%, 3/01/07 .................................................................. 1,225,000 1,292,571
Fort Bend County Levee ID No. 011, AMBAC Insured, 6.00%,
9/01/21 ........................................................................................ 1,395,000 1,423,081
9/01/22 ........................................................................................ 1,495,000 1,522,045
9/01/23 ........................................................................................ 1,610,000 1,639,125
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
TEXAS (CONT.)
Grand Prairie Health Facilities Development Corp., Dallas/Fort Worth Medical Center Project,
Refunding, AMBAC Insured, 6.875%, 11/01/10 ...................................................... $2,700,000 $2,728,782
Harris County Health Facilities Development Corp. Revenue, Christus Health, Refunding,
Series A, MBIA Insured, 5.375%, 7/01/29 ......................................................... 22,000,000 20,590,460
Harris County Hospital District Mortgage Revenue, Refunding, AMBAC Insured, 7.40%, 2/15/10 ......... 2,350,000 2,709,315
Harris County Toll Road,
Senior lien, Series A, AMBAC Insured, 6.50%, 8/15/17 ............................................ 1,580,000 1,680,046
Senior lien, Series B, AMBAC Insured, 6.625%, 8/15/17 ........................................... 240,000 242,352
Series A, FGIC Insured, 6.50%, 8/15/11 .......................................................... 35,000 37,366
Houston Airport System Revenue, sub. lien, Series A, FGIC Insured, 6.75%, 7/01/21 .................. 2,500,000 2,618,275
Houston Water and Sewer System Revenue,
Junior lien, Refunding, Series C, AMBAC Insured, 6.375%, 12/01/17 ............................... 935,000 978,823
Junior lien, Refunding, Series C, MBIA Insured, 5.75%, 12/01/15 ................................. 500,000 512,665
Series A, MBIA Insured, 6.375%, 12/01/22 ........................................................ 1,840,000 1,952,350
Series A, MBIA Insured, Pre-Refunded, 6.375%, 12/01/22 .......................................... 4,540,000 4,905,470
Lubbock HFC, SFMR, Mortgage Extension Program, Refunding, Series B, 8.875%, 12/01/12 ............... 555,000 556,948
Matagorda County Navigation District No. 1 PCR, Central Power and Light Co. Project,
AMBAC Insured, 7.50%, 12/15/14 .................................................................. 200,000 207,746
Refunding, Series E, MBIA Insured, 6.10%, 7/01/28 ............................................... 12,850,000 13,232,159
Matagorda County Navigation District No. 1 Revenue,
Houston Industries Inc. Project, Refunding, Series A, MBIA Insured, 5.25%, 11/01/29 ............. 3,185,000 2,923,862
Houston Industries Inc. Project, Refunding, Series B, MBIA Insured, 5.15%, 11/01/29 ............. 2,750,000 2,482,123
Houston Light and Power Co., Refunding, Series E, FGIC Insured, 7.20%, 12/01/18 ................. 100,000 102,654
Palo Duro River Authority, Refunding, FSA Insured, 6.375%, 8/01/08 ................................. 6,000,000 6,060,780
Portland Community Center Complex Development Corp. Sales Tax Revenue, Refunding,
AMBAC Insured, 5.45%, 2/15/25 ................................................................... 1,450,000 1,397,800
Sabine River Authority PCR, Texas Utilities Electric Co. Project, Collateralized,
Refunding, FGIC Insured, 6.55%, 10/01/22 ........................................................ 3,250,000 3,432,455
San Antonio Water Revenue,
Refunding and Improvement, MBIA Insured, 5.60%, 5/15/21 ......................................... 3,250,000 3,197,610
Senior lien, MBIA Insured, 6.50%, 5/15/10 ....................................................... 2,920,000 3,106,909
San Marcos Waterworks and Sewer Systems Revenue, Series 1998, FSA Insured,
5.125%, 8/15/20 ................................................................................. 2,870,000 2,653,085
San Patricio County COP, MBIA Insured, Pre-Refunded, 6.60%, 4/01/07 ................................ 2,500,000 2,640,650
Smithville HDC, Mortgage Revenue, Smithville Retirement, Refunding, Series A, MBIA Insured,
6.40%, 1/01/22 .................................................................................. 1,045,000 1,074,041
Southeast HDC Mortgage Revenue, Stonegate Retirement, MBIA Insured, 6.40%, 1/01/24 ................. 1,170,000 1,206,867
Tarrant County Health Facilities Development Corp. Health Systems Revenue,
Harris Methodist Health, MBIA Insured, ETM, 6.00%, 9/01/24 ...................................... 3,250,000 3,359,233
Tarrant County Health Facilities Development Corp. Hospital Revenue,
Fort Worth Osteopathic Hospital, MBIA Insured, 5.125%, 5/15/21 .................................. 2,905,000 2,661,067
Texas Health Facilities Development Corp. Hospital Revenue, All Saints Episcopal Hospitals,
Refunding, Series B, MBIA Insured,
6.25%, 8/15/22 .................................................................................. 2,500,000 2,627,575
6.375%, 8/15/23 ................................................................................. 4,885,000 5,158,218
Texas State Turnpike Authority Revenue, Dallas North Tollway, Refunding,
AMBAC Insured, 5.00%, 1/01/20 ................................................................... 7,250,000 6,570,240
Tyler Health Facilities Development Corp. Hospital Revenue, East Texas Medical Center Project,
Series B, FSA Insured, 5.50%, 11/01/17 .......................................................... 1,000,000 984,130
Series C, FSA Insured, 5.60%, 11/01/27 .......................................................... 1,430,000 1,404,046
Series D, FSA Insured, 5.375%, 11/01/27 ......................................................... 14,500,000 13,553,585
-----------
169,547,635
-----------
US TERRITORIES
District of Columbia HFA, RMR, Series 1986-1, FGIC Insured, 7.75%, 9/01/16 ......................... 710,000 716,213
-----------
UTAH 1.3%
Intermountain Power Agency Power Supply Revenue, Refunding,
Series A, AMBAC Insured, 5.50%, 7/01/20 ......................................................... 4,680,000 4,583,077
Series B, MBIA Insured, 5.75%, 7/01/19 .......................................................... 3,250,000 3,271,515
Provo Electric System Revenue, Refunding, Series A, AMBAC Insured, ETM, 10.375%, 9/15/15 ........... 40,000 55,443
Utah County Hospital Revenue, IHC Health Services Inc., MBIA Insured, 5.25%,
8/15/21 ......................................................................................... 5,000,000 4,702,200
8/15/26 ......................................................................................... 5,000,000 4,640,050
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
UTAH (CONT.)
Utah State Board of Regents Student Loan Revenue, Series H, AMBAC Insured, 6.70%, 11/01/15 ......... $1,080,000 $1,136,192
White City Water Implementation District GO, Refunding, AMBAC Insured, 5.30%, 2/01/25 .............. 3,435,000 3,255,968
----------
21,644,445
----------
VERMONT .7%
Swanton Village Electric System Revenue, Refunding, MBIA Insured, 5.75%, 12/01/19 .................. 1,740,000 1,759,958
Vermont COP, MBIA Insured, Pre-Refunded, 7.25%, 6/15/11 ............................................ 2,205,000 2,308,966
Vermont HFA, Home Mortgage Purchase, Series B, MBIA Insured, 7.60%, 12/01/24 ....................... 6,630,000 6,788,324
Vermont Municipal Bond Bank, Series 2, FSA Insured, 6.25%, 12/01/19 ................................ 1,000,000 1,052,420
----------
11,909,668
----------
VIRGINIA 1.5%
Chesapeake Bay Bridge and Tunnel Commission District Revenue, General Resolution,
MBIA Insured, Pre-Refunded, 5.75%, 7/01/25 ...................................................... 9,850,000 10,120,481
Chesapeake IDA, Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured,
6.00%, 6/01/12 .................................................................................. 5,000,000 5,313,750
Danville IDA, Hospital Revenue, Danville Regional Medical Center, FGIC Insured,
Pre-Refunded, 6.50%, 10/01/24 ................................................................... 1,000,000 1,098,780
Hampton Roads Regional Jail Authority Jail Facilities Revenue, Series A, MBIA Insured,
5.00%, 7/01/28 .................................................................................. 3,405,000 3,064,875
Spotsylvania County Water and Sewer System Revenue, MBIA Insured, 5.40%, 6/01/27 ................... 3,850,000 3,731,305
Winchester IDA, Educational Facilities Revenue, First Mortgage, Shenandoah University Project,
MBIA Insured,
5.00%, 10/01/18 ................................................................................. 1,000,000 922,460
5.25%, 10/01/28 ................................................................................. 1,420,000 1,345,095
----------
25,596,746
----------
WASHINGTON 5.6%
Bellingham Housing Authority Revenue, Pacific Rim and Cascade Meadows Project, Refunding,
MBIA Insured, 5.20%, 11/01/27 ................................................................... 4,000,000 3,715,600
Douglas County PUD No. 1 Electric Systems Revenue, MBIA Insured, 6.00%, 1/01/15 .................... 900,000 938,880
Everett COP, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 4/01/09 ................................. 850,000 890,868
Grant County PUD No. 2, Wanapum Hydroelectric Revenue, Series B, AMBAC Insured,
6.75%, 1/01/23 .................................................................................. 1,060,000 1,124,628
Pre-Refunded, 6.75%, 1/01/23 .................................................................... 940,000 1,004,851
King County Public Hospital District No. 001 Hospital Facilities Revenue,
Valley Medical Center, King County Sewer, MBIA Insured, 6.125%, 1/01/33 ......................... 3,000,000 3,074,640
Kitsap County School District No. 100-C, MBIA Insured, Pre-Refunded, 6.60%, 12/01/08 ............... 1,015,000 1,064,837
Klickitat County PUD No. 001 Electric Revenue, FGIC Insured,
5.65%, 10/01/15 ................................................................................. 1,000,000 1,009,230
5.75%, 10/01/27 ................................................................................. 1,000,000 1,003,980
Mason County GO, School District No. 402, Pioneer, MBIA Insured, Pre-Refunded,
6.60%, 12/01/11 ................................................................................. 1,040,000 1,141,941
Pierce County GO, School District No. 003 Puyallup, FGIC Insured, 5.70%, 12/01/15 .................. 1,000,000 1,020,990
Port of Longview GO, MBIA Insured, 6.00%, 11/01/15 ................................................. 2,000,000 2,072,720
Seatac Storm Water Revenue, MBIA Insured, Pre-Refunded, 6.50%, 12/01/13 ............................ 2,890,000 3,172,815
Seattle Municipality Metropolitan Sewer Revenue, Series W, MBIA Insured,
Pre-Refunded, 6.30%, 1/01/33 .................................................................... 11,000,000 11,837,100
Seattle Water System Revenue, FGIC Insured, 5.625%, 8/01/26 ........................................ 2,000,000 1,984,800
Snohomish County PUD No. 1 Electric Revenue, Generation System, FGIC Insured,
ETM, 6.65%, 1/01/16 ............................................................................. 4,250,000 4,516,348
Spokane Public Facilities District Hotel Motel and Sales Use Tax Revenue,
Multi-Purpose Arena Project, AMBAC Insured, 6.50%, 1/01/18 ...................................... 5,000,000 5,229,050
Tacoma Electric System Revenue, Refunding,
AMBAC Insured, 6.25%, 1/01/11 ................................................................... 500,000 524,365
FGIC Insured, 6.25%, 1/01/15 .................................................................... 6,190,000 6,505,504
Tacoma GO, Series A, MBIA Insured, 5.625%, 12/01/22 ................................................ 3,400,000 3,362,736
Thurston and Pierce Counties Community Schools, Series B, AMBAC Insured, 6.65%, 12/01/09 ........... 1,305,000 1,404,376
Washington State Health Care Facilities Authority Revenue, Swedish Health Services,
Refunding, AMBAC Insured, 5.50%, 11/15/28 ....................................................... 15,370,000 14,765,037
Washington State Health Care Facilities Authority Revenue, Providence Services,
MBIA Insured, 5.50%, 12/01/26 ................................................................... 7,000,000 6,685,910
Washington State Housing Finance Commission MFMR, Series A, GNMA Secured, 7.70%, 7/01/32 ........... 2,845,000 2,909,098
Washington State Public Power Supply System Revenue, Nuclear Project No. 1,
Refunding, Series A, MBIA Insured, 6.25%, 7/01/17 ............................................... 420,000 436,943
Series C, FGIC Insured, Pre-Refunded, 7.75%, 7/01/08 ............................................ 2,500,000 2,630,750
Washington State University Revenues, Housing and Dining System, Refunding,
MBIA Insured, 6.40%, 10/01/24 ................................................................... 6,130,000 6,515,577
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
WASHINGTON (CONT.)
Western Washington University Revenue, Housing and Dining System,
MBIA Insured, 6.375%, 10/01/22 ............................................................... $80,000 $83,460
Refunding, MBIA Insured, 6.70%, 10/01/11 ..................................................... 235,000 243,860
Refunding, MBIA Insured, 6.375%, 10/01/21 .................................................... 770,000 788,626
Whatcom County School District No. 501, GO, Bellingham, FGIC Insured, Pre-Refunded,
6.125%, 12/01/13 ............................................................................. 2,000,000 2,152,100
Yakima-Tieton Irrigation District Revenue, Refunding, FSA Insured, 6.20%, 6/01/19 ............... 350,000 366,097
-------------
94,177,717
-------------
WEST VIRGINIA 1.6%
Harrison County Community Solid Waste Disposal Revenue, Potomac Edison Co.,
Series C, AMBAC Insured, 6.75%, 8/01/24 ...................................................... 11,560,000 12,366,426
Monongalia County Building Community Hospital Revenue, Monongalia General Hospital
Refunding, Series B, MBIA Insured, 6.50%, 7/01/17 ............................................ 1,000,000 1,035,550
West Virginia State GO, Series A, FGIC Insured, 5.00%, 11/01/21 ................................. 5,000,000 4,538,950
West Virginia State University Revenue, Refunding, AMBAC Insured, 6.00%, 4/01/12 ................ 2,250,000 2,382,548
West Virginia State Water Development Authority Revenue,
Loan Program II, Series B, FSA Insured, Pre-Refunded, 7.50%, 11/01/29 ........................ 3,000,000 3,078,450
Loan Program, Refunding, Series A, FSA Insured, 7.00%, 11/01/25 .............................. 2,750,000 2,908,208
-------------
26,310,132
-------------
WISCONSIN 1.1%
Superior Limited Obligation Revenue, Midwest Energy Resources, Refunding, Series E,
FGIC Insured, 6.90%, 8/01/21 ................................................................. 3,000,000 3,492,780
Wisconsin State Health and Educational Facilities Authority Revenue,
Aurora Health Care Inc., Refunding, MBIA Insured, 5.25%, 8/15/27 ............................. 11,000,000 10,124,820
SSM Health Care, Refunding, Series AA, MBIA Insured, 6.25%, 6/01/20 .......................... 500,000 516,055
Wisconsin State Health and Educational Revenue,
Community Provider Program, Series A, FSA Insured, 7.50%, 1/15/04 ............................ 1,753,000 1,788,481
Series A, FSA Insured, 7.50%, 1/15/09 ........................................................ 2,000,000 2,041,960
-------------
17,964,096
-------------
WYOMING 1.3%
Gillette Health Facilities Revenue, Lutheran Hospital and Home Society, Refunding,
MBIA Insured, 5.90%, 1/01/16 ................................................................. 500,000 513,960
Natrona County Hospital Revenue, Wyoming Medical Center Projects, Refunding,
AMBAC Insured, 6.00%, 9/15/24 ................................................................ 9,885,000 10,177,102
University of Wyoming Revenues, Facilities, MBIA Insured, 7.10%, 6/01/10 ........................ 2,245,000 2,295,625
Wyoming CDA, SFMR, Series A, AMBAC Insured, 6.00%, 6/01/23 ...................................... 6,750,000 6,824,250
Wyoming Municipal Power Agency Power Supply System Revenue, Series A, MBIA Insured,
Pre-Refunded, 6.125%, 1/01/16 ................................................................ 2,000,000 2,141,460
-------------
21,952,397
-------------
TOTAL LONG TERM INVESTMENTS (COST $1,660,560,473) ............................................... 1,684,744,053
-------------
(a)SHORT TERM INVESTMENTS 1.9%
ALASKA .4%
Valdez Marine Terminal Revenue, Exxon Pipeline Co. Project,
Refunding, Series A, Daily VRDN and Put, 2.70%, 12/01/33 ..................................... 3,400,000 3,400,000
Series B, Daily VRDN and Put, 2.70%, 12/01/33 ................................................ 3,400,000 3,400,000
-------------
6,800,000
-------------
CALIFORNIA .3%
Irvine Ranch Water District COP, Capital Improvement Project, Daily VRDN and Put, 2.60%, 8/01/16 4,900,000 4,900,000
-------------
LOUISIANA
Louisiana State Offshore Terminal Authority Deepwater Port Revenue, Loop Inc.,
1st Stage, ACES, Refunding, Daily VRDN and Put, 2.70%, 9/01/06 ............................... 500,000 500,000
-------------
MARYLAND .1%
Howard County MFR, Avalon Meadows Project, Refunding, FNMA Insured,
Weekly VRDN and Put, 3.15%, 6/15/26 .......................................................... 800,000 800,000
Maryland State Health and Higher Educational Facilities Authority Revenue,
Catholic Health Initiatives, Series B, Weekly VRDN and Put, 3.25%, 12/01/15 .................. 500,000 500,000
-------------
1,300,000
-------------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)SHORT TERM INVESTMENTS (CONT.)
MICHIGAN .2%
Delta County EDC, Environmental Improvement Revenue, Mead Escanaba Paper Project,
Refunding, Series C, Daily VRDN and Put, 2.80%, 12/01/23 ................................... $1,200,000 $1,200,000
Grand Rapids Water Supply System Revenue, FGIC Insured, Daily VRDN and Put, 3.15%, 1/01/20 .... 650,000 650,000
Midland County EDC, Limited Obligation Revenue, Dow Chemical Co. Project, Refunding,
Series B, Daily VRDN and Put, 2.85%, 12/01/15 .............................................. 800,000 800,000
--------------
2,650,000
--------------
NEW MEXICO
Farmington PCR, Arizona Public Service Co.,
Refunding, Series B, Daily VRDN and Put, 2.70%, 9/01/24 .................................... 700,000 700,000
Series A, Daily VRDN and Put, 2.70%, 5/01/24 ............................................... 200,000 200,000
--------------
900,000
--------------
NEW YORK .3%
Long Island Power Authority Electric System Revenue, Sub Series 5, Daily VRDN and Put,
2.70%, 5/01/33 ............................................................................. 1,400,000 1,400,000
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Series C, FGIC Insured, Daily VRDN and Put, 2.80%, 6/15/23 ................................. 2,400,000 2,400,000
Series G, FGIC Insured, Daily VRDN and Put, 2.70%, 6/15/24 ................................. 1,200,000 1,200,000
--------------
5,000,000
--------------
NORTH CAROLINA
Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co.,
Series A, Weekly VRDN and Put, 3.30%, 5/01/15 .............................................. 100,000 100,000
--------------
OHIO .1%
Cuyahoga County EDR, Cleveland Orchestra Project, Daily VRDN and Put, 2.70%, 4/01/28 .......... 600,000 600,000
Cuyahoga County Hospital Revenue, Refunding, Series B, AMBAC Insured,
Weekly VRDN and Put, 3.30%, 1/01/16 ........................................................ 500,000 500,000
Cuyahoga County IDR, Allen Group Inc. Project, Weekly VRDN and Put, 3.20%, 12/01/15 ........... 200,000 200,000
--------------
1,300,000
--------------
TENNESSEE .2%
Bradley County IDB, Industrial Revenue, Olin Corp. Project, Refunding, Series C,
Daily VRDN and Put, 2.85%, 11/01/17 ........................................................ 2,700,000 2,700,000
--------------
TEXAS .1%
Gulf Coast Waste Disposal Authority PCR, AMOCO Oil Co. Project, Refunding,
Daily VRDN and Put, 2.70%, 10/01/17 ........................................................ 300,000 300,000
Lubbock Health Facilities Development Corp. Revenue, St. Joseph Health System,
Daily VRDN and Put, 2.75%, 7/01/13 ......................................................... 1,400,000 1,400,000
--------------
1,700,000
--------------
US TERRITORIES
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured,
Weekly VRDN and Put, 2.85%, 12/01/15 ....................................................... 300,000 300,000
--------------
WASHINGTON .2%
Washington State Health Care Facilities Authority Revenue, Sisters of Providence,
Series D, Daily VRDN and Put, 2.70%, 10/01/05 .............................................. 3,200,000 3,200,000
--------------
Total Short Term Investments (Cost $31,350,000) ............................................... 31,350,000
--------------
Total Investments (Cost $1,691,910,473) 102.2% ................................................ 1,716,094,053
Other Assets, less Liabilities (2.2%) ......................................................... (37,133,779)
--------------
Net Assets 100.0% ............................................................................. $1,678,960,274
==============
</TABLE>
See glossary of terms on page 83.
(a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest at
specified dates.
(b)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 -------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $ 11.71 $ 11.75 $ 11.54 $ 11.65 $ 11.34 $ 11.81
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income .......................... .29 .59 .61 .63 .66 .66
Net realized and unrealized gains (losses) ..... (.59) .03 .35 (.10) .31 (.47)
---------------------------------------------------------------------------------
Total from investment operations ................ (.30) .62 .96 .53 .97 .19
---------------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (.29)(3) (.59) (.61) (.64)(2) (.66) (.66)
In excess of net investment income ............. -- -- (.01) -- -- --
Net realized gains ............................. -- (.07) (.13) -- -- --
---------------------------------------------------------------------------------
Total distributions ............................. (.29) (.66) (.75) (.64) (.66) (.66)
---------------------------------------------------------------------------------
Net asset value, end of period .................. $ 11.12 $ 11.71 $ 11.75 $ 11.54 $ 11.65 $ 11.34
================================================================================
Total return* ................................... (2.59)% 5.36% 8.50% 4.75% 8.80% 1.83%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $ 331,351 $ 340,109 $ 328,147 $ 325,065 $ 301,529 $ 288,331
Ratios to average net assets:
Expenses ....................................... .69%** .68% .68% .68% .69% .67%
Net investment income .......................... 5.01%** 4.99% 5.21% 5.51% 5.67% 5.89%
Portfolio turnover rate ......................... 13.05% 6.80% 30.46% 29.22% 10.29% 16.90%
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $ 11.76 $ 11.80 $ 11.59 $ 11.69 $ 11.36
-----------------------------------------------------------------
Income from investment operations:
Net investment income .......................... .26 .52 .55 .57 .50
Net realized and unrealized gains (losses) ..... (.58) .03 .34 (.09) .32
-----------------------------------------------------------------
Total from investment operations ................ (.32) .55 .89 .48 .82
-----------------------------------------------------------------
Less distributions from:
Net investment income .......................... (.26)(4) (.52) (.55) (.58)(2) (.49)
Net realized gains ............................. -- (.07) (.13) -- --
-----------------------------------------------------------------
Total distributions ............................. (.26) (.59) (.68) (.58) (.49)
-----------------------------------------------------------------
Net asset value, end of period .................. $ 11.18 $ 11.76 $ 11.80 $ 11.59 $ 11.69
=================================================================
Total return* ................................... (2.77)% 4.74% 7.86% 4.22% 7.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $ 27,969 $ 26,271 $ 13,937 $ 6,378 $ 2,759
Ratios to average net assets:
Expenses ....................................... 1.25%** 1.24% 1.25% 1.25% 1.26%**
Net investment income .......................... 4.44%** 4.44% 4.59% 4.96% 5.06%**
Portfolio turnover rate ......................... 13.05% 6.80% 30.46% 29.22% 10.29%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C.
(2)Includes distributions in excess of net investment income in the amount of
$.001.
(3)Includes distributions in excess of net investment income in the amount of
$.004.
(4)Includes distributions in excess of net investment income in the amount of
$.003.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.5%
Amesbury GO, FGIC Insured, 5.00%, 3/15/18 ............................................................ $ 1,500,000 $ 1,390,470
Ashburnham and Westminister Regional School District, MBIA Insured, 6.00%, 12/15/13 .................. 2,700,000 2,858,220
Attleboro Municipal Purpose GO, AMBAC Insured, 6.00%,
7/01/11 ........................................................................................... 1,045,000 1,102,266
7/01/12 ........................................................................................... 1,045,000 1,109,424
7/01/13 ........................................................................................... 685,000 724,559
7/01/14 ........................................................................................... 755,000 798,156
Blackstone-Milville School District, AMBAC Insured, Pre-Refunded, 6.50%,
5/01/08 ........................................................................................... 705,000 757,628
5/01/09 ........................................................................................... 750,000 805,988
5/01/10 ........................................................................................... 795,000 854,347
Boston GO, Refunding, Series B, FGIC Insured, 5.25%, 4/01/14 ......................................... 3,335,000 3,284,808
Boston Revenue, Boston City Hospital, Refunding, Series B, MBIA Insured, 5.75%, 2/15/23 .............. 10,500,000 10,505,250
Boston Water and Sewer Commission Revenue, Series A, GNMA Secured, Pre-Refunded, 7.10%, 11/01/19 ..... 1,400,000 1,435,728
Central Berkshire GO, School District, MBIA Insured, Pre-Refunded, 7.25%, 6/01/08 .................... 1,095,000 1,145,589
Chelsea GO, State Qualified, Refunding, AMBAC Insured, 5.125%, 6/15/16 ............................... 1,750,000 1,669,308
Dudley Charleston Regional School District GO, Series B, FGIC Insured, 5.25%, 5/01/19 ................ 3,140,000 2,995,372
Framingham Housing Authority Mortgage Revenue, Beaver Terrace Apartments, Series A,
GNMA Secured, 6.65%, 2/20/32 ...................................................................... 1,650,000 1,730,141
Greenfield GO, MBIA Insured, Pre-Refunded, 6.50%,
10/15/08 .......................................................................................... 500,000 533,555
10/15/09 .......................................................................................... 500,000 533,555
Holyoke GO, School Project Loans, MBIA Insured, Pre-Refunded, 8.05%, 6/15/04 ......................... 1,000,000 1,126,200
Hudson GO, MBIA Insured, 6.00%,
5/15/13 ........................................................................................... 250,000 263,918
5/15/14 ........................................................................................... 240,000 253,500
Lenox GO, Refunding, AMBAC Insured,
6.60%, 10/15/11 ................................................................................... 1,000,000 1,055,090
6.625%, 10/15/15 .................................................................................. 500,000 528,830
Leominster GO, MBIA Insured, Pre-Refunded, 7.50%, 4/01/09 ............................................ 450,000 468,824
Ludlow GO, School Project, Limited Tax, MBIA Insured,
7.30%, 11/01/07 ................................................................................... 210,000 243,856
7.30%, 11/01/08 ................................................................................... 210,000 245,301
7.40%, 11/01/09 ................................................................................... 210,000 248,646
Lynn Water and Sewer Commission General Revenue, Series A,
FSA Insured, 5.125%, 12/01/17 ..................................................................... 3,000,000 2,854,620
MBIA Insured, Pre-Refunded, 7.25%, 12/01/10 ....................................................... 4,000,000 4,241,200
Mansfield Municipal Purpose Loan, FGIC Insured, 5.125%, 8/15/17 ...................................... 1,685,000 1,600,548
Martha's Vineyard Regional High School District No. 100, AMBAC Insured, Pre-Refunded,
6.55%, 12/15/10 ................................................................................... 830,000 904,625
6.60%, 12/15/11 ................................................................................... 725,000 793,273
6.65%, 12/15/12 ................................................................................... 880,000 966,196
6.70%, 12/15/14 ................................................................................... 210,000 229,612
Mashpee GO, MBIA Insured, 5.50%, 2/01/17 ............................................................. 2,000,000 1,980,020
Mashpee Water District GO, MBIA Insured, 6.40%, 10/15/12 ............................................. 500,000 532,095
Massachusetts Bay Transportation Authority COP, BIG Insured, 7.75%, 1/15/06 .......................... 2,500,000 2,814,250
Massachusetts Bay Transportation Authority Revenue, General Transportation System,
Series A, FSA Insured, Pre-Refunded, 5.625%, 3/01/26 .............................................. 1,470,000 1,560,449
Series B, AMBAC Insured, 5.375%, 3/01/25 .......................................................... 4,570,000 4,359,780
Massachusetts Education Loan Authority Revenue, Issue D, Series A, MBIA Insured, 7.25%, 1/01/09 ...... 1,655,000 1,714,232
Massachusetts Municipal Wholesale Electric Co. Power Supply System Revenue,
Series D, MBIA Insured, 6.125%, 7/01/19 ........................................................... 4,395,000 4,558,626
Massachusetts State GO, Series B,
AMBAC Insured, 6.50%, 8/01/11 ..................................................................... 1,665,000 1,754,893
MBIA Insured, 6.50%, 8/01/11 ...................................................................... 855,000 901,161
Massachusetts State Health and Educational Facilities Authority Revenue,
Bay State Medical Center, Refunding, Series D, FGIC Insured, 6.00%, 7/01/15 ....................... 1,500,000 1,546,620
Bay State Medical Center, Series E, FSA Insured, 6.00%, 7/01/26 ................................... 5,000,000 5,078,200
Bentley College, Series I, MBIA Insured, 6.125%, 7/01/17 .......................................... 1,250,000 1,303,025
Berkshire Health System, Series D, MBIA Insured, 6.00%, 10/01/19 .................................. 5,500,000 5,608,900
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Massachusetts State Health and Educational Facilities Authority Revenue, (cont.)
Beverly Hospital, Lot 1, Refunding, Series D, MBIA Insured, 7.30%, 7/01/13 ...................... $ 1,900,000 $ 1,954,340
Boston College, Series J, FGIC Insured, 6.625%, 7/01/21 ......................................... 20,000 21,033
Boston College, Series J, FGIC Insured, Pre-Refunded, 6.625%, 7/01/21 ........................... 2,230,000 2,370,646
Cable Housing and Health Services, Series A, MBIA Insured, 5.25%, 7/01/23 ....................... 1,000,000 931,810
Children's Hospital, Refunding, Series E, AMBAC Insured, 6.20%, 10/01/16 ........................ 2,200,000 2,318,602
Community College Program, Series A, Connie Lee Insured, Pre-Refunded, 6.50%, 10/01/09 .......... 1,000,000 1,082,710
Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/18 ............................. 5,595,000 5,535,637
Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/25 ............................. 7,720,000 7,449,491
Dana-Farber Cancer Institute, Refunding, Series F, FGIC Insured, 6.00%, 12/01/15 ................ 1,000,000 1,032,950
Lahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 7/01/23 ............................ 26,730,000 25,336,565
Massachusetts General Hospital, Refunding, Series F, AMBAC Insured, 6.00%, 7/01/15 .............. 2,500,000 2,565,125
Massachusetts General Hospital, Series F, AMBAC Insured, Pre-Refunded, 6.25%, 7/01/20 ........... 9,000,000 9,755,640
McLean Hospital, Series C, FGIC Insured, Pre-Refunded, 6.625%, 7/01/15 .......................... 1,280,000 1,383,898
Milton Hospital, Series B, MBIA Insured, 7.00%, 7/01/16 ......................................... 2,400,000 2,494,488
Mt. Auburn Hospital, Series B-1, MBIA Insured, 6.30%, 8/15/24 ................................... 6,500,000 6,815,835
New England Deaconess Hospitals, Series D, AMBAC Insured, Pre-Refunded, 6.875%, 4/01/22 ......... 1,895,000 2,050,617
Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 7/01/18 ............................... 1,300,000 1,329,172
Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 7/01/25 ............................... 6,750,000 6,850,305
Northeastern University, Series D, AMBAC Insured, 7.125%, 10/01/10 .............................. 1,250,000 1,310,900
Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ................................ 3,900,000 4,148,781
Partners Healthcare System, Series A, MBIA Insured, 5.375%, 7/01/24 ............................. 5,000,000 4,721,800
Simmons College, Series C, MBIA Insured, 5.125%, 10/01/28 ....................................... 2,600,000 2,347,956
Springfield College, AMBAC Insured, 5.00%, 10/15/27 ............................................. 2,500,000 2,214,650
Stonehill College, MBIA Insured, 6.55%, 7/01/12 ................................................. 495,000 528,170
Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.65%, 7/01/10 ........................ 1,025,000 1,078,649
Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.70%, 7/01/20 ........................ 515,000 542,161
Stonehill College, Series E, MBIA Insured, 6.60%, 7/01/20 ....................................... 1,550,000 1,649,929
Stonehill College, Series E, MBIA Insured, Pre-Refunded, 6.55%, 7/01/12 ......................... 395,000 426,280
Stonehill College, Series E, MBIA Insured, Pre-Refunded, 6.60%, 7/01/20 ......................... 1,450,000 1,566,740
Stonehill College, Series F, AMBAC Insured, 5.75%, 7/01/26 ...................................... 1,690,000 1,685,268
Suffolk University, Series B, Connie Lee Insured, 6.35%, 7/01/22 ................................ 3,000,000 3,139,650
Tufts University, FGIC Insured, 5.95%, 8/15/18 .................................................. 5,000,000 5,098,350
University Hospital, Series C, MBIA Insured, Pre-Refunded, 7.25%, 7/01/19 ....................... 1,500,000 1,572,390
Wellesley College, Series F, 5.125%, 7/01/39 .................................................... 5,000,000 4,477,400
Wentworth Institute of Technology, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 4/01/10 ........ 1,820,000 1,895,093
Williams College, Series F, MBIA Insured, 5.50%, 7/01/26 ........................................ 2,500,000 2,408,225
Massachusetts State HFA,
Housing Development, Series D, MBIA Insured, 5.40%, 6/01/20 ..................................... 4,270,000 4,104,879
Housing Revenue, SF, Series 53, MBIA Insured, 6.15%, 12/01/29 ................................... 2,500,000 2,549,250
Housing Revenue, SF, Series 57, MBIA Insured, 5.55%, 6/01/25 .................................... 10,000 9,564
Housing Revenue, SF, Series 59, AMBAC Insured, 5.50%, 12/01/30 .................................. 5,000,000 4,702,100
Housing Revenue, SFMR, Series 18, MBIA Insured, 7.35%, 12/01/16 ................................. 1,450,000 1,498,909
MFHR, Section 8 Assisted, Series A, GNMA Secured, ETM, 7.00%, 4/01/21 ........................... 430,000 490,716
Massachusetts State Industrial Finance Agency Assisted Living Facility Revenue, Arbors at Taunton
Project, GNMA Secured, 5.50%, 6/20/40 ............................................................ 2,000,000 1,853,780
Massachusetts State Industrial Finance Agency Electrical Utility Revenue, Nantucket Electric Co.,
Series A, AMBAC Insured, 5.875%, 7/01/17 ......................................................... 4,000,000 4,072,640
Massachusetts State Industrial Finance Agency Revenue,
Babson College, Series A, MBIA Insured, Pre-Refunded, 6.50%, 10/01/22 ........................... 3,105,000 3,361,815
Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 .................................... 860,000 878,653
Brandeis University, Series C, MBIA Insured, Pre-Refunded, 6.80%, 10/01/19 ...................... 6,215,000 6,354,651
College of the Holy Cross, Refunding, MBIA Insured, 5.625%, 3/01/26 ............................. 1,000,000 980,430
Combined Jewish Philanthropies, Refunding, Series A, AMBAC Insured, 6.375%, 2/01/15 ............. 2,010,000 2,152,891
Milton Academy, Series A, MBIA Insured, Pre-Refunded, 7.25%, 9/01/19 ............................ 1,000,000 1,020,000
Saint Marks School Issue, MBIA Insured, 5.375%, 1/01/21 ......................................... 2,665,000 2,558,640
Simons Rock College, AMBAC Insured, 5.50%, 6/01/17 .............................................. 1,000,000 993,190
Simons Rock College, AMBAC Insured, 5.50%, 6/01/27 .............................................. 1,560,000 1,501,906
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Massachusetts State Industrial Finance Agency Revenue, (cont.)
Suffolk University, AMBAC Insured, 5.25%, 7/01/17 ................................................... $ 3,510,000 $3,387,641
Suffolk University, AMBAC Insured, 5.25%, 7/01/27 ................................................... 2,000,000 1,856,600
Trustees Deerfield Academy, 5.25%, 10/01/27 ......................................................... 2,800,000 2,643,116
Western New England College, AMBAC Insured, 5.00%, 7/01/28 .......................................... 4,000,000 3,538,840
WGBH Educational Foundation, Refunding, AMBAC Insured, 5.00%, 3/01/28 ............................... 4,000,000 3,541,280
Worcester Polytechnic Institute, Refunding, MBIA Insured, 5.125%, 9/01/17 ........................... 3,720,000 3,525,295
Worcester Polytechnic Institute, Refunding, Series II, MBIA Insured, 5.50%, 9/01/21 ................. 3,500,000 3,412,850
Worcester Polytechnic Institute, Refunding, Series II, MBIA Insured, 5.125%, 9/01/27 ................ 4,000,000 3,628,400
Massachusetts State Port Authority Revenue,
Series A, FGIC Insured, 7.50%, 7/01/20 .............................................................. 3,980,000 4,145,648
Series A, FGIC Insured, Pre-Refunded, 7.50%, 7/01/20 ................................................ 1,220,000 1,280,829
Series A, FSA Insured, 5.125%, 7/01/17 .............................................................. 5,000,000 4,761,000
Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/19 .................................. 2,215,000 2,184,876
Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/22 .................................. 2,610,000 2,545,925
Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/27 .................................. 1,500,000 1,449,765
Special Facilities, Bosfuel Project, MBIA Insured, 5.75%, 7/01/29 ................................... 7,450,000 7,272,914
Special Facilities, Bosfuel Project, MBIA Insured, 5.75%, 7/01/39 ................................... 3,000,000 2,930,970
US Air Project, Series A, MBIA Insured, 5.875%, 9/01/23 ............................................. 4,500,000 4,468,500
Massachusetts State Turnpike Authority Metropolitan Highway System Revenue,
Series A, MBIA Insured, 5.00%, 1/01/27 .............................................................. 4,500,000 4,020,345
Series A, MBIA Insured, 5.00%, 1/01/37 .............................................................. 10,000,000 8,715,000
Sub. lien, Refunding, Series B, MBIA Insured, 5.125%, 1/01/37 ....................................... 10,000,000 8,903,900
Massachusetts State Turnpike Authority Western Turnpike Revenue, Series A, MBIA Insured, 5.55%, 1/01/17 1,865,000 1,862,781
Massachusetts State Water Resources Authority Revenue, Refunding, Series B, MBIA Insured, 5.00%, 3/01/22 1,500,000 1,357,245
Melrose Municipal Purpose GO, MBIA Insured,
6.00%, 8/15/11 ...................................................................................... 200,000 211,134
6.05%, 8/15/12 ...................................................................................... 200,000 210,876
6.10%, 8/15/13 ...................................................................................... 200,000 212,578
6.10%, 8/15/14 ...................................................................................... 200,000 212,668
Millis School Project GO, Unlimited Tax, AMBAC Insured, 7.40%,
5/01/06 ............................................................................................. 270,000 280,301
5/01/07 ............................................................................................. 270,000 280,209
5/01/08 ............................................................................................. 270,000 280,282
Norfolk GO, AMBAC Insured, 6.00%,
1/15/10 ............................................................................................. 450,000 470,277
1/15/11 ............................................................................................. 425,000 443,947
1/15/12 ............................................................................................. 375,000 393,154
1/15/13 ............................................................................................. 300,000 315,300
North Andover GO, FGIC Insured, 5.50%,
1/15/14 ............................................................................................. 850,000 860,489
1/15/15 ............................................................................................. 420,000 423,641
North Andover Municipal Purpose GO, Limited Tax, MBIA Insured, 7.40%, 9/15/09 .......................... 300,000 316,710
North Attleborough GO,
Limited Tax, AMBAC Insured, Pre-Refunded, 7.20%, 6/01/09 ............................................ 125,000 130,730
MBIA Insured, 5.70%, 1/15/16 ........................................................................ 850,000 869,797
Northhampton GO, MBIA Insured, 5.60%, 5/15/17 .......................................................... 1,085,000 1,085,705
Plymouth County COP, Correctional Facility Project, AMBAC Insured, 5.00%, 4/01/22 ...................... 3,500,000 3,166,170
Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ........................ 190,000 196,722
Salem GO, AMBAC Insured,
6.70%, 8/15/05 ...................................................................................... 425,000 448,983
6.80%, 8/15/07 ...................................................................................... 500,000 528,655
Somerville Housing Authority Revenue, Clarendon Hill, GNMA Secured, 7.95%, 11/20/30 .................... 3,000,000 3,095,670
South Essex Sewer District GO,
AMBAC Insured, 6.25%, 11/01/11 ...................................................................... 330,000 346,061
Series B, MBIA Insured, Pre-Refunded, 7.00%, 6/01/24 ................................................ 2,800,000 3,150,112
Southbridge GO, AMBAC Insured, 6.375%, 1/01/12 ......................................................... 2,375,000 2,506,338
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Whately GO, AMBAC Insured,
6.20%, 1/15/07 ................................................................................. $ 215,000 $ 225,339
6.30%, 1/15/08 ................................................................................. 215,000 225,765
6.40%, 1/15/10 ................................................................................. 200,000 210,732
Worcester GO, Refunding, Series E, MBIA Insured, 6.00%, 10/01/15 .................................. 1,335,000 1,411,856
Worcester Municipal Purpose Loan, Refunding, Series A, AMBAC Insured, 5.25%, 8/01/16 .............. 1,410,000 1,368,413
------------
TOTAL LONG TERM INVESTMENTS (COST $346,590,859) ................................................... 350,458,458
------------
(a)SHORT TERM INVESTMENTS 1.3%
Massachusetts State Health and Educational Facilities Authority Revenue, Capital Assets Program,
Series D, MBIA Insured, Daily VRDN and Put, 2.80%, 1/01/35 (Cost $4,700,000) .................... 4,700,000 4,700,000
------------
TOTAL INVESTMENTS (COST $351,290,859) 98.8% ....................................................... 355,158,458
OTHER ASSETS, LESS LIABILITIES 1.2% ............................................................... 4,161,783
------------
NET ASSETS 100.0% ................................................................................. $359,320,241
============
</TABLE>
See glossary of terms on page 83.
(a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest at
specified dates.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 ----------------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ... $ 12.28 $ 12.20 $ 12.00 $ 12.09 $ 11.76 $ 12.24
----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ................. .30 .61 .63 .66 .68 .69
Net realized and unrealized
gains (losses) ....................... (.56) .13 .34 (.09) .34 (.48)
----------------------------------------------------------------------------------------
Total from investment operations ....... (.26) .74 .97 .57 1.02 .21
----------------------------------------------------------------------------------------
Less distributions from:
Net investment income ................. (.30)(4) (.61) (.63) (.66)(3) (.69)(2) (.69)
In excess of net investment income .... -- -- (.01) -- -- --
Net realized gains .................... -- (.05) (.13) -- -- --
----------------------------------------------------------------------------------------
Total distributions .................... (.30) (.66) (.77) (.66) (.69) (.69)
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 11.72 $ 12.28 $ 12.20 $ 12.00 $ 12.09 $ 11.76
========================================================================================
Total return* .......................... (2.11)% 6.23% 8.37% 4.90% 8.86% 1.87%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...... $ 1,151,515 $1,161,345 $1,142,565 $1,111,537 $1,115,454 $1,037,717
Ratios to average net assets:
Expenses .............................. .64%** .63% .63% .62% .62% .61%
Net investment income ................. 4.98%** 4.98% 5.24% 5.52% 5.65% 5.87%
Portfolio turnover rate ................ 3.87% 7.37% 20.08% 30.03% 9.38% 9.12%
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ... $ 12.36 $ 12.27 $ 12.07 $ 12.14 $ 11.77
------------ ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ................. .27 .55 .57 .59 .51
Net realized and unrealized
gains (losses) ...................... (.56) .13 .33 (.07) .37
------------ ---------- ---------- ---------- ----------
Total from investment operations ....... (.29) .68 .90 .52 .88
------------ ---------- ---------- ---------- ----------
Less distributions from:
Net investment income ................. (.27)4 (.54) (.57) (.59) (.51)
Net realized gains .................... -- (.05) (.13) -- --
------------ ---------- ---------- ---------- ----------
Total distributions .................... (.27) (.59) (.70) (.59) (.51)
------------ ---------- ---------- ---------- ----------
Net asset value, end of period ......... $ 11.80 $ 12.36 $ 12.27 $ 12.07 $ 12.14
======================================================================
Total return* .......................... (2.40)% 5.71% 7.70% 4.44% 7.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...... $ 53,635 $ 49,970 $ 32,873 $ 20,162 $ 6,683
Ratios to average net assets:
Expenses .............................. 1.20%** 1.19% 1.20% 1.19% 1.20%**
Net investment income ................. 4.42%** 4.42% 4.67% 4.94% 5.03%**
Portfolio turnover rate ................ 3.87% 7.37% 20.08% 30.03% 9.38%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C.
(2)Includes distributions in excess of net investment income in the amount of
$.001.
(3)Includes distributions in excess of net investment income in the amount of
$.002.
(4)Includes distributions in excess of net investment income in the amount
of $.004.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.5%
Allegan Public School, AMBAC Insured, Pre-Refunded, 5.75%, 5/01/22 ................................ $ 4,165,000 $ 4,415,858
Allendale Public School, MBIA Insured,
5.875%, 5/01/14 ............................................................................... 1,335,000 1,390,149
Pre-Refunded, 5.875%, 5/01/14 ................................................................... 665,000 708,996
School Building, Pre-Refunded, 6.00%, 5/01/24 ................................................... 3,750,000 4,017,638
Almont Community Schools, FGIC Insured, 5.50%, 5/01/26 ............................................. 1,925,000 1,862,149
Alpena Public Schools GO, MBIA Insured, Pre-Refunded, 5.625%, 5/01/22 .............................. 1,665,000 1,752,062
Anchor Bay School District, MBIA Insured, Pre-Refunded, 5.50%, 5/01/26 ............................. 7,380,000 7,707,377
Avondale School District, AMBAC Insured, Pre-Refunded, 5.75%, 5/01/22 .............................. 4,000,000 4,240,920
Bath Community Schools GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/25 .............................. 1,625,000 1,734,265
Battle Creek Downtown Development Authority, Refunding, MBIA Insured, 5.125%, 5/01/20 .............. 4,500,000 4,198,185
Berkley City School District, FGIC Insured, Pre-Refunded,
5.625%, 1/01/15 ................................................................................. 2,060,000 2,172,785
6.00%, 1/01/19 .................................................................................. 2,125,000 2,278,595
Big Rapids Public School District, Building and Site, FGIC Insured, Pre-Refunded, 5.625%, 5/01/25 .. 1,470,000 1,554,099
Brandon School District, FGIC Insured, Pre-Refunded, 5.875%,
5/01/16 ......................................................................................... 5,540,000 5,948,852
5/01/26 ......................................................................................... 7,000,000 7,516,600
Breitung Township School District GO,
FSA Insured, Pre-Refunded, 7.20%, 5/01/19 ....................................................... 7,500,000 7,673,325
Refunding, MBIA Insured, 6.30%, 5/01/15 ......................................................... 2,935,000 3,086,974
Byron Center Public Schools,
MBIA Insured, Pre-Refunded, 5.875%, 5/01/24 ..................................................... 5,115,000 5,470,697
Refunding, MBIA Insured, 5.875%, 5/01/24 ........................................................ 135,000 136,060
Cadillac Area Public Schools GO, FGIC Insured,
5.50%, 5/01/22 .................................................................................. 2,605,000 2,535,733
Pre-Refunded, 5.50%, 5/01/22 .................................................................... 2,770,000 2,895,287
Caledonia Community Schools,
MBIA Insured, Pre-Refunded, 5.85%, 5/01/22 ...................................................... 4,500,000 4,799,565
Refunding, AMBAC Insured, 6.625%, 5/01/14 ....................................................... 3,750,000 3,979,050
Refunding, AMBAC Insured, 5.50%, 5/01/22 ........................................................ 1,500,000 1,460,115
Calumet, Laurium and Keweenaw Public Schools GO, FSA Insured, Pre-Refunded, 5.875%, 5/01/20 ........ 875,000 936,451
Cedar Springs Public School District, MBIA Insured, Pre-Refunded, 5.875%,
5/01/19 ......................................................................................... 2,425,000 2,595,308
5/01/24 ......................................................................................... 3,875,000 4,138,694
Central Michigan University Revenue, FGIC Insured,
5.00%, 10/01/27 ................................................................................. 500,000 441,095
Pre-Refunded, 5.625%, 10/01/22 .................................................................. 2,500,000 2,638,925
Charlotte Public School District GO, FGIC Insured, 5.375%, 5/01/29 ................................. 8,850,000 8,379,534
Chelsea School District, FGIC Insured, Pre-Refunded, 5.875%, 5/01/25 ............................... 3,140,000 3,358,356
Chippewa County Hospital Financing Authority Revenue, Chippewa County War
Memorial Hospital, Refunding, Series B, 5.625%, 11/01/14 ........................................ 650,000 622,778
Coldwater Community Schools, MBIA Insured, Pre-Refunded,
6.20%, 5/01/15 .................................................................................. 1,100,000 1,196,613
6.30%, 5/01/23 .................................................................................. 1,700,000 1,856,383
De Witt Public Schools, AMBAC Insured, Pre-Refunded,
5.70%, 5/01/21 .................................................................................. 6,905,000 7,298,930
5.50%, 5/01/26 .................................................................................. 5,500,000 5,743,980
Dearborn EDC Hospital Revenue, Oakwood Obligation Group,
Refunding, Series A, MBIA Insured, 5.25%, 8/15/21 ............................................... 1,000,000 954,850
Series A, FGIC Insured, 5.75%, 11/15/15 ......................................................... 100,000 101,425
Series A, FGIC Insured, 5.875%, 11/15/25 ........................................................ 4,400,000 4,478,276
Detroit GO, City School District, Series A, AMBAC Insured, Pre-Refunded, 5.70%, 5/01/25 ............ 14,000,000 14,997,220
Detroit Local Development Finance Authority, Refunding, Series A, 5.375%, 5/01/21 .................. 100,000 94,435
Detroit Sewage Disposal Revenue,
Refunding, Series B, MBIA Insured, 5.25%, 7/01/21 ............................................... 12,585,000 11,957,009
Series A, MBIA Insured, 5.50%, 7/01/20 .......................................................... 215,000 210,803
Series A, MBIA Insured, 5.00%, 7/01/27 .......................................................... 20,000,000 17,827,000
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Detroit Water Supply System Revenue,
FGIC Insured, Pre-Refunded, 7.25%, 7/01/20 ................................................. $ 3,500,000 $ 3,670,380
Refunding, FGIC Insured, ETM, 6.25%, 7/01/12 ............................................... 5,000,000 5,227,850
Series A, MBIA Insured, 5.00%, 7/01/27 ..................................................... 5,750,000 5,096,340
Detroit/Wayne County Stadium Authority, FGIC Insured, 5.25%, 2/01/27 .......................... 5,500,000 5,115,385
Dexter Community Schools, Refunding, AMBAC Insured, 5.70%, 5/01/14 ............................ 1,050,000 1,067,147
East Detroit School District GO, FGIC Insured,
6.10%, 5/01/16 ............................................................................. 1,025,000 1,070,746
Pre-Refunded, 6.10%, 5/01/16 ............................................................... 4,975,000 5,405,537
East Lansing Building Authority GO, Refunding, AMBAC Insured, 7.00%, 10/01/16 ................. 1,250,000 1,277,413
Eastern Michigan University Revenue,
FGIC Insured, 5.50%, 6/01/27 ............................................................... 9,100,000 8,822,359
Refunding, AMBAC Insured, 6.375%, 6/01/14 .................................................. 1,000,000 1,047,950
Eaton Rapids Public Schools, Building and Site, MBIA Insured, Pre-Refunded, 5.50%, 5/01/20 .... 2,435,000 2,558,089
Ecorse Public School District, FGIC Insured, 5.50%, 5/01/17 ................................... 5,000,000 4,932,950
Farmington Hills EDC Revenue, Botsford Continuing Care,
Series A, MBIA Insured, 5.75%, 2/15/25 .................................................... 100,000 100,537
Farmington Hills Hospital Finance Authority Revenue, Botsford General Hospital,
Refunding, Series A, MBIA Insured, Pre-Refunded, 7.10%, 2/15/14 ........................... 10,140,000 10,759,351
Ferndale School District GO,
FGIC Insured, 5.50%, 5/01/22 ............................................................... 4,525,000 4,404,680
Refunding, FGIC Insured, 5.375%, 5/01/21 ................................................... 4,185,000 4,016,679
Ferris State College Revenue, AMBAC Insured, Pre-Refunded,
6.15%, 10/01/14 ............................................................................ 1,000,000 1,082,160
6.25%, 10/01/19 ............................................................................ 1,000,000 1,085,860
Ferris State University Revenue, AMBAC Insured, Pre-Refunded,
5.75%, 10/01/17 ............................................................................ 2,500,000 2,666,725
5.85%, 10/01/22 ............................................................................ 2,500,000 2,682,450
5.90%, 10/01/26 ............................................................................ 6,840,000 7,360,729
Fowlerville Community School District,
MBIA Insured, Pre-Refunded, 5.60%, 5/01/21 ................................................. 2,000,000 2,101,420
Refunding, FGIC Insured, 5.75%, 5/01/20 .................................................... 2,150,000 2,155,977
Gladstone Area Public Schools GO, AMBAC Insured,
5.50%, 5/01/26 ............................................................................. 695,000 672,308
Pre-Refunded, 5.50%, 5/01/26 ............................................................... 805,000 840,710
Godfrey-Lee Public School District GO, MBIA Insured, 5.50%, 5/01/27 ........................... 1,150,000 1,110,325
Gogebic-Iron Wastewater Authority Wastewater Treatment System Revenue,
Refunding, MBIA Insured, 5.95%, 1/01/15 ................................................... 1,015,000 1,045,186
6.05%, 1/01/25 ............................................................................. 500,000 514,130
Grand Haven Area Public Schools GO,
MBIA Insured, Pre-Refunded, 6.05%, 5/01/14 ................................................. 4,540,000 4,871,057
Refunding, MBIA Insured, 6.05%, 5/01/14 .................................................... 460,000 485,042
Grand Ledge Public School District GO,
MBIA Insured, Pre-Refunded, 6.60%, 5/01/24 ................................................. 10,000,000 11,044,800
Refunding, MBIA Insured, 5.375%, 5/01/24 ................................................... 13,105,000 12,493,521
Grand Rapids Downtown Development Authority Tax Increment Revenue,
MBIA Insured, 6.875%, 6/01/24 ............................................................ 7,500,000 8,132,400
Grand Rapids Sanitary Sewer System Revenue, Refunding and Improvement,
MBIA Insured, Pre-Refunded, 6.00%, 1/01/20 ............................................... 3,850,000 3,877,951
Grand Rapids Water Supply System Revenue, FGIC Insured, Pre-Refunded, 7.25%, 1/01/20 .......... 5,375,000 5,541,840
Grand Traverse County Building Authority GO, AMBAC Insured, Pre-Refunded, 5.75%, 9/01/15 ...... 1,700,000 1,792,480
Grand Traverse County Hospital Revenue, Munson Healthcare, Series A, AMBAC Insured,
6.25%, 7/01/12 ............................................................................. 815,000 860,086
6.25%, 7/01/22 ............................................................................. 2,395,000 2,508,667
Pre-Refunded, 6.25%, 7/01/12 ............................................................... 1,685,000 1,802,765
Pre-Refunded, 6.25%, 7/01/22 ............................................................... 5,505,000 5,889,744
Greenville Public School Building GO, MBIA Insured, Pre-Refunded, 5.75%, 5/01/19 .............. 2,010,000 2,132,530
Grosse-Ile Township School District GO, FGIC Insured, Pre-Refunded, 6.00%, 5/01/22 ............ 5,250,000 5,649,473
Hamilton Community School District GO, Refunding, FGIC Insured, 5.00%, 5/01/24 ................ 2,000,000 1,808,300
Hancock Hospital Finance Authority Revenue, Portage Health, MBIA Insured, 5.45%, 8/01/47 ...... 4,400,000 4,131,248
Harrison Community Schools GO, AMBAC Insured, Pre-Refunded, 6.25%, 5/01/13 .................... 4,715,000 5,138,926
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
Haslett Public School District GO,
FSA Insured, Pre-Refunded, 7.50%, 5/01/20 ................................................ $ 4,000,000 $ 4,139,240
MBIA Insured, Pre-Refunded, 5.70%, 5/01/26 ............................................... 3,900,000 4,122,495
Refunding, FSA Insured, 6.625%, 5/01/19 .................................................. 3,875,000 4,102,695
Hastings School District GO, FGIC Insured, Pre-Refunded, 5.625%, 5/01/15 .................... 1,000,000 1,057,210
Holland School District GO, Refunding, AMBAC Insured, 6.375%, 5/01/10 ....................... 2,000,000 2,106,220
Holly Area School District GO, FGIC Insured, Pre-Refunded, 5.625%, 5/01/25 .................. 8,775,000 9,277,018
Hopkins Public Schools GO, FGIC Insured, Pre-Refunded,
5.70%, 5/01/21 ........................................................................... 4,000,000 4,228,200
5.50%, 5/01/26 ........................................................................... 1,000,000 1,044,360
Houghton-Portage Township School District GO, Refunding, AMBAC Insured, 6.00%, 5/01/14 ...... 2,000,000 2,091,320
Howell Public Schools GO, MBIA Insured, 5.60%, 5/01/21 ...................................... 3,475,000 3,431,771
Hudsonville Public Schools GO, Series B, FGIC Insured, Pre-Refunded,
6.05%, 5/01/19 ........................................................................... 2,000,000 2,163,160
6.10%, 5/01/24 ........................................................................... 2,000,000 2,167,320
Huron Valley School District GO,
FGIC Insured, Pre-Refunded, 5.875%, 5/01/16 .............................................. 100,000 106,816
FGIC Insured, Pre-Refunded, 5.75%, 5/01/22 ............................................... 2,450,000 2,597,564
Refunding, FGIC Insured, 6.125%, 5/01/20 ................................................. 11,535,000 11,829,950
Jenison Public Schools GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/16 ....................... 130,000 138,674
Kalamazoo Downtown Development, Refunding, 5.35%, 4/01/18 ................................... 200,000 195,844
Kalamazoo Hospital Finance Authority Hospital Facility Revenue,
Borgess Medical Center, Series A, AMBAC Insured, 5.625%, 6/01/14 ......................... 3,805,000 3,832,054
Bronson Methodist Hospital, Refunding and Improvement, MBIA Insured, 5.875%, 5/15/26 ..... 26,165,000 26,544,636
Bronson Methodist Hospital, Refunding and Improvement, Series A, MBIA Insured,
Pre-Refunded, 6.25%, 5/15/12 ........................................................... 5,000,000 5,401,000
Bronson Methodist Hospital, Refunding and Improvement, Series A, MBIA Insured,
Pre-Refunded, 6.375%, 5/15/17 .......................................................... 2,460,000 2,667,673
Bronson Methodist Hospital, Refunding, MBIA Insured, 5.25%, 5/15/18 ...................... 250,000 237,693
Bronson Methodist Hospital, Refunding, MBIA Insured, 5.50%, 5/15/28 ...................... 15,000,000 14,454,150
Kelloggsville Public School District GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/13 ......... 1,000,000 1,058,610
Kenowa Hills Public Schools, MBIA Insured, 5.875%,
5/01/21 .................................................................................. 1,510,000 1,524,345
5/01/26 .................................................................................. 9,000,000 9,140,220
Kent County Building Authority GO, 5.00%, 6/01/26 ........................................... 21,885,000 19,545,931
Kent Hospital Finance Authority Health Care Revenue, Butterworth Health System,
Series A, MBIA Insured, Pre-Refunded, 5.625%, 1/15/26 ................................... 15,500,000 16,510,755
Lake Linden-Hubbell Public Schools, FSA Insured,
5.40%, 5/01/18 ........................................................................... 825,000 801,331
5.50%, 5/01/23 ........................................................................... 675,000 654,966
Lake Orion Community School District GO, Refunding, AMBAC Insured, 5.50%, 5/01/20 ........... 2,200,000 2,149,400
Lake Shore Public Schools GO, Macomb County, FSA Insured, 5.50%,
5/01/17 .................................................................................. 4,500,000 4,439,655
5/01/20 .................................................................................. 3,540,000 3,458,580
Lake Superior State University Revenue, AMBAC Insured, Pre-Refunded, 6.375%, 11/15/15 ....... 1,500,000 1,654,260
Lakeshore Public Schools GO, Berrien County, MBIA Insured, 5.70%, 5/01/22 ................... 3,500,000 3,495,275
Lakeview Community Schools GO,
FGIC Insured, Pre-Refunded, 5.75%, 5/01/16 ............................................... 100,000 106,023
Refunding, MBIA Insured, 6.75%, 5/01/13 .................................................. 1,500,000 1,577,220
Lakewood Public Schools GO, MBIA Insured,
5.375%, 5/01/20 .......................................................................... 3,300,000 3,174,369
5.75%, 5/01/22 ........................................................................... 2,200,000 2,204,620
Lansing Building Authority, Refunding, MBIA Insured, 5.60%, 6/01/19 ......................... 1,470,000 1,456,006
Lenawee County Hospital Finance Authority Hospital Revenue, Lenawee Health Alliance,
Refunding, Series A, AMBAC Insured, 5.20%, 7/01/19 ..................................... 2,115,000 1,994,974
Leslie Public Schools GO, Ingham and Jackson Counties, AMBAC Insured,
Pre-Refunded, 6.00%, 5/01/25 ............................................................ 3,500,000 3,764,950
Lincoln Consolidated School District GO, FSA Insured, 5.00%, 5/01/28 ........................ 2,000,000 1,795,520
Lincoln Consolidated School District,
FGIC Insured, Pre-Refunded, 5.85%, 5/01/21 ............................................... 130,000 139,524
Refunding, FGIC Insured, 5.85%, 5/01/21 .................................................. 10,000 10,081
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Lincoln Park School District,
FGIC Insured, Pre-Refunded, 5.85%, 5/01/15 ...................................................... $ 2,885,000 $ 3,093,845
FGIC Insured, Pre-Refunded, 5.90%, 5/01/26 ...................................................... 6,050,000 6,505,081
Refunding, FGIC Insured, 5.00%, 5/01/26 ......................................................... 400,000 359,808
Marquette City Hospital Finance Authority Revenue, Marquette General Hospital,
Refunding, Series D, FSA Insured,
5.875%, 4/01/11 ................................................................................. 4,525,000 4,711,747
6.10%, 4/01/19 .................................................................................. 5,225,000 5,458,610
Marysville Public School District, MBIA Insured, Pre-Refunded, 5.75%, 5/01/22 ...................... 1,100,000 1,167,056
Mason Public School District GO, FGIC Insured, 5.40%, 5/01/21 ...................................... 1,400,000 1,348,004
Menominee Area Public School District GO, Refunding, AMBAC Insured, 6.00%, 5/01/20 ................. 2,675,000 2,727,350
Merrill Community School District GO, FGIC Insured, 5.60%, 5/01/26 ................................. 4,000,000 4,202,840
Michigan Higher Education Student Loan Authority Revenue, Series XIII-A, MBIA Insured,
7.40%, 10/01/04 ................................................................................. 1,360,000 1,407,029
7.55%, 10/01/08 ................................................................................. 1,325,000 1,368,646
Michigan Municipal Bond Authority Revenue,
Local Government Loan Program Revenue Sharing, 5.20%, 11/01/19 .................................. 330,000 302,580
Local Government Loan Program, Refunding, Series G, AMBAC Insured, 6.75%, 11/01/14 .............. 6,490,000 7,176,123
Local Government Loan Program, Refunding, Series G, AMBAC Insured, 6.80%, 11/01/14 .............. 1,650,000 1,799,606
Local Government Loan Program, Refunding, Series G, AMBAC Insured, 6.80%, 11/01/23 .............. 825,000 910,495
Local Government Loan Program, Series C, MBIA Insured, 6.00%, 11/01/10 .......................... 3,790,000 3,979,045
Michigan State Building Authority Revenue,
Detroit Regional Prisons, Series I, MBIA Insured, Pre-Refunded, 7.25%, 10/01/08 ................. 10,000,000 10,028,300
Facilities Program, Refunding, Series 1, 4.75%, 10/15/21 ........................................ 500,000 431,105
Refunding, Series I, AMBAC Insured, 6.25%, 10/01/20 ............................................. 1,500,000 1,558,440
Series II, MBIA Insured, 6.25%, 10/01/20 ........................................................ 4,645,000 4,839,997
Series II, MBIA Insured, ETM, 7.40%, 4/01/01 .................................................... 2,140,000 2,176,915
Michigan State Comprehensive Transportation Revenue, Series A, MBIA Insured, 5.50%, 5/15/22 ........ 4,500,000 4,391,370
Michigan State HDA,
Rental Housing Revenue, Series A, AMBAC Insured, 6.00%, 4/01/16 ................................. 200,000 204,682
SFMR, Refunding, Series B, 6.20%, 6/01/27 ....................................................... 70,000 71,796
SFMR, Refunding, Series E, 6.20%, 12/01/27 ...................................................... 295,000 300,994
SFMR, Series A, AMBAC Insured, 5.95%, 6/01/17 ................................................... 2,500,000 2,525,500
SFMR, Series A, AMBAC Insured, 6.05%, 12/01/27 .................................................. 1,000,000 1,015,330
SFMR, Series D, 5.95%, 12/01/16 ................................................................. 250,000 254,598
Michigan State Hospital Finance Authority Revenue,
Crittenton Hospital, Series A, FGIC Insured, 6.75%, 3/01/20 ..................................... 1,750,000 1,795,973
Detroit Medical Center Obligation Group, Refunding, Series A, AMBAC Insured, 5.50%, 8/15/24 ..... 15,000,000 14,277,150
Detroit Medical Center Obligation Group, Refunding, Series A, AMBAC Insured, 5.25%, 8/15/27 ..... 10,000,000 9,217,300
Henry Ford Health, Refunding, Series A, 5.25%, 11/15/25 ......................................... 10,000,000 9,051,300
Holland Community Hospital, AMBAC Insured, 5.625%, 1/01/28 ...................................... 3,000,000 2,959,980
Hospital-Charity Obligation Group, Series A, 5.125%, 11/01/29 ................................... 800,000 706,920
Mercy Health Services, Refunding, Series T, MBIA Insured, 5.75%, 8/15/15 ........................ 10,525,000 10,691,927
Mercy Health Services, Series Q, AMBAC Insured, 5.375%, 8/15/26 ................................. 12,090,000 11,424,808
Mercy Health Services, Series R, AMBAC Insured, 5.375%, 8/15/16 ................................. 1,500,000 1,460,115
Mercy Health Services, Series R, AMBAC Insured, 5.375%, 8/15/26 ................................. 1,750,000 1,653,715
Mercy Health Services, Series U, 5.75%, 8/15/26 ................................................. 300,000 293,556
Mercy Health Services, Series U, MBIA Insured, 5.75%, 8/15/26 ................................... 2,300,000 2,301,633
Mercy Health Services, Series W, FSA Insured, 5.25%, 8/15/27 .................................... 8,605,000 7,976,147
Mid Michigan Obligation Group, Refunding, Series A, FSA Insured, 5.375%, 6/01/27 ................ 7,500,000 7,091,775
Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.00%, 8/15/31 ...................... 7,050,000 6,151,196
Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.125%, 8/15/25 ..................... 10,375,000 9,376,821
Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.00%, 8/15/26 ...................... 500,000 441,465
Presbyterian Villages Obligation Group, 6.375%, 1/01/15 ......................................... 225,000 228,528
Presbyterian Villages Obligation Group, 6.375%, 1/01/25 ......................................... 1,250,000 1,260,775
Sparrow Obligation Group, MBIA Insured, 5.90%, 11/15/26 ......................................... 100,000 101,693
Sparrow Obligation Group, Refunding, MBIA Insured, 6.50%, 11/15/11 .............................. 1,500,000 1,577,595
St. John's Hospital, Refunding, Series A, AMBAC Insured, 6.00%, 5/15/13 ......................... 3,445,000 3,567,125
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Michigan State Hospital Finance Authority Revenue, (cont.)
St. John's Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 5/15/14 ........................ $ 9,545,000 $ 9,994,760
St. John's Hospital, Refunding, Series A, AMBAC Insured, 5.125%, 5/15/17 ....................... 14,500,000 13,592,300
Michigan State Strategic Fund Limited Obligation Revenue,
Detroit Edison Co., Pollution Project, Refunding, FGIC Insured, 6.875%, 12/01/21 ............... 20,000,000 21,138,400
Detroit Edison Co., Pollution Project, Refunding, Series AA, FGIC Insured, 6.95%, 5/01/11 ...... 5,000,000 5,771,700
Detroit Edison Co., Pollution Project, Refunding, Series BB, AMBAC Insured, 7.00%, 5/01/21 ..... 3,000,000 3,518,760
Detroit Edison Co., Pollution Project, Refunding, Series BB, MBIA Insured, 6.05%, 10/01/23 ..... 1,285,000 1,329,063
Detroit Edison Co., Pollution Project, Refunding, Series BB, MBIA Insured, 6.20%, 8/15/25 ...... 10,250,000 10,760,450
Detroit Edison Co., Pollution Project, Refunding, Series CC, FGIC Insured, 6.95%, 9/01/21 ...... 5,540,000 5,859,326
Detroit Edison Co., Pollution Project, Refunding, Series CC, MBIA Insured, 6.05%, 10/01/23 ..... 5,825,000 6,024,739
Hope Network Project, Refunding, Series B, 5.125%, 9/01/13 ..................................... 600,000 579,372
St. John-Bon Secours Continuing Care, 7.90%, 11/15/16 .......................................... 1,800,000 1,826,154
Worthington Armstrong Venture, 5.75%, 10/01/22 ................................................. 350,000 339,549
Michigan State Trunk Line,
Refunding, Series A, MBIA Insured, 5.00%, 11/01/26 ............................................. 5,500,000 4,894,615
Refunding, Series B, AMBAC Insured, 5.50%, 10/01/21 ............................................ 1,400,000 1,396,388
Refunding, Series B, MBIA Insured, 5.50%, 10/01/21 ............................................. 4,500,000 4,488,390
Series A, FGIC Insured, 5.50%, 10/01/21 ........................................................ 1,475,000 1,471,195
Series A, FGIC Insured, Pre-Refunded, 5.625%, 11/01/20 ......................................... 2,765,000 2,938,642
Series A, FGIC Insured, Pre-Refunded, 5.80%, 11/15/24 .......................................... 6,000,000 6,458,640
Series A, FGIC Insured, Pre-Refunded, 5.625%, 11/01/26 ......................................... 8,990,000 9,554,572
Monroe County PCR, Detroit Edison Co.,
Series 1, MBIA Insured, 6.875%, 9/01/22 ........................................................ 4,000,000 4,255,600
Series 1-B, MBIA Insured, 6.55%, 9/01/24 ....................................................... 4,000,000 4,203,680
Series CC, AMBAC Insured, 7.50%, 12/01/19 ...................................................... 10,000,000 10,366,200
Series CC, MBIA Insured, 6.55%, 6/01/24 ........................................................ 1,150,000 1,206,362
Morley-Stanwood Community Schools, Building and Site, FGIC Insured,
Pre-Refunded, 5.625%, 5/01/21 ................................................................ 2,000,000 2,114,420
Muskegon Public Schools GO, Series 95, FGIC Insured, 5.25%,
5/01/18 ........................................................................................ 1,900,000 1,812,885
5/01/21 ........................................................................................ 2,000,000 1,888,680
Northern Michigan University Revenue, AMBAC Insured, Pre-Refunded, 5.60%, 12/01/13 ................ 1,715,000 1,815,568
Northview Public School District GO, Refunding, FGIC Insured, 5.00%, 5/01/21 ...................... 3,450,000 3,151,472
Northview Public Schools District GO, MBIA Insured,
5.80%, 5/01/21 ................................................................................. 235,000 236,567
Pre-Refunded, 5.80%, 5/01/21 ................................................................... 4,265,000 4,561,673
Novi Community School District GO,
Building and Site, FGIC Insured, 5.30%, 5/01/21 ................................................ 1,960,000 1,863,000
FGIC Insured, Pre-Refunded, 6.125%, 5/01/18 .................................................... 4,750,000 5,108,293
Oakland County EDC, Limited Obligation Revenue, Cranbrook Educational Community,
Refunding, 5.00%, 11/01/17 ................................................................... 500,000 455,935
Oakland, Washtenaw, etc. Counties Community College District, AMBAC Insured, 6.65%, 5/01/11 ....... 3,500,000 3,765,160
Oakridge Public Schools GO, FSA Insured,
5.00%, 5/01/23 ................................................................................. 500,000 452,995
5.125%, 5/01/28 ................................................................................ 500,000 456,315
Paw Paw Public School District, Building and Site, FGIC Insured, Pre-Refunded, 5.625%, 5/01/25 .... 3,500,000 3,673,215
Petoskey Hospital Finance Authority Facilities Revenue, Northern Michigan Hospital,
MBIA Insured, Pre-Refunded,
7.00%, 11/15/07 ................................................................................ 4,500,000 4,620,015
6.75%, 11/15/19 ................................................................................ 1,000,000 1,026,180
Pinckney Community Schools, Livingston and Washtenaw Counties, FGIC Insured, 5.50%, 5/01/27 ....... 10,700,000 10,330,850
Plymouth-Canton Community School District,
Refunding, AMBAC Insured, 5.50%, 5/01/13 ....................................................... 4,000,000 4,017,040
Series C, FGIC Insured, Pre-Refunded, 6.50%, 5/01/16 ........................................... 3,500,000 3,756,690
Series C, MBIA Insured, Pre-Refunded, 6.50%, 5/01/16 ........................................... 3,000,000 3,220,020
Port Huron School District,
FSA Insured, Pre-Refunded, 7.25%, 5/01/15 ...................................................... 5,500,000 5,736,280
Refunding, AMBAC Insured, 6.00%, 5/01/12 ....................................................... 4,500,000 4,696,065
Portage Lake Water and Sewer Authority GO, Refunding, AMBAC Insured,
6.10%, 10/01/14 ................................................................................ 770,000 817,286
6.20%, 10/01/20 ................................................................................ 670,000 700,666
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Portage Public Schools GO, MBIA Insured, Pre-Refunded, 5.625%, 5/01/19 ............................. $ 2,750,000 $ 2,899,683
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured,
ETM, 8.75%, 7/01/00 ............................................................................ 500,000 521,110
Pre-Refunded, 9.00%, 7/01/09 ................................................................... 2,500,000 2,947,500
Puerto Rico Commonwealth GO, Public Improvement, MBIA Insured, 6.75%, 7/01/06 ..................... 830,000 840,956
Puerto Rico Electric Power Authority Revenue, Refunding, Series U, FSA Insured, 6.00%, 7/01/14 .... 3,400,000 3,592,338
Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ................... 1,290,000 1,340,671
Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 7/01/14 ........................ 8,700,000 9,193,029
Redford USD GO, FGIC Insured, Pre-Refunded, 6.00%, 5/01/22 ........................................ 14,090,000 15,229,599
Rockford Public Schools GO, Refunding,
AMBAC Insured, 5.875%, 5/01/19 ................................................................. 3,900,000 3,931,980
FGIC Insured, 5.25%, 5/01/22 ................................................................... 1,250,000 1,177,313
FGIC Insured, 5.25%, 5/01/27 ................................................................... 3,000,000 2,793,270
FSA Insured, 5.875%, 5/01/19 ................................................................... 3,150,000 3,175,830
MBIA Insured, 5.875%, 5/01/12 .................................................................. 1,850,000 1,919,542
MBIA Insured, 5.875%, 5/01/19 .................................................................. 1,925,000 1,940,785
Romulus Community Schools GO, Refunding, FGIC Insured, 5.75%,
5/01/13 ........................................................................................ 690,000 706,312
5/01/17 ........................................................................................ 1,200,000 1,207,368
5/01/22 ........................................................................................ 5,435,000 5,444,892
Royal Oak Hospital Finance Authority Revenue, Refunding, MBIA Insured, 6.25%, 1/01/19 ............. 5,000,000 5,169,400
Saginaw Hospital Finance Authority Revenue,
Covenant Medical Center, Refunding, Series E, MBIA Insured, 5.375%, 7/01/19 .................... 4,850,000 4,636,067
Covenant Medical Center, Refunding, Series E, MBIA Insured, 5.50%, 7/01/24 ..................... 2,750,000 2,624,545
St. Luke's Hospital Project, Refunding, Series C, MBIA Insured, 6.875%, 7/01/14 ................ 5,325,000 5,572,187
St. Luke's Hospital Project, Refunding, Series C, MBIA Insured, 6.75%, 7/01/17 ................. 2,000,000 2,085,340
St. Luke's Hospital Project, Refunding, Series C, MBIA Inusred, 6.00%, 7/01/21 ................. 3,875,000 3,913,246
St. Luke's Hospital Project, Refunding, Series D, MBIA Insured, 6.50%, 7/01/11 ................. 1,000,000 1,046,590
Saginaw Valley State University Revenue, AMBAC Insured, 5.25%, 7/01/19 ............................ 2,540,000 2,419,553
Saranac Community School District GO, MBIA Insured, 5.25%, 5/01/21 ................................ 1,350,000 1,274,859
Sault Ste. Marie Water Treatment GO, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/10 .................. 2,000,000 2,040,000
Schoolcraft Community School District GO, FGIC Insured,
Pre-Refunded, 5.75%, 5/01/21 ................................................................... 3,575,000 3,790,323
Pre-Refunded, 5.375%, 5/01/26 .................................................................. 1,000,000 1,036,430
Shelby Public School District GO, MBIA Insured, Pre-Refunded, 5.625%, 5/01/21 ..................... 1,925,000 2,032,319
South Haven Public Schools GO, Refunding, FGIC Insured, 5.50%,
5/01/13 ........................................................................................ 1,000,000 1,009,110
5/01/17 ........................................................................................ 1,725,000 1,701,868
South Redford School District GO, FGIC Insured,
5.50%, 5/01/22 ................................................................................. 3,155,000 3,071,109
Pre-Refunded, 5.50%, 5/01/22 ................................................................... 1,455,000 1,519,544
St. Clair County Building Authority GO, MBIA Insured, 5.25%,
4/01/18 ........................................................................................ 2,065,000 1,970,630
4/01/21 ........................................................................................ 2,400,000 2,266,752
St. Clair County EDC, PCR, Detroit Edison Co., Refunding, Series DD,
AMBAC Insured, 6.05%, 8/01/24 ................................................................. 7,745,000 7,962,557
St. John's Public Schools, FGIC Insured, Pre-Refunded,
5.625%, 5/01/20 ................................................................................ 7,000,000 7,400,470
5.75%, 5/01/25 ................................................................................. 2,000,000 2,126,760
Sturgis Public School District, MBIA Insured, Pre-Refunded, 6.10%, 5/01/18 ........................ 1,000,000 1,070,330
Thornapple Kellogg School District, FGIC Insured, 5.375%, 5/01/22 ................................. 1,960,000 1,876,955
Three Rivers Community Schools, Building and Site, MBIA Insured, Pre-Refunded, 6.00%, 5/01/23 ..... 2,400,000 2,594,112
Traverse City Area Public Schools GO, Building and Site, Series I, MBIA Insured,
Pre-Refunded, 5.70%, 5/01/20 .................................................................. 4,550,000 4,827,141
University of Michigan Revenues, Medical Service Plan, MBIA Insured,
Pre-Refunded, 6.50%, 12/01/21 ................................................................ 2,365,000 2,527,476
Vestaburg Community Schools GO, Refunding, MBIA Insured, 5.50%, 5/01/26 ........................... 1,000,000 967,350
Vicksburg Community Schools GO, Refunding, MBIA Insured, 5.625%,
5/01/12 ........................................................................................ 2,175,000 2,234,682
5/01/20 ........................................................................................ 1,000,000 992,070
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Walled Lake Consolidated School District GO, Refunding, MBIA Insured, 5.50%, 5/01/22 .......... $ 3,000,000 $ 2,920,230
Wayland USD GO, FGIC Insured, Pre-Refunded, 6.75%, 5/01/24 .................................... 2,000,000 2,225,360
Wayne Charter County Airport Revenue, Detroit Metropolitan Wayne County,
Series A, MBIA Insured, 5.25%, 12/01/18 ................................................... 5,500,000 5,175,775
Series A, MBIA Insured, 5.00%, 12/01/22 ................................................... 10,100,000 9,003,948
Sub. lien, Refunding, Series C, MBIA Insured, 5.25%, 12/01/21 ............................. 1,000,000 958,160
Sub. lien, Series B, MBIA Insured, 6.875%, 12/01/11 ....................................... 300,000 317,736
Sub. lien, Series B, MBIA Insured, 6.75%, 12/01/21 ........................................ 2,000,000 2,109,040
Wayne County Airport Revenue, sub. lien, Series B, AMBAC Insured, 6.00%, 12/01/20 ............ 10,585,000 10,664,493
Wayne State University Revenue, FGIC Insured, 5.125%, 11/15/29 ............................... 8,150,000 7,369,475
Wayne-Westland Community Schools GO, Refunding, FGIC Insured, 6.10%, 5/01/13 ................. 2,275,000 2,387,408
West Ottawa Public School District GO,
FGIC Insured, 5.60%, 5/01/21 .............................................................. 2,355,000 2,325,704
FGIC Insured, 5.60%, 5/01/26 .............................................................. 12,100,000 11,869,132
Refunding, FGIC Insured, 6.00%, 5/01/20 ................................................... 6,630,000 6,739,594
Western School District GO, Refunding, MBIA Insured, 5.50%, 5/01/20 .......................... 1,660,000 1,621,820
Western Townships Utilities Authority GO, Sewer Disposal System, Refunding, FSA Insured,
6.75%, 1/01/15 ............................................................................ 18,710,000 19,456,903
6.50%, 1/01/19 ............................................................................ 4,915,000 5,080,144
White Cloud Public Schools GO, Refunding, FSA Insured, 5.50%, 5/01/20 ........................ 1,000,000 977,000
Williamston Community School District GO, MBIA Insured, 5.375%, 5/01/15 ...................... 4,900,000 4,856,145
Williamston County GO, Refunding, AMBAC Insured, 6.90%, 11/01/17 ............................. 1,800,000 1,913,274
Wyandotte City School District GO, Refunding, FSA Insured, 5.625%, 5/01/13 ................... 1,800,000 1,827,270
Wyandotte Electric Revenue, Refunding, MBIA Insured, 6.25%, 10/01/17 ......................... 9,980,000 10,505,647
Yale Public Schools District GO, AMBAC Insured,
5.375%, 5/01/17 ........................................................................... 2,000,000 1,945,400
5.50%, 5/01/19 ............................................................................ 1,500,000 1,469,880
Ypsilanti School District GO,
FGIC Insured, Pre-Refunded, 5.75%, 5/01/20 ................................................ 4,700,000 4,983,081
Refunding, FGIC Insured, 5.375%, 5/01/26 .................................................. 4,750,000 4,514,353
Zeeland Public Schools GO,
FGIC Insured, 5.375%, 5/01/25 ............................................................. 6,040,000 5,745,308
Series B, MBIA Insured, Pre-Refunded, 6.05%, 5/01/19 ...................................... 3,000,000 3,244,740
Series B, MBIA Insured, Pre-Refunded, 6.10%, 5/01/24 ...................................... 4,000,000 4,334,640
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,154,368,712) ............................................ 1,187,343,411
--------------
(a)SHORT TERM INVESTMENTS .3%
Delta County EDC, Environmental Improvement Revenue, Mead Escanaba Paper Project,
Refunding, Series C, Daily VRDN and Put, 2.80%, 12/01/23 ................................... 500,000 500,000
Farmington Hills Hospital Finance Authority Revenue, Botsford General Hospital, Series B,
MBIA Insured, Daily VRDN and Put, 3.00%, 2/15/16 ........................................... 100,000 100,000
Flint Hospital Building Authority Revenue, Hurley Medical Center, Series B,
Weekly VRDN and Put, 3.25%, 7/01/15 ........................................................ 200,000 200,000
Michigan State Strategic Fund Limited Obligation Revenue, Detroit Edison Co.,
Reserve 1, Refunding, Daily VRDN and Put, 2.80%, 9/01/30 ................................... 100,000 100,000
Midland County EDC, Limited Obligation Revenue, Dow Chemical Co. Project,
Refunding, Series B, Daily VRDN and Put, 2.85%, 12/01/15 ................................... 1,300,000 1,300,000
Royal Oak Hospital Finance Authority Revenue, William Beaumont Hospital, Series L,
Daily VRDN and Put, 3.00%, 1/01/27 ......................................................... 700,000 700,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $2,900,000) ............................................... 2,900,000
--------------
TOTAL INVESTMENTS (COST $1,157,268,712) 98.8% ................................................ 1,190,243,411
OTHER ASSETS, LESS LIABILITIES 1.2% .......................................................... 14,906,726
--------------
NET ASSETS 100.0% ............................................................................ $1,205,150,137
==============
</TABLE>
See glossary of terms on page 83.
(a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest at
specified dates.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 -----------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.14 $ 12.16 $ 12.01 $ 12.14 $ 11.88 $ 12.33
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .29 .61 .64 .65 .67 .69
Net realized and unrealized gains (losses) ... (.58) .01 .25 (.12) .27 (.45)
-----------------------------------------------------------------------------
Total from investment operations .............. (.29) .62 .89 .53 .94 .24
-----------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.29) (.62)(3) (.64) (.66) (.68) (.69)
In excess of net investment income ........... (.01) -- -- -- -- --
Net realized gains ........................... (.02) (.02) (.10) -- -- --(2)
-----------------------------------------------------------------------------
Total distributions ........................... (.32) (.64) (.74) (.66) (.68) (.69)
-----------------------------------------------------------------------------
Net asset value, end of period ................ $ 11.53 $ 12.14 $ 12.16 $ 12.01 $ 12.14 $ 11.88
=============================================================================
Total return* ................................. (2.37)% 5.18% 7.60% 4.54% 8.06% 2.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $490,291 $515,174 $495,315 $482,128 $492,139 $479,934
Ratios to average net assets:
Expenses ..................................... .67%** .67% .65% .66% .66% .66%
Net investment income ........................ 4.88%** 5.01% 5.29% 5.47% 5.58% 5.81%
Portfolio turnover rate ....................... 6.29% 16.25% 14.87% 14.40% 17.72% 17.59%
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.19 $ 12.21 $ 12.05 $ 12.17 $ 11.89
-------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .26 .54 .57 .59 .50
Net realized and unrealized gains (losses) ... (.58) .01 .26 (.12) .28
-------------------------------------------------------------
Total from investment operations .............. (.32) .55 .83 .47 .78
-------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.26) (.55)(3) (.57) (.59) (.50)
In excess of net investment income ........... (.01) -- -- -- --
Net realized gains ........................... (.02) (.02) (.10) -- --
-------------------------------------------------------------
Total distributions ........................... (.29) (.57) (.67) (.59) (.50)
-------------------------------------------------------------
Net asset value, end of period ................ $ 11.58 $ 12.19 $ 12.21 $ 12.05 $ 12.17
=============================================================
Total return* ................................. (2.64)% 4.58% 7.04% 3.98% 6.67%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 23,217 $ 20,896 $ 10,131 $ 4,844 $ 1,152
Ratios to average net assets:
Expenses ..................................... 1.23%** 1.23% 1.22% 1.23% 1.25%**
Net investment income ........................ 4.32%** 4.44% 4.72% 4.87% 4.94%**
Portfolio turnover rate ....................... 6.29% 16.25% 14.87% 14.40% 17.72%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C.
(2)Includes distributions from net realized gains of $.004.
(3)Includes distributions in excess of net investment income in the amount of
$.001.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 101.2%
Albany ISD No. 745, Series A, FSA Insured, 6.00%, 2/01/16 .............................................. $2,295,000 $2,411,563
Albert Lea Minnesota ISD No. 241, MBIA Insured, 5.00%, 2/01/18 ......................................... 2,000,000 1,869,660
Anoka County Housing and Redevelopment Authority,
City of Ramsey, Housing Development, AMBAC Insured, 5.00%, 1/01/28 .................................. 2,045,000 1,868,864
Ice Arena, Series A, MBIA Insured, 5.70%, 2/01/23 ................................................... 2,195,000 2,201,453
Anoka County Resource Recovery Revenue, Northern States Power Co., AMBAC Insured,
7.15%, 12/01/08 ..................................................................................... 2,100,000 2,155,797
Becker GO, Tax Increment, Refunding, Series D, MBIA Insured, 6.25%, 8/01/15 ............................ 4,870,000 4,968,423
Benson ISD No. 777 GO, FSA Insured, 6.00%, 2/01/15 ..................................................... 290,000 296,348
Big Lake ISD No. 727, MBIA Insured,
5.625%, 2/01/19 ..................................................................................... 500,000 501,625
5.70%, 2/01/21 ...................................................................................... 3,085,000 3,103,325
Bloomington Health Care Facilities Revenue, Masonic Home Care Center, AMBAC Insured,
5.875%, 7/01/22 ..................................................................................... 2,685,000 2,728,094
Brainerd Health Care Facilities Revenue, Benedictine Health St. Joseph, Refunding, Series D,
MBIA Insured, 5.875%, 2/15/13 ....................................................................... 3,500,000 3,622,500
Buffalo GO,
AMBAC Insured, 5.55%, 6/01/17 ....................................................................... 1,000,000 1,007,170
ISD No. 877, Formerly Wright County ISD No.23, Refunding, MBIA Insured, 5.00%, 2/01/22 .............. 6,255,000 5,786,375
ISD No. 877, FSA Insured, 6.15%, 2/01/18 ............................................................ 2,800,000 2,934,540
Burnsville ISD, Series A, FSA Insured, 6.20%, 2/01/17 .................................................. 2,105,000 2,242,835
(b)Burnsville MFHR, Coventry Center, Refunding, Series A, GNMA Secured,
5.90%, 9/20/19 ...................................................................................... 400,000 399,520
(b)Burnsville MFR, Coventry Court, Refunding, Series A, GNMA Secured,
5.95%, 9/20/29 ...................................................................................... 1,275,000 1,273,177
6.00%, 9/20/34 ...................................................................................... 1,000,000 997,060
Champlin EDA, Housing Development, MBIA Insured, 5.625%, 2/01/26 ....................................... 1,000,000 992,470
Chanhassen Apartments Project GO, Series B, AMBAC Insured, 6.20%, 1/01/25 .............................. 2,975,000 3,085,045
Columbia Heights ISD, No. 013, FSA Insured,
5.375%, 2/01/19 ..................................................................................... 2,450,000 2,393,626
5.50%, 2/01/23 ...................................................................................... 6,000,000 5,898,900
(b)Dakota County Housing and Redevelopment Authority MFHR, Dakota Station Project, GNMA Secured,
5.65%, 1/20/24 ...................................................................................... 1,500,000 1,493,985
5.75%, 1/20/41 ...................................................................................... 6,000,000 5,971,380
Dakota County Housing and Redevelopment Authority SFMR,
GNMA Secured, FNMA Insured, 5.75%, 4/01/18 .......................................................... 2,992,000 2,996,368
GNMA Secured, FNMA Insured, 5.85%, 10/01/30 ......................................................... 4,988,000 4,980,618
Refunding, GNMA Secured, 8.10%, 3/01/16 ............................................................. 180,000 185,175
Dakota County Housing and Redevelopment Authority, Governmental Housing Revenue,
Eagan Senior Housing Facility, MBIA Insured, 5.40%, 1/01/27 ......................................... 1,315,000 1,283,703
Dakota, Washington and Stearns County SFMR, Series 1990, GNMA Secured,
7.80%, 12/01/10 ..................................................................................... 525,000 541,868
7.85%, 12/01/30 ..................................................................................... 1,950,000 2,011,055
Dilworth ISD No. 147, MBIA Insured, 6.00%, 2/01/15 ..................................................... 1,040,000 1,085,094
Duluth EDA,
Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured, 6.20%, 11/01/12 ............. 2,880,000 3,092,947
Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured, 6.30%, 11/01/22 ............. 5,405,000 5,820,428
Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured, Pre-Refunded, 6.30%, 11/01/22 2,125,000 2,301,290
Hospital Facilities Revenue, St. Lukes Hospital, Series A, Connie Lee Insured, 6.40%, 5/01/12 ....... 3,000,000 3,067,560
(b)Eagan MFHR, Forest Ridge Apartments, Refunding, Series A, GNMA Secured,
5.95%, 9/20/29 ...................................................................................... 1,700,000 1,697,569
6.00%, 9/20/34 ...................................................................................... 1,480,000 1,475,649
Eagan MFMR, Forest Ridge Apartments, Refunding, BIG Insured, 7.50%, 3/01/27 ............................ 4,420,000 4,520,334
Eden Prairie ISD No. 272, Series A,
FGIC Insured, Pre-Refunded, 5.45%, 2/01/08 .......................................................... 1,000,000 1,021,660
FSA Insured, Pre-Refunded, 5.75%, 2/01/15 ........................................................... 4,980,000 5,177,855
Eden Prairie MFHR, Olympic Ridge, Refunding, Series A, GNMA Secured, 6.25%, 1/20/31 .................... 2,000,000 2,064,400
Eveleth EDA, Housing Development, MBIA Insured, 5.80%, 7/01/25 ......................................... 1,000,000 1,008,870
Faribault ISD No. 656, FSA Insured, 5.75%, 6/01/15 ..................................................... 1,500,000 1,566,165
Ham Lake GO, Anoka County Housing, Senior Housing Project, Series B, MBIA Insured, 6.10%, 1/01/26 ...... 2,180,000 2,222,096
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Hennepin County GO, Series A, 5.125%,
12/01/17 .............................................................................................. $ 1,820,000 $ 1,745,908
12/01/19 .............................................................................................. 1,440,000 1,367,683
Hibbing Health Care Facilities Revenue, The Duluth Clinic Ltd., FSA Insured, Pre-Refunded, 5.00%, 11/01/25 9,300,000 9,014,862
Hopkins Elderly Housing Revenue, St. Therese Project, Refunding, Series A, GNMA Secured,
5.60%, 11/20/17 ....................................................................................... 750,000 741,495
5.70%, 11/20/32 ....................................................................................... 3,000,000 2,938,410
Inner Grove Heights Tax Increment, Series D, MBIA Insured, 5.50%, 2/01/19 ................................ 1,000,000 991,700
Kenyon Wanamingo ISD No. 2172, MBIA Insured, 6.00%, 2/01/22 .............................................. 4,030,000 4,251,972
Lakeville ISD No. 194,
FGIC Insured, 5.40%, 2/01/13 .......................................................................... 1,000,000 1,020,080
Series C, MBIA Insured, 5.125%, 2/01/13 ............................................................... 5,325,000 5,231,067
Minneapolis and St. Paul Housing RDA, Health Care System Revenue,
Children's Health Care, Series A, FSA Insured, 5.70%, 8/15/16 ......................................... 1,005,000 1,015,834
Health One Obligated Group, Series A, MBIA Insured, Pre-Refunded, 7.40%, 8/15/11 ...................... 10,390,000 10,943,995
Health One Obligated Group, Series A, MBIA Insured, Pre-Refunded, 6.75%, 8/15/14 ...................... 3,950,000 4,136,875
Minneapolis and St. Paul Metropolitan Airport Commission Airport Revenue, Series A, AMBAC Insured,
5.00%, 1/01/22 ........................................................................................ 11,750,000 10,745,140
5.20%, 1/01/24 ........................................................................................ 6,600,000 6,201,030
5.00%, 1/01/30 ........................................................................................ 33,405,000 29,782,228
Minneapolis CDA and St. Paul Housing RDA, Health Care Facilities Revenue, Carondelet
Community Hospitals Inc., Series B, BIG Insured, Pre-Refunded, 8.875%, 11/01/15 ....................... 900,000 1,149,615
Minneapolis CDA, Tax Increment Revenue, Series 1990, MBIA Insured, 7.00%, 3/01/01 ........................ 2,100,000 2,186,793
Minneapolis GO, Sports Arena Project, Refunding, 5.20%, 10/01/24 ......................................... 3,750,000 3,553,838
Minneapolis Hospital Facilities Revenue, Fairview Hospital and Healthcare, Refunding,
Series A, MBIA Insured, 6.50%, 1/01/11 ................................................................ 600,000 632,910
Series B, MBIA Insured, 6.70%, 1/01/17 ................................................................ 7,815,000 8,254,516
Minneapolis MFR, Riverside Plaza, Refunding, GNMA Secured, 5.20%, 12/20/30 ............................... 6,320,000 5,860,536
Minneapolis Revenue University Gateway Project, Series A, 5.25%, 12/01/24 ................................ 3,000,000 2,812,590
Minneapolis Special School District No. 001, Series A, MBIA Insured, 5.90%, 2/01/17 ...................... 5,000,000 5,090,350
Minneapolis St. Paul Housing Finance Board SFMR,
Phase VI, Series A, GNMA Secured, 8.30%, 8/01/21 ...................................................... 1,700,000 1,708,755
Series A, GNMA Secured, 8.375%, 11/01/17 .............................................................. 320,000 324,010
Series C, GNMA Secured, 8.875%, 11/01/18 .............................................................. 255,000 258,198
Minnesota Agriculture and Economic Development Board Revenue,
Benedictine Health, Refunding, Series A, MBIA Insured, 5.00%, 2/15/23 ................................. 6,850,000 6,184,591
Benedictine Health, Refunding, Series A, MBIA Insured, 5.125%, 2/15/29 ................................ 12,250,000 11,201,155
Evangelical Lutheran Good Samaritan, AMBAC Insured, 5.00%, 12/01/23 ................................... 2,750,000 2,478,493
Evangelical Lutheran Good Samaritan, Society Project, AMBAC Insured, 5.15%, 12/01/22 .................. 5,180,000 4,821,337
Health Care System, Fairview Hospital, Refunding, Series A, MBIA Insured, 5.75%, 11/15/26 ............. 14,000,000 14,020,020
Minnesota State GO, Refunding, MBIA Insured, 5.40%, 8/01/09 .............................................. 3,000,000 3,038,820
Minnesota State HFA,
Rental Housing, Refunding, Series D, MBIA Insured, 5.90%, 8/01/15 ..................................... 1,225,000 1,249,280
Rental Housing, Refunding, Series D, MBIA Insured, 5.95%, 2/01/18 ..................................... 2,645,000 2,690,917
Rental Housing, Refunding, Series D, MBIA Insured, 6.00%, 2/01/22 ..................................... 3,100,000 3,159,334
SFHR, Series D, 5.45%, 1/01/26 ........................................................................ 5,000,000 4,719,800
SFMR, Series E, AMBAC Insured, 5.40%, 1/01/25 ......................................................... 9,000,000 8,501,580
SFMR, Series F, MBIA Insured, 6.30%, 7/01/25 .......................................................... 1,470,000 1,513,027
SFMR, Series G, AMBAC Insured, 6.25%, 7/01/26 ......................................................... 2,420,000 2,481,250
SFMR, Series I, MBIA Insured, 6.25%, 1/01/15 .......................................................... 1,365,000 1,402,101
Minnesota State Higher Education Facilities Authority Revenue,
Bethel, Refunding, 5.10%, 4/01/28 ..................................................................... 4,100,000 3,816,403
Series 3, Connie Lee Insured, Pre-Refunded, 6.50%, 1/01/17 ............................................ 3,940,000 4,052,802
Minnetonka MFHR,
Brier Creek Project, Refunding, Series A, GNMA Secured, 6.45%, 6/20/24 ................................ 2,720,000 2,818,926
Cedar Hills East Project, FGIC Insured, 7.40%, 12/01/07 ............................................... 350,000 361,211
Cedar Hills East Project, FGIC Insured, 7.50%, 12/01/27 ............................................... 1,000,000 1,024,230
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
New Hope MFR, North Ridge, Refunding, Series A, GNMA Secured,
6.05%, 1/01/17 ......................................................................................... $ 450,000 $ 462,717
6.20%, 1/01/31 ......................................................................................... 5,470,000 5,572,617
North Branch ISD No. 138 GO, Series A, FGIC Insured, 5.625%, 2/01/17 ...................................... 1,240,000 1,287,591
North St. Paul Maplewood ISD No. 622 GO,
Refunding, Series A, 5.125%, 2/01/25 ................................................................... 2,275,000 2,117,684
Series A, MBIA Insured, Pre-Refunded, 7.10%, 2/01/19 ................................................... 2,000,000 2,234,980
Northeast Metropolitan ISD No. 916 GO, FSA Insured, 5.80%, 1/01/16 ........................................ 5,475,000 5,653,978
Northern Municipal Power Agency Electric System Revenue,
Refunding, FSA Insured, 5.00%, 1/01/12 ................................................................. 1,780,000 1,735,126
Refunding, FSA Insured, 5.25%, 1/01/17 ................................................................. 1,000,000 968,960
Refunding, FSA Insured, 5.30%, 1/01/21 ................................................................. 1,000,000 959,240
Refunding, Series B, AMBAC Insured, 5.50%, 1/01/18 ..................................................... 8,150,000 8,093,521
Series C, AMBAC Insured, 6.125%, 1/01/20 ............................................................... 8,090,000 8,535,678
Owatonna Public Utilities Commission Public Utilities Revenue, Refunding, Series A, AMBAC Insured, 5.45%,
1/01/16 ................................................................................................ 3,350,000 3,338,979
Park Rapids ISD No. 309, MBIA Insured, 5.00%, 2/01/25 ..................................................... 9,090,000 8,331,985
Plymouth Health Facilities Revenue, Westhealth Project, Series A, FSA Insured,
6.25%, 6/01/16 ......................................................................................... 1,600,000 1,686,944
6.125%, 6/01/24 ........................................................................................ 1,815,000 1,887,346
Princeton Hospital Revenue, Fairview Hospital and Healthcare, Series C, MBIA Insured, 6.25%, 1/01/21 ...... 7,205,000 7,515,463
Princeton ISD, No. 477, Mille Lacs County,
FSA Insured, 5.125%, 2/01/24 ........................................................................... 2,190,000 2,038,605
Series A, FSA Insured, 5.375%, 2/01/17 ................................................................. 2,540,000 2,499,004
Puerto Rico Commonwealth GO, Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 7/01/23 ............... 3,000,000 3,310,350
Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ........................... 535,000 553,928
Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 7/01/14 ................................ 1,300,000 1,373,671
Robbinsdale Hospital Revenue, North Memorial Medical Center Project,
Refunding, Series A, AMBAC Insured, 5.45%, 5/15/13 ..................................................... 2,000,000 2,006,620
Refunding, Series A, AMBAC Insured, 5.55%, 5/15/19 ..................................................... 1,000,000 989,280
Series B, AMBAC Insured, 5.45%, 5/15/13 ................................................................ 2,900,000 2,916,675
Series B, AMBAC Insured, 5.50%, 5/15/23 ................................................................ 7,900,000 7,695,232
Rochester Health Care Facilities Revenue, Mayo Foundation, Series B, 5.50%, 11/15/27 ...................... 5,000,000 4,846,450
Roseville ISD No. 623, Series A,
FGIC Insured, 6.00%, 2/01/23 ........................................................................... 1,250,000 1,263,013
FSA Insured, 5.80%, 2/01/19 ............................................................................ 1,200,000 1,210,596
FSA Insured, 5.85%, 2/01/24 ............................................................................ 2,470,000 2,490,822
FSA Insured, 6.00%, 2/01/25 ............................................................................ 4,260,000 4,370,291
Scott County Housing and Redevelopment Authority Facilities Lease Revenue, AMBAC Insured,
5.25%, 12/01/11 ........................................................................................ 2,380,000 2,390,877
5.50%, 12/01/15 ........................................................................................ 1,750,000 1,757,893
(b)5.70%, 2/01/29 ......................................................................................... 1,380,000 1,376,012
(b)Scott County Housing and Redevelopment Authority GO, Savage City, Hamilton Apartments Project,
AMBAC Insured, 5.70%, 2/01/33 .......................................................................... 2,285,000 2,278,099
Scott County Housing and Redevelopment Authority Housing Development Revenue,
River City Centre Project, Series A, FSA Insured,
5.35%, 2/01/20 ......................................................................................... 760,000 736,121
5.375%, 2/01/27 ........................................................................................ 1,520,000 1,455,871
Scott County Housing and Redevelopment Authority Special Benefits Tax Revenue,
River City Centre Project, Series B, AMBAC Insured, 5.50%, 2/01/27 ..................................... 675,000 658,179
Scott County Housing and Redevelopment Authority Tax Increment Development Revenue,
River City Centre Project, Series E, FSA Insured, 5.375%, 2/01/25 ...................................... 1,170,000 1,123,762
Shakopee Public Utilities Commission Revenue, AMBAC Insured, 5.60%, 8/01/18 ............................... 1,750,000 1,752,328
South Washington County ISD No. 833 GO, Refunding, Series A, FGIC Insured, 6.125%, 6/01/10 ................ 2,080,000 2,131,355
Southern Minnesota Municipal Power Agency Power Supply System Revenue,
Refunding, Series A, MBIA Insured, ETM, 5.75%, 1/01/18 ................................................. 1,000,000 1,019,580
Series A, AMBAC Insured, 5.75%, 1/01/18 ................................................................ 2,250,000 2,269,283
Series A, FGIC Insured, 5.75%, 1/01/18 ................................................................. 1,000,000 1,008,570
Series A, MBIA Insured, 5.00%, 1/01/12 ................................................................. 5,975,000 5,834,946
Series A, MBIA Insured, 5.75%, 1/01/18 ................................................................. 8,865,000 8,940,973
Series B, AMBAC Insured, 6.00%, 1/01/16 ................................................................ 5,000,000 5,160,200
Series C, AMBAC Insured, 5.00%, 1/01/17 ................................................................ 1,000,000 933,930
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
St. Cloud Hospital Facilities Revenue, St. Cloud Hospital, Refunding,
Series A, AMBAC Insured, 5.00%, 7/01/15 ................................................. $ 1,165,000 $ 1,115,744
Series C, AMBAC Insured, 5.30%, 10/01/20 ................................................ 1,230,000 1,183,149
St. Cloud Housing and RDA, Sales Tax Revenue, Paramount Theater Project, Refunding,
Series A, FGIC Insured, 5.00%, 3/01/22 .................................................. 1,250,000 1,139,850
St. Francis ISD No. 015, Series A, FSA Insured,
6.35%, 2/01/13 .......................................................................... 1,500,000 1,617,495
6.375%, 2/01/16 ......................................................................... 5,465,000 5,900,506
St. Louis Park Health Care Facilities Revenue, Health System of Minnesota Obligated Group,
Refunding, Series A, AMBAC Insured, 5.20%,
7/01/16 ................................................................................. 1,000,000 964,080
7/01/23 ................................................................................. 9,000,000 8,416,710
St. Louis Park Hospital Facilities Revenue, Methodist Hospital Project, Refunding, Series A,
AMBAC Insured, 7.25%,
7/01/08 ................................................................................. 4,115,000 4,300,422
7/01/15 ................................................................................. 1,000,000 1,044,970
St. Paul Housing and Redevelopment Authority Parking Revenue, Series A, FSA Insured,
5.75%, 8/01/13 .......................................................................... 5,105,000 5,212,205
St. Paul ISD No. 625,
Series A, FSA Insured, 5.75%, 2/01/16 ................................................... 3,500,000 3,582,985
Series C, MBIA Insured, 6.10%, 2/01/14 .................................................. 1,075,000 1,124,264
Series C, MBIA Insured, 6.10%, 2/01/15 .................................................. 500,000 522,510
St. Paul Port Authority IDR, Series K, FGIC Insured, 9.50%,
12/01/01 ................................................................................ 5,000 5,100
12/01/02 ................................................................................ 5,000 5,107
12/01/14 ................................................................................ 190,000 180,606
Stillwater ISD No. 834 GO, MBIA Insured, 5.75%, 2/01/15 .................................... 2,990,000 3,122,367
Todd Morrisson and Stearns Counties ISD No. 2753 GO, MBIA Insured, 5.00%, 4/01/17 .......... 2,500,000 2,354,800
Virginia Governmental Housing Project GO, Refunding, MBIA Insured, 5.90%, 2/01/26 .......... 2,915,000 2,959,395
Wadena ISD No. 819, GO, Refunding, AMBAC Insured, 5.60%, 2/01/20 ........................... 3,150,000 3,150,536
Washington County Housing and RDAR, Government Housing, Landfall Terrace Project, Refunding,
5.35%, 2/01/22 .......................................................................... 1,000,000 964,540
5.40%, 8/01/27 .......................................................................... 2,015,000 1,936,355
Washington County SFRMR, Housing and RDA, GNMA Secured, 7.60%, 12/01/11 .................... 85,000 85,097
Western Minnesota Municipal Power Agency Power Supply Revenue, Refunding, Series A,
AMBAC Insured, 5.50%, 1/01/12 ........................................................... 2,745,000 2,794,300
AMBAC Insured, 5.50%, 1/01/13 ........................................................... 4,500,000 4,550,535
MBIA Insured, 5.50%, 1/01/15 ............................................................ 5,425,000 5,425,326
Western Minnesota Municipal Power Agency Transmission Project Revenue, Refunding,
AMBAC Insured, 6.75%, 1/01/16 ........................................................... 2,000,000 2,086,440
Worthington ISD No. 518 GO, Series A, FSA Insured, 5.00%, 2/01/24 .......................... 5,675,000 5,217,538
-------------
TOTAL LONG TERM INVESTMENTS (COST $519,982,867) ............................................ 519,558,363
-------------
(a)SHORT TERM INVESTMENTS 1.1%
Beltrami County Environmental Control Revenue, Northwood Panelboard, Refunding, Daily
VRDN and Put, 2.80%, 12/01/21 ........................................................... 300,000 300,000
Duluth Tax Increment Revenue, Lake Superior Paper, Registered, Weekly VRDN and Put,
3.25%, 9/01/10 .......................................................................... 300,000 300,000
Minneapolis Convention Center, Weekly VRDN and Put, 3.15%, 12/01/18 ........................ 1,600,000 1,600,000
Minneapolis GO, Series B, Weekly VRDN and Put, 3.15%, 12/01/16 ............................. 3,500,000 3,500,000
-------------
SHORT TERM INVESTMENTS (COST $5,700,000) ................................................... 5,700,000
-------------
TOTAL INVESTMENTS (COST $525,682,867) 102.3% ............................................... 525,258,363
OTHER ASSETS, LESS LIABILITIES (2.3%) ...................................................... (11,750,485)
-------------
NET ASSETS 100.0% .......................................................................... $ 513,507,878
=============
</TABLE>
See glossary of terms on page 83.
(a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest at
specified dates.
(b)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 --------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.49 $ 12.45 $ 12.19 $ 12.22 $ 11.90 $ 12.40
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................ .30 .62 .64 .66 .68 .69
Net realized and unrealized gains (losses) ... (.58) .07 .33 (.03) .33 (.50)
-------- -------- -------- -------- -------- --------
Total from investment operations .............. (.28) .69 .97 .63 1.01 .19
-------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income ........................ (.30) (.62) (.64)4 (.66)3 (.69)2 (.69)
In excess of net investment income ........... (.01) -- -- -- -- --
Net realized gains ........................... (.02) (.03) (.07) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ........................... (.33) (.65) (.71) (.66) (.69) (.69)
Net asset value, end of period ................ $ 11.88 $ 12.49 $ 12.45 $ 12.19 $ 12.22 $ 11.90
Total return* ................................. (2.31)% 5.63% 8.22% 5.35% 8.66% 1.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $754,531 $776,592 $741,079 $698,360 $685,783 $652,545
Ratios to average net assets:
Expenses ..................................... .65%** .65% .64% .64% .64% .63%
Net investment income ........................ 4.93%** 4.98% 5.24% 5.43% 5.58% 5.83%
Portfolio turnover rate ....................... 5.79% 6.56% 12.84% 14.95% 11.47% 11.76%
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.56 $ 12.51 $ 12.24 $ 12.26 $ 11.90
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................ .27 .55 .58 .59 .52
Net realized and unrealized gains (losses) ... (.58) .08 .34 (.02) .35
-------- -------- -------- -------- --------
Total from investment operations .............. (.31) .63 .92 .57 .87
-------- -------- -------- -------- --------
Less distributions from:
Net investment income ........................ (.27) (.55) (.58) (.59) (.51)
In excess of net investment income ........... (.01) -- -- -- --
Net realized gains ........................... (.02) (.03) (.07) -- --
-------- -------- -------- -------- --------
Total distributions ........................... (.30) (.58) (.65) (.59) (.51)
-------- -------- -------- -------- --------
Net asset value, end of period ................ $ 11.95 $ 12.56 $ 12.51 $ 12.24 $ 12.26
======== ======== ======== ======== ========
Total return* ................................. (2.57)% 5.10% 7.66% 4.79% 7.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 43,655 $ 42,258 $ 28,178 $ 15,786 $ 6,085
Ratios to average net assets:
Expenses ..................................... 1.21%** 1.21% 1.20% 1.20% 1.22%**
Net investment income ........................ 4.37%** 4.42% 4.67% 4.80% 4.99%**
Portfolio turnover rate ....................... 5.79% 6.56% 12.84% 14.95% 11.47%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C.
(2)Includes distributions in excess of net investment income in the amount of
$.001.
(3)Includes distributions in excess of net investment income in the amount of
$.003.
(4)Includes distributions in excess of net investment income in the amount of
$.007.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.1%
Akron Bath Copley Joint Township Hospital Revenue, Akron General Medical Center Project, Refunding,
AMBAC Insured, 5.375%,
1/01/17 ......................................................................................... $ 1,000,000 $ 991,580
1/01/22 ......................................................................................... 1,500,000 1,451,595
1/01/27 ......................................................................................... 1,000,000 959,180
Akron GO, Limited Tax, FGIC Insured, 7.50%, 9/01/05 ................................................ 500,000 573,245
Akron Sewer System Revenue, Refunding, MBIA Insured, 5.55%, 12/01/16 ............................... 3,660,000 3,676,470
Akron Waterworks System First Mortgage Revenue, FGIC Insured, 6.00%, 3/01/14 ....................... 1,000,000 1,050,910
Allen County GO, Refunding, AMBAC Insured, 5.30%, 12/01/15 ......................................... 1,250,000 1,235,150
Allen County Sewer Revenue, MBIA Insured, 5.70%, 12/01/13 .......................................... 1,200,000 1,226,016
Archbold Area Local School District GO,
AMBAC Insured, 6.00%, 12/01/21 .................................................................. 2,000,000 2,049,660
Refunding, MBIA Insured, 5.90%, 12/01/11 ........................................................ 600,000 611,406
Aurora City School District GO, Refunding and Improvement, FGIC Insured, 5.80%, 12/01/16 ........... 1,075,000 1,117,699
Avon Local School District, AMBAC Insured, 6.00%, 12/01/20 ......................................... 2,500,000 2,558,425
Beavercreek Local School District GO, FGIC Insured, 5.70%, 12/01/20 ................................ 8,375,000 8,379,606
Belmont County Correctional Facility, MBIA Insured, 5.85%, 12/01/16 ................................ 500,000 521,520
Bluffton Exempt Village School District, AMBAC Insured, 5.50%, 12/01/16 ............................ 1,000,000 999,910
Brunswick City School District, AMBAC Insured, 6.90%, 12/01/12 ..................................... 2,295,000 2,444,519
Butler County GO, AMBAC Insured, 5.75%, 12/01/16 ................................................... 1,000,000 1,022,950
Butler County Hospital Facilities Revenue, Middletown Regional Hospital, Refunding and
Improvement, FGIC Insured, 6.75%, 11/15/10 ...................................................... 2,150,000 2,292,803
Butler County Transportation Improvement, Series A, FSA Insured, 5.125%, 4/01/17 ................... 2,000,000 1,903,100
Butler County Waterworks Revenue, AMBAC Insured,
6.35%, 12/01/08 ................................................................................. 790,000 846,114
6.40%, 12/01/12 ................................................................................. 500,000 536,265
5.45%, 12/01/16 ................................................................................. 1,000,000 1,003,200
Canal Winchester Local School District GO, Franklin and Fairfield Co. Ohio, FGIC Insured,
5.30%, 12/01/25 ................................................................................. 5,705,000 5,366,180
Cardington and Lincoln Local School District, MBIA Insured, 6.60%, 12/01/14 ........................ 400,000 424,064
Celina Wastewater System Mortgage Revenue, FGIC Insured, Pre-Refunded, 6.55%, 11/01/16 ............. 1,200,000 1,270,608
Centerville GO, Capital Facilities, MBIA Insured, 5.65%, 12/01/18 .................................. 2,265,000 2,264,774
Chillicothe GO, Limited Tax, AMBAC Insured, 6.05%, 12/01/12 ........................................ 675,000 703,526
Claymont City School District, FGIC Insured, 5.70%, 12/01/21 ....................................... 1,000,000 999,900
Clermont County Hospital Facilities Revenue, Mercy Health System,
Refunding, Series B, AMBAC Insured, 6.00%, 9/01/19 .............................................. 1,750,000 1,798,650
Series A, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/19 ........................................... 515,000 548,001
Clermont County Sewer System Revenue, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/15 .............. 4,280,000 4,401,552
Clermont County Waterworks Revenue, Refunding, AMBAC Insured, 5.80%, 12/01/18 ...................... 11,000,000 11,259,270
Cleveland Airport Systems Revenue,
Series A, FGIC Insured, 6.25%, 1/01/20 .......................................................... 3,000,000 3,131,610
Series A, FSA Insured, 5.125%, 1/01/27 .......................................................... 5,900,000 5,334,426
Series B, FGIC Insured, Pre-Refunded, 6.10%, 1/01/24 ............................................ 1,450,000 1,565,319
Cleveland GO, Series 1994, MBIA Insured, Pre-Refunded, 6.70%, 11/15/18 ............................. 2,000,000 2,235,520
Cleveland Waterworks Revenue,
Refunding and Improvement, Series I, FSA Insured, 5.00%, 1/01/28 ................................ 20,000,000 17,913,400
Refunding, Series F, AMBAC Insured, 6.25%, 1/01/16 .............................................. 2,000,000 2,097,000
Series F-92A, AMBAC Insured, Pre-Refunded, 6.25%, 1/01/15 ....................................... 1,000,000 1,061,490
Series H, MBIA Insured, Pre-Refunded, 5.75%, 1/01/26 ............................................ 19,750,000 21,166,668
Clinton-Massie Local School District, Issue I, AMBAC Insured, Pre-Refunded, 7.50%, 12/01/11 ........ 1,000,000 1,089,910
Columbiana County, Refunding, FSA Insured, 5.25%, 12/01/24 ......................................... 1,000,000 936,260
Columbus GO, Limited Tax, FGIC Insured, 9.50%, 4/15/03 ............................................. 975,000 1,140,575
Columbus Municipal Airport Authority Revenue, Airport Improvement, Port Columbus International,
Series B, AMBAC Insured, 5.00%, 1/01/18 ............................................................ 3,815,000 3,525,670
Columbus State Community College General Receipts, AMBAC Insured, 5.75%, 12/01/16 .................. 2,100,000 2,135,931
Columbus Tax Increment Financing Revenue, Easton Project, AMBAC Insured, 5.30%, 12/01/19 ........... 2,500,000 2,380,550
Coshocton Sewer System GO, AMBAC Insured, 6.50%, 12/01/12 .......................................... 1,530,000 1,632,908
Crestview Local School District GO, Construction and Improvement, AMBAC Insured,
6.65%, 12/01/14 ................................................................................. 1,650,000 1,769,873
Cuyahoga County GO, Limited Tax, MBIA Insured, 9.375%, 10/01/04 .................................... 100,000 121,348
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
Cuyahoga County Hospital Revenue,
Metrohealth System Project, Refunding and Improvement, MBIA Insured, 5.50%, 2/15/27 .......... $ 3,915,000 $ 3,817,477
University Hospitals Health System Inc., Refunding, AMBAC Insured, 5.40%, 1/15/19 ............ 2,500,000 2,412,550
University Hospitals Health System Inc., Refunding, AMBAC Insured, 5.50%, 1/15/30 ............ 4,000,000 3,856,880
Cuyahoga County Utility System Revenue,
AMBAC Insured, 5.125%, 2/15/28 ............................................................... 1,750,000 1,602,213
Medical Center Co. Project, Refunding, Series B, MBIA Insured, 6.10%, 8/15/15 ................ 2,945,000 3,057,440
Dayton Airport Revenue, Refunding, AMBAC Insured, 5.25%, 12/01/15 ............................... 2,000,000 1,967,640
Defiance GO, MBIA Insured,
6.10%, 12/01/14 .............................................................................. 1,000,000 1,066,500
6.20%, 12/01/20 .............................................................................. 750,000 781,403
Delaware City School District, FGIC Insured, 5.75%, 12/01/15 .................................... 1,640,000 1,680,787
Dover City School District, AMBAC Insured, 6.25%, 12/01/16 ...................................... 2,000,000 2,097,000
Dover Municipal Electric System Revenue, FGIC Insured, 6.00%, 12/01/19 .......................... 1,625,000 1,687,595
Dover Waterworks Systems Revenue, AMBAC Insured, 6.00%, 12/01/13 ................................ 1,100,000 1,154,483
East Liverpool Hospital Revenue, East Liverpool City Hospital Project, Series B, FSA Insured,
5.00%, 10/01/21 .............................................................................. 1,000,000 906,830
Edgewood City School District GO, Refunding, Series A, MBIA Insured, 5.25%, 12/01/25 ............ 6,575,000 6,140,195
Fairborn GO, Limited Tax, Series 1991, MBIA Insured, 7.00%, 10/01/11 ............................ 1,390,000 1,498,823
Fairfield City School District GO, FGIC Insured, 6.00%, 12/01/20 ................................ 1,000,000 1,018,620
Fairfield County GO, FGIC Insured, 5.25%, 6/01/24 ............................................... 4,220,000 3,953,465
Finneytown Local School District, FGIC Insured, 5.80%, 12/01/24 ................................. 1,980,000 1,990,435
Forest Hills Local School District, MBIA Insured, 5.70%, 12/01/16 ............................... 1,500,000 1,532,265
Fostoria City School District GO, AMBAC Insured, Pre-Refunded, 6.70%, 12/01/16 .................. 2,500,000 2,725,625
Franklin County Convention Facilities Authority Tax and Lease Revenue, Anticipation Bonds,
MBIA Insured, 5.00%, 12/01/27 ................................................................ 2,000,000 1,786,460
Franklin County Hospital Revenue, Holy Cross Health Systems, AMBAC Insured, 5.875%, 6/01/21 ..... 2,500,000 2,558,925
Green County Sewer System Revenue, Governmental Enterprise, MBIA Insured, 5.25%, 12/01/25 ....... 6,000,000 5,704,560
Green County Water System Revenue, Series A, FGIC Insured, 6.125%, 12/01/21 ..................... 2,100,000 2,188,179
Green Local School District GO, Summit County, FGIC Insured,
5.875%, 12/01/14 ............................................................................. 2,800,000 3,024,924
5.90%, 12/01/19 .............................................................................. 5,150,000 5,569,674
Hamilton City Electric System Mortgage Revenue,
Refunding, Series A, FGIC Insured, 6.00%, 10/15/23 ........................................... 18,450,000 19,029,330
Series B, FGIC Insured, 6.30%, 10/15/25 ......................................................... 2,340,000 2,465,354
Hamilton County Hospital Facilities Revenue,
Bethesda Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 1/01/12 ........................ 3,650,000 3,878,855
Children's Hospital Medical Center, Series G, MBIA Insured, 5.00%, 5/15/23 ................... 5,000,000 4,511,600
Hamilton County Sewer System Revenue, Refunding, Series A, FGIC Insured, 6.05%, 12/01/15 ........ 3,010,000 3,183,617
Hamilton Wastewater System Revenue, Series A, FSA Insured,
5.90%, 10/15/21 .............................................................................. 3,040,000 3,114,541
5.20%, 10/15/23 .............................................................................. 7,525,000 7,109,921
Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................... 4,665,000 4,856,638
Hillard School District GO, Refunding, FGIC Insured, 6.55%, 12/01/05 ............................ 500,000 550,080
Hudson Local School District GO, Refunding, FGIC Insured, 5.60%, 12/15/14 ....................... 2,750,000 2,796,283
Indian Lake Local School District GO, Construction and Improvement, FGIC Insured,
5.375%, 12/01/23 ............................................................................. 1,000,000 953,700
Indian Valley Local School District GO, AMBAC Insured, 5.75%, 12/01/19 .......................... 1,000,000 1,005,110
Ironton Building Improvement, AMBAC Insured, 5.50%, 12/01/22 .................................... 1,000,000 973,060
Jackson Local School District GO, Stark and Summit Counties School Building,
Construction and Improvement, MBIA Insured,
5.40%, 12/01/13 .............................................................................. 2,750,000 2,761,660
5.50%, 12/01/21 .............................................................................. 3,060,000 2,983,102
Jackson Waterworks Revenue, AMBAC Insured, 5.60%, 12/01/18 ...................................... 500,000 500,625
Kent City School District, FGIC Insured, 5.75%, 12/01/21 ........................................ 1,500,000 1,505,610
Kent State University Revenues, General Receipts,
AMBAC Insured, Pre-Refunded, 6.45%, 5/01/12 .................................................. 1,195,000 1,281,148
MBIA Insured, 5.50%, 5/01/28 ................................................................. 5,920,000 5,777,742
Kettering City School District, FGIC Insured, 5.25%, 12/01/22 ................................... 1,000,000 941,110
Lake County Hospital Facilities Revenue, Lake Hospital System Inc., AMBAC Insured,
5.00%, 8/15/23 ............................................................................... 7,500,000 6,764,175
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
Lake County Hospital Improvement Revenue, Lake Hospital System Inc., Series B and C, AMBAC Insured,
7.875%, 1/01/05 ................................................................................ $ 1,810,000 $ 1,833,530
8.00%, 1/01/13 ................................................................................. 2,185,000 2,214,061
Lake Local School District GO, Stark County, AMBAC Insured, 6.25%, 12/01/09 ....................... 1,000,000 1,061,540
Lakota Local District GO, AMBAC Insured, Pre-Refunded, 6.125%, 12/01/17 ........................... 3,200,000 3,458,400
Lebanon Electric Revenue Mortgage, AMBAC Insured, 5.60%, 12/01/16 ................................. 795,000 798,570
Liberty Benton Local School District, AMBAC Insured, Pre-Refunded, 6.10%, 12/01/19 ................ 2,045,000 2,230,563
Licking Valley Local School GO, MBIA Insured, 5.00%, 12/01/25 ..................................... 3,000,000 2,700,570
Lincolnview Local School District, FGIC Insured, 5.50%, 12/01/25 .................................. 4,225,000 4,087,941
Lorain County Health Facilities Revenue, Catholic Healthcare Partners, Series A, AMBAC Insured,
5.50%, 9/01/29 ................................................................................. 6,500,000 6,296,030
Lorain County Hospital Revenue, Catholic Healthcare Partners, Refunding, Series B, MBIA Insured,
5.50%, 9/01/27 ................................................................................. 12,200,000 11,893,902
Loveland City School District GO, Refunding, Series A, MBIA Insured, 5.00%, 12/01/24 .............. 6,000,000 5,418,720
Lucas County GO, Limited Tax, FGIC Insured, 8.00%,
12/01/06 ....................................................................................... 120,000 143,088
12/01/08 ....................................................................................... 110,000 133,994
12/01/09 ....................................................................................... 120,000 147,379
12/01/10 ....................................................................................... 220,000 271,924
Lucas County Hospital Revenue,
Promedia Healthcare Obligation Group, AMBAC Insured, 5.375%, 11/15/29 .......................... 2,000,000 1,901,160
Promedica Healthcare Obligation, Refunding, MBIA Insured, 5.75%, 11/15/14 ...................... 5,000,000 5,172,750
St. Vincent Medical Center, Refunding, Series B, MBIA Insured, 5.25%, 8/15/20 .................. 3,500,000 3,337,460
Mahoning County GO, Bridge Improvement,
Limited Tax, AMBAC Insured, 7.20%, 12/01/09 .................................................... 1,500,000 1,539,435
Unlimited Tax, AMBAC Insured, 7.15%, 12/01/04 .................................................. 1,500,000 1,540,080
Mahoning County Hospital Facilities Revenue,
Western Reserve Care, MBIA Insured, ETM, 5.50%, 10/15/25 ....................................... 5,000,000 5,009,400
Youngstown Hospital Inc. Project, Series B, MBIA Insured, Pre-Refunded, 7.00%, 10/15/08 ........ 2,000,000 2,157,640
Mansfield Hospital Improvement Revenue, Mansfield General Hospital Project, AMBAC Insured,
6.70%, 12/01/09 ................................................................................ 2,500,000 2,671,175
Marietta City School District, Series B, AMBAC Insured, 5.75%, 12/01/07 ........................... 1,000,000 1,039,740
Marietta Water Revenue, AMBAC Insured, 5.95%, 12/01/21 ............................................ 3,875,000 3,999,310
Marysville Exempted Village School District GO, MBIA Insured, 5.75%, 12/01/23 ..................... 1,000,000 1,001,070
Marysville Water Systems, Refunding, AMBAC Insured,
5.40%, 12/01/13 ................................................................................ 1,000,000 1,003,530
5.50%, 12/01/18 ................................................................................ 1,500,000 1,487,550
Mason Sewer Systems Revenue, FGIC Insured, 6.00%, 12/01/19 ........................................ 1,935,000 2,000,829
Maumee Hospital Revenue, Saint Luke's Hospital Project, Refunding, AMBAC Insured,
5.80%, 12/01/14 ................................................................................ 2,755,000 2,850,103
Medina City School District GO, FGIC Insured, 5.25%, 12/01/28 ..................................... 4,000,000 3,718,080
Mentor Exempted Village School District, MBIA Insured,
5.375%, 12/01/11 ............................................................................... 1,000,000 1,004,380
6.625%, 12/01/13 ............................................................................... 2,000,000 2,122,240
Pre-Refunded, 7.40%, 12/01/11 .................................................................. 2,040,000 2,099,405
Miami County Hospital Facilities Revenue, Upper Valley Medical Center, Nursing Care Inc.,
Series B, MBIA Insured, 6.50%, 5/01/21 ......................................................... 1,340,000 1,392,528
Middleburg Heights Hospital Revenue, Southwest General Health Center, Refunding, FSA Insured,
5.75%, 8/15/21 ................................................................................. 1,500,000 1,515,735
Montgomery County Hospital Facilities Revenue, Kettering Medical Center Facilities, MBIA Insured,
7.40%, 4/01/09 ................................................................................. 12,510,000 12,790,224
5.50%, 4/01/26 ................................................................................. 2,000,000 1,950,820
Montgomery County Revenue,
Miami Valley Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 11/15/12 ..................... 1,600,000 1,703,776
Miami Valley Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 11/15/16 ..................... 3,250,000 3,410,160
Sisters of Charity Health Care, Series A, MBIA Insured, 6.625%, 5/15/21 ........................ 1,565,000 1,640,089
Muskingum County GO,
County Office Building Improvement, AMBAC Insured, 7.20%, 12/01/10 ............................. 1,000,000 1,048,900
Justice Center Improvement, AMBAC Insured, Pre-Refunded, 6.375%, 12/01/17 ...................... 1,695,000 1,831,448
Napoleon City School District GO, AMBAC Insured, 5.375%, 12/01/18 ................................. 1,000,000 967,890
New Lexington HDC, Mortgage Revenue, Lincoln Park, Refunding, Series A, MBIA Insured,
5.85%, 1/01/21 ................................................................................. 1,060,000 1,062,671
New Philadelphia City School District GO, School Improvement, AMBAC Insured, 6.25%, 12/01/17 ...... 2,000,000 2,091,480
New Richmond Exempted Village School District GO, AMBAC Insured, 7.125%, 9/01/09 .................. 1,500,000 1,534,230
North Olmsted GO, AMBAC Insured, 6.25%, 12/15/12 .................................................. 3,800,000 4,023,098
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
North Ridgeville GO, City School District, AMBAC Insured, 6.30%, 12/01/17 ......................... $ 2,900,000 $ 3,067,939
Northeastern Local School District GO, Clark County Improvement, FGIC Insured, 5.55%, 12/01/18 .... 1,000,000 988,260
Northridge Local School District GO, Licking, Knox and Del Counties Improvement,
FSA Insured, 5.75%, 12/01/18 ...................................................................... 1,090,000 1,096,998
Northwest Local School District GO,
Hamilton County, FGIC Insured, 5.15%, 12/01/22 ................................................. 3,400,000 3,156,322
Scioto County, AMBAC Insured, 7.05%, 12/01/14 .................................................. 2,000,000 2,160,720
Oak Hills Local School District GO, MBIA Insured, 5.45%, 12/01/21 ................................. 5,000,000 4,843,050
Ohio Capital Corp. HMR,
Refunding, Series G, MBIA Insured, 6.35%, 7/01/22 .............................................. 2,000,000 2,058,220
Refunding, Series H, MBIA Insured, 6.90%, 7/01/24 .............................................. 4,215,000 4,351,903
Refunding, Series J, MBIA Insured, 6.50%, 1/01/25 .............................................. 3,500,000 3,580,815
Westview Apartments, Refunding, Series A, MBIA Insured, 6.125%, 1/01/15 ........................ 1,625,000 1,677,618
Westview Apartments, Refunding, Series A, MBIA Insured, 6.25%, 1/01/23 ............................ 2,565,000 2,634,537
Ohio HFA,
MFHR, Northridge Apartments, FGIC Insured, 10.35%, 12/01/25 .................................... 755,000 807,888
MFHR, Wind River Apartment Project, Series A, GNMA Secured, 5.65%, 5/01/32 ..................... 2,035,000 1,967,214
RMR, Series A-1, GNMA Secured, 5.40%, 9/01/29 .................................................. 3,000,000 2,858,940
SFMR, Series A, GNMA Secured, 7.65%, 3/01/29 ................................................... 2,375,000 2,422,500
SFMR, Series B, GNMA Secured, 7.40%, 9/01/15 ................................................... 515,000 529,224
SFMR, Series C, GNMA Secured, 7.85%, 9/01/21 ................................................... 1,255,000 1,301,862
SFMR, Series D, GNMA Secured, 7.50%, 9/01/13 ................................................... 805,000 833,167
SFMR, Series D, GNMA Secured, 7.05%, 9/01/16 ................................................... 3,580,000 3,700,216
SFMR, Series I, GNMA Secured, 7.60%, 9/01/16 ................................................... 2,190,000 2,267,636
Ohio Municipal Electric Generation Agency Joint Venture 5, Certificates of Beneficial Interest,
AMBAC Insured,
5.625%, 2/15/16 ................................................................................ 13,000,000 13,148,330
5.375%, 2/15/24 ................................................................................ 7,680,000 7,521,178
Ohio State Air Quality Development Authority Revenue,
Cincinnati Gas and Electric, Refunding, Series B, MBIA Insured, 5.45%, 1/01/24 ................. 5,000,000 4,900,600
Columbus and Southern Power, Series A, FGIC Insured, 6.375%, 12/01/20 .......................... 4,000,000 4,228,160
JMG Funding LP Project, AMBAC Insured, 5.625%, 10/01/22 ........................................ 7,500,000 7,333,800
JMG Funding LP Project, Refunding, AMBAC Insured, 6.375%, 1/01/29 .............................. 1,230,000 1,290,122
JMG Funding LP Project, Refunding, AMBAC Insured, 6.375%, 4/01/29 .............................. 15,245,000 15,990,176
Ohio Power Co., Refunding, Series C, AMBAC Insured, 5.15%, 5/01/26 ............................. 7,500,000 6,937,425
PCR, Ohio Edison, Refunding, Series A, FGIC Insured, 7.45%, 3/01/16 ............................ 1,000,000 1,033,270
PCR, Ohio Edison, Refunding, Series B, AMBAC Insured, 5.625%, 11/15/29 ......................... 5,400,000 5,400,918
PCR, Pennsylvania Power Co., Refunding, Series A, AMBAC Insured, 6.45%, 5/01/27 ................ 7,000,000 7,379,330
Ohio State Building Authority Revenue, Adult Correctional Facilities, Series A,
AMBAC Insured, 5.60%, 4/01/16 .................................................................. 2,000,000 2,017,600
MBIA Insured, 6.125%, 10/01/13 ................................................................. 13,000,000 13,798,590
Ohio State Department of Transportation COP, Panhandle Rail Line Project,
FSA Insured, 6.50%, 4/15/12 .................................................................... 1,100,000 1,169,597
Ohio State Education Loan Revenue, Series A-1, AMBAC Insured, 5.85%, 12/01/19 ..................... 5,000,000 4,958,500
Ohio State Higher Educational Facility Commission Revenue,
Higher Educational Facility Oberlin College, AMBAC Insured, 5.00%, 10/01/26 .................... 5,000,000 4,500,750
University Dayton Project, FGIC Insured, 5.80%, 12/01/14 ....................................... 1,300,000 1,333,059
University Dayton Project, FGIC Insured, 6.75%, 12/01/15 ....................................... 1,725,000 1,841,455
Xavier University Higher Educational Facility, MBIA Insured, 5.375%, 5/15/22 ................... 5,000,000 4,868,550
Ohio State Turnpike Commission Turnpike Revenue, Series A,
FGIC Insured, Pre-Refunded, 5.75%, 2/15/24 ..................................................... 1,000,000 1,067,120
MBIA Insured, Pre-Refunded, 5.50%, 2/15/26 ..................................................... 19,400,000 20,541,884
Ohio State University General Receipts Revenue, Athens, FSA Insured, 5.00%, 12/01/24 .............. 3,025,000 2,728,217
Ohio State Water Development Authority PCR, Facilities Revenue,
Pennsylvania Power Co. Project, Refunding, AMBAC Insured, 6.15%, 8/01/23 ....................... 3,420,000 3,556,150
Water Control Loan Fund, Water Quality Series, MBIA Insured, 5.125%, 6/01/19 ................... 5,000,000 4,700,900
Ohio State Water Development Authority Revenue,
Cincinnati Gas, Refunding, Series A, MBIA Insured, 5.45%, 1/01/24 .............................. 4,000,000 3,920,480
Dayton Power, Refunding, Series A, AMBAC Insured, 6.40%, 8/15/27 ............................... 5,000,000 5,293,050
Fresh Water Service, AMBAC Insured, 5.90%, 12/01/21 ............................................ 8,750,000 9,006,375
Pure Water, Refunding and Improvement, AMBAC Insured, 5.50%, 12/01/11 .......................... 1,000,000 1,024,120
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
Ohio State Water Development Authority Revenue, (cont.)
Pure Water, Refunding and Improvement, AMBAC Insured, ETM, 5.50%, 12/01/18 ................. $ 4,450,000 $ 4,413,065
Pure Water, Series I, AMBAC Insured, ETM, 7.00%, 12/01/09 .................................. 2,000,000 2,242,340
Olentangy Local School District GO, BIG Insured, 7.75%,
12/01/08 ................................................................................... 375,000 449,321
12/01/09 ................................................................................... 375,000 453,154
12/01/10 ................................................................................... 375,000 458,839
Olmsted Falls Local School District, FGIC Insured,
5.85%, 12/15/17 ............................................................................ 1,500,000 1,547,340
Pre-Refunded, 7.05%, 12/15/11 .............................................................. 1,000,000 1,081,370
Ontario Local School District GO, FSA Insured, 5.125%, 12/01/18 ............................... 4,000,000 3,746,240
Orrville Water Systems Improvement Revenue, MBIA Insured, 6.125%, 12/01/18 .................... 1,150,000 1,200,727
Ottawa County GO, Catawba Isle, AMBAC Insured, Pre-Refunded, 7.00%, 9/01/11 ................... 1,500,000 1,600,305
Ottawa County Sewer System Revenue, Danbury Project, Refunding, AMBAC Insured,
5.50%, 10/01/14 ............................................................................ 1,950,000 1,969,656
Painesville Township Local School District GO, Lake County, FGIC Insured,
5.625%, 12/01/09 ........................................................................... 3,240,000 3,333,182
5.65%, 12/01/15 ............................................................................ 4,490,000 4,565,073
Perrysburg Exempted Village School District,
AMBAC Insured, 6.00%, 12/01/15 ............................................................. 2,000,000 2,116,980
Series B, FSA Insured, 5.00%, 12/01/25 ..................................................... 5,000,000 4,500,950
Pickerington Local School District GO,
AMBAC Insured, 5.00%, 12/01/25 ............................................................. 8,335,000 7,523,921
Refunding, AMBAC Insured, 5.55%, 12/01/07 .................................................. 1,000,000 1,035,610
Powell Village GO, Series A, MBIA Insured,
5.55%, 12/01/17 ............................................................................ 840,000 833,263
5.60%, 12/01/22 ............................................................................ 445,000 438,699
Puerto Rico Commonwealth GO,
FSA Insured, 5.40%, 7/01/25 ................................................................ 3,000,000 2,926,320
Refunding, MBIA Insured, 5.75%, 7/01/24 .................................................... 2,000,000 2,036,380
Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured, 5.50%, 7/01/21 ....... 4,000,000 3,994,600
Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 6.00%, 7/01/21 .................... 11,000,000 11,106,700
Revere Local School District GO, AMBAC Insured,
5.25%, 12/01/16 ............................................................................ 2,000,000 1,944,580
6.00%, 12/01/16 ............................................................................ 1,600,000 1,676,032
Reynoldsburg City School District GO, Refunding, FGIC Insured, 5.45%, 12/01/17 ................ 4,075,000 3,996,190
Salem GO, AMBAC Insured, 6.50%, 12/01/06 ...................................................... 2,000,000 2,208,360
South Range Local School District GO, MBIA Insured, 6.15%, 12/01/18 ........................... 700,000 721,840
SouthWest Regional Water District Revenue, MBIA Insured, 6.00%,
12/01/15 ................................................................................... 1,000,000 1,042,780
12/01/20 ................................................................................... 700,000 724,416
South-Western City School District of Ohio Franklin and Pickway Counties GO,
FGIC Insured, ETM, 7.875%,
12/01/04 ................................................................................... 550,000 634,970
12/01/06 ................................................................................... 600,000 713,730
12/01/07 ................................................................................... 600,000 722,070
Springboro Sewer Systems Revenue, Refunding, MBIA Insured, 5.70%, 6/01/18 ..................... 1,410,000 1,422,422
Springboro Water Systems Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/18 ................... 1,125,000 1,113,008
St. Mary's Electric System Mortgage Revenue, AMBAC Insured, 6.65%, 12/01/11 ................... 600,000 638,982
St. Mary's Waterworks Revenue, AMBAC Insured, 6.65%, 12/01/11 ................................. 750,000 798,728
Stark County GO, Refunding, AMBAC Insured, 5.70%, 11/15/17 .................................... 2,775,000 2,793,426
Stark County Sewer District Improvement Bonds, FGIC Insured, 5.80%, 12/01/16 .................. 1,000,000 1,039,780
Steubenville City School District, Series A, AMBAC Insured, Pre-Refunded, 6.20%, 12/01/17 ..... 2,075,000 2,254,197
Struthers City School District, AMBAC Insured, 6.50%, 12/01/14 ................................ 1,750,000 1,869,333
Summit County GO, Limited Tax, Refunding, Series B, AMBAC Insured, 6.95%, 8/01/08 ............. 400,000 423,264
Sylvania City School District, FGIC Insured, 5.75%, 12/01/22 .................................. 4,830,000 4,840,868
Toledo GO, Limited Tax,
AMBAC Insured, 5.95%, 12/01/15 ............................................................. 3,715,000 3,902,087
AMBAC Insured, 6.00%, 12/01/16 ............................................................. 1,000,000 1,058,030
FGIC Insured, 7.375%, 12/01/00 ............................................................. 500,000 521,050
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Toledo GO, Limited Tax, (cont.)
FGIC Insured, 7.375%, 12/01/02 ............................................................. $ 400,000 $ 435,576
FGIC Insured, 7.375%, 12/01/03 ............................................................. 650,000 720,883
FGIC Insured, 7.375%, 12/01/04 ............................................................. 650,000 733,142
FGIC Insured, 7.375%, 12/01/05 ............................................................. 650,000 739,694
FGIC Insured, 7.375%, 12/01/06 ............................................................. 625,000 717,081
Trumbull County Hospital Revenue,
Refunding and Improvement, Series A, FGIC Insured, 6.25%, 11/15/12 ......................... 1,000,000 1,070,950
Refunding, Series B, FGIC Insured, 6.90%, 11/15/12 ......................................... 2,000,000 2,145,620
Twinsburg City School District, FSA Insured, 6.70%, 12/01/11 .................................. 4,000,000 4,236,720
(b)University of Akron General Receipts,
FGIC Insured, 5.70%, 1/01/24 ............................................................... 7,300,000 7,270,800
University of Cincinnati COP, MBIA Insured, 6.75%, 12/01/09 ................................... 1,600,000 1,718,400
University of Cincinnati General Receipt,
Series AD, MBIA Insured, 5.125%, 6/01/20 ................................................... 1,500,000 1,397,430
Series W, MBIA Insured, 5.85%, 6/01/16 ..................................................... 1,630,000 1,696,683
University of Puerto Rico Revenues, Series M, MBIA Insured, 5.25%, 6/01/25 .................... 6,000,000 5,746,440
University of Toledo General Receipt,
FGIC Insured, 5.30%, 6/01/18 ............................................................... 2,000,000 1,944,280
Refunding, Series A, FGIC Insured, 5.90%, 6/01/20 .......................................... 5,500,000 5,596,030
Upper Arlington County School District GO, MBIA Insured, 5.25%, 12/01/22 ...................... 5,000,000 4,705,550
Urbana Wastewater Treatment Plant GO, Improvement, AMBAC Insured, 7.05%, 12/01/11 ............. 1,000,000 1,082,650
Valley Local School District, AMBAC Insured, 7.00%, 12/01/13 .................................. 1,400,000 1,537,483
Warren GO,
MBIA Insured, 6.65%, 11/01/12 .............................................................. 2,415,000 2,661,620
Refunding, AMBAC Insured, 5.50%, 11/15/13 .................................................. 1,015,000 1,041,146
Wausen Exempt Village School District GO, Refunding and School Improvements,
MBIA Insured, 5.50%, 12/01/17 .............................................................. 1,800,000 1,775,376
Wayne Local School District GO, Warren County, AMBAC Insured, 6.10%, 12/01/24 ................. 1,800,000 1,849,032
Westerville, Minerva Park, and Blendon Joint Township Hospital District Revenue,
St. Ann's Hospital, Refunding, Series B, AMBAC Insured, ETM, 7.00%, 9/15/12 ................ 5,000,000 5,224,950
Wilmington City School District GO, FGIC Insured, 6.30%, 12/01/14 ............................. 2,000,000 2,107,660
Wilmington Sewer System Revenue, First Mortgage, Refunding, MBIA Insured, 5.30%, 2/15/18 ...... 1,170,000 1,137,767
Wilmington Water Revenue, First Mortgage System, AMBAC Insured,
5.90%, 6/15/14 ............................................................................. 1,275,000 1,329,162
6.00%, 6/15/21 ............................................................................. 2,510,000 2,601,565
Woodmore Local School District GO, Refunding, AMBAC Insured, 5.65%, 12/01/08 .................. 500,000 518,835
Wooster City School District GO, AMBAC Insured, 6.50%, 12/01/17 ............................... 8,700,000 9,432,975
Worthington City School District GO, Refunding, FGIC Insured, 6.375%, 12/01/12 ................ 2,350,000 2,481,412
Youngstown State University General Receipts, AMBAC Insured, 6.00%, 12/15/16 .................. 2,250,000 2,444,738
Zane Trace Local School District GO, AMBAC Insured, 5.45%, 12/01/19 ........................... 1,000,000 973,610
------------
TOTAL LONG TERM INVESTMENTS (COST $777,028,864) ............................................... 791,263,286
------------
(a)SHORT TERM INVESTMENTS .1%
Cuyahoga County EDR, The Cleveland Orchestra Project, Daily VRDN and Put, 2.70%, 4/01/28 ...... 300,000 300,000
Cuyahoga County IDR, Allen Group Inc. Project, Weekly VRDN and Put, 3.20%, 12/01/15 ........... 100,000 100,000
Paulding County Solid Waste Disposal Revenue, LaFarge Corp. Project,
Daily VRDN and Put, 2.75%, 8/01/26 ......................................................... 300,000 300,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $700,000) .................................................. 700,000
------------
TOTAL INVESTMENTS (COST $777,728,864) 99.2% ................................................... 791,963,286
OTHER ASSETS, LESS LIABILITIES .8% ............................................................ 6,223,149
------------
NET ASSETS 100.0% ............................................................................. $798,186,435
============
</TABLE>
See glossary of terms on page 83.
(a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest at
specified dates.
(b)Sufficient collateral has been segregated for securities
traded on a when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
ACES - Adjustable Convertible Exempt Securities
AMBAC - American Municipal Bond Assurance Corp.
BART - Bay Area Rapid Transit
BIG - Bond Investors Guaranty Insurance Co. (acquired by MBIA in 1989 and no
longer does business under this name).
CDA - Community Development Authority/Agency
CDD - Community Development District
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.
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance (some of the securities shown as FSA
Insured were originally issued by Capital Guaranty Insurance Co. (CGIC)
which was acquired by FSA in 1995 and no longer does business under
this name).
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority Revenue
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDB - Industrial Development Board
IDR - Industrial Development Revenue
ISD - Independent School District
LP - 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
MTA - Metropolitan Transit Authority
MUD - Municipal Utility District
PBA - Public Building Authority
PCC - Pollution Control Corporation
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PUD - Public Utility District
RDA - Redevelopment Authority/Agency
RDAR - Redevelopment Authority/Agency Revenue
RMR - Residential Mortgage Revenue
SF - Single Family
SFM - Single Family Mortgage
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
SFRMR - Single Family Residential Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
ARIZONA FLORIDA FRANKLIN
INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in securities:
Cost ............................................................... $ 87,048,590 $ 120,211,902 $ 1,691,910,473
==========================================================
Value .............................................................. 86,145,907 120,548,694 1,716,094,053
Cash ................................................................ 4,229,527 11,121 70,732
Receivables:
Investment securities sold ......................................... -- 978,328 19,806,991
Capital shares sold ................................................ 174,997 216,795 1,282,250
Interest ........................................................... 852,360 2,101,391 23,179,698
----------------------------------------------------------
Total assets ................................................... 91,402,791 123,856,329 1,760,433,724
----------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased .................................... 6,958,800 2,734,501 72,424,431
Capital shares redeemed ............................................ 146,831 228,897 4,703,648
Affiliates ......................................................... 55,810 77,934 1,029,519
Shareholders ....................................................... 636 1,358 24,096
Distributions to shareholders ....................................... 142,483 205,765 3,150,111
Other liabilities ................................................... 3,046 17,678 141,645
Total liabilities .............................................. 7,307,606 3,266,133 81,473,450
----------------------------------------------------------
Net assets, at value .......................................... $ 84,095,185 $ 120,590,196 $ 1,678,960,274
----------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ........ $ (33,491) $ (53,027) $ (2,683,746)
Net unrealized appreciation (depreciation) .......................... (902,683) 336,792 24,183,580
Accumulated net realized gain (loss) ................................ (736,949) (1,330,151) 857,907
Capital shares ...................................................... 85,768,308 121,636,582 1,656,602,533
----------------------------------------------------------
Net assets, at value .......................................... $ 84,095,185 $ 120,590,196 $ 1,678,960,274
==========================================================
CLASS A:
Net assets, at value ................................................ $ 84,095,185 $ 120,590,196 $ 1,613,823,507
==========================================================
Shares outstanding .................................................. 8,229,255 12,081,189 138,584,985
==========================================================
Net asset value per share* .......................................... $ 10.22 $ 9.98 $ 11.65
==========================================================
Maximum offering price per share (net asset value per share / 95.75%) $ 10.67 $ 10.42 $ 12.17
==========================================================
CLASS C:
Net assets, at value ................................................ -- -- $ 65,136,767
==========================================================
Shares outstanding .................................................. -- -- 5,559,964
==========================================================
Net asset value per share* .......................................... -- -- $ 11.72
==========================================================
Maximum offering price per share (net asset value per share / 99.00%) -- -- $ 11.84
==========================================================
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
MASSACHUSETTS MICHIGAN MINNESOTA OHIO
INSURED TAX-FREE INSURED 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:
Cost ................................................... $ 351,290,859 $ 1,157,268,712 $ 525,682,867 $ 777,728,864
======================================================================
Value .................................................. 355,158,458 1,190,243,411 525,258,363 791,963,286
Cash .................................................... 39,067 49,005 96,234 26,557
Receivables:
Investment securities sold ............................. -- -- 1,745,594 9,219,819
Capital shares sold .................................... 386,977 554,084 62,140 1,158,004
Interest ............................................... 4,935,402 19,012,528 5,352,109 11,847,558
----------------------------------------------------------------------
Total assets ....................................... 360,519,904 1,209,859,028 532,514,440 814,215,224
----------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ........................ -- -- 17,025,033 13,265,075
Capital shares redeemed ................................ 250,594 1,617,535 619,800 692,602
Affiliates ............................................. 254,128 778,973 338,632 518,916
Shareholders ........................................... 3,951 16,328 6,873 9,967
Distributions to shareholders ........................... 658,234 2,176,221 930,682 1,439,804
Other liabilities ....................................... 32,756 119,834 85,542 102,425
----------------------------------------------------------------------
Total liabilities .................................. 1,199,663 4,708,891 19,006,562 16,028,789
----------------------------------------------------------------------
Net assets, at value .............................. $ 359,320,241 $ 1,205,150,137 $ 513,507,878 $ 798,186,435
======================================================================
Net assets consist of:
Accumulated distributions in excess of net investment
income ................................................ $ (305,039) $ (1,469,627) $ (597,254) $ (521,523)
Net unrealized appreciation (depreciation) .............. 3,867,599 32,974,699 (424,504) 14,234,422
Accumulated net realized gain (loss) .................... (915,006) (156,784) 118,859 (1,075,275)
Capital shares .......................................... 356,672,687 1,173,801,849 514,410,777 785,548,811
----------------------------------------------------------------------
Net assets, at value .............................. $ 359,320,241 $ 1,205,150,137 $ 513,507,878 $ 798,186,435
======================================================================
CLASS A:
Net assets, at value .................................... $ 331,350,903 $ 1,151,515,125 $ 490,290,829 $ 754,531,001
======================================================================
Shares outstanding ...................................... 29,800,086 98,271,007 42,528,903 63,488,945
======================================================================
Net asset value per share* .............................. $ 11.12 $ 11.72 $ 11.53 $ 11.88
======================================================================
Maximum offering price per share (net asset value per
share / 95.75%) ....................................... $ 11.61 $ 12.24 $ 12.04 $ 12.41
======================================================================
CLASS C:
Net assets, at value .................................... $ 27,969,338 $ 53,635,012 $ 23,217,049 $ 43,655,434
======================================================================
Shares outstanding ...................................... 2,502,624 4,546,516 2,004,587 3,653,155
======================================================================
Net asset value per share* .............................. $ 11.18 $ 11.80 $ 11.58 $ 11.95
======================================================================
Maximum offering price per share (net asset value per
share / 99.00%) ....................................... $ 11.29 $ 11.92 $ 11.70 $ 12.07
======================================================================
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
ARIZONA FLORIDA FRANKLIN
INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest .................................................................. $ 2,225,540 $ 3,366,808 $ 49,936,762
-----------------------------------------------------
Expenses:
Management fees (Note 3) .................................................. 264,118 374,432 4,053,462
Distribution fees: (Note 3)
Class A .................................................................. 42,481 62,948 753,232
Class C .................................................................. -- -- 215,741
Transfer agent fees (Note 3) .............................................. 11,412 20,227 366,003
Custodian fees ............................................................ 332 673 9,063
Reports to shareholders ................................................... 3,277 5,719 95,719
Registration and filing fees .............................................. 5,159 5,532 70,323
Professional fees ......................................................... 1,155 1,138 21,521
Trustees' fees and expenses ............................................... 380 574 8,347
Insurance ................................................................. -- -- 1,506
Other ..................................................................... 8,529 10,356 56,845
-----------------------------------------------------
Total expenses ....................................................... 336,843 481,599 5,651,762
Expenses waived/paid by affiliate (Note 3) ........................... -- (9,493) --
-----------------------------------------------------
Net expenses ........................................................ 336,843 472,106 5,651,762
-----------------------------------------------------
Net investment income .............................................. 1,888,697 2,894,702 44,285,000
-----------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ................................. (554,114) (62,603) 866,544
Net unrealized depreciation on investments ................................ (4,376,924) (6,452,674) (86,709,540)
-----------------------------------------------------
Net realized and unrealized loss ........................................... (4,931,038) (6,515,277) (85,842,996)
-----------------------------------------------------
Net decrease in net assets resulting from operations ....................... $ (3,042,341) $ (3,620,575) $ (41,557,996)
=====================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
MASSACHUSETTS MICHIGAN MINNESOTA OHIO
INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Interest ............................................. $ 10,527,359 $ 34,082,450 $ 14,761,345 $ 22,855,742
---------------------------------------------------------------------------
Expenses:
Management fees (Note 3) ............................. 956,187 2,853,626 1,316,265 1,965,818
Distribution fees: (Note 3)
Class A ............................................. 159,326 540,250 231,329 358,251
Class C ............................................. 89,369 176,745 73,685 142,786
Transfer agent fees (Note 3) ......................... 80,607 314,220 128,453 194,754
Custodian fees ....................................... 1,829 6,367 2,708 4,042
Reports to shareholders .............................. 28,611 87,726 49,042 64,985
Registration and filing fees ......................... 11,200 11,504 10,824 13,688
Professional fees .................................... 4,550 13,075 6,729 9,131
Trustees' fees and expenses .......................... 1,972 5,420 2,127 3,629
Insurance ............................................ -- 2,127 9,829 7,243
Other ................................................ 16,096 40,486 25,538 31,523
---------------------------------------------------------------------------
Total expenses .................................. 1,349,747 4,051,546 1,856,529 2,795,850
---------------------------------------------------------------------------
Net investment income .......................... 9,177,612 30,030,904 12,904,816 20,059,892
---------------------------------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............ (915,006) (42,324) 117,513 (1,075,016)
Net unrealized depreciation on investments ........... (17,969,841) (56,673,850) (25,740,561) (38,006,193)
---------------------------------------------------------------------------
Net realized and unrealized loss ...................... (18,884,847) (56,716,174) (25,623,048) (39,081,209)
---------------------------------------------------------------------------
Net decrease in net assets resulting from operations .. $ (9,707,235) $ (26,685,270) $ (12,718,232) $ (19,021,317)
===========================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN ARIZONA INSURED
TAX-FREE INCOME FUND
-------------------------------------
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 1,888,697 $ 3,274,625
Net realized gain (loss) from investments ............................................. (554,114) 64,058
Net unrealized appreciation (depreciation) on investments ............................. (4,376,924) 334,186
-------------------------------------
Net increase (decrease) in net assets resulting from operations ................... (3,042,341) 3,672,869
Distributions to shareholders from:
Net investment income ................................................................. (1,956,393) (3,262,224)
In excess of net investment income .................................................... (33,491) --
-------------------------------------
Total distributions to shareholders .................................................... (1,989,884) (3,262,224)
Capital share transactions: (Note 2) ................................................... 8,442,985 22,215,047
-------------------------------------
Net increase (decrease) in net assets ............................................. 3,410,760 22,625,692
Net assets:
Beginning of period .................................................................... 80,684,425 58,058,733
-------------------------------------
End of period .......................................................................... $ 84,095,185 $ 80,684,425
=====================================
Undistributed net investment income (accumulated distributions in excess of net .........
investment income) included in net assets:
End of period ......................................................................... $ (33,491) $ 67,696
=====================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FLORIDA INSURED
TAX-FREE INCOME FUND
----------------------------------------
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 2,894,702 $ 5,520,101
Net realized gain (loss) from investments ............................................. (62,603) 2,867
Net unrealized appreciation (depreciation) on investments ............................. (6,452,674) 979,147
----------------------------------------
Net increase (decrease) in net assets resulting from operations ................... (3,620,575) 6,502,115
Distributions to shareholders from:
Net investment income ................................................................. (2,935,127) (5,528,406)
In excess of net investment income .................................................... (53,027) --
----------------------------------------
Total distributions to shareholders .................................................... (2,988,154) 5,528,406
Capital share transactions: (Note 2) ................................................... 2,711,103 22,008,531
----------------------------------------
Net increase (decrease) in net assets ............................................. (3,897,626) 22,982,240
Net assets:
Beginning of period .................................................................... 124,487,822 101,505,582
----------------------------------------
End of period .......................................................................... $ 120,590,196 $ 124,487,822
========================================
Undistributed net investment income (accumulated distributions in excess of net .........
investment income) included in net assets:
End of period ......................................................................... $ (53,027) $ 40,425
========================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN INSURED
TAX-FREE INCOME FUND
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 44,285,000 $ 89,621,811
Net realized gain (loss) from investments ........ 866,544 10,620,546
Net unrealized depreciation on investments ....... (86,709,540) (3,082,372)
-----------------------------------------
Net increase (decrease) in net assets
resulting from operations .................... (41,557,996) 97,159,985
Distributions to shareholders from:
Net investment income:
Class A ......................................... (42,820,609) (87,334,716)
Class C ......................................... (1,464,391) (2,287,095)
In excess of net investment income:
Class A ......................................... (921,628) (856,324)
Class C ......................................... (31,550) (22,408)
Net realized gains:
Class A ......................................... (2,955,081) (13,902,736)
Class C ......................................... (115,840) (425,541)
-----------------------------------------
Total distributions to shareholders ............... (48,309,099) (104,828,820)
Capital share transactions: (Note 2)
Class A ......................................... (26,714,806) 49,150,017
Class C ......................................... 3,362,101 27,381,709
-----------------------------------------
Total capital share transactions .................. (23,352,705) 76,531,726
Net increase (decrease) in net assets ........ (113,219,800) 68,862,891
Net assets:
Beginning of period ............................... 1,792,180,074 1,723,317,183
-----------------------------------------
End of period ..................................... $ 1,678,960,274 $ 1,792,180,074
=========================================
Accumulated distributions in excess of net
investment income included in net assets:
End of period .................................... $ (2,683,746) $ (1,730,568)
=========================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MASSACHUSETTS INSURED
TAX-FREE INCOME FUND
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 9,177,612 $ 17,503,725
Net realized gain (loss) from investments ........ (915,006) 549,086
Net unrealized depreciation on investments ....... (17,969,841) (1,068)
-------------------------------------
Net increase (decrease) in net assets
resulting from operations .................... (9,707,235) 18,051,743
Distributions to shareholders from:
Net investment income:
Class A ......................................... (8,577,131) (16,632,794)
Class C ......................................... (600,481) (844,761)
In excess of net investment income:
Class A ......................................... (112,772) --
Class C ......................................... (7,895) --
Net realized gains:
Class A ......................................... -- (1,931,958)
Class C ......................................... -- (108,794)
-------------------------------------
Total distributions to shareholders ............... (9,298,279) (19,518,307)
Capital share transactions: (Note 2)
Class A ......................................... 8,837,206 13,335,276
Class C ......................................... 3,108,066 12,428,507
-------------------------------------
Total capital share transactions .................. 11,945,272 25,763,783
Net increase (decrease) in net assets ........ (7,060,242) 24,297,219
Net assets:
Beginning of period ............................... 366,380,483 342,083,264
-------------------------------------
End of period ..................................... $ 359,320,241 $ 366,380,483
=====================================
Accumulated distributions in excess of net
investment income included in net assets:
End of period .................................... $ (305,039) $ (184,372)
=====================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN MICHIGAN INSURED
TAX-FREE INCOME FUND
-----------------------------------------
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
-----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 30,030,904 $ 59,062,198
Net realized gain (loss) from investments ........ (42,324) 2,222,023
Net unrealized appreciation (depreciation)
on investments ................................... (56,673,850) 10,636,500
-----------------------------------------
Net increase (decrease) in net assets
resulting from operations .................... (26,685,270) 71,920,721
Distributions to shareholders from:
Net investment income:
Class A ......................................... (28,865,796) (56,963,881)
Class C ......................................... (1,165,108) (1,809,222)
In excess of net investment income:
Class A ......................................... (396,078) --
Class C ......................................... (15,988) --
Net realized gains:
Class A ......................................... (29,037) (5,139,566)
Class C ......................................... (1,392) (185,565)
-----------------------------------------
Total distributions to shareholders ............... (30,473,399) (64,098,234)
Capital share transactions: (Note 2)
Class A ......................................... 44,779,236 11,242,515
Class C ......................................... 6,214,220 16,812,877
-----------------------------------------
Total capital share transactions .................. 50,993,456 28,055,392
Net increase (decrease) in net assets ........ (6,165,213) 35,877,879
Net assets:
Beginning of period ............................... 1,211,315,350 1,175,437,471
-----------------------------------------
End of period ..................................... $ 1,205,150,137 $ 1,211,315,350
=========================================
Accumulated distributions in excess of net
investment income included in net assets:
End of period .................................... $ (1,469,627) $ (1,057,561)
=========================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MINNESOTA INSURED
TAX-FREE INCOME FUND
---------------------------------
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
---------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 12,904,816 $ 25,893,137
Net realized gain (loss) from investments ........ 117,513 1,829,574
Net unrealized appreciation (depreciation)
on investments ................................... (25,740,561) (1,790,539)
---------------------------------
Net increase (decrease) in net assets
resulting from operations .................... (12,718,232) 25,932,172
Distributions to shareholders from:
Net investment income:
Class A ......................................... (12,421,652) (25,368,828)
Class C ......................................... (483,164) (681,854)
In excess of net investment income:
Class A ......................................... (528,851) (46,601)
Class C ......................................... (20,548) (1,254)
Net realized gains:
Class A ......................................... (1,012,401) (856,454)
Class C ......................................... (45,306) (29,745)
---------------------------------
Total distributions to shareholders ............... (14,511,922) (26,984,736)
Capital share transactions: (Note 2)
Class A ......................................... 1,172,088 20,874,563
Class C ......................................... 3,495,994 10,802,209
---------------------------------
Total capital share transactions .................. 4,668,082 31,676,772
Net increase (decrease) in net assets ........ (22,562,072) 30,624,208
Net assets:
Beginning of period ............................... 536,069,950 505,445,742
---------------------------------
End of period ..................................... $ 513,507,878 $ 536,069,950
=================================
Accumulated distributions in excess of net
investment income included in net assets:
End of period .................................... $ (597,254) $ (47,855)
=================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN OHIO INSURED
TAX-FREE INCOME FUND
--------------------------------------
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
--------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .............................................................. $ 20,059,892 $ 39,188,055
Net realized gain (loss) from investments .......................................... (1,075,016) 2,482,460
Net unrealized appreciation (depreciation) on investments .......................... (38,006,193) 1,410,754
--------------------------------------
Net increase (decrease) in net assets resulting from operations ................ (19,021,317) 43,081,269
Distributions to shareholders from:
Net investment income:
Class A ........................................................................... (19,115,923) (37,252,026)
Class C ........................................................................... (943,969) (1,528,613)
In excess of net investment income:
Class A ........................................................................... (470,693) --
Class C ........................................................................... (23,265) --
Net realized gains:
Class A ........................................................................... (1,086,613) (1,823,769)
Class C ........................................................................... (61,057) (89,688)
--------------------------------------
Total distributions to shareholders ................................................. (21,701,520) (40,694,096)
Capital share transactions: (Note 2)
Class A ........................................................................... 16,488,181 33,237,755
Class C ........................................................................... 3,570,520 13,967,984
--------------------------------------
Total capital share transactions .................................................... 20,058,701 47,205,739
Net increase (decrease) in net assets .......................................... (20,664,136) 49,592,912
Net assets:
Beginning of period ................................................................. 818,850,571 769,257,659
--------------------------------------
End of period ....................................................................... $ 798,186,435 $ 818,850,571
======================================
Accumulated distributions in excess of net investment income included in net
assets:
End of period ....................................................................... $ (521,523) $ (27,565)
======================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax Free Trust (the Trust) is registered under the
Investment Company Act of 1940 as an open-end investment company, consisting of
twenty-six separate series (the Funds). All Funds included in this report are
diversified except the Franklin Arizona Insured Tax-Free Income Fund and the
Franklin Florida Insured Tax-Free Income Fund. The Funds' investment objective
is to provide tax-free income.
The following summarizes the Funds' significant accounting policies.
a. SECURITY VALUATION
Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. 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. Securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.
b. INCOME TAXES
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount and
premium are amortized on an income tax basis. Distributions to shareholders are
recorded on the ex-dividend date.
Realized and unrealized gains and 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.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. INSURANCE
The scheduled payments of interest and principal for each insured long-term
municipal security in the Trust are insured by either a new issue insurance
policy, a portfolio insurance policy, a secondary insurance policy, or by
collateral guaranteed by an agency of the U.S. government.
Depending on the type of coverage, premiums for insurance are either added to
the cost basis of the security, included as an expense of the fund, or paid by a
third party.
e. 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.
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
The Funds, except the Franklin Arizona Insured Tax-Free Income Fund and
the Franklin Florida Insured Tax-Free Income Fund, offer two classes of shares:
Class A and Class C. Effective January 1, 1999, Class I and Class II were
renamed Class A and Class C, respectively. Each class of shares differs by their
initial sales load, distribution fees, voting rights on matters affecting a
single class and the exchange privilege of each class.
At August 31, 1999, there were an unlimited number of shares authorized (no par
value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN ARIZONA INSURED FRANKLIN FLORIDA INSURED
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold ........................................... 1,274,981 $ 13,600,427 1,471,125 $ 15,225,161
Shares issued in reinvestment of distributions ........ 95,452 1,010,826 101,258 1,042,600
Shares redeemed ....................................... (584,153) (6,168,268) (1,317,077) (13,556,658)
-------------------------------------------------------------------
Net increase ........................................... 786,280 $ 8,442,985 255,306 $ 2,711,103
===================================================================
Year ended February 28, 1999
Shares sold ........................................... 2,370,125 $ 25,660,758 3,700,444 $ 38,909,596
Shares issued in reinvestment of distributions ........ 146,945 1,590,252 182,603 1,917,371
Shares redeemed ....................................... (466,289) (5,035,963) (1,790,202) (18,818,436)
-------------------------------------------------------------------
Net increase ........................................... 2,050,781 $ 22,215,047 2,092,845 $ 22,008,531
===================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN INSURED FRANKLIN MASSACHUSETTS
TAX-FREE INCOME FUND INSURED TAX-FREE INCOME FUND
----------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold ......................................... 11,139,570 $ 134,005,873 2,637,949 $ 30,512,778
Shares issued in reinvestment of distributions ...... 1,733,470 20,809,731 349,517 4,014,947
Shares redeemed ..................................... (15,127,810) (181,530,410) (2,237,882) (25,690,519)
----------------------------------------------------------------------
Net increase (decrease) .............................. (2,254,770) $ (26,714,806) 749,584 $ 8,837,206
======================================================================
Year ended February 28, 1999
Shares sold ......................................... 20,347,674 $ 250,574,059 3,673,445 $ 43,120,431
Shares issued in reinvestment of distributions ...... 3,787,915 46,606,128 740,160 8,686,439
Shares redeemed ..................................... (20,145,689) (248,030,170) (3,280,706) (38,471,594)
----------------------------------------------------------------------
Net increase ......................................... 3,989,900 $ 49,150,017 1,132,899 $ 13,335,276
======================================================================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold ......................................... 937,438 $ 11,366,087 468,689 $ 5,419,137
Shares issued in reinvestment of distributions ...... 83,467 1,007,454 35,972 415,011
Shares redeemed ..................................... (745,094) (9,011,440) (235,235) (2,726,082)
----------------------------------------------------------------------
Net increase ......................................... 275,811 $ 3,362,101 269,426 $ 3,108,066
======================================================================
Year ended February 28, 1999
Shares sold ......................................... 2,858,182 $ 35,405,965 1,236,934 $ 14,603,154
Shares issued in reinvestment of distributions ...... 143,445 1,775,301 59,445 700,881
Shares redeemed ..................................... (791,952) (9,799,557) (243,865) (2,875,528)
----------------------------------------------------------------------
Net increase ......................................... 2,209,675 $ 27,381,709 1,052,514 $ 12,428,507
======================================================================
</TABLE>
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONT.)
<TABLE>
<CAPTION>
FRANKLIN MICHIGAN INSURED FRANKLIN MINNESOTA INSURED
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
----------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold .......................................... 6,827,181 $ 82,896,474 2,025,947 $ 24,208,577
Shares issued on merger (Note 7) ..................... 1,293,437 15,172,016 -- --
Shares issued in reinvestment of distributions ....... 1,221,826 14,718,399 619,005 7,364,887
Shares redeemed ...................................... (5,650,166) (68,007,653) (2,555,598) (30,401,376)
----------------------------------------------------------------------
Net increase .......................................... 3,692,278 $ 44,779,236 89,354 $ 1,172,088
======================================================================
Year ended February 28, 1999
Shares sold .......................................... 8,062,766 $ 98,708,500 4,579,843 $ 55,803,476
Shares issued in reinvestment of distributions ....... 2,592,822 31,727,653 1,138,659 13,862,003
Shares redeemed ...................................... (9,743,467) (119,193,638) (4,006,455) (48,790,916)
----------------------------------------------------------------------
Net increase .......................................... 912,121 $ 11,242,515 1,712,047 $ 20,874,563
======================================================================
Class C Shares:
Six months ended August 31, 1999
Shares sold .......................................... 976,921 $ 11,930,254 392,127 $ 4,707,409
Shares issued in reinvestment of distributions ....... 65,911 798,929 31,681 378,405
Shares redeemed ...................................... (540,090) (6,514,963) (133,026) (1,589,820)
----------------------------------------------------------------------
Net increase .......................................... 502,742 $ 6,214,220 290,782 $ 3,495,994
======================================================================
Year ended February 28, 1999
Shares sold .......................................... 1,687,220 $ 20,782,927 967,191 $ 11,818,508
Shares issued in reinvestment of distributions ....... 114,497 1,411,093 38,858 475,238
Shares redeemed ...................................... (437,096) (5,381,143) (121,981) (1,491,537)
----------------------------------------------------------------------
Net increase .......................................... 1,364,621 $ 16,812,877 884,068 $ 10,802,209
======================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN OHIO INSURED
TAX-FREE INCOME FUND
---------------------------------------
CLASS A SHARES: SHARES AMOUNT
---------------------------------------
<S> <C> <C>
Six months ended August 31, 1999
Shares sold ............................................................... 4,408,816 $ 54,313,646
Shares issued in reinvestment of distributions ............................ 841,193 10,299,389
Shares redeemed ........................................................... (3,931,289) (48,124,854)
---------------------------------------
Net increase ............................................................... 1,318,720 $ 16,488,181
=======================================
Year ended February 28, 1999
Shares sold ............................................................... 7,474,825 $ 93,338,302
Shares issued in reinvestment of distributions ............................ 1,562,346 19,499,382
Shares redeemed ........................................................... (6,380,336) (79,599,929)
---------------------------------------
Net increase ............................................................... 2,656,835 $ 33,237,755
=======================================
Class C Shares:
Six months ended August 31, 1999
Shares sold ............................................................... 579,029 $ 7,158,834
Shares issued in reinvestment of distributions ............................ 58,733 722,614
Shares redeemed ........................................................... (349,773) (4,310,928)
---------------------------------------
Net increase ............................................................... 287,989 $ 3,570,520
=======================================
Year ended February 28, 1999
Shares sold ............................................................... 1,355,256 $ 17,004,771
Shares issued in reinvestment of distributions ............................ 92,437 1,159,580
Shares redeemed ........................................................... (334,322) (4,196,367)
---------------------------------------
Net increase ............................................................... 1,113,371 $ 13,967,984
=======================================
</TABLE>
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), Franklin/Templeton Investor Services, Inc. (Investor Services),
and Franklin Templeton Services, Inc. (FT Services), the Funds' investment
manager, principal underwriter, transfer agent, and administrative manager,
respectively.
The Funds pay an investment management fee to Advisers based on the average net
assets of the Funds as follows:
<TABLE>
<CAPTION>
ANNUALIZED FEE RATE MONTH-END NET ASSETS
----------------------------------------------------------------------------
<S> <C>
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
</TABLE>
Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.
Advisers agreed in advance to waive management fees for the Franklin Florida
Insured Tax-Free Income Fund, as noted in the Statement of Operations.
The Funds reimburse Distributors up to .10% and .65% per year of their average
daily net assets of Class A and Class C, respectively, for costs incurred in
marketing the Funds' shares.
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the period as follows:
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN ARIZONA FRANKLIN FLORIDA FRANKLIN MASSACHUSETTS FRANKLIN MICHIGAN
INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net commissions paid .. $23,500 $2,417 $281,998 $78,996 $200,995
Contingent deferred
sales charges ........ $ 5,822 $ 463 $ 31,115 $23,806 $ 20,922
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN
MINNESOTA FRANKLIN OHIO
INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND
---------------------------------------------
<S> <C> <C>
Net commissions paid .......... $71,321 $148,845
Contingent deferred
sales charges ................ $ 7,301 $ 15,675
</TABLE>
The Funds paid transfer agent fees of $1,115,676, of which $930,078 was paid to
Investor Services.
4. INCOME TAXES
At February 28, 1999, the Funds had tax basis capital losses which may be
carried over to offset future capital gains. Such losses expire as follows:
<TABLE>
<CAPTION>
FRANKLIN ARIZONA FRANKLIN FLORIDA
INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND
--------------------------------------
<S> <C> <C>
Capital loss carryovers expiring in:
2003 $165,472 $1,100,392
2005 17,363 167,156
--------------------------------------
$182,835 $1,267,548
======================================
</TABLE>
Distributions of income to shareholders may not equal net investment income due
to differing treatments of dividend distributions for book and tax purposes.
Net realized capital gains (losses) differ for financial statement and tax
purposes primarily due to differing treatment of wash sales.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At August 31, 1999, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:
<TABLE>
<CAPTION>
Franklin
Franklin Arizona Franklin Florida Franklin Massachusetts Franklin Michigan
Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments at cost ....... $ 87,048,590 $ 120,211,902 $ 1,691,913,592 $ 351,290,859 $ 1,157,380,738
================================================================================================
Unrealized appreciation ... $ 1,545,940 $ 2,789,667 $ 54,647,080 $ 9,111,234 $ 48,566,788
Unrealized depreciation ... (2,448,623) (2,452,875) (30,466,619) (5,243,635) (15,704,115)
------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) ........... $ (902,683) $ 336,792 $ 24,180,461 $ 3,867,599 $ 32,862,673
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Franklin
Minnesota Franklin Ohio
Insured Tax-Free Insured Tax-Free
Income Fund Income Fund
---------------------------------------
<S> <C> <C>
Investments at cost .......... $ 525,682,867 $ 777,728,864
=================================
Unrealized appreciation ...... $ 11,775,783 $ 26,644,953
Unrealized depreciation ...... (12,200,287) (12,410,531)
---------------------------------
Net unrealized appreciation
(depreciation) .............. $ (424,504) $ 14,234,422
=================================
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended August 31, 1999, were as follows:
<TABLE>
<CAPTION>
Franklin
Franklin Arizona Franklin Florida Franklin Massachusetts Franklin Michigan
Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases .. $20,951,039 $16,608,009 $200,565,442 $56,621,334 $85,162,089
Sales ...... $10,662,803 $11,387,217 $203,740,699 $47,200,793 $46,182,572
</TABLE>
<TABLE>
<CAPTION>
Franklin
Minnesota Franklin Ohio
Insured Tax-Free Insured Tax-Free
Income Fund Income Fund
--------------------------------------------
<S> <C> <C>
Purchases .... $53,216,626 $65,525,510
Sales ........ $33,083,710 $46,828,991
</TABLE>
6. CREDIT RISK
The Funds have investments in excess of 10% of their total net assets in their
respective states and/or U.S. territories and possessions except the Franklin
Insured Tax-Free Income Fund which has investments in excess of 10% of its total
net assets in the state of Texas. Such concentration may subject the Funds more
significantly to economic changes occurring within those states and/or U.S.
territories and possessions.
7. FUND MERGER
On August 26, 1999, the Franklin Michigan Insured Tax-Free Income Fund acquired
the net assets of Franklin Michigan Tax-Free Income Fund pursuant to a plan of
reorganization approved by Franklin Michigan Tax-Free Income Fund's
shareholders. The merger was accomplished by a tax-free exchange of 1,293,437
Class A shares of the Franklin Michigan Insured Tax-Free Income Fund (valued at
$11.73) for the net assets of the Franklin Michigan Tax-Free Income Fund which
aggregated $15,172,016, including $346,476 of unrealized depreciation. The
merger was accounted for as a pooling-of-interests without restatement for
financial reporting purposes. The combined net assets of the Franklin Michigan
Insured Tax-Free Income Fund immediately after the merger were $1,206,193,329.
SHAREHOLDER LETTER
Dear Shareholder:
This semiannual report for Franklin Tax-Free Trust covers the period ended
August 31, 1999.
During the six months under review, the U.S. bond markets continued to
experience challenging times. The yield on the benchmark 30-year Treasury bond
steadily increased, from 5.57% on February 28, 1999, to 6.07% on August 31, 1999
- --reaching a high of 6.25% on August 10, 1999. Although many of the
uncertainties associated with hedge funds and 1998's financial stresses on Asia,
Latin America and Eastern Europe either dissipated or stabilized, the Federal
Reserve Board's (the Fed's) position toward domestic inflationary tendencies
renewed investor concern. At its June 30 meeting, the Federal Open Market
Committee (FOMC) raised the federal funds target rate to 5.00%, while announcing
a neutral bias toward further increases, which most investors initially viewed
as positive. However, most bond investors became cautious as they perceived Alan
Greenspan's testimony before the U.S. House of Representatives on July 22, 1999,
as a change by the Fed from a neutral bias to one of possibly raising rates.
Indeed, the FOMC raised its target for the federal funds rate another
quarter-percentage point to 5.25% and again adopted a neutral bias at its August
24 meeting, which appeared to stabilize the bond markets for the short term.
The economy's future direction and its effect on inflationary pressures will
ultimately determine the level of volatility that impacts the bond markets in
the near future. During the period under review, many investors
uncharacteristically reacted very swiftly to new releases of economic data or
Fed announcements, and in many instances the market overcorrected. Investors
with short-term investment horizons may view such instability as unfavorable.
However, we prefer to take a long-term approach toward investing and find that
recent market conditions afforded us opportunities not only to increase the
funds' income earning potential, but also to enhance the portfolios' overall
structure. Our conservative, long-term, buy-and-hold philosophy enables us to
produce comparatively high credit-quality portfolios that distribute favorable
tax-free income.(1) We do not purchase exotic derivative products or use
leverage as part of our investment strategy to increase yield because we also
strive to maintain low share-price volatility. We encourage you to examine the
credit quality of your tax-free fund, as well as its yield when evaluating your
investment needs.
CONTENTS
Shareholder Letter ...................................................... 1
Special Feature:
Uncovering Tax-Free
Opportunities ........................................................... 5
Fund Reports
Franklin Alabama
Tax-Free Income Fund .................................................... 8
Franklin Florida
Tax-Free Income Fund .................................................... 12
Franklin Georgia
Tax-Free Income Fund .................................................... 16
Franklin Kentucky
Tax-Free Income Fund .................................................... 20
Franklin Louisiana
Tax-Free Income Fund .................................................... 24
Franklin Maryland
Tax-Free Income Fund .................................................... 28
Franklin Missouri
Tax-Free Income Fund .................................................... 32
Franklin North Carolina
Tax-Free Income Fund .................................................... 36
Franklin Texas
Tax-Free Income Fund .................................................... 40
Franklin Virginia
Tax-Free Income Fund .................................................... 44
Municipal Bond Ratings .................................................. 48
Financial Highlights &
Statement of Investments ................................................ 50
Financial Statements .................................................... 97
Notes to Financial Statements ........................................... 108
FUND CATEGORY
[PYRAMID GRAPHIC]
With municipal bond insurance prevalent over the past few years, the difference
in yields between high- and lower-rated bonds has narrowed compared to
historical levels. As a result, many of our funds in recent years chose to
invest in high-rated bonds because of the risk versus return characteristics in
the marketplace. At the end of this reporting period, many of our tax-free
funds held a large percentage of AAA-rated bonds, reflecting the portfolios'
high quality. Our disciplined, long-term, income-oriented investment approach,
along with our ability to recognize value, enables us to offer funds providing
attractive tax-free yields while enjoying excellent credit quality
characteristics compared to their peers. Historically more than 85% of total
return for municipal bonds is derived from the income component. In light of
this, we choose to concentrate on income and risk-adjusted total return in
managing our funds, and on this basis, most of our tax-free funds compare very
favorably to their peers.
As the interest-rate outlook stabilizes and inflationary concerns diminish, we
expect the bond markets to become more stable. Overall, we expect municipal
bonds to perform well, as at the end of the reporting period the ratio of yields
for the Bond Buyer 40 Municipal Index versus the 30-year Treasury bond
approached 95%, considerably higher than the historical average of 89%, which
means municipal bonds are relatively inexpensive. Furthermore, municipal bond
supply for 1999 is expected to be approximately 18% less than in 1998, with
about $230 billion coming to market. The reduced supply should enhance municipal
bond performance going forward.
1. For investors subject to federal or state 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.
Please keep in mind that interest rates and thus, bond prices, rise and fall
depending on the economy. Such fluctuations are a normal part of investing, and
one should expect this when investing in any security, including municipal
bonds. Municipal bond funds can help lower such volatility, as they offer a
level of diversification that is difficult for individual investors to achieve
on their own. They continue to be an attractive investment for those investors
seeking tax-free income as well as providing an opportunity to reduce risk in
their portfolios. Depending on your federal and state tax rates, a taxable
investment would need to offer a higher yield than the taxable equivalent yield
of a tax-free investment. We encourage you to discuss your financial goals with
an investment representative. As always, we appreciate your support, welcome
your questions and look forward to serving your investment needs in the years
ahead.
Sincerely,
/s/ C. B. Johnson
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
/s/ Thomas J. Kenny
Thomas J. Kenny
Director
Franklin Municipal Bond Department
WHAT DOES "TAXABLE EQUIVALENT" MEAN FOR YOU?
For yield and distribution rate, the taxable equivalent is the amount a taxable
investment would have to earn to match a tax-free investment such as municipal
bonds. You can find your fund's taxable equivalent distribution rate and yield
in the Performance Summary that follows your fund's report.
OVERALL MORNINGSTAR RATINGS(TM)
These funds in Franklin Tax-Free Trust were rated against a universe of 1,591;
1,210 and 372 municipal bond funds for the 3-, 5- and 10-year periods,
respectively, ended August 31, 1999.
FRANKLIN MUNICIPAL BOND FUNDS ARE STAR QUALITY
You may be pleased to know how well your Franklin Tax-Free Income Fund compares
with the competition. Morningstar, a leading mutual fund rating company, awarded
33 Franklin municipal bond funds their highest ratings, four or five stars. With
one of the largest municipal bond departments in the industry, Franklin
Templeton has the resources needed to identify attractive municipal bond
opportunities and the know-how to purchase them at favorable prices. We offer
investors more high-quality choices than any other fund group followed by
Morningstar.
*****
FIVE-STAR FRANKLIN TAX-FREE INCOME FUNDS(1,2)
- --------------------------------------------------------------------------------
Franklin Florida Tax-Free Income Fund - Class A
Franklin Texas Tax-Free Income Fund - Class A
****
Four-Star Franklin Tax-Free Income Funds(1,2)
- --------------------------------------------------------------------------------
Franklin Alabama Tax-Free Income Fund - Class A
Franklin Georgia Tax-Free Income Fund - Class A
Franklin Kentucky Tax-Free Income Fund - Class A
Franklin Louisiana Tax-Free Income Fund - Class A
Franklin Maryland Tax-Free Income Fund - Class A
Franklin Missouri Tax-Free Income Fund - Class A
Franklin North Carolina Tax-Free Income Fund - Class A
Franklin Virginia Tax-Free Income Fund - Class A
1. For investors subject to federal or state alternative minimum tax, all or a
portion of the dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
2. For the 3-, 5- and 10-year periods ended August 31, 1999, the respective
Morningstar ratings were as follows: Alabama Tax-Free Income 3, 4, 4; Florida
Tax-Free Income 4, 5, 5; Georgia Tax-Free Income 4, 4, 4; Kentucky Tax-Free
Income 4, 4, N/A; Louisiana Tax-Free Income 4, 4, 4; Maryland Tax-Free Income 3,
4, 4; Missouri Tax-Free Income 4, 4, 4; North Carolina Tax-Free Income 4, 4, 4;
Texas Tax-Free Income 4, 5, 5; Virginia Tax-Free Income 3, 4, 4.
Morningstar proprietary ratings reflect historical risk-adjusted performance and
can change monthly. They are calculated from the fund's 3-, 5- and 10-year
average annual returns in excess of 90-day Treasury bill returns with
appropriate sales charge adjustments, and a risk factor reflecting performance
below 90-day T-bill returns. The top 10% of funds in a broad asset class receive
five stars, the next 22.5% four stars, the next 35% three stars, the next 22.5%
two stars, and the bottom 10% one star. Ratings are for Class A shares only;
other classes may vary. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
You have previously received a prospectus for Franklin Tax-Free Trust in which
you are a shareholder. Franklin Templeton Distributors, Inc. is the principal
underwriter of the Trust.
This page is not part of the shareholder report.
[SPECIAL UPDATE GRAPHIC]
UNCOVERING TAX-FREE OPPORTUNITIES
[PHOTO OF RAFAEL COSTAS]
Rafael Costas, Senior Vice President and Director of Franklin's Municipal
Research Department, discusses how research is an integral part of Franklin's
tax-free income funds' success.
Q: Could you provide an overview of Franklin's research department?
RAFAEL COSTAS: We have one of the industry's largest municipal research staffs,
allowing us to routinely analyze more than 2,000 debt issuers a year. The
research department analysts work closely with our portfolio managers, who rely
on these analysts when making buy and sell decisions. With a focus on in-depth
research and the discipline to buy when others are selling, we often are able to
find exciting opportunities at temporarily depressed prices. Generally, we
concentrate on investment-grade issues. Of course, for our high yield funds, we
also look for below investment-grade bonds that we feel offer appropriate
rewards for the increased risk.
Q: What are some advantages of Franklin's size and reputation?
RAFAEL: Today, Franklin is one of the nation's leading tax-free fund managers.
Our size, with approximately $50 billion of tax-free investments, often enables
us to purchase investments at advantageous prices, which in turn, can help keep
investment costs low. We pass on these savings to shareholders in the form of
higher tax-free yields.(1) In addition, our size often makes us a favorite of
new issuers, as many prefer to work with a minimum number of investors.
Q: What type of tax-free bonds do you favor?
RAFAEL: We typically look for investment-grade bonds, as we try to provide our
shareholders high, current income with a relatively low level of risk. Most of
our investment-grade tax-free bond funds are composed of a high percentage of
securities rated AAA or AA, the highest ratings bonds can receive from national
credit rating agencies.(2) In addition, many of our purchases are insured
because of the prevalence of insurance in the municipal bond marketplace in the
past few years. Insured securities normally are rated AAA, further improving the
quality of our funds. For our high yield funds, we look for bonds which may be
out of favor but, in our view, still have solid fundamentals and the potential
to be upgraded. In fact, we devote much of our research efforts to finding such
bonds in the low investment-grade, high yield sectors.
1. For investors subject to the federal or state 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.
2. Ratings can change.
Q: How do you research a bond?
RAFAEL: We emphasize detailed, high-quality research, which often enables us to
uncover attractive investments that others may have overlooked. When presented
with an opportunity, our analysts carefully consider such factors as the bond's
purpose, who will repay the bond, if the projections are reasonable, the payment
schedule and the issuer's credit history. We incorporate all of the numerical
findings in our internal, proprietary databases and spreadsheets created by our
analysts. With the processed information and analysis, we meet with our
portfolio managers to discuss the merits of each individual issue. The portfolio
manager's decision to buy a security will depend largely on our analysis of the
bond's credit quality and price. We continue to monitor our investments closely
after the purchase, looking for signs of potential problems as well as
additional opportunities.
Q: Do you feel it is important to personally meet management and municipal
officials?
RAFAEL: Very much so. Each year Franklin's analysts and portfolio managers visit
hundreds of sites to garner an understanding that can be obtained only through
personal inspection. They meet face-to-face with the project's management and
municipal officials to discuss firsthand any potential problems. Our analysts
also can use these meetings to discover new opportunities, often before they are
widely known.
Q: Do issuers and investment bankers ever come to Franklin?
RAFAEL: Our sizable presence in the municipal bond market frequently means that
issuers and their bankers come to us with new issues. In a typical day, we may
receive between 50 and 100 calls from brokers offering new and secondary issues.
Approx-
[PHOTO]
Municipal research analyst Molly Butler discusses a bond issue with portfolio
manager Stella Wong imately three times a week, investment bankers visit our
offices, usually as part of an issue's road show. We view these as excellent
opportunities not only to buy issues at favorable prices, but also to propose
changes to the issue, enhancing its quality and appeal to our distinct
standards.
Q: How can Franklin's research influence the portfolio managers' investment
decisions?
RAFAEL: Our extensive research allows us to use a contrarian approach to
investing, because we firmly believe that near-term volatility can create
opportunities for greater long-term yields. For example, when Moody's, Standard
& Poor's or Fitch, three national credit rating agencies, downgrade a bond, many
investors sell the issue, sometimes reducing prices to what we believe are
attractive levels. As we evaluate our investments based on our internal
assessments, we can use these valuable opportunities to purchase what we believe
are high-quality issues at temporarily depressed prices.
External events can also lead to situations where bonds become undervalued. Over
the past few years, for example, Medicare reform negatively affected the
hospital bond sector, even for those hospitals in strong financial shape. As
many hospitals' credit profiles weakened, we were able to find value selectively
through our analysts' expertise. Seeking to take advantage of this, we
recommended such bonds to our portfolio managers who purchased them at a time
when the market seemed to be shunning these issues.
Q: Could you provide an example of a successful outcome of your research?
RAFAEL: Sure. A perfect example is Tucson Electric Power (TEP). It issued $579
million in tax-exempt debt in 1997-98. However, the utility had a long, troubled
history and its debt was rated below investment grade. So, Molly Butler, our
electric utility analyst, and I flew to Tucson and spent an entire day with
TEP's top executives and division heads. We discussed their history, current
position and future plans as well as challenged and questioned many of their
projections and assumptions. At the end of the day, we were satisfied that their
management team had a clear vision and a realistic plan for the future.
Q: How is TEP doing today?
RAFAEL: Since then, the rating agencies have raised TEP's credit rating and the
bonds have seen a significant increase in value. Of course, the ratings can
change again in the future. However, the bonds are still offering above-market
yields for our shareholders, because we were able to purchase the securities
when they were unpopular. We have an excellent relationship with management and
they often call Ms. Butler to discuss the latest releases of information.
THANK YOU, RAFAEL.
WHAT IS A ROAD SHOW?
Before a new issue is brought to the public, the issuer and its investment
bankers travel around the country making presentations to potential investors
concerning the issuer's financial information and outlook.
FRANKLIN ALABAMA TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin Alabama Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
<TABLE>
<S> <C>
AAA - 63.4%
AA - 4.7%
A - 3.6%
BBB - 23.5%
Below Investment Grade - 4.8%
</TABLE>
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Alabama Tax-Free Income Fund 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.(1)
- --------------------------------------------------------------------------------
STATE UPDATE
[GRAPHIC OF ALABAMA] Alabama's proactive economic development policies are
producing gains statewide. Once overly dependent on the manufacturing sector,
the state's economy has extensively diversified and now boasts a number of
high-tech firms in the Huntsville area as well as health care and business
services companies in Birmingham and Mobile. The service and trade sectors have
provided 75% of net growth since 1990. As a result, per capita income has grown
faster than the nation's, although it is still at 83% of the national average.
Unemployment, historically above the national average, has been at par or below
the national average since 1991.(2)
While the manufacturing sector's significance has declined -- currently about
20% of employment compared with 27% in 1981 -- the sector has undergone a
dramatic transformation. Textile and apparel jobs are leaving the state, as
companies move abroad or suffer from cheaper imports. However, nondurable
manufacturing is thriving. Mercedes-Benz, which opened its Alabama plant in
1997, is doing better than expected and is expanding its facilities in the
state. Honda, Navistar and Boeing are significant manufacturers with extensive
investments in Alabama that are expected to provide further employment
opportunities in the future.(3)
1. 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.
2. Source: Standard & Poor's(R), CreditWeek Municipal, 4/99.
3. Source: Moody's Investors Service, State of Alabama, 7/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 51 of
this report.
Meanwhile, the state maintains a tight grip on its borrowing. Alabama has the
16th lowest net tax-supported debt in the nation, at $317 per capita compared
with the $505 national average.(3) Based on this prudent financial management
and solid economic growth, Standard & Poor's, a national credit rating agency,
assigned Alabama an AA rating.(4)
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
4.88%.
Alabama's $2.7 billion municipal bond supply from January through August 1999
represented a favorable 39% increase compared with the same period last year.
Several large infrastructure deals accounted for the majority of the supply;
however, the fund was also able to find value in a number of smaller deals. Some
recently purchased revenue bonds included Florence Electric, Birmingham Water
and Sewer, Jefferson County Sewer and Warrior River Water Authority Water.
At the end of the reporting period, utilities remained the fund's largest sector
weighting, increasing to 25.3% of the portfolio's total long-term investments
from 21.8% on February 28, 1999. Portfolio quality also increased during the
same period, as the fund's highest-rated, AAA bonds grew from 59.7% to 63.4% of
total long-term investments. Higher-rated bonds generally exhibit greater price
stability than their lower-rated counterparts, better ensuring the safety of
your principal and income stream.
PORTFOLIO BREAKDOWN
Franklin Alabama
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- -----------------------------------------------------------------------------------
<S> <C>
Utilities 25.3%
Hospital & Health Care 21.6%
Corporate Backed 13.3%
General Obligation 12.3%
Prerefunded 6.7%
Housing 6.2%
Subject to Government Appropriation 4.0%
Transportation 3.5%
Higher Education 3.4%
Other Revenue 2.0%
Tax Supported Debt 1.7%
</TABLE>
4. This does not indicate Standard & Poor's rating of the fund.
5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Alabama Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
-------------------------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
March 5 cents 4.42 cents
April 5 cents 4.42 cents
May 5 cents 4.42 cents
June 5 cents 4.46 cents
July 5 cents 4.46 cents
August 5 cents 4.46 cents
- --------------------------------------------------------------------------------
TOTAL 30 CENTS 26.64 CENTS
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.57 $11.11 $11.68
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
------------------------------------------------
<S> <C>
Dividend Income $0.3000
Long-Term Capital Gain $0.0072
TOTAL $0.3072
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.57 $11.17 $11.74
</TABLE>
<TABLE>
DISTRIBUTIONS (3/1/99 - 8/31/99)
------------------------------------------------
<S> <C>
Dividend Income $0.2664
Long-Term Capital Gain $0.0072
TOTAL $0.2736
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.24% -0.27% +30.45% +90.77% +129.03%
Average Annual Total Return(2) -6.41% -4.48% +4.54% +6.21% +6.76%
Distribution Rate(3) 5.17%
Taxable Equivalent Distribution Rate(4) 9.01%
30-Day Standardized Yield(5) 4.78%
Taxable Equivalent Yield(4) 8.33%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.52% -0.83% +13.15% +23.12%
Average Annual Total Return(2) -4.45% -2.76% +3.84% +4.68%
Distribution Rate(3) 4.76%
Taxable Equivalent Distribution Rate(4) 8.30%
30-Day Standardized Yield(5) 4.39%
Taxable Equivalent Yield(4) 7.65%
</TABLE>
FRANKLIN ALABAMA
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Alabama state personal income tax bracket of 42.6%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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.
CREDIT QUALITY BREAKDOWN*
Franklin Florida Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
<TABLE>
<S> <C>
AAA - 69.8%
AA - 8.7%
A - 10.9%
BBB - 10.0%
Below investment Grade - 06.%
</TABLE>
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
FRANKLIN FLORIDA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Florida Tax-Free Income Fund seeks to provide high,
current income exempt from regular federal tax through a portfolio consisting
primarily of Florida municipal bonds.(1) In addition, the fund's shares are free
from Florida's annual intangibles tax.
- --------------------------------------------------------------------------------
STATE UPDATE(2)
[GRAPHIC OF FLORIDA] Florida continues to be one of the fastest growing states
in the nation. Its personal income has grown 6.2% per year since 1994, compared
with 5.6% nationally for the same period, ranking 20th among the states.
Non-agricultural job growth for 1998 was 4.1%, compared with 2.6% nationally.
This trend should continue throughout 1999 with an expected 4% increase over
1998. Florida's double-digit population growth for each of the past two decades
is expected to continue as aging baby-boomers begin to retire and move to the
state. Such strong population growth has been the main fuel of the state's
economy, but has also driven the need for expanded government services including
education, corrections, transportation and health and human services.
The state's debt has risen with its growth, and both are expected to continue
expanding. 1999 debt per capita was $863 compared with $505 for the national
state median. Florida decreased its intangible personal property tax during the
reporting period. The new tax rate will reduce the levy from $2 million
currently to $1.5 million. The net effect will have only a small impact on the
future revenues relative to the state's total income.
1. 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.
2. Source: Moody's Investors Service, State of Florida, 8/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 55 of
this report.
12
<PAGE>
Projections for general revenue growth indicate a slowdown to 5.0% in 1999 from
a strong 7.6% in 1998. The state enacted a constitutional amendment adding a
Budget Stabilization Fund, which is required to be funded at 5% of the previous
year's General Fund receipts. Additionally, the state has constitutionally
enacted a revenue limitation to control spending growth by limiting the amount
of taxes and other revenue that can be raised in any given year. Exempt from
this cap are monies pledged to existing and new bond issues, to mitigate risk to
bondholders.
As of July 1999, Florida's state agency computer systems are 99% Year-2000
compliant, with the remaining 1% anticipated to be by October 1999.
PORTFOLIO NOTES
During the reporting period, many Florida municipal bond issuers enhanced their
debt's credit quality by purchasing insurance for their upcoming offerings. The
increased competitive environment among the various municipal insurers gave
issuers the opportunity to purchase insurance at attractive prices, either for
new money projects or to refinance existing debt. The majority of the new
purchases were insured, thus enhancing the portfolio quality. Accordingly, our
percentage of AAA-rated holdings increased slightly from 69.2% to 69.8% of total
long-term investments during the period under review. Higher quality bonds
generally exhibit greater price stability than their lower-rated counterparts,
better ensuring the safety of your principal and income stream. Some recent
purchases included West Palm Beach Utility System Revenue; Wellington Public
Service Tax Revenue; Miami-Dade County Housing Finance Authority Revenue - Home
Ownership Mortgage; and Florida Housing Finance Corp. Revenue - Brenwood Trace
Apartments bonds.
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(3) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
4.7%.
PORTFOLIO BREAKDOWN
Franklin Florida
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG TERM
SECTOR INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 22.8%
Prerefunded 21.3%
Hospital & Health Care 13.1%
Transportation 11.4%
Housing 9.1%
Tax Supported Debt 9.1%
Other Revenue 5.3%
General Obligation 3.7%
Subject to Government Appropriation 3.3%
Higher Education 0.6%
Corporate Backed 0.3%
</TABLE>
3. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
Florida's municipal bond issuance declined 14% for the first half of the
calendar year compared with the same period a year ago. As interest rates
continued to climb, there were fewer opportunities for issuers to refund
existing debt. In this higher interest rate environment, the portfolio employed
a strategy of booking tax losses. These losses can then be carried forward to
help offset any current or future taxable capital gains, possibly lowering
shareholders' tax liabilities. The fund also sold prerefunded bonds to capture
the premium and decrease the portfolio's call exposure throughout the period
under review. Looking forward, the fund will maintain its strategy of buying
current coupon bonds at a slight discount as we seek to provide shareholders
with high, current tax-free income.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Florida Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
---------------------------
MONTH CLASS A CLASS C
- ----------------------------------------------------------------------------------
<S> <C> <C>
March 5 cents 4.43 cents
April 5 cents 4.43 cents
May 5 cents 4.43 cents
June 5 cents 4.46 cents
July 5 cents 4.46 cents
August 5 cents 4.46 cents
- ----------------------------------------------------------------------------------
TOTAL 30 CENTS 26.67 CENTS
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.56 $11.35 $11.91
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.3000
Long-Term Capital Gain $0.0009
TOTAL $0.3009
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.57 $11.44 $12.01
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.2667
Long-Term Capital Gain $0.0009
TOTAL $0.2676
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.16% +0.18% +32.64% +96.48% +139.07%
Average Annual Total Return(2) -6.33% -4.08% +4.90% +6.52% +7.14%
Distribution Rate(3) 5.06%
Taxable Equivalent Distribution Rate(4) 8.38%
30-Day Standardized Yield(5) 4.47%
Taxable Equivalent Yield(4) 7.40%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -2.51% -0.47% +15.26% +25.05%
Average Annual Total Return(2) -4.41% -2.39% +4.48% +5.06%
Distribution Rate(3) 4.65%
Taxable Equivalent Distribution Rate(4) 7.70%
30-Day Standardized Yield(5) 4.08%
Taxable Equivalent Yield(4) 6.75%
</TABLE>
FRANKLIN FLORIDA TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
federal personal income tax bracket of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
CREDIT QUALITY BREAKDOWN*
Franklin Georgia Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
AAA 62.4%
AA 8.8%
A 12.2%
BBB 16.6%
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
FRANKLIN GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Georgia Tax-Free Income Fund 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.(1)
- --------------------------------------------------------------------------------
STATE UPDATE
[GRAPHIC OF GEORGIA] Georgia's debt has the highest credit rating from Moody's,
Fitch and Standard & Poor's, three national credit rating agencies.(2) The state
has followed the disciplined and sound policy of issuing only general obligation
and guaranteed bonds for the past two decades. This simple debt structure
allowed the state to restrain debt growth to a pace slower than revenue growth,
and helped push the debt burden to low levels. Such financial practices,
exercised for the past six years, have allowed Georgia to return its reserves to
the same levels as those preceding the recession of the early 1990s.
New job growth in Georgia outpaced the national average in 1998, increasing
3.3%. Meanwhile, unemployment remained at a low 4.2%, compared with 4.5% for the
nation. Georgia ended fiscal 1999 with a $665 million cash surplus in addition
to the $83 million surplus carried forward from 1998. The state plans to use
these surpluses to buffer phased-in tax cuts taking full effect in fiscal 2000.
The state's 1999 per capita debt, $679, was slightly above the $505 national
median. Georgia has moved its economy from one dependent on agriculture to a
modern, manufacturing-, trade- and services-based economy.(3)
1. 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.
2. This does not indicate a rating for the fund.
3. Source: Moody's Investors Service, State of Georgia, 7/26/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 64 of
this report.
Georgia's economic outlook is excellent. The state's disciplined debt policies,
consistent maintenance of sound, conservative financial operations, coupled with
strong growth expectations and a stable, broad-based economy, should lead the
state to further economic success.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
4.89%. The rise in interest rates created an excellent opportunity for Franklin
Georgia Tax-Free Income Fund to book tax losses and reinvest the proceeds at
significantly higher yields. These losses can be carried forward to help offset
current or future capital gains and reduce our shareholders' tax liabilities. In
this process, we sold Atlanta General Obligation, Atlanta Water and Sewer
Revenue, Savannah Hospital Authority Revenue and Lee County Utilities Authority
Water and Sewer Revenue bonds during the reporting period.
Our purchases during the six-month reporting period included Rome Water and
Sewer Revenue; Rockdale County Water and Sewer Authority Revenue; Private
Colleges and Universities Authority Revenue - Mercer University Project; Medical
Center Hospital Authority - Columbus Regional Healthcare System; and Clarke
County Hospital Authority - Athens Regional Medical Center Project bonds. These
purchases maintained diversification in a broad range of sectors, helping reduce
the fund's exposure to risk and volatility that may affect any one sector. In
addition, the fund held 62.4% of total long-term investments in AAA quality
bonds as of August 31, 1999, reflecting our holdings' fundamentally high
quality. Higher-rated bonds generally exhibit greater price stability than their
lower-rated counterparts, better ensuring the safety of your principal and
income stream.
PORTFOLIO BREAKDOWN
Franklin Georgia
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 21.5%
Prerefunded 15.9%
Hospital & Health Care 13.2%
Housing 12.4%
General Obligation 10.8%
Corporate Backed 8.9%
Higher Education 5.8%
Transportation 4.4%
Tax Supported Debt 3.4%
Other Revenue 2.4%
Subject to Government Appropriation 1.3%
</TABLE>
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
During the early part of 1999, before the rise in interest rates, issuers took
full advantage of lower rates and refinanced outstanding debt. As a result, the
fund's prerefunded bond exposure was approximately 16% at the end of the
reporting period. In keeping with our strategy, we looked for opportunities to
sell prerefunded bonds and reinvest the money in securities with at least
ten-year call protection, in an attempt to protect the fund's long-term income
stream. As of August 31, 1999, the fund's weighted average life-to-first call
was 6.75 years. We bought municipal securities with current coupons, at a slight
discount, seeking to maximize the tax-free income distributed to shareholders.
As a result, this disciplined investment approach helped protect the fund's
share value and maintain a competitive yield.
We are closely monitoring Georgia's supply of tax-exempt municipal bonds. For
the first six months of 1999, the state issued $2.8 billion worth, a 3.7%
decrease from the same period in 1998. The state's relatively low debt burden
and growing need for new infrastructure such as highways, schools and affordable
housing should maintain new borrowing requirements.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Georgia Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
---------------------------
MONTH CLASS A CLASS C
- ----------------------------------------------------------------------------------
<S> <C> <C>
March 4.95 cents 4.43 cents
April 4.95 cents 4.43 cents
May 4.95 cents 4.43 cents
June 4.95 cents 4.42 cents
July 4.95 cents 4.42 cents
August 4.95 cents 4.42 cents
- ----------------------------------------------------------------------------------
TOTAL 29.70 CENTS 26.55 CENTS
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.59 $11.48 $12.07
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.2970
Long-Term Capital Gain $0.0017
TOTAL $0.2987
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.60 $11.55 $12.15
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.2655
Long-Term Capital Gain $0.0017
TOTAL $0.2672
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.39% -0.37% +30.39% +91.09% +130.93%
Average Annual Total Return(2) -6.57% -4.61% +4.55% +6.23% +6.83%
Distribution Rate(3) 4.95%
Taxable Equivalent Distribution Rate(4) 8.72%
30-Day Standardized Yield(5) 4.48%
Taxable Equivalent Yield(4) 7.89%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.73% -0.91% +13.72% +23.06%
Average Annual Total Return(2) -4.62% -2.81% +4.02% +4.65%
Distribution Rate(3) 4.43%
Taxable Equivalent Distribution Rate(4) 7.80%
30-Day Standardized Yield(5) 4.08%
Taxable Equivalent Yield(4) 7.19%
</TABLE>
FRANKLIN GEORGIA TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Georgia state personal income tax bracket of 43.2%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin Kentucky Tax-Free Income Fund
Based on Total Long-Term Investment
8/31/99
[PIE CHART]
AAA - 67.2%
AA - 7.1%
A - 8.8%
BBB - 16.1%
Below Investment Grade - 0.8%
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Kentucky Tax-Free Income Fund 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.(1)
- --------------------------------------------------------------------------------
COMMONWEALTH UPDATE
[GRAPHIC OF KENTUCKY] The Bluegrass State is attracting its share of attention.
Kentucky has enjoyed positive in-migration during the past few years, in
contrast to the 1980s' population declines resulting from the coal industry's
downsizing. Employment growth also has been robust, providing jobs for many of
the new arrivals. For the year ended February 1999, employment grew by 2.1%, in
line with the national average.(2) Furthermore, the recent trend has been away
from lower-paying jobs in tobacco, apparel and coal mining, toward higher-paying
jobs in the automobile, transportation, health care and financial services
sectors.
Kentucky has significantly improved its financial condition in recent years.
After running budget deficits in the early '90s, the commonwealth turned around
and posted its fifth consecutive surplus in fiscal 1998. The current year looks
encouraging as well; from January through April 1999, tax collections were 3.3%
higher than the same period a year ago. While a strong economy naturally helps
increase revenues, the commonwealth also has shown prudent spending control over
the past five years. For fiscal years 1993 through 1998, actual expenditures
were 96.5% of the budget.(2) Even more impressive is that Kentucky accomplished
this while making substantial financial obligations to improving its education
system. Still, Kentucky must deal with debt levels that are relatively high and
slightly above national levels. In addition, per capita income remained below
the national average, at 81.4% in 1998.(2)
1. For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distribution of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
2. Source: Moody's Investors Service, State of Kentucky, 6/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 68 of
this report.
Based on Kentucky's solid economy and prudent fiscal management, Moody's, a
national credit rating agency, assigned the commonwealth a strong Aa2 rating.(3)
With Kentucky's strengths far outweighing its weaknesses, the commonwealth
should continue to see above-average economic performance.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
5.23%. The rise in interest rates during the reporting period, created an
excellent opportunity for Franklin Kentucky Tax-Free Income Fund to book tax
losses and reinvest the proceeds at significantly higher yields. These losses
can then be carried forward to help offset current or future capital gains and
reduce our shareholders' tax liabilities. Since Kentucky bond supply is scarce,
the fund sold Puerto Rico bonds and invested in Kentucky bonds when they became
available. Sales of Puerto Rico Power Authority Power Revenue and Puerto Rico
Commonwealth Highway and Transportation Authority Revenue bonds during the
reporting period provided tax losses.
Our purchases during the six-month reporting period included Hardin County Water
District No. 2 Water System Revenue, Oldham County School District Finance Corp.
School Building Revenue, Jefferson County School District Finance Corp. School
Building Revenue, and Kentucky State Property and Buildings Commission Revenues
bonds. These purchases maintained diversification in a broad range of sectors,
helping reduce the fund's exposure to risk and volatility that may affect any
one sector. In addition, the fund held 67.2% of total long-term investments in
AAA quality securities at the end of the reporting period, reflecting our
holdings' fundamentally high quality. Higher-rated bonds generally exhibit
greater price stability than their lower-rated counterparts, better ensuring the
safety of your principal and income stream.
PORTFOLIO BREAKDOWN
Franklin Kentucky
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ----------------------------------------------------------------------------------
<S> <C>
Utilities 21.8%
Hospital & Health Care 20.8%
Housing 14.7%
Subject to Government Appropriation 13.3%
Transportation 8.8%
Prerefunded 6.1%
Corporate Backed 5.8%
Other Revenue 5.6%
Tax Supported Debt 2.9%
Higher Education 0.2%
</TABLE>
3. This does not indicate Moody's rating of the fund.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
DIVIDEND DISTRIBUTIONS*
Franklin Kentucky
Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND
MONTH PER SHARE
- --------------------------------------------------------------------------------
<S> <C>
March 4.85 cents
April 4.85 cents
May 4.85 cents
June 4.85 cents
July 4.85 cents
August 4.85 cents
- --------------------------------------------------------------------------------
TOTAL 29.10 CENTS
</TABLE>
*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 include all accrued income earned by the fund during the
reporting period.
We are closely monitoring the supply of Kentucky tax-exempt municipal bonds. For
the first six months of 1999, the commonwealth issued a total of $1.3 billion, a
4% decrease from the same period last year. The commonwealth's low debt burden
and growing need for new infrastructure such as highways, schools and affordable
housing should maintain the new borrowing requirement.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.60 $10.87 $11.47
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.2910
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR (10/12/91)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -2.69% -0.86% +35.02% +66.64%
Average Annual Total Return(2) -6.83% -5.05% +5.27% +6.11%
Distribution Rate(3) 5.10%
Taxable Equivalent Distribution Rate(4) 8.98%
30-Day Standardized Yield(5) 4.85%
Taxable Equivalent Yield(4) 8.54%
</TABLE>
FRANKLIN KENTUCKY
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance. The fund's manager agreed in advance to waive a portion
of its management fees, which reduces operating expenses and increases
distribution rate, yield and total return to shareholders. Without this waiver,
the fund's distribution rate and total return would have been lower, and yield
for the period would have been 4.52%. The fee waiver may be discontinued at any
time upon notice to the fund's Board of Trustees.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge. Six-month return has not been annualized.
3. Distribution rate is based on an annualization of the current 4.82 cent per
share monthly dividend and the maximum offering price per share of $11.35 on
August 31, 1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Kentucky state personal income tax bracket of 43.2%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 LOUISIANA TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin Louisiana Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
AAA - 61.0%
AA - 2.4%
A - 7.5%
BBB - 21.8%
Below Investment Grade - 7.3%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Louisiana Tax-Free Income Fund 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.(1)
- --------------------------------------------------------------------------------
STATE UPDATE
[GRAPHIC OF LOUISIANA] Rising income levels and better control of finances
improved the state's financial picture. Louisiana's employment base has become
slightly more diverse through the growth of service sector jobs, but the state
remains highly dependent upon the oil and gas industry for a disproportionately
large amount of employment and revenue. State income levels have increased but
still lag that of the U.S., at 81% of the national average. Job growth has been
2.3% annually through the 1990s.(2) The state relies on broad-based sales taxes,
individual and corporate income taxes, and severance and royalty taxes for its
finances. These are all susceptible to cyclical economic swings. In November
1998, voters approved a rainy day fund to be funded from budget surpluses. Many
other states have found such a fund to be beneficial during hard economic times.
Louisiana's outlook is stable. The state has been trying to reverse its negative
financial position by reducing government employment, controlling Medicaid
spending, shrinking the debt burden and addressing some unfunded liabilities.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(3) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
5.18%. The rise in interest rates created an excellent opportunity for Franklin
Louisiana Tax-Free Income Fund to book tax losses and reinvest the proceeds at
significantly higher yields. These losses can be carried forward to help offset
current or future capital gains and reduce our shareholders' tax liabilities. In
the process, we sold Shreveport Airport System Revenue, New Orleans Aviation
Board Revenue, Jefferson Parish Hospital Service District No.1 Hospital Revenue,
Louisiana Stadium and Exposition District Hotel Occupancy Tax and Stadium
Revenue, and Louisiana Public Facilities Authority Hospital Revenue - Franciscan
Missionaries bonds during the reporting period.
1. 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.
2. Source: Standard & Poor's, 7/5/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 71 of
this report.
Our purchases during the six-month reporting period included Greater New Orleans
Expressway Commission Revenue; Louisiana Public Facilities Authority Revenue -
Centenary College Project; Louisiana State Office Facilities Corp. Lease Revenue
- - Capitol Complex Program; Louisiana Public Facilities Authority Hospital
Revenue - Touro Infirmary Project; and De Soto Parish Pollution Control Revenue
- - Cleco Utility Group Inc. Project bonds. These purchases maintained
diversification in a broad range of sectors, helping reduce the fund's exposure
to risk and volatility that may affect any one sector. In addition, the fund
held 61% of total long-term investments in AAA-quality securities at the end of
the reporting period, reflecting our holdings' fundamentally high quality.
Higher-rated bonds generally exhibit greater price stability than their
lower-rated counterparts, better ensuring the safety of your principal and
income stream.
In keeping with our strategy, we looked for opportunities to sell prerefunded
bonds and reinvest the money in securities with at least ten-year call
protection, and we bought municipal securities with current coupons, at a slight
discount, seeking to maximize the tax-free income distributed to shareholders.
As of August 31, 1999, the fund's weighted average life-to-first call was 6.42
years. As a result, this disciplined investment approach helped protect the
fund's share value and maintain a competitive yield.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
3. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
PORTFOLIO BREAKDOWN
Franklin Louisiana
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 17.4%
Higher Education 15.3%
Hospital & Health Care 14.7%
Corporate Backed 11.4%
Tax Supported Debt 9.8%
Housing 8.9%
General Obligation 6.5%
Prerefunded 5.8%
Subject to Government Appropriation 4.8%
Transportation 3.1%
Other Revenue 2.3%
</TABLE>
We are closely monitoring the supply of Louisiana tax-exempt municipal bonds.
From January through August 1999, the state issued a total of nearly $2 billion,
a 17% decrease from the same period last year. The state's low debt burden and
growing need for new infrastructure such as highways, schools and affordable
housing should maintain the new borrowing requirement.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Louisiana Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
----------------------------
MONTH CLASS A CLASS C
- ----------------------------------------------------------------------------------
<S> <C> <C>
March 4.9 cents 4.33 cents
April 4.9 cents 4.33 cents
May 4.9 cents 4.33 cents
June 4.9 cents 4.36 cents
July 4.9 cents 4.36 cents
August 4.9 cents 4.36 cents
- ----------------------------------------------------------------------------------
TOTAL 29.4 CENTS 26.07 CENTS
</TABLE>
*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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.60 $10.99 $11.59
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.294
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.60 $11.06 $11.66
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.2607
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.64% -0.62% +31.03% +91.10% +129.72%
Average Annual Total Return(2) -6.74% -4.87% +4.65% +6.23% +6.79%
Distribution Rate(3) 5.12%
Taxable Equivalent Distribution Rate(4) 9.02%
30-Day Standardized Yield(5) 4.71%
Taxable Equivalent Yield(4) 8.30%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.91% -1.18% +14.24% +24.46%
Average Annual Total Return(2) -4.83% -3.12% +4.20% +4.93%
Distribution Rate(3) 4.74%
Taxable Equivalent Distribution Rate(4) 8.35%
30-Day Standardized Yield(5) 4.32%
Taxable Equivalent Yield(4) 7.61%
</TABLE>
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Louisiana state personal income tax bracket of 43.2%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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
CREDIT QUALITY BREAKDOWN*
Franklin Maryland Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
AAA 52.1%
AA 15.5%
A 22.3%
BBB 10.1%
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
- -------------------------------------------------------------------------------
Your Fund's Goal: Franklin Maryland Tax-Free Income Fund 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.(1)
- -------------------------------------------------------------------------------
STATE UPDATE
[GRAPHIC OF MARYLAND] Maryland continues to receive an Aaa rating, the highest
possible, from Moody's, a national credit rating agency.(2) The state's economy
has seen improved growth over the past two years, turning around the trend that
started with the recession of the early '90s and the federal downsizing during
the mid-'90s.
Employment growth was 3.6% in 1998 and has averaged about 2.5% for the first
half of 1999. State tax collections have registered strong gains over 1998,
providing the state with extra funds, while personal income tax collections have
grown more than 4%. This increase occurred while the state implemented a
five-year, 10% income tax reduction. Maryland has a high debt per capita of
$850, making it 10th in the nation. Seeking to improve matters, the state,
through a committee policy, established a total debt limit of 3.2% of personal
income and debt service within 8% of revenues.(3)
Maryland's outlook is excellent. Financial reserves are healthy, the state has
implemented two-thirds of a multi-year income tax reduction, and its economic
strength indicates sustained fiscal balance.
1. 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.
A non-diversified fund may be subject to greater risk of adverse economic or
regulatory developments in that state than a fund with broader geographical
diversification.
2. This does not indicate Moody's rating for the fund.
3. Source: Moody's Investors Service, State of Maryland, 7/9/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 75 of
this report.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
5.23%.
Franklin Maryland Tax-Free Income Fund sought to take advantage of the recent
volatility in the municipal bond marketplace by purchasing on the dips in the
market. This strategy worked well for the fund as the recent volatility enabled
us to invest at higher yields. Most of our purchases were in the new-issue
market, as many deals were priced attractively. Recent purchases during the
reporting period included Baltimore General Obligation; Maryland State Community
Development Authority - Department of Housing and Community Development Single
Family Housing Revenue Program; and Maryland State Health and Higher Educational
Facilities Authority Revenue for Roland Park Place Project and Anne Arundel
Medical Center bonds. One constant in your portfolio's investment strategy is
the fund's emphasis on high quality and insured bond issues. As of August 31,
1999, 52.1% of the fund's total long-term investments were in highest-rated AAA
securities. Higher-rated bonds generally exhibit greater price stability than
their lower-rated counterparts, better ensuring the safety of your principal and
income stream.
Maryland's new-issue supply from January through August 1999 was down 38% from
the same period a year ago. Due to the lack of supply for Maryland issues during
the period under review, we did not have the opportunity to book tax losses. We
made most of the fund's purchases to invest available funds. However, if more
supply becomes available under the recent favorable market conditions, either
via the new-issue or secondary market, the fund will attempt to book losses
seeking to offset potential capital gains.
BOOKING TAX LOSSES:
For accounting purposes, a loss from the sale of a security can be kept on the
books, with time restrictions, and used in a later accounting period to offset a
profit. Such a strategy can help minimize the effect of taxes on profits.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
PORTFOLIO BREAKDOWN
Franklin Maryland
Tax-Free Income Fund
8/31/99
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ---------------------------------------
<S> <C>
Hospital & Health Care 22.4%
Housing 19.2%
Utilities 17.3%
Subject to Government
Appropriation 9.5%
General Obligation 9.3%
Prerefunded 7.1%
Transportation 4.9%
Other Revenue 4.1%
Corporate Backed 3.4%
Tax Supported Debt 1.8%
Higher Education 1.0%
</TABLE>
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Maryland Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
-------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
March 4.6 cents 4.04 cents
April 4.6 cents 4.04 cents
May 4.6 cents 4.04 cents
June 4.6 cents 4.08 cents
July 4.6 cents 4.08 cents
August 4.6 cents 4.08 cents
- --------------------------------------------------------------------------------
TOTAL 27.6 CENTS 24.36 CENTS
</TABLE>
* 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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
FRANKLIN MARYLAND TAX-FREE INCOME FUND
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.61 $11.05 $11.66
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.2760
Long-Term Capital Gain $0.0301
TOTAL $0.3061
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.61 $11.14 $11.75
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
----------------------------------
<S> <C>
Dividend Income $0.2436
Long-Term Capital Gain $0.0301
TOTAL $0.2737
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (10/3/88)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.61% -0.58% +33.10% +93.24% +107.01%
Average Annual Total Return(2) -6.76% -4.80% +4.98% +6.34% +6.47%
Distribution Rate(3) 4.78%
Taxable Equivalent Distribution Rate(4) 8.58%
30-Day Standardized Yield(5) 4.57%
Taxable Equivalent Yield(4) 8.20%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.86% -1.13% +14.71% +25.53%
Average Annual Total Return(2) -4.79% -3.05% +4.34% +5.14%
Distribution Rate(3) 4.35%
Taxable Equivalent Distribution Rate(4) 7.81%
30-Day Standardized Yield(5) 4.17%
Taxable Equivalent Yield(4) 7.49%
</TABLE>
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Maryland state and local personal income tax bracket of
44.3%, based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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
CREDIT QUALITY BREAKDOWN*
Franklin Missouri Tax-free Income Fund
Based on Total Long-term Investments
8/31/99
[PIE CHART]
AAA - 62.9%
AA - 13.4%
A - 6.2%
BBB - 16.6%
Below Investment Grade - 0.9%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin Missouri Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF MISSOURI]
The Show Me State is showing its strength. Profiting from the booming national
economy, Missouri's employment and personal income are increasing faster than
national rates. For the past three fiscal years, employment has expanded by an
average 2.1%, fueling personal income growth by 4.2% in fiscal 1998 and an
estimated 5.0% in fiscal 1999.(2) As of June 1999, unemployment stood at just
3.8%, significantly below the national average.(3)
Missouri enjoys an economy that is large, diverse and stable, which often
shields it from a downturn in any one sector. Manufacturing, trade, services and
agriculture are particularly important sectors within the state. Missouri's
central location and extensive transportation infrastructure give the state a
decided advantage over its neighbors for the trade and distribution of goods.
Financially, Missouri's prudent fiscal management is paying big dividends. With
a debt per capita of $249, the state has less than half the average national
debt. At fiscal year-end 1998, Missouri had a positive general fund balance of
$1.17 billion.(2) This combination is enabling the state to focus on improving
the quality of life for its citizens. In its fiscal year 2000 budget, Missouri
plans to reduce taxes, cut unnecessary expenditures and invest in such high
priority projects as education, public safety and job preparation. Based on this
positive financial picture, Standard and Poor's, a national credit rating
agency, assigns the state its highest rating, AAA.(4)
1. 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.
2. Source: Standard and Poor's, CreditWeek Municipal, 6/14/99.
3. Source: Bureau of Labor Statistics, 8/99.
You will find a complete listing of the fund's portfolios holdings, including
dollar value and number of shares or principal amount, beginning on page 79 of
this report.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
5.5%.
During the six months under review, the higher interest-rate environment
provided a favorable opportunity for Franklin Missouri Tax-Free Income Fund to
sell some lower-yielding bonds at a loss and reinvest the proceeds in
higher-yielding bonds. We can use the proceeds from such sales to help offset
current or future capital gains, possibly reducing shareholders' tax
liabilities. Missouri's $2 billion municipal bond supply for January through
August 1999 was fairly light, a 45% decrease from issuance for the same period
last year. However, we were still able to find value in a number of deals that
came to market, including St. Charles County Public Water Supply District No. 2
Certificates of Participation; Kansas City Municipal Assistance - Leasehold Roe
Bartle; University of Missouri Health Facilities Revenue - Health System; and
St. Louis County Industrial Development Authority, Multi-Family Housing Revenue
- - Lucas Hunt Village Project GNMA bonds.
The hospital and health care sector remained the fund's largest category
weighting, comprising 29.8% of total long-term investments on August 31, 1999.
At the same time, the fund held 62.9% of total long-term investments in
highest-rated AAA bonds. Higher-rated bonds generally exhibit greater price
stability than their lower-rated counterparts, better ensuring the safety of
your principal and income stream.
PORTFOLIO BREAKDOWN
Franklin Missouri
Tax-free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- --------------------------------------------------------
Hospital & Health Care 29.8%
Subject to Government Appropriation 19.1%
Prerefunded 11.2%
Housing 11.0%
Utilities 9.4%
Corporate Backed 4.3%
Tax Supported Debt 3.9%
Higher Education 3.7%
Transportation 3.2%
Other Revenue 3.0%
General Obligation 1.4%
4. This does not indicate Standard and Poor's rating of the fund.
5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Missouri Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
----------------------------
MONTH CLASS A CLASS C
- ---------------------------------------------------------------------
March 5 cents 4.42 cents
April 5 cents 4.42 cents
May 5 cents 4.42 cents
June 5 cents 4.48 cents
July 5 cents 4.48 cents
August 5 cents 4.48 cents
- ---------------------------------------------------------------------
TOTAL 30 CENTS 26.70 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
FRANKLIN MISSOURI TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.67 $11.52 $12.19
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.3000
Long-Term Capital Gain $0.0135
TOTAL $0.3135
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.67 $11.57 $12.24
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2670
Long-Term Capital Gain $0.0135
TOTAL $0.2805
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.92% -0.88% +32.58% +96.11% +133.51%
Average Annual Total Return(2) -7.04% -5.07% +4.89% +6.51% +6.93%
Distribution Rate(3) 4.99%
Taxable Equivalent Distribution Rate(4) 8.79%
30-Day Standardized Yield(5) 4.61%
Taxable Equivalent Yield(4) 8.12%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -3.18% -1.44% +14.88% +25.07%
Average Annual Total Return(2) -5.06% -3.33% +4.38% +5.04%
Distribution Rate(3) 4.59%
Taxable Equivalent Distribution Rate(4) 8.08%
30-Day Standardized Yield(5) 4.23%
Taxable Equivalent Yield(4) 7.45%
</TABLE>
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Missouri state personal income tax bracket of 43.2%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin North Carolina
Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
AAA - 57.4%
AA - 18.5%
A - 12.2%
BBB - 11.9%
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin North Carolina Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF NORTH CAROLINA]
North Carolina is rated AAA by Standard & Poor's, a national credit rating
agency, for its economic growth coupled with the state's fiscal practices, which
have rebuilt its financial position over the past seven years.(2)
The state has continued to broaden its textile-, manufacturing- and
tobacco-dominated economy into an employment mix relying more strongly on
finance, services and trade. North Carolina's unemployment rate was 3.4% in
1998, well below that of the national level. Non-manufacturing growth is
expected to average 2.4% through 2000. Sales tax collections were 4.3% in 1998,
and income-tax revenues grew more than 12%. Despite an increase in the state's
general obligation (GO) debt recently, its debt per capita is a very low
$330.(3)
North Carolina's outlook is positive. The state's economy is expected to
continue expanding, and North Carolina's budgetary discipline and maintenance of
strong financial operations, sufficient reserve levels and financial flexibility
should allow it to take further advantage of the expected expansion.
1. 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.
2. This does not indicate Standard & Poor's rating for the fund.
3. Source: Standard & Poor's, 7/9/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 84 of
this report.
PORTFOLIO NOTES
During the reporting period, many of North Carolina municipal bond issuers
enhanced their debt's credit quality by purchasing insurance for their upcoming
offerings. The increased competitive environment among the various municipal
insurers gave issuers the opportunity to purchase insurance at attractive
prices, either for new money projects or to refinance existing debt. The
majority of the new purchases were insured. As a result, the portfolio quality
remained strong by maintaining 57.4% of the fund's total long-term investments
in the highest-rated AAA securities as of August 31, 1999. Higher-rated bonds
generally exhibit greater price stability than their lower-rated counterparts,
better ensuring the safety of your principal and income stream. Some recent
purchases included Appalachian State University Revenue; Johnston County Finance
Corporation Installment Payment Revenue - School and Museum Project; and North
Carolina Medical Care Commission Health Care Facilities Revenue - Scotland
Memorial Hospital Project bonds.
North Carolina's municipal bond issuance declined 23% for the first half of the
calendar year compared with the same period in 1998. Generally rising interest
rates during the six-month period under review presented challenges for the
municipal bond market, as bond prices fall when interest rates rise. For the six
months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and
the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's
portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as
measured by net asset value, declined only 5.18%. As interest rates continued to
climb, there were fewer opportunities for issuers to refund existing debt. In
this higher interest-rate environment, the portfolio employed a strategy of
booking tax losses. These tax losses can then be carried forward to help offset
any current or future taxable capital gains. The fund also sold prerefunded
bonds to capture the premium and decrease the portfolio's call exposure
throughout the period under review. Looking forward, the fund will maintain its
strategy of buying current coupon bonds at a slight discount, seeking to provide
shareholders with high, current tax-free income.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
PORTFOLIO BREAKDOWN
Franklin North Carolina
Tax-free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ---------------------------------------------------
Utilities 23.2%
Hospital & Health Care 21.9%
Prerefunded 18.1%
Housing 11.1%
Subject to Government Appropriation 9.0%
Higher Education 4.9%
Corporate Backed 4.7%
Other Revenue 2.6%
Tax Supported Debt 2.3%
General Obligation 1.9%
Transportation 0.3%
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin North Carolina Tax-free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
----------------------------
MONTH CLASS A CLASS C
- ---------------------------------------------------------------------
March 4.95 cents 4.36 cents
April 4.95 cents 4.36 cents
May 4.95 cents 4.36 cents
June 4.95 cents 4.39 cents
July 4.95 cents 4.39 cents
August 4.95 cents 4.39 cents
- ---------------------------------------------------------------------
TOTAL 29.70 CENTS 26.25 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.63 $11.53 $12.16
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.297
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.64 $11.60 $12.24
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2625
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.73% -0.65% +31.59% +90.42% +131.78%
Average Annual Total Return(2) -6.87% -4.86% +4.73% +6.19% +6.87%
Distribution Rate(3) 4.93%
Taxable Equivalent Distribution Rate(4) 8.85%
30-Day Standardized Yield(5) 4.55%
Taxable Equivalent Yield(4) 8.17%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -3.08% -1.28% +14.83% +24.45%
Average Annual Total Return(2) -4.96% -3.17% +4.36% +4.92%
Distribution Rate(3) 4.52%
Taxable Equivalent Distribution Rate(4) 8.11%
30-Day Standardized Yield(5) 4.16%
Taxable Equivalent Yield(4) 7.47%
</TABLE>
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and North Carolina state personal income tax bracket of 44.3%,
based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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
CREDIT QUALITY BREAKDOWN*
Franklin Texas Tax-free Income Fund
Based on Long-term Investments
8/31/99
AAA - 53.5%
AA - 6.7%
A - 4.5%
BBB - 35.3%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin Texas Tax-Free Income Fund seeks to provide high,
current income exempt from regular federal income tax through a portfolio
consisting primarily of Texas municipal bonds.(1)
STATE UPDATE
[GRAPHIC OF TEXAS]
Add the Texas economy to the list of things for which Texans should be proud.
The state has one of the nation's strongest economies and it continues to grow.
Once overly reliant on the oil and agriculture industries, Texas has now
diversified into a trade and service powerhouse. Such diversification has been
so successful that the state barely felt a ripple from the oil price declines in
1997 and 1998. The high-technology sector in particular, which includes such
leading companies as Dell and Texas Instruments, is seeing substantial growth.
The state's financial management has been strong as well. For the past few
years, Texas has maintained a cash surplus, and ended the 1998 fiscal year with
a surplus of $3.3 billion. Its debt burden still remains relatively low with
$296 net tax-supported debt per capita compared with $505 nationally, ranking
36th lowest in the nation.(2)
Texas does face some challenges on the horizon. It is a fast-growing state, now
the country's second most populous, which pressures the state to provide basic
services such as education, health care and criminal justice. In addition,
Internet and e-commerce growth also may pose a threat to the state's fiscal
health. Texas is heavily dependent on sales taxes for its revenues, and at this
time, there is no sales tax on items purchased in the electronic marketplace.
The rapid increase of the Internet may take away sales from the traditional
retailers, which could lower the state's sales tax collection.(3)
1. 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.
2. Source: Moody's Investors Service, State of Texas, 7/99.
3. Source: Moody's Investors Service, State of Texas, 6/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 89 of
this report.
Moody's, a national credit rating agency, assigned Texas an Aa1 rating, as a
result of its strong economy.(4) Looking forward, the positive trends ought to
remain in place, and the economy should continue to outpace the nation's.
PORTFOLIO NOTES
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
5.17%. The rise in interest rates created an excellent opportunity for Franklin
Texas Tax-Free Income Fund to book tax losses and reinvest the proceeds at
significantly higher yields. These losses can be carried forward to help offset
current or future capital gains and reduce our shareholders' tax liabilities. In
the process, we sold Socorro Independent School District General Obligation
(GO); Waxahachie Community Development Corp. Sales Tax Revenue; Gulf Coast Water
Authority Texas Water Systems Contract Revenue - La Marque Project; and Port
Corpus Christi Industrial Development Corp. Revenue - Valero bonds during the
reporting period.
Our purchases during the six-month reporting period included University of Texas
University Revenues - Financing System; Brownsville Combined Tax and Revenue
Certificates of Obligation; Denton County GO - Permanent Improvement; Decatur
Hospital Authority Hospital Revenue; Houston Higher Education Finance Corp.
Higher Education Revenue - Rice University Project; and Harris County Health
Facilities Development Corp. Revenue - Christus Health bonds. These purchases
maintained diversification in a broad range of sectors, helping reduce the
fund's exposure to risk and volatility that may affect any one sector. In
addition, the fund held 53.5% of total long-term investments in AAA quality
securities as of August 31, 1999, reflecting our holdings' fundamentally high
quality. Higher-rated bonds generally exhibit greater price stability than their
lower-rated counterparts, better ensuring the safety of your principal and
income stream.
PORTFOLIO BREAKDOWN
Franklin Texas Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- -----------------------------------------
Hospital & Health Care 24.6%
Utilities 21.2%
Corporate Backed 12.7%
Prerefunded 11.0%
General Obligation 8.4%
Higher Education 7.4%
Transportation 6.8%
Housing 4.5%
Tax Supported Debt 2.0%
Other Revenue 1.4%
4. This does not indicate Moody's rating of the fund.
5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
We continued to buy municipal securities with current coupons at a slight
discount, seeking to maximize the tax-free income distributed to shareholders.
As in previous reporting periods, the fund actively managed its exposure to
prerefunded bonds. They comprised only 11% of total long-term investments on
August 31, 1999. As a result, this disciplined investment approach helped
protect the fund's share value and maintain a competitive yield.
We closely monitor the supply of Texas tax-exempt municipal bonds. From January
through August 1999, the state issued more than $11.8 billion, a 2.4% increase
from the same period in 1998. Going forward, Texas' growing population will
continue to create sustained need for spending on education, transportation and
water development, resulting in the need for further borrowing.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Texas Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
----------------------------
MONTH CLASS A CLASS C
- ----------------------------------------------------------------------------------
<S> <C> <C>
March 4.85 cents 4.28 cents
April 4.85 cents 4.28 cents
May 4.85 cents 4.28 cents
June 4.80 cents 4.24 cents
July 4.80 cents 4.24 cents
August 4.80 cents 4.24 cents
- ----------------------------------------------------------------------------------
TOTAL 28.95 CENTS 25.56 CENTS
</TABLE>
* 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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.59 $10.83 $11.42
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2895
Long-Term Capital Gain $0.0397
TOTAL $0.3292
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.60 $10.97 $11.57
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2556
Long-Term Capital Gain $0.0397
TOTAL $0.2953
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.28% -0.53% +31.58% +93.52% +135.93%
Average Annual Total Return(2) -6.46% -4.73% +4.74% +6.36% +7.03%
Distribution Rate(3) 5.09%
Taxable Equivalent Distribution Rate(4) 8.43%
30-Day Standardized Yield(5) 4.59%
Taxable Equivalent Yield(4) 7.60%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.63% -1.09% +14.62% +25.68%
Average Annual Total Return(2) -4.57% -3.02% +4.29% +5.18%
Distribution Rate(3) 4.71%
Taxable Equivalent Distribution Rate(4) 7.80%
30-Day Standardized Yield(5) 4.20%
Taxable Equivalent Yield(4) 6.95%
</TABLE>
FRANKLIN TEXAS TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
federal personal income tax bracket of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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
CREDIT QUALITY BREAKDOWN*
Franklin Virginia Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
AAA 57.5%
AA 21.0%
A 9.4%
BBB 11.9%
Below Investment Grade 0.2%
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
- -------------------------------------------------------------------------------
Your Fund's Goal: Franklin Virginia Tax-Free Income Fund 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.(1)
- -------------------------------------------------------------------------------
COMMONWEALTH UPDATE
[GRAPHIC OF VIRGINIA] Virginia is rated a strong AAA by Standard & Poor's, a
national credit rating agency, for its healthy and diversified economy, low
unemployment rates, above-average income levels, prudent financial management
and low per capita debt burden.(2)
Employment growth in high-technology and business services have offset job
losses in manufacturing and federal government employment. The service sector,
accounting for about 30% of the commonwealth's employment, should continue to
lead job growth. Virginia's per capita income, $27,364 in 1998, is the highest
of the southern states and slightly above the $26,397 national average. Personal
income is expected to grow approximately 6% in each of the next three years. The
Secretary of Finance and the Department of Planning and Budget monitor revenue
collections and expenditures, and have done a skillful job adjusting their
financial practices for economic trends. The commonwealth has an exceptionally
low $190 per capita debt.(3)
Virginia's outlook is positive. The commonwealth's steady economic growth
coupled with its strong financial management practices should allow Virginia's
favorable economic situation to continue.
1. 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.
2. This does not indicate Standard & Poor's rating for the fund.
3. Source: Standard & Poor's, 7/9/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 92 of
this report.
PORTFOLIO NOTES
During the reporting period, many Virginia municipal bond issuers enhanced their
debt's credit quality by purchasing insurance for their upcoming offerings. The
increased competitive environment among the various municipal insurers gave
issuers the opportunity to purchase insurance at attractive prices, either for
new money projects or to refinance existing debt. The majority of the new
purchases were insured, thus enhancing the portfolio quality. Accordingly, our
AAA-rated portfolio holdings increased from 55.1% to 57.5% of total long-term
investments during the period under review. Higher-rated bonds generally exhibit
greater price stability than their lower-rated counterparts, better ensuring the
safety of your principal and income stream. Some recent purchases included
Chesapeake Toll Road Revenue - Expressway; Newport News Redevelopment and
Housing Authority Revenue; Virginia State Housing Development Authority -
Multi-Family Housing; and Prince William County Service Authority Water and
Sewer Systems Revenue bonds.
Generally rising interest rates during the six-month period under review
presented challenges for the municipal bond market, as bond prices fall when
interest rates rise. For the six months ended August 31, 1999, the 30-year
Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for
the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison,
your fund's Class A share price, as measured by net asset value, declined only
5.30%.
Virginia's municipal bond issuance declined significantly, down 39% for the
first eight months of the calendar year compared with the same period a year
ago. As interest rates continued to climb, there were fewer opportunities for
issuers to refund existing debt. In this higher interest-rate environment, the
portfolio employed a strategy of booking tax losses. These tax losses can then
be carried forward to help offset any current or future taxable capital gains,
possibly lowering shareholders' tax liabilities. The fund also sold prerefunded
bonds to capture the premium and decrease the portfolio's call exposure
throughout the period under review. Looking forward, the fund will maintain its
strategy of buying current coupon bonds at a slight discount to provide
shareholders with high, current tax-free income.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index
is unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
PORTFOLIO BREAKDOWN
Franklin Virginia
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- -----------------------------------------------------
Utilities 18.6%
Hospital & Health Care 16.1%
Prerefunded 14.5%
Transportation 13.0%
Corporate Backed 10.6%
Housing 10.6%
Other Revenue 6.7%
Higher Education 5.4%
General Obligation 2.3%
Subject to Government Appropriation 1.3%
Tax Supported Debt 0.9%
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Virginia Tax-Free Income Fund
3/1/99 - 8/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
----------------------------
MONTH CLASS A CLASS C
- ----------------------------------------------------------------------------------
<S> <C> <C>
March 4.85 cents 4.29 cents
April 4.85 cents 4.29 cents
May 4.85 cents 4.29 cents
June 4.85 cents 4.32 cents
July 4.85 cents 4.32 cents
August 4.85 cents 4.32 cents
- ----------------------------------------------------------------------------------
TOTAL 29.10 CENTS 25.83 CENTS
</TABLE>
* 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 include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.63 $11.25 $11.88
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.291
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 2/28/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.62 $11.33 $11.95
<CAPTION>
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.2583
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.85% -0.95% +31.17% +92.98% +132.74%
Average Annual Total Return(2) -7.00% -5.16% +4.67% +6.34% +6.90%
Distribution Rate(3) 4.95%
Taxable Equivalent Distribution Rate(4) 8.70%
30-Day Standardized Yield(5) 4.55%
Taxable Equivalent Yield(4) 7.99%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -3.02% -1.42% +14.07% +24.02%
Average Annual Total Return(2) -4.93% -3.33% +4.13% +4.86%
Distribution Rate(3) 4.54%
Taxable Equivalent Distribution Rate(4) 7.98%
30-Day Standardized Yield(5) 4.15%
Taxable Equivalent Yield(4) 7.29%
</TABLE>
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Virginia state personal income tax bracket 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 August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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.
MUNICIPAL BOND RATINGS
MOODY'S
Aaa: Best quality. They carry the smallest degree of investment risk and
generally are referred to as "gilt-edged." Interest payments are protected by a
large or exceptionally stable margin, and principal is secure. Although the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: High quality by all standards. Together with the Aaa group, they comprise
what generally are known as high-grade bonds. Aa bonds are rated lower than Aaa
because margins of protection may not be as large, fluctuation of protective
elements may be of greater amplitude, or there may be other elements which make
the long-term risks appear larger.
A: Possess many favorable investment attributes and are considered upper
medium-grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa: Medium-grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Ba: Contain speculative elements. Often the protection of interest and principal
payments may be very moderate and, thereby, not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa: Poor standing. Such issues may be in default, or elements of danger with
respect to principal or interest may be present.
Ca: Obligations that are highly speculative. Such issues are often in default or
have other marked shortcomings.
C: Lowest-rated class of bonds. Issues rated C can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
S&P(R)
AAA: The highest rating assigned by S&P to a debt obligation and indicates the
ultimate degree of protection as to principal and interest.
AA: Also qualify as high-grade obligations, and, in the majority of instances,
differ from AAA issues only in a small degree.
A: Generally regarded as upper medium-grade. They have considerable investment
strength but are not entirely free from adverse effects of changes in economic
and trade conditions. Interest and principal are regarded as safe.
BBB: Regarded as having an adequate capacity to pay principal and interest.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for bonds
in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds likely will have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: Reserved for income bonds on which no interest is being paid.
D: Debt rated "D" is in default and payment of interest and/or repayment of
principal is in arrears.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN ALABAMA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
Six Months Ended Year Ended February 28,
August 31, 1999 -------------------------------------------------------------
Class A (unaudited)*** 1999 1998 1997 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.68 $ 11.98 $ 11.73 $ 11.73 $ 11.31 $ 11.80
------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .30 .62 .64 .65 .66 .66
Net realized and unrealized gains (losses) ... (.56) (.25) .36 .01 .42 (.50)
------------------------------------------------------------------------------
Total from investment operations .............. (.26) .37 1.00 .66 1.08 .16
------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.30)(3) (.62)(2) (.65) (.66) (.66) (.65)
Net realized gains ........................... (.01) (.05) (.10) -- -- --
------------------------------------------------------------------------------
Total distributions ........................... (.31) (.67) (.75) (.66) (.66) (.65)
------------------------------------------------------------------------------
Net asset value, end of period ................ $ 11.11 $ 11.68 $ 11.98 $ 11.73 $ 11.73 $ 11.31
==============================================================================
Total return* ................................. (2.24%) 3.21% 8.79% 5.84% 9.74% 1.54%
Ratios/supplemental data
Net assets, end of period (000's) ............. $ 225,818 $ 238,670 $ 216,982 $ 193,466 $ 185,981 $ 170,051
Ratios to average net assets:
Expenses ..................................... .72%** .71% .72% .71% .72% .72%
Net investment income ........................ 5.30%** 5.23% 5.39% 5.62% 5.69% 5.88%
Portfolio turnover rate ....................... 12.37% 8.67% 10.44% 15.47% 12.39% 19.85%
Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.74 $ 12.04 $ 11.78 $ 11.77 $ 11.36
------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .27 .56 .58 .59 .49
Net realized and unrealized gains (losses) ... (.56) (.25) .36 .01 .41
------------------------------------------------------------------
Total from investment operations .............. (.29) .31 .94 .60 .90
------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.27)(3) (.56)(2) (.58) (.59) (.49)
Net realized gains ........................... (.01) (.05) (.10) -- --
------------------------------------------------------------------
Total distributions ........................... (.28) (.61) (.68) (.59) (.49)
------------------------------------------------------------------
Net asset value, end of period ................ $ 11.17 $ 11.74 $ 12.04 $ 11.78 $ 11.77
==================================================================
Total return* ................................. (2.52%) 2.62% 8.23% 5.28% 8.01%
Ratios/supplemental data
Net assets, end of period (000's) ............. $ 16,250 $ 14,895 $ 9,469 $ 5,683 $ 1,662
Ratios to average net assets:
Expenses ..................................... 1.26%** 1.27% 1.29% 1.28% 1.29%**
Net investment income ........................ 4.74%** 4.67% 4.80% 5.05% 5.09%**
Portfolio turnover rate ....................... 12.37% 8.67% 10.44% 15.47% 12.39%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.006 and $.004 for Class A and C, respectively.
(3) Includes distributions in excess of net investment income in the amount of
$.002.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ALABAMA TAX-FREE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS 98.6%
BONDS 97.9%
Alabama Building Renovation Financing Authority Revenue, 7.45%, 9/01/11 ...................... $ 1,500,000 $ 1,572,465
Alabama HFA, SFMR,
GNMA Secured, Series A, 7.50%, 10/01/10 ................................................... 490,000 503,955
Series A-1, GNMA Secured, FNMA Insured, 6.50%, 4/01/17 .................................... 3,440,000 3,539,347
Series A-2, GNMA Secured, FNMA Insured, 6.80%, 4/01/25 .................................... 1,215,000 1,259,773
Series C, GNMA Secured, 7.45%, 10/01/21 ................................................... 285,000 290,900
Series C-2, GNMA Secured, 7.75%, 4/01/22 .................................................. 660,000 680,117
Series D-2, GNMA Secured, FNMA Insured, 5.75%, 10/01/23 ................................... 1,970,000 1,947,128
Alabama State Docks Department Docks Facilities Revenue, MBIA Insured, 6.30%, 10/01/21 ....... 4,500,000 4,728,060
Alabama State IDA, Solid Waste Disposal Revenue, Pine City Fiber Co., 6.45%, 12/01/23 ........ 2,000,000 2,006,720
Alabama Water Pollution Control Authority Revolving Fund Loan, Series B,
Pre-Refunded, 7.75%, 8/15/12 ................................................................. 2,885,000 2,992,149
Alabaster Water and Gas Board Revenue, AMBAC Insured, 6.35%, 9/01/14 ......................... 2,215,000 2,372,199
Alexander City Utility Revenue, wts., Refunding, FSA Insured, 6.20%, 8/15/10 ................. 2,000,000 2,134,260
Athens Electric Revenue, wts., MBIA Insured, 6.00%, 6/01/25 .................................. 1,000,000 1,033,630
Athens Water and Sewer Revenue, wts., AMBAC Insured, 6.10%, 8/01/18........................... 1,500,000 1,565,520
Auburn Governmental Utility Services Corp. Wastewater Treatment Revenue,
Merscot-Auburn LP Project, FGIC Insured, 7.30%, 1/01/12 ...................................... 1,390,000 1,426,349
Auburn University General Fee Revenue, Refunding, 7.00%, 6/01/11 ............................. 2,000,000 2,110,440
Baldwin County Eastern Shore Health Care Authority Hospital Revenue, 5.75%, 4/01/27 .......... 1,000,000 919,880
Bessemer Medical Clinic Board Revenue, Bessemer Carraway Center, Refunding, Series A,
MBIA Insured, 7.25%, 4/01/15 ................................................................. 1,000,000 1,032,910
Birmingham Airport Authority Revenue, Series A, AMBAC Insured, 7.375%, 7/01/10 ............... 500,000 515,470
Birmingham Baptist Medical Center Special Care Facilities Financing Authority Revenue,
Baptist Health System Inc., Refunding, MBIA Insured,
5.875%, 11/15/19 .......................................................................... 3,500,000 3,266,655
7.00%, 1/01/21 ............................................................................ 1,870,000 1,942,500
5.875%, 11/15/26 .......................................................................... 2,000,000 1,836,460
Birmingham GO, Refunding, Series B, 6.25%, 4/01/16 ........................................... 1,000,000 1,048,930
Birmingham Southern College Private Educational Building Authority
Tuition, Refunding, 5.35%, 12/01/19 .......................................................... 1,000,000 932,060
Birmingham Special Care Facilities Financing Authority Revenue,
Health Care, Medical Center East, MBIA Insured, 7.00%, 7/01/12 ............................ 1,200,000 1,268,652
Medical Center East, Refunding, MBIA Insured, 7.25%, 7/01/15 .............................. 2,000,000 2,016,420
Birmingham Water and Sewer Revenue, wts., Series A, 4.75%, 1/01/29 ........................... 1,860,000 1,549,696
Birmingham-Jefferson Civic Center Authority, Special Tax, Capital Outlay,
7.40%, 1/01/08 ............................................................................ 285,000 290,569
7.25%, 1/01/12 ............................................................................ 640,000 645,171
Camden IDB, PCR, Facilities Revenue, MacMillian Bloedel Project, Refunding,
Series A, 7.75%, 5/01/09 ..................................................................... 3,250,000 3,398,980
Citronelle IDB, PCR, Stauffer Chemical Project, Series 1982, 8.00%, 12/01/12 ................. 500,000 519,135
Coffee County PBA, Building Revenue, wts., FSA Insured, 6.10%, 9/01/16 ....................... 1,000,000 1,047,180
Colbert County Health Care Authority, Helen Keller Hospital, Refunding, 8.75%, 6/01/09 ....... 1,750,000 1,841,368
Columbia IDB, PCR, Alabama Power Co. Project, Refunding, AMBAC Insured, 6.50%, 9/01/23 ....... 4,500,000 4,590,000
Courtland IDB,
Environmental Improvement Revenue, Champion International Corp. Project,
Refunding, 6.40%, 11/01/26 ................................................................ 2,000,000 2,033,020
Solid Waste Disposal Revenue, Champion International Corp. Project, 7.75%, 1/01/20 ........ 505,000 519,458
Solid Waste Disposal Revenue, Champion International Corp. Project,
Series A, 6.50%, 9/01/25 5,000,000 5,106,050
Courtland IDBR, Champion International Corp., Refunding, Series A, 7.20%, 12/01/13 ........... 4,000,000 4,297,600
Demopolis HDC, MFHR, Refunding, Series A, FSA Insured, 7.625%, 8/01/19 ....................... 1,400,000 1,433,586
Fairfield GO, wts., AMBAC Insured, Pre-Refunded, 6.30%, 6/01/22 .............................. 3,000,000 3,166,020
Fairfield IDB, Environmental Improvement Revenue, USX Corp. Project, Refunding,
5.45%, 9/01/14 ............................................................................ 2,000,000 1,896,000
Series A, 6.70%, 12/01/24 ................................................................. 3,500,000 3,655,505
Florence Electric Revenue, wts., FSA Insured, 5.25%, 6/01/19 ................................. 2,915,000 2,777,062
Gadsden HDC, MFR, Refunding, Series A, 7.00%, 1/01/22 ........................................ 1,565,000 1,590,697
Guam Airport Authority Revenue, Series A, 6.50%, 10/01/23 .................................... 1,000,000 1,057,330
Guam Power Authority Revenue, Series A, 5.125%, 10/01/29 ..................................... 1,000,000 890,160
Gulf Shores GO, Refunding, wts., AMBAC Insured, 6.00%, 9/01/21 ............................... 1,935,000 1,993,340
Helena Utilities Board Water and Sewer Revenue, MBIA Insured, 5.75%, 9/01/25 ................. 6,000,000 6,058,680
Houston County Health Care Authority Revenue, Southeast Medical Center,
MBIA Insured, 6.125%, 10/01/12 ............................................................... 2,070,000 2,163,047
Huntsville Solid Waste Disposal Authority and Resource Recovery Revenue,
FGIC Insured, 7.00%, 10/01/14 ................................................................ 230,000 239,736
Jackson IDBR, Solid Waste, Boise Cascade, Refunding, 5.70%, 12/01/27 ......................... 4,150,000 3,787,290
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ALABAMA TAX-FREE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS (CONT.)
BONDS (CONT.)
Jasper County Waterworks and Sewer Board Water and
Sewer Revenue, AMBAC Insured, 6.15%, 6/01/14 ............................................... $ 1,000,000 $ 1,062,460
Jefferson County Sewer Revenue,
Capital Improvement wts., Series A, FGIC Insured, 5.375%, 2/01/36 ......................... 5,000,000 4,736,850
wts., ETM, 7.50%, 9/01/13 ................................................................. 200,000 205,204
wts., Refunding, Series A, FGIC Insured, 5.375%, 2/01/27 .................................. 4,500,000 4,322,250
wts., Series D, FGIC Insured, 5.75%, 2/01/27 .............................................. 6,000,000 5,926,260
Lauderdale County and Florence Healthcare Authority Revenue GO, Coffee
Health Group, Series A, MBIA Insured, 5.375%, 7/01/29 ...................................... 5,000,000 4,672,950
LCM Housing Assistance Corp. Project MFR, Section 8 Assisted Project,
Refunding, Series A, 7.875%, 1/01/22 ....................................................... 1,255,000 1,276,762
Lee County GO, wts., AMBAC Insured, 5.50%, 2/01/21 ........................................... 2,250,000 2,208,263
Macon County Limited Obligation Revenue, School wts., AMBAC Insured, 5.10%, 2/01/24 .......... 1,200,000 1,096,812
Madison GO, wts.,
MBIA Insured, 6.00%, 4/01/23 .............................................................. 2,000,000 2,051,220
Series B, MBIA Insured, 6.25%, 2/01/15 .................................................... 1,560,000 1,662,632
Marshall County Health Care Authority Hospital Revenue,
Boaz-Albertville Medical Center, Refunding, 6.50%, 1/01/18 ................................ 10,810,000 11,141,543
Guntersville-Arab Medical Center, Refunding, 7.60%, 10/01/07 .............................. 2,530,000 2,705,582
Mcintosh IDB, Environmental Improvement Revenue, CIBA Specialty,
Refunding, Series C, 5.375%, 6/01/28 ....................................................... 3,000,000 2,790,750
Mobile Airport Authority Revenue, Mae Project, 7.375%, 11/01/12 .............................. 1,000,000 1,045,370
Mobile Commission of Water and Sewer Revenue, Refunding, 6.50%, 1/01/09 ...................... 1,500,000 1,579,890
Mobile Housing Assistance Corp. MFHR, Refunding, Series A, FSA Insured, 7.625%, 2/01/21 ...... 1,340,000 1,366,385
Mobile IDB, Solid Waste Disposal Revenue, Mobile Energy Service Co.
Project, Refunding, 6.95%, 1/01/20 ......................................................... 8,000,000 4,240,000
Montgomery Medical Clinic Board Health Care Facilities Revenue, Jackson
Hospital and Clinic, Refunding, AMBAC Insured, 6.00%, 3/01/26 .............................. 6,000,000 6,197,280
Morgan County Decatur Health Care Authority Hospital Revenue, Decatur General
Hospital, Refunding, Connie Lee Insured, 6.375%, 3/01/24 ................................... 5,750,000 6,018,468
Moulton Waterworks Board Water Revenue, Series A, 6.30%, 1/01/18 ............................. 1,500,000 1,505,880
Muscle Shoals GO, Refunding, wts., MBIA Insured,
5.80%, 8/01/16 ............................................................................ 1,725,000 1,755,895
5.90%, 8/01/25 ............................................................................ 7,000,000 7,096,740
Oneonta Utilities Board Utility Revenue,
FSA Insured, 6.90%, 11/01/24 .............................................................. 230,000 250,679
FSA Insured, Pre-Refunded, 6.90%, 11/01/24 ................................................ 4,000,000 4,504,960
MBIA Insured, 5.50%, 11/01/23 ............................................................. 3,820,000 3,724,997
Perdido Bay Water Sewer and Fire Protection District Water Revenue, Refunding,
FSA Insured, 5.375%, 11/01/22 .............................................................. 1,085,000 1,049,347
Phenix County IDB, Environmental Improvement Revenue, Mead Coated Board
Project, Refunding, Series A, 5.30%, 4/01/27 ............................................... 8,300,000 7,358,282
Piedmont IDBR, Springs Industrial Project, 8.25%, 9/01/10 .................................... 780,000 816,808
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Refunding, Series R, 7.15%, 7/01/00 ........................................................ 600,000 616,134
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue,
Series A, 7.90%, 7/01/07 ................................................................... 5,000 5,056
Puerto Rico Commonwealth Urban Renewal and Housing Corp. Commonwealth
Appropriation, Refunding, 7.875%, 10/01/04 ................................................. 300,000 306,714
Puerto Rico Electric Power Authority Revenue, Series DD, 5.00%, 7/01/28 ...................... 3,000,000 2,669,400
Puerto Rico Public Finance Corp. Commonwealth Appropriation, Series A, 5.00%, 6/01/26 ........ 4,000,000 3,572,480
Russellville GO, wts., Refunding, MBIA Insured, 5.75%, 12/01/26 .............................. 2,500,000 2,510,425
Tuscaloosa County Board Education Capital Outlay, wts., Series A, AMBAC
Insured, 5.50%, 2/01/27 .................................................................... 2,375,000 2,309,379
Tuscaloosa, wts., AMBAC Insured, 6.75%, 7/01/20 .............................................. 4,925,000 5,118,848
University of North Alabama Revenue, General Fee, Series A, FSA Insured, 5.375%, 11/01/17 .... 4,995,000 4,878,617
Valley Special Care Facilities Financing Authority Revenue, Lanier Memorial
Hospital, Series A, 5.65%, 11/01/22 ........................................................ 3,465,000 3,176,400
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%,
10/01/13 .................................................................................. 1,700,000 1,654,491
10/01/22 .................................................................................. 2,300,000 2,184,701
Warrior River Water Authority Water Revenue, FSA Insured,
5.40%, 8/01/29 ............................................................................ 4,250,000 4,056,029
5.50%, 8/01/34 ............................................................................ 4,735,000 4,543,563
Wilsonville IDB, PCR, Southern Electric Generating System, Refunding, Series C,
MBIA Insured, 6.75%, 2/01/15 ................................................................. 3,500,000 3,653,894
------------
TOTAL BONDS (COST $238,687,909) .............................................................. 237,116,279
------------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ALABAMA TAX-FREE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS (CONT.)
ZERO COUPON BONDS .7%
Alexander City Capital Appreciation, wts., Insured,
5/01/23 ................................................................................... $ 1,790,000 $ 436,903
5/01/24 ................................................................................... 1,790,000 416,569
5/01/25 ................................................................................... 1,790,000 394,623
5/01/26 ................................................................................... 1,790,000 364,426
------------
TOTAL ZERO COUPON BONDS (COST $1,727,618) .................................................... 1,612,521
------------
TOTAL INVESTMENTS (COST $240,415,527) 98.6% .................................................. 238,728,800
OTHER ASSETS, LESS LIABILITIES 1.4% .......................................................... 3,339,178
------------
NET ASSETS 100.0% ............................................................................ $242,067,978
============
</TABLE>
See glossary of terms on page 96.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN FLORIDA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 -------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $11.91 11.87 $11.59 $11.69 $11.35 $11.77
------ ----- ------ ------ ------ ------
Income from investment operations:
Net investment income ........................ .31 .62 .64 .67 .69 .69
Net realized and unrealized gains (losses) ... (.56) .05 .30 (.08) .34 (.44)
------ ----- ------ ------ ------ ------
Total from investment operations .............. (.25) .67 .94 .59 1.03 .25
------ ----- ------ ------ ------ ------
Less distributions from:
Net investment income ........................ (.31)(3) (.62)(2) (.65) (.69) (.69) (.67)
Net realized gains ........................... -- (4) (.01) (.01) -- -- --
------ ----- ------ ------ ------ ------
Total distributions ........................... (.31) (.63) (.66) (.69) (.69) (.67)
------ ----- ------ ------ ------ ------
Net asset value, end of period ................ $11.35 $11.91 $11.87 $11.59 $11.69 $11.35
====== ====== ====== ====== ====== ======
Total return* ................................. (2.16%) 5.75% 8.37% 5.20% 9.28% 2.36%
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000's) $1,663,397 $1,785,720 $1,650,068 $1,458,087 $1,353,541 $1,265,018
Ratios to average net assets:
Expenses ....................... .62%** .61% .61% .60% .60% .59%
Net investment income .......... 5.22%** 5.19% 5.45% 5.78% 5.93% 6.15%
Portfolio turnover rate ......... 12.12% 7.66% 5.60% 12.00% 11.78% 14.34%
</TABLE>
CLASS C
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $12.01 $11.96 $11.67 $11.76 $11.37
------ ------ ------ ------ ------
Income from investment operations:
Net investment income .................... .27 .55 .60 .60 .52
Net realized and unrealized gains (losses) (.57) .06 .29 (.07) .38
------ ------ ------ ------ ------
Total from investment operations .......... (.30) .61 .89 .53 .90
------ ------ ------ ------ ------
Less distributions from:
Net investment income .................... (.27) (.55)(2) (.59) (.62) (.51)
Net realized gains ....................... --(4) (.01) (.01) -- --
------ ------ ------ ------ ------
Total distributions ....................... (.27) (.56) (.60) (.62) (.51)
------ ------ ------ ------ ------
Net asset value, end of period ............ $11.44 $12.01 $11.96 $11.67 $11.76
====== ====== ====== ====== ======
Total return* ............................. (2.51%) 5.21% 7.80% 4.65% 8.05%
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000's) $ 82,528 $ 82,596 $ 56,027 $ 23,556 $ 7,644
Ratios to average net assets:
Expenses ....................... 1.18%** 1.17% 1.17% 1.17% 1.18%**
Net investment income .......... 4.70%** 4.63% 4.88% 5.17% 5.33%**
Portfolio turnover rate ......... 12.12% 7.66% 5.60% 12.00% 11.78%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.0005 and $.0004 for Class A and C, respectively.
(3) Includes distributions in excess of net investment income in the amount of
$.001.
(4) Includes distributions of net realized gains in the amount of $.001.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 101.1%
BONDS 96.5%
Alachua County Health Facilities Authority Revenue,
Santa Fe Health Care Facilities Project, Pre-Refunded, 7.60%, 11/15/13 ............. $ 6,705,000 $ 7,114,810
Shands Teaching Hospital, Series A, MBIA Insured, 5.80%, 12/01/26 .................. 12,000,000 12,127,080
Alachua County Public Improvement Revenue, Refunding, FSA Insured, 5.375%, 8/01/17 .. 5,755,000 5,654,115
Atlantic Beach Utilities Systems Revenue, MBIA Insured, 5.50%, 10/01/25 ............. 2,000,000 1,978,060
Bay County Hospital System Revenue, Bay Medical Center Project, Pre-Refunded, 8.00%,
10/01/12 ........................................................................... 11,205,000 13,101,110
Bay County Resource Recovery Revenue,
Series A, MBIA Insured, Pre-Refunded, 6.60%, 7/01/11 ............................... 3,710,000 4,003,535
Series B, MBIA Insured, Pre-Refunded, 6.60%, 7/01/12 ............................... 18,150,000 19,586,028
Bay County Water System Revenue, Refunding, AMBAC Insured,
6.50%, 9/01/07 ..................................................................... 525,000 562,380
6.60%, 9/01/11 ..................................................................... 675,000 723,161
Bay Medical Center Hospital Revenue, Bay Medical Center Project, Refunding, AMBAC
Insured, 5.60%, 10/01/19 ........................................................... 13,130,000 13,147,857
Boynton Beach Public Service Tax Revenue, MBIA Insured, Pre-Refunded, 7.50%, 11/01/10 4,000,000 4,178,320
Brevard County Health Facilities Authority Revenue, Wuesthoff Memorial Hospital,
Series B, Pre-Refunded, 7.20%, 4/01/13 ............................................. 5,000,000 5,430,650
Brevard County HFA, SFMR, Refunding, Series B, FSA Insured, 7.00%, 3/01/13 .......... 835,000 868,350
Brevard County School Board COP, Refunding, Series A, AMBAC Insured, 5.40%, 7/01/11 . 4,415,000 4,499,768
Broward County Educational Facilities Authority Revenue, Nova Southeastern University
Project, Refunding, Connie Lee Insured, 6.125%, 4/01/17 ............................ 2,250,000 2,365,853
Broward County HFA,
MFHR, Bridgewater Place Apartments Project, Series A, 5.45%, 10/01/34 .............. 3,000,000 2,775,840
MFHR, Cross Keys Apartments Project, Series A, 5.80%, 10/01/33 ..................... 2,000,000 1,919,740
MFHR, Cross Keys Apartments Project, Series A, 5.85%, 4/01/39 ...................... 5,895,000 5,692,507
MFHR, Stirling Apartments Phase II, Series A, 5.35%, 10/01/29 ...................... 1,000,000 928,240
MFHR, Stirling Apartments Phase II, Series A, 5.40%, 4/01/39 ....................... 2,000,000 1,844,520
SFMR, Refunding, Series B, GNMA Secured, FNMA Insured, 5.40%, 4/01/29 .............. 4,000,000 3,753,320
Broward County HFAR,
Nursing Home, Refunding, 7.40%, 8/15/10 ............................................ 2,080,000 2,174,910
Nursing Home, Refunding, 7.50%, 8/15/20 ............................................ 1,475,000 1,565,757
Series B, GNMA Secured, 7.55%, 3/01/15 ............................................. 2,710,000 2,782,520
Series C, GNMA Secured, Pre-Refunded, 8.00%, 3/01/21 ............................... 770,000 793,100
Series D, GNMA Secured, 6.90%, 6/01/09 ............................................. 250,000 260,668
Series D, GNMA Secured, 7.375%, 6/01/21 ............................................ 670,000 699,715
Broward County Professional Sports Facilities Tax Revenue, Civic Arena Project,
Series A, MBIA Insured,
5.75%, 9/01/21 .................................................................... 5,000,000 5,038,200
5.625%, 9/01/28 ................................................................... 13,745,000 13,766,855
Broward County Resource Recovery Revenue,
Broward Waste Energy Co., LP, North Project, Series 1984, 7.95%, 12/01/08 .......... 5,580,000 5,789,752
SES Waste Energy Co., LP, South Project, 7.95%, 12/01/08 ........................... 10,140,000 10,521,163
Broward County School Board COP, Series C, AMBAC Insured, 5.375%, 7/01/17 ........... 10,000,000 9,824,900
Cape Canaveral Hospital District Revenue COP,
AMBAC Insured, 6.875%, 1/01/21 ..................................................... 1,500,000 1,582,170
Refunding, 5.25%, 1/01/28 .......................................................... 3,500,000 3,054,310
Celebration CDD, Special Assessment,
MBIA Insured, 6.00%, 5/01/10 ....................................................... 3,875,000 4,078,011
MBIA Insured, 6.10%, 5/01/16 ....................................................... 2,815,000 2,941,844
Series A, MBIA Insured, 5.50%, 5/01/18 ............................................. 2,000,000 1,986,000
Charlotte County Utilities Revenue, Refunding, Series A, FGIC Insured, 5.625%,
10/01/21 ........................................................................... 3,000,000 2,997,960
Citrus County PCR, Florida Power Corp., Crystal River, Refunding,
Series A, 6.625%, 1/01/27 .......................................................... 11,100,000 11,721,378
Series B, 6.35%, 2/01/22 ........................................................... 20,400,000 21,563,820
Cityplace CDD Revenue, Capital Improvement, MBIA Insured, 5.00%, 5/01/22 ............ 8,500,000 7,808,270
Clay County HFAR, SFM,
Multi County, GNMA Secured, 5.30%, 10/01/29 ........................................ 4,710,000 4,414,542
Multi County, GNMA Secured, 5.45%, 4/01/31 ......................................... 1,775,000 1,690,333
Series A, GNMA Secured, 7.80%, 6/01/22 ............................................. 2,790,000 2,898,643
Series A, GNMA Secured, 7.45%, 9/01/23 ............................................. 1,310,000 1,353,702
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Clearwater MFR, Rental Housing, Drew Gardens Projects, Refunding,
Series A, FHA Insured, 6.50%, 10/01/25 .................................................$ 2,810,000 $ 2,895,649
Clewiston Water and Sewer Revenue, AMBAC Insured, Pre-Refunded, 7.65%, 10/01/10 ......... 1,000,000 1,023,080
Collier County Water and Sewer District Revenue, Sewer Assessment, East and South Naples
Project, MBIA Insured, 7.15%, 10/01/11 ................................................ 80,000 81,300
Coral Springs ID, Special Water and Sewer Project, 6.75%, 11/01/02 ..................... 2,195,000 2,220,374
Dade County Aviation Revenue, Miami International Airport, Series B, FSA Insured,
5.125%, 10/01/22 ...................................................................... 4,750,000 4,373,040
Dade County Health Facilities Authority Hospital Revenue, Catholic Health and
Rehabilitation Inc. Project, Refunding, 7.625%, 8/15/20 ............................... 7,475,000 7,762,414
Dade County HFA,
MFMR, Hialeah Center, Series 5, GNMA Secured, Pre-Refunded, 7.875%, 12/01/32 ........ 1,930,000 2,006,544
SFMR, Refunding, Series D, FSA Insured, 6.95%, 12/15/12 ............................. 400,000 417,992
SFMR, Refunding, Series E, FNMA Insured, GNMA Secured, 7.00%, 3/01/24 ............... 300,000 309,978
SFMR, Series A, GNMA Secured, 7.50%, 9/01/13 ........................................ 2,005,000 2,039,205
SFMR, Series A, GNMA Secured, 7.10%, 3/01/17 ........................................ 1,425,000 1,475,345
SFMR, Series B, GNMA Secured, 7.25%, 9/01/23 ........................................ 250,000 258,618
Dade County IDA, Solid Waste Disposal Revenue, Florida Power and Light Co. Project,
7.15%, 2/01/23 ........................................................................ 5,695,000 5,989,716
Dade County School Board COP, Series B, AMBAC Insured, Pre-Refunded, 5.75%, 8/01/19 .... 10,000,000 10,685,600
Dade County Seaport Revenue, Refunding, Series 95, MBIA Insured, 5.75%, 10/01/15 ....... 4,100,000 4,192,742
Dade County Special Obligation, Courthouse Center Project, Pre-Refunded, 6.10%, 4/01/20 5,000,000 5,424,650
Dade County Water and Sewer System Revenue, FGIC Insured,
5.25%, 10/01/21 ..................................................................... 5,000,000 4,767,400
5.75%, 10/01/22 ..................................................................... 8,245,000 8,334,706
5.50%, 10/01/25 ..................................................................... 35,325,000 34,937,485
5.25%, 10/01/26 ..................................................................... 32,000,000 30,276,480
Dovera CDD, Special Assessment Revenue,
7.625%, 5/01/03 ....................................................................... 180,000 188,444
7.875%, 5/01/12 ..................................................................... 715,000 751,172
Duval County HFA,
MFHR, Mortgage, Eagles Point North, Series A, MBIA Insured, 5.60%, 7/01/17 ......... 1,000,000 993,230
MFHR, Mortgage, Eagles Point North, Series A, MBIA Insured, 5.70%, 7/01/27 ......... 2,000,000 1,972,360
SFMR, FNMA and GNMA Secured, 5.20%, 10/01/19 ....................................... 3,000,000 2,804,850
SFMR, GNMA Secured, 5.30%, 4/01/31 ................................................... 1,800,000 1,685,034
SFMR, Series 1988, GNMA Secured, 8.625%, 12/01/19 .................................... 35,000 35,310
SFMR, Series A, GNMA Secured, 7.85%, 12/01/22 ........................................ 1,755,000 1,807,211
SFMR, Series B, GNMA Secured, 7.70%, 11/01/11 ........................................ 340,000 347,334
SFMR, Series C, FGIC Insured, GNMA Secured, 7.70%, 9/01/24 ........................... 750,000 781,785
Escambia County Health Facilities Authority Health Facility Revenue, Baptist Hospital and
Baptist Manor, 5.125%, 10/01/19 ........................................................ 8,750,000 7,806,663
Pre-Refunded, 6.75%, 10/01/14 ........................................................ 3,415,000 3,748,577
Refunding, 6.75%, 10/01/14 ........................................................... 935,000 1,006,696
Escambia County HFA, SFMR, Multi-County Program,
MBIA Insured, GNMA Secured, 5.20%, 4/01/32 ........................................... 7,500,000 6,916,050
Series C, FNMA and GNMA Secured, 5.80%, 10/01/19 ..................................... 1,415,000 1,414,929
Series C, FNMA and GNMA Secured, 7.40%, 10/01/23 ..................................... 3,955,000 4,073,057
Series C, FNMA and GNMA Secured, 5.875%, 10/01/28 .................................... 6,275,000 6,281,212
Escambia County Revenue, Series B, Sub Series 1, MBIA Insured, 7.20%, 1/01/15 ........... 2,210,000 2,265,162
Escambia County School Board COP, FSA Insured, 6.375%, 2/01/12 .......................... 1,210,000 1,253,959
Escambia County Utilities Authority Sanitary System Revenue, FSA Insured, Pre-Refunded,
6.00%, 1/01/23 ......................................................................... 2,500,000 2,667,250
First Florida Governmental Financing Commission Revenue, AMBAC Insured, 5.75%, 7/01/16 .. 3,700,000 3,762,567
Florida HFA,
General Mortgage, Refunding, Series A, 6.40%, 6/01/24 .................................. 3,500,000 3,613,015
Homeowner Mortgage, Series 1, MBIA Insured, 5.625%, 7/01/17 .......................... 4,965,000 5,007,451
Homeownership Revenue, Series G-1, GNMA Secured, 7.80%, 9/01/10 ...................... 485,000 501,451
Homeownership Revenue, Series G-1, GNMA Secured, 7.90%, 3/01/22 ...................... 2,500,000 2,591,600
MF Housing, Citrus Meadows Apartments Project, Series Q, GNMA Secured, 7.65%, 6/20/31 4,000,000 4,069,280
MF Housing, Driftwood Terrace Project, Series I, 7.65%, 12/20/31 ..................... 3,445,000 3,519,584
MFHR, Refunding, Series A, 6.95%, 10/01/21 ........................................... 2,900,000 2,963,452
Reserve at Kanapaha, Series G, AMBAC Insured, 5.70%, 7/01/37 ......................... 5,000,000 4,841,500
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Florida HFA, (cont.)
Reserve at Northshore, Series H, AMBAC Insured, 5.70%, 5/01/37 ........................... $ 2,000,000 $ 1,936,680
Riverfront Apartments, Series A, AMBAC Insured, 6.25%, 4/01/37 ........................... 1,300,000 1,337,739
SFMR, Series A, 8.60%, 7/01/16 ........................................................... 215,000 215,198
Florida HFC Revenue,
Brenwood Trace Apartments, Series E-1, FSA Insured, 5.65%, 6/01/19 ....................... 1,500,000 1,487,520
Brenwood Trace Apartments, Series E-1, FSA Insured, 5.80%, 12/01/38 ...................... 5,000,000 4,961,200
Housing, Grand Savannah Club Apartments, Series A, FSA Insured, 5.45%, 3/01/30 ........... 3,400,000 3,254,072
Florida State Board of Education Capital Outlay, Public Education,
Refunding, Series A, 7.25%, 6/01/23 ...................................................... 8,775,000 9,177,071
(b)Refunding, Series D, 5.75%, 6/01/22 ...................................................... 25,000,000 24,747,250
Series A, 5.25%, 6/01/22 ................................................................. 2,750,000 2,640,468
Series B, 5.875%, 6/01/24 ................................................................ 8,990,000 9,171,868
Series B, 5.875%, 6/01/25 ................................................................ 7,000,000 7,121,940
Series F, FGIC Insured, 5.50%, 6/01/26 ................................................... 10,000,000 9,916,000
Florida State Community Services Corp. Walton County Water and Sewer Revenue, South Walton
County Regional Utilities, 7.00%, 3/01/18 .................................................. 2,550,000 2,716,566
Florida State Correctional Privatization Commission COP, Correctional Facility Bay Project,
MBIA Insured, 6.00%, 8/01/15 ............................................................... 6,000,000 6,293,100
Florida State Department of Corrections COP, Okeechobee Correctional Facility, AMBAC Insured,
6.25%, 3/01/15 ............................................................................. 2,960,000 3,164,743
Florida State Department of General Services Division, Facilities Management Revenue,
Facilities Pool, Refunding, Series B, AMBAC Insured,
5.70%, 9/01/20 ............................................................................ 7,000,000 7,031,990
(b) 5.50%, 9/01/28 .......................................................................... 10,000,000 9,832,000
Florida State Department of Transportation GO, Right of Way,
Acquisition and Bridge, 5.375%, 7/01/26 .................................................. 5,000,000 4,871,400
Series B, 5.00%, 7/01/27 ................................................................. 5,000,000 4,507,650
Florida State Division Bond Finance Department General Services Revenues, Department of
Natural Resources Preservation 2000, AMBAC Insured, Pre-Refunded, 6.75%, 7/01/13 ........... 3,000,000 3,193,020
Florida State Governmental Utility Authority Revenue, Poinciana Utility System, AMBAC Insured,
5.00%, 10/01/29 ............................................................................. 10,000,000 9,011,200
Florida State Mid-Bay Bridge Authority Revenue,
Exchangeable, 6.05%, 10/01/22 ............................................................. 7,000,000 6,905,430
Exchangeable, Series A, 5.95%, 10/01/13 ................................................... 13,505,000 13,440,581
Exchangeable, Series D, 6.10%, 10/01/22 ................................................... 11,100,000 11,017,860
Series A, 8.00%, 10/01/06 ................................................................. 2,600,000 2,847,364
Series A, 7.50%, 10/01/17 ................................................................. 14,250,000 15,460,110
Series A, ETM, 6.875%, 10/01/22 ........................................................... 6,000,000 6,966,600
Florida State Turnpike Authority Revenue, Department of Transportation, Series A,
AMBAC Insured, Pre-Refunded, 7.125%, 7/01/18 .............................................. 8,780,000 9,402,239
FGIC Insured, 5.50%, 7/01/21 .............................................................. 17,350,000 17,067,195
FGIC Insured, 5.625%, 7/01/25 ............................................................. 7,000,000 7,017,080
Gainesville Utilities Systems Revenue,
Series A, 5.20%, 10/01/26 ................................................................. 7,590,000 7,088,984
Series B, 6.00%, 10/01/17 ................................................................. 3,500,000 3,571,540
Gateway Services District Revenue, Transportation Roadway Service Charges, 8.75%, 5/01/14 .... 8,675,000 9,572,949
Gulf Breeze Revenue, Local Government Loan Program, FGIC Insured, 7.75%, 12/01/15 ............ 2,000,000 2,056,820
Hialeah Housing Authority Revenue, Affordable Housing Program, Refunding, GNMA Secured,
5.30%, 12/20/18 ............................................................................. 1,240,000 1,196,340
Highlands County Health Facilities Authority Revenue, Adventist Health Systems,
5.25%, 11/15/20 ........................................................................... 11,000,000 9,894,940
Refunding, 5.25%, 11/15/28 ................................................................ 3,000,000 2,635,560
Hillsborough County Aviation Authority Revenue,
Special Purpose, Delta Airlines Inc., Refunding, 7.75%, 1/01/24 ........................... 14,945,000 15,272,146
Tampa International Airport, Series A, FGIC Insured, 6.90%, 10/01/11 ...................... 4,490,000 4,591,025
Tampa International Airport, Series A, FGIC Insured, Pre-Refunded, 6.90%, 10/01/11 ........ 3,510,000 3,588,975
Tampa International Airport, Series B, FGIC Insured, 5.875%, 10/01/23 ..................... 5,730,000 5,848,840
Hillsborough County Capital Improvement Revenue, County Center Project, Second Series,
Pre-Refunded,
6.625%, 7/01/12 ........................................................................... 8,300,000 8,950,637
6.75%, 7/01/22 ............................................................................ 1,250,000 1,352,100
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Hillsborough County Educational Facilities Authority Revenue, University of
Tampa Project, Asset Guaranty Insured, 5.00%, 12/01/28 ...................................... $ 700,000 $ 611,779
Hillsborough County IDAR, Colonial Penn Insurance Project, 7.35%, 8/01/13 ................... 5,300,000 5,643,546
Hillsborough County Port District Revenue, Tampa Port Authority, Pre-Refunded, 8.25%, 6/01/09 3,000,000 3,213,150
Hillsborough County School Board COP,
Master Lease Program, Series A, MBIA Insured, 5.25%, 7/01/22 ............................. 20,000,000 19,152,400
MBIA Insured, Pre-Refunded, 6.00%, 7/01/12 ............................................... 9,500,000 10,273,395
MBIA Insured, Pre-Refunded, 6.00%, 7/01/14 ............................................... 5,500,000 5,947,755
Hillsborough County Utilities Revenue, Refunding,
Series A, 6.625%, 8/01/11 ................................................................ 10,400,000 10,879,440
Series A, 7.00%, 8/01/14 ................................................................. 5,515,000 5,796,100
Series A, 6.50%, 8/01/16 ................................................................. 3,000,000 3,116,490
Series B, 6.50%, 8/01/16 ................................................................. 1,000,000 1,038,830
Indian River County Hospital District Revenue, Refunding, FSA Insured, 5.70%, 10/01/15 ...... 1,000,000 1,021,260
Indian Trace CDD, Water Management Special Benefit Assessment, MBIA Insured, 5.00%, 5/01/27 . 10,000,000 9,017,800
Jacksonville Capital Improvement Revenue, Certificates, Gator Bowl Project, AMBAC Insured,
5.875%, 10/01/25 ............................................................................ 5,000,000 5,094,600
Jacksonville Electric Authority Revenue, Water and Sewer, Series B, FGIC Insured, 5.40%,
10/01/20 .................................................................................... 3,000,000 2,915,310
Jacksonville Health Facilities Authority Hospital Revenue,
Charity Obligation Group, Series C, MBIA Insured, 5.375%, 8/15/29 ........................ 20,000,000 19,098,400
Riverside Hospital Project, Pre-Refunded, 7.625%, 10/01/13 ............................... 8,480,000 8,675,210
Jacksonville Hospital Revenue, University Medical Center Inc. Project, Connie Lee Insured,
6.60%, 2/01/21 .............................................................................. 1,750,000 1,843,415
Jupiter Sales Tax Revenue, Series 1990, Pre-Refunded, 7.40%, 9/01/20 ........................ 1,000,000 1,055,390
Kissimmee Water and Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/15 ................ 5,000,000 5,239,850
Lake County School Board COP, MBIA Insured, 5.00%, 7/01/23 .................................. 10,000,000 9,105,100
(b)Lakeland Hospital System Revenue, Lakeland Regional Health System, Series A, MBIA Insured,
5.50%, 11/15/26 ............................................................................. 10,000,000 9,791,900
Lakeland Utilities Tax Revenue, Refunding and Improvement, Series A, FGIC Insured, 6.00%,
10/01/17 .................................................................................... 4,500,000 4,707,990
Lee County Capital Bonds, Series A, MBIA Insured, Pre-Refunded, 7.30%, 10/01/07 ............. 1,000,000 1,022,810
Lee County Hospital Board of Directors Hospital Revenue, Lee Memorial Health System, Series
A, MBIA Insured, 5.875%, 4/01/24 .......................................................... 18,000,000 18,348,840
Lee County IDA, Health Care Facilities Revenue, Shell Point Village Project,
Refunding, Series A, 5.50%, 11/15/29 ................................................... 4,000,000 3,497,040
Series A, 5.50%, 11/15/21 .............................................................. 7,500,000 6,745,875
Lee County IDAR, Bonita Springs Sewer Project, Asset Guaranty, Insured,
7.20%, 11/01/11 ........................................................................ 5,000,000 5,288,800
7.25%, 11/01/20 ........................................................................ 2,000,000 2,103,680
Lee County Local Option Gas Tax Revenue, FGIC Insured, 5.75%, 10/01/20 .................... 2,575,000 2,596,373
Lee County Solid Waste System Revenue, Series A, MBIA Insured, 7.00%,
10/01/04 ............................................................................... 1,945,000 2,075,004
10/01/05 ............................................................................... 1,175,000 1,251,833
10/01/06 ............................................................................... 1,305,000 1,390,073
10/01/11 ............................................................................... 4,600,000 4,890,398
Lee County Transportation Facilities Revenue, MBIA Insured, 5.75%,
10/01/22 ............................................................................... 4,500,000 4,548,960
10/01/27 ............................................................................... 5,900,000 5,956,581
Leesburg Hospital Revenue, Leesburg Regional Medical Center Project,
Capital Improvement, Series A, Pre-Refunded, 7.375%, 7/01/11 ........................... 1,250,000 1,372,675
Capital Improvement, Series A, Pre-Refunded, 7.50%, 7/01/21 ............................ 2,115,000 2,329,524
Refunding, Series A, 6.125%, 7/01/18 ................................................... 7,000,000 7,222,040
Leesburg Utilities Revenue,
FGIC Insured, Pre-Refunded, 7.60%, 10/01/09 ............................................ 500,000 506,535
Series B, AMBAC Insured, 5.375%, 10/01/28 .............................................. 6,515,000 6,233,487
Leon County Capital Improvement Revenue, AMBAC Insured, 5.25%, 10/01/17 ................... 3,000,000 2,904,630
Leon HFA, SFMR, Series A, GNMA Secured, 7.30%, 4/01/21 .................................... 695,000 716,455
Manatee County HFA, SFMR, Series A, GNMA Secured, 6.85%, 11/01/23 ......................... 3,970,000 4,084,852
Manatee County IDR, Manatee Hospital and Health System Inc.,
ETM, 8.25%, 3/01/01 .................................................................... 600,000 616,182
Pre-Refunded, 9.25%, 3/01/21 ........................................................... 6,700,000 7,309,030
Manatee County School Board COP, MBIA Insured, Pre-Refunded, 6.125%, 7/01/21 .............. 5,575,000 6,115,162
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Martin County Consolidated Utilities System Revenue,
FGIC Insured, Pre-Refunded, 6.00%, 10/01/24 ......................................... $ 3,265,000 $ 3,540,174
Refunding, FGIC Insured, 6.00%, 10/01/24 ............................................ 735,000 762,364
Martin County PCR, Florida Power and Light Co. Project, Refunding, MBIA Insured, 7.30%,
7/01/20 ................................................................................ 14,500,000 15,123,935
Miami Beach Special Obligation, Subordinated, FGIC Insured, ETM, 7.375%, 12/01/08 ...... 2,000,000 2,052,960
Miami-Dade County HFA, MFMR, Villa Esperanza Apartments Project,
5.25%, 10/01/19 ..................................................................... 430,000 408,001
5.40%, 10/01/33 ..................................................................... 1,500,000 1,400,715
Miami-Dade County HFAR, Home Ownership Mortgage, Series A-1, GNMA Secured, FNMA Insured,
5.625%, 4/01/32 ........................................................................ 2,400,000 2,330,160
Miami-Dade County Water and Sewer Revenue, Series A, FGIC Insured, 5.00%, 10/01/29 ..... 25,000,000 22,528,000
Miramar Wastewater Improvement Assessment Revenue, FGIC Insured, Pre-Refunded, 6.75%,
10/01/25 ............................................................................... 6,500,000 7,215,130
Nassau County PCR, ITT Rayonier Inc. Project, Refunding, 6.25%, 6/01/10 ................ 5,000,000 5,162,650
North Broward Hospital District Revenue, Refunding and Improvement, MBIA Insured,
5.375%, 1/15/24 ..................................................................... 10,710,000 10,335,793
5.75%, 1/15/27 ...................................................................... 14,370,000 14,472,314
North Miami Health Facilities Authority Revenue, Catholic Health Services Obligation
Group, 6.00%,
8/15/16 ............................................................................. 2,000,000 2,041,540
8/15/24 ............................................................................. 1,750,000 1,760,763
North Port Utilities Revenue, FGIC Insured, Pre-Refunded, 6.25%, 10/01/22 .............. 1,500,000 1,611,090
Northern Palm Beach County Water Control District Revenue, Unit Development No. 31,
Project 2,
6.75%, 11/01/07 ..................................................................... 725,000 800,306
6.625%, 11/01/13 .................................................................... 1,470,000 1,615,780
Orange County Health Facilities Authority Revenue,
Adventist/Sunbelt, Series A, AMBAC Insured, 6.875%, 11/15/15 ........................ 1,000,000 1,066,610
Adventist/Sunbelt, Series A, FSA Insured, 7.00%, 11/15/14 ........................... 3,000,000 3,076,140
Mayflower Retirement Project, Refunding, Asset Guaranteed, 5.25%, 6/01/29 ........... 4,200,000 3,936,030
Orlando Regional Healthcare, Refunding, Series A, MBIA Insured, 6.00%, 11/01/24 ..... 1,000,000 1,043,990
South Central Nursing, Series A, FSA Insured, 5.40%, 7/01/19 ........................ 1,750,000 1,712,358
South Central Nursing, Series A, FSA Insured, 5.50%, 7/01/32 ........................ 3,000,000 2,941,650
Orange County HFAR,
Refunding, Series A, FGIC Insured,GNMA Secured, 7.60%, 1/01/24 ...................... 4,475,000 4,646,303
Series A, GNMA Secured, 7.375%, 9/01/24 ............................................. 410,000 427,507
Series D, GNMA Secured, 7.80%, 10/01/22 ............................................. 525,000 541,291
Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ............... 5,050,000 5,242,658
Orange County Tourist Development Tax Revenue,
AMBAC Insured, Pre-Refunded, 7.25%, 10/01/10 ........................................ 3,000,000 3,171,690
Refunding, MBIA Insured, 5.125%, 10/01/20 ........................................... 10,000,000 9,416,100
Series B, MBIA Insured, Pre-Refunded, 6.00%, 10/01/24 ............................... 24,675,000 26,754,609
Orlando and Orange County Expressway Authority Expressway Revenue,
junior lien, FGIC Insured, 5.00%, 7/01/28 ........................................... 37,025,000 33,326,573
senior lien, AMBAC Insured, ETM, 7.625%, 7/01/18 .................................... 265,000 270,520
Orlando Community RDA, Tax Increment Revenue, Series A,
6.50%, 10/01/11 ..................................................................... 2,155,000 2,253,785
6.75%, 10/01/16 ..................................................................... 2,585,000 2,701,971
Orlando Wastewater Systems Revenue, Refunding, Series C, AMBAC Insured,
5.15%, 10/01/13 ..................................................................... 3,410,000 3,366,216
5.20%, 10/01/14 ..................................................................... 2,740,000 2,686,597
Osceola County Gas Tax Revenue, Refunding and Improvement, FGIC Insured,
6.00%, 4/01/13 ...................................................................... 3,500,000 3,700,235
Osceola County IDA, Community Provider Pooled Loan Program,
Series A, FSA Insured, 7.75%, 7/01/10 ............................................... 4,634,000 4,864,588
Series C, FSA Insured, 7.60%, 7/01/10 ............................................... 795,000 833,597
Osceola County Sales Tax Revenue, FSA Insured, 5.00%, 4/01/24 .......................... 10,000,000 9,080,000
Pace Property Finance Authority Inc. Utility Systems Revenue, Refunding and Improvement,
AMBAC Insured, 6.125%, 9/01/07 ...................................................... 270,000 280,946
AMBAC Insured, 6.25%, 9/01/13 ....................................................... 685,000 711,612
Pre-Refunded, 6.125%, 9/01/07 ....................................................... 730,000 761,427
Pre-Refunded, 6.25%, 9/01/13 ........................................................ 1,860,000 1,943,254
Pre-Refunded, 6.125%, 9/01/17 ....................................................... 840,000 876,162
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured,
6.00%, 6/01/15 .................................................................... $ 5,000,000 $ 5,244,900
Pre-Refunded, 7.25%, 6/01/11 ...................................................... 6,950,000 7,268,449
Palm Beach County Financing Authority MFR, Housing Windsor Park Apartment Project,
Series A, 5.90%, 6/01/38 .......................................................... 1,000,000 996,870
Palm Beach County Health Facilities Authority Retirement Community Revenue, Acts
Retirement-Life Communities, 5.125%, 11/15/29 ........................................ 3,650,000 3,161,302
Palm Beach County HFA, SFM Purchase Revenue,
Series A, GNMA Secured, 7.70%, 3/01/22 ............................................ 5,565,000 5,756,436
Series B, GNMA Secured, 7.60%, 3/01/23 ............................................ 4,110,000 4,279,044
Palm Beach County IDR, Lourdes-Noreen Mckeen Residence, Geriatric Care Inc. Project,
6.55%, 12/01/16 ................................................................... 1,755,000 1,797,138
6.625%, 12/01/26 .................................................................. 4,000,000 4,096,560
(c) Palm Beach County Solid Waste IDR, Okeelanta Power and Light Co. Project,
Series A,
6.50%, 2/15/09 .................................................................... 3,600,000 2,340,000
6.70%, 2/15/15 .................................................................... 11,700,000 7,605,000
Pensacola Airport Revenue, Series A, MBIA Insured, 5.75%, 10/01/27 ................... 5,615,000 5,678,899
Pensacola-Westwood Homes Development Corp. Revenue, Mortgage Loan, Refunding, FNMA/FHA
Insured, 6.40%, 7/15/23 .............................................................. 965,000 981,743
Pinellas County HFA,
SFHR, Multi-County Program, Series A-1, FNMA Insured, GNMA Secured, 5.30%, 9/01/30 1,500,000 1,390,635
SFHR, Multi-County Program, Series C-1, FNMA Insured, GNMA Secured, 5.45%, 9/01/29 1,765,000 1,670,467
SFMR, Multi-County Program, Series B, GNMA Secured, 6.875%, 8/01/10 ............... 1,060,000 1,095,150
SFMR, Multi-County Program, Series B, GNMA Secured, 7.375%, 2/01/24 ............... 4,415,000 4,572,616
SFMR, Series A, GNMA Secured, 7.30%, 8/01/22 ...................................... 1,385,000 1,422,118
SFMR, Series A, GNMA Secured, 7.75%, 8/01/23 ...................................... 1,300,000 1,344,863
Pinellas County PCR, Florida Power and Light Co., Refunding, 7.20%, 12/01/14 ......... 12,200,000 12,926,754
Plantation Health Facilities Authority Revenue, Covenant Retirement Community Inc.,
Pre-Refunded, 7.625%, 12/01/12 ....................................................... 1,500,000 1,674,555
7.75%, 12/01/22 ................................................................... 3,000,000 3,360,330
Polk County HFA, Refunding, Series A, GNMA Secured, 7.15%, 9/01/23 ................... 2,035,000 2,106,998
Polk County IDAR, Solid Waste Disposal Facility, Tampa Electric Co. Project, 5.85%,
12/01/30 ............................................................................. 20,500,000 20,716,480
Port Everglades Authority Port Improvement Revenue,
Series A, Pre-Refunded, 7.50%, 9/01/12 ............................................ 18,050,000 18,411,000
Series 1986, ETM, 7.50%, 11/01/06 ................................................. 575,000 650,607
Port St. Lucie Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured,
5.125%, 9/01/27 ...................................................................... 24,640,000 22,831,670
Santa Rosa County Health Facilities Authority Revenue, Gulf Breeze Hospital Inc.,
Refunding, 8.60%, 10/01/02 ........................................................ 20,000 20,275
Series A, 6.20%, 10/01/14 ......................................................... 14,350,000 14,559,080
Santa Rosa County IDR, Refunding, Holley Navarre Water System Project, 6.75%, 5/01/24 .... 4,290,000 4,452,162
Sarasota County Solid Waste System Revenue, AMBAC Insured, 5.50%, 10/01/16 ............... 6,250,000 6,258,563
Sarasota County Utilities System Revenue, FGIC Insured,
5.75%, 10/01/27 ....................................................................... 18,000,000 18,204,840
Refunding, Series A, 5.25%, 10/01/25 .................................................. 9,000,000 8,523,180
Seminole County School Board COP, Series B, MBIA Insured, Pre-Refunded, 6.50%, 7/01/21 ... 5,000,000 5,474,100
South Broward Hospital District Revenue, Refunding, MBIA Insured, 5.25%, 5/01/21 ......... 5,000,000 4,751,500
South Florida Water Management District Special Obligation, Land Acquisition Bonds,
AMBAC Insured, 6.00%, 10/01/15 ........................................................... 1,000,000 1,045,890
South Miami Health Facilities Authority Hospital Revenue, Baptist Health System Obligation
Group, MBIA Insured, 5.00%, 11/15/28 ..................................................... 10,000,000 8,996,000
St. John's County IDA, IDR, Professional Golf Hall of Fame Project, MBIA Insured, 5.80%,
9/01/16 .................................................................................. 4,660,000 4,755,483
St. Lucie County Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%,
2/01/23 .................................................................................. 7,500,000 7,902,900
St. Lucie West Services District Capital Improvement Revenue, Lake Charles Project, 7.50%,
2/01/00 .................................................................................. 2,660,000 2,669,443
St. Petersburg Health Facilities Authority Revenue, Allegany Health System,
Series A, MBIA Insured, Pre-Refunded, 7.00%, 12/01/15 ................................. 10,500,000 11,332,650
St. Mary, Series B, Pre-Refunded, 7.75%, 12/01/15 ..................................... 8,630,000 8,888,555
Sunrise Lakes Recreation District, Phase 4,
Refunding, AMBAC Insured, 5.25%, 8/01/24 .............................................. 4,320,000 4,095,792
Series A, Pre-Refunded, 6.75%, 8/01/15 ................................................ 3,080,000 3,445,842
Series A, Pre-Refunded, 6.75%, 8/01/24 ................................................ 6,120,000 6,846,934
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Sunrise Special Tax District No. 1, Refunding, 6.375%,
11/01/08 ......................................................................... $ 3,485,000 $ 3,636,319
11/01/21 ......................................................................... 12,390,000 12,889,193
Sunrise Utilities System Revenue,
Refunding, AMBAC Insured, 5.20%, 10/01/22 ........................................ 2,550,000 2,424,999
Series A, AMBAC Insured, Pre-Refunded, 5.90%, 10/01/18 ........................... 4,000,000 4,314,800
Tallahassee Consolidated Utility System Revenue, Series 1994, 6.20%, 10/01/19 ....... 3,400,000 3,530,254
Tampa Allegheny Health System Revenue, St. Joseph, MBIA Insured, Pre-Refunded,
6.75%, 12/01/17 .................................................................. 1,180,000 1,267,320
6.50%, 12/01/23 .................................................................. 7,000,000 7,764,750
Tampa Guaranteed Entitlement Revenue, Refunding, AMBAC Insured, 7.15%, 10/01/18 ..... 2,000,000 2,129,680
Tampa-Hillsborough County Expressway Authority Revenue, AMBAC Insured, 5.00%, 7/01/22 11,500,000 10,533,195
Tampa Occupational License Tax, Refunding, Series B, FGIC Insured, 5.50%, 10/01/27 .. 10,525,000 10,376,387
Tampa Sports Authority Revenue,
Guaranteed Package, Tampa Bay Arena Project, MBIA Insured, 6.00%, 10/01/15 ....... 1,000,000 1,075,060
Guaranteed Package, Tampa Bay Arena Project, MBIA Insured, 6.05%, 10/01/20 ....... 1,715,000 1,807,507
Guaranteed Package, Tampa Bay Arena Project, MBIA Insured, 6.10%, 10/01/26 ....... 2,695,000 2,885,483
Interlock Agreement, Tampa Bay, MBIA Insured, Pre-Refunded, 6.05%, 10/01/15 ...... 4,250,000 4,589,703
Interlock Agreement, Tampa Bay, MBIA Insured, Pre-Refunded, 6.10%, 10/01/20 ...... 5,160,000 5,584,978
Interlock Agreement, Tampa Bay, MBIA Insured, Pre-Refunded, 6.125%, 10/01/26 ..... 6,800,000 7,368,276
Tampa Water and Sewer Revenue, sub. lien, Series A, AMBAC Insured, 7.25%, 10/01/16 .. 1,330,000 1,332,899
Titusville Water and Sewer Revenue, MBIA Insured, Pre-Refunded, 6.20%, 10/01/14 ..... 6,000,000 6,559,620
University Community Hospital Inc. Revenue, FSA Insured, Pre-Refunded,
7.375%, 9/01/07 .................................................................. 5,000,000 5,278,250
7.50%, 9/01/11 ................................................................... 5,000,000 5,284,300
Venice Health Care Revenue, Bon Secours Health System Project, MBIA Insured, 5.625%,
8/15/26 .......................................................................... 6,000,000 5,979,180
Viera East CDD,
Special Assessment, 8.625%, 5/01/14 .................................................. 10,640,000 11,690,806
Special Assessment, ETM, 7.50%, 5/01/03 .............................................. 1,435,000 1,566,446
Special Assessment, Pre-Refunded, 8.50%, 5/01/04 ..................................... 2,810,000 3,076,051
Special Assessment, Pre-Refunded, 7.50%, 5/01/12 ..................................... 5,225,000 5,724,353
Special Assessment, Refunding, 6.30%, 5/01/26 ........................................ 7,355,000 7,773,867
Special Assessment, Refunding, Series A, 6.00%, 5/01/14 .............................. 11,295,000 11,554,559
Special Assessment, Series B, ETM, 6.75%, 5/01/14 .................................... 7,490,000 7,654,705
Special Assessment, Water Management, Refunding, Series A, 6.50%, 5/01/22 ............ 11,340,000 11,586,985
Special Assessment, Water Management, Series B, 6.50%, 5/01/05 ....................... 465,000 471,081
Special Assessment, Water Management, Series B, 6.50%, 5/01/22 ....................... 4,580,000 4,618,654
Water and Sewer Revenue, 7.875%, 5/01/03 ............................................. 2,585,000 2,683,513
Water and Sewer Revenue, 6.75%, 5/01/09 .............................................. 2,850,000 2,934,274
Village Center CDD, Recreational Revenue, Refunding, Series A, MBIA Insured, 5.00%,
11/01/21 ............................................................................. 5,000,000 4,568,149
Volusia County Educational Facility Authority Revenue,
Embry Riddle Aeronautical University, Connie Lee Insured, Pre-Refunded, 6.625%,
10/15/22 ............................................................................. 500,000 542,759
Educational Facilities, Embry Riddle University, Refunding, Series B, AMBAC Insured,
5.25%, 10/15/22 ...................................................................... 3,490,000 3,341,220
Educational Facilities, Stetson University Inc. Project, AMBAC Insured, 5.25%, 6/01/29 5,000,000 4,685,749
Volusia County Health Facilities Authority Revenue, Hospital Facilities, Memorial Health
Systems Project, AMBAC Insured, 5.50%, 11/15/26 ...................................... 9,770,000 9,633,512
Wellington Public Service Tax Revenue, AMBAC Insured, 5.25%, 9/01/19 .................... 1,000,000 969,899
West Lake CDD, Special Assessment Revenue, MBIA Insured, 5.75%, 5/01/17 ................. 1,970,000 2,006,720
(b) West Palm Beach Utility System Revenue, FGIC Insured, 5.50%, 10/01/29 ................ 6,805,000 6,715,990
Westgate/Belvedere Homes Community RDAR, Series 1992, Pre-Refunded,
6.50%, 11/01/09 ...................................................................... 410,000 429,704
6.60%, 11/01/17 ...................................................................... 1,410,000 1,479,343
Winter Haven Public Improvement Revenue, Refunding, FGIC Insured, 5.25%, 10/01/29 ....... 5,045,000 4,726,811
-------------
TOTAL BONDS (COST $1,677,485,897) ....................................................... 1,684,853,379
-------------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS 4.6%
Broward County Water and Sewer Utility Revenue, Refunding, Series A, AMBAC
Insured,10/01/08 ............................................................... $ 3,670,000 $ 2,346,121
Dade County Guaranteed Entitlement Revenue, Capital Appreciation, AMBAC Insured,
Pre-Refunded,8/01/18 ........................................................... 17,020,000 5,031,282
Florida HFC Revenue, Deferred Interest, Homeowner Mortgage,
Series 1, MBIA Insured,07/01/17 ............................................. 3,270,000 1,184,067
Series 2, MBIA Insured,01/01/29 ............................................. 50,025,000 8,885,441
Florida State Mid-Bay Bridge Authority Revenue, Series A, AMBAC Insured,
10/01/25 .................................................................... 9,845,000 2,166,589
10/01/26 .................................................................... 2,500,000 526,025
Lakeland Electric and Water Revenue, Capital Appreciation, ETM,10/01/14 ........ 5,770,000 2,490,736
Miami-Dade County Special Obligation,
sub. lien, Refunding, Series A, MBIA Insured,10/01/25 ....................... 22,365,000 4,921,866
Sub Series B, MBIA Insured,10/01/36 ......................................... 5,635,000 645,489
Sub Series C, MBIA Insured,10/01/28 ......................................... 8,305,000 1,531,276
Port Everglades Authority Port Improvement Revenue,
Capital Appreciation, 09/01/10 .............................................. 24,525,000 13,724,926
Capital Appreciation, ETM, 09/01/10 ......................................... 25,475,000 14,210,974
Refunding, Series A, 09/01/02 ............................................... 10,575,000 9,233,984
Refunding, Series A, 09/01/03 ............................................... 9,075,000 7,529,165
Refunding, Series A, 09/01/04 ............................................... 3,550,000 2,787,567
Sarasota Special Obligated Revenue, Refunding, AMBAC Insured,
11/01/09 .................................................................... 1,365,000 815,028
11/01/12 .................................................................... 1,780,000 889,608
11/01/15 .................................................................... 2,180,000 908,493
-------------
TOTAL ZERO COUPON BONDS (COST $51,731,504) ..................................... 79,828,637
-------------
TOTAL LONG TERM INVESTMENTS (COST $1,729,217,401) .............................. 1,764,682,016
-------------
(a)SHORT TERM INVESTMENTS .4%
Jacksonville Educational Facilities Revenue, Jacksonville University Project,
Weekly VRDN and Put, 3.20%, 10/01/22 ........................................... 200,000 200,000
Jacksonville Health Facilities Authority Hospital Revenue, Charity Obligation
Group, Series C, MBIA Insured, Weekly VRDN and Put, 3.10%, 8/15/19 ............. 6,855,000 6,855,000
-------------
TOTAL SHORT TERM INVESTMENTS (COST $7,055,000) ................................. 7,055,000
-------------
TOTAL INVESTMENTS (COST $1,736,272,401) 101.5% ................................. 1,771,737,016
OTHER ASSETS, LESS LIABILITIES (1.5%) .......................................... (25,811,258)
-------------
NET ASSETS 100.0% .............................................................. $ 1,745,925,758
===============
</TABLE>
See glossary of terms on page 96.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
(c) See Note 6 regarding defaulted securities.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN GEORGIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28
AUGUST 31, 1999 ----------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...... $ 12.07 $ 12.12 $ 11.86 $ 11.88 $ 11.54 $ 12.00
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income .................... .30 .61 .63 .65 .66 .66
Net realized and unrealized gains (losses) (.58) .01 .27 (.02) .34 (.46)
-----------------------------------------------------------------------------
Total from investment operations .......... (.28) .62 .90 .63 1.00 .20
-----------------------------------------------------------------------------
Less distributions from:
Net investment income .................... (.30) (.61)(3) (.64)(2) (.65) (.66) (.66)
In excess of net investment income ....... (.01) -- -- -- -- --
Net realized gains ....................... --(4) (.06) -- -- -- --
-----------------------------------------------------------------------------
Total distributions ....................... (.31) (.67) (.64) (.65) (.66) (.66)
-----------------------------------------------------------------------------
Net asset value, end of period ............ $ 11.48 $ 12.07 $ 12.12 $ 11.86 $ 11.88 $ 11.54
=============================================================================
Total return* ............................. (2.39%) 5.22% 7.75% 5.47% 8.90% 1.87%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $ 158,065 $ 164,669 $149,642 $ 139,903 $130,380 $116,771
Ratios to average net assets:
Expenses ................................. .76%** .76% .76% .75% .77% .76%
Net investment income .................... 4.98%** 5.00 5.28% 5.49% 5.58% 5.76%
Portfolio turnover rate ................... 22.14% 12.84% 14.77% 17.47% 10.98% 36.17%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $ 12.15 $ 12.19 $ 11.92 $ 11.92 $ 11.57
------------------------------------------------------------
Income from investment operations:
Net investment income .................... .26 .543 .57 .58 .50
Net realized and unrealized gains (losses) (.59) .02 .27 (.01) .34
------------------------------------------------------------
Total from investment operations .......... (.33) .56 .84 .57 .84
------------------------------------------------------------
Less distributions from:
Net investment income .................... (.26) (.54) (.57) (.57) (.49)
In excess of net investment income ....... (.01) -- -- -- --
Net realized gains ....................... --(4) (.06) -- -- --
------------------------------------------------------------
Total distributions ....................... (.27) (.60) (.57) (.57) (.49)
------------------------------------------------------------
Net asset value, end of period ............ $ 11.55 $ 12.15 $ 12.19 $ 11.92 $ 11.92
============================================================
Total return* ............................. (2.73%) 4.70% 7.19% 4.97% 7.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $18,235 $17,277 $9,107 $4,484 $1,335
Ratios to average net assets:
Expenses ................................. 1.32%** 1.31% 1.32% 1.32% 1.34%**
Net investment income .................... 4.44%** 4.45% 4.72% 4.87% 5.04%**
Portfolio turnover rate ................... 22.14% 12.84% 14.77% 17.47% 10.98%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.001.
(3) Includes distributions in excess of net investment income in the amount of
$.004 and $.003 for Class A and C, respectively.
(4) Includes distributions of net realized gains in the amount of $.002.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN GEORGIA TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 102.3%
Albany-Daugherty County Hospital Authority Revenue, Anticipation Certificates,
Series B, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/10 ....................... $ 500,000 $ 528,430
Atlanta Airport Facilities Revenue, Series B, AMBAC Insured, 6.00%, 1/01/21 .... 1,100,000 1,124,838
Atlanta and Fulton Counties Recreation Authority Revenue, Downtown Arena Public
Improvement Project, Refunding, Series A, MBIA Insured, 5.375%,
12/01/21 .................................................................... 3,000,000 2,895,990
12/01/26 .................................................................... 1,500,000 1,434,825
Atlanta COP, Pretrial Detention Center, MBIA Insured, Pre-Refunded, 6.25%,
12/01/11 .................................................................... 1,000,000 1,076,760
Atlanta Downtown Development Authority Revenue, Underground Atlanta Project,
Refunding, 6.25%, 10/01/16 .................................................. 2,000,000 2,090,740
Atlanta GO,
Refunding, FGIC Insured, 5.00%, 12/01/20 .................................... 4,500,000 4,145,625
Series A, Pre-Refunded, 6.125%, 12/01/23 .................................... 5,000,000 5,435,000
Atlanta HDC, Mortgage Revenue, Oakland City/West, Refunding, Series A, FHA
Insured, 6.375%, 3/01/23 .................................................... 1,480,000 1,520,315
Atlanta Special Purpose Facilities Revenue, Delta Air Lines Inc. Project,
Series B, 7.90%, 12/01/18 ................................................... 3,500,000 3,591,035
Atlanta Urban Residential Finance Authority MFHR,
Defoors Ferry Manor Project, 5.90%, 10/01/18 ................................ 1,700,000 1,731,093
Fulton Cotton Mill, GNMA Secured, 6.00%, 5/20/17 ............................ 1,040,000 1,059,812
Fulton Cotton Mill, GNMA Secured, 6.125%, 5/20/27 ........................... 1,560,000 1,584,352
Atlanta Water and Sewer Revenue, FGIC Insured, Pre-Refunded, 5.25%, 1/01/27 .... 1,900,000 1,965,588
Baldwin County Hospital Authority Revenue, Oconee Regional Medical Center,
5.25%, 12/01/22 ............................................................. 2,615,000 2,302,220
5.375%, 12/01/28 ............................................................ 2,000,000 1,749,220
Barnesville Water and Sewer Revenue, Pre-Refunded, 6.85%, 9/01/17 .............. 1,000,000 1,051,540
Brunswick and Glynn County Development Authority Revenue, Georgia Pacific
Project, Refunding, 5.55%, 3/01/26 .......................................... 5,700,000 5,262,582
Burke County Development Authority PCR, Georgia Power Co. Plant Vogtle, 1st
Series, 6.10%, 4/01/25 ...................................................... 1,000,000 1,025,460
Camden County Joint Development Authority PCR, Union Carbide Corp. Project,
Refunding, 5.00%, 1/01/12 ................................................... 1,000,000 936,850
Chatham County Hospital Authority Revenue, Memorial Medical Center, Refunding
and Improvement, Series A, AMBAC Insured, 5.70%, 1/01/19 .................... 1,000,000 1,007,100
Cherokee County Water and Sewage Authority Revenue,
FGIC Insured, 5.00%, 8/01/27 ............................................... 2,000,000 1,779,960
Refunding, MBIA Insured, 6.90%, 8/01/18 .................................... 1,595,000 1,680,620
Clarke County Hospital Authority Revenue Certificates, Athens Regional Medical
Center Project, Refunding, MBIA Insured, 5.25%, 1/01/29 ..................... 3,000,000 2,784,360
Clayton County Development Authority Special Facility Revenue, Delta Air Lines
Inc. Project, Refunding, 7.625%, 1/01/20 .................................... 1,400,000 1,439,760
Clayton County Hospital Authority Revenue, Anticipation Certificates, Southern
Regional Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 8/01/13 ......... 2,400,000 2,570,064
Clayton County MFHR, Pointe Clear Apartments Project, FSA Insured, 5.70%,
7/01/23 ..................................................................... 1,000,000 999,910
Cobb County Kennestone Hospital Authority Revenue, Series A, MBIA Insured, ETM,
7.75%, 2/01/07 .............................................................. 100,000 110,276
Columbia County GO, Courthouse/Detention Center Projects, 5.00%, 2/01/24 ....... 2,460,000 2,216,435
Commerce Combined Public Utility Revenue, Refunding and Improvement, AMBAC
Insured, Pre-Refunded, 7.50%, 12/01/20 ...................................... 100,000 102,936
Conyers Water and Sewer Revenue, Series A, AMBAC Insured, ETM, 6.60%, 7/01/15 .. 1,000,000 1,066,650
Coweta County Association County Commissioners Leasing Program COP, MBIA
Insured, Pre-Refunded, 7.00%, 12/01/10 ...................................... 750,000 768,398
DeKalb County Housing Authority SFMR, GNMA Secured, 7.70%, 2/01/24 ............. 245,000 255,474
Douglas County Housing Authority MFHR, Millwood Park Apartments, FNMA Insured,
5.45%, 1/01/18 .............................................................. 1,380,000 1,334,874
Downtown Smyrna Development Authority Revenue, Refunding and Improvement, 5.15%,
2/01/16 ..................................................................... 550,000 531,647
Fitzgerald Housing Authority Mortgage Revenue, Bridge Creek, Refunding, Series
A, MBIA Insured, 6.50%, 7/01/24 ............................................. 935,000 958,758
Fulco Hospital Authority Revenue, Anticipation Certificates, Health System,
Catholic Health East, Series A, MBIA Insured, 5.00%, 11/15/28 ............... 4,000,000 3,546,720
Fulton County Building Authority Revenue,
Human Resources and Government Facilities Program, 7.10%, 1/01/15 ........... 750,000 783,968
Judicial Center Facilities Project, Refunding, 6.50%, 1/01/15 ............... 1,000,000 1,033,360
Fulton County Development Authority Special Facilities Revenue, Delta Airlines
Inc. Project, 5.45%, 5/01/23 ................................................ 1,805,000 1,644,211
Fulton Dekalb Hospital Authority Revenue, Grady Memorial Hospital Project,
Series A, AMBAC Insured, Pre-Refunded, 7.25%, 1/01/20 ....................... 1,480,000 1,525,939
Gainesville and Hall County Hospital Authority Revenue, Anticipation
Certificates, Northeast Georgia Health Care Project, Refunding,
MBIA Insured, 5.75%, 10/01/17 ............................................... 210,000 213,650
MBIA Insured, 6.00%, 10/01/25 ............................................... 750,000 771,203
Series B, MBIA Insured, 7.20%, 10/01/20 ..................................... 455,000 460,806
Georgia Municipal Electric Authority Power Revenue, Series W, 6.60%, 1/01/18 ... 1,000,000 1,111,130
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN GEORGIA TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Georgia Municipal Gas Authority Gas Revenue, City of Toccoa Project, AMBAC
Insured, 5.00%, 6/01/24 .......................................................... $ 3,000,000 $ 2,701,020
Georgia State HFAR,
Homeownership Opportunity Program, Series A, 6.60%, 12/01/23 .................... 1,995,000 2,053,673
Homeownership Opportunity Program, Series A-1, 6.75%, 6/01/17 ................... 2,895,000 3,021,917
Homeownership Opportunity Program, Series C, 6.60%, 12/01/23 .................... 485,000 503,382
MF, Club Candlewood Project, FSA Insured, Pre-Refunded, 7.15%, 1/01/25 .......... 1,000,000 1,133,740
MF, Lake Vista Apartments Project, Series A, FSA Insured, 5.95%, 1/01/27 ........ 1,000,000 1,013,470
SFM, Series B, Sub Series B-2, 6.15%, 12/01/28 .................................. 1,000,000 1,019,510
SFM, Sub Series B-2, 5.85%, 12/01/28 ............................................ 2,990,000 2,994,096
Georgia State Residential Finance Authority Home Ownership Mortgage Revenue,
Convertible Loans, Series B, Sub Series B, 7.50%, 6/01/17 ....................... 190,000 198,438
Series B, FHA Insured, 7.00%, 12/01/12 .......................................... 710,000 745,031
Series E, Sub Series E-1, FHA Insured, 7.50%, 6/01/17 ........................... 265,000 276,689
Hogansville Combined Public Utility System Revenue, Refunding, FSA Insured,
6.00%, 10/01/23 .................................................................. 3,300,000 3,473,184
La Grange Water and Sewer Revenue, Pre-Refunded, 7.375%, 1/01/12 ................... 1,000,000 1,031,270
Liberty County IDR, Leconte Property Inc. Project, Refunding, 7.875%, 12/01/14 ..... 850,000 894,362
Marietta Development Authority Revenue, First Mortgage, Life College Inc.,
Refunding, Series A, FSA Insured, 5.75%, 9/01/14 ................................ 1,800,000 1,843,974
Refunding, Series A, FSA Insured, 5.80%, 9/01/19 ................................ 1,100,000 1,118,975
Refunding, Series A, FSA Insured, 5.95%, 9/01/19 ................................ 1,000,000 1,026,840
Series B, FSA Insured, 5.75%, 9/01/14 ........................................... 800,000 819,544
Medical Center Hospital Authority, Revenue Anticipation Certificates, Columbus
Regional Healthcare System, MBIA Insured, 5.50%, 8/01/25 ......................... 12,000,000 11,550,840
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue,
Second Indenture, Refunding, Series A, MBIA Insured, 5.625%, 7/01/20 ............ 2,670,000 2,681,748
Series A, MBIA Insured, Pre-Refunded, 6.90%, 7/01/20 ............................ 5,930,000 6,642,074
Monroe County Development Authority PCR,
Georgia Power Co., AMBAC Insured, 6.25%, 7/01/19 ................................ 1,000,000 1,023,760
Georgia Power Co., Scherer Project, senior lien, First Series, 5.75%, 9/01/23 ... 1,000,000 985,920
Oglethorpe Power Co., Scherer Project, Refunding, Series A, 6.80%, 1/01/12 ...... 1,500,000 1,665,645
Municipal Electric Authority, Project One, Refunding, Sub Series A,
AMBAC Insured, 5.125%, 1/01/16 .................................................. 2,000,000 1,907,280
MBIA Insured, 5.375%, 1/01/19 ................................................... 4,820,000 4,648,456
Paulding County Water and Sewer Revenue, AMBAC Insured, Pre-Refunded, 5.80%,
12/01/16 ........................................................................ 500,000 539,165
Peachtree City Water and Sewer Authority Sewer Systems Revenue, Series A,
5.60%, 3/01/27 .................................................................. 3,000,000 2,970,900
Pike County School District, Refunding, AMBAC Insured, 5.70%, 2/01/16 .............. 1,000,000 1,031,230
Polk County Water Authority Water and Sewerage Revenue, Refunding, MBIA
Insured, 7.00%, 12/01/15 ........................................................ 100,000 102,480
Private Colleges and Universities Authority Revenue,
Emory University Project, Series A, 5.00%, 11/01/24 ............................. 2,250,000 2,018,588
Mercer University Project, Refunding, Series A, 5.25%, 10/01/25 ................. 2,000,000 1,825,460
Mercer University Project, Series A, AMBAC Insured, 5.375%, 10/01/29 ............ 2,000,000 1,837,140
Puerto Rico Commonwealth GO, Public Improvement, Refunding, 5.375%, 7/01/25 ........ 8,025,000 7,673,906
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding,
Series R, 7.15%, 7/01/00 ........................................................ 230,000 236,185
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue,
Series A,
7.90%, 7/01/07 .................................................................. 15,000 15,169
7.50%, 7/01/09 .................................................................. 5,000 5,064
Puerto Rico Electric Power Authority Revenue,
Refunding, Series U, 6.00%, 7/01/14 ............................................. 1,000,000 1,053,620
Series T, 6.00%, 7/01/16 ........................................................ 1,000,000 1,032,640
Richmond County Development Authority, Solid Waste Disposal Revenue, International
Paper Co. Project, 5.80%, 12/01/20 .............................................. 1,500,000 1,471,140
Rockdale County Water and Sewer Authority Revenue, Refunding, FSA Insured, 5.00%,
7/01/22 ......................................................................... 2,700,000 2,453,733
Rome Water and Sewer Revenue, Refunding and Improvement, AMBAC Insured, 5.25%,
1/01/15 ......................................................................... 2,750,000 2,684,770
Savannah EDA, IDR, Hershey Foods Corp. Project, Refunding, 6.60%, 6/01/12 .......... 1,000,000 1,058,980
Savannah Hospital Authority Revenue, St. Joseph's Hospital Project, Pre-Refunded,
6.20%, 7/01/23 .................................................................. 2,000,000 2,157,060
Savannah Port Authority PCR, Union Carbide Plastic Co. Inc., Refunding, 7.55%,
8/01/04 ......................................................................... 4,600,000 4,623,874
St. Mary's Housing Authority MFMR,
Cumberland Oaks Apartments, Refunding, Series A, FHA Insured, 7.375%, 9/01/22 ... 500,000 515,050
Pine Apartments, Series C, FHA Insured, 7.375%, 4/01/22 ......................... 700,000 711,088
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN GEORGIA TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Tift County School District, MBIA Insured, 6.125%, 2/01/15 .................... $ 2,330,000 $ 2,392,164
Upper Oconee Basin Water Authority Revenue, FGIC Insured, 5.25%, 7/01/27 ..... 3,000,000 2,812,470
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A,
5.40%, 10/01/12 ........................................................... 850,000 831,266
5.50%, 10/01/22 ........................................................... 1,200,000 1,139,844
5.625%, 10/01/25 .......................................................... 1,530,000 1,468,372
Walker, Dade and Catoosa County Hospital Authority Revenue, Anticipation
Certificates, Series A, FGIC Insured,Pre-Refunded, 7.00%, 10/01/10 ........ 1,500,000 1,612,680
Walton County Water and Sewer Authority Revenue, Refunding and Improvement,
MBIA Insured, 6.00%, 2/01/21 .............................................. 2,000,000 2,070,580
White County IDAR, Clark Schwebel Fiber Glass, Refunding, 6.85%, 6/01/10 ..... 1,780,000 1,864,866
-------------
TOTAL LONG TERM INVESTMENTS (COST $179,739,982) .............................. 180,394,806
-------------
(a) SHORT TERM INVESTMENTS 1.0%
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured,
Weekly VRDN and Put, 2.85%, 12/01/15 ...................................... 100,000 100,000
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series
A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ..................... 1,700,000 1,700,000
-------------
TOTAL SHORT TERM INVESTMENTS (COST $1,800,000) ............................... 1,800,000
-------------
TOTAL INVESTMENTS (COST $181,539,982) 103.3% ................................. 182,194,806
OTHER ASSETS, LESS LIABILITIES (3.3%) ........................................ (5,894,442)
-------------
NET ASSETS 100.0% ............................................................ $ 176,300,364
=============
</TABLE>
See glossary of terms on page 96.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest at specified dates.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 -------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $ 11.47 $ 11.45 $ 11.05 $ 11.04 $ 10.54 $ 11.18
-------------------------------------------------------------------------
Income from investment operations:
Net investment income .............................. .29 .59 .61 .61 .62 .61
Net realized and unrealized gains (losses) ......... (.59) .03 .40 .01 .50 (.62)
--------------------------------------------------------------------------
Total from investment operations .................... (.30) .62 1.01 .62 1.12 (.01)
--------------------------------------------------------------------------
Less distributions from net investment income ....... (.30)(2) (.60)(1) (.61) (.61) (.62) (.63)
--------------------------------------------------------------------------
Net asset value, end of period ...................... $ 10.87 $ 11.47 $ 11.45 $ 11.05 $ 11.04 $ 10.54
==========================================================================
Total return* ....................................... (2.69%) 5.51% 9.38% 5.86% 10.73% .11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $66,957 $ 64,516 $ 54,211 $44,289 $ 38,991 $ 32,831
Ratios to average net assets:
Expenses ........................................... .46%** .42% .35% .34% .33% .29%
Expenses excluding waiver and payments by affiliates .80%** .81% .81% .81% .82% .80%
Net investment income .............................. 5.14%** 5.12% 5.40% 5.63% 5.65% 5.94%
Portfolio turnover rate ............................. 4.83% 10.49% 26.61% 24.81% 31.89% 32.92%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) Includes distributions in excess of net investment income in the amount of
$.004.
(2) Includes distributions in excess of net investment income in the amount of
$.008.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN KENTUCKY TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.4%
Ashland PCR, Ashland Oil Inc. Project, Refunding, 6.65%, 8/01/09 .................. $ 700,000 $ 735,224
Ashland Solid Waste Revenue, Ashland Oil Inc. Project, 7.20%, 10/01/20 ............ 1,000,000 1,054,190
Boone County PCR, Collateralized, Dayton Power and Light Co., Refunding, Series
A, 6.50%, 11/15/22 ................................................................ 710,000 760,176
Carroll County PCR, Collateralized, Kentucky Utilities Co. Project, Series B,
6.25%, 2/01/18 .................................................................... 325,000 341,543
Christian County Hospital Revenue, Jennie Stuart Medical Center, Series A,
6.00%, 7/01/17 .................................................................... 1,000,000 1,010,130
Danville Multi-City Lease Revenue,
Campbellsville, Series B, MBIA Insured, 6.15%, 7/01/12 ......................... 1,500,000 1,610,085
Housing Authority, Jefferson County, 6.50%, 3/01/19 ............................ 125,000 130,820
Shelbyville, Series H, MBIA Insured, 6.70%, 7/01/11 ............................ 100,000 106,572
Daviess County Hospital Revenue, Odch Inc., Series A, MBIA Insured, 6.25%,
8/01/12 ........................................................................ 100,000 105,353
8/01/22 ........................................................................ 210,000 219,068
Daviess County Public Improvement Corp. Revenue, First Mortgage, Court Facilities
Project, Refunding, Series A, 5.70%, 10/01/14 ..................................... 545,000 557,104
Eastern University Revenues, Consolidated Educational Building, Series Q, AMBAC
Insured, 6.40%, 5/01/08 ........................................................... 100,000 105,108
Elizabethtown Public Properties Holding Inc. Revenue, First Mortgage,
Administrative Office of the Courts, Judicial Facilities Project,
MBIA Insured, 5.20%, 4/01/22 ...................................................... 2,000,000 1,890,760
Fulton County Industrial Building Revenue, H.I.S. Income Project, 7.50%, 2/01/10 .. 500,000 509,390
Greater Kentucky Housing Assistance Corp. Mortgage Revenue, Section 8 Assisted
Projects, Refunding, Series A, MBIA Insured, 6.10%, 1/01/24 ....................... 2,000,000 2,027,440
Guam Airport Authority Revenue, Series A, 6.50%, 10/01/23 ......................... 400,000 422,932
Guam Power Authority Revenue, Series A, Pre-Refunded, 6.30%, 10/01/22 ............. 225,000 241,985
Hancock County Solid Waste Disposal Revenue, Willamette Industries Inc. Project,
6.60%, 5/01/26 .................................................................... 1,000,000 1,048,910
Hardin County Water District No. 2 Water System Revenue, Series A, AMBAC Insured,
5.00%, 1/01/31 .................................................................... 2,620,000 2,356,873
Henry County Water District No. 2 Water Revenue, Refunding, MBIA Insured, 4.75%,
1/01/28 ........................................................................... 2,035,000 1,734,369
Hopkins County Hospital Revenue, Trover Clinic Foundation Inc., MBIA Insured,
6.625%, 11/15/11 .................................................................. 125,000 131,815
Jefferson County Capital Projects Corp. Lease Revenue, MBIA Insured, 5.375%,
6/01/22 ........................................................................... 2,000,000 1,942,340
Jefferson County Health Facilities Revenue,
Jewish Hospital Healthcare Services Inc., AMBAC Insured, 6.50%, 5/01/15 ........ 750,000 790,988
Jewish Hospital Healthcare Services Inc., AMBAC Insured, 6.55%, 5/01/22 ........ 720,000 758,203
Jewish Hospital Healthcare Services Inc., Refunding, AMBAC Insured, 5.75%,
1/01/26 ..................................................................... 2,000,000 2,011,280
University Medical Center Inc. Project, MBIA Insured, 5.50%, 7/01/17 ........... 1,500,000 1,494,810
Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11 1,930,000 1,991,702
Jefferson County PCR,
DuPont, Series A, 6.30%, 7/01/12 ............................................... 450,000 484,403
Louisville Gas and Electric Co. Project, Refunding, Series A, 7.45%, 6/15/15 ... 100,000 104,421
Jefferson County School District Finance Corp. School Building Revenue,
Refunding, Series A, FSA Insured, 5.25%, 1/01/19 ............................... 1,500,000 1,429,860
Series B, FSA Insured, 5.25%, 6/01/19 .......................................... 1,400,000 1,333,752
Kenton County Airport Board Revenue,
Cincinnati/Northern Kentucky International Airport, Series B, MBIA Insured,
5.75%, 3/01/13 .............................................................. 1,230,000 1,270,012
Special Facilities, Delta Airlines Inc. Project, Series A, 7.50%, 2/01/20 ...... 445,000 472,928
Special Facilities, Delta Airlines Inc. Project, Series A, 7.125%, 2/01/21 ..... 325,000 342,531
Special Facilities, Delta Airlines Inc. Project, Series B, 7.25%, 2/01/22 ...... 445,000 471,282
Kenton County Water District No. 1 Waterworks Revenue,
Refunding, FGIC Insured, 6.375%, 2/01/17 ....................................... 155,000 164,123
Series A, MBIA Insured, 5.80%, 2/01/15 ......................................... 500,000 518,310
Series B, FGIC Insured, 5.70%, 2/01/20 ......................................... 500,000 506,010
Kentucky Development Finance Authority Hospital Revenue, St. Elizabeth Medical
Center, Refunding and Improvement, Series A, FGIC Insured, 6.00%, 11/01/10 ....... 750,000 765,278
Kentucky Development Finance Authority Revenue, Sisters of Charity of Nazareth
Health Corp., Pre-Refunded, 6.75%, 11/01/12 ....................................... 100,000 107,101
Kentucky Economic Development Finance Authority Hospital Facilities Revenue, St
Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%, 12/01/22 ..... 625,000 644,156
Kentucky Economic Development Finance Authority Hospital System Revenue,
Appalachian Regional Health Center Facility, Refunding and Improvement,
5.875%, 10/01/22 ............................................................... 2,000,000 1,851,520
Kentucky Economic Development Finance Authority Medical Center Revenue, Ashland
Hospital Corp., Refunding and Improvement, Series A, FSA Insured,
6.125%, 2/01/12 ................................................................ 500,000 527,800
Kentucky Economic Development Finance Authority Revenue, Refunding and Improvement,
Catholic Health, Series A, 5.00%, 12/01/18 ........................................ 2,000,000 1,807,160
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN KENTUCKY TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Kentucky HFC Revenue,
Refunding, Series A, 6.375%, 7/01/28 .............................................. $1,500,000 $ 1,538,985
Series B, 6.25%, 7/01/28 .......................................................... 1,280,000 1,306,048
Series C, FHA Insured, 6.40%, 1/01/17 ............................................. 1,200,000 1,242,732
SFMR, Series A, 6.60%, 7/01/11 .................................................... 40,000 41,446
SFMR, Series B, 6.60%, 7/01/11 .................................................... 150,000 155,421
SFMR, Series D, FHA Insured, 7.45%, 1/01/23 ....................................... 75,000 77,693
Kentucky Infrastructure Authority Revenue,
Infrastructure Revolving Fund Program, Series J, Pre-Refunded, 6.375%, 6/01/14 .... 500,000 550,145
Wastewater Revolving Fund Program, Series D, 5.75%, 6/01/15 ....................... 300,000 304,083
Kentucky State Property and Buildings Commission Revenues,
Project No. 56, Pre-Refunded, 6.00%, 9/01/14 ...................................... 700,000 758,366
(b) Project No. 64, MBIA Insured, 5.50%, 5/01/17 ................................... 1,535,000 1,521,185
Lexington-Fayette Urban County Government Revenue, University of Kentucky Library
Project, MBIA Insured, Pre-Refunded,
6.625%, 11/01/13 .................................................................. 500,000 556,850
6.75%, 11/01/24 ................................................................... 750,000 839,550
Louisville and Jefferson County Metropolitan Sewer District Sewer and Drain System
Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 5/15/22 ................................. 1,000,000 905,500
Refunding, Series B, MBIA Insured, 5.30%, 5/15/18 ................................. 1,000,000 962,050
Series A, AMBAC Insured, Pre-Refunded, 6.75%, 5/15/25 ............................. 300,000 336,018
Series A, FGIC Insured, 5.00%, 5/15/30 ............................................ 3,000,000 2,681,040
Series A, MBIA Insured, 5.50%, 5/15/21 ............................................ 500,000 489,420
Louisville and Jefferson County Regional Airport Authority Airport Systems Revenue,
MBIA Insured, 5.00%, 7/01/25 ......................................................... 1,500,000 1,327,455
Madison County Utility District Revenue, Refunding, FSA Insured, 5.20%, 2/01/22 ...... 1,000,000 945,580
McCracken County Hospital Revenue, Mercy Health System, Refunding, Series A, MBIA
Insured, 6.40%, 11/01/07 ............................................................. 500,000 541,585
Northern Kentucky Water Service District Revenue, MBIA Insured, 4.875%, 2/01/20 ...... 1,270,000 1,127,658
Oldham County School District Finance Corp. School Building Revenue, 5.00%, 7/01/19 .. 1,000,000 933,160
Pendleton County Multi-County Lease Revenue, Kentucky Association of Counties
Leasing Trust, Series A, 6.50%, 3/01/19 .............................................. 1,050,000 1,099,718
Puerto Rico Commonwealth GO, Pre-Refunded, 6.45%, 7/01/17 ............................ 430,000 473,555
Puerto Rico Industrial Medical and Environmental Pollution Control Facilities
Financing Authority Revenue, 6.45%, 12/01/25 ......................................... 1,480,000 1,535,840
Russell Health System Revenue,
8.10%, 7/01/15 .................................................................... 205,000 232,529
Our Lady of Bellefonte, Refunding, 5.50%, 7/01/15 ................................. 1,800,000 1,699,902
Pre-Refunded, 8.10%, 7/01/15 ...................................................... 145,000 174,661
Russellville Housing Authority MFR, The Field Manor Project, GNMA Secured, 5.65%,
4/20/34 .............................................................................. 1,455,000 1,405,617
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.625%,
10/01/25 ............................................................................. 2,000,000 1,919,440
-----------
TOTAL LONG TERM INVESTMENTS (COST $66,576,748) ....................................... 66,573,049
-----------
(a) SHORT TERM INVESTMENTS .3%
Kentucky Development Finance Authority Revenue, Pooled Loan Program, Series A,
FGIC Insured, Weekly VRDN and Put, 3.25%, 12/01/15 (COST $200,000) ................... 200,000 200,000
-----------
TOTAL INVESTMENTS (COST $66,776,748) 99.7% ........................................... 66,773,049
OTHER ASSETS, LESS LIABILITIES .3% ................................................... 184,020
-----------
NET ASSETS 100.0% .................................................................... $66,957,069
===========
</TABLE>
See glossary of terms on page 96.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principle balance plus accrued
interest at specific dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.59 $ 11.61 $ 11.32 $ 11.32 $ 11.03 $ 11.56
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .29 .60 .63 .65 .66 .66
Net realized and unrealized gains (losses) ... (.59) (.01) .30 -- .28 (.55)
--------------------------------------------------------------------------------
Total from investment operations .............. (.30) .59 .93 .65 .94 .11
--------------------------------------------------------------------------------
Less distributions from net investment income . (.30)(3) (.61)(2) (.64) (.65) (.65) (.64)
--------------------------------------------------------------------------------
Net asset value, end of period ................ $ 10.99 $ 11.59 $ 11.61 $ 11.32 $ 11.32 $ 11.03
================================================================================
Total return* ................................. (2.64%) 5.23% 8.46% 5.94% 8.75% 1.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 155,071 $ 158,099 $ 134,922 $ 112,981 $107,461 $ 104,980
Ratios to average net assets:
Expenses ..................................... .74%** .75% .76% .76% .78% .75%
Net investment income ........................ 5.14%** 5.14% 5.50% 5.76% 5.89% 5.98%
Portfolio turnover rate ....................... 13.54% 14.99% 15.26% 13.68% 5.23% 32.28%
CLASS C
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.66 $ 11.68 $ 11.37 $ 11.37 $ 11.01
--------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .26 .54 .57 .58 .49
Net realized and unrealized gains (losses) ... (.60) (.01) .32 -- .35
--------------------------------------------------------------------
Total from investment operations .............. (.34) .53 .89 .58 .84
--------------------------------------------------------------------
Less distributions from net investment income . (.26)(3) (.55)(2) (.58) (.58) (.48)
--------------------------------------------------------------------
Net asset value, end of period ................ $ 11.06 $ 11.66 $ 11.68 $ 11.37 $ 11.37
====================================================================
Total return* ................................. (2.91%) 4.61% 8.02% 5.27% 7.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 12,377 $ 9,982 $ 4,469 $ 3,004 $ 1,438
Ratios to average net assets:
Expenses ..................................... 1.30%** 1.31% 1.32% 1.33% 1.35%**
Net investment income ........................ 4.58%** 4.58% 4.95% 5.29% 5.27%**
Portfolio turnover rate ....................... 13.54% 14.99% 15.26% 13.68% 5.23%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.0006 and $.0004 for Class A and C, respectively.
(3) Includes distributions in excess of net investment income in the amount of
$.008 and $.007 for Class A and C, respectively.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN LOUISIANA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.4%
BONDS 98.0%
Ascension Parish Sales and Use Tax, Gravity Drainage District No 1,
Pre-Refunded, 7.25%,
12/01/06 ....................................................................... $ 300,000 $ 307,065
12/01/07 ....................................................................... 300,000 307,065
12/01/08 ....................................................................... 200,000 204,710
Bastrop PCR, International Paper Co. Project, Refunding, 6.90%, 3/01/07 ........... 500,000 528,565
Bossier City Public Improvement Sales and Use Tax Revenue,
FGIC Insured, 5.00%, 12/01/19 .................................................. 1,145,000 1,039,133
Refunding, FGIC Insured, 5.00%, 12/01/21 ....................................... 1,875,000 1,688,700
Refunding, FGIC Insured, 5.00%, 12/01/22 ....................................... 1,515,000 1,361,228
Calcasieu Parish Public Trust Authority Mortgage Revenue, Refunding,
Series A, 7.75%, 6/01/12 ....................................................... 480,000 502,306
Series B, 6.875%, 11/01/12 ..................................................... 720,000 747,626
Calcasieu Parish Public Trust Authority SFMR, Series A, GNMA Secured, FNMA Insured,
6.40%, 4/01/32 ................................................................. 285,000 290,908
De Soto Parish Environmental Improvement Revenue, International Paper Co. Project,
5.60%, 11/01/22 ................................................................ 2,250,000 2,108,588
Series A, 7.70%, 11/01/18 ...................................................... 1,500,000 1,676,220
Series A, 5.65%, 12/01/21 ...................................................... 1,000,000 950,170
(b) De Soto Parish PCR, Cleco Utility Group Inc. Project, Refunding, AMBAC Insured,
5.875%, 9/01/29 ................................................................ 5,000,000 5,023,500
Denham Spring Livingston Housing and Mortgage Finance Authority SFHR, Series A,
ETM, 7.20%, 8/01/10 ............................................................ 1,380,000 1,551,148
East Baton Rouge Mortgage Finance Authority, SFM Purchase,
Refunding, Series A, 6.10%, 10/01/29 ........................................... 990,000 1,008,582
Series A, GNMA Secured, 7.875%, 8/01/23 ........................................ 630,000 649,826
Series F, GNMA Secured, 7.875%, 12/01/21 ....................................... 705,000 736,612
East Baton Rouge Parish Sales and Use Tax,
FGIC Insured, 5.90%, 2/01/18 ................................................... 750,000 773,288
(b) Public Improvement, Series ST-A, FGIC Insured, 5.625%,
2/01/23 ........................................................................ 3,625,000 3,486,453
Greater New Orleans Expressway Commission Revenue, FSA Insured, 5.25%, 11/01/16 ... 3,105,000 2,992,537
Hammond Tangipahoa Home Mortgage Authority Revenue, University Facilities Inc.
Project, MBIA Insured, 5.375%, 7/15/15 ......................................... 1,090,000 1,061,006
Jefferson Parish School Board Sales and Use Tax Revenue, Series A, ETM, 7.35%,
2/01/03 ........................................................................ 500,000 506,785
Jefferson Sales Tax District Special Sales Tax Revenue, Refunding, FSA Insured,
5.00%, 12/01/22 ................................................................ 4,500,000 4,064,490
Lafayette Public Trust Financing Authority SFMR,
Refunding, Series A, 8.50%, 11/15/12 ........................................... 205,397 209,478
Series A, ETM, 7.20%, 4/01/11 .................................................. 30,000 30,076
Lafourche Parish Home Mortgage Authority SFMR, ETM, 7.40%, 7/01/10 ................ 95,000 107,700
Lake Charles Harbor and Terminal District Port Facilities Revenue, Occidental
Petroleum Corp., Refunding, 7.20%, 12/01/20 .................................... 3,000,000 3,205,170
Lake Charles Nonprofit HDC, Section 8 Assisted Mortgage Revenue, Chateau Project,
Refunding, Series A, FSA Insured, 7.875%, 2/15/25 .............................. 750,000 752,828
Leesville IDBR, Wal-Mart Stores Inc. Project, Refunding, 7.10%, 3/01/11 ........... 1,750,000 1,808,135
Louisiana HFA, Mortgage Revenue,
MF, Refunding, Series A, FHA Insured, 7.00%, 7/01/22 ........................... 2,795,000 2,818,478
MF Westview Project, FHA Insured, 7.80%, 4/01/30 ............................... 750,000 776,153
Louisiana Public Facilities Authority Hospital Revenue,
Franciscan Missionaries, Series C, MBIA Insured, 5.00%, 7/01/19 ................ 3,750,000 3,386,663
Louisiana Health Systems Corp. Project, Refunding, FSA Insured, 5.00%, 10/01/22 1,000,000 898,890
Pendleton Memorial Methodist, Refunding, 5.25%, 6/01/28 ........................ 5,000,000 4,107,400
Touro Infirmary Project, Series A, 5.625%, 8/15/29 ............................. 6,000,000 5,427,480
Women's Hospital Foundation Project, Refunding, FSA Insured, 5.60%, 10/01/19 ... 1,500,000 1,480,350
Louisiana Public Facilities Authority Lease Revenue, Orleans Parish School Board
Project, FSA Insured, 5.65%, 6/15/11 ........................................... 1,230,000 1,259,778
Louisiana Public Facilities Authority Revenue,
Alton Ochsner Medical Foundation Project, Series C, MBIA Insured, 6.50%, 5/15/22 930,000 978,118
Centenary College Project, Pre-Refunded, 5.90%, 2/01/17 ........................ 1,000,000 1,064,190
Centenary College Project, Refunding, 5.75%, 2/01/29 ........................... 7,300,000 6,914,122
Dillard University Project, Refunding, AMBAC Insured, 5.00%, 2/01/18 ........... 2,000,000 1,818,200
HFA, Mortgage Purchase, FNMA Insured, 6.05%, 1/01/26 ........................... 1,200,000 1,218,012
Loyola University Project, Refunding, MBIA Insured, 5.625%, 10/01/16 ........... 1,000,000 1,007,210
MF Housing, One Lakeshore, Refunding, Series A, GNMA Secured, 6.40%, 7/20/20 ... 1,900,000 1,946,474
SFM Purchase, Series C, 8.45%, 12/01/12 ........................................ 995,065 1,045,535
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN LOUISIANA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Louisiana Public Facilities Authority Revenue, (cont.)
Student Loan, Series A, Sub Series 3, 7.00%, 9/01/06 ........................... $ 955,000 $ 984,911
Tulane University, AMBAC Insured, 6.05%, 10/01/25 .............................. 5,500,000 5,753,605
Xavier University of Louisiana Project, Refunding, MBIA Insured, 5.25%, 9/01/17 1,000,000 959,540
Xavier University of Louisiana Project, Refunding, MBIA Insured, 5.25%, 9/01/27 6,015,000 5,583,183
Louisiana State Gas and Fuels Tax Revenue, Series A, Pre-Refunded, 7.25%, 11/15/04 500,000 513,475
Louisiana State Office Facilities Corp. Lease Revenue, Capitol Complex Program,
Series A, MBIA Insured, 5.375%, 3/01/19 ........................................ 3,000,000 2,910,150
Louisiana State Offshore Terminal Authority Deepwater Port Revenue,
Loop Inc., First Stage, Refunding, Series B, 7.20%, 9/01/08 .................... 1,000,000 1,058,610
Series E, 7.60%, 9/01/10 ....................................................... 480,000 501,816
Series E, Pre-Refunded, 7.60%, 9/01/10 ......................................... 520,000 549,541
Louisiana State University Agricultural and Mechanical College University Revenues,
Auxiliary, MBIA Insured, 5.50%, 7/01/26 ........................................ 1,500,000 1,454,880
Louisiana State University at Eunice Project, MBIA Insured, 5.00%, 6/01/18 ..... 1,025,000 935,220
Mississippi River Bridge Authority Revenue, 6.75%, 11/01/12 ....................... 1,050,000 1,122,902
Natchitoches Parish GO, Consolidated School District No. 7, Series B, Pre-Refunded,
7.50%,
3/01/09 ........................................................................ 230,000 234,218
3/01/10 ........................................................................ 235,000 239,310
New Orleans GO,
AMBAC Insured, Pre-Refunded, 6.00%, 9/01/21 .................................... 695,000 719,096
Drain Systems, AMBAC Insured, 5.00%, 12/01/18 .................................. 1,000,000 926,450
Public Improvement, Series A, AMBAC Insured, 5.125%, 12/01/27 .................. 1,000,000 915,730
Public Improvement, Series A, FGIC Insured, Pre-Refunded, 5.50%, 12/01/21 ...... 500,000 522,720
Refunding, AMBAC Insured, 6.00%, 9/01/21 ....................................... 1,305,000 1,319,368
New Roads Electric System Revenue, 7.00%, 7/01/17 ................................. 1,000,000 1,039,570
Office Facility Corp. Capital Facilities Bonds, 7.75%, 12/01/10 ................... 1,600,000 1,711,696
Orleans Levee District GO, Levee Improvement, FSA Insured, 5.95%, 11/01/14 ........ 910,000 956,774
Orleans Parish Parishwide School District GO,
AMBAC Insured, 5.375%, 9/01/21 ................................................. 2,000,000 1,928,800
Refunding, Series B, FGIC Insured, 5.50%, 9/01/20 .............................. 1,000,000 981,690
Series A, FGIC Insured, 5.125%, 9/01/22 ........................................ 1,000,000 928,030
Orleans Parish School Board, Series 95, FGIC Insured, 5.375%, 9/01/18 ............. 1,950,000 1,896,863
Ouachita Parish Hospital Service District No. 1 Revenue, Glenwood Regional
Medical Center, Refunding, FSA Insured, 5.75%, 5/15/21 ......................... 2,500,000 2,505,700
Puerto Rico Commonwealth GO, Series 1990, Pre-Refunded, 7.70%, 7/01/20 ............ 500,000 526,580
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue,
Series A,
7.90%, 7/01/07 ................................................................. 120,000 121,350
7.75%, 7/01/08 ................................................................. 50,000 50,755
Puerto Rico HFC, SFMR, Portfolio No. 1,
Series B, GNMA Secured, 7.65%, 10/15/22 ........................................ 55,000 56,946
Series C, GNMA Secured, 6.85%, 10/15/23 ........................................ 650,000 675,532
Rapides Parish Housing and Mortgage Finance Authority Revenue, SFM Purchase,
FHA Insured, ETM, 7.25%, 8/01/10 ............................................... 1,370,000 1,519,604
Shreveport Airport System Revenue, Series A, FSA Insured, 5.375%, 1/01/28 ......... 1,000,000 938,510
Shreveport Certificates of Indebtedness, Refunding, Series A, AMBAC Insured,
5.00%, 10/01/16 ................................................................ 1,000,000 929,330
Shreveport GO, FGIC Insured, 5.00%, 3/01/18 ....................................... 1,000,000 930,340
Shreveport Water and Sewer Revenue, Series A, FGIC Insured, 5.95%, 12/01/14 ....... 3,500,000 3,631,285
St. Bernard Home Mortgage Authority Revenue, SF, Series A, FGIC Insured, ETM,
7.50%, 9/01/10 ................................................................. 435,000 495,256
St. Bernard Parish Exempt Facilities Revenue, Mobil Oil Corp. Project, 5.90%,
11/01/26 ....................................................................... 2,000,000 2,005,420
St. Bernard Parish Home Mortgage Authority SFMR, Refunding, Series A, 8.00%,
3/25/12 ........................................................................ 447,154 471,139
St. Charles Parish PCR,
Louisiana Power and Light Co. Project, 7.50%, 6/01/21 .......................... 2,500,000 2,628,125
Union Carbide Corp. Project, Refunding, 5.10%, 1/01/12 ......................... 3,000,000 2,814,090
St. Charles Parish Solid Waste Disposal Revenue, Louisiana Power and Light Co.
Project,
7.05%, 4/01/22 ................................................................. 1,500,000 1,560,270
Series A, 7.00%, 12/01/22 ...................................................... 750,000 793,898
St. John's Baptist Parish EDR, USX Corp. Project, Refunding, 5.35%, 12/01/13 ...... 2,500,000 2,345,600
St. John's Baptist Parish Sales Tax District, 7.30%,
12/01/08 ....................................................................... 430,000 445,037
12/01/09 ....................................................................... 275,000 284,463
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN LOUISIANA TAX-FREE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
St. Tammany's Public Trust Financing Authority SFMR, Series A, ETM, 7.20%,
7/01/10 ................................................................................ $ 165,000 $ 183,505
7/01/11 ................................................................................ 50,000 56,893
State Colleges and Universities Lease Revenue, University of Southwestern Louisiana,
Cajundome, MBIA Insured, 5.65%, 9/01/26 ................................................. 4,080,000 4,068,780
Tangipahoa Parish Hospital Service Revenue, District No. 1, Refunding, AMBAC Insured,
6.25%, 2/01/24 .......................................................................... 5,500,000 5,716,975
University System Board of Supervisors Revenue, Northwestern State University Wellness,
AMBAC Insured, 5.10%, 4/01/24 ........................................................... 1,000,000 914,969
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%,
10/01/18 ................................................................................ 3,000,000 2,873,459
West Feliciana Parish PCR, Gulf State Utility Co. Project,
7.70%, 12/01/14 ........................................................................ 6,500,000 6,987,109
Refunding, 8.00%, 12/01/24 ............................................................. 5,000,000 5,131,749
------------
TOTAL BONDS (COST $164,197,594) ........................................................... 164,137,768
------------
ZERO COUPON BONDS 1.4%
Shreveport Water and Sewer Revenue, Refunding, Series B, FGIC Insured,12/01/11 (COST
$ 2,127,882) ............................................................................ 5,000,000 2,316,450
------------
TOTAL LONG TERM INVESTMENTS ($166,325,476) ................................................ 166,454,218
------------
a SHORT TERM INVESTMENTS 4.3%
East Baton Rouge Parish PCR, Exxon Project, Refunding, Daily VRDN and Put,
2.95%, 3/01/22 .......................................................................... 1,000,000 1,000,000
Lake Charles Harbor and Terminal District Revenue, Reynolds Metal Co. Project, Weekly VRDN
and Put, 3.30%, 5/01/06 ................................................................. 500,000 500,000
Louisiana State Offshore Terminal Authority Deepwater Port Revenue, Loop Inc., First Stage,
Refunding,
ACES, Daily VRDN and Put, 2.70%, 9/01/06 ............................................... 4,900,000 4,900,000
Series A, Daily VRDN and Put, 2.70%, 9/01/08 ........................................... 100,000 100,000
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly
VRDN and Put, 2.85%, 12/01/15 ........................................................... 200,000 200,000
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, AMBAC
Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ........................................... 500,000 500,000
-------------
TOTAL SHORT TERM INVESTMENTS (COST $7,200,000) ............................................ 7,200,000
-------------
TOTAL INVESTMENTS (COST $173,525,476) 103.7% .............................................. 173,654,218
OTHER ASSETS, LESS LIABILITIES (3.7%) ..................................................... (6,206,714)
-------------
NET ASSETS 100.0% ......................................................................... $ 167,447,504
=============
</TABLE>
See glossary of terms on page 96.
a Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest at specified dates.
b Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN MARYLAND TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 ----------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.66 $ 11.64 $ 11.33 $ 11.38 $ 10.92 $ 11.36
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .28 .58 .59 .61 .62 .63
Net realized and unrealized gains (losses) ... (.58) .06 .32 (.03) .47 (.45)
--------------------------------------------------------------------------------
Total from investment operations .............. (.30) .64 .91 .58 1.09 .18
Less distributions from:
Net investment income ........................ (.28)(4) (.58)(3) (.60)(2) (.63) (.63) (.62)
Net realized gains ........................... (.03) (.04) -- -- -- --
--------------------------------------------------------------------------------
Total distributions ........................... (.31) (.62) (.60) (.63) (.63) (.62)
--------------------------------------------------------------------------------
Net asset value, end of period ................ $ 11.05 $ 11.66 $ 11.64 $ 11.33 $ 11.38 $ 10.92
================================================================================
Total return* ................................. (2.61%) 5.64% 8.27% 5.24% 10.18% 1.78%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 248,211 $ 253,014 $ 213,005 $ 185,234 $175,078 $153,145
Ratios to average net assets:
Expenses ..................................... .72%** .74% .74% .73% .74% .73%
Net investment income ........................ 4.88%** 4.91% 5.20% 5.42% 5.56% 5.86%
Portfolio turnover rate ....................... 1.01% 6.02% 3.19% 12.71% 8.11% 20.30%
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.75 $ 11.72 $ 11.40 $ 11.44 $ 10.93
---------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .25 .51 .54 .55 .47
Net realized and unrealized gains (losses) ... (.58) .07 .31 (.03) .51
---------------------------------------------------------------------
Total from investment operations .............. (.33) .58 .85 .52 .98
Less distributions from:
Net investment income ........................ (.25)(4) (.51)(3) (.53) (.56) (.47)
Net realized gains ........................... (.03) (.04) -- -- --
---------------------------------------------------------------------
Total distributions ........................... (.28) (.55) (.53) (.56) (.47)
---------------------------------------------------------------------
Net asset value, end of period ................ $ 11.14 $ 11.75 $ 11.72 $ 11.40 $ 11.44
=====================================================================
Total return* ................................. (2.86%) 5.11% 7.70% 4.68% 9.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 18,474 $ 16,826 $ 10,515 $ 5,084 $ 913
Ratios to average net assets:
Expenses ..................................... 1.28%** 1.29% 1.30% 1.27% 1.31%**
Net investment income ........................ 4.34%** 4.35% 4.63% 4.78% 4.95%**
Portfolio turnover rate ....................... 1.01% 6.02% 3.19% 12.71% 8.11%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.005.
(3) Includes distributions in excess of net investment income in the amount of
$.004 and $.003 for Class A and C, respectively.
(4) Includes distributions in excess of net investment income in the amount of
$.002 and $.001 for Class A and C, respectively.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MARYLAND TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.4%
Anne Arundel County Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.00%, 1/01/26 ... $1,650,000 $1,682,357
Anne Arundel County PCR, Baltimore Gas and Electric Co. Project, Refunding,
6.00%, 4/01/24 ......................................................................... 9,500,000 9,753,459
Baltimore Convention Center Revenue, FGIC Insured, Pre-Refunded, 6.15%, 9/01/19 ........... 4,250,000 4,574,318
Baltimore COP,
Emergency Telecommunication Phase II, Series A, MBIA Insured, 5.00%, 10/01/17 .......... 2,000,000 1,864,580
Refunding, Series C, MBIA Insured, 7.25%, 4/01/16 ...................................... 545,000 563,574
Baltimore County Authority Revenue, Series 1989, 7.20%, 7/01/19 ........................... 90,000 92,398
Baltimore County Mortgage Revenue, Old Orchard Apartments Project, Refunding, Series A,
MBIA Insured,
7.00%, 7/01/16 ......................................................................... 1,000,000 1,061,490
7.125%, 1/01/27 ........................................................................ 3,000,000 3,194,820
Baltimore Economic Development Lease Revenue, Armistead Partnership, Refunding, Series A,
6.75%, 8/01/02 ......................................................................... 780,000 816,941
7.00%, 8/01/11 ......................................................................... 3,225,000 3,441,591
Baltimore GO, Series B, 7.15%, 10/15/08 ................................................... 1,000,000 1,162,970
Baltimore GO, Consolidated Public Improvement,
Series A, FGIC Insured, 5.30%, 10/15/15 ................................................ 1,470,000 1,457,343
Series A, FGIC Insured, 5.30%, 10/15/17 ................................................ 1,500,000 1,462,410
Series A, FSA Insured, 5.25%, 10/15/17 ................................................. 3,300,000 3,198,558
Baltimore Port Facilities Revenue, Consolidated Coal Sales, Series A, 6.50%, 10/01/11 ..... 1,850,000 1,980,980
Baltimore Project Revenue, Wastewater Project, Refunding, Series B, FGIC Insured, 5.00%,
7/01/18 ................................................................................ 1,000,000 930,650
7/01/28 ................................................................................ 4,000,000 3,584,880
Baltimore Revenue, Wastewater Project, Refunding, Series A, FGIC Insured,
5.80%, 7/01/15 ......................................................................... 5,000,000 5,127,950
5.50%, 7/01/26 ......................................................................... 3,150,000 3,079,895
Frederick County College Revenue, Hood College Project, 7.20%, 7/01/09 .................... 350,000 361,722
Frederick County EDR, Manekin Frederick Project, Refunding, Series A, 7.50%, 12/01/14 ..... 500,000 513,905
Gaithersberg Hospital Facilities Revenue, Shady Grove Adventist Hospital, Refunding and
Improvement, FSA Insured, 6.00%, 9/01/21 ............................................... 8,000,000 8,266,319
Harford County Mortgage Revenue, Greenbrier V Apartments Project, Refunding, FHA Insured,
6.50%, 11/01/26 ........................................................................ 3,000,000 3,143,610
Howard County Mortgage Revenue, Normandy Woods III Apartments Project, Refunding, Series A,
6.10%, 7/01/25 ......................................................................... 2,000,000 2,044,960
Maryland Environmental Services COP, Water and Waste Facilities, Series A,
6.70%, 6/01/11 ......................................................................... 1,900,000 1,986,678
Maryland Local Government Insurance Trust Capitalization Program, Series A,
7.125%, 8/01/09 ........................................................................ 650,000 677,034
Maryland State CDA, Department of Housing and Community Development,
MFHR, Series A, 7.50%, 5/15/31 ......................................................... 30,000 30,359
MFHR Mortgage, Series A, 7.80%, 5/15/32 ................................................ 985,000 1,017,525
MFHR Mortgage, Series A, 6.85%, 5/15/33 ................................................ 1,800,000 1,878,354
MFHR Mortgage, Series D, 7.70%, 5/15/20 ................................................ 1,000,000 1,039,720
MFHR Mortgage, Series E, 7.10%, 5/15/28 ................................................ 675,000 700,468
Residential, Series D, 5.25%, 9/01/29 .................................................. 5,000,000 4,591,300
Series B, 5.35%, 9/01/30 ............................................................... 2,985,000 2,776,587
SF Program, 2nd Series, 7.60%, 4/01/23 ................................................. 360,000 372,823
SF Program, 3rd Series, 7.25%, 4/01/27 ................................................. 1,435,000 1,482,585
SF Program, 4th Series, 7.375%, 4/01/10 ................................................ 995,000 1,023,795
SF Program, 4th Series, 7.45%, 4/01/32 ................................................. 890,000 917,679
SF Program, 5th Series, 6.85%, 4/01/11 ................................................. 1,955,000 2,025,927
SFHR Program, First Series, 7.30%, 4/01/17 ............................................. 1,000,000 1,035,150
SF Program, Refunding, Second Series, 5.00%, 4/01/17 ................................... 3,000,000 2,819,340
Maryland State EDC, Lease Revenue, Hilton Street Facilities, Series A, 7.00%, 1/01/10 ..... 1,000,000 1,066,970
Maryland State Energy Financing Administration Solid Waste Disposal Revenue, Limited
Obligation, Wheelabrator Water Projects, 6.45%, 12/01/16 .............................. 3,000,000 3,124,620
Maryland State Health and Higher Educational Facilities Authority Revenue,
Anne Arundel Medical Center, FSA Insured, 5.10%, 7/01/18 ............................... 3,375,000 3,157,549
Anne Arundel Medical Center, FSA Insured, 5.125%, 7/01/28 .............................. 2,000,000 1,817,040
Anne Arundel Medical Center, FSA Insured, 5.125%, 7/01/33 .............................. 7,190,000 6,493,217
Charity Obligation Group, Series A, 5.00%, 11/01/19 .................................... 1,515,000 1,388,740
Charity Obligation Group, Series A, 5.00%, 11/01/29 .................................... 2,250,000 1,994,805
Doctors Community Hospital, Pre-Refunded, 8.75%, 7/01/12 ............................... 1,000,000 1,061,220
Doctors Community Hospital, Pre-Refunded, 8.75%, 7/01/22 ............................... 250,000 265,305
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MARYLAND TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Maryland State Health and Higher Educational Facilities Authority Revenue, (cont.)
Doctors Community Hospital, Refunding, 5.75%, 7/01/13 ...................................... $ 3,000,000 $ 2,856,840
Francis Scott Key Facility, junior lien, Refunding, 5.625%, 7/01/25 ........................ 2,510,000 2,467,832
Helix Health Issue, Refunding, AMBAC Insured, ETM, 5.00%, 7/01/27 .......................... 11,000,000 10,234,839
Johns Hopkins Medical Institutions, Parking Facilities, AMBAC Insured, 5.50%, 7/01/26 ...... 9,750,000 9,641,287
Johns Hopkins Medicine, Howard County Hospital, General Hospital Acquisition Issue,
MBIA Insured, 5.00%, 7/01/29 ............................................................ 2,000,000 1,816,080
Johns Hopkins Medicine, MBIA Insured, 5.00%, 7/01/19 ....................................... 3,000,000 2,802,870
Johns Hopkins University, Refunding, 5.625%, 7/01/17 ....................................... 1,150,000 1,172,069
Kernan Hospital, Connie Lee Insured, 6.10%, 7/01/24 ........................................ 1,700,000 1,761,166
Mercy Medical Center Project, Refunding, FSA Insured, 5.75%, 7/01/26 ....................... 1,500,000 1,501,920
Roland Park Place Project, Refunding, 5.625%, 7/01/18 ...................................... 2,500,000 2,289,475
Roland Park Place Project, Refunding, 5.625%, 7/01/24 ...................................... 5,000,000 4,492,200
Upper Chesapeake Hospitals, Series A, FSA Insured, 5.375%, 1/01/28 ......................... 9,440,000 9,036,062
Upper Chesapeake Hospitals, Refunding, Series A, FSA Insured, 5.125%, 1/01/33 .............. 7,400,000 6,686,344
Maryland State Industrial Development Financing Authority EDR, FSA Insured,
Pre-Refunded, 7.10%, 7/01/18 ............................................................... 1,350,000 1,446,323
Maryland State Industrial Development Financing Authority Revenue, American Center
Physics Headquarters, 6.625%, 1/01/17 ...................................................... 6,000,000 6,298,560
Maryland State Stadium Authority Lease Revenue, Convention Center Expansion,
AMBAC Insured, 5.875%, 12/15/14 ............................................................ 4,655,000 4,791,904
Maryland State Stadium Authority Sports Facilities Lease Revenue,
AMBAC Insured, 5.75%, 3/01/22 .............................................................. 5,000,000 5,033,200
AMBAC Insured, 5.80%, 3/01/26 .............................................................. 2,045,000 2,059,806
Series D, 7.60%, 12/15/19 .................................................................. 500,000 514,470
Maryland State Transportation Facilities Authority Revenue, Refunding,
Series 1992, 5.75%, 7/01/13 ................................................................ 5,400,000 5,445,684
Maryland Water Quality Financing Administration Revenue, Revolving Loan Fund,
Series A, 6.55%, 9/01/14 ................................................................... 1,000,000 1,047,830
Montgomery County Housing Opportunities Commission MFHR, Series B, 6.00%, 7/01/37 ............. 2,500,000 2,539,100
Montgomery County Housing Opportunities Commission MFMR, Series A,
7.25%, 7/01/11 ............................................................................. 375,000 391,661
7.00%, 7/01/23 ............................................................................. 2,410,000 2,515,895
Montgomery County Housing Opportunities Commission SFMR, Series A,
6.80%, 7/01/17 ............................................................................. 1,775,000 1,831,889
7.50%, 7/01/17 ............................................................................. 190,000 195,989
7.625%, 7/01/17 ............................................................................ 5,000 5,052
Montgomery County Revenue Authority Golf Course System Revenue, Series A,
6.125%, 10/01/22 ........................................................................... 1,000,000 1,014,880
Northeast Solid Waste Disposal Authority Revenue, Montgomery County Resources
Recreation Project, Series A,
6.20%, 7/01/10 ............................................................................. 3,100,000 3,252,272
6.30%, 7/01/16 ............................................................................. 6,000,000 6,217,860
Ocean City GO, Refunding, MBIA Insured, 5.75%,
3/15/12 .................................................................................... 1,880,000 1,956,666
3/15/13 .................................................................................... 1,120,000 1,156,232
3/15/14 .................................................................................... 1,180,000 1,216,851
Prince George's County COP, Real Estate Acquisition Program II,
MBIA Insured, 6.00%, 9/15/14 ............................................................... 2,050,000 2,129,643
Prince George's County GO, Consolidated Public Improvement,
MBIA Insured, 5.00%, 4/15/18 ............................................................... 2,100,000 1,962,240
Prince George's County Hospital Revenue, Dimensions Health Corp.,
Pre-Refunded, 7.00%, 7/01/22 ............................................................... 1,000,000 1,091,070
Prince George's County Housing Authority MFHR, Emerson House Project,
Series A, 7.00%, 4/15/19 ................................................................... 5,500,000 5,772,800
Prince George's County Housing Authority Mortgage Revenue, New Keystone Apartments
Project, Refunding, Series A, MBIA Insured, 6.80%, 7/01/25 ................................ 2,900,000 2,991,408
Prince George's County IDA, Lease Revenue, Upper Marlboro Justice Center
Project, MBIA Insured, 5.80%, 6/30/14 ...................................................... 2,750,000 2,806,870
Prince George's County Parking Authority Revenue, Justice Center Facilities
Project, Refunding, 6.45%, 5/01/05 ......................................................... 500,000 529,245
Prince George's County PCR, Refunding, Potomac Electric Project,
6.00%, 9/01/22 ............................................................................. 1,200,000 1,231,680
6.375%, 1/15/23 ............................................................................ 2,975,000 3,137,197
Puerto Rico Commonwealth GO,
5.50%, 7/01/17 ............................................................................. 4,050,000 4,026,915
5.40%, 7/01/25 ............................................................................. 1,950,000 1,896,921
Public Improvement, Refunding, 5.75%, 7/01/17 ................................................. 3,000,000 3,056,100
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series Y, 5.50%, 7/01/26 ................................................................... 6,900,000 6,701,694
Puerto Rico Electric Power Authority Revenue, Series AA, MBIA Insured, 5.375%, 7/01/27 ........ 3,000,000 2,917,500
Rockville Mortgage Revenue, Summit Apartments Project, Refunding,
Series A, MBIA Insured, 5.70%, 1/01/26 ..................................................... 1,145,000 1,155,179
University of Maryland Auxiliary Facilities System and Tuition Revenue,
Series A, 5.60%, 4/01/16 ................................................................... 1,000,000 1,018,480
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MARYLAND TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Virgin Islands PFA Revenue, senior lien,
Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 .................................... $ 1,700,000 $ 1,628,294
Refunding, Series A, 5.50%, 10/01/14 ..................................................... 3,300,000 3,210,900
Washington Suburban Sanitary District GO, General Construction, 5.25%, 6/01/19 ............. 1,330,000 1,279,300
------------
TOTAL LONG TERM INVESTMENTS (COST $261,934,789) ............................................ 262,341,014
------------
(a) SHORT TERM INVESTMENTS 0.4%
Howard County MFR, Avalon Meadows Housing Project, Weekly VRDN and Put, 3.05%, 6/15/26 ..... 800,000 800,000
Puerto Rico Commonwealth Government Development Bank,
Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ............................ 300,000 300,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,100,000) ............................................. 1,100,000
------------
TOTAL INVESTMENTS (COST $263,034,788) 98.8% ................................................ 263,441,014
OTHER ASSETS, LESS LIABILITIES 1.2% ........................................................ 3,244,046
------------
NET ASSETS 100.0% .......................................................................... $266,685,060
============
</TABLE>
See glossary of terms on page 96.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN MISSOURI TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 ---------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.19 $ 12.23 $ 11.83 $ 11.94 $ 11.44 $ 11.94
--------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .30 .61 .64 .65 .65 .65
Net realized and unrealized gains (losses) ... (.66) -- .44 (.07) .49 (.50)
--------------------------------------------------------------------------
Total from investment operations .............. (.35) .61 1.08 .58 1.14 .15
--------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.30)(2) (.62) (.64) (.65) (.64) (.65)
Net realized gains ........................... (.01) (.03) (.04) (.04) --
--------------------------------------------------------------------------
Total distributions ........................... (.31) (.65) (.68) (.69) (.64) (.65)
--------------------------------------------------------------------------
Net asset value, end of period ................ $ 11.52 $ 12.19 $ 12.23 $ 11.83 $ 11.94 $ 11.44
==========================================================================
Total return* ................................. (2.92%) 5.12% 9.43% 5.06% 10.23% 1.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $383,809 $386,948 $308,045 $269,564 $247,522 $227,442
Ratios to average net assets:
Expenses ..................................... .68%** .70% .71% .70% .71% .70%
Net investment income ........................ 4.98%** 4.99% 5.32% 5.56% 5.58% 5.75%
Portfolio turnover rate ....................... 10.22% 15.21% 14.30% 21.81% 18.27% 19.84%
CLASS C
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.24 $ 12.27 $ 11.85 $ 11.97 $ 11.47
-------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .27 .54 .58 .57 .48
Net realized and unrealized gains (losses) ... (.66) .01 .45 (.07) .50
-------------------------------------------------------------
Total from investment operations .............. (.39) .55 1.03 .50 .98
-------------------------------------------------------------
Less Distributions from:
Net investment income ........................ (.27)(2) (.55) (.57) (.58) (.48)
Net realized gains ........................... (.01) (.03) (.04) (.04) --
-------------------------------------------------------------
Total distributions ........................... (.28) (.58) (.61) (.62) (.48)
-------------------------------------------------------------
Net asset value, end of period ................ $ 11.57 $ 12.24 $ 12.27 $ 11.85 $ 11.97
=============================================================
Total return* ................................. (3.18%) 4.58% 8.96% 4.32% 8.66%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $25,343 $20,396 $10,045 $ 4,295 $ 1,325
Ratios to average net assets:
Expenses ..................................... 1.24%** 1.25% 1.27% 1.27% 1.27%**
Net investment income ........................ 4.42%** 4.44% 4.75% 4.92% 4.94%**
Portfolio turnover rate ....................... 10.22% 15.21% 14.30% 21.81% 18.27%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior
to May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.0001
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.0%
Audrain County Hospital Revenue, Audrain Medical Center Project, Refunding,
AMBAC Insured, 7.35%, 11/01/08 ................................................................ $ 500,000 $ 537,535
Bi State Development Agency Missouri Illinois Metropolitan District,
St. Clair County Metrolink Extension, Series A, MBIA Insured, 5.00%, 7/01/28 ............... 6,500,000 5,808,725
Term Facilities Revenue, American Commercial Lines Inc., Pre-Refunded, 7.75%, 6/01/10 ...... 3,000,000 3,176,400
Cape Girardeau County IDA, Solid Waste Disposal Revenue, Procter and Gamble
Paper Products, 5.30%, 5/15/28 ................................................................ 6,875,000 6,432,938
Fenton Public Facility Authority Leasehold Revenue, 5.25%, 1/01/18 ............................ 2,250,000 2,096,843
Guam Airport Authority Revenue,
Series A, 6.50%, 10/01/23 .................................................................. 1,075,000 1,136,630
Series B, 6.60%, 10/01/10 .................................................................. 500,000 530,850
Series B, 6.70%, 10/01/23 .................................................................. 4,000,000 4,255,240
Guam Power Authority Revenue, Refunding, Series A,
5.125%, 10/01/29 ........................................................................... 2,000,000 1,780,320
5.25%, 10/01/34 ............................................................................ 2,000,000 1,792,000
Hannibal IDA, Health Facilities, FSA Insured, 5.75%, 3/01/22 .................................. 1,800,000 1,809,594
Hazelwood IDA, MFHR, Lakes Apartments Project, Refunding,
Series A, GNMA Secured, 6.10%, 9/20/26 ........................................................ 1,745,000 1,761,822
Howard Bend Levee District Special Tax,
5.65%, 3/01/13 ............................................................................. 1,000,000 964,350
5.85%, 3/01/19 ............................................................................. 4,000,000 3,816,760
Jackson County IDAR, St. Joseph's Health Center Corp., MBIA Insured, 6.50%, 7/01/19 ........... 3,000,000 3,155,370
Jackson County Public Building Corp. Leasehold Revenue, Capital Improvement
Projects, MBIA Insured, 5.70%, 12/01/17 ....................................................... 1,595,000 1,614,268
Jefferson County GO, Reorganized School District No. R-3, AMBAC Insured, 7.00%, 3/01/09 ....... 370,000 383,279
Kansas City Airport Revenue, General Improvement,
Series B, FSA Insured, Pre-Refunded, 6.875%, 9/01/12 ......................................... 605,000 674,049
Kansas City IDA, MFHR,
Hilltop Village Apartments Project, Refunding, Series A, 5.70%, 10/01/17 ...................... 1,030,000 1,012,851
Hilltop Village Apartments Project, Refunding, Series A, 5.80%, 10/01/27 ................... 1,555,000 1,521,194
Mews Apartments Project, Series A, FNMA Secured, 6.30%, 7/01/20 ............................ 3,345,000 3,436,218
Kansas City IDAR, Ewing Marion Kauffman, Series B, 5.70%, 4/01/27 ............................. 11,100,000 11,297,358
Kansas City Land Clearance RDA Lease Revenue, Municipal
Auditorium and Muehlebach Hotel, Series A, FSA Insured,
5.90%, 12/01/18 .............................................................................. 5,000,000 5,166,450
Kansas City MAC Revenue, Leasehold Improvement,
Citywide Infrastructure, Series B, FSA Insured, 6.50%, 3/01/14 ............................. 7,790,000 8,251,947
Truman Medical Center, Series A, Pre-Refunded, 7.00%, 11/01/11 ............................. 1,665,000 1,761,287
Kansas City Municipal Assistance, Leasehold Roe Bartle, Refunding,
Series A, MBIA Insured, 5.00%, 4/15/20 ........................................................ 17,635,000 16,108,152
Kansas City Tax Increment Financing Commission Tax Increment Revenue,
Briarcliff West Project, Series B, 7.00%, 11/01/14 ............................................ 3,525,000 3,732,587
Lake of the Ozarks Community Bridge Corp. Bridge System Revenue,
Pre-Refunded, 6.25%, 12/01/16 .............................................................. 4,535,000 5,026,775
Pre-Refunded, 6.40%, 12/01/25 .............................................................. 7,000,000 7,799,960
Refunding, 5.25%, 12/01/14 ................................................................. 1,000,000 949,590
Refunding, 5.25%, 12/01/26 ................................................................. 1,000,000 912,330
Lee's Summit IDAR, John Knox Village Project,
6.55%, 8/15/10 ............................................................................. 1,000,000 1,040,740
6.625%, 8/15/13 ............................................................................ 2,000,000 2,112,940
Missouri School Board Association COP, Pooled Finance Program,
Series A-3, BIG Insured, 7.875%, 3/01/06 ................................................... 5,000 5,057
Series A-5, BIG Insured, 7.375%, 3/01/06 ................................................... 35,000 35,516
Missouri School Board Association Lease COP,
Fox C-6 School District, FSA Insured, 5.75%, 3/01/16 ....................................... 6,150,000 6,269,802
Republic R-3 School District Project, Refunding, FSA Insured, 6.00%, 3/01/16 ............... 2,220,000 2,288,465
Missouri State Development Finance Board Recreation Facilities Revenue, YMCA
Greater Saint Louis Project, Series A, 5.40%, 9/01/18 ......................................... 7,420,000 7,239,323
Missouri State Development Finance Board Solid Waste Disposal Revenue,
Procter and Gamble Paper Product, 5.20%, 3/15/29 .............................................. 3,000,000 2,758,800
Missouri State Environmental Improvement and Energy Resources
Authority Environmental Improvement Revenue,
Union Electric Co. Project, Series A, 7.40%, 5/01/20 .......................................... 2,390,000 2,483,569
Missouri State Environmental Improvement and Energy Resources Authority PCR,
National Rural Association, Electric Project, Series G-6, AMBAC Insured,
5.85%, 2/01/13 ............................................................................ 2,100,000 2,177,595
Thomas Hill Electric Cooperative, 5.50%, 12/01/11 .......................................... 2,000,000 2,046,360
Missouri State Environmental Improvement and Energy Resources
Authority Water PCR, Revolving Fund Program,
PCR, Kansas City Project, Series A, 5.75%, 1/01/16 ......................................... 1,000,000 1,019,110
Series A, 7.00%, 10/01/10 .................................................................. 940,000 983,343
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Missouri State Environmental Improvement and Energy Resources Authority Water
PCR, Revolving Fund Program, (cont.)
Series A, 6.55%, 7/01/14 ..................................................................... $ 4,500,000 $ 4,794,120
Series A, FSA Insured, 6.05%, 7/01/16 ........................................................ 1,000,000 1,047,660
Series B, 7.125%, 12/01/10 ................................................................... 430,000 452,145
Series B, 5.80%, 1/01/15 ..................................................................... 1,000,000 1,023,860
Series B, 7.20%, 7/01/16 ..................................................................... 2,000,000 2,229,860
Missouri State HDC,
MFHR, FHA Insured, 8.50%, 12/01/29 ........................................................... 135,000 135,772
Series B, GNMA Secured, 6.40%, 12/01/24 ...................................................... 2,105,000 2,152,594
SFMR, Homeowner Loan, Series B-1, 5.65%, 3/01/30 ............................................. 8,000,000 7,718,560
SFMR, Homeowner Loan, Series D, GNMA Secured, 6.125%, 3/01/28 ................................ 1,655,000 1,676,515
SFMR, Series A, GNMA Secured, 7.625%, 2/01/22 ................................................ 220,000 225,419
SFMR, Series B, GNMA Secured, 6.10%, 9/01/14 ................................................. 1,700,000 1,747,566
SFMR, Series B, GNMA Secured, 7.625%, 6/01/21 ................................................ 190,000 192,829
SFMR, Series B, GNMA Secured, 7.75%, 6/01/22 ................................................. 1,055,000 1,086,724
SFMR, Series B, GNMA Secured, 6.45%, 9/01/27 ................................................. 1,635,000 1,682,137
SFMR, Series B-2, GNMA/FNMA Insured, 5.50%, 3/01/25 .......................................... 1,995,000 1,913,265
SFMR, Series C, GNMA Secured, 6.90%, 7/01/18 ................................................. 1,215,000 1,260,490
SFMR, Series D-2, GNMA/FNMA Insured, 5.40%, 9/01/28 .......................................... 2,350,000 2,209,423
Missouri State Health and Educational Facilities Authority Educational Facilities
Revenue, Washington University, 5.00%, 11/15/37 ................................................. 11,150,000 9,692,807
Missouri State Health and Educational Facilities Authority Health Facilities Revenue,
BJC Health System, MBIA Insured, 5.00%, 5/15/38 .............................................. 5,000,000 4,392,300
Children's Mercy Hospital, 5.30%, 5/15/28 .................................................... 12,420,000 11,235,380
Freeman Health Systems Project, 5.25%, 2/15/28 ............................................... 2,750,000 2,409,303
Health Midwest, Series A, MBIA Insured, 6.40%, 2/15/15 ....................................... 5,000,000 5,236,150
Health Midwest, Series B, MBIA Insured, 6.10%, 6/01/11 ....................................... 700,000 739,459
Health Midwest, Series B, MBIA Insured, 6.25%, 6/01/14 ....................................... 1,990,000 2,113,917
Health Midwest, Series B, MBIA Insured, 6.25%, 2/15/22 ....................................... 1,100,000 1,145,760
Heartland Health, Refunding and Improvement, 8.125%, 10/01/10 ................................ 865,000 888,563
Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 .............................. 2,745,000 2,892,434
Jefferson Memorial Hospital Obligated Group, 6.75%, 5/15/15 .................................. 4,000,000 4,187,360
Jefferson Memorial Hospital Obligated Group, 6.80%, 5/15/25 .................................. 3,250,000 3,385,720
Lake of the Ozarks General Hospital, 6.25%, 2/15/11 .......................................... 410,000 421,070
Lake of the Ozarks General Hospital, FSA Insured, 5.125%, 2/15/24 ............................ 2,500,000 2,280,875
Lake of the Ozarks General Hospital, Pre-Refunded, 6.25%, 2/15/11 ............................ 840,000 921,682
Lake of the Ozarks General Hospital, Pre-Refunded, 6.50%, 2/15/21 ............................ 670,000 746,347
Lake of the Ozarks General Hospital, Refunding, 6.50%, 2/15/21 ............................... 330,000 342,349
Lutheran Senior Services, Refunding, 5.875%, 2/01/23 ......................................... 2,600,000 2,508,610
Lutheran Senior Services, Series A, 6.375%, 2/01/27 .......................................... 4,000,000 4,081,800
Park Lane Medical Center, Series A, MBIA Insured, 4.70%, 1/01/04 ............................. 1,900,000 1,907,258
Park Lane Medical Center, Series A, MBIA Insured, 5.60%, 1/01/15 ............................. 10,300,000 10,061,143
SSM Health Care, Refunding, Series AA, MBIA Insured, 6.25%, 6/01/16 .......................... 795,000 837,358
Missouri State Health and Educational Facilities Authority Revenue, SSM Health Care,
Refunding, Series A, MBIA Insured, 5.00%, 6/01/18 .............................................. 7,310,000 6,732,583
Missouri State Western College Revenue, Student Housing, Pre-Refunded, 8.00%, 10/01/16 .......... 5,000,000 5,468,900
Moberly Water and Sewer Revenue, Refunding and Improvement, FGIC Insured,
Pre-Refunded, 7.50%, 8/01/15 ................................................................... 1,000,000 1,053,780
North Kansas City Hospital Revenue, AMBAC Insured, 5.00%, 11/15/28 .............................. 4,300,000 3,834,783
Northeast State University Recreational Facility Revenue, Campus Recreational
Center Project, AMBAC Insured, 5.80%, 6/01/15 .................................................. 1,000,000 1,020,420
Northwest Educational Facilities Authority Leasehold Revenue, Jefferson County, FSA Insured,
5.70%, 3/01/15 ............................................................................... 3,775,000 3,805,049
Pre-Refunded, 5.70%, 3/01/15 ................................................................. 1,425,000 1,498,929
O Fallon Public Facilities Authority Leasehold Revenue, Series A,
AMBAC Insured, 5.40%, 2/01/17 .................................................................. 1,575,000 1,557,407
Phelps County Hospital Revenue, Regional Medical Center, Refunding,
Connie Lee Insured, 6.00%, 5/15/13 ............................................................. 5,000,000 5,137,700
Poplar Bluff Public Building Corp. Leasehold Revenue, Series A, MBIA Insured,
Pre-Refunded, 5.50%, 9/01/12 ................................................................... 2,820,000 2,941,880
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
Series A, FSA Insured, Pre-Refunded, 9.00%, 7/01/09 ............................................ 40,000 47,160
Puerto Rico Commonwealth GO, 5.00%, 7/01/27 ..................................................... 1,000,000 904,100
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A,
7.90%, 7/01/07 ............................................................................. $ 50,000 $ 50,563
7.75%, 7/01/08 ............................................................................. 475,000 482,173
Puerto Rico Electric Power Authority Revenue,
Series DD, 5.00%, 7/01/28 .................................................................. 2,470,000 2,197,806
Series X, 6.00%, 7/01/15 ................................................................... 2,375,000 2,461,711
Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ........................... 320,000 328,960
Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%,
10/15/23 ................................................................................... 1,265,000 1,314,689
Puerto Rico Industrial Tourist Educational Medical and Environmental Control
Facilities Financing Authority Industrial Revenue,
Guaynabo Municipal Government, 5.625%, 7/01/22 ................................................ 2,500,000 2,417,175
Puerto Rico Port Authority Revenue, Special Facilities, American Airlines,
Series A, 6.25%, 6/01/26 ................................................................... 2,500,000 2,574,300
Puerto Rico Public Finance Corp. Commonwealth Appropriation, Series A, 5.00%, 6/01/26 ......... 1,865,000 1,665,669
Pulaski County IDA, MFHR, St. Robert Project, Series A, GNMA Collateral, 6.00%, 8/20/39 ....... 1,600,000 1,595,136
Raymore GO, FSA Insured, Pre-Refunded, 6.00%, 3/01/14 ......................................... 1,000,000 1,042,420
Springfield Missouri IDAR, Bethesda Living Centers, Refunding, Series A,
5.625%, 8/15/18 ............................................................................ 3,000,000 2,762,130
5.70%, 8/15/28 ............................................................................. 5,250,000 4,736,498
St. Charles County IDA, MFHR, Ashwood Apartments Project,
Series A, FSA Insured, 5.60%, 4/01/30 ...................................................... 1,000,000 959,050
St. Charles County Public Water Supply District No. 2 COP, Refunding,
Series A, MBIA Insured, 5.00%, 12/01/20 ....................................................... 3,240,000 2,954,945
St. Charles Public Facility Authority Leasehold Revenue, Refunding,
AMBAC Insured, 5.80%, 2/01/10 .............................................................. 3,000,000 3,108,480
St. Louis Airport Revenue, Lambert-St. Louis International Airport,
FGIC Insured, Pre-Refunded, 6.125%, 7/01/15 ................................................ 1,925,000 2,045,236
Refunding and Improvement, FGIC Insured, 6.125%, 7/01/15 ................................... 75,000 78,620
Series B, FGIC Insured, 5.25%, 7/01/27 ..................................................... 2,555,000 2,371,807
St. Louis County Housing Authority MFHR, Kensington Square Apartments Project, Refunding,
6.55%, 3/01/14 ............................................................................. 1,000,000 1,037,560
6.65%, 3/01/20 ............................................................................. 2,750,000 2,866,875
St. Louis County IDA,
Bethesda Living Centers, Series B, 5.85%, 8/15/28 .......................................... 1,500,000 1,382,610
Elderly Housing Revenue, Centenary Towers Apartments Project, 6.40%, 4/01/14 ............... 1,000,000 1,032,510
Elderly Housing Revenue, Centenary Towers Apartments Project, 6.55%, 4/01/19 ............... 1,000,000 1,023,480
Health Facilities Revenue, Healthcare Nazareth Living, Refunding, 5.625%, 8/15/19 .......... 3,000,000 2,755,770
Health Facilities Revenue, Healthcare Nazareth Living, Refunding, 5.625%, 8/15/29 .......... 3,250,000 2,896,270
Health Facilities Revenue, Mother of Perpetual Help, GNMA Secured, 6.40%, 8/01/35 .......... 1,895,000 1,992,801
MFHR, Lucas Hunt Village Project, Refunding, Series A, GNMA Secured, 5.125%, 9/20/23 ....... 1,250,000 1,158,038
MFHR, Lucas Hunt Village Project, Refunding, Series A, GNMA Secured, 5.20%, 9/20/31 ........ 2,095,000 1,924,258
MFHR, South Summit Apartments, Refunding, Series A, GNMA Secured, 6.10%, 4/20/32 ........... 1,250,000 1,271,738
Sewer and Solid Waste Disposal Facilities Revenue, Anheuser-Busch Project,
5.875%, 11/01/26 .......................................................................... 1,000,000 1,000,870
St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 9/01/19 .............................. 20,000 20,250
St. Louis County Regional Convention and Sports Complex Authority Revenue,
Convention and Sports Project, Refunding, Series B, 5.75%, 8/15/21 ......................... 5,565,000 5,578,690
St. Louis GO, Public Safety, FGIC Insured, 5.125%, 2/15/18 .................................... 1,715,000 1,627,655
St. Louis Land Clearance RDA, Kiel Site Lease, Refunding,
Series A, MBIA Insured, 5.125%, 7/01/21 ....................................................... 1,625,000 1,518,628
St. Louis Municipal Finance Corp. Leasehold Revenue,
City Justice Center Improvement, Series A, AMBAC Insured, 6.00%, 2/15/19 ................... 5,370,000 5,575,027
Refunding, Series A, 6.00%, 7/15/13 ........................................................ 10,000,000 10,287,400
St. Louis Parking Facilities Revenue,
Marquette Building Facilities, Series A, MBIA Insured, 5.25%, 12/15/23 ..................... 1,000,000 948,680
Pre-Refunded, 6.625%, 12/15/21 ............................................................. 470,000 510,961
St. Louis Regional Convention and Sports Complex Authority Revenue,
Convention and Sports Facilities, Refunding, Series C, AMBAC Insured, 5.625%, 8/15/21 ...... 4,725,000 4,726,323
Series C, 7.75%, 8/15/01 ................................................................... 915,000 952,195
Series C, 7.90%, 8/15/21 ................................................................... 555,000 594,588
Series C, Pre-Refunded, 7.90%, 8/15/21 ..................................................... 4,000,000 4,505,520
Taney County IDA, Hospital Revenue, The Skaggs Community Hospital Association,
5.30%, 5/15/18 ............................................................................. 3,000,000 2,700,180
5.40%, 5/15/28 ............................................................................. 1,500,000 1,319,895
Taney County Reorganization School District No. R-V GO, Direct Deposit Program,
5.80%, 3/01/17 ................................................................................ 2,585,000 2,641,637
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
University of Missouri Health Facilities Revenue,
Health System, Refunding, Series A, AMBAC Insured, 5.60%, 11/01/26 ................... $ 5,000,000 $ 4,937,700
Series A, AMBAC Insured, 5.125%, 11/01/28 ............................................ 4,430,000 4,040,293
University of Missouri Revenues, System Facilities, 5.80%, 11/01/27 ..................... 4,000,000 4,050,640
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A,
5.40%, 10/01/12 ...................................................................... 2,500,000 2,444,900
5.50%, 10/01/22 ...................................................................... 2,500,000 2,374,675
Webb City School District No. R-VII Facilities Group Leasehold Revenue,
Refunding and Improvement, FSA Insured, 5.625%, 8/01/16 ................................. 1,115,000 1,120,954
West Plains IDA, Hospital Revenue, Ozarks Medical Center Project,
Refunding, 5.50%, 11/15/12 ........................................................... 1,000,000 927,220
Refunding, 5.60%, 11/15/17 ........................................................... 1,700,000 1,517,947
Refunding, 5.65%, 11/15/22 ........................................................... 1,500,000 1,320,510
Series A, Pre-Refunded, 8.625%, 9/15/20 .............................................. 1,935,000 2,041,638
------------
TOTAL LONG TERM INVESTMENTS (COST $400,998,805) ......................................... 400,917,821
------------
(a)SHORT TERM INVESTMENTS 1.0%
Kansas City IDA, Hospital Revenue, Research Health Services System, MBIA
Insured, Daily VRDN and Put,
2.75%, 10/15/14 ...................................................................... 100,000 100,000
2.75%, 4/15/15 ....................................................................... 1,000,000 1,000,000
2.75%, 10/15/15 ...................................................................... 900,000 900,000
Puerto Rico Commonwealth Government Development Bank, Refunding,
MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ...................................... 1,000,000 1,000,000
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 .......................... 1,200,000 1,200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $4,200,000) .......................................... 4,200,000
------------
TOTAL INVESTMENTS (COST $405,198,805) 99.0% ............................................. 405,117,821
OTHER ASSETS, LESS LIABILITIES 1.0% ..................................................... 4,034,613
------------
NET ASSETS 100.0% ....................................................................... $409,152,434
============
</TABLE>
See glossary of terms on page 96.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 -----------------------------
CLASS A (UNAUDITED)*** 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $ 12.16 $ 12.11 $ 11.73
-------- -------- --------
Income from investment operations:
Net investment income .......................... .30 .60 .62
Net realized and unrealized gains (losses) ..... (.63) .06 .38
-------- -------- --------
Total from investment operations ................ (.33) .66 1.00
-------- -------- --------
Less distributions from net investment income .... (.30)(3) (.61) (.62)
-------- -------- --------
Net asset value, end of period ................... $ 11.53 $ 12.16 $ 12.11
======== ======== ========
Total return* .................................... (2.73%) 5.54% 8.78%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $346,559 $349,419 $297,406
Ratios to average net assets:
Expenses ........................................ .68%** .70% .70%
Net investment income ........................... 5.00%** 4.95 5.24%
Portfolio turnover rate .......................... 4.56% 5.44% 9.95%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
------------------------------------------------
CLASS A 1997 1996(1) 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $ 11.75 $ 11.37 $ 11.92
-------- -------- --------
Income from investment operations:
Net investment income ......................... .64 .64 .65
Net realized and unrealized gains (losses) .... (.03) .39 (.55)
-------- -------- --------
Total from investment operations ............... .61 1.03 .10
-------- -------- --------
Less distributions from net investment income .. (.63) (.65)(2) (.65)
-------- -------- --------
Net asset value, end of period ................. $ 11.73 $ 11.75 $ 11.37
======== ======== ========
Total return* .................................. 5.38% 9.28% 1.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $260,979 $247,031 $216,263
Ratios to average net assets:
Expenses ...................................... .70% .71% .70%
Net investment income ......................... 5.47% 5.52% 5.75%
Portfolio turnover rate ........................ 9.98% 25.19% 25.05%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 12.24 $ 12.18 $ 11.79 $ 11.80 $ 11.41
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ........................... .27 .54 .56 .57 .49
Net realized and unrealized gains (losses) ...... (.64) .06 .39 (.02) .38
---------- ---------- ---------- ---------- ----------
Total from investment operations ................. (.37) .60 .95 .55 .87
---------- ---------- ---------- ---------- ----------
Less distributions from net investment income .... (.27)(3) (.54) (.56) (.56) (.48)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................... $ 11.60 $ 12.24 $ 12.18 $ 11.79 $ 11.80
========== ========== ========== ========== ==========
Total return* .................................... (3.08%) 5.02% 8.22% 4.83% 7.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $ 42,286 $ 38,171 $ 20,043 $ 9,607 $ 2,430
Ratios to average net assets:
Expenses ........................................ 1.24%** 1.25 1.26% 1.26% 1.28%**
Net investment income ........................... 4.44%** 4.40 4.69% 4.85% 4.90%**
Portfolio turnover rate .......................... 4.56% 5.44% 9.95% 9.98% 25.19%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.001.
(3) Includes distributions in excess of net investment income in the amount of
$.002.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.6%
Appalachian State University Revenue, Utility Systems,
MBIA Insured, Pre-Refunded, 6.10%, 5/15/13 .................................................. $1,075,000 $ 1,165,451
Refunding, MBIA Insured, 5.00%, 5/15/24 ..................................................... 4,410,000 3,970,852
Refunding, MBIA Insured, 5.00%, 5/15/18 ..................................................... 1,000,000 923,290
Asheville COP, Series A, MBIA Insured, 5.125%, 6/01/18 ......................................... 1,000,000 937,490
Asheville Water System Revenue, FGIC Insured, 5.70%, 8/01/25 ................................... 4,000,000 4,038,720
Buncombe County Metropolitan Sewage District System Revenue,
FSA Insured, 5.00%, 7/01/29 ................................................................. 5,000,000 4,448,150
Series B, Pre-Refunded, 6.75%, 7/01/16 ...................................................... 10,000 10,580
Cabarrus County Development Corp. Installment Payment Revenue,
AMBAC Insured, 5.30%, 6/01/19 ............................................................... 1,250,000 1,205,425
Centennial Authority Hotel Tax Revenue, Arena Project, FSA Insured, 5.125%, 9/01/19 ............ 5,115,000 4,778,280
Charlotte COP, Convention Facility Project, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/11 ....... 2,250,000 2,428,425
Charlotte GO,
Public Improvements, Series A, 5.00%, 2/01/22 ............................................... 2,190,000 2,031,203
Water and Sewer, 5.00%, 2/01/21 ............................................................. 4,260,000 3,963,334
(b)Charlotte Water and Sewer Systems Revenue, 5.25%, 6/01/24 .................................... 4,000,000 3,792,880
Charlotte-Mecklenberg Hospital Authority Health Care System Revenue,
5.90%, 1/15/16 .............................................................................. 3,465,000 3,540,364
Carolinas Healthcare System, Series A, 5.125%, 1/15/22 ...................................... 8,000,000 7,225,600
Pre-Refunded, 5.90%, 1/15/16 ................................................................ 1,000,000 1,077,310
Refunding, Series 1992, 6.25%, 1/01/20 ...................................................... 2,620,000 2,723,097
Refunding, Series 1992, Pre-Refunded, 6.25%, 1/01/20 ........................................ 1,000,000 1,060,340
Coastal Solid Waste Disposal System Authority Revenue,
Regional Solid Waste Management, Refunding, 6.50%, 6/01/08 ................................... 3,100,000 3,328,005
Columbus County Industrial Facilities and PCFA, Solid Water Disposal Revenue,
International Paper Co. Project, Refunding, Series A, 5.80%, 12/01/16 ........................ 1,450,000 1,426,597
Concord COP, Series B, MBIA Insured,
5.75%, 6/01/16 .............................................................................. 1,475,000 1,502,229
6.125%, 6/01/21 ............................................................................. 2,180,000 2,261,096
Concord Utilities Systems Revenue, Series A, MBIA Insured, 5.00%, 12/01/22 ..................... 1,000,000 906,780
Cumberland County COP, Civic Center Project,
Refunding, AMBAC Insured, 5.00%, 12/01/18 ................................................... 3,000,000 2,749,680
Refunding, AMBAC Insured, 5.00%, 12/01/24 ................................................... 2,760,000 2,482,427
Series A, AMBAC Insured, Pre-Refunded, 6.40%, 12/01/19 ...................................... 3,500,000 3,866,170
Series A, AMBAC Insured, Pre-Refunded, 6.40%, 12/01/24 ...................................... 3,765,000 4,158,894
Cumberland County Hospital Facilities Revenue, Cumberland County Hospital Systems Inc.,
MBIA Insured, Pre-Refunded, 6.00%, 10/01/21 ................................................. 2,500,000 2,592,575
Refunding, 5.25%, 10/01/29 .................................................................. 5,500,000 4,907,430
Davidson County COP, MBIA Insured, 5.00%, 6/01/18 .............................................. 600,000 550,662
Davie County GO, North Carolina Water, Unlimited Tax, Pre-Refunded, 7.10%,
4/01/10 ..................................................................................... 350,000 363,640
4/01/11 ..................................................................................... 250,000 259,743
Duplin County COP, Social Service Administrative Building,
Solid Waste Project, FGIC Insured, 6.75%, 9/01/12 ............................................ 2,000,000 2,115,620
Durham COP, Series 1991, 6.875%, 4/01/09 ....................................................... 1,650,000 1,735,058
Durham County COP,
Hospital and Office Facilities Project, Pre-Refunded, 6.00%, 5/01/14 ........................ 3,000,000 3,211,770
Hospital and Office Facilities Project, Pre-Refunded, 6.00%, 5/01/17 ........................ 3,200,000 3,425,888
Jail Facilities and Computer Equipment Project, Pre-Refunded, 6.625%, 5/01/14 ............... 3,000,000 3,175,320
East Carolina University Revenue, Student Fee,
Student Health Center, MBIA Insured, 5.25%, 5/01/19 .......................................... 1,160,000 1,122,625
Fayetteville Public Works Commission Revenue,
FSA Insured, 5.125%, 3/01/17 ................................................................ 2,500,000 2,365,950
FSA Insured, 5.125%, 3/01/24 ................................................................ 2,000,000 1,841,740
Series A, FSA Insured, 6.00%, 3/01/16 ....................................................... 2,000,000 2,077,160
Franklin County COP, AMBAC Insured, 5.00%, 6/01/25 ............................................. 1,500,000 1,345,980
Gaston COP, Police Station Project, FGIC Insured, 5.70%, 8/01/15 ............................... 1,500,000 1,535,370
Gaston County COP, Public Facilities Project, MBIA Insured, 5.25%, 12/01/16 .................... 1,000,000 977,730
Gaston County Industrial Facilities and PCFA Revenue, Duke Power Co. Project, 7.70%, 10/01/12 .. 750,000 774,413
Gastonia Combined Utilities System Revenue, MBIA Insured, Pre-Refunded, 6.10%, 5/01/19 ......... 2,200,000 2,384,052
Greensboro COP, Coliseum Arena Expansion Project, 6.75%, 12/01/09 .............................. 1,610,000 1,698,131
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Greensboro HDC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.70%, 1/01/24 ............. $ 1,320,000 $ 1,358,095
Guam Power Authority Revenue, Series A, Pre-Refunded, 6.375%, 10/01/08 .......................... 1,000,000 1,077,630
Halifax County Industrial Facilities and PCFA Revenue,
Champion International Corporate Project, 5.45%, 11/01/33 .................................... 4,000,000 3,519,760
Halifax County Insured Facility PCR, Solid Waste Disposal,
Champion International Corp., 8.15%, 11/01/19 ................................................ 400,000 410,056
Haywood County Industrial Facilities and PCFA,
Environmental Improvement Revenue, Champion International Project, 6.25%, 9/01/25 ........... 2,000,000 2,017,500
Solid Waste Disposal Revenue, Champion International, 8.10%, 11/01/09 ....................... 195,000 199,895
Solid Waste Disposal Revenue, Champion International, Pre-Refunded, 8.10%, 11/01/09 ......... 5,000 5,134
Highpoint Special Obligation Sales Tax Revenue, Solid Waste Management Project, 7.15%, 7/01/01 .. 800,000 806,400
Johnston County Finance Corp. Installment Payment Revenue,
School and Museum Project, FSA Insured, 5.25%, 8/01/21 ....................................... 1,000,000 953,660
Kinston Enterprise System Revenue, Combined Enterprise System, FSA Insured, 5.70%, 4/01/21 ...... 1,700,000 1,714,824
Kinston Housing Authority Mortgage Revenue,
Kinston Towers Project, Refunding, 6.75%, 12/01/18 ........................................... 3,155,000 3,234,317
Martin County Industrial Facilities and PCFA Revenue,
Pollution Control, Weyerhaeuser Co. Project, Refunding, 6.375%, 1/01/10 ..................... 3,000,000 3,122,340
Solid Waste, Weyerhaeuser Co. Project, 5.65%, 12/01/23 ...................................... 2,000,000 1,891,460
Solid Waste, Weyerhaeuser Co. Project, 6.00%, 11/01/25 ...................................... 4,000,000 4,020,080
Mooresville Grade School District COP, AMBAC Insured, 6.35%, 10/01/14 ........................... 1,000,000 1,055,790
New Hanover County Hospital Revenue,
New Hanover Regional Medical Center Project, MBIA Insured, 5.00%, 10/01/28 ................... 4,000,000 3,562,960
New Hanover County Industrial Facilities and PCFA Revenue, Refunding, 6.70%, 7/01/19 ............ 1,000,000 1,047,820
North Carolina Eastern Municipal Power Agency Power System Revenue,
Refunding, MBIA Insured, 5.375%, 1/01/24 .................................................... 9,300,000 8,963,247
Refunding, Series A, 6.50%, 1/01/17 ......................................................... 9,000,000 9,096,750
Refunding, Series A, 6.50%, 1/01/18 ......................................................... 3,000,000 3,080,820
Refunding, Series A, 5.75%, 1/01/26 ......................................................... 10,000,000 9,176,700
Refunding, Series B, 6.00%, 1/01/14 ......................................................... 3,000,000 2,954,430
Refunding, Series B, 5.75%, 1/01/24 ......................................................... 2,000,000 1,842,840
Series B, MBIA Insured, 5.875%, 1/01/21 ..................................................... 5,000,000 5,094,750
North Carolina Educational Facilities Finance Agency Revenue,
High Point College Project, 7.10%,
12/01/07 .................................................................................... 190,000 194,820
12/01/08 .................................................................................... 205,000 210,174
12/01/09 .................................................................................... 220,000 225,502
North Carolina HFA,
Home Ownership, Series 2-B, 5.10%, 7/01/17 .................................................. 1,450,000 1,381,357
MF, Mortgage Loan Resolution, Refunding, Series H, 6.05%, 7/01/28 ........................... 2,500,000 2,565,625
MF, Refunding, Series A, AMBAC Insured, 5.90%, 7/01/20 ...................................... 3,000,000 3,022,140
MF, Refunding, Series J, 5.45%, 7/01/17 ..................................................... 2,175,000 2,121,560
MFR, Refunding, Series B, 6.90%, 7/01/24 .................................................... 2,925,000 3,101,729
Refunding, Series F, 6.70%, 1/01/27 ......................................................... 4,855,000 5,160,574
SF, Refunding, Series DD, 6.20%, 9/01/27 .................................................... 2,920,000 2,965,377
SF, Series JJ, 6.45%, 9/01/27 ............................................................... 4,640,000 4,752,566
SFMR, Series J, 7.40%, 3/01/22 .............................................................. 135,000 138,349
SFMR, Series M, 7.85%, 9/01/28 .............................................................. 155,000 158,943
SFR, Refunding, Series S, 6.95%, 3/01/17 .................................................... 2,360,000 2,466,460
SFR, Series AA, 6.25%, 3/01/17 .............................................................. 915,000 943,100
SFR, Series RR, 5.85%, 9/01/28 .............................................................. 3,000,000 3,010,830
SFR, Series X, 6.65%, 9/01/19 ............................................................... 2,020,000 2,098,538
North Carolina Medical Care Commission Health Care Facilities Revenue,
Duke University Health Systems Project,Series B, 5.00%, 6/01/28 ............................. 5,000,000 4,380,200
Novant Health Project, Refunding, Series A, MBIA Insured, 5.00%, 10/01/18 ................... 1,500,000 1,375,500
Novant Health Project, Refunding, Series A, MBIA Insured, 5.00%, 10/01/24 ................... 5,500,000 4,948,735
Scotland Memorial Hospital Project, Asset Guaranteed, 5.50%, 10/01/19 ....................... 630,000 607,723
Scotland Memorial Hospital Project, Asset Guaranteed, 5.50%, 10/01/29 ....................... 1,220,000 1,156,536
Stanley Memorial Hospital Project, Pre-Refunded, 7.80%, 10/01/19 ............................ 1,250,000 1,278,988
North Carolina Medical Care Commission Health System Revenue,
Catholic Health East Project, Series C, AMBAC Insured, 5.00%,
11/15/18 .................................................................................... 2,500,000 2,291,675
11/15/28 .................................................................................... 4,850,000 4,319,071
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
North Carolina Medical Care Commission Hospital Revenue,
Annie Pen Memorial Hospital Project, Pre-Refunded, 7.50%, 8/15/21 ............... $ 4,700,000 $ 5,122,671
Annie Penn Memorial Hospital Project, Refunding, 5.25%, 1/01/12 ................. 1,940,000 1,811,126
Annie Penn Memorial Hospital Project, Refunding, 5.375%, 1/01/22 ................ 1,920,000 1,733,990
Duke University Hospital Project, Series C, 5.25%, 6/01/26 ...................... 1,500,000 1,371,375
Halifax Memorial Hospital Project, Pre-Refunded, 6.75%, 8/15/24 ................. 3,500,000 3,794,805
Halifax Regional Medical Center Project, 5.00%, 8/15/18 ......................... 1,500,000 1,303,920
Halifax Regional Medical Center Project, 5.00%, 8/15/24 ......................... 2,800,000 2,357,404
High Point Regional Health System, AMBAC Insured, 5.00%, 10/01/29 ............... 5,000,000 4,446,600
Mission St. Joseph's Health System Project, MBIA Insured, 5.125%, 10/01/28 ...... 5,000,000 4,560,850
North Carolina Baptist Hospitals Project, Refunding, Series A, 6.00%, 6/01/22 ... 4,830,000 4,905,010
Rex Healthcare Project, AMBAC Insured, 5.00%, 6/01/17 ........................... 2,780,000 2,567,219
Roanoke-Chowan Hospital Project, Pre-Refunded, 7.75%, 10/01/19 .................. 3,000,000 3,069,210
Transylvania Community Hospital Inc. Project, Refunding, 5.75%, 10/01/19 ........ 1,090,000 1,040,056
Wake County Hospital System Project, MBIA Insured, 5.375%, 10/01/26 ............. 10,500,000 10,073,385
Wayne Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.00%, 10/01/21 ... 1,000,000 1,055,410
Wilson Memorial Hospital Project, Refunding, AMBAC Insured, 5.625%, 11/01/18 .... 5,000,000 5,017,400
Wyne Memorial Hospital Project, Refunding, AMBAC Insured, 5.00%, 10/01/21 ....... 2,205,000 2,004,676
North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue,
Refunding, 6.25%, 1/01/17 ....................................................... 6,820,000 6,889,905
Series A, MBIA Insured, 5.125%, 1/01/17 ......................................... 1,000,000 941,330
Series A, MBIA Insured, 5.00%, 1/01/20 .......................................... 2,000,000 1,828,100
North Carolina State Education Assistance Authority Revenue,
Guaranteed, Student Loan, sub. lien,
Series A, 6.05%, 7/01/10 ........................................................ 3,310,000 3,363,225
Series A, 6.30%, 7/01/15 ........................................................ 1,500,000 1,523,880
Series C, 6.35%, 7/01/16 ........................................................ 4,500,000 4,550,985
Northampton County Insured Facility PCR,
Solid Waste Disposal, Champion International Corp., 8.05%, 11/01/04 .............. 400,000 410,008
Onslow County Combined Enterprise System Revenue, MBIA Insured, 6.00%, 6/01/15 ..... 2,000,000 2,103,780
Pender County COP, Pre-Refunded, 7.70%, 6/01/11 .................................... 1,195,000 1,288,449
Person County COP, Law Enforcement Center Project,
Series 1991, MBIA Insured, 7.125%, 6/01/11 ....................................... 2,165,000 2,290,916
Pitt County COP,
FGIC Insured, 6.00%, 4/01/12 .................................................... 750,000 786,128
MBIA Insured, 5.85%, 4/01/17 .................................................... 5,055,000 5,173,793
Puerto Rico Commonwealth GO,
Pre-Refunded, 6.45%, 7/01/17 .................................................... 8,050,000 8,865,385
Series 1990, Pre-Refunded, 7.25%, 7/01/10 ....................................... 500,000 524,555
Puerto Rico Commonwealth Highway and
Transportation Authority Revenue, Refunding, Series R, 7.15%, 7/01/00 ............ 1,250,000 1,283,613
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Tax Revenue, Series A,
7.75%, 7/01/08 .................................................................. 100,000 101,510
7.50%, 7/01/09 .................................................................. 25,000 25,318
Puerto Rico Electric Power Authority Revenue,
Series P, Pre-Refunded, 7.00%, 7/01/21 .......................................... 1,000,000 1,070,530
Series T, Pre-Refunded, 6.375%, 7/01/24 ......................................... 1,000,000 1,097,520
Series X, Pre-Refunded, 6.125%, 7/01/21 ......................................... 5,000,000 5,456,900
Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ................ 365,000 375,220
Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 .... 2,205,000 2,291,612
Puerto Rico Telephone Authority Revenue, Refunding, Series L,
6.00%, 1/01/12 .................................................................. 1,885,000 1,950,579
6.125%, 1/01/22 ................................................................. 1,490,000 1,565,722
Raeford HDC Revenue, First Lien, Yadkin Trail, Refunding, Series A, 6.00%, 7/15/22 . 1,415,000 1,433,324
Robeson County Industrial Facilities and PCFA Revenue,
Campbell Soup Co. Project, Refunding, 6.40%, 12/01/06 ............................ 1,750,000 1,927,345
Rutherford County COP, Public Facilities Project, FGIC Insured, 6.25%, 6/01/23 ..... 1,850,000 1,963,590
Scotland County COP, Jail/Courthouse Project, FSA Insured, 6.75%, 3/01/11 .......... 1,000,000 1,047,610
Stokes County COP, MBIA Insured, 7.00%, 3/01/06 .................................... 1,000,000 1,051,770
University of North Carolina at Chapel Hill Revenue,
Parking System, Series A, 5.70%, 5/15/27 ......................................... 3,000,000 2,991,420
University of North Carolina at Charlotte Revenue,
Student Activity Center, MBIA Insured, 5.50%,
6/01/16 ......................................................................... 1,000,000 1,001,160
6/01/21 ......................................................................... 3,500,000 3,447,324
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
University of North Carolina at Greensboro Revenue, Student Facilities System,
Series B, MBIA Insured, 5.45%, 4/01/23 ......................................... $ 1,000,000 $ 981,730
Series C, AMBAC Insured, 5.30%, 4/01/23 ........................................ 3,785,000 3,641,963
University of North Carolina at Wilmington Revenue,
Student Union System, AMBAC Insured, Pre-Refunded, 6.90%, 1/01/07 ............... 250,000 257,477
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A,
5.50%, 10/01/18 ................................................................ 2,000,000 1,915,640
5.625%, 10/01/25 ............................................................... 1,575,000 1,511,558
Wake County Industrial Facilities and PCFA Revenue,
Carolina Power and Light Co., 6.90%, 4/01/09 .................................... 10,000,000 10,329,200
Wilmington COP,
AMBAC Insured, 5.20%, 11/01/17 ................................................. 1,500,000 1,435,334
Series A, MBIA Insured, 5.30%, 6/01/19 ......................................... 2,225,000 2,145,656
Winston-Salem SFMR, 8.00%, 9/01/07 ................................................. 250,000 258,392
Winston-Salem Water and Sewer System Revenue, Series B, 5.70%, 6/01/17 ............. 2,250,000 2,282,107
------------
TOTAL LONG TERM INVESTMENTS (COST $387,415,036) .................................... 387,163,526
------------
(a)SHORT TERM INVESTMENTS .1%
Puerto Rico Commonwealth Government Development Bank,
Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ................... 100,000 100,000
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 .................... 100,000 100,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $200,000) ....................................... 200,000
------------
TOTAL INVESTMENTS (COST $387,615,036) 99.7% ........................................ 387,363,526
OTHER ASSETS, LESS LIABILITIES .3% ................................................. 1,481,220
------------
NET ASSETS 100.0% .................................................................. $388,844,746
============
</TABLE>
See glossary of terms on page 96
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin Texas Tax-Free Income Fund
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
CLASS A (UNAUDITED)*** 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ............. $ 11.42 $ 11.68 $ 11.37
-------- -------- --------
Income from investment operations:
Net investment income ........................... .29 .60 .62
Net realized and unrealized gains (losses) ...... (.54) (.05) .36
-------- -------- --------
Total from investment operations ................. (.25) .55 .98
-------- -------- --------
Less distributions from:
Net investment income ........................... (.30)(4) (.60)(3) (.63)
In excess of net investment income -- -- (.01)
Net realized gains .............................. (.04) (.21) (.03)
-------- -------- --------
Total distributions .............................. (.34) (.81) (.67)
-------- -------- --------
Net asset value, end of period ................... $ 10.83 $ 11.42 $ 11.68
-------- -------- --------
Total return* .................................... (2.28%) 4.86% 8.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $117,632 $127,739 $130,578
Ratios to average net assets:
Expenses ........................................ .79%** .77% .76%
Net investment income ........................... 5.17%** 5.17% 5.44%
Portfolio turnover rate .......................... 13.64% 25.26% 34.52%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
CLASS A 1997 1996(1) 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ........... $ 11.58 $ 11.25 $ 11.72
-------- -------- --------
Income from investment operations:
Net investment income ......................... .66 .67 .68
Net realized and unrealized gains (losses) .... -- .34 (.49)
-------- -------- --------
Total from investment operations ............... .66 1.01 .19
-------- -------- --------
Less distributions from:
Net investment income ......................... (.67) (.68) (.66)
In excess of net investment income............. -- -- --
Net realized gains ............................ (.20) -- --
-------- -------- --------
Total distributions ............................ (.87) (.68) (.66)
-------- -------- --------
Net asset value, end of period ................. $ 11.37 $ 11.58 $ 11.25
-------- -------- --------
Total return* .................................. 5.91% 9.15% 1.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $126,612 $129,702 $130,684
Ratios to average net assets:
Expenses ...................................... .75% .76% .73%
Net investment income ......................... 5.70% 5.86% 6.05%
Portfolio turnover rate ........................ 35.57% 18.38% 6.36%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 11.57 $ 11.81 $ 11.49 $ 11.68 $ 11.27
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income .............................. .26 .53 .58 .60 .51
Net realized and unrealized gains (losses) ......... (.56) (.03) .35 .02 .40
--------- --------- --------- --------- ---------
Total from investment operations .................... (.30) .50 .93 .62 .91
--------- --------- --------- --------- ---------
Less distributions from:
Net investment income .............................. (.26)(4) (.53)(3) (.58)(2) (.61) (.50)
Net realized gains ................................. (.04) (.21) (.03) (.20) --
--------- --------- --------- --------- ---------
Total distributions ................................. (.30) (.74) (.61) (.81) (.50)
--------- --------- --------- --------- ---------
Net asset value, end of period ...................... $ 10.97 $ 11.57 $ 11.81 $ 11.49 $ 11.68
--------- --------- --------- --------- ---------
Total return* ....................................... (2.63%) 4.40% 8.31% 5.48% 8.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $ 4,911 $ 5,229 $ 2,076 $ 740 $ 79
Ratios to average net assets:
Expenses ........................................... 1.35%** 1.33% 1.33% 1.32% 1.33%**
Net investment income .............................. 4.61%** 4.61% 4.79% 5.03% 5.23%**
Portfolio turnover rate ............................. 13.64% 25.26% 34.52% 35.57% 18.38%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.001.
(3) Includes distributions in excess of net investment income in the amount of
$.0005 and $.0003 for Class A and Class C, respectively.
(4) Includes distributions in excess of net investment income in the amount of
$.006 and $.005 for Class A and Class C, respectively.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN TEXAS TAX-FREE INCOME FUND AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 104.7%
Aldine ISD, Series A, 5.00%, 2/15/22 ......................................................... $1,500,000 $1,350,375
Alliance Airport Authority Special Facilities Revenue,
American Airlines Inc. Project, 7.00%, 12/01/11 ........................................... 2,250,000 2,492,438
(b)Austin Hotel Occupancy Tax Revenue, sub. lien, Refunding, AMBAC Insured, 5.80%, 11/15/29 .. 2,500,000 2,503,575
Austin Utility System Revenue,
Refunding, MBIA Insured, 5.50%, 5/15/14 .................................................. 1,325,000 1,326,166
Series A, AMBAC Insured, 6.75%, 11/15/07 ................................................. 800,000 850,528
Series A, Pre-Refunded, 8.00%, 11/15/16 .................................................. 50,000 53,192
Bexar County Health Facilities Development Corp. Revenue,
Incarnate Word Health Services, Refunding, FSA Insured, ETM, 6.00%, 11/15/15 ............. 3,000,000 3,257,460
Bexar County HFC Revenue, GNMA Secured, 8.10%, 3/01/24 ...................................... 95,000 98,919
Bexar Metropolitan Water District Waterworks Systems Revenue,
Refunding, MBIA Insured, 6.35%, 5/01/25 ................................................... 1,890,000 2,004,912
Brazos Higher Education Authority Revenue, Student Loan Inc.,
Refunding, Series A-2, 6.80%, 12/01/04 .................................................... 825,000 859,106
Brazos River Authority PCR, Texas Utilities Electric Co. Project, Collateralized,
Refunding, Series C, 5.55%, 6/01/30 ...................................................... 3,000,000 2,665,980
Series A, 7.875%, 3/01/21 ................................................................ 500,000 528,700
(b)Brownsville Combined Tax and Revenue, Certificates of Obligation,
Series A, FGIC Insured, 5.60%, 2/15/19 .................................................... 1,000,000 992,940
Cameron County HFC, Collateralized Mortgage Obligation,
Refunding, Series B, FGIC Insured, 7.85%, 3/01/24 ......................................... 70,000 72,873
Castleberry ISD, Refunding, 6.00%, 8/15/25 .................................................. 2,000,000 2,122,160
Cimarron MUD, Waterworks and Sewer System Combined Tax and Revenue,
Asset Guaranteed, Pre-Refunded, 7.50%, 3/01/15 ............................................ 2,275,000 2,305,758
Comal County Health Facilities Development Corp. Revenue,
McKenna Memorial Hospital, Refunding, FHA Insured, 7.375%, 1/15/21 ........................ 1,715,000 1,785,932
Corpus Christi HFC, SFMR, Refunding, Series A, MBIA Insured, 7.70%, 7/01/11 ................. 745,000 781,147
Dallas Civic Center Convention Complex Revenue, senior lien,
AMBAC Insured, Pre-Refunded, 7.00%, 1/01/10 ............................................... 2,000,000 2,074,840
Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 ............................................. 100,000 103,699
Dallas Housing Corp. Capital Projects Revenue,
Section 8, Assisted Projects, Refunding, 7.70%, 8/01/05 ................................... 500,000 514,520
Dallas-Fort Worth International Airport Facilities Improvement Corp. Revenue,
American Airlines Inc., 8.00%, 11/01/24 .................................................. 1,000,000 1,054,430
American Airlines Inc., Refunding, 6.00%, 11/01/14 ....................................... 2,000,000 2,035,920
Delta Airlines Inc., 7.625%, 11/01/21 .................................................... 2,000,000 2,125,900
Dallas-Fort Worth Regional Airport Revenue,
Joint Dallas-Fort Worth International, Refunding, MBIA Insured, 5.75%, 11/01/24 ........... 1,000,000 1,011,120
Decatur Hospital Authority Hospital Revenue, Series A, 5.75%, 9/01/29 ....................... 4,245,000 3,786,328
Denison Hospital Authority Revenue, Texoma Medical Center Inc. Project, 7.00%, 8/15/14 ...... 1,250,000 1,325,875
Denton County GO, Permanent Improvement, Refunding, 5.125%, 7/15/26 ......................... 2,000,000 1,845,260
El Paso HFC, SFMR, Refunding, Series A, 8.75%, 10/01/11 ..................................... 360,000 381,362
Fort Worth HFC,
HMR, Refunding, Series A, 8.50%, 10/01/11 ................................................ 665,000 702,805
SFMR, GNMA Secured, 8.25%, 12/01/11 ...................................................... 20,000 20,341
Gulf Coast Waste Disposal Authority Revenue,
Champion International Corp., Series A, 6.875%, 12/01/28 ................................. 1,000,000 1,061,720
Valero Energy Corp. Project, 5.70%, 4/01/32 .............................................. 3,000,000 2,713,830
Harris County Health Facilities Development Corp. Revenue,
Christus Health, Refunding, Series A, MBIA Insured, 5.375%, 7/01/29 ...................... 1,365,000 1,277,544
Hermann Hospital Project, FSA Insured, Pre-Refunded, 7.00%, 10/01/14 ..................... 750,000 806,340
Harrison County Health Facilities Development Corp.
Hospital Revenue, Marshall Regional Medical Center Project, 5.50%, 1/01/18 ................ 1,750,000 1,692,985
Houston Higher Education Finance Corp.
Higher Education Revenue, Rice University Project, Series A, 5.375%, 11/15/29 ............. 2,500,000 2,376,450
Leon County PCR, Nucor Corp. Project, Refunding, Series A, 7.375%, 8/01/09 .................. 2,000,000 2,118,440
Lower Colorado River Authority Revenue,
Refunding, Series B, AMBAC Insured, 7.00%, 1/01/11 ....................................... 55,000 57,727
Series B, AMBAC Insured, Pre-Refunded, 7.00%, 1/01/11 .................................... 150,000 158,457
Lower Neches Valley Authority IDC Revenue,
Mobil Oil Refunding Corp., Refunding, 5.55%, 3/01/33 ...................................... 1,500,000 1,409,175
Matagorda County Navigation District No. 1 PCR, Central Power and Light Co. Project,
Collateralized, 7.50%, 12/15/14 .......................................................... 1,200,000 1,245,120
Refunding, Series E, MBIA Insured, 6.10%, 7/01/28 ........................................ 1,500,000 1,544,610
Mesquite Health Facilities Development Corp. Revenue,
Retirement Facility, Christian Care Centers Inc., Refunding, Series A, 6.40%,
2/15/16 .................................................................................. 1,000,000 1,024,180
2/15/20 .................................................................................. 2,000,000 2,043,040
Montgomery County Texas GO, Library,
FGIC Insured, Pre-Refunded, 6.75%, 9/01/10 ............................................... 280,000 299,326
FGIC Insured, Pre-Refunded, 6.75%, 9/01/11 ............................................... 295,000 315,361
Refunding, FGIC Insured, 6.75%, 9/01/10 .................................................. 495,000 523,888
Refunding, FGIC Insured, 6.75%, 9/01/11 .................................................. 530,000 560,019
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN TEXAS TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
North Central Health Facility Development Corp. Revenue, C.C. Young Memorial Home Project,
Refunding, 6.30%, 2/15/15 ................................................................ $1,530,000 $1,555,964
Refunding, 6.375%, 2/15/20 ............................................................... 2,785,000 2,849,612
Series A, 5.375%, 2/15/14 ................................................................ 500,000 472,375
Series A, 5.375%, 2/15/25 ................................................................ 1,750,000 1,570,415
Nueces River Authority Environmental Improvement Revenue,
Asarco Inc. Project, Refunding, 5.60%, 1/01/27 ............................................ 6,000,000 5,412,000
Port Corpus Christi Nueces County General Revenue,
Union Pacific, Refunding, 5.65%, 12/01/22 ................................................. 2,000,000 1,905,440
Red River Authority PCR, West Texas Utilities Co. Project,
Public Service Co. of Oklahoma, Central Power and Light Co., Refunding,
MBIA Insured, 6.00%, 6/01/20 .............................................................. 7,000,000 7,229,880
Sabine River Authority PCR,
Southwestern Electric Power Co., Refunding, MBIA Insured, 6.10%, 4/01/18 ................. 5,000,000 5,216,600
Texas Utilities Electric Co. Project, Collateralized,
Refunding, FGIC Insured, 6.55%, 10/01/22 ................................................. 1,200,000 1,267,368
Tarrant County Health Facilities Development Corp.
Health Systems Revenue, Harris Methodist Health, FGIC Insured, ETM, 6.00%, 9/01/24 ....... 4,000,000 4,134,440
Tarrant County Health Facilities Development Corp. Revenue,
Bethesda Living Centers, Series C, 5.75%, 8/15/18 ......................................... 1,570,000 1,466,961
8/15/28 .................................................................................. 3,900,000 3,543,969
Texas City IDC, Marine Terminal Revenue,
ARCO Pipe Line Co. Project, Refunding, 7.375%, 10/01/20 ................................... 500,000 604,750
Texas Housing Agency Residential Development
Mortgage Revenue, Series A, 7.60%, 7/01/16 ................................................ 1,410,000 1,449,085
Texas State Department of Housing and Community Affairs
HMR, Refunding, Series A, GNMA Secured, 6.95%, 7/01/23 .................................... 1,515,000 1,589,947
Texas State GO, Veterans Housing Assistance Fund I, Refunding, 6.15%, 12/01/25 .............. 1,000,000 1,016,680
Texas State Higher Education Coordinating Board College
Student Loan Revenue, senior lien, 7.70%, 10/01/25 ........................................ 960,000 990,931
Texas State Turnpike Authority Revenue, Mountain Creek Lake Bridge, 7.00%, 1/01/07 .......... 25,000 25,343
Texas Water Development Board Revenue,
State Revolving Fund, senior lien, Series A, 5.75%, 7/15/16 ............................... 3,275,000 3,321,047
Tomball Hospital Authority Revenue, Refunding, 6.125%, 7/01/23 .............................. 2,000,000 2,004,160
Tyler Health Facilities Development Corp.
Hospital Revenue, East Texas Medical Center Project,
Series D, FSA Insured, 5.375%, 11/01/27 ................................................... 5,000,000 4,673,650
University of Texas University Revenues, Financing System, Refunding,
Series A, 7.00%, 8/15/07 ................................................................. 665,000 705,179
(b)Series A, 5.70%, 8/15/20 ................................................................. 2,500,000 2,503,675
Series B, 6.75%, 8/15/13 ................................................................. 1,300,000 1,369,069
(b)Series B, 5.70%, 8/15/20 ................................................................. 2,500,000 2,503,675
Van Alstyne ISD, GO, Refunding, 5.95%, 8/15/29 .............................................. 1,885,000 1,912,314
Waco Health Facilities Development Corp. Hospital Revenue,
Hillcrest Baptist Medical Center Project, MBIA Insured, 7.125%, 9/01/14 ................... 500,000 521,990
West Side Calhoun County Navigation District Solid Waste Disposal Revenue,
Union Carbide Chemical and Plastics Co. Project, 8.20%, 3/15/21 ........................... 1,000,000 1,058,770
Wylie ISD, GO,
Pre-Refunded, 7.00%, 8/15/24 ............................................................. 660,000 766,009
Refunding, 7.00%, 8/15/24 ................................................................ 340,000 383,907
------------
TOTAL LONG TERM INVESTMENTS (COST $127,194,863) ............................................. 128,287,978
------------
(a)SHORT TERM INVESTMENTS 1.1%
Brazos River Harbor Naval District, Brazoria County Revenue, Dow Chemical Company Project,
Refunding, Series A, Daily VRDN and Put, 2.90%, 8/01/22 .................................. 200,000 200,000
Brazos River Harbor Navigation District Harbor Revenue,
BASF Corp. Project, Daily VRDN and Put, 3.00%, 4/01/31 ................................... 500,000 500,000
Guadalupe Blanco River Authority PCR,
Central Power and Light Co. Project, Refunding, Daily VRDN and Put, 2.75%, 11/01/15 ....... 200,000 200,000
Gulf Coast Waste Disposal Authority PCR,
AMOCO Oil Co. Project, Refunding, Daily VRDN and Put, 2.70%, 10/01/17 ..................... 400,000 400,000
Puerto Rico Commonwealth Government Development Bank,
Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ............................. 100,000 100,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,400,000) .............................................. 1,400,000
------------
TOTAL INVESTMENTS (COST $128,594,863) 105.8% ................................................ 129,687,978
OTHER ASSETS, LESS LIABILITIES (5.8%) ....................................................... (7,145,895)
------------
NET ASSETS 100.0% ........................................................................... $122,542,083
============
</TABLE>
See glossary of terms on page 96.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
CLASS A (UNAUDITED)*** 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ........... $ 11.88 $ 11.88 $ 11.65
-------- -------- --------
Income from investment operations:
Net investment income ......................... .29 .60 .62
Net realized and unrealized gains (losses) .... (.62) .03 .35
-------- -------- --------
Total from investment operations ............... (.33) .63 .97
-------- -------- --------
Less distributions from:
Net investment income ......................... (.30)(3) (.60)(2) (.64)
Net realized gains ............................ -- (.03) (.10)
-------- -------- --------
Total distributions ............................ (.30) (.63) (.74)
-------- -------- --------
Net asset value, end of period ................. $ 11.25 $ 11.88 $ 11.88
-------- -------- --------
Total return* .................................. (2.85%) 5.40% 8.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $363,263 $379,670 $332,199
Ratios to average net assets:
Expenses ...................................... .68%** .68% .69%
Net investment income ......................... 5.02%** 4.98% 5.29%
Portfolio turnover rate ........................ 8.55% 8.90% 12.90%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
CLASS A 1997 1996(1) 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ........... $ 11.72 $ 11.33 $ 11.82
-------- -------- --------
Income from investment operations:
Net investment income ......................... .65 .66 .66
Net realized and unrealized gains (losses) .... (.07) .38 (.50)
-------- -------- --------
Total from investment operations ............... .58 1.04 .16
-------- -------- --------
Less distributions from:
Net investment income ......................... (.64) (.65) (.65)
Net realized gains ............................ (.01) -- --
-------- -------- --------
Total distributions ............................ (.65) (.65) (.65)
-------- -------- --------
Net asset value, end of period ................. $ 11.65 $ 11.72 $ 11.33
-------- -------- --------
Total return* .................................. 5.15% 9.41% 1.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $287,172 $271,396 $255,965
Ratios to average net assets:
Expenses ...................................... .69% .69% .69%
Net investment income ......................... 5.56% 5.66% 5.86%
Portfolio turnover rate ........................ 19.25% 12.72% 21.73%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended February 28,
August 31, 1999 -----------------------------------------------------------------
CLASS C (unaudited)*** 1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
(for a share outstanding
throughout the period)
Net asset value, beginning of period ........... $ 11.95 $ 11.95 $ 11.71 $ 11.77 $ 11.35 $ 11.82
---------- ---------- ---------- ---------- ---------- ---------
Income from investment operations:
Net investment income ......................... .26 .53 .57 .58 .49 .66
Net realized and unrealized gains (losses) .... (.62) .03 .34 (.05) .41 (.50)
---------- ---------- ---------- ---------- ---------- ---------
Total from investment operations ............... (.36) .56 .91 .53 .90 .16
---------- ---------- ---------- ---------- ---------- ---------
Less distributions from:
Net investment income ......................... (.26)(3) (.53)(2) (.57) (.58) (.48) (.65)
Net realized gains ............................ -- (.03) (.10) (.01) -- --
---------- ---------- ---------- ---------- ---------- ---------
Total distributions ............................ (.26) (.56) (.67) (.59) (.48) (.65)
---------- ---------- ---------- ---------- ---------- ---------
Net asset value, end of period ................. $ 11.33 $ 11.95 $ 11.95 $ 11.71 $ 11.77 $ 11.33
---------- ---------- ---------- ---------- ---------- ---------
Total return* .................................. (3.02%) 4.78% 7.97% 4.61% 8.07% 1.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $ 23,673 $ 22,796 $ 13,186 $ 6,674 $ 2,050 $255,965
Ratios to average net assets:
Expenses ...................................... 1.24%** 1.24% 1.25% 1.25% 1.26%** .69%
Net investment income ......................... 4.46%** 4.42% 4.72% 4.94% 5.06%** 5.86%
Portfolio turnover rate ........................ 8.55% 8.90% 12.90% 19.25% 12.72% 21.73%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.0005 and $.0004 for Class A and C, respectively.
(3) Includes distributions in excess of net investment income in the amount of
$.005 and $.004 for Class A and C, respectively.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 100.0%
Abingdon IDA, Hospital Facilities Revenue,
Johnston Memorial Hospital, Refunding, 5.375%, 7/01/28 .................................. $5,000,000 $4,618,400
Albermarle County IDAR,
Martha Jefferson Hospital, Refunding, 5.875%, 10/01/13 ................................. 5,000,000 5,074,900
University of Virginia Health Services Foundation, Pre-Refunded, 6.50%, 10/01/22 ....... 1,125,000 1,212,953
Arlington County GO, Pre-Refunded, 6.00%, 8/01/13 ...................................... 2,085,000 2,256,783
Arlington County IDA, Hospital Facility Revenue,
Arlington Hospital, Series A, Pre-Refunded, 7.125%, 9/01/21 ............................. 2,000,000 2,150,820
Augusta County IDAR, Augusta Hospital Corp. Project,
AMBAC Insured, Pre-Refunded, 6.625%, 9/01/12 ........................................... 1,000,000 1,065,930
Pre-Refunded, 7.00%, 9/01/21 ........................................................... 2,000,000 2,144,080
Augusta County Virginia Service Authority Water
and Sewer Revenue, MBIA Insured, 5.00%, 11/01/24 ........................................ 2,400,000 2,179,704
Bedford County GO, Series A, FGIC Insured, 5.35%, 12/15/17 ................................ 1,250,000 1,225,613
Bedford County IDA, IDR, Nekoosa
Packaging Corp. Project, Refunding, 5.60%, 12/01/25 ..................................... 11,000,000 10,122,090
Blacksburg Polytechnic Institute Sanitation Authority
Sewer System Revenue, Pre-Refunded, 6.25%, 11/01/12 ...................................... 1,230,000 1,320,848
Bristol GO, MBIA Insured, 5.25%, 4/01/16 .................................................. 1,025,000 991,903
Chesapeake Hospital Authority Facilities Revenue,
Chesapeake General Hospital, 8.20%, 7/01/05 ............................................. 2,500,000 2,611,800
Chesapeake IDA,
Nursing Home Revenue, Sentara Life Care Corp. Project, 8.00%, 11/01/17 ................. 225,000 229,770
Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%, 6/01/12 . 3,940,000 4,187,235
Chesapeake Toll Road Revenue, Expressway, Series A, 5.625%,
7/15/19 ................................................................................ 2,000,000 1,951,980
7/15/32 ................................................................................ 8,000,000 7,570,960
Covington-Alleghany County IDA, PCR, Westvaco Corp. Project, Refunding, 6.65%, 9/01/18 .... 5,000,000 5,358,400
Danville COP, Social Services, Pre-Refunded, 7.625%, 4/01/13 .............................. 2,000,000 2,141,840
Danville GO, Series 1991, Pre-Refunded, 6.75%,
2/01/10 ................................................................................ 655,000 690,717
2/01/11 ................................................................................ 705,000 743,444
Danville IDA,
Hospital Revenue, Danville Regional Medical Center,
FGIC Insured, Pre-Refunded, 6.50%, 10/01/24 ...................................... 5,000,000 5,493,900
Solid Waste Disposal Revenue, International Paper Co., 6.50%, 3/01/19 .................. 500,000 523,810
Fairfax County EDA, Parking Revenue, Huntington Metrorail, Pre-Refunded, 7.00%, 9/01/10 ... 1,000,000 1,051,510
Fairfax County EDA Revenue, National Wildlife Federation, MBIA Insured, 5.375%, 9/01/29 ... 8,800,000 8,379,096
Fairfax County IDAR, Health Care, Inova Health System Project,
6.00%, 8/15/26 ......................................................................... 5,000,000 5,167,550
Refunding, Series A, 5.00%, 8/15/25 .................................................... 5,000,000 4,429,950
Fairfax County Redevelopment and Housing Authority MFHR,
Cedar Ridge Apartments, GNMA Secured, 6.30%, 12/20/27 .................................. 4,700,000 4,911,829
Paul Spring Center, Refunding, Series A, FHA Insured, 5.90%, 6/15/17 ................... 1,000,000 1,023,900
Paul Spring Center, Refunding, Series A, FHA Insured, 6.00%, 12/15/28 .................. 1,000,000 1,020,660
Fairfax County Sewer Revenue, MBIA Insured, 5.875%, 7/15/28 ............................... 6,500,000 6,673,355
Frederick County IDA, Lease Revenue,
Government Complex Facilities Project, MBIA Insured, 6.50%, 12/01/09 .................... 2,040,000 2,220,805
Fredericksburg IDA, Hospital Facilities Revenue,
Medicorp Health System Obligation, Refunding, AMBAC Insured, 5.25%,
6/15/16 ................................................................................ 1,860,000 1,809,296
6/15/23 ................................................................................ 10,000,000 9,429,400
Front Royal and Warren County IDAR, Mortgage,
Heritage Hall No. 13, Refunding, FHA Insured, 8.25%, 7/15/05 ............................ 20,000 20,266
Goochland County IDA, IDR, Nekoosa Packaging Corp., Refunding, 5.65%, 12/01/25 ............ 5,500,000 5,096,355
Guam Airport Authority Revenue,
Refunding, Series A, 6.375%, 10/01/10 .................................................. 830,000 874,040
Series A, 6.50%, 10/01/23 .............................................................. 1,000,000 1,057,330
Halifax County IDA, Exempt Facilities Revenue,
Old Dominion Electric Cooperative Project, 6.50%, 12/01/12 .............................. 3,000,000 3,146,250
Hampton Redevelopment and Housing Authority
Senior Living Association Revenue, Refunding, Series A, GNMA Secured, 6.00%, 1/20/26 ... 1,060,000 1,080,469
Hampton Roads Medical College General Revenue, Refunding, Series A, 6.875%, 11/15/16 ...... 1,500,000 1,572,480
Hampton Roads Regional Jail Authority
Jail Facilities Revenue, Series A, MBIA Insured, 5.00%, 7/01/28 ......................... 10,000,000 9,001,100
Hanover County IDA, Hospital Revenue, Bon Secours Health Systems Projects,
MBIA Insured, 5.50%, 8/15/25 ............................................................ 1,000,000 978,340
Hanover County Water and Sewer System Revenue, MBIA Insured, 5.25%, 2/01/26 ............... 4,175,000 3,963,495
Henrico County IDAR, Solid Waste, Browning-Ferris Industries,
South Atlantic Inc., Series A, 5.875%, 3/01/17 .......................................... 1,000,000 949,240
Henry County IDA, Hospital Revenue,
Memorial Hospital of Martinsville and Henry, Refunding, 6.00%, 1/01/27 .................. 1,250,000 1,248,213
Leesburg Utilities System Revenue, Refunding, MBIA Insured, 5.125%, 7/01/22 ............... 3,750,000 3,503,475
</TABLE>
Franklin Tax-Free Trust
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Loudoun County IDA, Hospital Revenue, Loudoun Hospital Center, FSA Insured, 5.80%,
6/01/20 ................................................................................ $2,000,000 $2,038,500
6/01/26 ................................................................................ 3,000,000 3,057,750
Loudoun County Sanitation Authority Water and Sewer Revenue,
Refunding, FGIC Insured, 5.125%, 1/01/26 ............................................... 3,795,000 3,508,743
Refunding, FGIC Insured, 5.125%, 1/01/30 ............................................... 5,250,000 4,830,420
Series 96, FGIC Insured, 5.25%, 1/01/26 ................................................ 6,500,000 6,170,970
Series 96, FGIC Insured, 5.25%, 1/01/30 ................................................ 1,000,000 946,340
Lynchburg IDA, Healthcare Facilities Revenue, Centra Health, Refunding, 5.20%, 1/01/28 .... 8,500,000 7,578,260
Lynchburg Redevelopment and Housing Authority Revenue,
Waldon Pond III, Refunding, Series A, GNMA Secured, 6.20%, 7/20/27 ...................... 1,000,000 1,036,640
Mecklenburg County IDAR, Exempt Facility, Series A, 7.35%, 5/01/08 ........................ 4,500,000 4,691,025
Metropolitan Washington D.C. Airports Authority General Airport Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 10/01/27 ..................................... 7,500,000 6,644,550
Series A, 7.60%, 10/01/14 .............................................................. 1,000,000 1,052,250
Series A, 5.375%, 10/01/23 ............................................................. 3,985,000 3,751,758
Series B, 5.75%, 10/01/20 .............................................................. 6,000,000 5,906,100
Newport News IDA, Mortgage Revenue, Mennowood Communities Inc.,
Series A, GNMA Secured, 6.25%, 8/01/36 .................................................. 2,990,000 3,099,285
(b)Newport News Redevelopment and Housing Authority Revenue, Refunding,
Series A, GNMA Secured, 5.85%, 12/20/30 ................................................. 2,000,000 2,004,400
Norfolk GO, MBIA Insured, Pre-Refunded, 5.75%, 6/01/14 .................................... 2,075,000 2,197,155
Norfolk IDAR,
Children's Hospital of the Kings' Group Inc.,
AMBAC Insured, Pre-Refunded, 7.00%, 6/01/11 ............................................ 3,000,000 3,202,260
Health Care, Bon Secours Health, Series B, MBIA Insured, 5.25%, 8/15/26 ................ 4,000,000 3,769,240
Medical Center Hospital Project, Series A, 7.00%, 11/01/07 ............................. 20,000 20,043
Norfolk Parking System Revenue, MBIA Insured, 5.55%, 2/01/27 .............................. 4,475,000 4,400,491
Norfolk Water Revenue,
AMBAC Insured, 5.375%, 11/01/23 ........................................................ 1,500,000 1,457,415
MBIA Insured, 5.875%, 11/01/20 ......................................................... 7,000,000 7,174,790
MBIA Insured, 5.90%, 11/01/25 .......................................................... 5,900,000 6,072,516
Northern Virginia Transportation District
Commission Commuter Rail Revenue, Railway Express Project,
FSA Insured, Pre-Refunded, 7.00%, 7/01/05 .............................................. 360,000 376,798
Peninsula Airport Commission Revenue, Airport Improvement, 7.25%, 7/15/11 ................. 1,000,000 1,060,360
Peninsula Ports Authority Coal Terminal Revenue,
Coal Terminal Association Project, Refunding, 7.375%, 6/01/20 ............................. 5,480,000 5,823,541
Peninsula Ports Authority Health Care Facilities Revenue,
Bon Secours Health System, Refunding, Series A, MBIA Insured, 5.25%, 8/15/23 .......... 1,500,000 1,423,605
Peninsula Ports Authority Health System Revenue,
Riverside Health System Project, Series A, Pre-Refunded, 6.625%, 7/01/18 ................ 6,000,000 6,470,340
Peninsula Ports Authority Hospital Facility Revenue,
Whittaker Memorial Hospital Project, Refunding, FHA Insured, 8.70%, 8/01/23 ............. 50,000 50,325
Portsmouth GO, FGIC Insured, 5.25%, 8/01/21 ............................................... 1,000,000 956,080
Portsmouth IDAR, Hotel Conference Center and Parking, FSA Insured, 5.00%, 4/01/29 ......... 3,000,000 2,689,530
(b)Prince William County Service Authority
Water and Sewer Systems Revenue, FGIC Insured, 5.50%, 7/01/29 ........................... 5,000,000 4,849,950
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series Q, Pre-Refunded, 8.00%, 7/01/18 ................................................. 1,000,000 1,055,590
Series Y, Pre-Refunded, 6.00%, 7/01/22 ................................................. 2,000,000 2,172,060
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A,
7.90%, 7/01/07 ......................................................................... 100,000 101,125
7.75%, 7/01/08 ......................................................................... 350,000 355,285
Puerto Rico Electric Power Authority Revenue,
Refunding, Series Z, 5.25%, 7/01/21 .................................................... 1,500,000 1,414,395
Series P, Pre-Refunded, 7.00%, 7/01/21 ................................................. 1,500,000 1,605,795
Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ........... 100,000 103,538
Puerto Rico HFC Revenue,
MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ............................................. 2,055,000 2,112,540
Sixth Portfolio, Section 8, Assisted Projects,
FHA Insured, Pre-Refunded, 7.75%, 12/01/26 ............................................. 20,000 23,480
Puerto Rico Telephone Authority Revenue, Series L, Pre-Refunded, 6.125%, 1/01/22 ....... 5,000,000 5,254,100
Richmond GO, Refunding and Improvement, Series A, FSA Insured, 5.125%, 1/15/24 ............ 6,250,000 5,794,875
Richmond Metropolitan Authority Expressway Revenue,
Refunding, Series B, FGIC Insured, 6.25%, 7/15/22 ...................................... 5,000,000 5,239,100
Series A, FGIC Insured, Pre-Refunded, 6.375%, 7/15/16 .................................. 2,500,000 2,684,725
South Boston IDAR, Halifax Community Hospital Inc. Project, 7.375%, 9/01/11 ............... 4,250,000 4,582,095
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Spotsylvania County Water and Sewer System Revenue, MBIA Insured,
5.25%, 6/01/22 ......................................................................... $5,500,000 $5,267,240
5.40%, 6/01/27 ......................................................................... 8,800,000 8,528,696
Staunton IDA, Facilities Revenue, Mary Baldwin College, Series B, Pre-Refunded,
8.00%, 11/01/17 .......................................................................... 895,000 961,114
Tazewell County IDA, Lease Revenue, Courthouse Project, MBIA Insured,
5.25%, 1/01/17 ......................................................................... 1,250,000 1,215,275
5.30%, 1/01/27 ......................................................................... 500,000 477,750
University of Virginia Revenue, Refunding, Series A, 5.00%, 6/01/24 ....................... 8,000,000 7,222,160
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%
10/01/15 ............................................................................... 1,500,000 1,448,715
10/01/18 ............................................................................... 1,500,000 1,436,730
Virginia College Building Authority Educational Facilities Revenue,
Marymount University Project, Pre-Refunded, 7.00%, 7/01/22 ............................. 1,750,000 1,902,005
Twenty-first Century College Program, 5.25%, 8/01/16 ................................... 1,000,000 970,510
Washington and Lee University, 5.75%, 1/01/19 .......................................... 50,000 50,977
Washington and Lee University Project, Pre-Refunded, 5.80%, 1/01/24 .................... 3,000,000 3,197,430
Virginia Commonwealth Transportation Board Transportation Program Revenue,
Oak Grove Connector, Series A, 5.25%, 5/15/22 ............................................ 1,875,000 1,768,144
Virginia Port Authority Revenue, MBIA Insured, 5.50%, 7/01/24 ............................. 4,250,000 4,104,608
Virginia State HDA,
Commonwealth Mortgage, Series A, 7.10%, 1/01/17 ........................................ 1,000,000 1,033,970
Commonwealth Mortgage, Series A, 7.15%, 1/01/33 ........................................ 4,440,000 4,605,923
Commonwealth Mortgage, Series A, Sub Series A-1, 8.10%, 1/01/17 ........................ 5,000 5,016
Commonwealth Mortgage, Series B, Sub Series B-3, 7.375%, 7/01/17 ....................... 45,000 46,016
Commonwealth Mortgage, Series B, Sub Series B-4, 6.55%, 1/01/27 ........................ 2,000,000 2,030,980
Commonwealth Mortgage, Series C, Sub Series C-3, 6.00%, 1/01/17 ........................ 2,000,000 2,039,600
Commonwealth Mortgage, Series D, Sub Series D-1, 6.40%, 7/01/17 ........................ 3,430,000 3,585,310
Commonwealth Mortgage, Series D, Sub Series D-2, 7.35%, 7/01/17 ........................ 155,000 155,631
Commonwealth Mortgage, Series H, Sub Series H-2, 6.55%, 1/01/17 ........................ 1,000,000 1,035,710
MF Housing, Series C, 5.30%, 11/01/16 .................................................. 2,830,000 2,749,062
MF Housing, Series F, 7.10%, 5/01/13 ................................................... 9,000,000 9,384,480
MF Housing, Series H, 5.55%, 5/01/15 ................................................... 2,000,000 1,964,960
Virginia State Resources Authority Sewer System Revenue, Harrisonburg Rockingham Region,
Series A, Pre-Refunded, 6.00%, 5/01/22 ................................................... 1,000,000 1,054,180
Virginia State Resources Authority Water and Sewer System Revenue,
Pooled Loan Program, Series A, ETM, 7.35%, 11/01/16 .................................... 45,000 45,461
Pooled Loan Program, Series A, ETM, 7.45%, 11/01/16 .................................... 10,000 10,104
Pooled Loan Program, Series A, Pre-Refunded, 7.35%, 11/01/16 ........................... 190,000 194,908
Rapidan Service Authority, Refunding, 5.30%, 10/01/18 .................................. 1,610,000 1,541,012
Virginia State Resources Authority Water System Revenue, Refunding, Series A,
6.125%, 4/01/19 .......................................................................... 1,000,000 1,034,170
Virginia State Transportation Board Transportation Contract Revenue,
U.S. Route 28 Project, Refunding, 6.50%, 4/01/18 ........................................ 9,000,000 9,521,190
Washington County IDA,
College Facilities Revenue, Emory and Henry College Project, 6.375%, 4/01/23 ........... 3,295,000 3,337,110
Hospital Facilities Revenue, First Mortgage, Johnston Memorial Hospital, Pre-Refunded,
7.00%, 7/01/22 ........................................................................ 3,000,000 3,264,780
West Point IDA, Solid Waste Disposal Revenue, Chesapeake Corp. Project, Refunding,
Series B, 6.25%, 3/01/19 .............................................................. 5,450,000 5,551,643
Winchester IDA, Educational Facilities Revenue, First Mortgage, Shenandoah University
Project, MBIA Insured, 5.25%, 10/01/28 ................................................... 7,000,000 6,630,750
Refunding, Asset Guaranteed, 6.80%, 10/01/24 ........................................... 2,000,000 2,136,734
-----------
TOTAL LONG TERM INVESTMENTS (COST $384,527,339) ........................................... 386,796,471
-----------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)SHORT TERM INVESTMENTS .2%
Petersburg Hospital Authority Revenue, Southside Regional Hospital Facility, Daily VRDN and
Put, 2.95%, 7/01/27 ...................................................................... $ 100,000 $ 100,000
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN
and Put, 2.85%, 12/01/15 ................................................................. 200,000 200,000
Roanoke IDA Hospital Revenue, Carilion Health System,
Series B, Daily VRDN and Put, 2.95%, 7/01/27 ............................................ 100,000 100,000
Southampton County IDAR, Various Exempt Facilities, Hadson Power, 11-A, Daily VRDN and
Put, 3.10%, 4/01/15 ...................................................................... 500,000 500,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $900,000) .............................................. 900,000
------------
TOTAL INVESTMENTS (COST $385,427,339) 100.2% .............................................. 387,696,471
OTHER ASSETS, LESS LIABILITIES (.2%) ...................................................... (760,633)
------------
NET ASSETS 100.0% ......................................................................... $386,935,838
============
</TABLE>
See glossary of terms on page 96.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principle balance plus accrued
interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ACES - Adjustable Convertible Exempt Securities
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co. (acquired by MBIA in 1989 and
no longer does business under this name).
CDA - Community Development Authority/Agency
CDD - Community Development District
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
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance (some of the securities shown as FSA Insured
were originally issued by Capital Guaranty Insurance Co. (CGIC) which was
acquired by FSA in 1995 and no longer does business under this name).
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority Revenue
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority Revenue
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
IDC - Industrial Development Corp.
IDR - Industrial Development Revenue
ISD - Independent School District
LP - Limited Partnership
MAC - Municipal Assistance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
MUD - Municipal Utility District
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
RDA - Redevelopment Agency
RDAR - Redevelopment Authority/Agency Revenue
SF - Single Family
SFHR - Single Family Housing Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
</TABLE>
FRANKLIN TAX-FREE TRUST
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ALABAMA TAX-FREE FLORIDA TAX-FREE GEORGIA TAX-FREE KENTUCKY TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities:
Cost ..................................... $ 240,415,527 $ 1,736,272,401 $ 181,539,982 $ 66,776,748
=============== =============== =============== ===============
Value .................................... 238,728,800 1,771,737,016 182,194,806 66,773,049
Cash ...................................... 65,827 60,188 61,362 90,254
Receivables:
Investment securities sold ............... -- -- 3,324,672 959,893
Capital shares sold ...................... 369,212 4,438,421 368,676 58,461
Interest ................................. 4,002,012 30,503,348 2,576,233 986,466
--------------- --------------- --------------- ---------------
Total assets ........................... 243,165,851 1,806,738,973 188,525,749 68,868,123
--------------- --------------- --------------- ---------------
Liabilities:
Payables:
Investment securities purchased .......... -- 50,608,696 11,571,993 1,509,335
Capital shares redeemed .................. 488,717 6,109,397 162,191 253,799
Affiliates ............................... 176,723 1,081,775 140,174 25,325
Shareholders ............................. 3,951 23,489 1,381 822
Distributions to shareholders ............. 406,273 2,871,250 325,111 110,773
Other liabilities ......................... 22,209 118,608 24,535 11,000
--------------- --------------- --------------- ---------------
Total liabilities ...................... 1,097,873 60,813,215 12,225,385 1,911,054
--------------- --------------- --------------- ---------------
Net assets, at value ................... $ 242,067,978 $ 1,745,925,758 $ 176,300,364 $ 66,957,069
=============== =============== =============== ===============
Net assets consist of:
Accumulated distributions in excess of
net investment income .................. (168,636) (1,585,145) (207,686) (66,170)
Net unrealized appreciation (depreciation) (1,686,727) 35,464,615 654,824 (3,699)
Accumulated net realized gain (loss) ...... (986,784) 2,122,019 (328,573) (971,073)
Capital shares ............................ 244,910,125 1,709,924,269 176,181,799 67,998,011
--------------- --------------- --------------- ---------------
Net assets, at value ................... $ 242,067,978 $ 1,745,925,758 $ 176,300,364 $ 66,957,069
=============== =============== =============== ===============
CLASS A:
Net assets, at value ...................... $ 225,818,356 $ 1,663,397,373 $ 158,065,488 $ 66,957,069
=============== =============== =============== ===============
Shares outstanding ........................ 20,325,508 146,610,543 13,773,146 6,159,783
=============== =============== =============== ===============
Net asset value per share* ................ $ 11.11 $ 11.35 $ 11.48 $ 10.87
=============== =============== =============== ===============
Maximum offering price per share
(net asset value per share / 95.75%) ..... $ 11.60 $ 11.85 $ 11.99 $ 11.35
=============== =============== =============== ===============
CLASS C:
Net assets, at value ...................... $ 16,249,622 $ 82,528,385 $ 18,234,876 --
=============== =============== =============== ===============
Shares outstanding ........................ 1,454,615 7,212,430 1,579,338 --
=============== =============== =============== ===============
Net asset value per share* ................ $ 11.17 $ 11.44 $ 11.55 --
=============== =============== =============== ===============
Maximum offering price per share
(net asset value per share / 99.00%) ..... $ 11.28 $ 11.56 $ 11.67 --
=============== =============== =============== ===============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN NORTH
LOUISIANA TAX-FREE MARYLAND TAX-FREE MISSOURI TAX-FREE CAROLINA TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities:
Cost .................................... $ 173,525,476 $ 263,034,788 $ 405,198,805 $ 387,615,036
============= ============= ============= =============
Value ................................... 173,654,218 263,441,014 405,117,821 387,363,526
Cash ..................................... 64,852 102,452 13,000 79,457
Receivables:
Capital shares sold ..................... 145,490 132,227 374,041 324,893
Interest ................................ 2,723,107 4,062,923 6,362,413 6,216,933
------------- ------------- ------------- -------------
Total assets .......................... 176,587,667 267,738,616 411,867,275 393,984,809
------------- ------------- ------------- -------------
Liabilities:
Payables:
Investment securities purchased ......... 8,537,802 -- 1,600,000 3,800,923
Capital shares redeemed ................. 176,984 415,906 120,517 400,517
Affiliates .............................. 124,183 193,088 283,070 285,859
Shareholders ............................ 1,607 4,312 4,198 2,558
Distributions to shareholders ............ 277,354 412,484 657,593 617,899
Other liabilities ........................ 22,233 27,766 49,463 32,307
------------- ------------- ------------- -------------
Total liabilities ..................... 9,140,163 1,053,556 2,714,841 5,140,063
------------- ------------- ------------- -------------
Net assets, at value .................. $ 167,447,504 $ 266,685,060 $ 409,152,434 $ 388,844,746
============= ============= ============= =============
Net assets consist of:
Accumulated distributions in excess
of net investment income ............... $ (126,545) $ (171,621) $ (3,695) $ (69,732)
Net unrealized appreciation (depreciation) 128,742 406,226 (80,984) (251,510)
Accumulated net realized gain (loss) .... (1,296,999) 32,332 (784,750) (328,801)
Capital shares .......................... 168,742,306 266,418,123 410,021,863 389,494,789
------------- ------------- ------------- -------------
Net assets, at value .................. $ 167,447,504 $ 266,685,060 $ 409,152,434 $ 388,844,746
============= ============= ============= =============
CLASS A:
Net assets, at value ..................... $ 155,070,695 $ 248,211,360 $ 383,809,492 $ 346,558,986
============= ============= ============= =============
Shares outstanding ....................... 14,110,549 22,457,237 33,314,986 30,065,449
============= ============= ============= =============
Net asset value per share* ............... $ 10.99 $ 11.05 $ 11.52 $ 11.53
============= ============= ============= =============
Maximum offering price per share
(net asset value per share / 95.75%) ..... $ 11.48 $ 11.54 $ 12.03 $ 12.04
============= ============= ============= =============
CLASS C:
Net assets, at value ..................... $ 12,376,809 $ 18,473,700 $ 25,342,942 $ 42,285,760
============= ============= ============= =============
Shares outstanding ....................... 1,118,901 1,657,724 2,191,076 3,644,300
============= ============= ============= =============
Net asset value per share* ............... $ 11.06 $ 11.14 $ 11.57 $ 11.60
============= ============= ============= =============
Maximum offering price per share
(net asset value per share / 99.00%) ..... $ 11.17 $ 11.25 $ 11.69 $ 11.72
============= ============= ============= =============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
TEXAS TAX-FREE VIRGINIA TAX-FREE
INCOME FUND INCOME FUND
-------------------------------------
<S> <C> <C>
Assets:
Investments in securities:
Cost ............................................................... $ 128,594,863 $ 385,427,339
============= =============
Value .............................................................. 129,687,978 387,696,471
Cash ................................................................ 85,165 15,875
Receivables:
Capital shares sold ................................................ 2,480 542,974
Interest ........................................................... 1,921,391 5,881,812
------------- -------------
Total assets ..................................................... 131,697,014 394,137,132
------------- -------------
Liabilities:
Payables:
Investment securities purchased .................................... 8,521,303 5,608,230
Capital shares redeemed ............................................ 313,808 665,410
Affiliates ......................................................... 91,968 269,817
Shareholders ....................................................... 1,757 4,353
Distributions to shareholders ....................................... 203,971 619,383
Other liabilities ................................................... 22,124 34,101
------------- -------------
Total liabilities ................................................ 9,154,931 7,201,294
------------- -------------
Net assets, at value ............................................. $ 122,542,083 $ 386,935,838
============= =============
Net assets consist of:
Accumulated distributions in excess of net investment income ........ $ (200,564) $ (187,847)
Net unrealized appreciation ......................................... 1,093,115 2,269,132
Accumulated net realized loss ....................................... (24,671) (1,062,273)
Capital shares ...................................................... 121,674,203 385,916,826
------------- -------------
Net assets, at value ............................................. $ 122,542,083 $ 386,935,838
============= =============
CLASS A:
Net assets, at value ................................................ $ 117,631,574 $ 363,262,913
============= =============
Shares outstanding .................................................. 10,866,250 32,284,587
============= =============
Net asset value per share* .......................................... $ 10.83 $ 11.25
============= =============
Maximum offering price per share (net asset value per share / 95.75%) $ 11.31 $ 11.75
============= =============
CLASS C:
Net assets, at value ................................................ $ 4,910,509 $ 23,672,925
============= =============
Shares outstanding .................................................. 447,733 2,089,429
============= =============
Net asset value per share* .......................................... $ 10.97 $ 11.33
============= =============
Maximum offering price per share (net asset value per share / 99.00%) $ 11.08 $ 11.44
============= =============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ALABAMA TAX-FREE FLORIDA TAX-FREE GEORGIA TAX-FREE KENTUCKY TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Interest .......................................... $ 7,570,015 $ 53,535,845 $ 5,241,207 $ 1,861,773
------------ ------------ ------------ ------------
Expenses:
Management fees (Note 3) .......................... 690,856 4,233,793 518,403 208,881
Distribution fees (Note 3)
Class A .......................................... 115,356 837,074 81,873 33,743
Class C .......................................... 52,207 275,861 60,462 --
Transfer agent fees (Note 3) ...................... 49,395 303,615 44,874 12,260
Custodian fees .................................... 1,282 9,108 918 317
Reports to shareholders ........................... 15,505 111,227 16,892 4,100
Registration and filing fees ...................... 5,212 35,003 3,466 1,518
Professional fees ................................. 4,259 19,282 2,676 1,198
Trustees' fees and expenses ....................... 1,220 7,585 840 324
Other ............................................. 8,579 36,456 8,911 5,317
------------ ------------ ------------ ------------
Total expenses ............................... 943,871 5,869,004 739,315 267,658
Expenses waived/paid by affiliate (Note 3) ... -- -- -- (116,590)
------------ ------------ ------------ ------------
Net expenses ............................... 943,871 5,869,004 739,315 151,068
------------ ------------ ------------ ------------
Net investment income .................... 6,626,144 47,666,841 4,501,892 1,710,705
------------ ------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ......... (985,183) 2,132,953 (328,085) (128,486)
Net unrealized depreciation on investments ........ (11,433,599) (90,228,794) (8,722,650) (3,452,632)
------------ ------------ ------------ ------------
Net realized and unrealized loss ................... (12,418,782) (88,095,841) (9,050,735) (3,581,118)
------------ ------------ ------------ ------------
Net decrease in net assets resulting from operations $ (5,792,638) $(40,429,000) $ (4,548,843) $ (1,870,413)
============ ============ ============ ============
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN NORTH
LOUISIANA TAX-FREE MARYLAND TAX-FREE MISSOURI TAX-FREE CAROLINA TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Interest .......................................... $ 4,947,892 $ 7,647,156 $ 11,638,303 $ 11,205,509
--------------------------------------------------------------------
Expenses:
Management fees (Note 3) .......................... 484,046 738,540 1,051,559 1,014,601
Distribution fees (Note 3)
Class A .......................................... 77,172 125,343 189,682 174,089
Class C .......................................... 37,722 60,332 75,712 134,908
Transfer agent fees (Note 3) ...................... 30,282 65,758 93,938 82,893
Custodian fees .................................... 864 1,360 1,961 1,940
Reports to shareholders ........................... 9,059 20,522 33,099 21,779
Registration and filing fees ...................... 3,655 4,723 14,302 6,946
Professional fees ................................. 2,423 3,274 4,736 4,728
Trustees' fees and expenses ....................... 799 1,404 1,903 1,742
Other ............................................. 9,419 9,527 11,532 13,316
--------------------------------------------------------------------
Total expenses ............................... 655,441 1,030,783 1,478,424 1,456,942
--------------------------------------------------------------------
Net investment income ...................... 4,292,451 6,616,373 10,159,879 9,748,567
--------------------------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ......... (331,464) 32,896 (783,702) 218,246
Net unrealized depreciation on investments ........ (8,454,167) (13,742,756) (21,677,959) (21,202,218)
--------------------------------------------------------------------
Net realized and unrealized loss ................... (8,785,631) (13,709,860) (22,461,661) (20,983,972)
--------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (4,493,180) $ (7,093,487) $(12,301,782) $(11,235,405)
====================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) FRANKLIN FRANKLIN
<TABLE>
<CAPTION>
TEXAS TAX-FREE VIRGINIA TAX-FREE
INCOME FUND INCOME FUND
-----------------------------------
<S> <C> <C>
Investment income:
Interest ...................................................................... $3,849,794 $11,398,723
----------- ------------
Expenses:
Management fees (Note 3) ...................................................... 384,211 1,023,422
Distribution fees (Note 3)
Class A ...................................................................... 55,558 183,488
Class C ...................................................................... 16,643 78,694
Transfer agent fees (Note 3) .................................................. 31,769 87,736
Custodian fees ................................................................ 686 2,030
Reports to shareholders ....................................................... 10,217 25,321
Registration and filing fees .................................................. 12,065 8,212
Professional fees ............................................................. 1,887 4,296
Trustees' fees and expenses ................................................... 690 2,017
Other ......................................................................... 7,758 11,687
----------- ------------
Total expenses ........................................................... 521,484 1,426,903
----------- ------------
Net investment income .................................................. 3,328,310 9,971,820
----------- ------------
Realized and unrealized losses:
Net realized loss from investments ............................................ (23,713) (1,050,662)
Net unrealized depreciation on investments .................................... (6,336,938) (20,303,584)
----------- ------------
Net realized and unrealized loss ............................................... (6,360,651) (21,354,246)
----------- ------------
Net decrease in net assets resulting from operations ........................... $(3,032,341) $(11,382,426)
=========== ============
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended August 31, 1999 (unaudited)
and the year ended February 28, 1999
<TABLE>
<CAPTION>
FRANKLIN ALABAMA FRANKLIN FLORIDA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------------------ ----------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................... $ 6,626,144 $ 12,470,697 $ 47,666,841 $ 91,429,588
Net realized gain (loss) from investments ........... (985,183) 818,129 2,132,953 2,085,930
Net unrealized appreciation (depreciation) on
investments ....................................... (11,433,599) (5,618,719) (90,228,794) 5,208,364
------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations ....................................... (5,792,638) 7,670,107 (40,429,000) 98,723,882
Distributions to shareholders from:
Net investment income:
Class A ............................................ (6,252,085) (11,939,099) (45,728,049) (88,302,683)
Class C ............................................ (374,059) (559,627) (1,938,792) (3,126,905)
In excess of net investment income:
Class A ............................................ (47,460) (113,035) (132,587) (71,693)
Class C ............................................ (2,839) (5,302) (5,625) (2,539)
Net realized gains:
Class A ............................................. (148,972) (917,072) (135,130) (1,175,768)
Class C ............................................. (10,091) (51,296) (6,476) (52,335)
------------------------------------------------------------------------
Total distributions to shareholders .................. (6,835,506) (13,585,431) (47,946,659) (92,731,923)
Capital share transactions: (Note 2)
Class A ............................................. (1,042,281) 27,324,497 (37,991,376) 129,875,026
Class C ............................................. 2,172,932 5,704,773 3,977,142 26,353,188
------------------------------------------------------------------------
Total capital share transactions ..................... 1,130,651 33,029,270 (34,014,234) 156,228,214
Net increase (decrease) in net assets .............. (11,497,493) 27,113,946 (122,389,893) 162,220,173
Net assets:
Beginning of period .................................. 253,565,471 226,451,525 1,868,315,651 1,706,095,478
------------------------------------------------------------------------
End of period ........................................ $ 242,067,978 $ 253,565,471 $ 1,745,925,758 $ 1,868,315,651
========================================================================
Accumulated distributions in excess of net investment
income included in net assets:
End of period ....................................... $ (168,636) $ (118,337) $ (1,585,145) $ (1,446,933)
========================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
for the six months ended August 31, 1999 (unaudited)
and the year ended February 28, 1999
<TABLE>
<CAPTION>
FRANKLIN GEORGIA FRANKLIN KENTUCKY
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................... $ 4,501,892 $ 8,518,942 $ 1,710,705 $ 3,066,223
Net realized gain (loss) from investments ................ (328,085) 628,282 (128,486) 77,954
Net unrealized appreciation (depreciation) on investments (8,722,650) (506,735) (3,452,632) 73,621
-------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations .............................................. (4,548,843) 8,640,489 (1,870,413) 3,217,798
Distributions to shareholders from:
Net investment income:
Class A ................................................. (4,092,225) (7,931,954) (1,710,705) (3,089,344)
Class C ................................................. (409,667) (586,988) -- --
In excess of net investment income:
Class A ................................................. (125,580) (51,167) (46,380) (19,790)
Class C ................................................. (12,572) (3,786) -- --
Net realized gains:
Class A ................................................. (23,621) (739,309) -- --
Class C ................................................. (2,724) (67,075) -- --
-------------------------------------------------------------------
Total distributions to shareholders ....................... (4,666,389) (9,380,279) (1,757,085) (3,109,134)
Capital share transactions: (Note 2)
Class A ................................................. 1,665,193 15,711,376 6,068,963 10,196,210
Class C ................................................. 1,903,937 8,225,919 -- --
-------------------------------------------------------------------
Total capital share transactions .......................... 3,569,130 23,937,295 6,068,963 10,196,210
Net increase (decrease) in net assets .................... (5,646,102) 23,197,505 2,441,465 10,304,874
Net assets:
Beginning of period ....................................... 181,946,466 158,748,961 64,515,604 54,210,730
-------------------------------------------------------------------
End of period ............................................. $ 176,300,364 $ 181,946,466 $ 66,957,069 $ 64,515,604
===================================================================
Accumulated distributions in excess of net investment income
included in net assets:
End of period ............................................ $ (207,686) $ (69,534) $ (66,170) $ (19,790)
===================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
for the six months ended August 31, 1999 (unaudited)
and the year ended February 28, 1999
<TABLE>
<CAPTION>
FRANKLIN LOUISIANA FRANKLIN MARYLAND
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
----------------------------------- ------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
-------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income .......................... $ 4,292,451 $ 7,936,886 $ 6,616,373 $ 12,055,275
Net realized gain (loss) from investments ...... (331,464) 488,946 32,896 1,358,390
Net unrealized depreciation on investments ..... (8,454,167) (690,249) (13,742,756) (76,966)
-------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ............................. (4,493,180) 7,735,583 (7,093,487) 13,336,699
Distributions to shareholders from:
Net investment income:
Class A ....................................... (4,032,708) (7,761,641) (6,222,722) (11,448,258)
Class C ....................................... (259,743) (350,878) (393,651) (607,017)
In excess of net investment income:
Class A ....................................... (111,295) (7,732) (37,043) (84,177)
Class C ....................................... (7,168) (350) (2,343) (4,463)
Net realized gains:
Class A ....................................... -- -- (671,718) (871,879)
Class C ....................................... -- -- (49,584) (56,008)
-------------------------------------------------------------------------
Total distributions to shareholders ............. (4,410,914) (8,120,601) (7,377,061) (13,071,802)
Capital share transactions: (Note 2)
Class A ....................................... 5,248,048 23,548,340 8,677,060 39,756,722
Class C ....................................... 3,022,007 5,527,638 2,639,071 6,298,607
-------------------------------------------------------------------------
Total capital share transactions ................ 8,270,055 29,075,978 11,316,131 46,055,329
Net increase (decrease) in net assets .......... (634,039) 28,690,960 (3,154,417) 46,320,226
Net assets:
Beginning of period ............................. 168,081,543 139,390,583 269,839,477 223,519,251
-------------------------------------------------------------------------
End of period ................................... $ 167,447,504 $ 168,081,543 $ 266,685,060 $ 269,839,477
=========================================================================
Accumulated distributions in excess of net
investment income included in net assets:
End of period .................................. $ (126,545) $ (8,082) $ (171,621) $ (132,235)
=========================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
for the six months ended August 31, 1999 (unaudited)
and the year ended February 28, 1999
<TABLE>
<CAPTION>
FRANKLIN MISSOURI FRANKLIN NORTH CAROLINA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
-------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income .......................... $ 10,159,879 $ 17,579,385 $ 9,748,567 $ 17,127,841
Net realized gain (loss) from investments ...... (783,702) 490,267 218,246 832,636
Net unrealized appreciation (depreciation) on
investments .................................. (21,677,959) (605,052) (21,202,218) 413,367
-------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ............................. (12,301,782) 17,464,600 (11,235,405) 18,373,844
Distributions to shareholders from:
Net investment income:
Class A ........................................ (9,928,475) (17,097,301) (8,921,635) (15,908,188)
Class C ........................................ (523,302) (677,489) (911,121) (1,292,262)
In excess of net investment income:
Class A ........................................ (3,510) -- (63,271) --
Class C ........................................ (185) -- (6,462) --
Net realized gains:
Class A ........................................ (440,962) (848,423) -- --
Class C ........................................ (27,139) (35,015) -- --
-------------------------------------------------------------------------
Total distributions to shareholders ............. (10,923,573) (18,658,228) (9,902,489) (17,200,450)
Capital share transactions: (Note 2)
Class A ........................................ 18,746,288 80,047,632 16,060,662 50,945,959
Class C ........................................ 6,287,682 10,400,259 6,332,137 18,021,556
-------------------------------------------------------------------------
Total capital share transactions ................ 25,033,970 90,447,891 22,392,799 68,967,515
Net increase in net assets ..................... 1,808,615 89,254,263 1,254,905 70,140,909
Net assets:
Beginning of period ............................. 407,343,819 318,089,556 387,589,841 317,448,932
-------------------------------------------------------------------------
End of period ................................... $ 409,152,434 $ 407,343,819 $ 388,844,746 $ 387,589,841
=========================================================================
Undistributed net investment income (accumulated
distributions in excess of net investment income)
included in net assets:
End of period ................................. $ (3,695) $ 291,898 $ (69,732) $ 84,190
=========================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
for the six months ended August 31, 1999 (unaudited)
and the year ended February 28, 1999
<TABLE>
<CAPTION>
FRANKLIN TEXAS FRANKLIN VIRGINIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------------------ --------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
----------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income ............................. $ 3,328,310 $ 6,806,106 $ 9,971,820 $ 18,677,118
Net realized gain (loss) from investments ......... (23,713) 1,167,854 (1,050,662) 267,647
Net unrealized appreciation (depreciation) on
investments ..................................... (6,336,938) (1,644,556) (20,303,584) 703,456
----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ................................. (3,032,341) 6,329,404 (11,382,426) 19,648,221
Distributions to shareholders from:
Net investment income:
Class A ........................................... (3,213,079) (6,648,209) (9,441,875) (18,091,651)
Class C ........................................... (115,231) (157,897) (529,945) (779,882)
In excess of net investment income:
Class A ........................................... (68,485) (6,115) (160,830) (17,247)
Class C ........................................... (2,456) (145) (9,027) (743)
Net realized gains:
Class A ........................................... (440,542) (2,340,989) -- (789,058)
Class C ........................................... (17,396) (58,681) -- (38,432)
----------------------------------------------------------------------------
Total distributions to shareholders ................ (3,857,189) (9,212,036) (10,141,677) (19,717,013)
Capital share transactions: (Note 2)
Class A ........................................... (3,482,792) (25,786) 3,815,207 47,531,270
Class C ........................................... (53,589) 3,223,143 2,179,396 9,617,382
----------------------------------------------------------------------------
Total capital share transactions ................... (3,536,381) 3,197,357 5,994,603 57,148,652
Net increase (decrease) in net assets ............. (10,425,911) 314,725 (15,529,500) 57,079,860
Net assets:
Beginning of period ................................ 132,967,994 132,653,269 402,465,338 345,385,478
----------------------------------------------------------------------------
End of period ...................................... $ 122,542,083 $ 132,967,994 $ 386,935,838 $ 402,465,338
============================================================================
Accumulated distributions in excess of net investment
income included in net assets:
End of period ..................................... $ (200,564) $ (129,623) $ (187,847) $ (17,990)
============================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax Free Trust (the Trust) is registered under the Investment Company
Act of 1940 as an open-end investment company, consisting of twenty-six separate
series (the Funds). All Funds included in this report are diversified except the
Franklin Maryland Tax-Free Income Fund. The Funds' investment objectives are to
provide tax-free income.
The following summarizes the Funds' significant accounting policies.
a. SECURITY VALUATION
Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. 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. Securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.
b. INCOME TAXES
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
distribute substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount and
premium are amortized on an income tax basis. Distributions to shareholders are
recorded on the ex-dividend date.
Realized and unrealized gains and 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.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. 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. SHARES OF BENEFICIAL INTEREST
The Funds, except for the Franklin Kentucky Tax-Free Income Fund, offer two
classes of shares: Class A and Class C. Effective January 1, 1999, Class I and
II were renamed Class A and Class C, respectively. Each class of shares differs
by their initial sales load, distribution fees, voting rights on matters
affecting a single class and the exchange privilege of each class.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST (cont.)
At August 31, 1999, there were an unlimited number of shares authorized (no par
value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN ALABAMA FRANKLIN FLORIDA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
----------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold .................................. 1,269,263 $ 14,643,598 9,485,014 $ 111,131,259
Shares issued in reinvestment of distributions 241,989 2,774,817 1,189,354 13,871,903
Shares redeemed .............................. (1,614,576) (18,460,696) (14,021,681) (162,994,538)
----------------------------------------------------------------------
Net decrease ................................. (103,324) $ (1,042,281) (3,347,313) $ (37,991,376)
======================================================================
Year ended February 28, 1999
Shares sold .................................. 3,928,750 $ 46,288,384 27,102,249 $ 322,736,020
Shares issued in reinvestment of distributions 497,017 5,847,857 2,172,745 25,852,864
Shares redeemed .............................. (2,107,060) (24,811,744) (18,386,112) (218,713,858)
--------------------------------------------------------------------
Net increase ................................. 2,318,707 $ 27,324,497 10,888,882 $ 129,875,026
======================================================================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold .................................. 302,858 $ 3,512,479 1,117,041 $ 13,207,023
Shares issued in reinvestment of distributions 16,780 193,257 81,550 959,517
Shares redeemed .............................. (133,265) (1,532,804) (865,745) (10,189,398)
--------------------------------------------------------------------
Net increase ................................. 186,373 $ 2,172,932 332,846 $ 3,977,142
====================================================================
Year ended February 28, 1999
Shares sold .................................. 572,980 $ 6,785,441 3,192,922 $ 38,333,343
Shares issued in reinvestment of distributions 27,698 327,338 142,767 1,712,748
Shares redeemed .............................. (119,184) (1,408,006) (1,141,979) (13,692,903)
--------------------------------------------------------------------
Net increase ................................. 481,494 $ 5,704,773 2,193,710 $ 26,353,188
====================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN GEORGIA FRANKLIN KENTUCKY
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold .................................. 1,042,043 $ 12,383,079 804,277 $ 9,051,483
Shares issued in reinvestment of distributions 172,344 2,040,288 67,424 756,907
Shares redeemed .............................. (1,082,128) (12,758,174) (334,600) (3,739,427)
---------------------------------------------------------------------
Net increase ................................. 132,259 $ 1,665,193 537,101 $ 6,068,963
====================================================================
Year ended February 28, 1999
Shares sold .................................. 2,585,504 $ 31,326,826 1,245,441 $ 14,308,425
Shares issued in reinvestment of distributions 368,092 4,460,541 117,256 1,347,644
Shares redeemed .............................. (1,656,003) (20,075,991) (474,917) (5,459,859)
---------------------------------------------------------------------
Net increase ................................. 1,297,593 $ 15,711,376 887,780 $ 10,196,210
====================================================================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold .................................. 311,009 $ 3,729,863
Shares issued in reinvestment of distributions 21,885 260,567
Shares redeemed .............................. (176,150) (2,086,493)
-------------------------------
Net increase ................................. 156,744 $ 1,903,937
==============================
Year ended February 28, 1999
Shares sold .................................. 929,760 $ 11,327,791
Shares issued in reinvestment of distributions 35,188 428,887
Shares redeemed .............................. (289,533) (3,530,759)
-------------------------------
Net increase ................................. 675,415 $ 8,225,919
===============================
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST (cont.)
<TABLE>
<CAPTION>
FRANKLIN LOUISIANA FRANKLIN MARYLAND
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------------- ----------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold .................................. 1,337,416 $ 15,222,939 2,036,271 $ 23,364,373
Shares issued in reinvestment of distributions 156,214 1,774,397 330,036 3,766,767
Shares redeemed .............................. (1,029,413) (11,749,288) (1,616,545) (18,454,080)
--------------------------------------------------------------------
Net increase ................................. 464,217 $ 5,248,048 749,762 $ 8,677,060
====================================================================
Year ended February 28, 1999
Shares sold .................................. 3,221,007 $ 37,387,696 4,888,050 $ 57,057,592
Shares issued in reinvestment of distributions 306,021 3,551,482 564,968 6,597,373
Shares redeemed .............................. (1,499,172) (17,390,838) (2,046,845) (23,898,243)
--------------------------------------------------------------------
Net increase ................................. 2,027,856 $ 23,548,340 3,406,173 $ 39,756,722
====================================================================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold .................................. 295,695 $ 3,401,797 442,010 $ 5,121,459
Shares issued in reinvestment of distributions 11,590 132,203 27,368 314,538
Shares redeemed .............................. (44,802) (511,993) (243,851) (2,796,926)
--------------------------------------------------------------------
Net increase ................................. 262,483 $ 3,022,007 225,527 $ 2,639,071
====================================================================
Year ended February 28, 1999
Shares sold .................................. 536,583 $ 6,261,123 747,540 $ 8,797,704
Shares issued in reinvestment of distributions 16,406 191,580 38,241 450,176
Shares redeemed .............................. (79,281) (925,065) (250,371) (2,949,273)
--------------------------------------------------------------------
Net increase ................................. 473,708 $ 5,527,638 535,410 $ 6,298,607
====================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MISSOURI FRANKLIN NORTH CAROLINA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------------- -----------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold .................................. 4,714,640 $ 56,436,247 2,942,047 $ 35,225,226
Shares issued in reinvestment of distributions 408,327 4,864,608 382,579 4,550,415
Shares redeemed .............................. (3,552,166) (42,554,567) (1,995,955) (23,714,979)
-----------------------------------------------------------------------
Net increase ................................. 1,570,801 $ 18,746,288 1,328,671 $ 16,060,662
=======================================================================
Year ended February 28, 1999
Shares sold .................................. 8,870,628 $ 108,367,210 6,146,411 $ 74,796,684
Shares issued in reinvestment of distributions 712,755 8,699,355 654,741 7,962,453
Shares redeemed .............................. (3,032,017) (37,018,933) (2,617,169) (31,813,178)
-----------------------------------------------------------------------
Net increase ................................. 6,551,366 $ 80,047,632 4,183,983 $ 50,945,959
=======================================================================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold .................................. 589,758 $ 7,073,224 727,985 $ 8,742,763
Shares issued in reinvestment of distributions 32,604 389,350 49,114 587,581
Shares redeemed .............................. (98,199) (1,174,892) (252,497) (2,998,207)
-----------------------------------------------------------------------
Net increase ................................. 524,163 $ 6,287,682 524,602 $ 6,332,137
=======================================================================
Year ended February 28, 1999
Shares sold .................................. 904,387 $ 11,088,809 1,597,185 $ 19,527,930
Shares issued in reinvestment of distributions 41,559 509,208 68,045 832,816
Shares redeemed .............................. (97,734) (1,197,758) (190,827) (2,339,190)
-----------------------------------------------------------------------
Net increase ................................. 848,212 $ 10,400,259 1,474,403 $ 18,021,556
=======================================================================
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST (cont.)
<TABLE>
<CAPTION>
FRANKLIN TEXAS FRANKLIN VIRGINIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-----------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold ...................................... 363,569 $ 4,098,094 2,296,566 $ 26,786,142
Shares issued in reinvestment of distributions ... 148,411 1,658,564 404,562 4,702,439
Shares redeemed .................................. (829,039) (9,239,450) (2,387,380) (27,673,374)
-----------------------------------------------------------------
Net increase (decrease) .......................... (317,059) $ (3,482,792) 313,748 $ 3,815,207
=================================================================
Year ended February 28, 1999
Shares sold ...................................... 1,063,854 $ 12,279,433 6,206,679 $ 73,827,181
Shares issued in reinvestment of distributions ... 369,534 4,258,680 791,873 9,417,456
Shares redeemed .................................. (1,433,300) (16,563,899) (3,001,436) (35,713,367)
-----------------------------------------------------------------
Net increase ..................................... 88 $ (25,786) 3,997,116 $ 47,531,270
=================================================================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold ...................................... 55,674 $ 634,160 342,838 $ 4,041,739
Shares issued in reinvestment of distributions ... 7,514 85,033 27,874 326,027
Shares redeemed .................................. (67,553) (772,782) (188,135) (2,188,370)
-----------------------------------------------------------------
Net increase (decrease) .......................... (4,365) $ (53,589) 182,577 $ 2,179,396
=================================================================
Year ended February 28, 1999
Shares sold ...................................... 324,935 $ 3,790,151 916,509 $ 10,970,899
Shares issued in reinvestment of distributions ... 12,858 149,890 41,576 497,850
Shares redeemed .................................. (61,489) (716,898) (154,863) (1,851,367)
-----------------------------------------------------------------
Net increase ..................................... 276,304 $ 3,223,143 803,222 $ 9,617,382
=================================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Funds are also officers or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), Franklin/Templeton Investor Services, Inc. (Investor Services),
and Franklin Templeton Services, Inc. (FT Services), the Funds' investment
manager, principal underwriter, transfer agent, and administrative manager,
respectively.
The Funds pay an investment management fee to Advisers based on the average net
assets of the Funds as follows:
ANNUALIZED
FEE RATE MONTH-END NET ASSETS
-------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.
Advisers agreed in advance to waive a portion of the management fees for the
Franklin Kentucky Tax-Free Income Fund as noted in the Statement of Operations.
The Funds reimburse Distributors up to .10% and .65% per year of their average
daily net asset of Class A and Class C, respectively, for costs incurred in
marketing the Funds' shares.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
Distributors received (paid) net commissions from (on) sales of the Funds
shares, and received contingent deferred sales charges for the period 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>
Net commissions received (paid) ....... $ (25,097) $(231,895) $ (34,234) $ 14,763 $ (42,927)
Contingent deferred sales charges ..... $ 7,054 $ 9,085 $ 9,169 $ -- $ 12,923
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
MARYLAND MISSOURI NORTH CAROLINA TEXAS VIRGINIA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net commissions paid .................. $ (59,570) $ (59,621) $(116,861) $ (1,330) $ (3,739)
Contingent deferred sales charges ..... $ 11,555 $ 18,783 $ 18,456 $ 4,569 $ 22,306
</TABLE>
The Funds paid transfer agent fees of $802,520 of which $664,626 was paid to
Investor Services.
4. INCOME TAXES
At February 28, 1999, the Funds had tax basis capital losses which may be
carried over to offset future capital gains. Such losses expire as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
KENTUCKY LOUISIANA NORTH CAROLINA
TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------
<S> <C> <C> <C>
Capital loss carryovers expiring in:
2003 .................................. $450,595 $965,535 $357,415
2004 .................................. 65,389 -- --
2005 .................................. 294,278 -- 187,812
-----------------------------------------------
$810,262 $965,535 $545,227
===============================================
</TABLE>
At February 28, 1999, Franklin Kentucky Tax-Free Income Fund and Franklin
Virginia Tax-Free Income Fund have deferred capital losses occurring subsequent
to October 31, 1998 of $32,325 and $11,635, respectively. For tax purposes, such
losses will be reflected in the year ending February 29, 2000.
Distributions of income to shareholders may not equal net investment income due
to differing treatments of dividend distributions for book and tax purposes.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (continued)
4. INCOME TAXES (CONT.)
At August 31, 1999, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was 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>
Investments at cost ........... $ 240,415,527 $ 1,736,272,401 $ 181,539,982 $ 66,776,748 $ 173,525,476
===========================================================================================
Unrealized appreciation ....... $ 6,280,905 $ 68,547,289 $ 4,427,081 $ 1,731,481 $ 4,287,984
Unrealized depreciation ....... (7,967,632) (33,082,674) (3,772,257) (1,735,180) (4,159,242)
-------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) .............. $ (1,686,727) $ 35,464,615 $ 654,824 $ (3,699) $ 128,742
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
MARYLAND MISSOURI NORTH CAROLINA TEXAS VIRGINIA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments at cost ........... $ 263,034,788 $ 405,198,805 $ 387,615,036 $128,594,863 $ 385,427,339
===========================================================================================
Unrealized appreciation ....... $ 6,392,025 $ 10,571,574 $ 10,329,589 $ 3,890,919 $ 10,810,021
Unrealized depreciation ....... (5,985,799) (10,652,558) (10,581,099) (2,797,804) (8,540,889)
-------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) .............. $ 406,226 $ (80,984) $ (251,510) $ 1,093,115 $ 2,269,132
===========================================================================================
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended August 31, 1999 were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ALABAMA FLORIDA GEORGIA KENTUCKY LOUISIANA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases ..................... $ 33,235,796 $ 236,715,727 $ 51,313,900 $ 9,825,423 $ 33,660,968
Sales ......................... $ 30,690,682 $ 230,946,478 $ 39,731,380 $ 3,168,190 $ 22,588,724
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
MARYLAND MISSOURI NORTH CAROLINA TEXAS VIRGINIA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases ..................... $ 22,912,123 $ 67,915,014 $ 44,936,484 $ 18,760,191 $ 45,681,919
Sales ......................... $ 2,660,625 $ 41,240,936 $ 17,785,318 $ 17,584,016 $ 33,911,101
</TABLE>
6. CREDIT RISK AND DEFAULTED SECURITIES
At August 31, 1999, the Franklin Florida Tax-Free Income Fund held defaulted
securities with a value aggregating $9,945,000 representing .57% of the Fund's
net assets. For information as to specific securities, see the accompanying
Statement of Investments.
For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.
The Funds have investments in excess of 10% of their total net assets in their
respective states and/or U.S. territories and possessions. Such concentration
may subject the Funds more significantly to economic changes occurring within
those states and/or U.S. territories and possessions.
SHAREHOLDER LETTER
Dear Shareholder:
This semiannual report for Franklin Tax-Free Trust covers the period ended
August 31, 1999.
During the six months under review, U.S. bond markets continued to experience
challenging times. The yield on the benchmark 30-year Treasury bond steadily
increased, from 5.57% on February 28, 1999, to 6.07% on August 31, 1999 --
reaching a high of 6.25% on August 10, 1999. Although many of the uncertainties
associated with hedge funds and 1998's financial stresses on Asia, Latin America
and Eastern Europe either dissipated or stabilized, the Federal Reserve Board's
(the Fed's) position toward domestic inflationary tendencies renewed investor
concern. At its June 30 meeting, the Federal Open Market Committee (FOMC) raised
the federal funds target rate to 5.00%, while announcing a neutral bias toward
further increases, which most investors initially viewed as positive. However,
most bond investors became cautious as they perceived Alan Greenspan's testimony
before the U.S. House of Representatives on July 22, 1999, as a change by the
Fed from a neutral bias to one of possibly raising rates. Indeed, the FOMC
raised its target for the federal funds rate another quarter-percentage point to
5.25% and again adopted a neutral bias at its August 24, 1999, meeting, which
appeared to stabilize the bond markets for the short term.
The economy's future direction and its effect on inflationary pressures will
ultimately determine the level of volatility that impacts the bond markets in
the near future. During the period under review, many investors
uncharacteristically reacted very swiftly to new releases of economic data or
Fed announcements, and in many instances the market overcorrected. Investors
with short-term investment horizons may view such instability as unfavorable.
However, we prefer to take a long-term approach toward investing and find that
recent market conditions afforded us opportunities not only to increase the
funds' income-earning potential, but also to enhance the portfolios' overall
structure. Our conservative, long-term, buy-and-hold philosophy enables us to
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter ....................................................... 1
Special Feature: Uncovering Tax-Free Opportunities ....................... 5
Fund Reports
Franklin Arizona Tax-Free Income Fund .................................... 8
Franklin Colorado Tax-Free Income Fund ................................... 12
Franklin Connecticut Tax-Free Income Fund ................................ 15
Franklin Federal Intermediate-Term Tax-Free Income Fund .................. 19
Franklin High Yield Tax-Free Income Fund ................................. 23
Franklin New Jersey Tax-Free Income Fund ................................. 28
Franklin Oregon Tax-Free Income Fund ..................................... 32
Franklin Pennsylvania Tax-Free Income Fund ............................... 36
Franklin Puerto Rico Tax-Free Income Fund ................................ 40
Municipal Bond Ratings ................................................... 44
Financial Highlights & Statement of Investments .......................... 46
Financial Statements ..................................................... 111
Notes to Financial Statements ............................................ 122
</TABLE>
[PYRAMID GRAPH]
WHAT DOES "TAXABLE EQUIVALENT" MEAN FOR YOU?
For yield and distribution rate, the taxable equivalent is the amount a taxable
investment would have to earn to match a tax-free investment such as municipal
bonds.(1) You can find your fund's taxable equivalent distribution rate and
yield in the Performance Summary that follows your fund's report.
produce comparatively high credit-quality portfolios that distribute favorable
tax-free income.(1) We do not purchase exotic derivative products or use
leverage as part of our investment strategy to increase yield because we also
strive to maintain low share-price volatility. We encourage you to examine the
credit quality of your tax-free fund, as well as its yield when evaluating your
investment needs.
With municipal bond insurance prevalent over the past few years, the difference
in yields between high- and lower-rated bonds has narrowed compared to
historical levels. As a result, many of our funds in recent years chose to
invest in high-rated bonds because of the risk versus return characteristics in
the marketplace. At the end of this reporting period, many of our tax-free funds
held a large percentage of AAA-rated bonds, reflecting the portfolios' high
quality. Our disciplined, long-term, income-oriented investment approach, along
with our ability to recognize value, enables us to offer funds providing
attractive tax-free yields while enjoying excellent credit quality
characteristics compared to their peers. Historically more than 85% of total
return for municipal bonds is derived from the income component. In light of
this, we choose to concentrate on income and risk-adjusted total return in
managing our funds, and on this basis, most of our tax-free funds compare very
favorably to their peers.
As the interest-rate outlook stabilizes and inflationary concerns diminish, we
expect the bond markets to become more stable. Overall, we expect municipal
bonds to perform well, as at the end of the reporting period the ratio of yields
for the Bond Buyer 40 Municipal Index versus the 30-year Treasury bond
approached 95%, considerably higher than the historical average of 89%, which
means municipal bonds are relatively inexpensive. Furthermore, municipal bond
supply for 1999 is expected to be approximately 18% less than in 1998, with
about $230 billion coming to market. The reduced supply should enhance municipal
bonds' performance going forward.
Please keep in mind that interest rates and thus, bond prices, rise and fall
depending on the economy. Such fluctuations are a normal part of investing, and
one should expect this when investing in any security, including municipal
bonds. Municipal bond funds can help lower such volatility, as they offer a
level of diversification that is difficult for individual investors to achieve
on their own. They continue to be an attractive investment for those investors
seeking tax-free income as well as providing an opportunity to reduce risk in
their portfolios. Depending on your federal and state tax a taxable investment
would need to offer a higher yield than the taxable yield of a tax-free
investment. We encourage you to discuss your financial goals an investment
representative. As always, we appreciate your support, welcome questions and
look forward to serving your investment needs in the years ahead.
1. For investors subject to the federal or state 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.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
/s/ Thomas J. Kenny
Thomas J. Kenny
Director
Franklin Municipal Bond Department
FRANKLIN MUNICIPAL BOND FUNDS ARE STAR QUALITY
OVERALL MORNINGSTAR RATINGS(TM)
These funds in Franklin Tax-Free Trust were rated against a universe of 1,591;
1,210 and 372 municipal bond funds for the 3-, 5- and 10-year periods,
respectively, ended August 31, 1999.
You may be pleased to know how well your Franklin Tax-Free Income Fund compares
with the competition. Morningstar, a leading mutual fund rating company, awarded
33 Franklin municipal bond funds their highest ratings, four or five stars. With
one of the largest municipal bond departments in the industry, Franklin
Templeton has the resources needed to identify attractive municipal bond
opportunities and the know-how to purchase them at favorable prices. We offer
investors more high-quality choices than any other fund group followed by
Morningstar.
*****
FIVE-STAR FRANKLIN TAX-FREE INCOME FUNDS(1,2)
Franklin Federal Intermediate-Term Tax-Free Income Fund - Class A
Franklin High Yield Tax-Free Income Fund - Class A
Franklin Pennsylvania Tax-Free Income Fund - Class A
****
FOUR-STAR FRANKLIN TAX-FREE INCOME FUNDS(1,2)
Franklin Arizona Tax-Free Income Fund - Class A
Franklin Colorado Tax-Free Income Fund - Class A
Franklin Connecticut Tax-Free Income Fund - Class A
Franklin New Jersey Tax-Free Income Fund - Class A
Franklin Oregon Tax-Free Income Fund - Class A
Franklin Puerto Rico Tax-Free Income Fund - Class A
1. For investors subject to federal or state alternative minimum tax, all or a
portion of the dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
2. For the 3-, 5- and 10-year periods ended August 31, 1999, the respective
Morningstar ratings were as follows: Arizona Tax-Free Income 4, 4, 4; Colorado
Tax-Free Income 3, 4, 4; Connecticut Tax-Free Income 4, 4, 3; Federal
Intermediate-Term Tax-Free Income 4, 5, N/A; High Yield Tax-Free Income 5, 5, 5;
New Jersey Tax-Free Income 4, 4, 4; Oregon Tax-Free Income 4, 4, 3; Pennsylvania
Tax-Free Income 4, 5, 5; Puerto Rico Tax-Free Income 4, 5, 4.
Morningstar proprietary ratings reflect historical risk-adjusted performance and
can change monthly. They are calculated from the fund's 3-, 5- and 10-year
average annual returns in excess of 90-day Treasury bill returns with
appropriate sales charge adjustments, and a risk factor reflecting performance
below 90-day T-bill returns. The top 10% of funds in a broad asset class receive
five stars, the next 22.5% four stars, the next 35% three stars, the next 22.5%
two stars, and the bottom 10% one star. Ratings are for Class A shares only;
other classes may vary. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
You have previously received a prospectus for Franklin Tax-Free Trust in which
you are a shareholder. Franklin Templeton Distributors, Inc. is the principal
underwriter of the Trust.
This page is not part of the shareholder report.
[SPECIAL UPDATE GRAPHIC]
UNCOVERING TAX-FREE OPPORTUNITIES
[PHOTO OF RAFAEL COSTAS] Rafael Costas, Senior Vice President and Director of
Franklin's Municipal Research Department, discusses how research is an integral
part of Franklin's tax-free income funds' success.
Q: Could you provide an overview of Franklin's research department?
RAFAEL COSTAS: We have one of the industry's largest municipal research staffs,
allowing us to routinely analyze more than 2,000 debt issuers a year. The
research department analysts work closely with our portfolio managers, who rely
on these analysts when making buy and sell decisions. With a focus on in-depth
research and the discipline to buy when others are selling, we often are able to
find exciting opportunities at temporarily depressed prices. Generally, we
concentrate on investment grade issues. Of course, for our high yield funds, we
also look for below investment-grade bonds that we feel offer appropriate
rewards for the increased risk.
Q: What are some advantages of Franklin's size and reputation?
RAFAEL: Today, Franklin is one of the nation's leading tax-free fund managers.
Our size, with approximately $50 billion of tax-free investments, often enables
us to purchase investments at advantageous prices, which in turn, can help keep
investment costs low. We pass on these savings to shareholders in the form of
higher tax-free yields.(1) In addition, our size often makes us a favorite of
new issuers, as many prefer to work with a minimum number of investors.
Q: What type of tax-free bonds do you favor?
RAFAEL: We typically look for investment-grade bonds, as we try to provide our
shareholders high, current income with a relatively low level of risk. Most of
our investment grade tax-free bond funds are composed of a high percentage of
securities rated AAA or AA, the highest ratings bonds can receive from national
credit rating agencies.(2) In addition, many of our purchases are insured
because of the prevalence of insurance in the municipal bond marketplace in the
past few years. Insured securities normally are rated AAA, further improving the
quality of our funds. For our high yield funds, we look for bonds which may be
out of favor but, in our view, still have solid fundamentals and the potential
to be upgraded. In fact, we devote much of our research efforts to finding such
bonds in the low investment-grade, high yield sectors.
1. For investors subject to the federal or state 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.
2. Ratings can change.
Q: How do you research a bond?
RAFAEL: We emphasize detailed, high-quality research, which often enables us to
uncover attractive investments that others may have overlooked. When presented
with an opportunity, our analysts carefully consider such factors as the bond's
purpose, who will repay the bond, if the projections are reasonable, the payment
schedule and the issuer's credit history. We incorporate all of the numerical
findings in our internal, proprietary databases and spreadsheets created by our
analysts. With the processed information and analysis, we meet with our
portfolio managers to discuss the merits of each individual issue. The portfolio
manager's decision to buy a security will depend largely on our analysis of the
bond's credit quality and price. We continue to monitor our investments closely
after the purchase, looking for signs of potential problems as well as
additional opportunities.
Q: Do you feel it is important to personally meet management and municipal
officials?
RAFAEL: Very much so. Each year Franklin's analysts and portfolio managers visit
hundreds of sites to garner an understanding that can be obtained only through
personal inspection. They meet face-to-face with the project's management and
municipal officials to discuss firsthand any potential problems. Our analysts
also can use these meetings to discover new opportunities, often before they are
widely known.
Q: Do issuers and investment bankers ever come to Franklin?
RAFAEL: Our sizable presence in the municipal bond market frequently means that
issuers and their bankers come to us with new issues. In a typical day, we may
receive between 50 and 100 calls from brokers offering new and secondary issues.
Approximately three times a week, investment bankers visit our offices, usually
as part of an issue's road show. We view these as excellent opportunities not
only to buy issues at favorable prices, but also to propose changes to the
issue, enhancing its quality and appeal to our distinct standards.
[PHOTO]
Municipal research analyst Molly Butler discusses a bond issue with portfolio
manager Stella Wong.
Q: How can Franklin's research influence the portfolio managers investment
decisions?
RAFAEL: Our extensive research allows us to use a contrarian approach
to investing, because we firmly believe that near-term volatility can create
opportunities for greater long-term yields. For example, when Moody's, Standard
& Poor's or Fitch, three national credit rating agencies, downgrade a bond, many
investors sell the issue, sometimes reducing prices to what we believe are
attractive levels. As we evaluate our investments based on our internal
assessments, we can use these valuable opportunities to purchase what we believe
are high-quality issues at temporarily depressed prices.
External events can also lead to situations where bonds become undervalued. Over
the past few years, for example, Medicare reform negatively affected the
hospital bond sector, even for those hospitals in strong financial shape. As
many hospitals' credit profiles weakened, we were able to find value selectively
through our analysts' expertise. Seeking to take advantage of this, we
recommended such bonds to our portfolio managers who purchased them at a time
when the market seemed to be shunning these issues.
Q: Could you provide an example of a successful outcome of your research?
RAFAEL: Sure. A perfect example is Tucson Electric Power (TEP). It issued $579
million in tax-exempt debt in 1997-98. However, the utility had a long, troubled
history and its debt was rated below investment grade. So, Molly Butler, our
electric utility analyst, and I flew to Tucson and spent an entire day with
TEP's top executives and division heads. We discussed their history, current
position and future plans as well as challenged and questioned many of their
projections and assumptions. At the end of the day, we were satisfied that their
management team had a clear vision and a realistic plan for the future.
Q: How is TEP doing today?
RAFAEL: Since then, the rating agencies have raised TEP's credit rating and the
bonds have seen a significant increase in value. Of course, the ratings can
change again in the future. However, the bonds are still offering above-market
yields for our shareholders, because we were able to purchase the securities
when they were unpopular. We have an excellent relationship with management and
they often call Ms. Butler to discuss the latest releases of information.
THANK YOU, RAFAEL.
WHAT IS A ROAD SHOW?
Before a new issue is brought to the public, the issuer and its investment
bankers travel around the country making presentations to potential investors
concerning the issuer's financial information and outlook.
FRANKLIN ARIZONA TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin Arizona Tax-Free Income Fund
Based on Long-Term Investments
8/31/99
[PIE CHART]
AAA - 50.5%
AA - 15.1%
A - 17.8%
BBB - 16.6%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin Arizona Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF ARIZONA]
Arizona's economy continues to surpass optimistic forecasts, driven by
employment growth, population increases, a favorable business environment, new
home construction and six consecutive years of tax reductions. The job base
began dramatically diversifying several years ago, within the expanding
high-tech manufacturing and international trade sectors, along with the more
traditional mining, agriculture, tourism and retirement industries. The state
saw increased but more limited job growth during the reporting period. The state
boasts an unemployment rate below the national average, at 4.2% in July 1999,
which is even more impressive given the massive influx of new residents. (2)
Such growth is extremely important to the state's economic health. The number of
companies interested in relocating to Arizona is soaring, while many existing
companies have announced major expansions. In the Phoenix area alone, almost
2,000 new jobs were created in June 1999.(3) Furthermore, these new residents
need somewhere to live, fueling the important construction industry. Home
building permits in 1999 may break 1998's record of 36,001.(4) The state has
seen its personal income figures increase more than 65% since 1990.(5) Arizona,
not immune to world economic problems, struggled as three of Arizona's largest
copper producers laid off 2,850 workers during the reporting period, as the
price of copper remains depressed due to oversupply caused by the Asian
crisis.(6) However, these job losses should be easily offset by
continued new job growth. One concern for Arizona's economy is that rising
interest rates could cause a slowdown in construction spending.
1. 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.
2. Source: Bureau of Labor Statistics, 8/99.
3. Source: Arizona Dept. of Commerce, The Gold Sheet, 8/99.
4. Source: The Arizona Republic, Arizona Boom Still Booming, 8/99.
5. Source: Arizona Dept. of Commerce, The Gold Sheet, 7/27/99.
6. Source: Tucson Citizen, Copper Down, But Hopes Rise, 7/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 47 of
this report.
Arizona's future looks very bright. Presently, Arizona has the second
fastest-growing population of any state. The favorable climate should continue
to draw retiring baby-boomers, and the broad-based economy's ample supply of new
jobs should add to the state's younger population.
PORTFOLIO NOTES
Franklin Arizona Tax-Free Income Fund participated in the largest Arizona deal
of 1999, the $366 million Mesa, Arizona Industrial and Development Agency (IDA)
Health Facilities Revenue bonds for Discovery Health Systems, during the
reporting period. We made this issue one of the portfolio's core positions. The
bonds were insured and offered at extremely attractive yields for Arizona.
Considered a "specialty state," Arizona bonds typically trade at yield levels
below the national average for municipal bonds due to supply and demand
characteristics. Such purchases gave us the opportunity to restructure the
portfolio and we sold other bonds to book tax losses that can be carried forward
and used to help offset future capital gains and reduce our shareholders' tax
liabilities. Other notable purchases during the reporting period included
Maricopa County Hospital Revenue -- Sun Health Corp. and Phoenix Civic
Improvement Corp. Excise Tax Revenue bonds.
The rise in interest rates during the period resulted in decreasing bond prices.
For the six months ended August 31, 1999, the 30-year Treasury bond price fell
8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in
the fund's portfolio, was off 8.25%.(7) By comparison, your fund's Class A share
price, as measured by net asset value, declined only 5.18%.
AAA-rated securities made up 50.5% of Franklin Arizona Tax-Free Income Fund's
total long-term investments on August 31, 1999, reflecting the fund's high
quality. Higher-rated bonds generally exhibit greater price stability than their
lower-rated counterparts, better ensuring the safety of your principal and
income stream.
PORTFOLIO BREAKDOWN
Franklin Arizona
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
Utilities 25.4%
Hospital & Health Care 22.7%
Prerefunded 13.1%
General Obligation 9.3%
Tax Supported Debt 6.0%
Corporate Backed 5.2%
Housing 5.0%
Transportation 4.6%
Subject to Government
Appropriation 3.9%
Higher Education 2.5%
Other Revenue 2.3%
7. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
Arizona's new bond issuance for the first half of 1999 was $1.34 billion, down
43.6% from the same period last year. This reduced new-issue supply combined
with strong retail demand for Arizona municipal bonds should help support the
value of the portfolio's holdings.
Looking forward, we remain positive on the outlook for Arizona, its municipal
bonds and Franklin Arizona Tax-Free Income Fund. The reduced new-issue supply
combined with strong demand for Arizona municipal bonds continue to make Arizona
municipal bonds attractive investments.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS(*)
Franklin Arizona Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
-------------------------
MONTH CLASS A CLASS C
- ------------------------------------------------------------------------
March 4.75 cents 4.24 cents
April 4.75 cents 4.24 cents
May 4.75 cents 4.24 cents
June 4.75 cents 4.27 cents
July 4.75 cents 4.27 cents
August 4.75 cents 4.27 cents
- ------------------------------------------------------------------------
TOTAL 28.5 CENTS 25.53 CENTS
(*)Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
FRANKLIN ARIZONA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- ------------------------------------------------------------------------------
Net Asset Value -$0.59 $10.79 $11.38
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.2850
Long-Term Capital Gain $0.0346
TOTAL $0.3196
CLASS C CHANGE 8/31/99 2/28/99
- ------------------------------------------------------------------------------
Net Asset Value -$0.59 $10.86 $11.45
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.2553
Long-Term Capital Gain $0.0346
TOTAL $0.2899
CLASS A (formerly Class I):
Subject to the current,maximum 4.25% initial sales charge. Prior to July
1,1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1,1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.36% -0.21% +30.82% +91.60% +127.93%
Average Annual Total Return(2) -6.55% -4.47% +4.60% +6.25% + 6.72%
Distribution Rate(3) 5.06%
Taxable Equivalent Distribution Rate(4) 8.82%
30-Day Standardized Yield(5) 4.48%
Taxable Equivalent Yield(4) 7.81%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.61% -0.77% +14.31% +23.71%
Average Annual Total Return(2) -4.56% -2.73% +4.22% +4.79%
Distribution Rate(3) 4.63%
Taxable Equivalent Distribution Rate(4) 8.07%
30-Day Standardized Yield(5) 4.06%
Taxable Equivalent Yield(4) 7.08%
</TABLE>
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Arizona state personal income tax bracket of 42.6%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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
CREDIT QUALITY BREAKDOWN*
Franklin Colorado Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
AAA - 64.2%
AA - 8.8%
A - 13.3%
BBB - 13.7%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin Colorado Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF COLORADO]
The Colorado economy is on a roll; however, questions remain as to how fast and
how far it can go. After posting sluggish growth for the first half of 1999 due
to reductions in the construction and services sectors, the economy heated up a
little in July, with gains in several high-paying industries, including
manufacturing, transportation and construction. Unemployment, at 3.1% in June
1999, remains well below the national average, but a steady stream of new
residents so far has eased any labor shortages.(2) Debt per capita remains
relatively low and prudent financial management practices have placed the state
in a favorable fiscal position.
The city and county of Denver remains Colorado's economic center. The area
continues to show robust economic activity, illustrated by the 7.8% average
annual increases in the city's tax base over each of the past five years.(3)
Like the state, Denver has a relatively low debt per capita and conservative
financial management.
While labor shortages could hinder future growth, Colorado and Denver are in
strong fiscal shape, which gives them a promising outlook.
PORTFOLIO NOTES
For the first eight months of 1999, the Colorado municipal bond supply was $2.6
billion, an increase of 21.1% compared with the same period in 1998. In
addition, the number of insured issues shot up 70.1% in the first six months of
1999, compared with the same year-ago period. Reflecting this trend, AAA-rated
securities made up 64.2% of Franklin Colorado Tax-Free Income Fund's total
long-term investments on August 31, 1999. Higher-rated bonds generally exhibit
greater price stability than their lower-rated counterparts, better ensuring the
safety of your principal and income stream.
1. 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.
2. Source: Bureau of Labor Statistics, 8/99.
3. Source: Fitch IBCA, 5/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 53 of
this report.
The rise in interest rates during the period resulted in decreasing bond prices.
For the six months ended August 31, 1999, the 30-year Treasury bond price fell
8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in
the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share
price, as measured by net asset value, declined only 5.39%.
Notable purchases during the reporting period included revenue bonds from
Colorado Springs Utilities, University of Colorado Hospital Authority and
University of Colorado - Enterprise System. Hospital and health care remained
the fund's largest weighting, at 27.5% of total long-term investments, followed
by transportation, at 13.5% on August 31, 1999.
Going forward, Colorado's municipal bond supply for the remainder of the year is
expected to remain stable, which should continue to make them attractive
investments for investors seeking tax-free income. The fund will maintain its
fiscally responsible strategy of seeking to provide a high level of current
income with a relatively stable share price.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS(*)
Franklin Colorado Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
-------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
March 4.95 cents 4.38 cents
April 4.95 cents 4.38 cents
May 4.95 cents 4.38 cents
June 4.95 cents 4.42 cents
July 4.95 cents 4.42 cents
August 4.95 cents 4.42 cents
- --------------------------------------------------------------------------------
TOTAL 29.70 CENTS 26.40 CENTS
PORTFOLIO BREAKDOWN
Franklin Colorado
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- -------------------------------------
Hospital & Health Care 27.5%
Transportation 13.5%
Utilities 12.7%
Housing 10.9%
Tax Supported Debt 8.1%
General Obligation 7.6%
Subject to Government
Appropriation 6.4%
Higher Education 5.3%
Prerefunded 5.1%
Corporate Backed 2.9%
(*)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 include all accrued income earned by the fund during the reporting
period.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
FRANKLIN COLORADO TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- -------------------------------------------------------------------------------
Net Asset Value -$0.65 $11.40 $12.05
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.2970
Long-Term Capital Gain $0.0118
TOTAL $0.3088
CLASS C CHANGE 8/31/99 2/28/99
- -------------------------------------------------------------------------------
Net Asset Value -$0.65 $11.46 $12.11
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.2640
Long-Term Capital Gain $0.0118
TOTAL $0.2758
CLASS A (formerly Class I):
Subject to the current,maximum 4.25% initial sales charge. Prior to July
1,1994,fund shares were offered at a lower initial sales charge;thus actual
total returns may differ. May 1,1994,the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan,which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.82% -0.94% +32.91% +95.32% +134.39%
Average Annual Total Return(2) -6.91% -5.16% +4.93% +6.46% +6.97%
Distribution Rate(3) 4.99%
Taxable Equivalent Distribution Rate(4) 8.70%
30-Day Standardized Yield(5) 4.62%
Taxable Equivalent Yield(4) 8.05%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -3.08% -1.49% +14.65% +25.21%
Average Annual Total Return(2) -4.97% -3.38% +4.30% +5.07%
Distribution Rate(3) 4.58%
Taxable Equivalent Distribution Rate(4) 7.98%
30-Day Standardized Yield(5) 4.22%
Taxable Equivalent Yield(4) 7.35%
</TABLE>
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Colorado state personal income tax bracket of 42.6%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 Goal:Franklin Connecticut Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF CONNECTICUT]
Connecticut is the nation's wealthiest state, with per-capita income
approximately 142% of the national average, as of June 1999.(2) Its economy
remains strong, and in May 1999 the unemployment rate was only 3.4%.(3) The
powerful economy has resulted in budget surpluses over the past three years,
improving the state's financial position.
However, several notable issues temper this scenario. The state's debt per
capita is among the highest in the nation; at $3,043 it is more than six times
the national median. Plans for future borrowing promise to maintain this high
level. Connecticut also has large, unfunded pension liabilities, including $6.9
billion in teachers' retirement funds.(2) Flat or declining population figures,
coupled with low unemployment, mean that labor shortages will likely constrain
growth going forward.
As of mid-June 1999, 80% of Connecticut's mission-critical computer systems
were Year-2000 compliant. The state expects the remainder to be compliant by
November 1.(2)
The outlook for Connecticut is generally positive. Although the state has high
fixed costs from servicing its large debt, which may hinder growth, its
diversified and expanding economy, high wealth and a strengthening financial
position bode well for the future. Reflecting this upbeat projection, Standard
and Poor's(R), a national credit rating agency, assigned the state an AA
rating.(4)
CREDIT QUALITY BREAKDOWN*
Franklin Connecticut Tax-Free
Income Fund
Based on Total Long-Term Investments
8/31/99
[Pie Chart]
AAA - 42.6%
AA - 21.0%
A - 8.5%
BBB - 27.9%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
1. 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.
A non-diversified fund may be subject to greater risk of adverse economic or
regulatory developments in that state than a fund with broader geographical
diversification.
2. Source: Moody's Investors Service,State of Connecticut, 6/99.
3. Source: Bureau of Labor Statistics, 8/99.
4. This does not indicate Standard and Poor's rating of the fund.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 57 of
this report.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell pre-refunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
PORTFOLIO NOTES
Connecticut's municipal bond issuance continued at a snail's pace during the
period under review, while the demand from individual and institutional buyers
remained robust. Many issuers enhanced their debt's credit quality by purchasing
insurance for their upcoming issues, improving their bonds marketability and
giving them greater access to new money or better opportunities to refinance
existing debt. However, as interest rates rose, prerefunding activity decreased
because there was less advantage to issuers.
The rise in interest rates during the period resulted in decreasing bond prices.
For the six months ended August 31, 1999, the 30-year Treasury bond price fell
8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in
the fund's portfolio, was off 8.25%.(5) By comparison, your fund's Class A share
price, as measured by net asset value, declined only 5.50%.
The fund purchased primarily AA, AAA and insured bonds during the period,
resulting in a marked increase in the portfolio's quality. The percentage of
AAA-rated securities increased significantly, from 29.0% of total long-term
investments on February 28, 1999, to 42.6% at the end of the reporting period.
Higher-rated bonds generally exhibit greater price stability than their
lower-rated counterparts, better ensuring the safety of your principal and
income stream. Purchases during the period included Connecticut State Health and
Educational Facilities Authority Revenue Bonds for Fairfield University,
University of Connecticut Foundation and Horace Bushnell Memorial Hall.
Several times during the six-month period under review, the fund sought to book
tax losses, which can be carried forward in the portfolio to help offset any
future taxable capital gains and potentially lower shareholders' tax
liabilities. The fund was able to sell territorial debt, such as Puerto Rico
bonds, to purchase Connecticut state issues. This strategy allowed the fund to
remain well-diversified as well as provided opportunities in the future to buy
territorial debt, which is highly liquid and well received, when state issues
are scarce.
Looking forward, the fund will continue to buy current coupon bonds at a slight
discount in its effort to provide shareholders with high, current tax-free
income and preservation of capital. In addition, we intend to maintain our
strategy of selling pre-refunded bonds to decrease the fund's call exposure.
5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Connecticut Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
--------------------------
MONTH CLASS A CLASS C
- ---------------------------------------------------------------------
March 4.65 cents 4.12 cents
April 4.65 cents 4.12 cents
May 4.65 cents 4.12 cents
June 4.65 cents 4.14 cents
July 4.65 cents 4.14 cents
August 4.65 cents 4.14 cents
- ---------------------------------------------------------------------
TOTAL 27.90 cents 24.78 cents
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
PORTFOLIO BREAKDOWN
Franklin Connecticut
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- --------------------------------------
Hospital & Health Care 27.7%
Prerefunded 22.2%
Utilities 13.3%
Housing 12.5%
Higher Education 12.3%
General Obligation 5.0%
Tax Supported Debt 1.8%
Subject to Government
Appropriation 1.7%
Transportation 1.4%
Other Revenue 1.3%
Corporate Backed 0.8%
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.62 $10.65 $11.27
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.279
CLASS C CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.62 $10.68 $11.30
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.2478
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (10/3/88)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -3.02% -0.82% +30.34% +84.19% +98.72%
Average Annual Total Return(2) -7.14% -5.02% +4.53% +5.84% +6.07%
Distribution Rate(3) 5.00%
Taxable Equivalent Distribution Rate(4) 8.67%
30-Day Standardized Yield(5) 4.47%
Taxable Equivalent Yield(4) 7.75%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -3.29% -1.38% +13.91% +23.91%
Average Annual Total Return(2) -5.16% -3.26% +4.09% +4.82%
Distribution Rate(3) 4.60%
Taxable Equivalent Distribution Rate(4) 7.97%
30-Day Standardized Yield(5) 4.07%
Taxable Equivalent Yield(4) 7.06%
</TABLE>
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current,maximum 4.25% initial sales charge. Prior to July
1,1994,fund shares were offered at a lower initial sales charge;thus actual
total returns may differ. May 1,1994,the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan,which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Connecticut state personal income tax bracket of 42.3%,
based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 Goal: Franklin Federal Intermediate-Term Tax-Free Income Fund 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 3 and 10 years.(1)
PORTFOLIO NOTES
During the six-month reporting period, the 30-year Treasury bond yield rose from
5.57% on February 28, 1999, to 6.07% on August 31, 1999. As the municipal bond
market typically trends with the Treasury market, the yield on the Bond Buyer 40
Municipal Index, an indicator of the municipal bond market, rose during the same
period, from 5.23% to 5.78%. At the end of the reporting period, municipal bond
yields approached 95% of the yield on Treasury bonds, a ratio historically in
the 89% range. Thus, in our opinion municipal bonds were trading relatively
cheaply, providing the fund with several excellent buying opportunities.
The rise in interest rates during the period resulted in decreasing bond prices.
For the six months ended August 31, 1999, the 30-year Treasury bond price fell
8.38%, and the Bond Buyer 40 was off 8.25%.(2) By comparison, your fund's Class
A share price, as measured by net asset value, declined only 3.81%.
CREDIT QUALITY BREAKDOWN*
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Based on Long-Term Investments
8/31/99
[PIE CHART]
AAA - 18.3%
AA - 10.2%
A - 21.0%
BBB - 48.8%
Below Investment Grade - 1.7%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
1. This dividend income is generally subject to state and local income taxes, if
any. For investors subject to the federal or state alternative minimum tax, a
small portion of this income may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable.
A non-diversified fund may be subject to greater risk of adverse economic or
regulatory developments than a fund with broader diversification.
2. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 61 of
this report.
PORTFOLIO BREAKDOWN
Franklin Federal Intermediate-Term
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- -----------------------------------------
Utilities 19.6%
Hospital & Health Care 19.1%
Corporate Backed 12.0%
Tax Supported Debt 10.8%
Housing 7.9%
General Obligation 7.3%
Subject to Government
Appropriation 7.2%
Transportation 5.7%
Higher Education 4.0%
Prerefunded 3.3%
Other Revenue 3.1%
Our strategy remained unchanged, as we sought to produce high, current, tax-free
income, while maintaining share price stability. The fund generally employed a
buy-and-hold strategy, keeping portfolio turnover very low over the past six
months. We found value in the 10-15 year maturity range, and many of the funds
purchased during the reporting period were insured, improving the fund's overall
credit quality. During the period, AAA-rated bonds increased from 14.6% to 18.3%
of the fund's total long-term investments. Higher-rated bonds generally exhibit
greater price stability than their lower-rated counterparts, better ensuring
the safety of your principal and income stream.
Additionally, the fund was able to take advantage of opportunities in the market
to buy "specialty state" issues at national yield levels. These states generally
trade at lower yields than other states due to supply and demand
characteristics. The fund purchased bonds over the six-month period in many
different sectors, helping to maintain its diversification. Some of the
purchases included University of Akron, Ohio General Receipts; Florida State
Board of Education Capital Outlay and New Jersey State Housing and Mortgage
Finance Agency Revenue.
Going forward, our outlook for the fixed-income markets, including municipal
bonds, remains positive. Although we expect the supply of municipals to be
relatively strong, we anticipate that the yield ratio of municipal bonds to
Treasuries should fall more into its historical trading range, a positive sign
for municipal bonds.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS(*)
Franklin Federal Intermediate-Term
Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND
MONTH PER SHARE
- -------------------------------
March 4.15 cents
April 4.15 cents
May 4.15 cents
June 4.15 cents
July 4.15 cents
August 4.15 cents
- -------------------------------
TOTAL 24.90 CENTS
(*)Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.43 $10.87 $11.30
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.249
CLASS A (formerly Class I):
Subject to the maximum 2.25% initial sales charge. The fund's manager agreed in
advance to waive a portion of its management fees,which reduces operating
expenses and increases yield,distribution rate and total return to
shareholders. Without these reductions,the fund's distribution rate and total
return would have been lower,and yield for the period would have been 4.07%.The
fee waiver may be discontinued at any time upon notification to the fund's Board
of Trustees.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR (9/21/92)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -1.57% +0.58% +31.95% +51.42%
Average Annual Total Return(2) -3.78% -1.68% +5.23% +5.81%
Distribution Rate(3) 4.59%
Taxable Equivalent Distribution Rate(4) 7.60%
30-Day Standardized Yield(5) 4.10%
Taxable Equivalent Yield(4) 6.79%
</TABLE>
1. Cumulative total return represents 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 applicable, maximum
sales charge. Six-month return has not been annualized.
3. Distribution rate is based on an annualization of the current 4.25 cent per
share monthly dividend and the maximum offering price of $11.12 on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 HIGH YIELD TAX-FREE INCOME FUND
Your Fund's Goal: Franklin High Yield Tax-Free Income Fund 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.(1) As discussed in the fund's prospectus, these securities
entail greater risk than higher-rated municipal securities.
PORTFOLIO NOTES
The six-month period ended August 31, 1999, provided challenges and
opportunities in the municipal bond market. The 30-year Treasury bond yield rose
from 5.57% on February 28, 1999, to 6.07% on August 31, 1999, extending a trend
of higher rates that started after the 30-year Treasury bond yield reached a low
of 4.70% on October 5, 1998. The rise in interest rates during the period
resulted in decreasing bond prices. For the six months ended August 31, 1999,
the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, an indicator
of the municipal bond market, was off 8.25%.(2) By comparison, your fund's Class
A share price, as measured by net asset value, declined only 4.26%.
Given the substantial rate increase, it is interesting to note how the
relationship between Treasuries and municipal bonds has changed. In the fall of
1998, when the global financial crisis caused the flight to quality into
Treasuries, municipal bonds were actually yielding more than Treasuries for a
short while. The ratio of the yield on a generic insured municipal bond to the
30-year Treasury bond yield topped out at 101%, a very rare situation that put
municipal bonds in a position to outperform Treasuries. In fact, that has
occurred as the principal value of the 30-year Treasury bond has fallen about
17% since October 1998, while a generic insured municipal bond is down about 6%.
CREDIT QUALITY BREAKDOWN*
Franklin High Yield Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
AAA - 26.2%
AA - 2.7%
A - 9.7%
BBB - 27.6%
Below Investment Grade - 33.8%
* Quality breakdown may include
internal ratings for bonds not rated
by a national rating agency.
1. This dividend income is generally subject to state and local income taxes, if
any. For investors subject to the federal or state alternative minimum tax, a
small portion of this income may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable.
2. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 69 of
this report.
PORTFOLIO BREAKDOWN
Franklin High Yield
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- --------------------------------------
Utilities 31.2%
Hospital & Health Care 14.7%
Prerefunded 13.6%
Tax Supported Debt 10.2%
General Obligation 7.5%
Transportation 7.2%
Corporate Backed 6.5%
Housing 3.4%
Subject to Government
Appropriation 3.1%
Other Revenue 2.3%
Higher Education 0.3%
The supply of bonds in the municipal market also has been more favorable this
calendar year. In 1998, the supply was unusually large, with more than $280
billion coming to market. For 1999, we expect about $230 billion of supply,
approximately 18% less than 1998, which should help municipal bonds'
performance.
We continue to invest with our proven strategy that has guided our performance
through the years -- seeking to maximize income by finding the best value and
investing at a slight discount. Such a strategy has worked through many
different interest rate cycles, generally allowing us to provide high, current
income. The strategy also sets up the portfolio defensively, so that in the
recent rising interest-rate environment, our tax-free funds performed favorably
versus our competition. Also, we attempted to take advantage of recent market
conditions by selling bonds to book tax losses, which can be carried forward in
the portfolio to help offset any taxable capital gains in the future and
potentially lower shareholders' tax liabilities, and reinvesting the proceeds at
higher rates.
While interest rates rose in general, the high yield sector of the municipal
bond market held its value very well. The yield difference, or spread, between a
lower-rated bond, such as those in which the fund invests, and an insured bond
widened significantly between the spring and fall of 1998. During that period,
we invested aggressively, taking advantage of investor concerns as spreads
widened and high yield bond prices fell. But with the increase in interest rates
during the six months under review, the spread narrowed, allowing the value of
high yield bonds to improve relative to higher quality bonds.
We continued to seek out plenty of favorable opportunities in certain sectors of
the high yield market. Decreasing revenues from Medicare due to the Balanced
Budget Act caused uncertainty in the health care market, as some investors
became extremely nervous about these companies' ability to pay their debt. This
resulted in many opportunities to buy bonds at distressed levels that we believe
provide substantial value. Adhering to our research-based, value approach, we
sought to take advantage of some excellent opportunities, and during the period,
we purchased Mesa, Arizona Industrial and Development Authority (IDA) Health
Facilities Revenue bonds for Discovery Health Systems and Harris County Health
Facilities Development Corp. Revenue bonds for Christus Health. We see more
opportunities in the future as we continue to search all sectors in the
municipal bond marketplace.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS(*)
Franklin High Yield Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
------------------------------------------
MONTH CLASS A CLASS B(**) CLASS C
- --------------------------------------------------------------------------------
March 5.4 cents 4.84 cents 4.79 cents
April 5.4 cents 4.84 cents 4.79 cents
May 5.4 cents 4.84 cents 4.79 cents
June 5.4 cents 4.84 cents 4.90 cents
July 5.4 cents 4.84 cents 4.90 cents
August 5.4 cents 4.84 cents 4.90 cents
- --------------------------------------------------------------------------------
TOTAL 32.4 CENTS 29.04 CENTS 29.07 CENTS
(*)Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
(**)January 1, 1999, the fund began offering Class B shares to investors. See
the prospectus for details.
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- -----------------------------------------------------------------------------
Net Asset Value -$0.49 $11.00 $11.49
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.3240
Long-Term Capital Gain $0.0028
TOTAL $0.3268
CLASS B CHANGE 8/31/99 2/28/99
- -----------------------------------------------------------------------------
Net Asset Value -$0.48 $11.04 $11.52
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.2904
Long-Term Capital Gain $0.0028
TOTAL $0.2932
CLASS C CHANGE 8/31/99 2/28/99
- -----------------------------------------------------------------------------
Net Asset Value -$0.50 $11.07 $11.57
DISTRIBUTIONS (3/1/99 - 8/31/99)
--------------------------------
Dividend Income $0.2907
Long-Term Capital Gain $0.0028
TOTAL $0.2935
CLASS A (formerly Class I):
Subject to the current,maximum 4.25% initial sales charge. Prior to July
1,1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994,the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan,which affects subsequent
performance.
CLASS B:
Subject to no initial sales charge, but subject to a contingent deferred sales
charge (CDSC) declining from 4% to 0% over six years. These shares have higher
annual fees and expenses than Class A shares.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% CDSC for shares redeemed within 18
months of investment. These shares have higher annual fees and expenses than
Class A shares.
Past performance is not predictive of future results.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (3/18/86)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -1.40% -0.32% +39.31% +107.49% +180.79%
Average Annual Total Return(2) -5.59% -4.56% +5.93% +7.11% +7.63%
Distribution Rate(3) 5.64%
Taxable Equivalent Distribution Rate(4) 9.34%
30-Day Standardized Yield(5) 5.28%
Taxable Equivalent Yield(4) 8.74%
</TABLE>
INCEPTION
CLASS B 6-MONTH (1/1/99)
- ---------------------------------------------------------------------
Cumulative Total Return(1) -1.60% -0.66%
Aggregate Total Return(2) -5.43% -4.50%
Distribution Rate(3) 5.28%
Taxable Equivalent Distribution Rate(4) 8.74%
30-Day Standardized Yield(5) 4.95%
Taxable Equivalent Yield(4) 8.20%
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -1.76% -0.88% +18.00% +30.40%
Average Annual Total Return(2) -3.72% -2.81% +5.32% +6.06%
Distribution Rate(3) 5.28%
Taxable Equivalent Distribution Rate(4) 8.74%
30-Day Standardized Yield(5) 4.90%
Taxable Equivalent Yield(4) 8.11%
</TABLE>
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized. Since Class B shares have existed for less than one year, the
figures for that class represent aggregate total return from inception;
therefore, average annual total returns are not provided.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 NEW JERSEY TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin New Jersey Tax-Free
Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
AAA - 73.5%
AA - 6.0%
A - 5.8%
BBB - 13.2%
Below Investment Grade - 1.5%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin New Jersey Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF NEW JERSEY]
New Jersey's economy has found its stride. After the recession of the early
'90s, New Jersey was one of the last states to benefit from the national eco-
nomic rebound. However, in the past two years, the state has outperformed
expectations. In the first five months of 1999, monthly job growth increased
between 1.4% and 2.0%, compared with the same period a year ago.(2) Although job
growth remains below the national average, this situation is a dramatic
improvement from earlier in the decade.
The state's increasing job growth is largely a result of the economic shift from
manufacturing to services. Once principally reliant on manufacturing, the state
economy now is made up of a broad spectrum of industries, many of which are
service-based. Services are now the state's largest employment sector,
comprising 32% of jobs.(2)
New Jersey's financial condition remains sound. On June 30, 1999, the state
completed its 1999 fiscal year with a surplus of more than $1 billion. The state
has a moderate debt burden and due to its strong economy, has been able to cut
property and personal income taxes during the past few years. However, its debt
is rapidly rising, and at $14 billion as of July 1999, is the fourth-highest
among all states.(2) Although the escalating debt burden may be worrisome, the
increase partially reflects New Jersey's investments in its transportation
infrastructure, which should help fuel further growth.
1. 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.
2. Source: Moody's Investors Service, State of New Jersey, 8/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 93 of
this report.
New Jersey seems to have a solid future. With a large and diverse economy,
financial controls in place and per capita wealth second only to Connecticut's,
New Jersey has the sound foundation for additional growth. Based on these
factors, Standard and Poor's, a national credit rating agency, assigns New
Jersey an AA+ rating.(3)
PORTFOLIO NOTES
New Jersey's new municipal bond issuance increased 9.3% in the first half of
1999. Many issuers enhanced their debt's credit quality by purchasing insurance
for their upcoming issues, improving their bonds marketability and giving them
greater access to new money or better opportunities to refinance existing debt.
However, as interest rates rose, prerefunding activity decreased because there
was less opportunity for issuers to find interest rate savings.
The rise in interest rates during the period also resulted in decreasing bond
prices. For the six months ended August 31, 1999, the 30-year Treasury bond
price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of
securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's
Class A share price, as measured by net asset value, declined only 4.60%.
During the reporting period, the fund primarily purchased insured bonds, which
helped maintain the portfolio's high quality, as many insured bonds are rated
AAA. At the end of the period, 73.5% of the fund's total long-term investments
were rated AAA, compared with 73.0% on February 28, 1999. Higher-rated bonds
generally exhibit greater price stability than their lower-rated counterparts,
better ensuring the safety of your principal and income stream. Important
purchases during the period included Mount Laurel Township Board of Education
general obligation (GO), South Jersey Transportation Authority Transportation
Systems Revenue and New Jersey Health Care Facilities Financing Authority
Revenue Bonds for Burdette Tomlin Memorial Hospital and Meridian Health Systems
Obligation Group.
As opportunities allowed during the six-month period under review, the fund
sought to book tax losses, which can be carried forward in the portfolio to help
offset any taxable capital gains in the future and potentially lower
shareholders' tax liabilities.
PORTFOLIO BREAKDOWN
Franklin New Jersey
Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ----------------------------------------
Prerefunded 19.7%
Hospital & Health Care 19.0%
Utilities 15.7%
Transportation 13.3%
Housing 10.6%
Higher Education 6.0%
General Obligation 6.0%
Subject to Government
Appropriation 3.7%
Other Revenue 2.7%
Corporate Backed 2.1%
Tax Supported Debt 1.2%
3. This does not indicate Standard and Poor's rating of the fund.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell pre-refunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
Looking forward, the fund will continue to buy current coupon bonds at a slight
discount in its effort to provide shareholders with high, current tax-free
income and preservation of capital. In addition, we intend to maintain our
strategy of selling pre-refunded bonds to decrease the fund's call exposure.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS(*)
Franklin New Jersey Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
-------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
March 5 cents 4.43 cents
April 5 cents 4.43 cents
May 5 cents 4.43 cents
June 5 cents 4.46 cents
July 5 cents 4.46 cents
August 5 cents 4.46 cents
- --------------------------------------------------------------------------------
TOTAL 30 CENTS 26.67 CENTS
(*)Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.55 $11.41 $11.96
DISTRIBUTIONS (3/1/99 - 8/31/99)
-----------------------------------
Dividend Income $0.3000
Long-Term Capital Gain $0.0032
TOTAL $0.3032
CLASS C CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.56 $11.47 $12.03
DISTRIBUTIONS (3/1/99 - 8/31/99)
-----------------------------------
Dividend Income $0.2667
Long-Term Capital Gain $0.0032
TOTAL $0.2699
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (5/12/88)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.05% +0.10% +32.15% +92.82% +121.94%
Average Annual Total Return(2) -6.21% -4.13% +4.82% +6.32% +6.90%
Distribution Rate(3) 5.03%
Taxable Equivalent Distribution
Rate(4) 8.89%
30-Day Standardized Yield(5) 4.46%
Taxable Equivalent Yield(4) 7.89%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.40% -0.47% +15.35% +24.93%
Average Annual Total Return(2) -4.31% -2.39% +4.51% +5.03%
Distribution Rate(3) 4.63%
Taxable Equivalent Distribution Rate(4) 8.19%
30-Day Standardized Yield(5) 4.06%
Taxable Equivalent Yield(4) 7.18%
</TABLE>
Past performance is not predictive of future results.
FRANKLIN NEW JERSEY
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge;thus actual total
returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and New Jersey state personal income tax bracket of 43.4%,
based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
FRANKLIN OREGON TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin Oregon Tax-Free Income Fund
Based on Total Long-term Investments
8/31/99
[PIE CHART]
AAA - 41.4%
AA - 28.0%
A - 15.4%
BBB - 13.8%
Below Investment Grade - 1.4%
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin Oregon Tax-Free Income Fund 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.(1)
STATE UPDATE
[GRAPHIC OF OREGON]
Recently, Oregon's economy has become the envy of much of the nation. For the
past few years, aggressive expansion of the high-tech industry and a boom in
housing construction, resulting from strong immigration, have fueled an
impressive economic performance. Through 1997, Oregon's economy outperformed the
nation's for 12 consecutive years, but Asia's economic recession caused the
state to fall below the national average, as exports to the region count for 11%
of gross state product. In 1998, growth slowed to 2.0%, compared with 2.6% for
the nation.(2)
However, things are looking up again for Oregon. Since the fourth quarter of
1998, Oregon's exports to Asia have picked up significantly. Many analysts now
feel that the Asian economic crisis has begun to wane, and indeed, the East
Asian economies seem to be expanding again. In addition, Oregon's important
semiconductor industry also is turning around, as much of their business is in
Asia. As a result, Oregon's employment growth is expected to outpace the
nation's through 2000.
Oregon's outlook is positive, as the state maintains a tight grip on its
expenses and maintains a low debt burden. Revenues have exceeded projections for
the last few years and at $281 per person, Oregon's debt per capita is well
under the national average of $505.(2) As a result, Standard and Poor's, a
national credit rating agency, assigns the state an AA rating.(3)
1. 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.
2. Source: Moody's Investors Service, State of Oregon, 5/99.
3. This does not indicate Standard and Poor's rating of the fund.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 98 of
this report.
PORTFOLIO NOTES
The bond market experienced a significant rise in interest rates during the six
months under review, which led to a significant drop in bond prices. As of
August 31, 1999, the price of the 30-year Treasury bond was down 8.38% for the
six-month period under review, while the Bond Buyer 40 Municipal Index, a
reasonable proxy for the type of securities in the fund's portfolio, was off
8.25%.(4) By comparison, Franklin Oregon Tax-Free Income Fund's Class A share
price, as measured by net asset value, declined only 5.07%.
Our conservative, long-term, buy-and-hold philosophy enabled us to take
advantage of the market volatility during the six months under review. We sought
to construct a debt portfolio designed to lock in long-term high income while
reducing the potential for principal erosion and large price swings. With low
turnover rates and without using leverage, the fund was able to pay out
relatively high dividends with low volatility. The fund held a large percentage
of high coupon bonds during the period, which maintained stability in the rising
interest-rate environment. Furthermore, the fund maintained a shorter duration
(8.46 years) than the Bond Buyer 40 Index (14.0 years), where duration is a
measure of interest-rate risk.(5)
On August 31, 1999, the fund's total net assets were more than $500 million,
giving the fund a stable and diversified asset base. The fund often was able to
use its size as well as Franklin's presence in the municipal bond market to
structure issues to fit its needs. Furthermore, the fund maintained high credit
quality, with 41.4% of the fund's total long-term investments rated AAA at the
end of the reporting period. Higher-rated bonds generally exhibit greater price
stability than their lower-rated counterparts, better ensuring the safety of
your principal and income stream. Important purchases during the period included
Port of Portland International Airport Revenue and Salem-Keizer general
obligation bonds for School District No. 24J.
Going forward, we remain positive on the outlook for Oregon, its municipal bonds
and Franklin Oregon Tax-Free Income Fund. Our shareholders will continue to
benefit from our practice of holding onto premium bonds, not only for the income
and lower volatility, but also for tax efficiency and after-tax yield.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
5. Source: The Bond Buyer, 9/2/99.
PORTFOLIO BREAKDOWN
Franklin Oregon Tax-Free
Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- ------------------------------------
Hospital & Health Care 16.6%
Housing 15.7%
Transportation 15.0%
Prerefunded 13.6%
Utilities 11.1%
General Obligation 10.9%
Subject to Government
Appropriation 7.7%
Corporate Backed 4.5%
Higher Education 2.9%
Tax Supported Debt 2.0%
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Oregon Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
----------------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
March 4.85 cents 4.28 cents
April 4.85 cents 4.28 cents
May 4.85 cents 4.28 cents
June 4.80 cents 4.26 cents
July 4.80 cents 4.26 cents
August 4.80 cents 4.26 cents
- --------------------------------------------------------------------------------
TOTAL 28.95 CENTS 25.62 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.60 $11.23 $11.83
DISTRIBUTIONS (3/1/99 - 8/31/99)
-----------------------------------
Dividend Income $0.2895
CLASS C CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.60 $11.31 $11.91
DISTRIBUTIONS (3/1/99 - 8/31/99)
-----------------------------------
Dividend Income $0.2562
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.62% -0.65% +30.55% +87.06% +119.75%
Average Annual Total Return(2) -6.79% -4.89% +4.56% +6.00% +6.40%
Distribution Rate(3) 4.91%
Taxable Equivalent Distribution
Rate(4) 8.93%
30-Day Standardized Yield(5) 4.49%
Taxable Equivalent Yield(4) 8.17%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.88% -1.12% +13.69% +23.41%
Average Annual Total Return(2) -4.79% -3.04% +4.01% +4.73%
Distribution Rate(3) 4.50%
Taxable Equivalent Distribution Rate(4) 8.19%
30-Day Standardized Yield(5) 4.10%
Taxable Equivalent Yield(4) 7.46%
</TABLE>
Past performance is not predictive of future results.
FRANKLIN OREGON
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge;thus actual total
returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Oregon state personal income tax bracket of 45.0%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin Pennsylvania Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[PIE CHART]
AAA - 67.5%
AA - 7.8%
A - 10.9%
BBB - 13.9%
* Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
Your Fund's Goal: Franklin Pennsylvania Tax-Free Income Fund 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.(1)
COMMONWEALTH UPDATE
[GRAPHIC OF PENNSYLVANIA]
Pennsylvania's efforts to diversify its economy are beginning to pay off. A
variety of service industries including software, tourism, biotechnology and
business services recently have created new jobs. Meanwhile, employment in the
once all-important manufacturing sector has consistently fallen to a level more
in line with the national average, reducing the commonwealth's vulnerability
to sectoral and regional recessions. However, restricted by a tight labor force,
Pennsylvania has lagged the nation in new job growth as well as personal income
gains.
The commonwealth's debt position has improved consistently over the past few
years. Fiscal 1999, which ended June 30, was the third consecutive year that
Pennsylvania posted a large revenue surplus. The surplus reflects larger than
projected gains in tax revenues, despite the personal income and business tax
cuts enacted in each of the past three years. The state plans a conservative
budget for fiscal year 2000, which should produce another budget surplus.
Pennsylvania took the lead in preparing for the Year 2000 computer problem. In
December 1998, the commonwealth reported that 99% of its mission-critical
computer systems were Year-2000 compliant, the highest rate of any state at the
time.(2)
Looking forward, the outlook remains bright for Pennsylvania, as its
diversifying economy and strong fiscal health position it for continued solid
economic growth.
1. For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable. The
fund's shares are free from Pennsylvania personal property tax and income is
free from Philadelphia School Investment Net Income Tax.
2. Source: Moody's Investors Service, State of Pennsylvania, 6/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 103 of
this report.
Showing its confidence in Pennsylvania, Moody's, a national credit rating
agency, assigns the commonwealth an Aa3 rating.(3)
PORTFOLIO NOTES
Pennsylvania's new municipal bond issuance decreased significantly in the first
eight months of 1999, down 23.2% compared with the previous year. Many issuers
enhanced their debt's credit quality by purchasing insurance for their upcoming
issues, improving their bonds' marketability and giving them greater access to
new money or better opportunities to refinance existing debt. However, as
interest rates rose, prerefunding activity decreased because there was less
opportunity for issuers to find interest rate savings.
The rise in interest rates during the period also resulted in decreasing bond
prices. For the six months ended August 31, 1999, the 30-year Treasury bond
price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of
securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's
Class A share price, as measured by net asset value, declined only 5.13%.
During the period, the fund purchased primarily insured bonds, which led to a
solid improvement in the portfolio's quality as many insured bonds are rated
AAA. As a result, 67.5% of the fund's total long-term investments were rated AAA
at the end of the reporting period, compared with 60.3% on February 28, 1999.
Higher-rated bonds generally exhibit greater price stability than their
lower-rated counterparts, better ensuring the safety of your principal and
income stream. Important purchases during the period included Philadelphia
Parking Authority Parking Revenue, Pennsylvania Housing Finance Authority and
Pennsylvania Economic Development Financing Authority - USG Corp. Project.
Several times during the six-month period under review, the fund sought to book
tax losses, which can be carried forward in the portfolio to help offset any
future taxable capital gains and potentially lower shareholders' tax
liabilities.
Looking forward, the fund will continue to buy current coupon bonds at a slight
discount in our attempt to provide shareholders with high, current tax-free
income and preservation of capital. In addition, we intend to maintain our
strategy of selling prerefunded bonds to decrease the call exposure.
3. This does not indicate Moody's rating of the fund.
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
PORTFOLIO BREAKDOWN
Franklin Pennsylvania Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- -------------------------------------------------
Hospital & Health Care 20.0%
Utilities 17.2%
Prerefunded 15.0%
Higher Education 9.5%
Housing 9.1%
General Obligation 8.5%
Corporate Backed 8.2%
Other Revenue 4.1%
Tax Supported Debt 3.9%
Transportation 3.5%
Subject to Government Appropriation 1.0%
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Pennsylvania Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
---------------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
March 4.4 cents 3.89 cents
April 4.4 cents 3.89 cents
May 4.4 cents 3.89 cents
June 4.4 cents 3.93 cents
July 4.4 cents 3.93 cents
August 4.4 cents 3.93 cents
- --------------------------------------------------------------------------------
TOTAL 26.4 CENTS 23.46 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date 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.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.54 $9.98 $10.52
DISTRIBUTIONS (3/1/99 - 8/31/99)
------------------------------------
Dividend Income $0.2640
Long-Term Capital Gain $0.0002
TOTAL $0.2642
CLASS C CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.54 $10.03 $10.57
DISTRIBUTIONS (3/1/99 - 8/31/99)
-----------------------------------
Dividend Income $0.2346
Long-Term Capital Gain $0.0002
TOTAL $0.2348
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (12/1/86)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -2.61% -0.53% +31.88% +93.46% +126.76%
Average Annual Total Return(2) -6.77% -4.76% +4.78% +6.36% +6.27%
Distribution Rate(3) 5.07%
Taxable Equivalent Distribution
Rate(4) 8.64%
30-Day Standardized Yield(5) 4.68%
Taxable Equivalent Yield(4) 7.97%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -2.87% -1.09% +14.70% +24.35%
Average Annual Total Return(2) -4.81% -3.04% +4.34% +4.92%
Distribution Rate(3) 4.67%
Taxable Equivalent Distribution Rate(4) 7.95%
30-Day Standardized Yield(5) 4.27%
Taxable Equivalent Yield(4) 7.27%
</TABLE>
Past performance is not predictive of future results.
FRANKLIN PENNSYLVANIA
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
combined federal and Pennsylvania state personal income tax bracket of 41.3%,
based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
CREDIT QUALITY BREAKDOWN*
Franklin Puerto Rico Tax-Free Income Fund
Based on Total Long-Term Investments
8/31/99
[Pie Chart]
AAA -- 53.3%
AA -- 0.9%
A -- 1.4%
BBB -- 44.4%
* Quality breakdown may include internal ratings for bonds nor rated by a
national rating agency.
Your Fund's Goal: Franklin Puerto Rico Tax-Free Income Fund seeks to provide
high, current income exempt from regular federal and many states' personal
income taxes through a portfolio consisting primarily of Puerto Rico municipal
bonds.(1)
COMMONWEALTH UPDATE
[GRAPHIC OF PUERTO RICO]
Brushing aside the short-term negative impact of Hurricane Georges in September
1998, Puerto Rico posted another year of steady economic growth in fiscal 1998.
Building on an economic expansion that began in 1992, gross domestic product
increased 3.1% in fiscal 1998. During the same one-year period, exports jumped
26%, to $30 billion, while imports increased by 2%. In a sign that the
manufacturing sector may soon be improving, companies such as Amgen, Searle and
Sara Lee have committed to creating more than 3,200 jobs in Puerto Rico over the
next few years. However for 1998, the manufacturing sector as a whole continued
its steady decline, showing job losses of approximately 3%.(2)
The Puerto Rican government continues to push through the privatization of many
of its most important assets, which should lead to improved services and lower
consumer prices. On March 2, 1999, the government transferred control of the
Puerto Rico Telephone Company (PRTC) to a group headed by U.S. telephone company
GTE and Puerto Rican bank Banco Popular. In addition, the government gave French
company PSG operational control over water and sewage company PRASA in February
1999.
With steady growth in a number of sectors and solid showings in the important
construction and tourism industries, Puerto Rico is on track for another year of
economic expansion in the 2.5%-3.0% range.(3) Reflecting this positive outlook,
Moody's, a national credit rating agency, assigned Puerto Rico a Baa1 rating in
November 1998.(4)
1. For investors subject to the federal and state alternative minimum tax, a
small portion of this income may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable.
2. Source: PR Newswire Association, 3/22/99.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 108 of
this report.
PORTFOLIO NOTES
The rise in interest rates during the period resulted in decreasing bond prices.
For the six months ended August 31, 1999, the 30-year Treasury bond price fell
8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in
the fund's portfolio, was off 8.25%.(5) By comparison, your fund's Class A share
price, as measured by net asset value, declined only 4.29%.
During the six months under review, Franklin Puerto Rico Tax-Free Income Fund
continued its strategy of investing for current income in U.S. Territories'
municipal bonds. Through August 1999, the Puerto Rico bond supply was
significantly lighter than in the same period of 1998, when a large number of
bonds were prerefunded. The fund maintained its focus on purchasing high-quality
and insured issues during the period, and on August 31, 1999, 53.3% of the
fund's total long-term investments were AAA-rated bonds, reflecting the fund's
high quality. Higher-rated bonds generally exhibited greater price stability
than their lower-rated counterparts, better ensuring the safety of your
principal and income stream.
The fund's sector weightings changed only slightly during the reporting period.
On August 31, 1999, prerefunded securities was the fund's largest sector
holding, making up 25.3% of total long-term investments, followed by
transportation, at 12.1%.
Despite the limited number of bonds available, there were some new issues during
the period that we found to be attractive, including Guam Power Authority,
Puerto Rico Industrial Tourist Educational Medical and Environmental Control
Facilities for Ana G. Mendez University Systems Project and Puerto Rico
Industrial Tourist Educational Medical and Environmental Control Facilities
Financing Authority Hospital Revenue - San Lucas and Cristo Project.
Looking forward, the fund will continue to buy current coupon bonds at a slight
discount in its effort to provide shareholders with high, current tax-free
income and preservation of capital. In addition, we intend to maintain our
strategy of selling pre- refunded bonds to decrease the call exposure.
3. Source: Economist Intelligence Unit, 8/12/99.
4. This does not indicate Moody's rating of the fund.
5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index.
WHAT IS A PREREFUNDED BOND?
When a bond is prerefunded, a new issue is brought to market with a lower
interest rate to pay off the older issue at its first call date. In most cases,
the proceeds from the sale of the new bonds are invested in U.S. Treasury
securities that mature on the first call date of the original bonds. Because of
the U.S. Treasury backing, prerefunded bonds usually offer a substantial price
increase -- depending on their call date.
Generally, we look to sell prerefunded bonds as they approach five years to
their call date. At this point, the premium on prerefunded bonds often begins to
decline rapidly to the stated call price. Our strategy aims to capture the
bond's premium, increase the fund's call protection and protect its share value.
PORTFOLIO BREAKDOWN
Franklin Puerto Rico Tax-Free Income Fund
8/31/99
% OF TOTAL
LONG-TERM
SECTOR INVESTMENTS
- -------------------------------------------------
Prerefunded 25.3%
Transportation 12.1%
Hospital & Health Care 11.9%
Higher Education 9.6%
Utilities 7.8%
Housing 7.5%
Tax Supported Debt 7.4%
Subject to Government Appropriation 6.1%
General Obligation 5.1%
Other Revenue 4.5%
Corporate Backed 2.7%
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
DIVIDEND DISTRIBUTIONS*
Franklin Puerto Rico Tax-Free Income Fund
3/1/99 - 8/31/99
DIVIDEND PER SHARE
-----------------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
March 4.75 cents 4.18 cents
April 4.75 cents 4.18 cents
May 4.75 cents 4.18 cents
June 4.75 cents 4.22 cents
July 4.75 cents 4.22 cents
August 4.75 cents 4.22 cents
- --------------------------------------------------------------------------------
TOTAL 28.50 CENTS 25.20 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.51 $11.37 $11.88
DISTRIBUTIONS (3/1/99 - 8/31/99)
-----------------------------------
Dividend Income $0.2850
Long-Term Capital Gain $0.0156
TOTAL $0.3006
CLASS C CHANGE 8/31/99 2/28/99
- --------------------------------------------------------------------------------
Net Asset Value -$0.50 $11.39 $11.89
DISTRIBUTIONS (3/1/99 - 8/31/99)
-----------------------------------
Dividend Income $0.2520
Long-Term Capital Gain $0.0156
TOTAL $0.2676
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -1.74% +0.52% +33.53% +92.51% +181.69%
Average Annual Total Return(2) -5.94% -3.76% +5.04% +6.31% +7.13%
Distribution Rate(3) 4.80%
Taxable Equivalent Distribution
Rate(4) 7.95%
30-Day Standardized Yield(5) 4.41%
Taxable Equivalent Yield(4) 7.30%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -1.94% -0.04% +15.93% +25.77%
Average Annual Total Return(2) -3.86% -1.98% +4.69% +5.19%
Distribution Rate(3) 4.39%
Taxable Equivalent Distribution Rate(4) 7.27%
30-Day Standardized Yield(5) 4.00%
Taxable Equivalent Yield(4) 6.62%
</TABLE>
FRANKLIN PUERTO RICO
TAX-FREE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on August 31,
1999.
4. Taxable equivalent distribution rate and yield assume the 1999 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1999.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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.
MUNICIPAL BOND RATINGS
MOODY'S
Aaa: Best quality. They carry the smallest degree of investment risk and
generally are referred to as "gilt-edged." Interest payments are protected by a
large or exceptionally stable margin, and principal is secure. Although the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: High quality by all standards. Together with the Aaa group, they comprise
what generally are known as high-grade bonds. Aa bonds are rated lower than Aaa
because margins of protection may not be as large, fluctuation of protective
elements may be of greater amplitude, or there may be other elements which make
the long-term risks appear larger.
A: Possess many favorable investment attributes and are considered upper medium-
grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa: Medium-grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Ba: Contain speculative elements. Often the protection of interest and principal
payments may be very moderate and, thereby, not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa: Poor standing. Such issues may be in default, or elements of danger with
respect to principal or interest may be present.
Ca: Obligations that are highly speculative. Such issues are often in default or
have other marked shortcomings.
C: Lowest-rated class of bonds. Issues rated C can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
S&P(R)
AAA: The highest rating assigned by S&P to a debt obligation and indicates the
ultimate degree of protection as to principal and interest.
AA: Also qualify as high-grade obligations, and, in the majority of instances,
differ from AAA issues only in a small degree.
A: Generally regarded as upper medium-grade. They have considerable investment
strength but are not entirely free from adverse effects of changes in economic
and trade conditions. Interest and principal are regarded as safe.
BBB: Regarded as having an adequate capacity to pay principal and interest.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for bonds
in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds likely will have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: Reserved for income bonds on which no interest is being paid.
D: Debt rated "D" is in default and payment of interest and/or repayment of
principal is in arrears.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN ARIZONA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31,1999 ------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $11.38 $11.44 $11.24 $11.34 $11.11 $11.58
------------------------------------------------------------------------------
Income from investment operations:
Net investment income ....................... .29 .59 .61 .62 .64 .65
Net realized and unrealized gains (losses) .. (.55) (.01) .29 (.04) .36 (.48)
------------------------------------------------------------------------------
Total from investment operations .............. (.26) .58 .90 .58 1.00 .17
------------------------------------------------------------------------------
Less distributions from:
Net investment income ....................... (.29)(4) (.59)(2) (.61) (.63) (.65) (.64)
In excess of net investment income .......... -- -- (.01) -- -- --
Net realized gains .......................... (.04) (.05) (.08) (.05) (.12) --
------------------------------------------------------------------------------
Total distributions ........................... (.33) (.64) (.70) (.68) (.77) (.64)
------------------------------------------------------------------------------
Net asset value, end of period ................ $10.79 $11.38 $11.44 $11.24 $11.34 $11.11
==============================================================================
Total return* ............................... (2.36%) 5.17% 8.23% 5.33% 9.24% 1.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $832,231 $861,020 $810,250 $752,335 $750,797 $720,801
Ratios to average net assets:
Expenses .................................... .64%** .63% .63% .62% .62% .60%
Net investment income ....................... 5.12%** 5.11% 5.40% 5.59% 5.67% 5.86%
Portfolio turnover rate ....................... 13.62% 14.11% 20.02% 16.57% 25.12% 18.65%
CLASS C
- ------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $11.45 $11.51 $11.30 $11.38 $11.15
----------------------------------------------------------------
Income from investment operations:
Net investment income ....................... .26 .52 .56 .57 .49
Net realized and unrealized gains (losses) .. (.55) (.01) .29 (.03) .34
----------------------------------------------------------------
Total from investment operations .............. (.29) .51 .85 .54 .83
----------------------------------------------------------------
Less distributions from:
Net investment income ....................... (.26)(5) (.52)(3) (.56) (.57) (.48)
Net realized gains .......................... (.04) (.05) (.08) (.05) (.12)
----------------------------------------------------------------
Total distributions ........................... (.30) (.57) (.64) (.62) (.60)
----------------------------------------------------------------
Net asset value, end of period ................ $10.86 $11.45 $11.51 $11.30 $11.38
================================================================
Total return* ................................. (2.61%) 4.54% 7.67% 4.89% 7.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $24,808 $23,871 $14,537 $5,486 $1,892
Ratios to average net assets:
Expenses .................................... 1.20%** 1.19% 1.19% 1.19% 1.20%**
Net investment income ....................... 4.56%** 4.55% 4.82% 5.01% 5.05%**
Portfolio turnover rate ....................... 13.62% 14.11% 20.02% 16.57% 25.12%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.002.
(3) Includes distributions in excess of net investment income in the amount of
$.001.
(4) Includes distributions in excess of net investment income in the amount of
$.006.
(5) Includes distributions in excess of net investment income in the amount of
$.005.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.9%
Apache Junction Water Utilities Community,
FSA Insured, 5.80%, 7/01/17 ........................ $ 1,200,000 $ 1,219,488
Arizona Educational Loan Marketing Corp. Revenue,
Senior Series, 6.375%, 9/01/05 ..................... 10,000,000 10,390,800
Series B, MBIA Insured, 7.00%, 3/01/03 ............. 1,000,000 1,052,080
Series B, MBIA Insured, 7.35%, 9/01/04 ............. 1,000,000 1,022,500
Series B, MBIA Insured, 7.00%, 3/01/05 ............. 1,000,000 1,052,080
Series B, MBIA Insured, 7.375%, 9/01/05 ............ 775,000 792,438
Sub Series, 6.625%, 9/01/05 ........................ 1,000,000 1,046,770
Arizona Health Facilities Authority Hospital
System Revenue, Phoenix Baptist Hospital, MBIA
Insured, ETM, 6.25%, 9/01/11 ....................... 2,000,000 2,114,680
Arizona Health Facilities Authority Revenue,
Arizona Voluntary Hospital,
Hospital Federal Pooled Loan Revenue, Series B,
FGIC Insured, Pre-Refunded,7.75%,10/01/07 ........ 770,000 772,064
Series B, FGIC Insured, 7.25%, 10/01/13 ............ 5,000,000 5,059,950
Arizona State COP,
FSA Insured, 6.625%, 9/01/08 ....................... 5,000,000 5,310,800
Refunding, Series B, AMBAC Insured, 6.25%, 9/01/10 . 5,000,000 5,340,250
Arizona State Municipal Financing Program COP,
Dysart School, Series 22, BIG Insured, ETM,
7.875%, 8/01/05 .................................. 1,350,000 1,574,964
Peoria School, Series 19, BIG Insured, ETM,
7.75%, 8/01/04 ................................... 500,000 571,335
Series 20, BIG Insured, ETM, 7.625%, 8/01/06 ....... 3,250,000 3,628,560
Series 25, BIG Insured, 7.875%, 8/01/14 ............ 500,000 635,730
Arizona State Wastewater Management Authority
Wastewater Financial Assistance Revenue,
6.80%, 7/01/11 ..................................... 4,000,000 4,282,120
Series A, AMBAC Insured, 5.625%, 7/01/15 ........... 1,000,000 1,016,250
Casa Grande Excise Tax Revenue, FGIC Insured,
6.20%, 4/01/15 ..................................... 930,000 972,650
Casa Grande,
IDA, PCR, Frito Lay/PepsiCo, 6.60%, 12/01/10 ....... 1,800,000 1,929,402
IDR, Frito Lay/PepsiCo, 6.65%, 12/01/14 ............ 500,000 536,530
Chandler GO,FGIC Insured,
Pre-Refunded, 6.80%, 7/01/13 ....................... 1,750,000 1,938,493
Pre-Refunded, 6.85%, 7/01/14 ....................... 1,625,000 1,803,523
Refunding, 7.00%, 7/01/12 .......................... 1,000,000 1,047,860
Chandler IDA, MFHR, Hacienda Apartments Project,
Refunding, Series A, GNMA Secured, 6.05%, 7/20/30 ... 4,055,000 4,118,704
Chandler Street and Highway Revenue, MBIA Insured,
Pre-Refunded, 6.85%, 7/01/13 ........................ 1,250,000 1,387,325
Chandler Water and Sewer Revenue, Refunding,
FGIC Insured,
7.00%, 7/01/12 ..................................... 6,715,000 7,036,380
6.25%, 7/01/13 ..................................... 2,165,000 2,277,125
5.25%, 7/01/15 ..................................... 2,270,000 2,236,268
Coconino County Flagstaff USD, No.1, AMBAC Insured,
6.20%, 7/01/06 ..................................... 1,095,000 1,121,061
Coconino County PCR,
Arizona Public Service Co., Refunding, Series A,
MBIA Insured, 5.875%, 8/15/28 ..................... 5,275,000 5,339,408
Nevada Power Co., 6.375%, 10/01/36 ................. 3,500,000 3,607,905
Nevada Power Co., Refunding, Series E, 5.35%,
10/01/22 .......................................... 7,265,000 6,628,077
Nevada Power Co., Series B, 5.80%, 11/01/32 ........ 6,500,000 6,232,200
Eloy Municipal Property Corp. Facilities Revenue,
7.80%, 7/01/09 ..................................... 1,475,000 1,528,439
Gila County IDAR, Asarco Inc., Refunding, 5.55%,
1/01/27 ............................................ 45,900,000 41,434,389
Gilbert ID No.11, FGIC Insured, 7.60%, 1/01/05 ....... 1,500,000 1,539,375
Gilbert Water and Sewer Revenue, Refunding, FGIC
Insured, 6.50%,
7/01/12 ............................................ 1,500,000 1,626,600
7/01/22 ............................................ 3,250,000 3,469,180
Glendale IDA,
Educational Facilities Revenue, American Graduate
School International, Connie Lee Insured,
Pre-Refunded, 7.00%, 7/01/14 ...................... 1,000,000 1,127,960
Educational Facilities Revenue, American Graduate
School International, Connie Lee Insured,
Pre-Refunded, 7.125%, 7/01/20 ..................... 1,250,000 1,417,850
Educational Facilities Revenue, American Graduate
School International, Refunding, Connie Lee
Insured, 5.875%, 7/01/15 .......................... 2,200,000 2,260,148
Midwestern University, Series A, 5.375%, 5/15/28 ... 15,000,000 13,459,050
Midwestern University, Series A, Connie Lee Insured,
6.00%, 5/15/16 .................................... 455,000 470,839
Midwestern University, Series A, Connie Lee Insured,
6.00%, 5/15/26 .................................... 340,000 353,263
Midwestern University, Series A, MBIA Insured,
5.375%, 5/15/28 ................................... 2,000,000 1,927,640
Midwestern University, Series A, Pre-Refunded,
6.00%, 5/15/16 .................................... 1,485,000 1,616,497
Midwestern University, Series A, Pre-Refunded,
6.00%, 5/15/26 .................................... 1,660,000 1,806,993
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Glendale Municipal Property Corp., Refunding, MBIA
Insured, 7.00%, 7/01/09 ............................... $ 2,400,000 $ 2,447,328
Guam Power Authority Revenue, Series A, Pre-Refunded,
6.30%,
10/01/12 ............................................. 3,630,000 3,904,029
10/01/22 ............................................. 4,000,000 4,301,960
Lake Havasu City Wastewater COP, FGIC Insured,
7.00%, 6/01/05 ........................................ 2,700,000 2,854,980
Marana Municipal Property Corp. Municipal Facilities
Revenue, Refunding, MBIA Insured, 5.25%, 7/01/22 ...... 1,170,000 1,121,866
Maricopa County COP, 6.00%, 6/01/04 .................... 8,000,000 8,261,520
Maricopa County GO,
School District No. 4, Mesa Unified, FGIC Insured,
Pre-Refunded, 5.65%, 7/01/11 ........................ 500,000 533,680
School District No. 4, Mesa Unified, FGIC Insured,
Pre-Refunded, 5.70%, 7/01/12 ........................ 1,000,000 1,069,880
School District No. 8, Osborn, Refunding, Series A,
FGIC Insured, 5.875%, 7/01/14 ....................... 3,500,000 3,646,405
School District No. 11, Peoria Unified, Refunding,
AMBAC Insured, 6.10%, 7/01/10 ....................... 6,300,000 6,640,326
School District No. 11, Peoria Unified, Refunding,
MBIA Insured, 7.00%, 7/01/10 ........................ 2,800,000 2,940,532
School District No. 28, Kyrene Elementary, Series B,
FGIC Insured, 6.00%, 7/01/14 ........................ 2,000,000 2,066,500
School District No. 98, Fountain Hills Unified,
FGIC Insured, 6.625%, 7/01/10 ....................... 475,000 495,753
School District No. 98, Fountain Hills Unified,
FGIC Insured, Pre-Refunded, 6.625%, 7/01/10 ......... 825,000 868,626
UHSD No. 210, Series A, Pre-Refunded, 5.70%, 7/01/15 . 500,000 531,110
UHSD No. 210, Series B, Pre-Refunded, 5.50%, 7/01/17 . 8,050,000 8,480,514
USD No. 41, Gilbert, 6.25%, 7/01/15 .................. 2,000,000 2,064,080
USD No. 65, Littleton School Improvement, Series B,
FGIC Insured, 6.40%, 7/01/14 ........................ 1,175,000 1,240,565
USD No. 66, Roosevelt Elementary Project, Series B,
FGIC Insured, 5.25%, 7/01/17 ........................ 2,500,000 2,432,125
USD No. 69, Paradise Valley, Series A, Pre-Refunded,
7.10%, 7/01/05 ...................................... 1,000,000 1,118,340
USD No. 80, Chandler, FGIC Insured, Pre-Refunded,
6.00%, 7/01/13 ...................................... 1,600,000 1,723,824
USD No. 89, Dysart, Refunding and Improvement,
FGIC Insured, 6.70%, 7/01/05 ........................ 240,000 247,073
USD No. 89, Dysart, Refunding and Improvement,
FGIC Insured, 6.75%, 7/01/06 ........................ 1,760,000 1,809,650
Maricopa County Hospital Revenue, Sun Health Corp.,
5.30%, 4/01/29 ....................................... 15,595,000 13,953,314
Refunding, 5.80%, 4/01/08 ............................ 3,870,000 3,974,954
Refunding, 5.90%, 4/01/09 ............................ 2,120,000 2,182,370
Refunding, 6.125%, 4/01/18 ........................... 15,650,000 16,065,195
Maricopa County,
IDA, Health Facilities Revenue, Catholic Healthcare
West Project, Refunding, Series A, 5.00%, 7/01/16 ... 13,100,000 11,141,812
IDA, Health Facilities Revenue, Catholic Healthcare
West Project, Refunding, Series A, 5.00%, 7/01/21 ... 17,600,000 14,418,448
IDA, Hospital Facility Revenue, FSA Insured, 7.50%,
12/01/13 ............................................ 1,445,000 1,522,640
IDA, Hospital Facility Revenue, FSA Insured,
Pre-Refunded, 7.50%, 12/01/13 ....................... 1,305,000 1,386,784
IDA, Hospital Facility Revenue, Mayo Clinic Hospital,
5.25%, 11/15/37 ..................................... 20,725,000 18,832,393
IDA, Hospital Facility Revenue, Samaritan Health
Service Hospital, Refunding, Series A, MBIA Insured,
7.00%, 12/01/16 ..................................... 1,890,000 2,221,657
IDA, Hospital Facility Revenue, Samaritan Hospital
Health Services, Refunding, Series A, MBIA Insured,
7.00%,12/01/13 ...................................... 17,800,000 18,650,128
IDA, MFHR, Arborwood Apartments Project, Series A,
MBIA Insured, 5.05%, 10/01/29 ....................... 1,750,000 1,594,163
IDA, MFHR, Madera Pointe Apartments Project,
Refunding, FSA Insured, 5.90%, 6/01/26 .............. 2,105,000 2,143,606
IDA, MFHR, Stanford Court Apartments Project,
Series A, MBIA Insured, 5.30%, 7/01/28 .............. 1,235,000 1,175,424
IDA, Water System Revenue, Improvement, Chaparral
Water Co., Series A, AMBAC Insured, 5.40%, 12/01/22 . 1,000,000 956,570
IDR, Citizens Utilities Co. Project, 6.20%, 5/01/30 .. 5,000,000 5,066,000
Maricopa County IDAR, SFMR, GNMA Secured, 8.00%, 9/01/09 510,000 520,797
Maricopa County Stadium District Revenue, MBIA Insured,
5.75%, 7/01/16 ........................................ 3,000,000 3,043,650
Mesa IDAR, Discovery Health Systems, Series A, MBIA
Insured,
(b)5.75%, 1/01/25 .................................... 45,000,000 45,107,100
5.625%, 1/01/29 ................................... 4,000,000 3,940,320
Mesa Utility System Revenue, FGIC Insured, 5.375%,
7/01/17 ............................................... 15,500,000 15,297,725
Mohave County Hospital District No. 1, Kingman
Regional Medical Center Project,
FGIC Insured, 6.50%, 6/01/15 ......................... 1,500,000 1,574,310
Pre-Refunded, 8.375%, 6/01/15 ........................ 6,350,000 6,683,185
Mohave County IDA,
Health Care Revenue, Refunding, GNMA Secured,
6.375%, 11/01/31 .................................... 1,585,000 1,649,541
Hospital Systems Revenue, Baptist Hospital, MBIA
Insured, 5.50%, 9/01/21 ............................. 1,500,000 1,475,565
Hospital Systems Revenue, Baptist Hospital, MBIA
Insured, 5.75%, 9/01/26 ............................. 4,675,000 4,701,040
IDR, Citizens Utilities Co. Project, 6.60%, 5/01/29 .. 4,100,000 4,408,689
IDR, Citizens Utilities Co. Project, Series A,
7.15%, 2/01/26 ...................................... 10,000,000 10,217,300
IDR, Citizens Utilities Co. Project, Series B,
7.15%, 2/01/26 ...................................... 5,000,000 5,108,650
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Navajo County PCR, Arizona Public Service Co.,
Series A,
MBIA Insured, 5.875%, 8/15/28 ........................ $ 3,000,000 $ 3,036,630
Refunding, 5.875%, 8/15/28 ........................... 54,500,000 54,511,445
Nogales Municipal Development Authority Inc.
Municipal Facilities Revenue, Refunding, MBIA
Insured, 7.20%, 6/01/08 ............................... 6,350,000 6,713,601
Northern Arizona University System Revenue,
Refunding,FGIC Insured, 6.40%, 6/01/07 ................ 2,750,000 2,903,203
Northern Mariana Islands Commonwealth Ports
Authority Seaport Revenue, Series A, 6.85%,
3/15/28 ............................................... 8,785,000 9,008,051
Oro Valley Municipal Property Corp. Revenue,
Municipal Water System, MBIA Insured,
5.55%, 7/01/17 ....................................... 1,150,000 1,155,474
5.75%, 7/01/17 ....................................... 1,000,000 1,013,100
5.375%, 7/01/26 ...................................... 1,000,000 964,840
Peoria Municipal Development Authority Water and
Sewer Revenue, Refunding, FGIC Insured, 6.625%,
7/01/06 ............................................... 1,000,000 1,029,860
Phoenix Airport Revenue,
Refunding, Series B, MBIA Insured, 6.20%, 7/01/10 .... 700,000 753,494
Refunding, Series C, MBIA Insured, 6.30%, 7/01/10 .... 1,680,000 1,806,487
Refunding, Series C, MBIA Insured, 6.40%, 7/01/11 .... 1,785,000 1,924,587
Refunding, Series C, MBIA Insured, 6.40%, 7/01/12 .... 570,000 613,041
Series D, MBIA Insured, 6.30%, 7/01/10 ............... 1,800,000 1,935,522
Series D, MBIA Insured, 6.40%, 7/01/11 ............... 3,825,000 4,124,115
Series D, MBIA Insured, 6.40%, 7/01/12 ............... 820,000 881,918
Phoenix Civic Improvement Corp. Excise Tax Revenue,
Adams Street Garage Project, senior lien, Series B,
5.30%, 7/01/20 ...................................... 690,000 667,147
Adams Street Garage Project, senior lien, Series B,
5.35%, 7/01/24 ...................................... 2,985,000 2,889,211
Adams Street Garage Project, senior lien, Series B,
5.375%, 7/01/29 ..................................... 4,730,000 4,549,645
Municipal Courthouse Project, senior lien, Series A,
5.25%, 7/01/18 ...................................... 2,535,000 2,455,274
Municipal Courthouse Project, senior lien, Series A,
5.25%, 7/01/20 ...................................... 4,075,000 3,900,590
Municipal Courthouse Project, senior lien, Series A,
5.25%, 7/01/24 ...................................... 3,860,000 3,654,918
Municipal Courthouse Project, senior lien, Series A,
5.375%, 7/01/29 ..................................... 18,310,000 17,535,487
Phoenix Civic Improvement Corp. Municipal Facilities
Excise Tax Revenue, MBIA Insured, Pre-Refunded,
6.90%, 7/01/21 ........................................ 1,000,000 1,120,080
Phoenix Civic Improvement Corp. Water System Revenue,
junior lien, MBIA Insured, 5.375%, 7/01/22 ........... 8,130,000 7,905,449
Pre-Refunded, 5.95%, 7/01/15 ......................... 1,090,000 1,168,709
Pre-Refunded, 5.95%, 7/01/16 ......................... 3,665,000 3,929,650
Pre-Refunded, 6.00%, 7/01/19 ......................... 3,000,000 3,225,300
Phoenix Civic Plaza Building Corp., 6.00%, 7/01/14 ..... 4,300,000 4,480,170
Phoenix GO,
5.25%, 7/01/20 ....................................... 2,000,000 1,914,400
Refunding, 6.375%, 7/01/13 ........................... 5,000,000 5,284,750
Refunding, Series A, 5.00%, 7/01/19 .................. 3,500,000 3,266,060
Series A, Pre-Refunded, 5.50%, 7/01/15 ............... 5,000,000 5,247,450
Series B, 5.25%, 7/01/15 ............................. 2,775,000 2,727,964
Phoenix HFC, Mortgage Revenue,
Project A, Refunding, MBIA Insured, 6.50%, 7/01/24 ... 2,750,000 2,821,858
Section 8 Project, Refunding, Series A, MBIA Insured,
6.90%, 1/01/23 ...................................... 1,750,000 1,801,153
Section 8 Project, Refunding, Series A, MBIA Insured,
7.25%, 1/01/23 ...................................... 2,260,000 2,295,731
Phoenix IDA,
Hospital Revenue, Refunding, Series B, Connie Lee
Insured, 5.75%, 12/01/16 ............................ 3,500,000 3,529,295
SFMR, FNMA Insured, 6.30%, 12/01/12 .................. 695,000 718,547
SFMR, Statewide, Series C, GNMA Secured, 5.30%,
4/01/20 ............................................. 2,000,000 1,894,440
Phoenix Municipal Housing Revenue, Fillmore Gardens
Project, Refunding, 6.30%, 6/01/09 .................... 1,500,000 1,562,310
Phoenix Street and Highway Revenue,
ETM, 6.80%, 7/01/03 .................................. 1,000,000 1,084,350
Refunding, 6.60%, 7/01/07 ............................ 5,000,000 5,321,000
Pima County IDA,
Health Care Corp. Revenue, Carondelet St. Joseph's
and St. Mary's Hospital, BIG Insured, 8.00%, 7/01/13 65,000 66,047
Health Care Corp. Revenue, Carondelet St. Joseph's
and St. Mary's Hospital, MBIA Insured, 6.75%, 7/01/10 2,250,000 2,386,125
MFR, Series A, FNMA Insured, 6.00%, 12/01/21 ......... 2,720,000 2,764,037
SFMR, GNMA Secured, 6.40%, 11/01/09 .................. 795,000 820,527
SFMR, GNMA Secured, 8.125%, 9/01/20 .................. 920,000 931,509
SFMR, GNMA Secured, 6.75%, 11/01/27 .................. 3,555,000 3,683,478
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Pima County IDA,(cont.)
SFMR, Refunding, Series A, 7.625%, 2/01/12 ......... $ 2,600,000 $ 2,681,588
SFMR, Refunding, Series A, 6.50%, 2/01/17 .......... 675,000 693,826
Pima County IDAR,
MFHR, Housing Ria Nova and Villa Projects, GNMA
Secured, 5.20%, 12/20/31 .......................... 2,370,000 2,179,428
Refunding, Series A, MBIA Insured, 5.625%, 4/01/14 . 2,250,000 2,290,725
Pima County Sewer Revenue, Refunding, FGIC Insured,
6.75%, 7/01/15 ...................................... 1,410,000 1,475,678
Pima County USD, Tucson Project No.1, FGIC Insured,
5.875%, 7/01/14 ..................................... 21,000,000 21,706,020
Pinal County USD, No. 43, Apache Junction Improvement,
FGIC Insured, 7.15%, 7/01/05 ....................... 355,000 362,054
Refunding, Series A, FGIC Insured, 5.85%, 7/01/15 .. 2,500,000 2,576,175
Puerto Rico Commonwealth Aqueduct and Sewer Authority
Revenue, Series A, FSA Insured, Pre-Refunded, 9.00%,
7/01/09 ............................................. 75,000 88,425
Puerto Rico Commonwealth GO, Pre-Refunded, 6.50%,
7/01/23 ............................................. 4,850,000 5,351,733
Puerto Rico Commonwealth Highway and Transportation
Authority Revenue,
Series A, 5.00%, 7/01/38 ........................... 2,000,000 1,751,180
Series Y, 5.00%, 7/01/36 ........................... 9,000,000 7,983,360
Puerto Rico Commonwealth Infrastructure Financing
Authority Special Tax Revenue, Series A,
7.75%, 7/01/08 ..................................... 1,550,000 1,573,405
7.50%, 7/01/09 ..................................... 335,000 339,258
Puerto Rico Electric Power Authority Revenue,
Series X, Pre-Refunded, 6.125%, 7/01/21 ............. 25,720,000 28,070,294
Puerto Rico HFC Revenue,
MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ......... 1,215,000 1,249,020
Sixth Portfolio, Section 8 Assisted, FHA Mortgage
Insured, Pre-Refunded, 7.75%, 12/01/26 ............ 40,000 46,959
Puerto Rico HFC, SFMR, Portfolio No. 1, Series B,
GNMA Secured, 7.65%, 10/15/22 ....................... 370,000 383,091
Puerto Rico Industrial Tourist Educational Medical
and Environmental Control Facilities Financing
Authority Hospital Revenue,
Dr. Pila Hospital, Refunding, 5.875%, 8/01/12 ...... 5,225,000 5,355,782
Hospital Auxilio Mutuo Obligation, Series A, MBIA
Insured, 6.25%, 7/01/24 ........................... 1,950,000 2,075,600
Salt River Project Agricultural Improvement and
Power District Electric System Revenue,
Refunding, Series A, 5.75%, 1/01/13 ................ 2,435,000 2,493,026
Refunding, Series A, 5.00%, 1/01/20 ................ 7,500,000 6,931,650
Series A, 6.00%, 1/01/31 ........................... 4,600,000 4,662,146
Series A, MBIA Insured, 6.00%, 1/01/31 ............. 1,845,000 1,867,564
Series C, 6.20%, 1/01/12 ........................... 5,925,000 6,246,254
Series C, 6.25%, 1/01/19 ........................... 9,975,000 10,438,538
Series D, 6.25%, 1/01/27 ........................... 4,890,000 5,111,713
Santa Cruz County IDAR, Citizens Utilities Co. .......
Project, 6.60%, 5/01/29 ............................. 8,000,000 8,602,320
Scottsdale IDA Hospital Revenue, Scottsdale Memorial
Hospital, Refunding, Series A, AMBAC Insured, 5.70%,
9/01/15 ............................................ 1,250,000 1,261,525
9/01/18 ............................................ 4,045,000 4,069,310
Sedona Sewer Sales Tax Revenue, Refunding,
6.75%, 7/01/07 ..................................... 3,800,000 4,111,714
7.00%, 7/01/12 ..................................... 5,000,000 5,289,050
Tucson Airport Authority Revenue,
Series A, MBIA Insured, 6.875%, 6/01/20 ............ 1,090,000 1,125,894
Series B, MBIA Insured, 7.125%, 6/01/15 ............ 1,175,000 1,219,157
Series B, MBIA Insured, 7.25%, 6/01/20 ............. 1,125,000 1,168,043
Tucson GO, Series A, 5.375%, 7/01/20 ................. 1,800,000 1,756,908
Tucson IDA, MFR,
La Entrada, Refunding, 7.40%, 7/01/26 .............. 1,820,000 1,885,484
Los Portales Apartments, Refunding, GNMA Secured,
5.90%, 12/20/31 ................................... 2,000,000 2,021,180
Tucson Water Revenue, Refunding,
FGIC Insured, 5.125%, 7/01/20 ...................... 4,000,000 3,758,440
MBIA Insured, 7.00%, 7/01/10 ....................... 2,250,000 2,271,263
University of Arizona System Revenue, Pre-Refunded,
6.25%, 6/01/11 ..................................... 1,000,000 1,088,780
6.35%, 6/01/14 ..................................... 1,300,000 1,420,900
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%,
10/01/13 ................................................................................... $ 2,500,000 $ 2,433,075
10/01/22 ................................................................................... 3,750,000 3,562,013
Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.30%, 7/01/18 ... 2,475,000 2,312,640
Virgin Islands Water and Power Authority Water System Revenue, Refunding, 5.50%, 7/01/17 ...... 1,500,000 1,357,530
Yavapai County GO, USD No. 22 Humboldt, Project of 1995, Series B, MBIA Insured, 5.60%, 7/01/14 1,825,000 1,859,182
Yavapai County IDA,
Hospital Facility Revenue, Yavapai Regional Medical Center, Series A, FSA Insured,
5.125%, 12/01/13 .......................................................................... 2,000,000 1,953,420
IDR, Citizens Utilities Co. Project, 5.45%, 6/01/33 ........................................ 6,000,000 5,732,580
Yuma County GO, Elementary School District No. 1,
MBIA Insured, 5.50%, 7/01/14 ............................................................... 2,000,000 2,021,020
Series A, MBIA Insured, 5.75%, 7/01/14 ..................................................... 1,500,000 1,545,915
Yuma IDA,
Hospital Revenue, Regency Apartments, Refunding, Series A, GNMA Secured, 5.50%, 12/20/32 ... 2,000,000 1,920,300
Hospital Revenue, Yuma Regional Medical Center, Refunding, MBIA Insured, 5.50%, 8/01/17 .... 4,000,000 3,981,760
MFHR, Alexandrite Sands Apartments Project, FHA Insured, Pre-Refunded, 7.60%, 12/01/15 ..... 1,000,000 1,023,990
MFHR, Alexandrite Sands Apartments Project, FHA Insured, Pre-Refunded, 7.70%, 12/01/29 ..... 2,000,000 2,055,530
-------------
TOTAL LONG TERM INVESTMENTS (COST $837,345,085) ............................................... 847,719,433
=============
(a) SHORT TERM INVESTMENTS 1.6%
Maricopa County IDA, Hospital Facility Revenue, Samaritan Health Service
Hospital, Series B, 2, MBIA Insured, Daily VRDN and Put, 2.75%, 12/01/08................... 900,000 900,000
Maricopa County PCC, PCR, Arizona Public Service Co., Refunding, Series D, Daily VRDN and Put,
2.75%, 5/01/29 ............................................................................ 2,100,000 2,100,000
Maricopa County PCR, El Paso Electric Co. Project, Series A, Weekly VRDN and Put,
3.30%, 7/01/14 ............................................................................ 450,000 450,000
Pinal County IDA, PCR, Magma-Copper Co.,
Newmont Mining Corp., Daily VRDN and Put, 3.05%, 12/01/09 .................................. 8,800,000 8,800,000
Newmont Mining Corp., DATES, Daily VRDN and Put, 3.05%, 12/01/09 ........................... 200,000 200,000
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured,
Weekly VRDN and Put, 2.85%, 12/01/15 ...................................................... 1,100,000 1,100,000
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A,
AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ....................................... 300,000 300,000
-------------
TOTAL SHORT TERM INVESTMENTS (COST $13,850,000) ............................................... 13,850,000
-------------
TOTAL INVESTMENTS (COST $851,195,085) 100.5% .................................................. 861,569,433
OTHER ASSETS, LESS LIABILITIES (.5%) .......................................................... (4,530,226)
-------------
NET ASSETS 100.0% ............................................................................. $ 857,039,207
=============
</TABLE>
See glossary of terms on page 110.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN COLORADO TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.05 $ 12.11 $ 11.80 $ 11.84 $ 11.38 $ 11.94
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .29 .60 .63 .66 .67 .67
Net realized and unrealized gains (losses) ... (.63) .02 .39 (.04) .45 (.57)
---------------------------------------------------------------------------------
Total from investment operations .............. (.34) .62 1.02 .62 1.12 .10
---------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.30)(2) (.60) (.64) (.66) (.66) (.66)
Net realized gains ........................... (.01) (.08) (.07) -- -- --
---------------------------------------------------------------------------------
Total distributions ........................... (.31) (.68) (.71) (.66) (.66) (.66)
---------------------------------------------------------------------------------
Net asset value, end of period ................ $ 11.40 $ 12.05 $ 12.11 $ 11.80 $ 11.84 $ 11.38
---------------------------------------------------------------------------------
Total return* ................................. (2.82%) 5.24% 8.86% 5.44% 10.12% 1.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 288,952 $ 301,381 $ 266,599 $ 236,609 $ 215,609 $194,564
Ratios to average net assets:
Expenses ..................................... .69%** .70% .71% .71% .71% .70%
Net investment income ........................ 4.96%** 4.93% 5.28% 5.59% 5.73% 5.94%
Portfolio turnover rate ....................... 14.07% 12.60% 22.97% 14.13% 17.58% 28.83%
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 12.11 $ 12.17 $ 11.84 $ 11.87 $ 11.40
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .26 .54 .57 .59 .50
Net realized and unrealized gains (losses) ... (.63) .02 .40 (.02) .46
---------------------------------------------------------------------------------
Total from investment operations .............. (.37) .56 .97 .57 .96
---------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.27)(3) (.54) (.57) (.60) (.49)
Net realized gains ........................... (.01) (.08) (.07) -- --
---------------------------------------------------------------------------------
Total distributions ........................... (.28) (.62) (.64) (.60) (.49)
---------------------------------------------------------------------------------
Net asset value, end of period ................ $ 11.46 $ 12.11 $ 12.17 $ 11.84 $ 11.87
Total return* ................................. (3.08%) 4.63% 8.39% 4.93% 8.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 22,497 $ 21,899 $ 10,855 $ 5,654 $ 1,656
Ratios to average net assets:
Expenses ..................................... 1.24%** 1.26% 1.27% 1.28% 1.29%**
Net investment income ........................ 4.41%** 4.38% 4.72% 4.99% 5.12%**
Portfolio turnover rate........................ 14.07% 12.60% 22.97% 14.13% 17.58%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior
to May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.009
(3) Includes distributions in excess of net investment income in the amount of
$.008
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN COLORADO TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.2%
Adams County School No.12 GO, FGIC Insured, 5.40%, 12/15/14 ...................... $ 1,000,000 $ 1,002,810
Arapahoe County Capital Improvements Transportation Fund Highway Revenue,
Vehicle Registration, Series A, MBIA Insured, 6.15%, 8/31/26 .................. 8,000,000 8,405,600
Arapahoe County COP, Refunding, FSA Insured, 6.625%, 12/01/16 .................... 805,000 854,733
Arapahoe County School District No. 2, Refunding, MBIA Insured, 5.70%, 6/01/19 ... 2,200,000 2,211,814
Arvada IDR, Wanco Inc. Project,
5.25%, 12/01/07 ............................................................... 100,000 97,963
5.80%, 12/01/17 ............................................................... 480,000 464,741
Arvada MFHR, Springwood Community Project, Refunding, 6.35%, 8/20/16 ............. 1,000,000 1,022,370
Aurora COP, Refunding, 6.25%, 12/01/09 ........................................... 2,850,000 3,004,641
Bayfield School District No. 10, MBIA Insured, Pre-Refunded, 6.65%, 6/01/15 ...... 1,000,000 1,101,310
Boulder County Hospital Revenue, Longmont United Hospital Project,
5.50%, 12/01/12 ............................................................... 1,000,000 963,490
5.80%, 12/01/13 ............................................................... 2,000,000 2,003,380
5.60%, 12/01/17 ............................................................... 3,385,000 3,203,462
5.875%, 12/01/20 .............................................................. 1,285,000 1,247,709
Pre-Refunded, 8.20%, 12/01/20 ................................................. 3,000,000 3,182,760
Boulder, Larimer and Weld Counties GO, Vrain Valley School District RE1J,
Series A, FGIC Insured, 5.00%, 12/15/22 ...................................... 7,000,000 6,405,700
Castle Pines Metropolitan District GO, Refunding and Improvement,
FSA Insured, 5.25%, 12/01/15 ................................................. 1,900,000 1,853,222
Colorado Health Facilities Authority Revenue,
Birchwood Manor Project, Series A, GNMA Secured, 7.625%, 4/01/26 .............. 1,615,000 1,648,479
Boulder Community Hospital, Refunding, Series B, MBIA Insured, 5.875%, 10/01/23 1,500,000 1,522,005
Catholic Health Initiatives, Series A, 5.00%, 12/01/28 ........................ 1,800,000 1,533,402
Children's Hospital Association Project, MBIA Insured, 5.25%, 10/01/26 ........ 1,000,000 929,140
Community Provider Pooled Loan Program, FSA Insured, 6.75%, 7/15/17 ........... 954,000 998,456
Community Provider Pooled Loan Program, Series A, FSA Insured, 7.25%, 7/15/17 . 6,570,000 6,924,254
Covenant Retirement Communities, 6.75%, 12/01/15 .............................. 1,750,000 1,873,673
Covenant Retirement Communities, 6.75%, 12/01/25 .............................. 4,950,000 5,277,492
Kaiser Permanente, Series A, 5.35%, 11/01/16 .................................. 8,000,000 7,561,440
Mercy Medical Center Durango, 6.20%, 11/15/15 ................................. 1,250,000 1,305,038
National Benevolent Association, Refunding, Series A, 5.20%, 1/01/18 .......... 700,000 626,024
National Benevolent Association, Refunding, Series A, 5.25%, 1/01/27 .......... 1,180,000 1,023,449
National Benevolent Association, Series B, 5.25%, 2/01/18 ..................... 750,000 674,655
National Benevolent Association, Series B, 5.25%, 2/01/28 ..................... 2,500,000 2,163,550
Oakbrook Manor, Series A, GNMA Secured, 7.25%, 4/01/11 ........................ 365,000 372,931
Oakbrook Manor, Series A, GNMA Secured, 7.625%, 4/01/26 ....................... 885,000 903,346
Parkview Medical Center Inc. Project, 5.25%, 9/01/18 .......................... 1,660,000 1,492,224
Parkview Medical Center Inc. Project, 5.30%, 9/01/25 .......................... 1,615,000 1,417,211
PSL Health System Project, Series B, Pre-Refunded, 8.50%, 2/15/21 ............. 1,000,000 1,080,590
Sisters of Charity Leavenworth, 5.125%, 12/01/18 .............................. 1,000,000 934,340
Colorado HFA,
GO, Series A, 7.50%, 5/01/29 .................................................. 1,000,000 1,033,960
MF, Series A, 6.80%, 8/01/14 .................................................. 3,030,000 3,140,686
MF, Series A, 6.85%, 8/01/24 .................................................. 5,790,000 5,991,318
MF, Series A, 6.875%, 8/01/30 ................................................. 2,300,000 2,379,419
MF, Series A-2, 6.00%, 10/01/28 ............................................... 1,000,000 1,010,820
MF, Series A-2, FHA Insured, 5.45%, 10/01/29 .................................. 1,000,000 942,300
SF Program, Refunding, Series A-2, MBIA Insured, 5.625%, 11/01/23 ............. 4,000,000 3,960,560
SF Program, Series A-1, 8.00%, 8/01/17 ........................................ 125,000 127,180
SF Program, Series A-2, 7.70%, 2/01/23 ........................................ 300,000 309,537
SF Program, Series A-3, 7.90%, 8/01/21 ........................................ 100,000 102,452
SF Program, Series C-2, 7.375%, 8/01/10 ....................................... 585,000 602,018
SF Program, Series C-2, 7.85%, 2/01/21 ........................................ 90,000 91,981
Colorado Public Highway Authority Revenue, Highway E-470, Refunding,
Senior Series A, MBIA Insured, 5.25%, 9/01/18 ................................. 3,795,000 3,632,308
Senior Series A, MBIA Insured, 5.00%, 9/01/21 ................................. 2,000,000 1,814,100
Series A, MBIA Insured, 5.00%, 9/01/26 ........................................ 3,120,000 2,781,574
Colorado Springs Airport Revenue, Series A, MBIA Insured, 5.25%, 1/01/22 ......... 2,500,000 2,364,725
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN COLORADO TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Colorado Springs Hospital Revenue, Refunding, MBIA Insured, 6.00%,
12/15/15 ............................................................................ $ 5,575,000 $ 5,860,050
12/15/24 ............................................................................ 10,955,000 11,277,734
Colorado Springs Utilities Revenue,
Refunding and Improvement, Series A, 5.25%, 11/15/22 ................................ 1,000,000 941,170
Refunding and Improvement, Series A, 5.375%, 11/15/26 ............................... 16,920,000 16,051,158
Series A, 5.75%, 11/15/23 ........................................................... 1,450,000 1,451,552
Colorado State Board of Agriculture, State University Revenue, Refunding,
AMBAC Insured, 5.125%, 3/01/17 ..................................................... 1,000,000 946,380
Colorado State Board of Agriculture COP, MBIA Insured, 5.35%, 5/01/18 .................. 1,000,000 968,950
Colorado State Board of Community Colleges and Occupational Education
Revenue, Red Rocks Community College Project,
AMBAC Insured, Pre-Refunded, 6.00%, 11/01/19 ....................................... 1,090,000 1,169,777
Colorado Water Resource and Power Authority
Drinking Water Revenue, Series A, 5.30%, 9/01/18 .................................. 875,000 853,528
Colorado Water Resource and Power Development Authority,
Stagecoach Project, Pre-Refunded, 8.00%, 11/01/17 .................................. 65,000 65,453
Colorado Water Resource and Power Development Authority Clean Water
Revenue, Series A, 6.15%, 9/01/11 ................................................... 1,765,000 1,873,565
6.30%, 9/01/14 ...................................................................... 1,000,000 1,057,580
5.80%, 9/01/17 ...................................................................... 2,000,000 2,051,840
Colorado Water Resource and Power Development Authority
Small Water Resource Revenue, Series A, FGIC Insured, 6.70%, 11/01/12 .............. 750,000 801,705
Denver City and County Airport Revenue,
Series A, 7.50%, 11/15/23 ........................................................... 3,315,000 3,656,180
Series A, 8.50%, 11/15/23 ........................................................... 3,645,000 3,876,421
Series A, MBIA Insured, 5.60%, 11/15/20 ............................................. 3,200,000 3,176,160
Series A, Pre-Refunded, 7.50%, 11/15/12 ............................................. 3,000,000 3,339,120
Series A, Pre-Refunded, 7.50%, 11/15/23 ............................................. 685,000 785,668
Series A, Pre-Refunded, 8.50%, 11/15/23 ............................................. 355,000 380,184
Series D, 7.75%, 11/15/13 ........................................................... 1,000,000 1,182,500
Series E, MBIA Insured, 5.50%, 11/15/25 ............................................. 3,750,000 3,643,275
Denver City and County IDR, University of Denver Project, 7.50%, 3/01/11 ............... 1,880,000 1,963,773
Denver City and County MFHR, The Boston Lofts Project, Series A, FHA Insured,
5.75%, 10/01/27 .................................................................... 1,500,000 1,463,205
Denver City and County Revenue, Children's Hospital Association Project,
FGIC Insured, 6.00%, 10/01/15 ...................................................... 3,150,000 3,249,950
Denver City and County School District No.1 GO, FGIC Insured, 5.00%, 12/01/23 .......... 5,475,000 5,001,084
Denver City and County Special Facilities Airport Revenue, United Airlines Inc
Project, Series A, 6.875%, 10/01/32 ............................................... 2,000,000 2,099,580
Donala Water and Sanitary District GO, Improvement, Series B, 6.50%, 12/01/14 .......... 995,000 1,034,392
Douglas County MFR, Housing Mortgage, Parker Hilltop Project, FHA Insured,
5.45%, 8/01/28 ..................................................................... 2,000,000 1,905,000
Douglas County School District No. 1 GO, Douglas and Elbert Counties,
Improvement, Series A, MBIA Insured, 6.50%, 12/15/16 ............................... 230,000 247,374
Pre-Refunded, 6.50%, 12/15/16 ....................................................... 2,000,000 2,203,860
Fort Collins Lease COP, Civic Center Facilities Project, MBIA Insured,
5.125%, 12/01/18 ................................................................... 1,000,000 936,560
Fort Collins PCR, Anheuser-Busch Co. Project, Refunding, 6.00%, 9/01/31 ................ 5,000,000 5,041,000
Fort Collins Stormwater Utility Enterprise Storm Drain Revenue,
FSA Insured, 5.25%, 12/01/19 ....................................................... 2,965,000 2,822,769
Fremont County COP, Lease Purchase, MBIA Insured, 5.30%, 12/15/17 ...................... 1,570,000 1,519,886
Frisco Fire Protection District, Refunding and Improvement, 7.20%, 12/01/05 ............ 250,000 252,140
Greeley MFR, Housing Mortgage, Creek Stone Project, FHA Insured, 5.95%, 7/01/28 ........ 1,000,000 993,080
Guam Airport Authority Revenue,
Refunding, Series A, 6.375%, 10/01/10 ............................................... 400,000 421,224
Series A, 6.50%, 10/01/23 ........................................................... 800,000 845,864
Guam Power Authority Revenue, Series A, Pre-Refunded, 6.375%, 10/01/08 ................. 1,000,000 1,077,630
Jefferson County District Wide Sales Tax Revenue, Local ID, MBIA Insured, 6.30%, 6/01/22 7,450,000 7,693,317
Jefferson County Open Space Sales Tax Revenue, FGIC Insured, 5.00%, 11/01/18 ........... 3,000,000 2,766,720
Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ............. 225,000 235,098
La Junta Hospital Revenue, Ark Valley Regional Medical Center Project,
5.75%, 4/01/14 ...................................................................... 2,090,000 2,037,604
6.00%, 4/01/19 ...................................................................... 1,000,000 970,830
6.10%, 4/01/24 ...................................................................... 1,000,000 966,630
Lakewood MFHR Mortgage, FHA Insured Mortgage,
6.65%, 10/01/25 ..................................................................... 1,235,000 1,289,007
6.70%, 10/01/36 ..................................................................... 3,025,000 3,147,240
Larimer County COP, School District No. R1, Poudre, MBIA Insured, 5.65%, 12/01/16 ...... 2,300,000 2,330,130
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN COLORADO TAX-FREE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Las Animas County School District No. 1, Refunding,
6.15%, 12/01/08 ....................................................................... $ 1,000,000 $ 1,050,490
6.20%, 12/01/10 ....................................................................... 935,000 982,694
Left Hand Water District Revenue, MBIA Insured, 5.70%, 11/15/15 .......................... 1,400,000 1,430,520
Logan County SFMR, Refunding, Series A, 8.50%, 11/01/11 .................................. 185,000 190,147
Metex Metropolitan District GO, Refunding, Series A, MBIA Insured,
5.80%, 12/01/16 .......................................................................... 500,000 513,550
Montrose County COP, 6.35%, 6/15/06 ...................................................... 1,850,000 1,954,174
Mountain College Residence Hall Revenue Authority, MBIA Insured,
5.75%, 6/01/23 ........................................................................... 3,000,000 3,020,190
Municipal Subdistrict of Northern Colorado
Water Conservancy District Revenue, Series G, AMBAC Insured, 5.25%, 12/01/15 ............. 2,000,000 1,961,300
Platte River Power Authority Revenue, Refunding, Series D-2, MBIA Insured, 5.375%, 6/01/17 5,490,000 5,394,090
Postsecondary Educational Facilities Authority Revenue,
Auraria Foundation Project, FSA Insured, 6.00%, 9/01/15 ............................... 1,000,000 1,043,360
University of Denver Project, Refunding and Improvement, MBIA Insured, 5.375%, 3/01/18 2,500,000 2,430,100
Pueblo County, MBIA Insured, 6.00%, 6/01/16 .............................................. 4,395,000 4,579,766
Pueblo County COP, Public Parking, 6.90%, 7/01/15 ........................................ 500,000 511,980
Pueblo County School District No. 70 GO, Pueblo Rural, AMBAC Insured,
Pre-Refunded, 6.40%, 2/01/14 ......................................................... 1,000,000 1,088,770
Pueblo Urban Renewal Authority Tax Increment Revenue, Refunding, AMBAC Insured,
6.10%, 12/01/15 ...................................................................... 1,000,000 1,048,840
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A,
FSA Insured, Pre-Refunded, 9.00%, 7/01/09 ............................................ 55,000 64,845
Puerto Rico Industrial Tourist Educational Medical and Environmental Control
Facilities Financing Authority Industrial Revenue,
Guaynabo Municipal Government, 5.625%, 7/01/22 ....................................... 1,335,000 1,290,771
Regional Transportation District Sales Tax Revenue, FGIC Insured,
6.25%, 11/01/12 ...................................................................... 160,000 169,640
Southwestern SFMR, Refunding, Series A, 7.375%, 9/01/11 .................................. 360,000 369,695
Stonegate Village Metropolitan District, Refunding and Improvement, Series A,
FSA Insured, 5.60%, 12/01/25 ............................................................. 4,500,000 4,444,695
Summit County SFMR, Series A, 7.50%, 12/01/11 ............................................ 95,000 97,568
Summit County Sports Facilities Revenue, Keystone Resorts Project,
Ralston Purina Co., Refunding, 7.875%, 9/01/08 ....................................... 2,750,000 3,225,613
University of Colorado Hospital Authority Revenue,
Refunding, Series A, AMBAC Insured, 5.20%, 11/15/17 ................................... 1,000,000 951,340
Refunding, Series A, AMBAC Insured, 5.25%, 11/15/22 ................................... 5,000,000 4,693,650
Series A, AMBAC Insured, 5.50%, 11/15/24 .............................................. 3,000,000 2,900,550
Series A, AMBAC Insured, 5.00%, 11/15/29 .............................................. 11,865,000 10,472,642
University of Colorado Revenues, Enterprise System, Series A, Refunding,
MBIA Insured, 5.00%, 6/01/24 ......................................................... 5,375,000 4,839,328
University of Northern Colorado Authority Facilities System Revenue, MBIA Insured,
5.60%, 6/01/24 ....................................................................... 2,000,000 1,999,800
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A,
5.40%, 10/01/12 ....................................................................... 2,500,000 2,444,900
5.50%, 10/01/22 ....................................................................... 2,500,000 2,374,675
Westminster City Sales and Use Tax Revenue,
Refunding and Improvement, FGIC Insured, 7.00%, 12/01/08 .............................. 2,000,000 2,078,580
Storm Project, Refunding and Improvement, Series A, 5.60%, 12/01/16 ................... 1,500,000 1,520,880
Westminster COP,
Ice Centre Project, AMBAC Insured, 5.40%, 1/15/23 ..................................... 4,400,000 4,208,512
(b)MBIA Insured, 5.625%, 9/01/19 ...................................................... 1,000,000 991,090
Widefield Water and Sanitary District Water and Sewage Revenue,
Refunding and Improvement, Series A, MBIA Insured, 5.70%, 12/01/16 ................... 2,000,000 2,041,816
------------
TOTAL LONG TERM INVESTMENTS (COST $304,414,568) .......................................... 305,877,800
------------
(a) SHORT TERM INVESTMENTS .4%
Colorado Health Facilities Authority Revenue,
Boulder County Hospital, Project C, Weekly VRDN and Put, 3.25%, 10/01/14 .............. 200,000 200,000
Catholic Health Initiatives, Series B, Weekly VRDN and Put, 3.30%, 12/01/25 ........... 250,000 250,000
The Visiting Nurse Corp., Daily VRDN and Put, 3.00%, 7/01/22 .......................... 550,000 550,000
Christian Living Project, Weekly VRDN and Put, 3.30%, 1/01/24 ......................... 100,000 100,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,100,000) ........................................... 1,100,000
------------
TOTAL INVESTMENTS (COST $305,514,568) 98.6% .............................................. 306,977,800
------------
OTHER ASSETS, LESS LIABILITIES 1.4% ...................................................... 4,471,326
------------
NET ASSETS 100.0% ........................................................................ $311,449,126
============
</TABLE>
See glossary of terms on page 110.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1999 YEAR ENDED FEBRUARY 28,
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.27 $ 11.23 $ 10.92 $ 10.96 $ 10.64 $ 11.23
Income from investment operations:
Net investment income ........................ .28 .58 .60 .61 .62 .62
Net realized and unrealized gains (losses) ... (.63) .04 .32 (.02) .32 (.60)
-------------------------------------------------------------------------------
Total from investment operations .............. (.35) .62 .92 .59 .94 .02
-------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.28) (.58)2 (.60) (.63) (.62) (.61)
In excess of net investment income ........... -- -- (.01) -- -- --
-------------------------------------------------------------------------------
Total distributions ........................... (.28) (.58) (.61) (.63) (.62) (.61)
-------------------------------------------------------------------------------
Net asset value, end of period ................ $ 10.64 $ 11.27 $ 11.23 $ 10.92 $ 10.96 $ 10.64
===============================================================================
Total return* ................................. (3.02%) 5.62% 8.62% 5.52% 9.04% 0.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 239,180 $245,016 $ 203,643 183,649 $167,045 $ 155,623
Ratios to average net assets:
Expenses ..................................... .70%** .72% .73% .72% .73% .71%
Net investment income ........................ 5.03%** 5.08% 5.41% 5.62% 5.70% 5.83%
Portfolio turnover rate ....................... 15.38% 5.87% 18.54% 14.53% 3.88% 75.72%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.30 $ 11.26 $ 10.94 $ 10.97 $ 10.65
---------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .25 .52 .55 .60 .47
Net realized and unrealized gains (losses) ... (.62) .03 .31 (.07) .31
---------------------------------------------------------------
Total from investment operations .............. (.37) .55 .86 .53 .78
---------------------------------------------------------------
Less distributions from net investment income . (.25) (.51)(2) (.54) (.56) (.46)
---------------------------------------------------------------
Net asset value, end of period ................ $ 10.68 $ 11.30 $ 11.26 $ 10.94 $ 10.97
===============================================================
Total return* ................................. (3.26%) 5.02% 8.08% 5.03% 7.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 26,841 $ 23,443 $ 8,636 $ 4,149 $ 1,656
Ratios to average net assets:
Expenses ..................................... 1.25%** 1.28% 1.29% 1.29% 1.30%**
Net investment income ........................ 4.48%** 4.53% 4.85% 5.01% 5.12%**
Portfolio turnover rate ....................... 15.38% 5.87% 18.54% 14.53% 3.88%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior
to May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.002.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.4%
Bridgeport GO,
Series A, 7.25%, 6/01/00 ......................................................... $ 300,000 $ 306,810
Series B, 7.55%, 11/15/00 ........................................................ 1,375,000 1,408,605
Series B, Pre-Refunded, 7.75%, 11/15/10 .......................................... 3,750,000 3,990,300
Connecticut State Development Authority First Mortgage Revenue, Health Care Project,
Church Homes Inc., Refunding, 5.80%, 4/01/21 ..................................... 4,000,000 3,810,800
Elim Park Baptist Home, Refunding, Series A, 5.375%, 12/01/18 .................... 1,100,000 1,007,952
Connecticut State Development Authority PCR, New England Power Co., Pre-Refunded,
7.25%, 10/15/15 ................................................................. 750,000 768,120
Connecticut State Development Authority Revenue,
Life Care Facilities, Seabury Project, Refunding, 5.00%, 9/01/21 ................. 3,840,000 3,469,786
Refunding, 5.375%, 8/01/24 ....................................................... 2,000,000 1,883,600
Connecticut State Development Authority Solid Waste Disposal Facilities
Revenue, Pfizer Inc. Project, 7.00%, 7/01/25 .................................... 2,000,000 2,213,800
Connecticut State Development Authority Water Facility Revenue,
Bridgeport Hydraulic Co. Project,
6.15%, 4/01/35 ................................................................... 1,000,000 1,025,760
6.00%, 9/01/36 ................................................................... 10,000,000 10,110,700
Refunding, 7.25%, 6/01/20 ........................................................ 1,000,000 1,036,310
Connecticut State GO, 5.00%, 6/15/18 ................................................ 5,000,000 4,681,300
Connecticut State Health and Educational Facilities Authority Revenue,
Abbot Terrace Health Center Project, Series A, 6.00%, 11/01/14 ................... 2,000,000 2,082,720
Brunswick School, Series A, MBIA Insured, 5.00%, 7/01/29 ......................... 5,000,000 4,540,200
Capital Assets, Series B, ETM, 7.00%, 1/01/00 .................................... 635,000 641,655
Capital Assets, Series C, MBIA Insured, 7.00%, 1/01/20 ........................... 1,265,000 1,327,048
Capital Assets, Series C, MBIA Insured, Pre-Refunded, 7.00%, 1/01/20 ............. 200,000 211,410
(b) Child Care Facilities Program, Series C, AMBAC Insured, 5.625%, 7/01/29 .......... 1,250,000 1,241,838
Choate Rosemary Hall, Series A, MBIA Insured, Pre-Refunded, 7.00%, 7/01/25 ....... 1,500,000 1,677,930
(b) Fairfield University, Series I, MBIA Insured, 5.25%, 7/01/25 ..................... 2,500,000 2,377,800
(b) Fairfield University, Series I, MBIA Insured, 5.50%, 7/01/29 ..................... 8,000,000 7,861,200
Greenwich Hospital, Series A, MBIA Insured, 5.75%, 7/01/16 ....................... 1,000,000 1,015,120
Greenwich Hospital, Series A, MBIA Insured, 5.80%, 7/01/26 ....................... 2,500,000 2,511,750
Hartford University, Series C, Pre-Refunded, 8.00%, 7/01/18 ...................... 1,275,000 1,408,046
Hartford University, Series D, 6.80%, 7/01/22 .................................... 5,000,000 5,114,600
Hebrew Home and Hospital, Series B, FHA Insured, 5.15%, 8/01/28 .................. 3,800,000 3,445,650
(b) Horace Bushnell Memorial Hall, Series A, MBIA Insured, 5.625%, 7/01/29 ........... 1,000,000 992,050
Hospital for Special Care, Refunding, Series B, 5.375%, 7/01/17 .................. 7,205,000 6,648,702
Hospital for Special Care, Refunding, Series B, 5.50%, 7/01/27 ................... 17,000,000 15,409,140
Lutheran General Health Care System, ETM, 7.375%, 7/01/19 ........................ 500,000 592,410
New Britain Memorial Hospital, Series A, Pre-Refunded, 7.75%, 7/01/22 ............ 1,000,000 1,110,845
New Horizons Village Project, 7.30%, 11/01/16 .................................... 2,905,000 3,254,646
Quinnipiac College, Series C, Pre-Refunded, 7.75%, 7/01/20 ....................... 960,000 1,010,208
Sacred Heart University, Refunding, Series E, 5.00%, 7/01/28 ..................... 7,000,000 6,273,540
Sacred Heart University, Series C, 6.50%, 7/01/16 ................................ 235,000 248,043
Sacred Heart University, Series C, Pre-Refunded, 6.50%, 7/01/16 .................. 765,000 853,327
Sacred Heart University Authority Revenue, Series C, 6.625%, 7/01/26 ............. 785,000 828,615
Sacred Heart University Authority Revenue, Series C, Pre-Refunded, 6.625%, 7/01/26 6,215,000 6,977,456
Sacred Heart University, Series D, Pre-Refunded, 6.20%, 7/01/27 .................. 1,700,000 1,871,241
St. Mary's Hospital, Refunding, Series E, 5.50%, 7/01/20 ......................... 4,615,000 4,368,467
St. Mary's Hospital, Refunding, Series E, 5.875%, 7/01/22 ........................ 3,510,000 3,468,371
Taft School, Series A, Pre-Refunded, 7.375%, 7/01/20 ............................. 1,000,000 1,049,270
Taft School, Series C, Pre-Refunded, 6.00%, 7/01/16 .............................. 1,500,000 1,576,905
Trinity College, Series E, MBIA Insured, 5.875%, 7/01/26 ......................... 2,200,000 2,229,260
University Connecticut Foundation, Series A, 5.25%, 7/01/19 ...................... 500,000 480,900
University Connecticut Foundation, Series A, 5.375%, 7/01/29 ..................... 1,250,000 1,197,125
Veterans Memorial Medical Center, Series A, MBIA Insured, 5.50%, 7/01/26 ......... 4,210,000 4,077,764
Windham Community Memorial Hospital, Series C, 6.00%, 7/01/20 .................... 8,000,000 7,822,560
Yale New Haven Hospital, Refunding, Series H, MBIA Insured, 5.70%, 7/01/25 ....... 4,500,000 4,508,865
Yale New Haven Hospital, Series F, MBIA Insured, Pre-Refunded, 7.10%, 7/01/25 .... 7,000,000 7,335,230
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Connecticut State HFA, Housing Mortgage Finance Program,
Series B, 6.75%, 11/15/23 ........................................................ $ 14,705,000 $ 15,612,593
Series C-1, 6.60%, 11/15/23 ...................................................... 460,000 483,041
Series C-2, 6.25%, 11/15/18 ...................................................... 1,500,000 1,563,120
Series C-2, 6.70%, 11/15/22 ...................................................... 3,765,000 3,923,394
Series E, 6.30%, 5/15/17 ......................................................... 3,105,000 3,228,300
Sub Series B-1, 6.30%, 5/15/25 ................................................... 700,000 722,729
Sub Series B-1, 5.30%, 11/15/28 .................................................. 1,700,000 1,605,973
Sub Series C-2, 5.85%, 11/15/28 .................................................. 1,480,000 1,475,738
Sub Series D-1, 5.55%, 11/15/28 .................................................. 1,000,000 971,770
Sub Series E-2, 5.20%, 11/15/21 .................................................. 1,840,000 1,722,590
Sub Series G-1, 6.20%, 11/15/16 .................................................. 1,255,000 1,280,502
Connecticut State Higher Education Supplemental Loan Authority, Series A,
7.00%, 11/15/05 .................................................................. 720,000 747,648
7.20%, 11/15/10 .................................................................. 220,000 228,162
7.50%, 11/15/10 .................................................................. 345,000 350,537
Connecticut State Resource Recovery Authority Revenue, Bridgeport Resco Ltd.
Partnership Project, Series A, 7.625%, 1/01/09 ................................... 835,000 854,831
East Haven Bank Qualified GO, Pre-Refunded, 7.00%, 9/15/07 .......................... 200,000 204,200
Eastern Connecticut Resource Recovery Authority Solid Waste Revenue,
Wheelabrator Lisbon Project, Series A, 5.50%, 1/01/15 ........................... 8,000,000 7,495,360
Griswold GO, AMBAC Insured, 7.50%, 4/01/06 .......................................... 200,000 230,994
Guam Airport Authority Revenue, Series B,
6.60%, 10/01/10 .................................................................. 250,000 265,425
6.70%, 10/01/23 .................................................................. 1,300,000 1,382,953
Guam Power Authority Revenue, Series A,
Pre-Refunded, 6.75%, 10/01/24 .................................................... 5,500,000 6,149,000
Refunding, 5.25%, 10/01/34 ....................................................... 4,000,000 3,584,000
New Haven GO, Series A, Pre-Refunded, 7.40%, 3/01/12 ................................ 4,545,000 4,965,731
Plainfield GO,
Series 1988, 7.30%, 9/01/10 ...................................................... 150,000 160,880
Series 1991, 7.25%, 9/01/05 ...................................................... 335,000 359,582
Series 1991, 7.30%, 9/01/07 ...................................................... 335,000 359,566
Series 1991, 7.30%, 9/01/09 ...................................................... 335,000 359,432
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series A, 5.00%, 7/01/38 ........................................................ 2,500,000 2,188,975
Puerto Rico Electric Power Authority Revenue,
Series P, Pre-Refunded, 7.00%, 7/01/21 ........................................... 2,450,000 2,622,799
Series T, Pre-Refunded, 6.375%, 7/01/24 .......................................... 5,000,000 5,487,600
Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ..... 775,000 805,442
Puerto Rico Industrial Tourist Educational Medical and
Environmental Control Facilities Financing Authority Industrial Revenue,
Guaynabo Warehouse, Series A, 5.15%, 7/01/19 ..................................... 4,845,000 4,428,427
Puerto Rico Municipal Finance Agency GO, Series A, 6.50%, 7/01/19 ................... 5,000,000 5,374,600
South Central Regional Water Authority Water System Revenue, Refunding, Series A,
FGIC Insured, 5.125%, 8/01/29 .................................................... 9,840,000 9,005,371
Stratford GO, Unlimited Tax, Pre-Refunded, 7.30%, 3/01/12 ........................... 1,130,000 1,203,676
Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%,
10/01/13 ......................................................................... 2,500,000 2,433,075
10/01/22 ......................................................................... 2,500,000 2,374,675
Virgin Islands Water and Power Authority Electric System Revenue,
Refunding, 5.30%, 7/01/18 ........................................................ 1,500,000 1,401,600
Refunding, 5.30%, 7/01/21 ........................................................ 1,000,000 924,490
Series A, Pre-Refunded, 7.40%, 7/01/11 ........................................... 5,780,000 6,139,285
Waterbury GO, Pre-Refunded,
7.25%, 3/01/04 ................................................................... 785,000 834,439
7.50%, 3/01/07 ................................................................... 780,000 831,917
------------
TOTAL LONG TERM INVESTMENTS (COST $259,969,138) ..................................... 261,700,172
------------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) SHORT TERM INVESTMENTS .2%
Connecticut State Health and Educational Facilities Authority Revenue,
Yale University, Series T-1, Weekly VRDN and Put, 3.40%, 7/01/29 ................. $ 100,000 $ 100,000
Connecticut State Special Tax Obligation Revenue, Weekly VRDN and Put, 3.00%, 12/01/10 200,000 200,000
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured,
Weekly VRDN and Put, 2.70%, 12/01/15 ............................................. 300,000 300,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $600,000) ......................................... 600,000
------------
TOTAL INVESTMENTS (COST $260,569,138) 98.6% .......................................... 262,300,172
OTHER ASSETS, LESS LIABILITIES 1.4% .................................................. 3,721,225
------------
NET ASSETS 100.0% .................................................................... $266,021,397
============
</TABLE>
See glossary of terms on page 110.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 --------------------------------------------------------
(UNAUDITED)*** 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............... $ 11.30 $ 11.25 $ 10.94 $ 10.95 $ 10.48 $ 10.80
---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................. .26 .51 .53 .55 .55 .54
Net realized and unrealized gains (losses) ........ (.43) .06 .33 (.01) .47 (.33)
---------------------------------------------------------------------------
Total from investment operations ................... (.17) .57 .86 .54 1.02 .21
---------------------------------------------------------------------------
Less distributions from net investment income ...... (.26) (.52) (.55) (.55) (.55) (.53)
----------------------------------------------------------------------------
Net asset value, end of period ..................... $ 10.87 $ 11.30 $ 11.25 $ 10.94 $ 10.95 $ 0.48
===========================================================================
Total return* ...................................... (1.57%) 5.17% 8.02% 5.12% 9.93% (.20%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................. $ 182,057 $195,598 $ 139 $ 104,715 $ 85,967 $ 73,977
Ratios to average net assets:
Expenses .......................................... .75%** .75% .75% .68% .65% .56%
Expenses excluding waiver and payments by affiliate .76%** .78% .82% .84% .85% .84%
Net investment income ............................. 4.56%** 4.53% 4.83% 5.16% 5.12% 5.25%
Portfolio turnover rate ............................ 12.08% 16.57% 23.32% 22.54% 3.35% 38.46%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 103.0%
BONDS 100.9%
ALABAMA .6%
Morgan County Decatur Health Care Authority Hospital Revenue, Refunding,
Connie Lee Insured, 5.80%, 3/01/04 ............................................... $1,000,000 $1,044,920
----------
ALASKA .3%
Alaska State HFC, Collateral, Veteran's Mortgage Program, First Series, 5.80%, 6/01/04 430,000 443,416
Anchorage Parking Authority Revenue, 5th Avenue Garage Lease Project,
Refunding, 6.50%, 12/01/02 ....................................................... 170,000 177,431
----------
620,847
----------
ARIZONA 3.7%
Maricopa County COP, 5.625%, 6/01/00 ................................................. 330,000 332,396
Maricopa County GO, School District No. 40, Glendale Improvement, 6.10%, 7/01/08 ..... 1,000,000 1,066,090
Mesa IDAR, Discovery Health System, Series A, MBIA Insured,
5.50%, 1/01/13 .................................................................... 2,000,000 2,004,840
5.625%, 1/01/15 ................................................................... 3,000,000 3,018,480
Mohave County IDA, Hospital Systems Revenue, Medical Environments Inc., Phoenix
Hospital and Medical Center, Refunding, ETM, 6.00%, 7/01/00 ..................... 200,000 203,836
Phoenix HFC, Mortgage Revenue, Project A, Refunding, MBIA Insured, 6.00%, 7/01/02 .... 35,000 35,956
----------
6,661,598
----------
ARKANSAS .9%
Arkansas State Development Finance Authority Revenue, White River
Medical Center Project, 5.30%, 6/01/14 ........................................... 1,000,000 931,110
Camden PCR, International Paper Co. Project, Refunding, 5.70%, 9/01/12 ............... 750,000 754,793
----------
1,685,903
----------
CALIFORNIA 7.7%
ABAG Finance Corp. COP, ABAG XXVI, Series B, 6.30%, 10/01/02 ......................... 100,000 105,145
(b) Bakersfield PFA Revenue, Refunding, Series A, 5.80%, 9/15/05 ...................... 3,000,000 3,129,720
California Educational Facilities Authority Revenue, Pooled College and
University Financing, Refunding, Series B, 5.90%, 6/01/03 ........................ 1,500,000 1,566,780
(b) California Statewide CDA Revenue, COP, Health Facilities,
Barton Memorial Hospital, Refunding, Series B, 6.40%, 12/01/05 ................... 300,000 315,027
California Statewide Communities Development Corp. COP, Pacific Homes,
Series A, Pre-Refunded, 5.90%, 4/01/09 ........................................... 1,000,000 1,041,810
Coastside County Water District 1915 Act GO, Crystal Springs Project, Refunding,
5.10%, 9/02/03 .................................................................... 490,000 493,342
5.30%, 9/02/05 .................................................................... 620,000 614,984
Fresno Joint Powers Financing Authority Local Agency Revenue,
Refunding, Series A, 6.00%, 9/02/01 .............................................. 1,000,000 1,020,110
Los Angeles County Transport Commission COP, Series B, 5.90%, 7/01/00 ................ 100,000 101,812
San Diego Port Facilities Revenue, National Steel and Shipbuilding Co.,
Refunding, 6.60%, 12/01/02 ....................................................... 100,000 104,423
(b) San Francisco City and County RDA, Mortgage Revenue,
Refunding, Series A, MBIA Insured, 6.125%, 7/01/02 ............................... 50,000 50,036
San Francisco Downtown Parking Corp. Parking Revenue, 6.25%, 4/01/04 ................. 200,000 215,010
San Joaquin County COP, General Hospital Project, ETM, 5.90%, 9/01/03 ................ 200,000 211,780
San Ramon Valley USD, COP, Measure A, Capital Project, Series A, 5.95%, 10/01/01 ..... 1,535,000 1,594,051
Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1,
5.00%, 9/02/06 .................................................................... 465,000 455,867
5.25%, 9/02/11 .................................................................... 1,000,000 965,490
Snowline Joint USD, COP, ETM,
5.60%, 7/01/01 .................................................................... 260,000 266,924
5.70%, 7/01/02 .................................................................... 275,000 285,725
5.80%, 7/01/03 .................................................................... 290,000 304,868
Solano County COP, Justice Facility and Public Building Project,
Refunding, 5.875%, 10/01/05 ...................................................... 400,000 412,416
Southern California Rapid Transit District Revenue, Special Benefit AD A2,
6.00%, 9/01/02 ................................................................... 100,000 104,187
Susanville PFA Revenue, Series A, AMBAC Insured,
5.90%, 9/01/02 .................................................................... 25,000 25,942
6.00%, 9/01/03 .................................................................... 100,000 103,913
Tahoe City PUD, COP, Capital Facilities Project, Series B, 6.05%, 6/01/01 ............ 500,000 513,245
----------
14,002,607
----------
COLORADO 2.8%
Denver City and County Airport Revenue,
Series A, 7.00%, 11/15/99 ......................................................... 3,000,000 3,016,980
(b) Series C, 6.25%, 335,000 342,022
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
COLORADO (CONT.)
Montrose County COP, 6.20%, 6/15/03 ..................................................... $1,500,000 $ 1,567,515
Summit County Recreational Facilities Revenue, Copper Mountain, Refunding, 5.90%, 4/01/17 255,000 255,329
----------
5,181,846
----------
CONNECTICUT 4.1%
Connecticut State Health and Educational Facilities Authority Revenue,
Sacred Heart University, Refunding, Series C, 6.00%, 7/01/05 ........................ 135,000 140,015
Series C, ETM, 6.00%, 7/01/05 ........................................................ 425,000 454,635
Connecticut State HFA, Housing Mortgage Finance Program, Series C-2, 6.00%, 11/15/10 .... 2,000,000 2,078,020
Stamford Housing Authority MFR, Fairfield Apartments Project, 4.75%, 12/01/28 ........... 5,000,000 4,751,550
----------
7,424,220
----------
FLORIDA 5.8%
Alachua County Health Facilities Authority Revenue, Santa Fe Health
Systems Project, Pre-Refunded, 6.875%, 11/15/02 ..................................... 100,000 104,439
Florida State Board of Education Capital Outlay, Public Education,
Refunding, Series D, 5.50%,
6/01/08 .............................................................................. 850,000 865,266
6/01/10 .............................................................................. 945,000 949,479
6/01/11 .............................................................................. 200,000 199,810
6/01/12 .............................................................................. 200,000 198,536
6/01/13 .............................................................................. 200,000 196,766
6/01/14 .............................................................................. 200,000 196,418
Gateway Services District Revenue, Transportation Roadway Service Charges,
8.50%, 5/01/04 ...................................................................... 585,000 637,188
Meadow Pointe II CDD, Capital Improvement Revenue,
6.00%, 7/01/01 ....................................................................... 510,000 512,836
Series A, 5.25%, 8/01/03 ............................................................. 2,330,000 2,283,214
Nassau County PCR, ITT Rayonier Inc. Project, Refunding, 6.25%, 6/01/10 ................. 1,000,000 1,032,530
Northern Palm Beach County Water Control District Revenue, Unit Development No. 31,
Program 1, Refunding, 6.60%, 11/01/03 ................................................ 320,000 331,942
Program 2, Refunding, 6.60%, 11/01/03 ................................................ 405,000 420,115
Palm Beach County IDR, Lourdes-Noreen Mckeen Residence, Geriatric Care Inc. Project,
6.20%, 12/01/08 ...................................................................... 275,000 281,177
(c) 6.30%, 12/01/09 .................................................................... 580,000 594,001
Palm Beach County Solid Waste IDR, Okeelanta Power and Light Co. Project,
Series A, 6.375%, 2/15/07 ........................................................... 1,400,000 910,000
Pembroke Pines Special Assessment, No. 9, 5.75%, 11/01/05 ............................... 785,000 807,451
----------
10,521,168
----------
GEORGIA 3.0%
Baldwin County Hospital Authority Revenue, Oconee Regional Medical
Center, 5.30%, 12/01/13 ............................................................. 1,020,000 958,678
(b) Fulton County Development Authority Special Facilities Revenue,
Delta Airlines Inc. Project, Refunding, 6.85%, 11/01/07 ............................. 100,000 105,275
Macon-Bibb County Urban Development Authority Revenue, MF Housing,
Refunding, Series A, MBIA Insured, 5.00%, 1/01/07 ................................... 1,290,000 1,280,544
(b) Wayne County Development Authority PCR, ITT Rayonier Inc. Project,
Refunding, 6.10%, 11/01/07 .......................................................... 3,105,000 3,195,821
----------
5,540,318
----------
HAWAII 1.8%
Hawaii State Department of Budget and Finance Special Purpose Revenue,
Kaiser Permanente, Series A, 5.10%, 3/01/14 .......................................... 3,000,000 2,796,000
Kapiolani Health Obligation, 5.60%, 7/01/06 .......................................... 500,000 507,600
----------
3,303,600
----------
ILLINOIS 3.1%
Chicago O'Hare International Airport Special Facilities Revenue,
United Air Lines Project, Refunding, Series A, 5.35%, 9/01/16 ....................... 2,000,000 1,854,620
Illinois Educational Facilities Authority Revenue, Columbia College, 5.875%, 12/01/03 ... 850,000 877,727
Illinois HDA Revenue, Homeowner Mortgage, Sub Series A-1, 6.10%, 2/01/05 ................ 360,000 373,306
Illinois Health Facilities Authority Revenue,
St. Elizabeth's Hospital, 6.00%, 7/01/05 ............................................. 425,000 437,355
Victory Health Services, Series A, 5.25%, 8/15/09 .................................... 1,170,000 1,130,396
Metropolitan Pier and Exposition Authority Hospitality Facilities Revenue,
McCormick Place Convention Center, 5.75%, 7/01/06 ................................... 1,000,000 1,027,780
----------
5,701,184
----------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
INDIANA 3.2%
Franklin EDR, Hoover Universal Inc. Project, Johnson Controls, Refunding, 6.10%, 12/01/04 .......... $2,000,000 $ 2,102,100
Indianapolis Local Public Improvement Bond, Refunding, Series D, 6.10%, 2/01/02 .................... 100,000 104,076
(b) Sullivan PCR, Indiana-Michigan Power Co. Project, Refunding, Series C, 5.95%, 5/01/09 ............ 3,500,000 3,575,425
-----------
5,781,601
-----------
IOWA .1%
Iowa State Financial Authority Hospital Facilities Revenue, Trinity Regional Hospital
Project, Refunding, ETM, 6.50%, 7/01/00 ............................................................ 100,000 101,168
-----------
KENTUCKY 1.4%
Kenton County Airport Board Revenue, Special Facilities, Delta Airlines Inc. Project,
Series A, 6.75%, 2/01/02 ........................................................................... 100,000 103,647
Kentucky Economic Development Finance Authority Hospital System Revenue, Appalachian
Regional Health Center Facility, Refunding and Improvement,
5.70%, 10/01/10 .................................................................................. 1,000,000 991,050
5.75%, 10/01/11 .................................................................................. 1,500,000 1,479,405
-----------
2,574,102
-----------
LOUISIANA 3.2%
Calcasieu Parish Public Trust Authority Mortgage Revenue, Refunding, Series B, 6.375%, 11/01/02 .... 10,000 10,326
Louisiana Public Facilities Authority Revenue, Student Loan, Refunding, Series A-1, 6.20%,
3/01/01 ............................................................................................ 80,000 81,874
(b) Louisiana State Offshore Terminal Authority Deepwater Port Revenue, First Stage, Loop Inc.,
Refunding, Series B, 6.20%, 9/01/03 ................................................................ 100,000 104,370
St. John's Baptist Parish EDR, USX Corp. Project, Refunding, 5.35%, 12/01/13 ....................... 6,000,000 5,629,440
-----------
5,826,010
-----------
MARYLAND .1%
(b) Baltimore Economic Development Lease Revenue, Armistead Partnership, Refunding, Series A,
6.75%, 8/01/02 ..................................................................................... 125,000 130,920
-----------
MASSACHUSETTS 6.4%
Massachusetts State Development Finance Agency Revenue, Loomis Community Project, First
Mortgage, Refunding, Series A,
5.50%, 7/01/08 ..................................................................................... 3,225,000 3,189,267
Massachusetts State Industrial Finance Agency Resource Recovery Revenue, Ogden Haverhill
Project, Refunding, Series A,
4.95%, 12/01/06 .................................................................................. 2,500,000 2,458,025
5.15%, 12/01/07 .................................................................................. 2,000,000 1,964,300
5.20%, 12/01/08 .................................................................................. 2,000,000 1,953,960
Massachusetts State Industrial Finance Agency Revenue, Youville Senior Care, Series D,
5.50%, 10/01/12 .................................................................................... 1,745,000 1,740,079
New England Educational Loan Marketing Corp. Student Loan Revenue, Refunding, Series B,
5.60%, 6/01/02 ..................................................................................... 415,000 423,943
-----------
11,729,574
-----------
MICHIGAN 1.2%
Chippewa County Hospital Financing Authority Revenue, Chippewa County War Memorial Hospital,
Refunding, Series B,
5.30%, 11/01/07 .................................................................................. 815,000 792,343
5.625%, 11/01/14 ................................................................................. 350,000 335,342
Detroit GO, Refunding, Series B, 6.375%, 4/01/06 ................................................... 1,000,000 1,069,730
-----------
2,197,415
-----------
MINNESOTA .1%
(b) Minneapolis CDA, Supported Development Revenue, Common Bond Fund, Series 91-5A, 7.20%,
12/01/04 ........................................................................................... 200,000 211,606
-----------
MISSISSIPPI 1.7%
Mississippi Development Bank Special Obligation, Oktibbeha County Hospital Revenue Project,
Refunding, 5.65%, 7/01/06 .......................................................................... 725,000 735,585
Perry County PCR, Leaf River Forest Project, Refunding, 5.20%, 10/01/12 ............................ 2,500,000 2,361,500
-----------
3,097,085
-----------
MISSOURI 3.3%
Lake of the Ozarks Community Bridge Corp. Bridge System Revenue, Refunding, 5.00%, 12/01/08 ........ 3,000,000 2,883,780
Missouri State Health and Educational Facilities Authority Health Facilities Revenue, Park
Lane Medical Center, Series A, MBIA Insured, 4.70%, 1/01/04 ........................................ 1,200,000 1,204,584
Taney County IDA, Hospital Revenue, The Skaggs Community Hospital Association, 5.10%, 5/15/10 ...... 1,420,000 1,344,697
West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Refunding, 5.00%, 11/15/04 ....... 560,000 544,482
-----------
5,977,543
-----------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEBRASKA .8%
Omaha Stadium Facilities Corp. Lease Revenue, Rosenblatt Stadium Project, Series A, 4.90%,
11/01/13 ......................................................................................... $ 1,100,000 $ 1,036,607
Wayne State College Revenue, Student Fees and Facilities, Refunding, MBIA Insured, 5.05%,
7/01/10 .......................................................................................... 365,000 365,201
-----------
1,401,808
-----------
NEVADA 1.9%
Clark County Nevada PCR, Nevada Power Co. Project, Refunding, Series D, 5.30%, 10/01/11 .......... 1,500,000 1,446,780
Sparks RDA, Tax Allocation Revenue, Refunding, Asset Guaranty, 5.15%, 1/15/08 .................... 2,110,000 2,099,956
-----------
3,546,736
-----------
NEW HAMPSHIRE .6%
New Hampshire Higher Education and Health Facilities Authority Revenue, New Hampshire
Catholic Charities, Refunding, Series A, 5.10%, 8/01/04 ........................................ 1,160,000 1,152,008
-----------
NEW JERSEY 1.7%
Hudson County Improvement Authority Solid Waste Systems Revenue, Refunding,
Series 1, 5.90%, 1/01/15 ....................................................................... 1,000,000 994,920
New Jersey EDA Revenue, Economic Growth, 2nd Series F-1, 6.00%, 12/01/02 ......................... 70,000 71,772
New Jersey Health Care Facilities Financing Authority Revenue, Monmouth Medical Center, Refunding,
Series C, FSA Insured, ETM, 5.80%, 7/01/04 ..................................................... 1,000,000 1,056,670
New Jersey State Housing and Mortgage Finance Agency Revenue, SFMR, Home Buyer, Series Z, MBIA
Insured, 5.35%, 4/01/11 ........................................................................ 1,000,000 1,001,440
-----------
3,124,802
-----------
NEW YORK 10.4%
Metropolitan Transportation Authority Commuter Facilities Revenue, Services Contract,
Refunding, Series R, 5.50%, 7/01/01 ............................................................ 2,215,000 2,236,419
New York City GO,
Pre-Refunded, 6.50%, 8/01/04 .................................................................. 105,000 112,734
Refunding, Series H, 5.90%, 8/01/09 ........................................................... 500,000 527,435
(b) Refunding, Series J, 6.00%, 8/01/08 ......................................................... 3,000,000 3,200,100
Series B, 6.25%, 10/01/01 ................................................................... 75,000 77,905
Series B, ETM, 6.25%, 10/01/01 .............................................................. 25,000 26,049
Series C, 6.50%, 8/01/04 .................................................................... 410,000 436,367
Series C, 6.50%, 8/01/07 .................................................................... 1,490,000 1,578,700
Series C, Pre-Refunded, 6.50%, 8/01/07 ...................................................... 360,000 386,518
(b) Series H, 7.00%, 2/01/05 .................................................................... 30,000 32,013
Series H, Pre-Refunded, 7.00%, 2/01/05 ...................................................... 220,000 236,854
Series J, 6.00%, 2/15/04 .................................................................... 1,000,000 1,051,630
(b) New York City Health and Hospital Corp. Revenue, Refunding, Series A, 6.00%, 2/15/06 ........... 2,500,000 2,560,450
New York City IDA, Civic Facility Revenue, New York Blood Center Inc. Project, ETM, 6.80%,
5/01/02 ........................................................................................ 90,000 93,099
New York State Dormitory Authority Revenue, Mental Health Services Facilities Improvement,
Refunding, Series D, 5.60%, 2/15/07 ............................................................ 140,000 145,432
New York State HFAR, Health Facilities, New York City, Refunding, Series A, 5.90%, 5/01/05 ....... 1,000,000 1,035,350
New York State Tollway Authority Service Contract Revenue, Local Highway and Bridge,
5.75%, 4/01/08 ................................................................................. 500,000 520,215
5.75%, 4/01/09 ................................................................................. 1,150,000 1,188,445
Pre-Refunded, 5.90%, 4/01/08 ................................................................... 1,000,000 1,075,210
Oneida-Herkimer Solid Waste Management Authority Solid Waste Systems Revenue, Refunding,
6.20%, 4/01/00 ................................................................................. 100,000 101,430
Port Authority of New York and New Jersey Special Obligation Revenue, 3rd Installment, 7.00%,
10/01/07 ....................................................................................... 1,000,000 1,091,270
Ulster County Resource Recovery Agency Solid Waste System Revenue, 5.90%, 3/01/07 ................ 1,100,000 1,132,681
-----------
18,846,306
-----------
OHIO 2.1%
Franklin County Health Care Facilities Revenue, Presbyterian Retirement Services, Refunding,
5.25%, 7/01/08 ................................................................................. 575,000 549,516
5.40%, 7/01/10 ................................................................................. 775,000 735,336
5.50%, 7/01/11 ................................................................................. 500,000 474,935
University of Akron General Receipts, Series R, FGIC Insured, 5.75%, 1/01/14 ..................... 2,000,000 2,056,860
-----------
3,816,647
-----------
OKLAHOMA 1.4%
Jackson County Memorial Hospital Authority Revenue, Jackson County Memorial Hospital Project,
Refunding, 6.75%, 8/01/04 ...................................................................... 1,525,000 1,577,506
Valley View Hospital Authority Revenue, Valley View Regional Medical Center, Refunding, 5.75%,
8/15/06 ........................................................................................ 895,000 883,902
-----------
2,461,408
-----------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
OREGON .8%
Clackamas County Hospital Facilities Authority Revenue, Willamette View Inc. Project,
Refunding, 6.00%, 11/01/06 ................................................................... $ 500,000 $ 511,325
Hillsborough Hospital Facilities Authority Revenue, Refunding, 5.75%, 10/01/12 ................. 1,000,000 1,002,830
-----------
1,514,155
-----------
PENNSYLVANIA 4.1%
(b) Cambria County Hospital Development Authority Revenue, Conemaugh Valley Memorial Hospital,
Refunding and Improvement, Series B, Connie Lee Insured, Pre-Refunded, 5.90%, 7/01/03 ...... 100,000 105,791
Chartiers Valley Industrial and Commercial Development Authority Revenue, First Mortgage,
Asbury Place Project, 6.25%, 2/01/06 ....................................................... 240,000 244,414
Clarion County Hospital Authority Revenue, Clarion Hospital Project, Refunding, 5.40%,
7/01/07 ...................................................................................... 1,135,000 1,111,540
Northeastern Hospital and Educational Authority College Revenue, Kings College Project,
Refunding, Series B, 5.60%, 7/15/03 .......................................................... 410,000 417,659
Pennsylvania State Higher Educational Facilities Authority Health Services Revenue,
University of Pennsylvania Health Services, Refunding, Series A,
5.75%, 1/01/12 ............................................................................... 1,000,000 986,040
5.875%, 1/01/15 .............................................................................. 800,000 784,496
Philadelphia Gas Works Revenue,
Refunding, Series A, 5.70%, 7/01/00 .......................................................... 300,000 303,825
Refunding, Series A, 5.80%, 7/01/01 .......................................................... 300,000 306,219
Sub. lien, Series C, FSA Insured, 5.00%, 7/01/13 ............................................. 1,680,000 1,607,105
Schuylkill County IDA, Resource Recovery Revenue, Schuylkill Energy Resources Inc., 6.50%,
1/01/10 ...................................................................................... 1,685,000 1,688,252
-----------
7,555,341
-----------
SOUTH CAROLINA .5%
Charleston County Resource Recovery Revenue, Foster Wheeler Charleston, Refunding, AMBAC
Insured, 5.25%, 1/01/10 ...................................................................... 1,000,000 999,920
-----------
SOUTH DAKOTA .6%
South Dakota HDA Revenue, Homeownership Mortgage, Series D, 6.05%, 5/01/04 ..................... 990,000 1,033,501
-----------
TENNESSEE 1.0%
Memphis-Shelby County Airport Authority Special Facilities and Project Revenue, Federal
Express Corp., Refunding, 5.35%, 9/01/12 ..................................................... 1,000,000 982,560
Metropolitan Government of Nashville and Davidson County IDBR, Osco Treatment Inc.,
Refunding and Improvement, 6.00%, 5/01/03 .................................................... 750,000 763,463
-----------
1,746,023
-----------
TEXAS 3.5%
Abilene Higher Educational Facilities Corp.,
ETM, 5.90%, 10/01/05 ......................................................................... 65,000 69,009
Higher Education Revenue, Abilene Christian, Refunding and Improvement, 5.90%, 10/01/05 ...... 720,000 748,598
Houston ISD, Refunding, 5.50%, 8/15/09 ......................................................... 1,000,000 1,018,410
North Central Health Facility Development Corp. Revenue, C.C. Young Memorial Home Project,
Refunding, Series C, 6.10%, 2/15/06 .......................................................... 400,000 410,036
Port Corpus Christi Nueces County General Revenue, Union Pacific, Refunding, 5.35%, 11/01/10 ... 2,500,000 2,438,325
Trinity River Authority Revenue, Tarrant County Water Project Improvement, Refunding,
FSA Insured, 5.25%, 2/01/13 .................................................................. 1,795,000 1,764,413
-----------
6,448,791
-----------
US TERRITORIES 7.6%
District of Columbia GO,
Refunding, Series A, 5.875%, 6/01/05 ......................................................... 670,000 700,257
Series A, ETM, 5.875%, 6/01/05 ............................................................... 30,000 31,646
Puerto Rico Electric Power Authority Revenue,
(b) Refunding, Series Q, 5.90%, 7/01/01 ........................................................ 100,000 102,777
Series T, 6.00%, 7/01/04 ................................................................. 1,345,000 1,425,592
Virgin Islands PFA Revenue,
Senior lien, Refunding, Series A, 5.30%, 10/01/11 ............................................ 5,000,000 4,843,800
Subordinate lien, Fund Loan Notes, Series D, Refunding, 5.50%, 10/01/00 ...................... 2,000,000 2,019,680
Virgin Islands Water and Power Authority Water System Revenue, Refunding,
5.00%, 7/01/03 ............................................................................... 500,000 495,170
4.875%, 7/01/06 .............................................................................. 2,000,000 1,907,600
5.00%, 7/01/09 ............................................................................... 2,400,000 2,243,832
-----------
13,770,354
-----------
</TABLE>
FRANKLIN TAX-FREE TRUST
Statement of Investments, August 31, 1999 (unaudited) (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
UTAH .4%
Salt Lake County College Revenue, Westminster College Project, 5.50%, 10/01/12 .............. $ 340,000 $ 327,107
Utah State HFA, SFM, Refunding, 5.85%, 7/01/08 .............................................. 465,000 479,499
-----------
806,606
-----------
VIRGINIA 4.0%
Covington-Alleghany County IDA, PCR, Westvaco Corp. Project, Refunding, 5.85%, 9/01/04 ...... 2,800,000 2,925,384
Virginia State GO, 5.00%, 6/01/09 ........................................................... 1,000,000 1,006,300
Virginia State HDA, Commonwealth Mortgage, Sub Series C-7,
5.60%, 1/01/03 ............................................................................ 1,695,000 1,740,850
5.70%, 1/01/04 ............................................................................ 1,475,000 1,527,377
-----------
7,199,911
-----------
WASHINGTON 3.6%
Grant County PUD No. 2, Priest Rapids Hydroelectric Revenue, Second Series, Series A,
MBIA Insured, 5.00%, 1/01/14 .............................................................. 1,095,000 1,013,466
Marysville Water and Sewer Revenue, Refunding, MBIA Insured, 5.75%, 12/01/05 ................ 600,000 626,988
Spokane Downtown Foundation Parking Revenue, River Park Square Project, Asset Guaranty
Insured, 5.00%, 8/01/08 ................................................................... 3,000,000 2,942,850
Washington State Public Power Supply System Revenue,
Nuclear Project No. 1, Refunding, Series A, AMBAC Insured, 5.70%, 7/01/09 ................. 1,000,000 1,046,480
Nuclear Project No. 2, Refunding, Series A, 5.375%, 7/01/10 ............................... 1,000,000 997,080
-----------
6,626,864
-----------
WEST VIRGINIA .8%
West Virginia Public Energy Authority Energy Revenue, Morgantown Association Project,
Series A, 5.05%, 7/01/08 .................................................................. 1,390,000 1,401,259
-----------
WISCONSIN .6%
Wisconsin State GO, Refunding, Series 1, 5.50%, 5/01/10 ..................................... 1,000,000 1,028,860
-----------
TOTAL BONDS ................................................................................. 183,796,535
-----------
(d) ZERO COUPON BONDS 2.1%
Champaign County USD No. 116, Urbana, Series C, FGIC Insured, 1/01/10 ..................... 3,305,000 1,877,703
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien, Refunding,
Series A, 1/15/17 ....................................................................... 3,000,000 1,972,555
-----------
TOTAL ZERO COUPON BONDS ..................................................................... 3,850,258
-----------
TOTAL LONG TERM INVESTMENTS (COST $187,766,527) ............................................. 187,646,793
-----------
(a) SHORT-TERM INVESTMENTS 2.9%
Allegheny County Hospital Development Authority Revenue, Presbyterian, Health
Center, Series B, MBIA Insured,Weekly VRDN and Put, 3.35%, 3/01/20 ...................... 600,000 600,000
Fort Wayne Hospital Authority Hospital Revenue, Parkview Memorial
Hospital, Series D, Weekly VRDN and Put, 3.25%, 1/01/16 ................................. 600,000 600,000
New Jersey State Turnpike Authority Revenue, Series D, FGIC Insured, Weekly VRDN and
Put, 2.60%, 1/01/18 ..................................................................... 400,000 400,000
Northeastern Hospital and Educational Authority Health Care Revenue, Wyoming Valley Health
Care, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 3.25%, 1/01/24 ........... 1,500,000 1,500,000
Port Authority of New York and New Jersey Special Obligation Revenue, Versatile Structure,
Series 2, Daily VRDN and Put, 2.60%, 5/01/19 ............................................ 1,100,000 1,100,000
Southampton County IDAR, Various Exempt Facilities, Hadson Power, Series 11-A, Daily VRDN
and Put, 3.10%, 4/01/15 ................................................................. 100,000 100,000
Stevenson IDB Environmental Improvement Revenue, The Mead Corp. Project, Refunding,
Series D, Daily VRDN and Put, 2.80%, 11/01/11 ........................................... 900,000 900,000
-----------
TOTAL SHORT TERM INVESTMENTS (COST $5,200,000) .............................................. 5,200,000
-----------
TOTAL INVESTMENTS (COST $192,966,527) 105.9% ................................................ 192,846,793
OTHER ASSETS, LESS LIABILITIES (5.9%) ....................................................... (10,789,797)
-----------
NET ASSETS 100.0% ........................................................................... $ 182,056,996
===========
</TABLE>
See glossary of terms on page 110.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
(c) See Note 6 regarding defaulted securities.
(d) Zero coupon/step-up bonds. The current effective yield may vary. The
original accretion rate will remain constant.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 --------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999(2) 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.49 $ 11.68 $ 11.21 $ 11.19 $ 10.74 $ 11.25
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ........................ .32 .66 .69 .71 .74 .74
Net realized and unrealized gains (losses) ... (.48) (.18) .47 .04 .45 (.51)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .............. (.16) .48 1.16 .75 1.19 .23
---------- ---------- ---------- ---------- ---------- ----------
Less distributions from:
Net investment income ........................ (.33)(3) (.65) (.68) (.73)(1) (.74) (.74)
In excess of net investment income ........... -- -- (.01) -- -- --
Net realized gains ........................... -- (4) (.02) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ........................... (.33) (.67) (.69) (.73) (.74) (.74)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................ $ 11.00 $ 11.49 $ 11.68 $ 11.21 $ 11.19 $ 10.74
========== ========== ========== ========== ========== ==========
Total return* ................................. (1.40%) 4.21% 10.64% 7.01% 11.35% 2.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $5,719,163 $5,988,204 $5,742,939 $4,505,258 $3,787,147 $3,287,270
Ratios to average net assets:
Expenses ..................................... .61%** .62% .61% .62% .61% .60%
Net investment income ........................ 5.70%** 5.64% 5.98% 6.41% 6.68% 6.92%
Portfolio turnover rate ....................... 11.92% 18.55% 15.84% 6.98% 9.23% 15.89%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...................................... $ 11.52 $ 11.51
---------- ----------
Income from investment operations:
Net investment income .................................................... .29 .11
Net realized and unrealized losses ....................................... (.47) --
---------- ----------
Total from investment operations .......................................... (.18) .11
---------- ----------
Less distributions from:
Net investment income .................................................... (.30)(3) (.10)
Net realized gains ....................................................... -- (4) --
---------- ----------
Net asset value, end of period ............................................ $ 11.04 $ 11.52
========== ==========
Total return* ............................................................. (1.60%) .96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......................................... $ 72,071 $ 15,487
Ratios to average net assets:
Expenses ................................................................. 1.17%** 1.18%**
Net investment income .................................................... 5.18%** 5.06%**
Portfolio turnover rate ................................................... 11.92% 18.55%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to
May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) Includes distributions in excess of net investment income in the amount of
$.008.
(2) For the period January 1, 1999 (effective date) to February 28, 1999
for Class B.
(3) Includes distributions in excess of net investment income in
the amount of $.005.
(4) Includes distributions of net realized capital gains in
the amount of $.003.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights (continued)
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (CONT.)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 -----------------------------------------------
CLASS C (UNAUDITED)*** 1999 1998 1997 1996(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.56 $ 11.75 $ 11.26 $ 11.24 $ 10.81
--------- --------- --------- -------- --------
Income from investment operations:
Net investment income ........................ .29 .60 .63 .66 .56
Net realized and unrealized gains (losses) ... (.48) (.18) .48 .03 .42
--------- --------- --------- -------- --------
Total from investment operations .............. (.19) .42 1.11 .69 .98
--------- --------- --------- -------- --------
Less distributions from:
Net investment income ........................ (.30)(3) (.59) (.62) (.67)(2) (.55)
Net realized gains ........................... -- (4) (.02) -- -- --
--------- --------- --------- -------- --------
Total distributions ........................... (.30) (.61) (.62) (.67) (.55)
--------- --------- --------- -------- --------
Net asset value, end of period ................ $ 11.07 $ 11.56 $ 11.75 $ 11.26 $ 11.24
========= ========= ========= ======== ========
Total return* ................................. (1.76%) 3.69% 10.15% 6.36% 9.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 631,669 $ 631,974 $ 423,264 $194,400 $ 48,163
Ratios to average net assets:
Expenses ..................................... 1.17%** 1.18% 1.18% 1.18% 1.18%**
Net investment income ........................ 5.14%** 5.07% 5.38% 5.78% 6.07%**
Portfolio turnover rate ....................... 11.92% 18.55% 15.84% 6.98% 9.23%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.003.
(3) Includes distributions in excess of net investment income in the amount of
$.005.
(4) Includes distributions of net realized capital gains in the amount of
$.003.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.5%
BONDS 95.7%
ALABAMA 1.0%
Alabama State IDA, Solid Waste Disposal Revenue,
Pine City Fiber Co., Boise Cascade Corp., 6.45%, 12/01/23 ............................. $ 10,400,000 $ 10,434,944
Jefferson County Sewer Revenue, wts., Series D, FGIC Insured, 5.75%,
2/01/22 .............................................................................. 7,500,000 7,443,525
2/01/27 .............................................................................. 18,535,000 18,307,205
Marshall County Health Care Authority Hospital Revenue,
Boaz-Albertville Medical Center, Refunding, 6.20%, 1/01/08 ............................ 3,300,000 3,313,002
Mcintosh IDB, Environmental Improvement Revenue,
CIBA Specialty, Refunding, Series C, 5.375%, 6/01/28 .................................. 3,000,000 2,790,750
Mobile IDB, Solid Waste Disposal Revenue,
Mobile Energy Service Co. Project, Refunding, 6.95%, 1/01/20 .......................... 46,500,000 24,645,000
----------
66,934,426
----------
ALASKA .9%
Alaska Industrial Development and Export Authority Power Revenue,
Upper Lynn Canal Regional Power,
5.70%, 1/01/12 ....................................................................... 2,000,000 1,914,500
5.80%, 1/01/18 ....................................................................... 1,245,000 1,152,310
5.875%, 1/01/32 ...................................................................... 5,100,000 4,601,628
Alaska Industrial Development and Export Authority Revenue,
American President Lines Project, Refunding, 8.00%, 11/01/09 .......................... 4,000,000 4,095,640
Alaska Industrial Development and Export Authority,
Revolving Fund, Series A, 6.20%, 4/01/10 .............................................. 775,000 807,504
Alaska State HFC,
Refunding, Series A, MBIA Insured, 6.00%, 12/01/15 ................................... 3,410,000 3,505,310
Refunding, Series A, MBIA Insured, 5.875%, 12/01/24 .................................. 5,000,000 5,046,600
Refunding, Series A, MBIA Insured, 5.875%, 12/01/30 .................................. 12,475,000 12,558,707
Refunding, Series A, MBIA Insured, 6.10%, 12/01/37 ................................... 22,000,000 22,368,940
Series A, MBIA Insured, 5.85%, 12/01/15 .............................................. 4,670,000 4,727,348
----------
60,778,487
----------
ARIZONA 5.7%
Apache County IDA,
IDR, Tucson Electric Power Co. Project, Series C, 5.85%, 3/01/26 ..................... 16,500,000 15,230,985
PCR, Tucson Electric Power Co. Project, Series A, 5.85%, 3/01/28 ..................... 53,150,000 49,015,462
PCR, Tucson Electric Power Co. Project, Series B, 5.875%, 3/01/33 .................... 38,950,000 35,891,646
Arizona Health Facilities Authority Revenue, Bethesda Foundation Project, Series A,
6.375%, 8/15/15 ...................................................................... 400,000 403,644
6.40%, 8/15/27 ....................................................................... 4,000,000 3,974,080
Coconino County PCR, Tucson Electric Power Navajo, Refunding,
Series A, 7.125%, 10/01/32 ........................................................... 21,125,000 22,832,956
Series B, 7.00%, 10/01/32 ............................................................ 7,500,000 8,095,875
Gila County IDAR, Asarco Inc., Refunding, 5.55%, 1/01/27 ................................ 4,000,000 3,610,840
Gilbert Water Resources Municipal Property Corp. Water
and Wastewater System Revenue, sub. lien, 6.875%,
4/01/14 .............................................................................. 1,000,000 1,012,160
4/01/16 .............................................................................. 1,000,000 1,020,110
Maricopa County IDA, Health Facilities Revenue,
Catholic Healthcare West Project, Refunding, Series A, 5.00%, 7/01/16 ................. 6,500,000 5,528,380
Maricopa County PCC, PCR, Public Service Co. of Colorado,
Palo Verde, Refunding, Series A, 6.375%, 8/15/23 ..................................... 8,500,000 8,712,585
Refunding, Series A, 5.75%, 11/01/22 ................................................. 20,150,000 19,207,585
Maricopa County Rural Road ID, Pre-Refunded, 8.625%, 7/01/07 ............................ 3,890,000 4,158,643
(b)Mesa IDA Authority Health Facilities Revenue,
Discovery Health System, Series A, MBIA Insured, 5.75%, 1/01/25 ....................... 25,000,000 25,059,500
Pima County IDAR, Tucson Electric Power Co. Project,
Series A, 6.10%, 9/01/25 ............................................................. 3,990,000 3,786,231
Series B, 6.00%, 9/01/29 ............................................................. 94,690,000 89,545,459
Series C, 6.00%, 9/01/29 ............................................................. 53,500,000 50,593,345
Red Hawk Canyon Community Facility Revenue, 7.625%, 6/01/05 ............................. 13,995,000 14,387,420
Salt River Project Agricultural Improvement
and Power District Electric System Revenue, Series A, 6.00%, 1/01/31 .................. 5,000,000 5,067,550
----------
367,134,456
----------
ARKANSAS .3%
Baxter County IDR, Aeroquip/Trinova Corp. Project, Refunding, 5.80%, 10/01/13 ........... 2,400,000 2,425,200
Conway Hospital Revenue, Refunding, 8.375%, 7/01/11 ..................................... 1,000,000 1,044,030
Independence County PCR, Arkansas Power and Light Co. Project, Refunding, 6.25%,
1/01/21 ................................................................................ 5,000,000 5,149,200
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
ARKANSAS (CONT.)
Jefferson County PCR,
Entergy Arkansas Inc. Project, Refunding, 5.60%, 10/01/17 .......................... $ 9,400,000 $ 8,988,092
North Little Rock Health Facilities
Board Health Care Revenue, Baptist Health Facility,
Series A, MBIA Insured, 5.50%, 12/01/21 ............................................ 700,000 697,263
----------
18,303,785
----------
CALIFORNIA 7.0%
Adelanto Water Authority Revenue,
Water Systems Acquisition Project, sub. lien, Series A, 7.50%, 9/01/28 ............. 21,330,000 22,693,840
Alameda County MFHR,
Claremont House Project, Refunding, Series A, 8.00%, 12/01/23 ...................... 12,950,000 14,391,335
Antioch PFA, Reassessment Revenue, sub. lien, Series B, 5.85%, 9/02/15 ............... 7,000,000 6,857,760
Arroyo Grande Hospital System COP, Vista Hospital Systems,
Refunding, Series A, 9.50%, 7/01/20 ............................................... 22,515,000 22,515,000
Series A, 8.375%, 7/01/06 ......................................................... 2,500,000 2,500,000
Avenal PFA Revenue, Refunding,
7.00%, 9/02/10 .................................................................... 1,660,000 1,701,932
7.25%, 9/02/27 .................................................................... 3,665,000 3,756,552
Azusa RDA, Tax Allocation,
Merged Area Project, Refunding, Series A, 6.75%, 8/01/23 ........................... 2,850,000 2,983,808
Beaumont PFA Revenue,
Sewer Enterprise Project, Series A, Pre-Refunded, 6.90%, 9/01/23 .................. 4,575,000 5,218,931
Benicia 1915 Act, Fleetside Industrial Park Assessment, Refunding,
5.25%, 9/02/99 ................................................................... 180,000 180,000
5.50%, 9/02/00 ................................................................... 195,000 195,862
5.65%, 9/02/01 ................................................................... 205,000 206,845
5.80%, 9/02/02 ................................................................... 215,000 217,825
5.90%, 9/02/03 ................................................................... 225,000 228,834
6.00%, 9/02/04 ................................................................... 240,000 244,447
6.10%, 9/02/05 ................................................................... 255,000 259,215
6.20%, 9/02/06 ................................................................... 270,000 275,052
6.30%, 9/02/07 ................................................................... 290,000 296,386
6.40%, 9/02/08 ................................................................... 305,000 310,841
6.50%, 9/02/09 ................................................................... 325,000 331,942
6.60%, 9/02/10 ................................................................... 340,000 346,922
6.70%, 9/02/11 ................................................................... 365,000 374,687
6.80%, 9/02/12 ................................................................... 245,000 252,558
California Educational Facilities Authority Revenue,
Pooled College and University Financing, Series B, 6.125%, 6/01/09 ................ 3,000,000 3,123,900
California HFAR, MFHR, Series A, AMBAC Insured, 6.05%, 8/01/27 ...................... 2,000,000 2,052,620
California Special Districts Association
Finance Corp., COP, Series V, 7.50%, 5/01/13 ...................................... 790,000 836,784
California State GO, 5.75%, 3/01/19 ................................................. 310,000 314,139
California Statewide CDA,
California State University Northridge,
Refunding, AMBAC Insured, 6.00%, 4/01/26 ......................................... 2,500,000 2,577,550
Capistrano USD, CFD,
Special Tax No. 9, Pre-Refunded, 6.60%, 9/01/05 .................................. 285,000 313,853
Special Tax No. 9, Pre-Refunded, 6.70%, 9/01/06 .................................. 280,000 309,366
Special Tax No. 9, Pre-Refunded, 6.80%, 9/01/07 .................................. 325,000 360,266
Special Tax No. 9, Pre-Refunded, 6.90%, 9/01/08 .................................. 260,000 288,652
Special Tax No. 92-1, Pre-Refunded, 7.00%, 9/01/18 ............................... 1,000,000 1,115,790
Contra Costa County PFA Revenue, Refunding,
6.625%, 9/02/10 .................................................................. 2,295,000 2,368,440
6.875%, 9/02/16 .................................................................. 2,610,000 2,694,825
Corona COP,
Corona Community Hospital Project, ETM, 9.425%, 9/01/06 .......................... 7,955,000 9,280,223
Corona Community Hospital Project, Pre-Refunded, 9.425%, 9/01/20 ................. 8,820,000 11,579,778
Vista Hospital System, Refunding, Series B, 8.375%, 7/01/06 ...................... 11,100,000 11,100,000
Vista Hospital System, Refunding, Series B, 9.50%, 7/01/20 ....................... 10,885,000 10,885,000
Eden Township Hospital District Health
Facilities Revenue COP,
Eden Hospital Health Services Corp., Refunding, 5.85%, 7/01/18 .................... 4,845,000 4,901,687
Emeryville RDA, MFHR, Emery Bay Apartments II,
Refunding, Series A, 5.85%, 10/01/28 ............................................. 15,035,000 14,685,286
Sub. lien, Refunding, Series B, 6.35%, 10/01/28 .................................. 3,535,000 3,456,877
Sub. lien, Refunding, Series C, 7.875%, 10/01/28 ................................. 2,085,000 2,050,931
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, MBIA Insured, 5.75%, 1/15/40 .................... 10,000,000 9,548,000
Senior lien, Series A, Pre-Refunded, 6.50%, 1/01/32 .............................. 37,675,000 41,711,876
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Gateway Improvement Authority Revenue,
Marin City CFD, Series A, Pre-Refunded, 7.75%, 9/01/25 ............................ $ 4,500,000 $ 5,280,795
Hawthorne CRDA, Hawthorne Plaza Project, Refunding, 8.50%, 7/01/20 .................. 4,175,000 4,319,372
Hesperia PFA Revenue, Series B, 7.375%, 10/01/23 .................................... 6,365,000 6,560,596
Lake Elsinore 1915 Act, AD No. 93-1, Series A, 7.90%, 9/02/24 ....................... 6,000,000 6,253,740
Long Beach Special Tax, CFD No. 2, 7.50%, 9/01/11 ................................... 3,065,000 3,075,605
Los Angeles County CFD No. 4 Special Tax,
Improvement Area B, Series A, 9.25%, 9/01/22 ...................................... 29,500,000 30,135,430
Los Angeles MFR, Refunding,
Series J-1A, 7.125%, 1/01/24 ..................................................... 155,000 155,135
Series J-1B, 7.125%, 1/01/24 ..................................................... 675,000 675,587
Series J-1C, 7.125%, 1/01/24 ..................................................... 1,435,000 1,436,248
Series J-2A, 8.50%, 1/01/24 ...................................................... 860,000 860,378
Series J-2B, 8.50%, 1/01/24 ...................................................... 3,325,000 3,326,463
Series J-2C, 8.50%, 1/01/24 ...................................................... 7,090,000 7,093,120
Los Angeles Regional Airports Improvement Corp. Lease Revenue,
Facilities Sub-Lease, International Airport, Refunding, 6.35%, 11/01/25 .......... 25,000,000 25,871,750
United Airlines, International Airport, Refunding, 6.875%, 11/15/12 .............. 9,500,000 10,097,740
Los Angeles USD, Series A, FGIC Insured, 5.40%, 7/01/22 ............................. 9,000,000 8,712,630
Oakland Revenue, YMCA East Bay Project, Refunding, 7.10%, 6/01/10 ................... 2,335,000 2,504,101
Orinda 1915 Act, AD No. 94-1, Oak Springs, 8.25%, 9/02/19 ........................... 2,834,000 2,890,595
(e) Palmdale Special Tax CFD,
No. 93-1 Ritter Ranch Project, Series A, 8.50%, 9/01/24 ........................ 23,500,000 18,800,000
Perris PFA, Local Agency Revenue, Series B,
7.125%, 8/15/15 .................................................................. 2,035,000 2,093,689
7.25%, 8/15/23 ................................................................... 4,095,000 4,227,473
Riverside County COP,
Airforce Village Project West Inc., Series A, Pre-Refunded, 8.125%,
6/15/07 .......................................................................... 7,160,000 8,013,758
6/15/12 .......................................................................... 5,290,000 5,920,780
Roseville Special Tax, North Central CFD No. 1,
5.75%, 9/01/23 ................................................................... 3,000,000 2,836,140
Pre-Refunded, 8.60%, 11/01/17 .................................................... 12,000,000 13,345,920
San Bernardino County Finance Authority Revenue,
Public Improvement, AD, Refunding, Series A,
6.00%, 9/02/01 ................................................................... 1,450,000 1,467,908
6.50%, 9/02/04 ................................................................... 1,285,000 1,314,696
7.00%, 9/02/17 ................................................................... 2,710,000 2,770,379
San Francisco Downtown Parking Corp. Parking Revenue,
6.55%, 4/01/12 ................................................................... 1,800,000 1,919,844
6.65%, 4/01/18 ................................................................... 2,150,000 2,289,170
San Joaquin Hills Transportation Corridor Agency
Toll Road Revenue, senior lien, 5.00%, 1/01/33 .................................... 5,930,000 5,147,477
San Jose MFHR, Timberwood Apartments, Series B, 9.25%, 2/01/10 ...................... 1,500,000 1,532,655
San Luis Obispo COP, Vista Hospital System Inc., 8.375%, 7/01/29 .................... 22,000,000 22,000,000
San Ramon 1915 Act, Fostoria Parkway Reassessment District No. 9,
6.30%, 9/02/03 ................................................................... 185,000 192,478
6.80%, 9/02/15 ................................................................... 680,000 708,594
Santa Margarita/Dana Point Authority Revenue,
ID 3, 3A, 4, and 4A, Refunding, Series B, MBIA Insured, 5.75%, 8/01/20 ............ 3,000,000 3,030,450
South San Francisco RDA Tax Allocation,
Gateway Redevelopment Project, Pre-Refunded, 7.60%, 9/01/18 ....................... 2,000,000 2,226,580
Vallejo Special Tax, CFD No. 198, Pre-Refunded, 8.90%, 8/01/21 ...................... 7,500,000 8,000,025
-----------
448,983,718
-----------
COLORADO 2.3%
Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 6/01/11 .............. 2,485,000 2,624,756
Arvada MFHR, Springwood Community Project, 6.45%, 2/20/26 ........................... 3,000,000 3,068,400
Auraria Higher Education Center, Parking Facilities Revenue, Pre-Refunded,
7.75%, 4/01/09 ................................................................... 3,450,000 3,529,592
7.875%, 4/01/12 .................................................................. 1,600,000 1,638,048
Colorado Health Facilities Authority Revenue,
Beneficial Living System Inc., Series A, 10.125%, 10/01/20 ....................... 12,300,000 12,974,286
Rocky Mountain Adventist Health Center, Refunding, 6.25%, 2/01/04 ................ 2,200,000 2,164,206
Volunteers of America Care Facilities,
Refunding and Improvement, Series A, 5.45%, 7/01/08 ............................ 1,135,000 1,101,665
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
COLORADO (CONT.)
Colorado Health Facilities Authority Revenue, (cont.)
Volunteers of America Care Facilities,
Refunding and Improvement, Series A, 5.75%, 7/01/20 ............................ $ 3,000,000 $ 2,796,600
Volunteers of America Care Facilities,
Refunding and Improvement, Series A, 5.875%, 7/01/28 .............................. 5,290,000 4,926,101
Colorado HFA,
SF Program, Series A-2, 9.25%, 8/01/01 ........................................... 55,000 56,326
SF Program, Series A-2, 9.375%, 8/01/02 .......................................... 180,000 185,729
SF Program, Series B-1, 8.70%, 8/01/01 ........................................... 110,000 112,160
SFMR, Series B-3, 9.75%, 8/01/02 ................................................. 170,000 171,928
SFMR, Series C, 9.20%, 8/01/02 ................................................... 285,000 293,422
SFMR, Series C, 9.075%, 8/01/03 .................................................. 530,000 548,566
Denver City and County Airport Revenue,
Series A, 8.25%, 11/15/12 ........................................................ 5,350,000 5,675,548
Series A, 8.50%, 11/15/23 ........................................................ 29,060,000 30,905,019
Series A, 8.00%, 11/15/25 ........................................................ 135,000 142,792
Series A, MBIA Insured, 5.50%, 11/15/25 .......................................... 8,830,000 8,578,698
Series A, Pre-Refunded, 8.25%, 11/15/12 .......................................... 490,000 523,340
Series A, Pre-Refunded, 8.50%, 11/15/23 .......................................... 2,740,000 2,934,376
Series A, Pre-Refunded, 8.00%, 11/15/25 .......................................... 10,000 10,652
Series D, 7.75%, 11/15/13 ........................................................ 500,000 591,250
Series D, 7.75%, 11/15/21 ........................................................ 3,425,000 3,668,860
Series D, Pre-Refunded, 7.75%, 11/15/21 .......................................... 765,000 834,210
Eagle County Airport Terminal Project Revenue, 7.50%, 5/01/21 ....................... 2,305,000 2,419,420
Eagle County Sports and Housing Facilities Revenue,
Vail Associate Project, Refunding, 6.95%, 8/01/19 ................................. 41,200,000 43,661,700
Littleton MFHR, Riverpoint, Refunding, Series C, 8.00%, 12/01/29 .................... 3,015,000 3,243,205
Stonegate Village Metropolitan District, Refunding and Improvement,
Series A, FSA Insured, 5.60%, 12/01/25 ............................................ 4,640,000 4,582,974
(e) Villages Castle Rock Metropolitan District No. 4, Refunding, 8.50%, 6/01/31 ...... 3,000,000 1,754,850
-----------
145,718,679
-----------
CONNECTICUT 2.2%
Connecticut State Development Authority
First Mortgage Revenue, East Hill Gladeview Health
Project 86, Pre-Refunded, 9.75%, 12/15/16 ........................................ 2,600,000 2,767,024
Connecticut State Development Authority PCR,
Connecticut Light and Power, Refunding, Series B, 5.95%, 9/01/28 ................. 21,750,000 20,741,670
Connecticut Light and Water, Refunding, Series A, 5.85%, 9/01/28 ................. 74,975,000 71,463,171
Western Massachusetts Electric Co., Refunding, Series A, 5.85%, 9/01/28 .......... 12,500,000 11,914,500
Connecticut State Development Authority Water
Facility Revenue, Bridgeport Hydraulic Co. Project, 6.15%, 4/01/35 ................ 3,000,000 3,077,280
Connecticut State Health and Educational Facilities Authority Revenue,
Sacred Heart University, Series C, 6.50%, 7/01/16 ................................ 420,000 443,310
Sacred Heart University, Series C, Pre-Refunded, 6.50%, 7/01/16 .................. 1,580,000 1,762,427
Windham Community Memorial Hospital, Series C, 6.00%, 7/01/11 .................... 2,300,000 2,280,588
Connecticut State HFA, Housing Mortgage Finance Program,
Series C-1, 6.30%, 11/15/17 ...................................................... 19,995,000 20,904,573
Sub Series F-1, 6.00%, 5/15/17 ................................................... 3,500,000 3,597,650
-----------
138,952,193
-----------
FLORIDA 8.2%
Alachua County Health Facilities Authority Revenue,
Shands Teaching Hospital, Series A, MBIA Insured, 5.80%, 12/01/26 ................. 2,990,000 3,021,664
Beacon Tradeport CDD, Special Assessment,
Commercial Project, Series A, 5.80%, 5/01/04 ..................................... 4,350,000 4,312,938
Commercial Project, Series A, 6.00%, 5/01/16 ..................................... 27,760,000 27,017,142
Commercial Project, Series A, 6.20%, 5/01/22 ..................................... 23,590,000 22,999,542
Industrial Project, Series B, 6.125%, 5/01/17 .................................... 15,305,000 14,966,453
Industrial Project, Series B, 6.375%, 5/01/22 .................................... 8,835,000 8,731,542
Brooks of Bonita Springs CDD,
Capital Improvement Revenue, Series A, 6.20%, 5/01/19 ............................ 11,200,000 10,816,848
District Florida Capital Improvement Revenue, Series B, 5.65%, 5/01/06 ........... 2,850,000 2,781,914
Broward County Resource Recovery Revenue,
Broward Waste Energy Co., LP, North Project, Series 1984, 7.95%, 12/01/08 ......... 18,160,000 18,842,634
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
<S> <C> <C>
FLORIDA (CONT.)
Capron Trails CDD,
9.375%, 12/01/01 ..................................................................... $ 1,100,000 $ 1,149,654
9.50%, 12/01/10 ...................................................................... 5,795,000 6,054,500
Championsgate CDD, Capital Improvement Revenue,
Series A, 6.25%, 5/01/20 ............................................................. 2,835,000 2,754,741
Series B, 5.70%, 5/01/05 ............................................................. 1,520,000 1,501,821
East County Water Control District,
Lee County Drain, Series 1991, Pre-Refunded,
8.75%, 9/01/01 ....................................................................... 1,800,000 1,912,212
8.625%, 9/01/11 ...................................................................... 10,565,000 11,275,391
Falcon Trace CDD, Special Assessment,
5.75%, 5/01/09 ....................................................................... 1,700,000 1,638,885
6.00%, 5/01/20 ....................................................................... 3,695,000 3,466,280
Florida State Board of Education Capital Outlay,
(b) Public Education, Refunding, Series D, 5.75%, 6/01/22 ............................. 5,000,000 4,949,450
(b) Public Education, Refunding, Series D, 6.00%, 6/01/23 ............................. 5,000,000 5,193,350
Public Education, Series B, 5.875%, 6/01/24 ....................................... 7,000,000 7,141,610
Public Education, Series B, 5.875%, 6/01/25 ....................................... 2,000,000 2,034,840
Gateway Services District Water Management
Benefit Tax Revenue, Second Assessment Area, Phase One, 8.00%, 5/01/20 ................ 3,995,000 4,284,957
Heritage Harbor CDD, Special Assessment Revenue,
Series A, 6.70%, 5/01/19 ............................................................. 1,895,000 1,882,493
Series B, 6.00%, 5/01/03 ............................................................. 2,635,000 2,633,893
Heritage Isles CDD, Special Assessment Revenue, Series A, 5.75%, 5/01/05 ................ 2,000,000 1,987,460
Heritage Palms CDD, Capital Improvement Revenue, 5.40%, 11/01/03 ........................ 4,650,000 4,588,434
Highlands County Health Facilities Authority Revenue,
Adventist Health Systems, Refunding, 5.25%, 11/15/28 .................................. 9,000,000 7,906,680
Indian Trace CDD,
Water and Sewer Revenue, Expansion, 6.875%, 4/01/10 .................................. 9,800,000 10,054,702
Water Management Special Benefit, Refunding, Sub Series B, 8.25%, 5/01/05 ............ 7,510,000 8,212,185
Water Management Special Benefit, Refunding, Sub Series B, 8.25%, 5/01/11 ............ 12,760,000 14,004,483
Lakeland Retirement Community Revenue, First Mortgage,
Carpenters Home, Refunding, Series A, 6.75%, 1/01/19 .................................. 15,345,000 15,573,641
Lakewood Ranch CDD 2, Benefit Special Assessment,
6.25%, 5/01/18 ....................................................................... 11,670,000 11,197,832
Series A, 8.125%, 5/01/17 ............................................................ 10,000,000 10,809,900
Series B, 8.125%, 5/01/17 ............................................................ 2,680,000 2,897,053
Lakewood Ranch CDD 3, Special Assessment Revenue, 7.625%, 5/01/18 ....................... 6,180,000 6,525,338
Manatee County IDR, Manatee
Hospital and Health System Inc., Pre-Refunded, 9.25%, 3/01/21 ......................... 6,500,000 7,090,850
Meadow Pointe II CDD, Capital Improvement Revenue,
Series A, 5.25%, 8/01/03 ............................................................. 965,000 945,623
Series B, 5.50%, 8/01/05 ............................................................. 3,675,000 3,582,684
Mount Dora County Club CDD, Special Assessment Revenue,
6.75%, 5/01/03 ....................................................................... 65,000 65,703
7.125%, 5/01/05 ...................................................................... 3,195,000 3,286,409
7.75%, 5/01/13 ....................................................................... 1,865,000 1,959,183
Naples Heritage CDD, Capital Improvement Revenue, 6.15%, 11/01/01 ....................... 3,810,000 3,829,469
North Broward Hospital District Revenue,
Refunding and Improvement, MBIA Insured, 5.75%, 1/15/27 ............................... 20,000,000 20,142,400
North Springs ID,
Special Assessment Revenue, Parkland Isles Project, Series A, 7.00%, 5/01/19 ......... 1,300,000 1,344,109
Special Assessment Revenue, Parkland Isles Project, Series B, 6.25%, 5/01/05 ......... 3,650,000 3,696,392
Water Management, Series A, Pre-Refunded, 8.20%, 5/01/24 ............................. 1,920,000 2,208,288
Water Management, Series B, 8.30%, 5/01/24 ........................................... 1,685,000 1,793,666
Northwood CDD, Special Assessment Revenue,
6.40%, 5/01/02 ....................................................................... 2,610,000 2,628,688
Series A, 7.125%, 5/01/00 ............................................................ 220,000 220,623
Series B, 7.60%, 5/01/17 ............................................................. 1,530,000 1,567,791
Orlando Special Assessment Revenue,
Conroy Road Interchange Project, Series A, 5.80%, 5/01/26 ............................. 3,250,000 3,138,655
Palm Beach County Health Facilities Authority Revenue,
Abbey del Ray South Project, Refunding, 8.25%, 10/01/15 ............................... 6,000,000 6,426,600
(c) Palm Beach County Solid Waste IDR,
Okeelanta Power and Light Co. Project, Series A, 6.85%, 2/15/21 ..................... 27,000,000 17,550,000
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
<S> <C> <C>
FLORIDA (CONT.)
Pelican Marsh CDD, Special Assessment Revenue,
Refunding, Series A, 5.00%, 5/01/11 .......................................... $ 6,770,000 $ 6,841,965
Refunding, Series A, 5.50%, 5/01/16 .......................................... 4,370,000 4,415,317
Refunding, Series B, 5.25%, 5/01/09 .......................................... 300,000 303,150
Series A, ETM, 8.25%, 5/01/00 ................................................ 230,000 236,877
Series A, ETM, 8.25%, 5/01/01 ................................................ 250,000 266,600
Series A, ETM, 8.25%, 5/01/02 ................................................ 270,000 296,738
Series A, ETM, 8.25%, 5/01/03 ................................................ 295,000 333,205
Series A, ETM, 8.25%, 5/01/04 ................................................ 315,000 364,427
Series A, Pre-Refunded, 8.25%, 5/01/16 ....................................... 6,590,000 7,564,200
Series C, 7.00%, 5/01/19 ..................................................... 13,460,000 13,857,878
Series D, 6.95%, 5/01/19 ..................................................... 8,185,000 8,397,974
Piney-Z CDD, Capital Improvement Revenue,
Series A, 7.25%, 5/01/19 ..................................................... 995,000 993,826
Series B, 6.50%, 5/01/02 ..................................................... 6,265,000 6,247,709
Port Orange Lease Finance Corp. Recreation
Facilities Lease Revenue, Pre-Refunded, 8.75%, 10/01/12 ....................... 2,230,000 2,283,252
Reserve CDD,
Capital Improvement Revenue, Stormwater Management, 8.25%, 5/01/14 ........... 4,215,000 4,445,898
Utility Revenue, Stormwater Management, Refunding, Series A, 6.625%, 12/01/22 4,400,000 4,355,692
River Ridge CDD, Capital Improvement Revenue, 5.75%, 5/01/08 .................... 3,600,000 3,497,040
Riverwood Community Development Revenue, Special AD, Series A,
6.75%, 5/01/04 ............................................................... 3,320,000 3,410,105
7.75%, 5/01/14 ............................................................... 1,220,000 1,269,935
Saint Lucie West Services District Special Assessment Revenue,
Port Saint Lucie, Water Management Benefit, Refunding, Series B,
6.00%, 5/01/09 ............................................................... 1,430,000 1,427,784
6.25%, 5/01/25 ............................................................... 5,080,000 5,066,589
Santa Rosa County Health Facilities Authority Revenue,
Gulf Breeze Hospital Inc., Refunding, 8.60%, 10/01/02 ......................... 195,000 197,681
St. Lucie West Services District Capital Improvement Revenue,
Cascades Project, 6.10%, 5/01/18 ............................................. 2,560,000 2,476,774
Lake Charles Project, 6.375%, 8/01/02 ........................................ 2,230,000 2,206,317
Road Project, 5.875%, 5/01/09 ................................................ 6,910,000 6,787,209
St. Lucie West Services District Revenue, Port St. Lucie,
Pre-Refunded, 7.875%, 5/01/20 ................................................ 19,420,000 22,121,905
Refunding, 8.25%, 12/01/23 ................................................... 22,715,000 24,276,883
St. Lucie West Services District Water Management
Benefit Tax, Pre-Refunded, 7.70%, 5/01/25 ..................................... 4,885,000 5,596,842
Stoneybrook CDD, Capital Improvement Revenue,
Series A, 6.10%, 5/01/19 ..................................................... 830,000 813,176
Series B, 5.70%, 5/01/08 ..................................................... 2,610,000 2,578,236
Sumter County IDAR, Little Sumter Utility Co. Project,
6.75%, 10/01/27 .............................................................. 2,950,000 2,794,093
7.25%, 10/01/27 .............................................................. 4,200,000 4,227,888
Tampa Revenue, Aquarium Inc. Project, Pre-Refunded, 7.55%, 5/01/12 .............. 8,900,000 9,761,609
Village CDD No. 1, Capital Improvement Revenue,
8.40%, 5/01/12 ............................................................... 615,000 654,821
8.00%, 5/01/15 ............................................................... 2,775,000 2,920,965
Village Center CDD, Recreational Revenue,
Sub Series B, 6.25%, 1/01/13 ................................................. 7,665,000 7,616,327
Sub Series B, 8.25%, 1/01/17 ................................................. 2,700,000 2,884,086
Sub Series C, 7.375%, 1/01/19 ................................................ 2,640,000 2,667,139
Westchase East CDD, Capital Improvement Revenue, 6.10%, 5/01/20 ................. 6,200,000 6,015,426
-----------
529,073,133
-----------
GEORGIA .6%
Baldwin County Hospital Authority Revenue,
Oconee Regional Medical Center, 5.375%, 12/01/28 .................................... 1,470,000 1,285,677
Chatham County Hospital Authority Revenue,
Memorial Medical Center, Refunding and Improvement,
Series A, AMBAC Insured, 5.70%, 1/01/19 ............................................ 10,000,000 10,071,000
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
<S> <C> <C>
GEORGIA (CONT.)
Forsyth County Hospital Authority Revenue, Anticipation Certificate,
Georgia Baptist Health Care System Project,
6.25%, 10/01/18 .................................................................... $ 6,000,000 $ 5,761,080
6.375%, 10/01/28 ................................................................... 9,000,000 8,604,900
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue,
Second Indenture, Refunding, Series A, MBIA Insured, 5.625%, 7/01/20 ............... 15,000,000 15,066,000
Tift County IDAR, Beverly Enterprises, 10.125%, 9/01/10 ............................... 1,270,000 1,352,448
----------
42,141,105
----------
HAWAII .2%
Hawaii State Department of Transportation
Special Facilities Revenue, Continental Airlines Inc., 9.70%, 6/01/20 ............... 6,500,000 6,798,285
Hawaii State Special AD No. 17, AMBAC Insured, 9.50%, 8/01/11 ......................... 4,445,000 4,658,671
Hawaiian Home Lands Department Revenue, Pre-Refunded, 7.60%, 7/01/08 .................. 1,315,000 1,416,650
----------
12,873,606
----------
IDAHO .3%
Nez Perce County PCR, Potlatch Corp. Project, Refunding, 6.00%, 10/01/24 .............. 22,360,000 22,329,814
----------
ILLINOIS 5.4%
Alton Hospital Facilities Revenue,
St. Anthony's Health Center Project, Pre-Refunded, 8.375%, 9/01/14 .................. 8,655,000 8,828,100
Aurora MFR, Fox Valley Two-Oxford
Limited Development, Refunding, Series A, GNMA Secured, 6.125%, 2/20/32 ............. 5,635,000 5,689,209
Bryant PCR, Central Illinois Light Co. Project,
Refunding, MBIA Insured, 5.90%, 8/01/23 ............................................. 11,000,000 11,141,460
Chicago Board of Education GO,
Chicago School Reform, Series A, AMBAC Insured, 5.25%, 12/01/30 ..................... 10,830,000 9,829,741
Chicago O'Hare International Airport Special Facilities Revenue,
American Airlines Inc. Project, 8.20%, 12/01/24 .................................... 7,830,000 8,917,900
United Airlines Inc. Project, Series A, 8.85%, 5/01/18 ............................. 14,495,000 15,549,946
United Airlines Inc. Project, Series B, 8.85%, 5/01/18 ............................. 3,460,000 3,711,819
Chicago Wastewater Transmission Revenue,
MBIA Insured, Pre-Refunded, 6.375%, 1/01/24 ......................................... 4,780,000 5,246,767
Cook County GO, Refunding, Series A, MBIA Insured, 5.625%, 11/15/22 ................... 10,500,000 10,188,150
Illinois Development Finance Authority Hospital Revenue,
Adventist Health System, Sunbelt Obligation,
5.65%, 11/15/24 .................................................................... 23,750,000 21,810,338
5.50%, 11/15/29 .................................................................... 15,450,000 13,787,889
Illinois Development Finance Authority PCR,
Commonwealth Edison Co. Project, Refunding, Series 1991, 7.25%, 6/01/11 ............. 7,000,000 7,363,580
Illinois Development Finance Authority Revenue,
Provena Health, Series A, MBIA Insured, 5.50%, 5/15/21 .............................. 10,500,000 10,138,065
Illinois Educational Facilities Authority Revenue, Osteopathic Health Systems,
ETM, 7.125%, 5/15/11 ............................................................... 2,330,000 2,495,989
Pre-Refunded, 7.25%, 5/15/22 ....................................................... 7,000,000 8,332,310
Illinois Health Facilities Authority Revenue,
Northwestern Medical Center, MBIA Insured, Pre-Refunded, 6.625%, 11/15/25 .......... 6,500,000 7,243,080
Rush Presbyterian Hospital, Refunding, Series A, MBIA Insured, 6.25%, 11/15/20 ..... 9,000,000 9,468,090
Sarah Bush Lincoln Health Center, Pre-Refunded, 7.25%, 5/15/12 ..................... 2,000,000 2,185,980
Sarah Bush Lincoln Health Center, Refunding, Series B, 6.00%, 2/15/11 .............. 3,370,000 3,430,626
St. Elizabeth's Hospital, 6.25%, 7/01/16 ........................................... 1,215,000 1,245,497
St. Elizabeth's Hospital, 6.375%, 7/01/26 .......................................... 6,695,000 6,873,623
Thorek Hospital and Medical Center, Refunding, 5.25%, 8/15/18 ...................... 5,125,000 4,529,168
Thorek Hospital and Medical Center, Refunding, 5.375%, 8/15/28 ..................... 8,595,000 7,460,546
(b) Metropolitan Pier and Exposition Authority Dedicated
State Tax Revenue, McCormick Place Expansion Project,
Refunding, Series A, FGIC Insured, 5.25%, 12/15/28 ............................ 15,000,000 13,783,650
Metropolitan Pier and Exposition Authority Hospitality
Facilities Revenue, McCormick Place Convention Center,
5.75%, 7/01/06 ..................................................................... 1,650,000 1,695,837
6.25%, 7/01/17 ..................................................................... 11,000,000 11,329,450
7.00%, 7/01/26 ..................................................................... 7,500,000 8,443,500
Robbins Resource Recovery Revenue,
Series A, 8.375%, 10/15/10 ......................................................... 10,000,000 6,000,000
Series A, 8.375%, 10/15/16 ......................................................... 145,175,000 87,105,000
Series B, 8.375%, 10/15/16 ......................................................... 47,200,000 28,320,000
Southwestern Development Authority Revenue, Anderson Hospital, 5.625%, 8/15/29 ........ 2,425,000 2,193,607
----------
344,338,917
----------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
INDIANA .3%
Crawfordsville Industrial EDR, Kroger Co., Refunding, 7.70%, 11/01/12 .................... $ 5,000,000 $ 5,490,700
Goshen Industrial Revenue,
Greencroft Hospital Association Inc., Refunding, 5.75%,
8/15/19 ............................................................................... 3,000,000 2,781,900
8/15/28 ............................................................................... 5,000,000 4,543,550
Indiana Health Facility Financing Authority Hospital Revenue,
Hancock Memorial Hospital Project,
Series 1990, Pre-Refunded, 8.30%, 8/15/20 ............................................. 2,935,000 3,114,475
Jackson County Scheck Memorial Hospital, Refunding, 5.125%, 2/15/17 ................... 1,500,000 1,338,300
White River Elementary Building Corp. ....................................................
First Mortgage, AMBAC Insured, 5.00%, 7/15/16 ......................................... 1,000,000 936,030
-----------
18,204,955
-----------
KANSAS .1%
Manhattan Health Care Facility Revenue, Meadowlark Hills Retirement, Series A,
6.375%, 5/15/20 ....................................................................... 1,150,000 1,123,412
6.50%, 5/15/28 ........................................................................ 1,750,000 1,716,348
Prairie Village Revenue, Claridge Court Project, Series A, 8.75%, 8/15/23 ................ 5,730,000 6,393,076
-----------
9,232,836
-----------
KENTUCKY .8%
Adair County Public Hospital Corp. Revenue, Refunding and Improvement,
5.40%, 1/01/12 ........................................................................ 460,000 445,883
5.70%, 1/01/19 ........................................................................ 1,100,000 1,050,346
Kenton County Airport Board Revenue, Special Facilities, Delta Airlines Inc. Project,
8.10%, 12/01/15 ....................................................................... 11,000,000 11,290,840
Series A, 7.50%, 2/01/20 .............................................................. 11,230,000 11,934,795
Series B, 7.25%, 2/01/22 .............................................................. 3,595,000 3,807,321
Kentucky Economic Development Finance
Authority Hospital System Revenue,
Appalachian Regional Health Center Facility,
Refunding and Improvement, 5.875%, 10/01/22 ...................................... 7,835,000 7,253,330
Powderly IDR, First Mortgage Revenue, Kroger Co.,
Refunding, 7.375%, 9/01/06 ........................................................... 830,000 900,932
Russell Health System Revenue,
8.10%, 7/01/15 ........................................................................ 3,230,000 3,663,757
Franciscan Health Center, Series B, 8.10%, 7/01/01 .................................... 800,000 827,592
Our Lady of Bellefonte, Refunding, 5.50%, 7/01/15 ..................................... 1,000,000 944,390
Pre-Refunded, 8.10%, 7/01/15 .......................................................... 4,270,000 5,143,471
Stanford Health Facilities Revenue, Beverly Project, Refunding, 10.375%, 11/01/09 ........ 900,000 965,844
-----------
48,228,501
-----------
LOUISIANA 2.1%
Calcasieu Parish Public Trust Authority Mortgage Revenue,
Refunding, Series A, 7.75%, 6/01/12 ................................................... 1,320,000 1,381,340
Iberville Parish PCR, Entergy Gulf States Inc. ...........................................
Project, Refunding, 5.70%, 1/01/14 .................................................... 15,500,000 14,868,995
Lake Charles Harbor and Terminal District Port
Facilities Revenue, Trunkline Co. Project, Refunding, 7.75%, 8/15/22 .................. 35,000,000 38,628,100
Louisiana Public Facilities Authority Revenue,
Xavier University of Louisiana Project,
Refunding, MBIA Insured, 5.25%, 9/01/17 ............................................... 5,000,000 4,797,700
Pointe Coupee Parish PCR,
Gulf States Utilities Co. Project, Refunding, 6.70%, 3/01/13 .......................... 4,850,000 5,040,363
St. Charles Parish PCR, Louisiana Power and Light Co. Project, 8.00%, 12/01/14 ........... 13,525,000 14,013,929
St. Tammany Public Trust Financing Authority Revenue,
Christwood Project, Refunding, 5.70%, 11/15/28 ......................................... 4,000,000 3,607,320
West Feliciana Parish PCR,
Gulf State Utility Co. Project, Refunding, 8.00%, 12/01/24 ............................ 17,200,000 17,653,220
Gulf State Utility Co. Project, Series D, 5.80%, 12/01/15 ............................. 4,000,000 3,841,160
Gulf State Utility Co. Project, Series D, 5.80%, 4/01/16 .............................. 19,600,000 18,813,452
Series A, 7.50%, 5/01/15 .............................................................. 8,740,000 9,384,225
-----------
132,029,804
-----------
MAINE .6%
Maine State Finance Authority Solid Waste Disposal Revenue,
Boise Cascade Corp. Project, 7.90%, 6/01/15 ............................................ 5,000,000 5,193,350
Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 7/01/20 ..................... 4,800,000 4,990,752
Skowhegan PCR, S.D. Warren Co.,
Series A, 6.65%, 10/15/15 ............................................................. 24,570,000 25,277,862
Series B, 6.65%, 10/15/15 ............................................................. 4,940,000 5,082,321
-----------
40,544,285
-----------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MARYLAND .7%
Gaithersberg Hospital Facilities Revenue,
Shady Grove Adventist Hospital, Refunding and Improvement,
Series B, 8.50%, 9/01/03 ........................................................... $ 4,510,000 $ 4,955,453
Series B, 8.50%, 9/01/07 ........................................................... 5,340,000 6,289,345
Series B, Pre-Refunded, 8.50%, 9/01/22 ............................................. 3,550,000 4,035,853
Series C, FSA Insured, 6.00%, 9/01/21 .............................................. 5,000,000 5,166,450
Maryland State CDA, Department of Housing and
Community Development, Series A, 5.875%, 7/01/16 .................................... 3,975,000 4,047,464
Maryland State Health and Higher Educational Facilities
Authority Revenue, Roland Park Place Project, Refunding,
5.625%, 7/01/24 ..................................................................... 5,000,000 4,492,200
Takoma Park Hospital Facilities Revenue,
Washington Adventist Hospital Project, Series B, 8.50%,
9/01/03 ............................................................................ 4,700,000 5,146,688
9/01/07 ............................................................................ 6,975,000 8,166,191
-----------
42,299,644
-----------
MASSACHUSETTS 1.9%
Massachusetts Bay Transportation Authority Revenue,
General Transportation System, Series A, 7.00%, 3/01/21 ............................. 2,000,000 2,307,760
Massachusetts Municipal Wholesale Electric Co. ........................................
Power Supply System Revenue,
Series A, 6.75%, 7/01/11 ........................................................... 4,435,000 4,644,465
Series B, 6.75%, 7/01/17 ........................................................... 3,170,000 3,331,638
Massachusetts State Development Finance Agency Revenue,
Berkshire Retirement Project, First Mortgage, 5.60%, 7/01/19 ....................... 1,030,000 959,929
Berkshire Retirement Project, First Mortgage, 5.625%, 7/01/29 ...................... 1,620,000 1,473,552
Loomis Community Project, First Mortgage, Refunding, Series A, 5.75%, 7/01/23 ...... 3,500,000 3,292,485
Loomis Community Project, First Mortgage, Series A, 5.625%, 7/01/15 ................ 1,850,000 1,745,309
Massachusetts State Health and Educational Facilities Authority Revenue,
Bay State Medical Center, Series E, FSA Insured, 6.00%, 7/01/26 .................... 5,000,000 5,078,200
Framingham Union Hospital, Pre-Refunded, 8.50%, 7/01/10 ............................ 1,810,000 1,916,374
Partners Healthcare System, Series A, MBIA Insured, 5.375%, 7/01/24 ................ 9,000,000 8,499,240
Saint Memorial Medical Center, Refunding, Series A, 5.75%, 10/01/06 ................ 3,250,000 3,127,508
Saint Memorial Medical Center, Refunding, Series A, 6.00%, 10/01/23 ................ 6,235,000 5,807,715
Massachusetts State Industrial Finance Agency Resource
Recovery Revenue, Semass Project,
Series A, 9.00%, 7/01/15 ........................................................... 15,490,000 16,927,782
Series B, 9.25%, 7/01/15 ........................................................... 20,370,000 22,310,650
Massachusetts State Industrial Finance Agency Revenue,
Cape Cod Health Systems, Pre-Refunded, 8.50%, 11/15/20 .............................. 4,500,000 4,830,300
Massachusetts State Industrial Finance Agency
Solid Waste Disposal Revenue, Massachusetts Paper Co.
Project, senior lien, 8.50%, 11/01/12 .............................................. 42,402,544 28,091,685
Massachusetts State Turnpike Authority
Metropolitan Highway System Revenue, Series A, MBIA Insured, 5.00%, 1/01/37 ......... 7,500,000 6,536,250
-----------
120,880,842
-----------
MICHIGAN 2.4%
Cadillac Local Development Finance
Authority Tax Increment Revenue, Refunding, 8.50%, 3/01/10 .......................... 5,425,000 5,802,200
Detroit GO,
City School District, Series A,
AMBAC Insured, Pre-Refunded, 5.85%, 5/01/16 .................................. 5,175,000 5,587,551
Refunding, Series B, 6.375%, 4/01/07 ............................................... 7,535,000 8,049,038
Refunding, Series B, 6.25%, 4/01/08 ................................................ 3,000,000 3,182,160
Series A, Pre-Refunded, 6.80%, 4/01/15 ............................................. 5,160,000 5,747,311
Dickinson County, Memorial Hospital System Revenue,
Pre-Refunded, 8.125%, 11/01/24 ...................................................... 4,250,000 4,991,710
Garden City Hospital Financing Authority Hospital Revenue, Refunding,
5.625%, 9/01/10 .................................................................... 2,000,000 1,875,960
5.75%, 9/01/17 ..................................................................... 1,000,000 919,120
Kent Hospital Finance Authority Health Care Revenue,
Butterworth Health System, Series A,
MBIA Insured, Pre-Refunded, 6.125%, 1/15/21 ........................................ 11,770,000 12,858,019
Michigan State Hospital Finance Authority Revenue,
Detroit Medical Center Obligation Group, Refunding, Series A, 6.25%, 8/15/13 ....... 7,500,000 7,349,550
Detroit Medical Center Obligation Group, Refunding, Series A, 6.50%, 8/15/18 ....... 30,205,000 30,247,891
Detroit Medical Center Obligation Group, Refunding, Series B, 5.50%, 8/15/23 ....... 500,000 441,330
Detroit Medical Center Obligation Group, Series A, 5.25%, 8/15/23 .................. 500,000 426,215
Detroit Medical Center Obligation Group, Series A, 5.25%, 8/15/28 .................. 7,000,000 5,888,750
Genesys Regional Medical Center, Refunding, Series A, 5.50%, 10/01/27 .............. 16,500,000 14,613,390
Memorial Healthcare Center, Refunding, 5.75%, 11/15/15 ............................. 1,000,000 972,210
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MICHIGAN (CONT.)
Michigan State Hospital Finance Authority Revenue, (cont.)
Memorial Healthcare Center, Refunding, 5.875%, 11/15/21 .......................... $ 1,000,000 $ 956,350
Mercy Health Services, Series Q, AMBAC Insured, 5.75%, 8/15/16 ................... 9,310,000 9,452,722
Sinai Hospital, Refunding, 6.625%, 1/01/16 ....................................... 2,990,000 3,038,348
Sinai Hospital, Refunding, 6.70%, 1/01/26 ........................................ 7,250,000 7,401,960
Michigan State Strategic Fund Limited Obligation Revenue,
Detroit Edison Co., Pollution Project, Refunding,
Series BB, MBIA Insured, 6.20%, 8/15/25 ...................................... 7,825,000 8,214,685
Muskegon Hospital Finance Authority Hospital Revenue,
Muskegon General Hospital, Refunding, Series A, 8.25%, 2/15/11 ................... 3,500,000 3,638,775
Tawas City Hospital Finance Authority, Tawas St. Joseph's Hospital Project,
Refunding, Series A, 5.60%, 2/15/13 .............................................. 2,395,000 2,292,446
Series A, 5.75%, 2/15/23 ......................................................... 4,125,000 3,911,573
Wayne County Downriver Systems Sewer Disposal Revenue,
Series A, Pre-Refunded, 7.00%, 11/01/13 ......................................... 1,900,000 2,062,469
Wayne County GO,
IDA, Building Authority, Pre-Refunded, 8.00%, 3/01/17 ............................ 4,500,000 4,968,540
South Huron Valley Wastewater Control, Refunding, 7.875%, 5/01/02 ................ 1,550,000 1,582,054
-----------
156,472,327
-----------
MINNESOTA 2.4%
Burnsville Solid Waste Revenue, Freeway Transfer Inc. Project, 9.00%,
10/01/00 ......................................................................... 185,000 191,240
4/01/10 .......................................................................... 1,500,000 1,573,020
Duluth Commercial Development Revenue,
Duluth Radisson Hotel Project, Refunding, 8.00%, 12/01/15 ......................... 5,000,000 4,104,050
International Falls PCR, Boise Cascade Corp. ........................................
Project, Refunding, 5.65%, 12/01/22 ............................................... 10,500,000 9,647,820
Maplewood Health Care Facility Revenue,
Health East Project, 5.95%, 11/15/06 .............................................. 2,200,000 2,165,702
Minneapolis CDA, Supported Development Revenue, Limited Tax,
Series 2, 8.40%, 12/01/12 ........................................................ 2,785,000 2,836,328
Series 3-A, 8.375%, 12/01/19 ..................................................... 600,000 636,168
Minneapolis Revenue, Walker Methodist Senior Services, Series A,
5.875%, 11/15/18 ................................................................. 2,500,000 2,355,825
6.00%, 11/15/28 .................................................................. 4,750,000 4,440,490
Minnesota Agriculture and Economic Development Board Revenue,
Health Care System, Fairview Hospital,
Refunding, Series A, MBIA Insured, 5.75%, 11/15/26 ............................... 23,380,000 23,413,433
Minnesota State HFA, Rental Housing,
Refunding, Series D, MBIA Insured, 5.95%, 2/01/18 ................................. 3,295,000 3,352,201
Northfield First Mortgage Nursing Home Revenue,
Minnesota Odd Fellows Home Project, Pre-Refunded, 8.75%, 10/01/03 ................. 880,000 890,683
Northwest Multi-County RDAR, Government Housing,
Pooled Housing Project, 7.40%, 7/01/26 ............................................ 5,165,000 4,390,250
Robbinsdale MFHR, Copperfield Phase II Apartments,
Refunding, 9.00%, 3/01/25 ......................................................... 4,110,000 4,152,251
Rochester Health Care Facilities Revenue,
Mayo Foundation, Series A, 5.50%, 11/15/27 ........................................ 15,000,000 14,539,350
Roseville MFHR, Rosepointe I Project,
Refunding, Series C, 8.00%, 12/01/29 .............................................. 3,430,000 3,563,461
(e)South Central Multi-County Housing and RDAR,
Pooled Housing, 8.00%, 2/01/25 .................................................... 10,000,000 6,000,000
St. Cloud IDR, Nahan Printing, 9.75%, 6/01/20 ....................................... 5,700,000 6,134,055
St. Paul Housing and RDA, Housing Tax, 8.625%, 9/01/07 .............................. 1,345,000 1,441,168
St. Paul Port Authority Commercial Development,
Theole Printing Project, 9.00%, 10/01/21 .......................................... 570,000 586,262
St. Paul Port Authority IDR,
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/09 ............................ 40,000 39,360
SDA Enterprises, Series K, 10.25%, 10/01/10 ...................................... 1,095,000 1,053,040
Series A-I, 8.50%, 12/01/01 ...................................................... 665,000 655,983
Series A-I, 9.00%, 12/01/02 ...................................................... 260,000 259,147
Series A-I, 9.00%, 12/01/12 ...................................................... 4,300,000 3,934,156
Series A-II, 8.50%, 12/01/01 ..................................................... 650,000 641,186
Series A-II, 9.00%, 12/01/02 ..................................................... 255,000 254,164
Series A-II, 9.00%, 12/01/12 ..................................................... 4,235,000 3,874,686
Series A-III, 8.50%, 12/01/01 .................................................... 680,000 670,779
Series A-III, 9.00%, 12/01/02 .................................................... 265,000 264,131
Series A-III, 9.00%, 12/01/12 .................................................... 4,430,000 4,053,096
Series A-IV, 8.50%, 12/01/01 ..................................................... 525,000 517,881
Series A-IV, 9.00%, 12/01/02 ..................................................... 205,000 204,328
Series A-IV, 9.00%, 12/01/12 ..................................................... 3,375,000 3,087,855
Series C, 10.00%, 12/01/01 ....................................................... 860,000 871,601
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MINNESOTA (CONT.)
St. Paul Port Authority IDR, (cont.)
Series C, 10.00%, 12/01/02 ...................................................... $ 715,000 $ 724,645
Series C, 10.00%, 12/01/06 ...................................................... 2,930,000 2,838,818
Series C, 9.875%, 12/01/08 ...................................................... 3,100,000 3,003,838
Series F, 10.25%, 10/01/99 ...................................................... 65,000 64,973
Series F, 8.00%, 9/01/00 ........................................................ 25,000 24,853
Series F, 10.25%, 10/01/00 ...................................................... 70,000 70,156
Series F, 8.00%, 9/01/01 ........................................................ 25,000 24,797
Series F, 10.25%, 10/01/01 ...................................................... 80,000 80,210
Series F, 8.00%, 9/01/02 ........................................................ 25,000 24,792
Series F, 10.25%, 10/01/02 ...................................................... 90,000 90,057
Series F, 8.00%, 9/01/19 ........................................................ 1,025,000 835,631
Series I, 10.75%, 12/01/00 ...................................................... 15,000 15,084
Series I, 10.75%, 12/01/01 ...................................................... 15,000 15,148
Series I, 10.75%, 12/01/02 ...................................................... 15,000 15,116
Series J, 9.50%, 12/01/01 ....................................................... 80,000 80,423
Series J, 9.50%, 12/01/02 ....................................................... 95,000 95,235
Series J, 9.50%, 12/01/11 ....................................................... 1,325,000 1,262,341
Series L, 9.50%, 12/01/01 ....................................................... 40,000 40,212
Series L, 9.75%, 12/01/01 ....................................................... 25,000 25,132
Series L, 9.50%, 12/01/02 ....................................................... 45,000 45,111
Series L, 9.75%, 12/01/02 ....................................................... 30,000 30,065
Series L, 9.50%, 12/01/14 ....................................................... 1,025,000 971,300
Series L, 9.75%, 12/01/14 ....................................................... 1,530,000 1,455,397
Series N, 10.00%, 12/01/01 ...................................................... 65,000 65,314
Series N, 10.75%, 10/01/02 ...................................................... 1,300,000 1,310,140
Series N, 10.00%, 12/01/02 ...................................................... 65,000 65,139
Series N, 10.00%, 12/01/14 ...................................................... 1,405,000 1,343,517
Series S, 9.625%, 12/01/01 ...................................................... 55,000 55,009
Series S, 9.625%, 12/01/02 ...................................................... 60,000 59,980
Series S, 9.625%, 12/01/14 ...................................................... 1,280,000 1,225,190
Series T, 9.625%, 12/01/01 ...................................................... 30,000 30,161
Series T, 9.625%, 12/01/02 ...................................................... 35,000 35,081
Series T, 9.625%, 12/01/14 ...................................................... 910,000 871,034
St. Paul Port Authority Lease Revenue, Mears Park Center Project, 6.50%,
6/01/16 ......................................................................... 4,930,000 4,953,467
6/01/26 ......................................................................... 10,660,000 10,710,742
Victoria Private School Facility Revenue,
Holy Family Catholic High School, Series A, 5.875%, 9/01/29 ...................... 4,000,000 3,827,040
-----------
153,180,298
-----------
MISSISSIPPI 1.1%
Claiborne County PCR, Systems Energy Resources Inc.,
Refunding, 6.20%, 2/01/26 ........................................................ 33,295,000 33,505,757
Corinth and Alcorn County Hospital Revenue,
Magnolia Regional Health Center Project,
Refunding, Series A, 5.50%, 10/01/21 ............................................ 4,000,000 3,612,160
Series B, 5.50%, 10/01/21 ....................................................... 1,000,000 903,040
Lowndes County Hospital Revenue,
Golden Triangle Medical Center, 8.50%, 2/01/10 ................................... 4,035,000 4,164,443
Mississippi Business Finance Corp. PCR,
System Energy Resource Inc. Project,
5.875%, 4/01/22 ................................................................. 24,900,000 23,292,207
Refunding, 5.90%, 5/01/22 ....................................................... 6,730,000 6,314,423
-----------
71,792,030
-----------
MISSOURI 1.4%
Lake of the Ozarks Community Bridge Corp. Bridge System Revenue,
Pre-Refunded, 6.25%, 12/01/16 ................................................... 1,000,000 1,108,440
Pre-Refunded, 6.40%, 12/01/25 ................................................... 3,000,000 3,342,840
Refunding, 5.25%, 12/01/20 ...................................................... 12,280,000 11,389,332
Refunding, 5.25%, 12/01/26 ...................................................... 8,875,000 8,096,929
Marshall IDA, Hospital Revenue,
John Fitzgibbon Memorial Hospital, Pre-Refunded, 10.00%, 5/01/20 ................. 8,500,000 9,010,510
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MISSOURI (CONT.)
Missouri State Health and Educational Facilities Authority
Health Facilities Revenue, Heartland Health,
Refunding and Improvement, 8.125%, 10/01/10 ................................... $ 7,300,000 $ 7,498,852
Newton County IDA, Health Facilities Revenue,
Beverly Enterprises, 10.375%, 11/01/08 ......................................... 1,320,000 1,367,652
Perry County GO, Perry Memorial Hospital,
Pre-Refunded, 9.125%, 6/01/11 .................................................. 1,500,000 1,587,450
St. Louis County IDA, Kiel Center, Refunding,
7.625%, 12/01/09 .............................................................. 8,000,000 8,550,640
7.75%, 12/01/13 ............................................................... 5,175,000 5,534,197
7.875%, 12/01/24 .............................................................. 6,000,000 6,419,940
St. Louis Municipal Finance Corp. Leasehold Revenue,
City Justice Center, Refunding, Series A, AMBAC Insured, 5.95%, 2/15/16 ....... 8,640,000 8,970,566
Refunding, Series A, 6.00%, 7/15/13 ........................................... 14,250,000 14,659,545
West Plains IDA, Hospital Revenue,
Ozarks Medical Center Project, Refunding, 5.50%, 11/15/12 ...................... 500,000 463,610
-----------
88,000,503
-----------
MONTANA .3%
Montana State Board of Housing SFM,
Senior Bonds, Series B-2, 8.90%, 10/01/00 ..................................... 65,000 65,645
Series A, FHA Insured, 8.275%, 10/01/03 ....................................... 330,000 341,573
Montana State Board of Investments Resource
Recovery Revenue, Yellowstone Energy Project, 7.00%, 12/31/19 .................. 20,770,000 20,669,266
-----------
21,076,484
-----------
NEBRASKA .3%
Kearney IDR, Great Platte River Road, 6.75%,
1/01/23 ....................................................................... 9,000,000 7,634,880
1/01/28 ....................................................................... 6,500,000 5,455,255
Lancaster County Hospital Authority Revenue,
Bryan Memorial Hospital Project No. 1,
Series A, MBIA Insured, 5.375%, 6/01/19 ........................................ 5,465,000 5,261,866
Scotts Bluff County Hospital Authority No. 1 Hospital Revenue,
Regional West, 6.375%, 12/15/08 ............................................... 1,145,000 1,201,529
Regional West Medical Center, Pre-Refunded, 6.375%, 12/15/08 .................. 955,000 1,030,999
-----------
20,584,529
-----------
NEVADA 3.0%
Clark County IDR,
Nevada Power Co. Project, Refunding, Series C, 5.50%, 10/01/30 ................ 41,400,000 37,371,780
Southwest Gas Corp., Series A, 6.50%, 12/01/33 ................................ 13,775,000 14,309,057
Clark County PCR, Nevada Power Co.
Project, Refunding, Series D, 5.45%, 10/01/23 .................................. 4,000,000 3,645,720
Clark County Special ID No. 108, Summerlin, 6.625%, 2/01/17 ...................... 7,550,000 7,775,670
Henderson Local ID,
No. 2, 9.50%, 8/01/11 ......................................................... 5,485,000 5,706,265
No. T-1, Series A, 8.50%, 8/01/13 ............................................. 21,990,000 24,133,145
No. T-4, Series A, Pre-Refunded, 8.50%, 11/01/12 .............................. 8,680,000 9,006,368
No. T-4C, Green Valley, Refunding, Series A, 5.90%, 11/01/18 .................. 3,200,000 3,110,368
No. T-10, 7.50%, 8/01/15 ...................................................... 7,260,000 7,484,770
No. T-12, Series A, 7.375%, 8/01/18 ........................................... 49,590,000 52,178,102
Las Vegas Downtown RDA,
Tax Increment Revenue, Fremont Street Project, Series A, 6.10%, 6/15/14 ........ 3,500,000 3,557,820
Las Vegas Local Improvement Bond Special Assessment,
ID No. 404, FSA Insured, 5.85%, 11/01/09 ...................................... 3,370,000 3,443,870
ID No. 707, 6.60%, 6/01/05 .................................................... 1,000,000 1,034,770
ID No. 707, 6.70%, 6/01/06 .................................................... 1,235,000 1,278,237
ID No. 707, 6.80%, 6/01/07 .................................................... 1,805,000 1,868,626
ID No. 707, 7.10%, 6/01/16 .................................................... 8,000,000 8,287,760
Las Vegas Special Assessment
ID No. 505, Elkhorn Springs, 8.00%, 9/15/13 .................................... 7,615,000 7,848,857
Nevada Housing Division, SF Program, Subordinated,
FI/GML, Series A, 9.30%, 10/01/00 ............................................. 50,000 50,673
FI/GML, Series A-1, 8.75%, 10/01/04 ........................................... 200,000 207,652
FI/GML, Series A-2, 9.375%, 10/01/00 .......................................... 55,000 55,782
FI/GML, Series A-2, 8.65%, 10/01/01 ........................................... 185,000 187,355
FI/GML, Series A-3, 9.20%, 10/01/00 ........................................... 80,000 80,988
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEVADA (CONT.)
Nevada Housing Division, SF Program, Subordinated, (cont.)
FI/GML, Series B, 9.50%, 10/01/01 .............................................. $ 130,000 $ 132,977
FI/GML, Series B-1, 7.90%, 10/01/05 ............................................ 540,000 554,828
FI/GML, Series C-1, 7.55%, 10/01/05 ............................................ 675,000 695,081
Series B-2, 9.65%, 10/01/02 .................................................... 105,000 106,813
Series C-1, 9.60%, 10/01/02 .................................................... 175,000 175,340
------------
194,288,674
------------
NEW HAMPSHIRE 2.5%
New Hampshire Higher Education and Health Facilities Authority Revenue,
Hillcrest Terrace, 7.50%, 7/01/24 .............................................. 18,450,000 19,271,763
Hospital Littleton Hospital Association, Series B., 5.90%, 5/01/28 ............. 2,000,000 1,844,700
Kendal at Hanover Project, Pre-Refunded, 8.00%, 10/01/19 ....................... 9,290,000 9,506,457
New Hampshire Catholic Charities, Refunding, Series A, 5.75%, 8/01/11 .......... 1,300,000 1,286,688
New Hampshire State Business Finance Authority PCR,
Connecticut Light and Power Co., Refunding, Series A, 5.85%, 12/01/22 .......... 21,000,000 19,562,340
Public Service Co. of New Hampshire, Refunding, Series D, 6.00%, 5/01/21 ....... 28,000,000 26,883,920
Public Service Co. of New Hampshire, Refunding, Series E, 6.00%, 5/01/21 ....... 21,800,000 20,931,052
United Illuminating Co., Refunding, Series A, 5.875%, 10/01/33 ................. 3,000,000 2,878,590
New Hampshire State IDAR, Pollution Control,
Connecticut Light and Power Co., 5.90%, 11/01/16 ............................... 5,400,000 5,163,966
Connecticut Light and Power Co., 5.90%, 8/01/18 ................................ 8,000,000 7,589,520
Public Service Co. of New Hampshire Project, Series A, 7.65%, 5/01/21 .......... 10,970,000 11,421,306
Public Service Co. of New Hampshire Project, Series C, 7.65%, 5/01/21 .......... 34,635,000 36,059,884
------------
162,400,186
------------
NEW JERSEY .4%
Hudson County Improvement Authority Solid Waste Systems Revenue, Refunding,
Series 1, 6.00%, 1/01/19 ....................................................... 2,180,000 2,179,782
Series 1, 6.00%, 1/01/29 ....................................................... 5,000,000 4,965,350
Series 2, 6.125%, 1/01/19 ...................................................... 2,125,000 2,128,804
Series 2, 6.125%, 1/01/29 ...................................................... 5,105,000 5,114,138
New Jersey EDA Revenue, First Mortgage,
Keswick Pines, Refunding, 5.75%, 1/01/24 ........................................ 1,500,000 1,406,700
New Jersey Health Care Facilities
Financing Authority Revenue, Lutheran Home, Series A, 8.40%, 7/01/19 ............ 2,100,000 2,151,471
New Jersey State Housing and Mortgage Finance Agency MFHR,
Refunding, Series A, AMBAC Insured,
6.00%, 11/01/14 ................................................................ 3,000,000 3,092,670
6.05%, 11/01/20 ................................................................ 5,500,000 5,655,760
------------
26,694,675
------------
NEW MEXICO 4.1%
Farmington PCR,
Public Service Co. of New Mexico,
San Juan Project, Refunding, Series A, 6.30%, 12/01/16 .................. 29,045,000 29,304,662
Public Service Co. of New Mexico,
San Juan Project, Refunding, Series A, 5.80%, 4/01/22 .................. 22,500,000 21,230,550
Public Service Co. of New Mexico,
San Juan Project, Refunding, Series A, 6.40%, 8/15/23 .................. 58,250,000 58,906,478
Public Service Co. of New Mexico,
San Juan Project, Refunding, Series B, 6.30%, 12/01/16 ................. 14,500,000 14,629,630
Public Service Co. of New Mexico,
San Juan Project, Refunding, Series B, 5.80%, 4/01/22 .................. 19,500,000 18,399,810
Public Service Co. of New Mexico,
San Juan Project, Refunding, Series C, 5.80%, 4/01/22 .................. 13,900,000 13,115,762
Public Service Co. of New Mexico,
San Juan Project, Refunding, Series D, 6.375%, 4/01/22 ................. 64,125,000 65,061,225
Tucson Electric Power Co., Series A, 6.95%, 10/01/20 ........................... 37,000,000 39,511,560
New Mexico Mortgage Finance Authority SFM Program,
Refunding, Series A-1, 7.90%, 7/01/04 .......................................... 465,000 476,676
Series A, 9.50%, 9/01/00 ....................................................... 110,000 110,604
Series A, 9.10%, 9/01/03 ....................................................... 590,000 612,385
Series A, FHA Insured, 8.80%, 9/01/01 .......................................... 160,000 163,603
Series B, 9.30%, 9/01/00 ....................................................... 35,000 35,189
Sub Series A, 9.55%, 9/01/02 ................................................... 505,000 513,196
Rio Rancho Water and Wastewater Revenue,
Series A, FSA Insured, Pre-Refunded, 5.90%, 5/15/15 ............................. 3,620,000 3,866,920
------------
265,938,250
------------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK 11.1%
MTA Commuter Facilities Revenue,
Series 8, 5.50%, 7/01/21 ........................................................ $16,775,000 $16,134,866
Series A, MBIA Insured, 5.625%, 7/01/27 ......................................... 12,880,000 12,816,115
Series R, 5.50%, 7/01/17 ........................................................ 2,000,000 1,951,040
Service Contract, Refunding, Series 1, FSA Insured, 5.70%, 7/01/24 .............. 10,000,000 10,066,500
MTA Service Contract Revenue,
Commuter Facilities, Refunding, Series 5, 6.50%, 7/01/16 ........................ 3,860,000 4,028,759
Commuter Facilities, Refunding, Series N, 6.80%, 7/01/04 ........................ 3,330,000 3,586,010
Commuter Facilities, Refunding, Series N, 6.90%, 7/01/05 ........................ 3,050,000 3,284,881
Transit Facilities, Refunding, Series N, 6.80%, 7/01/04 ......................... 2,330,000 2,509,130
Transit Facilities, Refunding, Series N, 6.90%, 7/01/05 ......................... 2,470,000 2,660,215
Transit Facilities, Refunding, Series N, 7.125%, 7/01/09 ........................ 7,830,000 8,446,613
Transit Facilities, Refunding, Series P, 5.75%, 7/01/15 ......................... 6,065,000 6,106,181
MTA Transit Facilities Revenue,
Series A, MBIA Insured, 5.875%, 7/01/27 ......................................... 22,700,000 23,251,156
Service Contract, Refunding, Series R, 5.50%, 7/01/17 ........................... 5,000,000 4,877,600
New York City GO,
Refunding, Series F, 6.00%, 8/01/11 ............................................. 10,000,000 10,469,800
Refunding, Series F, 5.25%, 8/01/15 ............................................. 20,580,000 19,847,764
Refunding, Series H, 6.25%, 8/01/15 ............................................. 25,000,000 26,449,750
Refunding, Series H, 6.125%, 8/01/25 ............................................ 5,600,000 5,726,896
Refunding, Series J, 6.00%, 8/01/21 ............................................. 10,000,000 10,163,600
Series A, 6.125%, 8/01/06 ....................................................... 9,955,000 10,612,329
Series A, 6.25%, 8/01/08 ........................................................ 10,000,000 10,673,600
Series A, 7.25%, 3/15/20 ........................................................ 100,000 102,756
Series A, 6.25%, 8/01/21 ........................................................ 845,000 868,981
Series A, Pre-Refunded, 6.125%, 8/01/06 ......................................... 235,000 254,698
Series A, Pre-Refunded, 7.25%, 3/15/20 .......................................... 230,000 237,813
Series B, 7.00%, 2/01/18 ........................................................ 3,255,000 3,442,781
Series B, 7.00%, 2/01/19 ........................................................ 3,375,000 3,567,341
Series B, 7.00%, 2/01/20 ........................................................ 3,305,000 3,492,559
Series B, 6.00%, 8/15/26 ........................................................ 4,355,000 4,405,910
Series B, Pre-Refunded, 6.75%, 10/01/15 ......................................... 100,000 108,395
Series B, Pre-Refunded, 7.00%, 2/01/18 .......................................... 835,000 897,976
Series B, Pre-Refunded, 7.00%, 2/01/19 .......................................... 1,625,000 1,747,558
Series B, Pre-Refunded, 7.00%, 2/01/20 .......................................... 2,440,000 2,624,025
Series B, Pre-Refunded, 6.00%, 8/15/26 .......................................... 645,000 701,212
Series B, Sub Series B-1, Pre-Refunded, 7.00%, 8/15/16 .......................... 17,070,000 19,137,689
Series B, Sub Series B-1, Pre-Refunded, 7.25%, 8/15/19 .......................... 5,000,000 5,660,650
Series C, 5.375%, 11/15/27 ...................................................... 7,450,000 6,982,885
Series C, 5.50%, 11/15/37 ....................................................... 2,000,000 1,899,200
Series C, Pre-Refunded, 7.25%, 8/15/24 .......................................... 7,905,000 8,371,474
Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/16 .......................... 55,000 59,875
Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/17 .......................... 370,000 402,797
Series C, Sub Series C-1, Pre-Refunded, 7.50%, 8/01/21 .......................... 435,000 479,457
Series D, 6.00%, 2/15/10 ........................................................ 8,155,000 8,510,721
Series D, 7.625%, 2/01/14 ....................................................... 40,000 42,934
Series D, 7.50%, 2/01/18 ........................................................ 5,000 5,345
Series D, Pre-Refunded, 7.70%, 2/01/11 .......................................... 150,000 163,874
Series D, Pre-Refunded, 7.625%, 2/01/13 ......................................... 400,000 436,316
Series D, Pre-Refunded, 7.625%, 2/01/14 ......................................... 810,000 883,540
Series D, Pre-Refunded, 7.50%, 2/01/18 .......................................... 380,000 413,425
Series D, Pre-Refunded, 7.50%, 2/01/19 .......................................... 330,000 359,027
Series E, 6.25%, 2/15/07 ........................................................ 3,270,000 3,500,699
Series E, 7.50%, 2/01/18 ........................................................ 45,000 48,101
Series E, Pre-Refunded, 6.25%, 2/15/07 .......................................... 6,730,000 7,322,442
Series E, Pre-Refunded, 7.50%, 2/01/18 .......................................... 480,000 522,221
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York City GO, (cont.)
Series F, 7.625%, 2/01/13 ........................................................ $ 45,000 $ 48,355
Series F, 7.625%, 2/01/15 ........................................................ 15,000 16,104
Series F, 7.50%, 2/01/21 ......................................................... 110,000 117,424
Series F, Pre-Refunded, 7.625%, 2/01/13 .......................................... 310,000 338,145
Series F, Pre-Refunded, 7.625%, 2/01/14 .......................................... 275,000 299,967
Series F, Pre-Refunded, 7.50%, 2/01/21 ........................................... 575,000 625,577
Series F, Pre-Refunded, 6.625%, 2/15/25 .......................................... 8,625,000 9,516,825
Series G, 5.75%, 8/01/10 ......................................................... 505,000 521,519
Series G, 6.125%, 10/15/11 ....................................................... 20,480,000 21,743,206
Series G, 6.20%, 10/15/14 ........................................................ 10,000,000 10,584,300
Series G, 7.50%, 2/01/22 ......................................................... 10,000 10,673
Series G, Pre-Refunded, 7.50%, 2/01/22 ........................................... 50,000 54,338
Series H, 7.20%, 2/01/15 ......................................................... 875,000 931,044
Series H, 7.00%, 2/01/22 ......................................................... 10,000 10,561
Series H, 5.00%, 3/15/29 ......................................................... 34,625,000 30,334,270
Series H, Pre-Refunded, 7.20%, 2/01/14 ........................................... 625,000 674,969
Series H, Pre-Refunded, 7.20%, 2/01/15 ........................................... 500,000 539,975
Series H, Pre-Refunded, 7.00%, 2/01/19 ........................................... 2,245,000 2,416,989
Series H, Pre-Refunded, 7.00%, 2/01/20 ........................................... 280,000 301,118
Series H, Pre-Refunded, 7.00%, 2/01/22 ........................................... 25,000 26,886
Series I, 6.25%, 4/15/17 ......................................................... 23,865,000 24,910,764
Series I, 6.25%, 4/15/27 ......................................................... 7,705,000 7,940,080
Series I, Pre-Refunded, 6.25%, 4/15/17 ........................................... 1,505,000 1,653,243
Series I, Pre-Refunded, 6.25%, 4/15/27 ........................................... 15,215,000 16,713,678
New York City IDA,
Civic Facility Revenue, Amboy Properties Corp. Project,
9.625%, 6/01/15 ............................................................ 6,205,000 6,652,008
Civic Facility Revenue, Amboy Properties Corp. Project, Refunding,
6.75%, 6/01/20 ............................................................. 7,160,000 7,015,511
IDR, La Guardia Association LP Project, Refunding, 6.00%, 11/01/28 ............... 7,500,000 7,124,100
New York State Dormitory Authority Revenue,
City University System, Third General, Series 2, 6.00%, 7/01/26 .................. 6,100,000 6,161,793
City University System, Third General, Series 2, Pre-Refunded, 6.00%, 7/01/26 .... 15,750,000 17,162,303
Mental Health Services Facilities, Refunding, Series B, 5.625%, 2/15/21 .......... 8,360,000 8,191,462
Mental Health Services Facilities, Series A, 6.00%, 8/15/17 ...................... 11,240,000 11,483,346
Mental Health Services Facilities, Series A, 5.75%, 2/15/27 ...................... 5,000,000 4,945,350
State University Educational Facilities, Pre-Refunded, 6.00%, 5/15/18 ............ 5,000,000 5,442,750
State University Educational Facilities, Refunding, 5.125%, 5/15/27 .............. 3,755,000 3,359,936
New York State Environmental Facilities Corp. Special Obligation PCR,
State Water Revenue, New York Municipal Water, Refunding, Series A,
5.875%, 6/15/14 .................................................................. 5,000,000 5,158,700
New York State HFA, Service Contract Obligation Revenue, Series A,
6.00%, 3/15/26 ................................................................... 4,975,000 5,009,328
Pre-Refunded, 7.80%, 9/15/10 ..................................................... 6,850,000 7,273,330
Pre-Refunded, 7.80%, 9/15/20 ..................................................... 9,715,000 10,315,387
Pre-Refunded, 6.50%, 3/15/25 ..................................................... 10,000,000 11,159,800
New York State HFAR, Refunding, Series A, 5.90%, 11/01/05 ........................... 12,515,000 12,990,820
New York State Medical Care Facilities Finance Agency Revenue,
Hospital and Nursing, Series B, FHA Insured, 6.95%, 2/15/32 ...................... 3,305,000 3,509,546
Hospital and Nursing, Series B, Pre-Refunded, 6.95%, 2/15/32 ..................... 695,000 751,253
Montefiore Medical Center, Insured Mortgage, Series A, AMBAC/FHA Insured,
5.75%, 2/15/25 ................................................................... 6,175,000 6,253,052
New York State Mortgage Agency Revenue, Homeowners Mortgage,
Series 59, 6.10%, 10/01/15 ....................................................... 2,000,000 2,060,260
Series 59, 6.15%, 10/01/17 ....................................................... 2,750,000 2,832,665
Series 61, 5.80%, 10/01/16 ....................................................... 7,100,000 7,216,937
(b) New York State Thruway Authority Service Contract Revenue, Local Highway and
Bridge, 5.75%, 4/01/19 ........................................................... 10,000,000 9,941,400
New York State Urban Development Corp. Revenue, Correctional Capital Facilities,
Series 6, 5.375%, 1/01/25 ........................................................ 5,750,000 5,391,028
Series 7, 5.70%, 1/01/27 ......................................................... 22,750,000 22,285,218
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State Urban Development Corp.,
Corporate Purpose, sub. lien, Refunding, 5.50%, 7/01/22 .................................. $ 7,975,000 $ 7,673,625
New York, New York City, Series F, Pre-Refunded, 7.625%, 2/01/15 ........................... 15,000 16,362
Oneida County IDAR, Civic Facility, St. Elizabeth Medical,
Series A, 5.75%, 12/01/19 ............................................................... 1,575,000 1,471,381
Series A, 5.875%, 12/01/29 .............................................................. 2,750,000 2,550,763
Series B, 6.00%, 12/01/19 ............................................................... 2,520,000 2,425,525
Series B, 6.00%, 12/01/29 ............................................................... 7,560,000 7,156,901
Onondaga County IDA Solid Waste Disposal
Facility Revenue, Solvay Paperboard LLC Project, Refunding,
6.80%, 11/01/14 ......................................................................... 5,000,000 5,018,750
7.00%, 11/01/30 ......................................................................... 7,000,000 7,025,970
Port Authority of New York and New Jersey Revenue, Special Obligation Revenue,
Consolidated, 102nd Series, MBIA Insured, 5.75%, 10/15/23 .............................. 5,000,000 5,117,350
Port Authority of New York and New Jersey Special Obligation Revenue,
2nd Installment, 6.50%, 10/01/01 ........................................................ 1,000,000 1,035,190
3rd Installment, 7.00%, 10/01/07 ........................................................ 8,000,000 8,730,160
4th Installment, Special Project, 6.75%, 10/01/11 ....................................... 925,000 984,940
5th Installment, 6.75%, 10/01/19 ........................................................ 17,500,000 18,470,025
Continental Airlines Inc., Eastern Project, La Guardia, 9.00%, 12/01/10 ................. 10,000,000 10,637,200
Continental Airport Project, Eastern Project, La Guardia, 9.125%, 12/01/15 .............. 27,650,000 29,452,780
Ulster County IDA, Civic Facility Revenue, Benedictine Hospital Project, Series A,
6.40%, 6/01/14 .......................................................................... 725,000 712,711
6.45%, 6/01/24 .......................................................................... 1,950,000 1,902,713
Warren and Washington Counties IDAR,
Adirondack Resource Recovery Project, Refunding, Series A, 7.90%, 12/15/07 ............... 1,150,000 1,171,517
------------
712,888,638
------------
NORTH CAROLINA 1.7%
Asheville Water System Revenue, FGIC Insured, 5.70%, 8/01/25 ............................... 2,500,000 2,524,200
North Carolina Eastern Municipal Power Agency Power System Revenue,
Refunding, Series A, 5.75%, 1/01/26 ..................................................... 37,500,000 34,412,625
Refunding, Series B, 6.00%, 1/01/14 ..................................................... 16,000,000 15,756,960
Refunding, Series B, 5.75%, 1/01/24 ..................................................... 35,750,000 32,940,765
Series B, MBIA Insured, 5.875%, 1/01/21 ................................................. 20,000,000 20,379,000
North Carolina HFA, SF, Series II, GNMA Secured, 6.20%,
3/01/16 ................................................................................. 2,775,000 2,850,480
9/01/17 ................................................................................. 1,845,000 1,896,439
------------
110,760,469
------------
NORTH DAKOTA .4%
Mercer County PCR, Basin Electric Power Corp.,
Refunding, Second Series, AMBAC Insured, 6.05%, 1/01/19 .................................. 24,655,000 25,297,263
------------
OHIO 5.3%
Cleveland Airport Special Revenue, Continental Airlines Inc. Project,
9.00%, 12/01/19 .......................................................................... 21,235,000 21,918,767
(b) Refunding, 5.70%, 12/01/19 ............................................................ 11,520,000 10,709,222
Cuyahoga County Hospital Revenue, University Hospitals Health System, Refunding,
Series B, MBIA Insured, 5.50%, 1/15/16 ................................................... 10,065,000 10,064,295
Dayton Special Facilities Revenue,
Emery Air Freight Corp., Emery Worldwide Air Inc., Refunding,
Series A, 5.625%, 2/01/18 ............................................................... 5,000,000 4,749,750
Series C, 6.05%, 10/01/09 ............................................................... 7,500,000 7,797,825
Series E, 6.05%, 10/01/09 ............................................................... 4,000,000 4,158,840
Elyria GO, FGIC Insured, 5.40%, 12/01/22 ................................................... 2,785,000 2,674,380
Franklin County Health Care Facilities Revenue, Presbyterian Retirement Services,
Refunding, 5.50%, 7/01/17 ............................................................... 3,100,000 2,883,341
Refunding, 5.50%, 7/01/21 ............................................................... 4,700,000 4,308,866
Series A, 6.625%, 7/01/13 ............................................................... 1,000,000 1,065,670
Lorain County Hospital Revenue, Catholic Healthcare Partners,
Refunding, Series B, MBIA Insured, 5.50%, 9/01/27 ........................................ 17,885,000 17,436,265
Lucas County Health Facilities Revenue,
Presbyterian Retirement Services, Refunding, Series A,
6.625%, 7/01/14 ......................................................................... 1,000,000 1,038,270
6.75%, 7/01/20 .......................................................................... 2,000,000 2,079,820
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
OHIO (CONT.)
Montgomery County Health Systems Revenue,
Franciscan at Saint Leonard, Refunding, 5.50%, 7/01/18 ............................ $ 3,630,000 $ 3,323,265
Franciscan Medical Center-Dayton, Refunding, 5.50%, 7/01/18 ....................... 1,900,000 1,739,450
Refunding, Series B, 8.10%, 7/01/01 ............................................... 600,000 620,694
Refunding, Series B-1, 8.10%, 7/01/01 ............................................. 500,000 517,245
Refunding, Series B-1, 8.10%, 7/01/18 ............................................. 1,955,000 2,217,537
Series B-1, Pre-Refunded, 8.10%, 7/01/18 .......................................... 4,345,000 5,233,813
Series B-2, 8.10%, 7/01/18 ........................................................ 1,995,000 2,262,909
Series B-2, Pre-Refunded, 8.10%, 7/01/18 .......................................... 4,505,000 5,441,229
St. Leonard, Series B, 8.10%, 7/01/18 ............................................. 3,100,000 3,514,408
St. Leonard, Series B, Pre-Refunded, 8.10%, 7/01/18 ............................... 6,500,000 7,850,830
Muskingum County Hospital Facilities Revenue,
Franciscan Sisters, Refunding, Connie Lee Insured, 5.375%, 2/15/12 ................. 1,200,000 1,202,520
Oak Hills Local School District GO, MBIA Insured, 5.45%, 12/01/21 .................... 4,925,000 4,770,404
Ohio State Air Quality Development Authority Revenue,
Dayton Power and Light Co. Project, Refunding, 6.10%, 9/01/30 ..................... 17,900,000 18,216,651
PCR, Toledo Edison, Series B, Refunding, 8.00%, 5/15/19 ........................... 5,265,000 5,455,224
Pollution Control, Cleveland Electric, Refunding, Series A, 6.10%, 8/01/20 ........ 10,400,000 10,159,344
Pollution Control, Cleveland Electric, Refunding, Series B, 6.00%, 8/01/20 ........ 39,760,000 38,832,399
Pollution Control, Toledo Edison, Refunding, Series A, 6.10%, 8/01/27 ............. 5,000,000 4,869,050
Ohio State Solid Waste Revenue, Republic Engineered Steels Inc., 9.00%, 6/01/21 ...... 16,650,000 17,968,847
Ohio State Water Development Authority PCR, Facilities Revenue,
Cleveland Electric, Refunding, Series A, 6.10%, 8/01/20 ........................... 18,000,000 17,583,480
Cleveland Electric, Refunding, Series A, 8.00%, 10/01/23 .......................... 27,700,000 30,837,579
Toledo Edison, Series A, 8.00%, 5/15/19 ........................................... 6,200,000 6,424,006
Ohio State Water Development Authority Revenue, Fresh Water Service, AMBAC
Insured, 5.90%, 12/01/21 .......................................................... 9,250,000 9,521,025
Toledo-Lucas County Port Authority Airport Revenue, Burlington Air Express,
Project 1, 7.00%, 4/01/04 ......................................................... 4,370,000 4,595,798
Project 1, 7.25%, 4/01/09 ......................................................... 5,385,000 5,748,380
Project 1, 7.375%, 4/01/14 ........................................................ 8,200,000 8,759,896
Project 1, 7.50%, 4/01/19 ......................................................... 14,365,000 15,357,191
Series 1, Pre-Refunded, 9.125%, 9/15/01 ........................................... 735,000 787,479
Series 1, Pre-Refunded, 9.125%, 9/15/13 ........................................... 5,875,000 6,294,475
Toledo-Lucas County Port Authority Development Revenue, Nortwest Ohio Bond Fund,
Series A, Pre-Refunded, 8.625%, 5/15/10 ........................................... 1,095,000 1,158,992
Series B, 9.00%, 11/15/08 ......................................................... 980,000 997,121
Series D, Pre-Refunded, 8.25%, 5/15/20 ............................................ 2,870,000 3,013,242
Willoughby IDR, Presbyterian Retirement Services, Refunding,
Series A, 6.875%, 7/01/16 ......................................................... 1,500,000 1,527,120
------------
337,686,914
------------
OKLAHOMA .3%
Tulsa County Municipal Airport Revenue,
American Airlines Inc., 7.375%, 12/01/20 ........................................... 12,845,000 13,463,230
Valley View Hospital Authority Revenue,
Valley View Regional Medical Center, Refunding, 6.00%, 8/15/14 ..................... 4,000,000 3,988,120
------------
17,451,350
------------
OREGON 1.4%
Klamath Falls Electric Revenue, Klamath Cogen, senior lien, Refunding,
5.75%, 1/01/13 .................................................................... 8,000,000 7,710,960
5.875%, 1/01/16 ................................................................... 19,400,000 18,698,496
6.00%, 1/01/25 .................................................................... 56,060,000 53,395,468
Northern Wasco County Peoples Utilities District Electric Revenue,
FGIC Insured, 5.625%, 12/01/22 .................................................... 2,500,000 2,521,200
Oregon State Department of Administrative Services COP,
Series A, MBIA Insured, 5.50%, 11/01/20 ........................................... 5,585,000 5,577,628
Series C, MBIA Insured, 5.75%, 5/01/17 ............................................ 4,665,000 4,771,829
------------
92,675,581
------------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
PENNSYLVANIA 5.0%
Allegheny County Hospital Development Authority Revenue,
Allegheny Valley Health Facilities Management Co., 7.50%, 8/01/13 ................ $ 9,100,000 $ 9,088,170
Allegheny Valley Hospital, 7.75%, 8/01/20 ........................................ 2,100,000 2,091,600
Allegheny County IDAR, Environmental Improvement, USX Corp., Refunding, 6.10%,
7/15/20 .......................................................................... 6,460,000 6,399,276
Bucks County IDA, Environmental Improvement Revenue, USX Corp. Project,
Refunding, 5.60%, 3/01/33 ........................................................ 4,125,000 3,745,253
Chartiers Valley Industrial and Commercial Development Authority Revenue,
Asbury Health Center Project, Refunding,
7.40%, 12/01/15 .................................................................. 5,250,000 6,015,608
(b)Chartiers Valley Industrial and Commercial Development Authority
First Mortgage Revenue, Asbury Health Center, Refunding, 6.375%,
12/01/19 ......................................................................... 1,000,000 980,400
12/01/24 ......................................................................... 1,750,000 1,679,738
Delaware County IDAR, Resource Recovery Facility, Refunding, Series A,
6.10%, 1/01/04 ................................................................... 1,310,000 1,326,716
6.10%, 1/01/06 ................................................................... 2,140,000 2,155,387
6.50%, 1/01/08 ................................................................... 425,000 426,305
6.10%, 7/01/13 ................................................................... 16,500,000 16,107,465
6.20%, 7/01/19 ................................................................... 6,500,000 6,311,825
Delaware River Port Authority Pennsylvania and New Jersey Revenue,
Series 1995, FGIC Insured, 5.50%, 1/01/26 ........................................ 20,750,000 20,492,493
Franklin County IDA, Health Facilities Revenue, Encore Nursing Center,
10.375%, 7/01/11 ................................................................. 650,000 700,557
Refunding, 10.375%, 7/01/11 ...................................................... 2,800,000 3,017,784
Gettysburg IDA Health Facilities Revenue, Encore Nursing Center, Refunding,
10.375%, 7/01/11 ................................................................. 3,000,000 3,233,340
Lehigh County IDA, PCR, Pennsylvania Power and Light Co. Project, Refunding,
Series A, MBIA Insured, 6.15%, 8/01/29 ........................................... 4,000,000 4,172,560
Monroeville Hospital Authority Hospital Revenue, Forbes Health Systems, Refunding,
5.75%, 10/01/05 .................................................................. 1,000,000 978,180
7.00%, 10/01/13 .................................................................. 8,825,000 8,795,436
6.25%, 10/01/15 .................................................................. 4,545,000 4,481,779
Montgomery County Higher Education and Health Authority Revenue,
First Mortgage, Holy Redeemer Long-Term Care, Series A, Pre-Refunded,
8.20%, 6/01/06 ................................................................... 1,465,000 1,589,320
First Mortgage, Holy Redeemer Long-Term Care, Series A, Pre-Refunded,
8.00%, 6/01/22 ................................................................... 3,500,000 3,838,135
St. Joseph's University, Pre-Refunded, 8.30%, 6/01/10 ............................ 5,000,000 5,265,350
United Hospital, Series A, Pre-Refunded, 8.375%, 11/01/11 ........................ 200,000 205,508
United Hospital, Series A, Pre-Refunded, 7.50%, 11/01/12 ......................... 3,560,000 3,582,321
United Hospital, Series A, Pre-Refunded, 7.50%, 11/01/13 ......................... 750,000 754,703
United Hospital, Series A, Pre-Refunded, 7.50%, 11/01/14 ......................... 600,000 603,762
United Hospital, Series B, Pre-Refunded, 7.50%, 11/01/14 ......................... 3,940,000 3,964,704
United Hospital, Series B, Pre-Refunded, 7.50%, 11/01/15 ......................... 1,600,000 1,610,032
Montgomery County IDA, Retirement Community Revenue, Act Retirement-Life
Communities, 5.25%, 11/15/28 ..................................................... 2,500,000 2,184,125
Montgomery County IDAR, Resource Recovery, 7.50%, 1/01/12 ........................... 10,000,000 10,335,800
Pennsylvania Convention Center Authority Revenue, Refunding, Series A,
5.75%, 9/01/99 ................................................................... 1,750,000 1,750,000
6.25%, 9/01/04 ................................................................... 5,000,000 5,210,500
6.60%, 9/01/09 ................................................................... 16,000,000 17,126,880
6.70%, 9/01/14 ................................................................... 20,760,000 22,312,018
6.75%, 9/01/19 ................................................................... 15,800,000 16,979,470
Pennsylvania EDA, Financing Resources Recovery Revenue, Colver Project,
Series D, 7.125%, 12/01/15 ....................................................... 10,000,000 10,890,500
Pennsylvania State Higher Educational Facilities Authority Health Services Revenue,
Allegheny Delaware Valley Obligation Group, Series A, MBIA Insured,
5.875%, 11/15/16 ................................................................. 15,000,000 14,729,550
University of Pennsylvania Health Services, Refunding, Series A,
5.75%, 1/01/12 ................................................................... 5,000,000 4,930,200
University of Pennsylvania Health Services, Refunding, Series A,
5.875%, 1/01/15 .................................................................. 1,000,000 980,620
Philadelphia Gas Works Revenue,
14th Series A, Pre-Refunded, 6.375%, 7/01/26 ..................................... 885,000 959,898
Refunding, 14th Series, 6.375%, 7/01/26 .......................................... 1,965,000 2,056,530
Philadelphia GO, Refunding, Series B, 6.00%, 5/15/05 ................................ 3,080,000 3,240,222
Philadelphia IDA, Health Care Facility Revenue, Pauls Run, Series A,
5.85%, 5/15/13 ................................................................... 2,200,000 2,100,098
5.75%, 5/15/18 ................................................................... 1,500,000 1,386,720
5.875%, 5/15/28 .................................................................. 2,500,000 2,282,600
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
PENNSYLVANIA (CONT.)
Philadelphia Municipal Authority Revenue, Lease,
Refunding, Series D, 6.30%, 7/15/17 .................................................. $ 3,500,000 $ 3,613,715
Sub Series C, 8.625%, 11/15/16 ....................................................... 2,210,000 2,365,916
Sub Series D, 6.25%, 7/15/13 ......................................................... 3,000,000 3,128,070
Philadelphia Water and Sewer Revenue, Series 10, ETM, 7.35%, 9/01/04 .................... 14,235,000 15,565,973
Schuylkill County IDA, Resource Recovery Revenue, Schuylkill Energy Resources Inc.,
6.50%, 1/01/10 ....................................................................... 28,870,000 28,925,719
South Fork Municipal Authority Hospital Revenue, Conemaugh Valley Memorial Hospital
Project, Series A, MBIA Insured,
5.75%, 7/01/16 ....................................................................... 8,130,000 8,241,544
South Wayne County Water and Sewer Authority Revenue, Refunding, 8.20%, 4/15/13 ......... 8,055,000 8,235,996
Washington County IDA, PCR, West Pennsylvania Power Co., Series G, AMBAC Insured,
6.05%, 4/01/14 ....................................................................... 5,025,000 5,283,034
------------
318,429,405
------------
RHODE ISLAND .3%
Rhode Island Housing and Mortgage Finance Corp. Revenue, Homeownership Opportunity,
Series 17-A, 6.25%, 4/01/17 .......................................................... 5,000,000 5,111,500
Rhode Island State Health and Educational Building Corp. Revenue,
Hospital Financing Lifespan Obligation Group, MBIA Insured, 5.75%, 5/15/23 ........... 5,000,000 4,999,500
Landmark Medical Center, 5.875%, 10/01/19 ............................................ 6,000,000 6,059,100
West Warwick GO, Series A,
7.00%, 8/15/02 ....................................................................... 120,000 124,925
7.30%, 7/15/08 ....................................................................... 845,000 915,203
------------
17,210,228
------------
SOUTH CAROLINA .8%
Charleston County Hospital Facilities First Mortgage Revenue, Sandpiper Village Inc.,
8.00%, 11/01/13 ...................................................................... 3,535,000 3,510,502
Piedmont Municipal Power Agency Electric Revenue, Refunding,
6.60%, 1/01/21 ....................................................................... 3,660,000 3,672,700
Series A, AMBAC Insured, 6.55%, 1/01/16 .............................................. 4,110,000 4,123,727
South Carolina Jobs EDA, Health Facilities Revenue, 1st Mortgage Lutheran Homes,
Refunding,
5.65%, 5/01/18 ....................................................................... 3,200,000 2,973,280
5.70%, 5/01/26 ....................................................................... 4,235,000 3,857,746
South Carolina Public Service Authority Revenue, Refunding, Series A, MBIA Insured,
5.75%, 1/01/22 ....................................................................... 32,500,000 32,861,075
------------
50,999,030
------------
SOUTH DAKOTA .2%
South Dakota HDA Revenue, Homeownership Mortgage, Series A, 6.125%, 5/01/17 ............. 5,000,000 5,112,350
South Dakota Health and Educational Facilities Authority Revenue,
AMBAC Insured, 5.50%, 8/01/22 ........................................................ 7,100,000 6,928,109
Prairie Lakes Health Care, Pre-Refunded, 7.25%, 4/01/22 .............................. 2,480,000 2,751,337
Prairie Lakes Health Care, Refunding, 7.25%, 4/01/22 ................................. 1,020,000 1,081,690
------------
15,873,486
------------
TENNESSEE .3%
Johnson City Health and Educational Facilities Board Revenue, Pine Oaks Assisted Project,
Series A, GNMA Secured, 5.90%, 6/20/37 ................................................ 2,620,000 2,573,050
Knox County Health, Educational and Housing Facilities Board MFHR, East Towne Village
Project, GNMA Secured, 8.20%, 7/01/28 ................................................. 3,035,000 3,119,373
Memphis-Shelby County Airport Authority Special Facilities and Project Revenue,
Federal Express Corp., 7.875%, 9/01/09 ................................................ 6,000,000 6,460,440
Metropolitan Government of Nashville and Davidson County GO, Public Improvements,
5.875%, 5/15/26 ....................................................................... 5,000,000 5,082,850
Shelby County Health and Education Housing Facility Revenue, Beverly Enterprise,
10.125%, 12/01/11 ..................................................................... 2,800,000 2,957,220
Tennessee HDA, Mortgage Finance, Series A, 6.90%, 7/01/25 ............................... 200,000 211,338
------------
20,404,271
------------
TEXAS 3.7%
Alliance Airport Authority Special Facilities Revenue, 7.50%, 12/01/29 .................. 10,000,000 10,502,400
Bexar County Health Facilities Development Corp. Revenue, Incarnate Word Health
Services, Refunding, FSA Insured, ETM, 6.00%, 11/15/15 ........................... 8,750,000 9,500,925
(b)Comal ISD, GO, Refunding, 5.75%, 8/01/28 .............................................. 10,000,000 9,957,500
Coppell Special Assessment, Gateway Project, 8.70%, 3/01/12 ............................. 4,190,000 4,335,519
Copperas Cove Health Facilities Development Corp. Hospital Revenue, First Mortgage,
Metroplex Health, Series B, Pre-Refunded, 9.125%, 12/01/19 ....................... 5,328,000 5,503,344
Decatur Hospital Authority Hospital Revenue, Series A, 5.75%, 9/01/29 ................... 5,000,000 4,459,750
El Paso HFC, SFMR, Refunding, Series A, 8.75%, 10/01/11 ................................. 3,650,000 3,866,591
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
TEXAS (CONT.)
Georgetown Health Facilities Development Corp.
Revenue, Georgetown Healthcare System, Refunding, 6.25%, 8/15/29 ....................... $ 10,975,000 $ 10,517,123
Harris County Health Facilities Development Corp. ......................................
Hospital Revenue, Memorial Hospital System Project,
Refunding, Series A, MBIA Insured,
5.75%, 6/01/19 ...................................................................... 15,065,000 15,108,086
5.50%, 6/01/24 ...................................................................... 12,000,000 11,667,120
Harris County Health Facilities Development Corp. Revenue,
Christus Health, Refunding, Series A, MBIA Insured, 5.375%, 7/01/29 .................. 15,000,000 14,038,950
Harris County Health Facilities Development Corp
Special Facilities Revenue, Medical Center Project, MBIA Insured, 6.00%, 5/15/20 ..... 7,000,000 7,228,970
Nueces River Authority Environmental Improvement
Revenue, Asarco Inc. Project, Refunding,
5.60%, 1/01/27 ...................................................................... 8,640,000 7,793,280
Series A, 5.60%, 4/01/18 ............................................................ 4,500,000 4,153,050
Nueces River Authority Water Supply Revenue,
Facilities, Corpus Christi Lake Project, FSA Insured, 5.50%, 3/01/27 ................. 7,500,000 7,262,625
Port Corpus Christi IDC Revenue,
Valero, Refunding, Series C, 5.40%, 4/01/18 .......................................... 15,800,000 14,416,236
Port Corpus Christi Nueces County General Revenue,
Union Pacific, Refunding, 5.65%, 12/01/22 ............................................ 5,000,000 4,763,600
Red River Authority PCR,
West Texas Utilities Co. Project,
Public Service Co. of Oklahoma,
Central Power and Light Co., Refunding,
MBIA Insured, 6.00%, 6/01/20 ......................................................... 8,000,000 8,262,720
Sabine River Authority PCR,
Southwestern Electric Power Co., Refunding, MBIA Insured, 6.10%, 4/01/18 ............. 7,000,000 7,303,240
Sam Rayburn Municipal Power Agency Supply System Revenue, Refunding,
Series A, 6.50%, 10/01/08 ........................................................... 755,000 764,037
Series A, 6.75%, 10/01/14 ........................................................... 12,990,000 13,228,496
Series A, 6.25%, 10/01/17 ........................................................... 4,795,000 4,733,432
Series B, 5.75%, 10/01/08 ........................................................... 1,315,000 1,268,133
Series B, 6.125%, 10/01/13 .......................................................... 5,340,000 5,243,506
Series B, 5.50%, 10/01/20 ........................................................... 11,255,000 10,127,136
San Antonio Electric and Gas Revenue, Series 95, MBIA Insured, 5.375%, 2/01/18 ......... 6,000,000 5,799,000
Texas State GO, Veterans Housing Assistance Fund I, Refunding, 6.15%, 12/01/25 ......... 7,430,000 7,553,932
Texas Water Development Board Revenue, State Revolving Fund, 6.00%, 7/15/13 ............ 4,000,000 4,167,120
Tomball Hospital Authority Revenue, Refunding, 6.125%, 7/01/23 ......................... 8,750,000 8,768,200
Travis County Health Facilities Development
Corp. Hospital Revenue, Charity Obligation Group, Series A, 5.375%, 11/01/28 .......... 11,685,000 10,804,535
Tyler Health Facilities Development Corp. ..............................................
Hospital Revenue, East Texas Medical Center Project, Series B,
FSA Insured, 5.60%, 11/01/27 .......................................................... 3,450,000 3,387,383
------------
236,485,939
------------
US TERRITORIES 4.6%
American Samoa EDA, Executive Office Building Revenue, 10.125%, 9/01/08 ................ 2,175,000 2,241,707
District of Columbia GO,
Refunding, Series A, 5.875%, 6/01/05 ................................................ 7,205,000 7,530,378
Refunding, Series A, 6.00%, 6/01/07 ................................................. 10,905,000 11,518,297
Refunding, Series B, 5.25%, 6/01/26 ................................................. 59,315,000 53,712,105
Series A, 5.25%, 6/01/27 ............................................................ 25,225,000 22,649,780
Series A, ETM, 5.875%, 6/01/05 ...................................................... 595,000 627,648
Series A, ETM, 6.00%, 6/01/07 ....................................................... 870,000 928,099
Series A, Pre-Refunded, 6.375%, 6/01/11 ............................................. 22,770,000 25,074,779
Series A, Pre-Refunded, 6.375%, 6/01/16 ............................................. 27,230,000 29,986,221
Series E, FSA Insured, 6.00%, 6/01/11 ............................................... 5,000,000 5,203,500
District of Columbia Hospital Revenue,
Medlantic Healthcare Group, Refunding,
Series A, MBIA Insured, ETM, 5.70%, 8/15/08 ........................................ 6,500,000 6,791,525
Medlantic Healthcare Group, Refunding,
Series A, MBIA Insured, ETM, 5.875%, 8/15/19 ....................................... 8,850,000 9,324,626
Washington Hospital Center Corp.,
Series A, Pre-Refunded, 7.00%, 8/15/05 ............................................. 2,000,000 2,151,440
Washington Hospital Center Corp.,
Series A, Pre-Refunded, 9.00%, 1/01/08 ............................................. 12,430,000 13,431,734
Washington Hospital Center Corp.,
Series A, Pre-Refunded, 8.75%, 1/01/15 ............................................. 3,750,000 4,042,800
Washington Hospital Center Corp.,
Series A, Pre-Refunded, 7.125%, 8/15/19 ............................................ 4,500,000 4,918,725
District of Columbia Redevelopment Land Agency Washington D.C
Sports Arena Special Tax Revenue, 5.625%, 11/01/10 ................................... 1,005,000 999,945
District of Columbia Revenue,
Carnegie Endowment Revenue, 5.75%, 11/15/26 .......................................... 5,410,000 5,402,101
Methodist Home Issue, 6.00%, 1/01/29 ................................................. 4,750,000 4,469,608
Northern Mariana Islands Commonwealth Ports Authority
Airport Revenue, senior lien, Series A, 6.25%, 3/15/28 ............................... 14,830,000 14,976,520
Northern Mariana Islands Commonwealth Ports Authority
Seaport Revenue, Series A, 6.85%, 3/15/28 ............................................ 8,980,000 9,208,002
Puerto Rico Commonwealth Infrastructure Financing Authority
Special Tax Revenue, Series A, 7.75%, 7/01/08 ........................................ 700,000 710,570
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
US TERRITORIES (CONT.)
Virgin Islands PFA Revenue, Matching Fund Loan Notes,
Series A, Pre-Refunded, 7.25%, 10/01/18 ...................................... $ 14,000,000 $ 15,479,380
sub. lien, Fund Loan Notes, Refunding, Series E, 5.75%, 10/01/13 .................... 15,000,000 14,701,800
sub. lien, Fund Loan Notes, Refunding, Series E, 5.875%, 10/01/18 ................... 9,000,000 8,822,610
sub. lien, Fund Loan Notes, Refunding, Series E, 6.00%, 10/01/22 .................... 15,000,000 14,925,000
Virgin Islands Water and Power Authority
Electric System Revenue, Series A, Pre-Refunded, 7.40%, 7/01/11 ...................... 360,000 382,378
Virgin Islands Water and Power Authority
Water System Revenue, Series B, Pre-Refunded, 7.60%, 1/01/12 ......................... 4,000,000 4,427,600
-------------
294,638,878
-------------
UTAH .4%
Box Elder County PCR, Nucor Corp. Project, 6.90%, 5/15/17 .............................. 2,000,000 2,141,240
Carbon County Solid Waste Disposal Revenue,
Laidlaw Environmental Services, Refunding, Series A, 7.45%, 7/01/17 .................. 2,500,000 2,692,775
Tooele County PCR, Laidlaw Environmental,
Refunding, Series A, 7.55%, 7/01/27 .................................................. 3,500,000 3,775,870
Utah Assessed Municipal Power Systems Revenue,
San Juan Project, MBIA Insured, Pre-Refunded, 6.375%, 6/01/22 ........................ 11,000,000 12,059,410
Utah State HFA, SFM,
Series A-2, 9.625%, 7/01/02 ......................................................... 15,000 15,248
Series A-2, 9.45%, 7/01/03 .......................................................... 25,000 25,541
Series B, 9.50%, 7/01/00 ............................................................ 5,000 5,054
Series B, 9.25%, 7/01/01 ............................................................ 5,000 5,060
Series B-2, 9.50%, 7/01/02 .......................................................... 5,000 5,087
Series B-2, 9.45%, 7/01/03 .......................................................... 35,000 35,854
Series C-1, 9.375%, 7/01/00 ......................................................... 10,000 10,081
Series C-2, 9.05%, 7/01/03 .......................................................... 75,000 77,638
Series D-2, 9.00%, 7/01/03 .......................................................... 170,000 175,962
Series E, 9.50%, 7/01/00 ............................................................ 10,000 10,090
Series E-1, 8.70%, 7/01/03 .......................................................... 215,000 222,187
Sub Series B-2, 8.70%, 7/01/04 ...................................................... 395,000 409,643
Sub Series D, 8.45%, 7/01/04 ........................................................ 180,000 183,949
Weber County Municipal Building Authority Lease Revenue,
Refunding, MBIA Insured, 5.75%, 12/15/19 ............................................. 5,000,000 5,031,650
-------------
26,882,339
-------------
VIRGINIA .2%
Virginia State HDA, Commonwealth Mortgage, Series D, Sub Series D-3, 6.125%, 1/01/19 ... 9,715,000 9,912,312
-------------
WASHINGTON .1%
Washington State Public Power Supply System Revenue,
Nuclear Project No. 1, Series C, Pre-Refunded, 8.00%, 7/01/17 ........................ 5,000,000 5,271,550
-------------
WEST VIRGINIA .3%
West Virginia State Hospital Finance Authority Hospital Revenue,
Logan General Hospital Project, Refunding and Improvement, 7.25%, 7/01/20 ........... 15,000,000 14,625,000
West Virginia State Water Development Authority Revenue,
Solid Waste Management, Series C, 8.125%, 8/01/15 .................................... 2,290,000 2,382,585
-------------
17,007,585
-------------
WISCONSIN .9%
Wisconsin Housing and EDA, Homeownership Revenue,
Series C, 6.15%, 9/01/17 ............................................................. 2,275,000 2,324,208
Wisconsin State Health and Educational Facilities Authority Revenue,
Clement Manor, Refunding, 5.75%, 8/15/24 ............................................ 4,000,000 3,706,040
Felician Health Care, Series A, AMBAC Insured,
Pre-Refunded, 7.00%, 1/01/15 ................................................... 5,000,000 5,151,200
Franciscan Health System Inc. Project, Pre-Refunded, 8.375%, 3/01/05 ................ 6,000,000 6,254,880
Franciscan Health System Inc. Project, Pre-Refunded, 8.50%, 3/01/20 ................. 6,000,000 6,258,540
Franciscan Skemp Medical Center Inc. Project, 6.25%, 11/15/20 ....................... 9,510,000 9,841,519
Sisters Sorrowful Mother, Series A, MBIA Insured, 5.90%, 8/15/24 .................... 22,055,000 22,469,855
-------------
56,006,242
-------------
WYOMING .2%
Sweetwater County PCR, Idaho Power Co. Project,
Refunding, Series A, 6.05%, 7/15/26 .................................................. 10,500,000 10,599,435
Teton County Hospital District Hospital Revenue,
Refunding and Improvement, 5.80%, 12/01/17 ........................................... 1,965,000 1,853,034
Wyoming CDA, Housing Revenue, Series 1, 6.15%, 6/01/17 ................................. 1,000,000 1,037,250
-------------
13,489,719
-------------
TOTAL BONDS ............................................................................ 6,148,782,341
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(d) ZERO COUPON BONDS 3.8%
CALIFORNIA 3.5%
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, MBIA Insured, 1/15/22 ....................... $ 49,115,000 $ 12,399,573
Convertible Capital Appreciation, Refunding, 1/15/23 ......................... 35,000,000 18,905,250
San Francisco City and County RDA,
Lease Revenue, George R. Moscone Center,
7/01/09 ..................................................................... 3,750,000 2,246,963
7/01/10 ..................................................................... 4,500,000 2,521,935
7/01/12 ..................................................................... 4,500,000 2,213,010
7/01/13 ..................................................................... 4,250,000 1,956,403
7/01/14 ..................................................................... 2,250,000 967,995
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Junior lien, ETM, 1/01/04 ................................................... 7,400,000 6,083,022
Junior lien, ETM, 1/01/05 ................................................... 8,000,000 6,239,440
Junior lien, ETM, 1/01/06 ................................................... 9,000,000 6,666,390
Junior lien, ETM, 1/01/07 ................................................... 9,400,000 6,592,784
Junior lien, ETM, 1/01/08 ................................................... 10,400,000 6,893,224
Junior lien, ETM, 1/01/09 ................................................... 21,900,000 13,691,004
Junior lien, ETM, 1/01/10 ................................................... 15,000,000 8,845,200
Junior lien, ETM, 1/01/12 ................................................... 30,100,000 15,718,822
Junior lien, ETM, 1/01/24 ................................................... 52,700,000 13,052,209
Junior lien, ETM, 1/01/25 ................................................... 45,200,000 10,544,256
Junior lien, ETM, 1/01/26 ................................................... 131,900,000 28,977,111
Junior lien, ETM, 1/01/27 ................................................... 139,100,000 28,849,340
Senior lien, Refunding, Series A, 1/15/23 ................................... 20,000,000 12,921,000
Senior lien, Refunding, Series A, 1/15/24 ................................... 20,000,000 12,915,600
-------------
219,200,531
-------------
FLORIDA .1%
Miami-Dade County Special Obligation,
Capital Appreciation, Series B, MBIA Insured,10/01/28 ....................... 11,860,000 2,186,747
Capital Appreciation, Series B, MBIA Insured,10/01/29 ....................... 20,000,000 3,479,200
Capital Appreciation, Series B, MBIA Insured,10/01/32 ....................... 7,780,000 1,125,844
Capital Appreciation, Series B, MBIA Insured,10/01/33 ....................... 2,000,000 273,000
Capital Appreciation, Series B, MBIA Insured,10/01/35 ....................... 6,765,000 821,542
Sub. lien, Series B, MBIA Insured,10/01/34 .................................. 3,895,000 501,481
-------------
8,387,814
-------------
NEBRASKA .1%
Kearney IDR, Great Platte River Road, Capital Appreciation,
zero cpn. to 1/01/06, 7.00% thereafter,
1/01/11 ..................................................................... 4,255,000 2,639,717
1/01/17 ..................................................................... 8,895,000 5,441,872
-------------
8,081,589
-------------
NEW YORK
MAC for City of Troy, Capital Appreciation, Series C, MBIA Insured,
7/15/21 ..................................................................... 428,010 124,174
1/15/22 ..................................................................... 649,658 182,820
-------------
306,994
-------------
OHIO .1%
Akron COP, Akron Municipal Baseball Stadium Project,
Capital Appreciation, zero cpn. to 12/01/01,
6.30% thereafter, 12/01/05 .................................................. 1,700,000 1,564,646
6.40% thereafter, 12/01/06 .................................................. 1,685,000 1,558,810
6.50% thereafter, 12/01/07 .................................................. 1,750,000 1,626,468
6.90% thereafter, 12/01/16 .................................................. 2,500,000 2,385,575
-------------
7,135,499
-------------
TOTAL ZERO COUPON BONDS ........................................................ 243,112,427
-------------
TOTAL LONG TERM INVESTMENTS (COST $6,342,124,371) .............................. 6,391,894,768
-------------
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)SHORT TERM INVESTMENTS .2%
Delta County EDC, Environmental Improvement Revenue,
Mead Escanaba Paper Project, Refunding, Series C,
Daily VRDN and Put, 2.80%, 12/01/23 ......................................... $ 2,200,000 $ 2,200,000
Jacksonville Health Facilities Authority Hospital Revenue,
Charity Obligation Group, Series C, MBIA Insured,
Weekly VRDN and Put, 3.20%, 8/15/19 ........................................ 2,100,000 2,100,000
New Jersey EDA, EDR, Dow Chemical,
El Dorado Term 1984B, Refunding, Daily VRDN and Put, 2.60%, 5/01/03 ............ 700,000 700,000
Port Authority of New York and New Jersey Special Obligation Revenue,
Versatile Structure, Series 2, Daily VRDN and Put, 2.60%, 5/01/19 .......... 2,100,000 2,100,000
Uinta County PCR, Chevron USA Inc. Project,
Refunding, Daily VRDN and Put, 2.70%, 8/15/20 .................................. 7,000,000 7,000,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $14,100,000) .................................. 14,100,000
--------------
TOTAL INVESTMENTS (COST $6,356,224,371) 99.7% .................................... 6,405,994,768
OTHER ASSETS, LESS LIABILITIES .3% ............................................... 16,908,338
--------------
NET ASSETS 100.0% ................................................................ $6,422,903,106
==============
</TABLE>
See glossary of terms on page 110.
(a)Variable rate demand notes (VRDN) 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 at
specified dates.
(b)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
(c)See Note 6 regarding defaulted securities.
(d)Zero coupon/step-up bonds. The current effective yield may vary. The original
accretion rate will remain constant.
(e)The bond pays interest based upon the issuer's ability to pay, which may be
less than the stated interest rate.
See notes to financial statements
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 --------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ------- --------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ...... $ 11.96 $ 11.92 $ 11.61 $ 11.68 $ 11.28 $ 11.82
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income .................... .30 .61 .63 .64 .65 .66
Net realized and unrealized gains (losses) (.54) .05 .32 (.06) .39 (.55)
--------- --------- --------- --------- --------- ---------
Total from investment operations .......... (.24) .66 .95 .58 1.04 .11
--------- --------- --------- --------- --------- ---------
Less distributions from:
Net investment income .................... (.31)(2) (.62) (.64) (.65) (.64) (.65)
Net realized gains ....................... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ............ $ 11.41 (4) $ 11.96 $ 11.92 $ 11.61 $ 11.68 $ 11.28
========= ========= ========= ========= ========= =========
Total return* ............................. (2.05%) 5.63% 8.37% 5.13% 9.43% 1.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $ 677,939 $ 681,818 $ 636,929 $ 574,691 $ 564,864 $ 533,937
Ratios to average net assets:
Expenses ................................. .66%** .65% .66% .64% .65% .63%
Net investment income .................... 5.06%** 5.06% 5.34% 5.58% 5.65% 5.86%
Portfolio turnover rate ................... 5.59% 5.43% 12.77% 8.87% 12.04% 31.05%
CLASS C
- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning of period ...... $ 12.03 $ 11.98 $ 11.66 $ 11.72 $ 11.30
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income .................... .26 .54 .56 .57 .49
Net realized and unrealized gains (losses) (.55) .06 .33 (.05) .40
--------- --------- --------- --------- ---------
Total from investment operations .......... (.29) .60 .89 .52 .89
--------- --------- --------- --------- ---------
Less distributions from:
Net investment income .................... (.27)(3) (.55) (.57) (.58) (.47)
Net realized gains ....................... -- (4) -- -- -- --
--------- --------- --------- --------- ---------
Net asset value, end of period ............ $ 11.47 $ 12.03 $ 11.98 $ 11.66 $ 11.72
========= ========= ========= ========= =========
Total return* ............................. (2.40%) 5.09% 7.84% 4.57% 8.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $ 51,770 $ 48,715 $ 28,139 $ 13,095 $ 4,542
Ratios to average net assets:
Expenses ................................. 1.22%** 1.21% 1.21% 1.21% 1.23%**
Net investment income .................... 4.50%** 4.50% 4.77% 5.01% 5.15%**
Portfolio turnover rate ................... 5.59% 5.43% 12.77% 8.87% 12.04%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C.
(2)Includes distributions in excess of net investment income in the amount of
$.007.
(3)Includes distributions in excess of net investment income in the amount of
$.006.
(4)Includes distribution of net realized gains in the amount of $.003.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.9%
BONDS 98.9%
Aberdeen Township, Refunding, FGIC Insured, 5.70%, 2/01/22 ............................... $ 4,100,000 $ 4,135,424
Allamuchy Town Board of Education COP,
MBIA Insured, 6.00%, 11/01/14 .......................................................... 1,000,000 1,042,390
Atlantic City Municipal Utilities Authority Revenue,
Water System, Pre-Refunded, 7.75%, 5/01/17 ............................................. 2,000,000 2,091,720
Atlantic County Improvement Authority Luxury Tax Revenue,
Convention Center Project, MBIA Insured, ETM, 7.40%, 7/01/16 ........................... 9,500,000 11,487,305
Atlantic County Utilities Authority, Solid Waste Revenue,
7.00%, 3/01/08 ........................................................................ 2,000,000 1,991,160
7.125%, 3/01/16 ....................................................................... 6,600,000 6,596,766
Bedminister Township Board of Education COP,
Pre-Refunded, 7.125%, 9/01/10 .......................................................... 2,000,000 2,123,880
Bergen County Utility Authority Solid Waste System Revenue,
Series A, FGIC Insured, 6.25%, 6/15/11 ................................................. 1,325,000 1,395,835
Camden County Improvement Authority Health System Revenue,
Catholic Health East, Series B, AMBAC Insured, 5.00%, 11/15/28 ......................... 11,600,000 10,315,184
Camden County Municipal Utilities Authority Sewer Revenue,
Refunding, FGIC Insured,
5.20%, 7/15/15 ........................................................................ 5,000,000 4,842,250
5.25%, 7/15/16 ........................................................................ 2,005,000 1,941,662
5.125%, 7/15/17 ....................................................................... 4,560,000 4,322,014
5.25%, 7/15/17 ........................................................................ 2,425,000 2,332,414
Cape May County IPC, Financing Authority Revenue,
Refunding, Atlantic City Electric Co., Series A, MBIA Insured, 6.80%, 3/01/21 .......... 5,400,000 6,271,182
Carteret Board of Education COP, MBIA Insured, Pre-Refunded, 6.25%, 4/15/19 .............. 2,750,000 3,014,055
Church Street Corp. Keansburg Elderly Housing Mortgage Revenue,
Refunding, 5.625%, 3/01/11 ............................................................. 1,890,000 1,902,758
Delaware River and Bay Authority Revenue,
FGIC Insured, 5.25%, 1/01/26 ........................................................... 10,200,000 9,764,664
Delaware River Port Authority Pennsylvania and New Jersey Revenue,
Series 1995, FGIC Insured, 5.50%, 1/01/26 .............................................. 24,000,000 23,702,160
Essex County Improvement Authority Revenue,
MBIA Insured, Pre-Refunded, 6.00%, 12/01/17 ........................................... 2,510,000 2,683,843
Utilities System, Orange Franchise, Series A,
MBIA Insured, 5.375%, 7/01/18 .................................................... 1,400,000 1,369,886
Evesham Municipal Utilities Authority Revenue,
Series B, MBIA Insured, 7.00%, 7/01/10 ................................................. 3,000,000 3,062,460
Freehold Township Board of Education, FSA Insured, 5.40%, 7/15/28 ........................ 1,080,000 1,049,177
Gloucester County Improvement Authority Revenue,
Justice Complex Lease Project, Pre-Refunded, 7.50%, 12/15/10 ........................... 1,000,000 1,020,820
Gloucester County Improvement Authority Solid Waste Resource
Recovery Revenue, SES Gloucester Co. LP Project, Series B, 8.375%, 7/01/10 ............ 275,000 275,963
Guam Power Authority Revenue, Refunding, Series A, 5.25%, 10/01/34 ....................... 4,000,000 3,584,000
Hamilton Township Board of Education COP,
Series B, FSA Insured, 7.00%, 12/15/15 ................................................. 4,670,000 4,937,217
Highland Park School District GO, Refunding, MBIA Insured, 5.125%, 2/15/25 ............... 7,120,000 6,663,964
Howell Township GO, Refunding, FGIC Insured, 6.80%, 1/01/14 .............................. 1,750,000 1,860,198
Hudson County Improvement Authorities Facilities Lease Revenue,
Hudson County Lease Project, FGIC Insured, Pre-Refunded, 6.00%, 12/01/25 .............. 2,000,000 2,138,520
Hudson County Improvement Authority Solid Waste Systems Revenue,
Koppers Site Project, Series A, 6.125%, 1/01/29 ........................................ 6,510,000 6,443,728
Mercer County Improvement Authority Revenue, Library Systems,
Series A, Pre-Refunded, 6.00%, 12/01/14 ................................................ 2,500,000 2,691,675
Middlesex County COP, MBIA Insured,
5.30%, 6/15/29 ........................................................................ 5,000,000 4,694,050
Pre-Refunded, 6.00%, 8/15/14 .......................................................... 1,500,000 1,600,215
Pre-Refunded, 6.125%, 2/15/19 ......................................................... 2,300,000 2,465,117
Middlesex County Improvement Authority Revenue,
Guaranteed Educational Services, Commission Project,
Pre-Refunded, 6.00%, 9/15/14 .......................................................... 2,000,000 2,167,600
Middlesex County Utilities Authority Sewer Revenue,
Refunding, Series A, FGIC Insured,
5.375%, 9/15/15 ....................................................................... 2,100,000 2,087,694
5.125%, 12/01/16 ...................................................................... 9,000,000 8,616,690
Middletown Township GO, Board of Education, MBIA Insured, 5.85%,
8/01/24 ............................................................................... 4,295,000 4,368,101
8/01/25 ............................................................................... 4,300,000 4,378,690
Moorestown Township School District GO, FGIC Insured, 5.00%, 1/01/26 ..................... 1,000,000 921,680
Mount Laurel Township Board of Education GO, FGIC Insured, 5.40%,
8/01/16 ............................................................................... 2,155,000 2,147,802
8/01/17 ............................................................................... 2,405,000 2,385,808
New Jersey EDA,
Auto Parking Revenue, Blair Development Co., FGIC Insured, 5.60%, 10/15/26 ............ 2,000,000 1,977,860
EDR, School Revenue, Blair Academy, 1995 Project, Series N, 6.90%, 12/01/11 ........... 3,545,000 3,729,269
EDR, School Revenue, Blair Academy, 1995 Project, Series P, 6.90%, 12/01/11 ........... 395,000 415,532
Heating and Cooling Revenue, Trigen-Trenton Project, Series A, 6.20%, 12/01/10 ........ 6,370,000 6,514,599
Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.10%, 12/01/04 ........ 3,245,000 3,317,526
Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.20%, 12/01/07 ........ 2,720,000 2,790,312
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
<S> <C> <C>
New Jersey EDA, (cont.)
Market Transition Facilities Revenue,
Senior Lien, Series A, MBIA Insured, 5.875%, 7/01/11 .......................... $ 3,000,000 $ 3,158,880
Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project,
Series A, AMBAC Insured, 6.25%, 8/01/24 ....................................... 8,200,000 8,572,444
PCR, Jersey Central Power and Light, 7.10%, 7/01/15 ................................. 550,000 583,561
School Revenue, Blair Academy, 1995 Project, Series A, 5.85%, 9/01/16 ............... 1,640,000 1,644,100
State Lease Revenue, Liberty State Park Lease Rental,
Refunding, AMBAC Insured, 5.75%, 3/15/20 ...................................... 4,605,000 4,648,149
State Lease Revenue, Liberty State Park Lease Rental,
Refunding, AMBAC Insured, 5.75%, 3/15/22 ...................................... 3,315,000 3,339,332
Terminal Revenue, GATX Terminals Corp. Project, 6.65%, 9/01/22 ...................... 7,440,000 7,787,150
Water Facilities Revenue, Hackensack Water Co. Project,
Refunding, Series A, MBIA Insured, 5.80%, 3/01/24 ............................. 1,000,000 1,007,520
Water Facilities Revenue, Middlesex Water Co. Project, 7.25%, 7/01/21 ............... 6,000,000 6,319,380
New Jersey EDA Revenue,
Educational Testing Service, Refunding, Series A,
MBIA Insured, 4.75%, 5/15/25 ................................................... 3,000,000 2,553,240
Hillcrest Health Services System Project,
Refunding, AMBAC Insured, 5.375%, 1/01/16 ...................................... 2,500,000 2,458,475
St. Barnabas Project, Series A, MBIA Insured, 5.375%, 7/01/27 ....................... 4,375,000 4,159,838
Transportation Project Sub-Lease, Series A, FSA Insured, 5.00%, 5/01/18 ............. 2,000,000 1,868,600
New Jersey Health Care Facilities Financing Authority Revenue,
Atlantic City Medical Center, Series C, 6.80%, 7/01/11 .............................. 2,500,000 2,646,925
Atlantic Health Systems, Series A, AMBAC Insured, 5.00%, 7/01/27 .................... 7,500,000 6,732,675
Berkeley Heights Convalescent Hospital, AMBAC Insured, 5.00%, 7/01/26 ............... 6,000,000 5,365,380
Beth Israel Hospital Association Passaic, 7.80%, 7/01/04 ............................ 2,345,000 2,398,935
Beth Israel Hospital Association Passaic, Refunding, 7.875%, 7/01/07 ................ 1,000,000 1,023,050
Burdette Tomlin Memorial Hospital, 5.50%, 7/01/29 ................................... 5,725,000 5,397,244
Cathedral Health Service, Pre-Refunded, 7.25%, 2/15/21 .............................. 2,020,000 2,146,129
Cathedral Health Services, Refunding, MBIA Insured, 5.25%, 8/01/21 .................. 5,000,000 4,732,150
Cathedral Health, Series A, FHA Insured, Pre-Refunded, 7.25%, 2/15/10 ............... 9,275,000 9,854,131
Christian Health Care Center, Refunding, Series A, 5.50%, 7/01/18 ................... 1,200,000 1,104,816
East Orange General Hospital, Series B, 7.75%, 7/01/20 .............................. 5,445,000 5,635,031
Elizabeth General Medical Center, Series C, 7.375%, 7/01/15 ......................... 4,890,000 5,045,698
Franciscan St. Mary's Hospital, 5.875%, 7/01/12 ..................................... 5,150,000 5,138,052
Hackensack Medical Center, FGIC Insured, Pre-Refunded, 6.25%, 7/01/21 ............... 2,400,000 2,488,944
Hackensack University Medical Center,
Refunding, Series B, MBIA Insured, 5.20%, 1/01/28 .............................. 5,000,000 4,630,450
Holy Name Hospital, 6.00%, 7/01/25 .................................................. 3,000,000 2,968,620
Holy Name Hospital, AMBAC Insured, 5.25%, 7/01/20 ................................... 4,380,000 4,187,368
Holy Name Hospital, Series B, AMBAC Insured,
Pre-Refunded, 7.00%, 7/01/08 .................................................. 2,000,000 2,093,320
Jersey Shore Medical Center, Refunding, AMBAC Insured, 5.875%, 7/01/24 .............. 1,525,000 1,616,332
Jersey Shore Medical Center, Refunding, AMBAC Insured, 5.875%, 7/01/24 .............. 975,000 981,611
John F. Kennedy Health Systems, Obligation Group Revenue,
FGIC Insured, 5.70%, 7/01/25 .................................................. 5,000,000 5,008,950
John F. Kennedy Medical Center/Hartwyck,
Refunding, MBIA Insured, 5.00%, 7/01/25 ....................................... 7,855,000 7,037,687
Medical Center at Princeton Obligation Group, AMBAC Insured, 5.00%, 7/01/28 ......... 7,000,000 6,228,600
Meridian Health Systems Obligation Group, FSA Insured, 5.375%, 7/01/24 .............. 6,500,000 6,228,950
Meridian Health Systems Obligation Group, FSA Insured, 5.25%, 7/01/29 ............... 9,050,000 8,456,139
Monmouth Medical Center, Series C, FSA Insured, Pre-Refunded, 6.25%, 7/01/16 ........ 4,900,000 5,351,535
Monmouth Medical Center, Series C, FSA Insured,
Pre-Refunded, 6.25%, 7/01/24 .................................................. 8,250,000 9,010,238
New Jersey Geriatric Center of Workmen's Circle Inc.,
Series A, FHA Insured, 8.00%, 2/01/28 ......................................... 125,000 127,853
Newcomb Medical Center, Series A, 7.875%, 7/01/03 ................................... 2,075,000 2,109,943
Pascack Valley Hospital Association, 5.125%, 7/01/28 ................................ 6,000,000 5,109,720
Pascack Valley Hospital, Pre-Refunded, 6.90%, 7/01/21 ............................... 3,565,000 3,797,153
Riverview Medical Center, AMBAC Insured, Pre-Refunded, 5.875%, 7/01/16 .............. 10,000,000 10,760,400
Shoreline Behavioral Health, MBIA Insured, 5.50%, 7/01/27 ........................... 1,500,000 1,462,335
Southern Ocean County Hospital, FSA Insured, 5.00%, 7/01/27 ......................... 2,000,000 1,785,220
St. Barnabas Health, Refunding, Series B, MBIA Insured, 5.00%, 7/01/24 .............. 13,000,000 11,734,190
St. Joseph's Hospital and Medical Center,
Refunding, Connie Lee Insured, 5.75%, 7/01/16 ................................ 2,050,000 2,088,151
St. Joseph's Hospital and Medical Center,
Refunding, Connie Lee Insured, 6.00%, 7/01/26 ................................ 1,000,000 1,021,880
Wayne General Hospital, Series B, Pre-Refunded, 5.75%, 8/01/11 ...................... 1,680,000 1,800,086
Wayne General Hospital, Series B, Pre-Refunded, 5.875%, 8/01/18 ..................... 1,000,000 1,076,930
New Jersey State Building Authority Revenue, Refunding, 5.00%, 6/15/15 ................. 5,000,000 4,783,850
New Jersey State Educational Facilities Authority Revenue,
Jersey State College, Series D, MBIA Insured, Pre-Refunded, 6.125%, 7/01/22 ......... 2,000,000 2,133,200
New Jersey Institute of Technology Revenue,
Refunding, Series A, MBIA Insured, 6.00%, 7/01/24 ............................. 1,455,000 1,499,159
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
<S> <C> <C>
New Jersey State Educational Facilities Authority Revenue, (cont.)
New Jersey Institute of Technology, Series 95-E, MBIA Insured, 5.375%, 7/01/25 ........ $ 2,500,000 $ 2,400,400
New Jersey Institute of Technology, Series A, MBIA Insured, 6.00%, 7/01/15 ............ 4,000,000 4,144,400
Princeton University, Refunding, Series A, 5.00%, 7/01/29 ............................. 5,000,000 4,553,600
Princeton University, Series C, 5.25%, 7/01/25 ........................................ 2,760,000 2,650,511
Rider College, Series D, AMBAC Insured, 6.20%, 7/01/17 ................................ 3,000,000 3,143,340
Rowan College, Series E, AMBAC Insured, 6.00%, 7/01/26 ................................ 9,810,000 10,024,643
Seton Hall University Project, Refunding, Series E, MBIA Insured, 5.60%, 7/01/16 ...... 1,765,000 1,779,526
Seton Hall University Project, Series D, 7.00%, 7/01/21 ............................... 2,665,000 2,805,446
Seton Hall University Project, Series D, Pre-Refunded, 7.00%, 7/01/21 ................. 1,735,000 1,852,598
St. Peters College, Series B, 5.50%, 7/01/27 .......................................... 2,000,000 1,840,040
Stevens Institute of Technology, Series I, 5.00%, 7/01/18 ............................. 1,100,000 1,003,420
Stevens Institute of Technology, Series I, 5.00%, 7/01/28 ............................. 1,575,000 1,397,419
Trenton State College, Series B, AMBAC Insured, Pre-Refunded, 6.125%, 7/01/19 ......... 4,780,000 5,156,234
Trenton State College, Series B, AMBAC Insured, Pre-Refunded, 6.125%, 7/01/24 ......... 7,845,000 8,462,480
University of Medical Dentistry, Series C, AMBAC Insured, 5.20%, 12/01/19 ............. 1,000,000 952,990
University of Medical Dentistry, Series C, AMBAC Insured, 5.125%, 12/01/29 ............ 2,700,000 2,466,315
New Jersey State Highway Authority Garden State Parkway, Senior Parkway Revenue,
6.20%, 1/01/10 ........................................................................ 5,000,000 5,409,850
6.25%, 1/01/14 ........................................................................ 2,500,000 2,628,600
6.00%, 1/01/16 ........................................................................ 2,900,000 2,962,756
New Jersey State Housing and Mortgage Finance Agency MFHR,
Montclarion Project, Series J, FHA Insured, 7.70%, 11/01/29 ........................... 2,155,000 2,223,141
Refunding, Series A, AMBAC Insured, 6.00%, 11/01/14 ................................... 5,000,000 5,154,450
Refunding, Series A, AMBAC Insured, 6.05%, 11/01/20 ................................... 12,500,000 12,854,000
Regency Park Project, Series H, 7.70%, 11/01/30 ....................................... 450,000 460,292
Series A, AMBAC Insured, 5.55%, 5/01/27 ............................................... 2,000,000 1,920,720
New Jersey State Housing and Mortgage Finance Agency Revenue,
Home Buyer, Series B, MBIA Insured, 7.90%, 10/01/22 ................................... 425,000 433,343
Home Buyer, Series D, MBIA Insured, 7.70%, 10/01/29 ................................... 2,180,000 2,225,453
Home Buyer, Series J, MBIA Insured, 6.20%, 10/01/25 ................................... 4,980,000 5,098,574
Home Buyer, Series N, MBIA Insured, 6.35%, 10/01/27 ................................... 4,000,000 4,132,240
Home Buyer, Series U, MBIA Insured, 5.85%, 4/01/29 .................................... 12,000,000 12,062,880
Section 8, Refunding, Series 1, 6.70%, 11/01/28 ....................................... 2,885,000 3,033,722
Section 8, Refunding, Series A, 6.95%, 11/01/13 ....................................... 12,400,000 13,067,120
(b)SFMR, Home Bury, Series Z, MBIA Insured, 5.70%, 10/01/17 ............................ 6,325,000 6,343,153
New Jersey State Sports and Exposition Authority
Convention Center Luxury Tax, Series A, MBIA Insured, Pre-Refunded,
6.60%, 7/01/15 ........................................................................ 8,000,000 8,632,960
6.25%, 7/01/20 ........................................................................ 6,800,000 7,275,252
Newark Board of Education, MBIA Insured, 5.875%, 12/15/14 ................................ 3,250,000 3,379,318
North Brunswick Township Board of Education GO,
Refunding, FGIC Insured, 5.00%, 2/01/15 ............................................... 2,000,000 1,923,000
Northern Mariana Islands Commonwealth Ports Authority
Seaport Revenue, Series A, 6.85%, 3/15/28 ............................................. 1,985,000 2,035,399
Ocean Township Municipal Utilities Authority Revenue,
Refunding, AMBAC Insured, 5.80%, 12/01/18 ............................................. 7,400,000 7,479,106
Orange Township GO, Municipal Utility and Lease,
Refunding, Series C, MBIA Insured, 5.10%, 12/01/17 .................................... 3,035,000 2,899,396
Plainfield Board Education, FSA Insured, 5.00%, 8/01/26 .................................. 6,050,000 5,555,957
Port Authority of New York and New Jersey Revenue,
Consolidated 67th Series, 6.875%, 1/01/25 ............................................. 2,500,000 2,546,975
Consolidated 67th Series, AMBAC Insured, 6.875%, 1/01/25 .............................. 750,000 763,943
Consolidated 71st Series, 6.50%, 1/15/26 .............................................. 2,500,000 2,577,825
Consolidated 72nd Series, 7.35%, 10/01/27 ............................................. 7,000,000 7,598,710
Consolidated 74th Series, 6.75%, 8/01/26 .............................................. 1,000,000 1,043,720
Consolidated 84th Series, 6.00%, 1/15/28 .............................................. 1,125,000 1,154,846
Consolidated 94th Series, 6.00%, 12/01/16 ............................................. 2,000,000 2,083,980
Consolidated 94th Series, 6.00%, 6/01/17 .............................................. 5,000,000 5,209,950
Consolidated, 109th Series, FGIC Insured, 5.375%, 7/15/22 ............................. 4,645,000 4,528,364
Delta Air Lines Special Project, Series 1, 6.95%, 6/01/08 ............................. 5,000,000 5,320,650
Special Obligation Revenue, 4th Installment, Special Project, 6.75%, 10/01/11 ......... 2,500,000 2,662,000
Special Obligation Revenue, Consolidated,
102nd Series, MBIA Insured, 5.75%, 10/15/23 ..................................... 5,000,000 5,117,350
Special Obligation Revenue, John F. Kennedy
International Air Terminal, MBIA Insured, 5.75%, 12/01/22 ....................... 8,000,000 8,011,440
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
<S> <C> <C>
Puerto Rico Commonwealth GO, Pre-Refunded, 6.45%, 7/01/17 .............................. $ 3,000,000 $ 3,303,870
Puerto Rico Commonwealth Highway and
Transportation Authority Revenue, Series Q, Pre-Refunded, 8.00%, 7/01/18 ............ 8,000,000 8,444,720
Puerto Rico Commonwealth Infrastructure Financing
Authority Special Tax Revenue, Series A,
7.90%, 7/01/07 ..................................................................... 120,000 121,350
7.75%, 7/01/08 ..................................................................... 1,350,000 1,370,385
7.50%, 7/01/09 ..................................................................... 100,000 101,271
Puerto Rico Commonwealth Urban Renewal and
Housing Corp. Commonwealth Appropriation, Refunding, 7.875%, 10/01/04 ............... 1,000,000 1,022,380
Puerto Rico Electric Power Authority Revenue,
Series T, 6.00%, 7/01/16 ........................................................... 11,535,000 11,911,502
Series X, 6.00%, 7/01/15 ........................................................... 2,000,000 2,073,020
Series X, Pre-Refunded, 6.125%, 7/01/21 ............................................ 5,000,000 5,456,900
Puerto Rico HFC Revenue,
MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ......................................... 4,185,000 4,302,180
Sixth Portfolio, Section 8 Assisted, FHA Mortgage Insured,
Pre-Refunded, 7.75%, 12/01/26 ................................................ 125,000 146,748
Puerto Rico HFC, SFMR, Portfolio No. 1,
Series B, GNMA Secured, 7.65%, 10/15/22 ............................................. 470,000 486,629
Rutgers State University, Series A, 6.50%, 5/01/18 .................................... 4,250,000 4,501,940
Salem County IPC, Financing Authority Revenue, Public Services, Electric and Gas Co.,
Refunding, Series D, MBIA Insured, 6.55%, 10/01/29 ................................... 5,000,000 5,421,350
South Brunswick Township Board of Education GO,
Refunding, Series AA, FGIC Insured, 5.50%, 8/01/24 ................................. 1,720,000 1,701,510
South Jersey Transportation Authority Transportation Systems Revenue,
AMBAC Insured, 5.00%, 11/01/29 ..................................................... 16,525,000 14,779,795
Stony Brook Regional Sewerage Authority Revenue,
Series A, Pre-Refunded, 7.40%, 12/01/09 ............................................ 1,000,000 1,029,000
Union County Improvement Authority Revenue,
Plainfield Board of Education, FGIC Insured, Pre-Refunded, 5.85%, 8/01/26 ........... 5,000,000 5,376,300
Union County Utilities Authority Solid Waste Revenue,
sub. leased, Ogden Martin, Series A, AMBAC Insured, 5.35%, 6/01/23 .................. 2,900,000 2,732,612
University of Medicine and Dentistry COP,
Series A, MBIA Insured, 5.00%, 9/01/22 .............................................. 1,700,000 1,548,547
University of Medicine and Dentistry Revenue, Series C, Pre-Refunded, 7.20%,
12/01/09 ........................................................................... 750,000 771,390
12/01/19 ........................................................................... 725,000 745,668
Virgin Islands PFA Revenue, Fund Loan Notes, Senior Lien, Refunding, Series A,
5.50%, 10/01/18 .................................................................... 3,045,000 2,916,562
5.50%, 10/01/15 .................................................................... 2,500,000 2,414,525
5.50%, 10/01/22 .................................................................... 2,000,000 1,899,740
------------
TOTAL BONDS ............................................................................ 721,556,209
------------
ZERO COUPON BONDS
(d)Middlesex County COP, MBIA Insured, 6/15/24 ......................................... 1,000,000 241,280
------------
TOTAL LONG TERM INVESTMENTS (COST $709,221,163) ....................................... 721,797,489
------------
(a)SHORT TERM INVESTMENTS .1%
New Jersey State Turnpike Authority Revenue,
Series D, FGIC Insured, Weekly VRDN and Put, 2.50%, 1/01/18 (COST $400,000) ......... 400,000 400,000
------------
TOTAL INVESTMENTS (COST $709,621,163) 99.0% ........................................... 722,197,489
OTHER ASSETS, LESS LIABILITIES 1.0% ................................................... 7,512,061
------------
NET ASSETS 100.0% ..................................................................... $729,709,550
============
</TABLE>
See glossary of terms on page 110.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable rate adjustment formula and an unconditional right of
demand to receive payment of the principal balance plus accrued interest at
specified dates.
(b) Sufficient collateral has been segregated for securities
traded on a when-issued or delayed delivery basis.
(d) Zero coupon/step-up bonds. The current effective yield may vary. The
original accretion rate will remain constant.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN OREGON TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 -----------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ------- --------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.83 $ 11.86 $ 11.55 $ 11.60 $ 11.22 $ 11.70
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................ .29 .59 .62 .63 .63 .63
Net realized and unrealized gains (losses) ... (.59) (.01) .31 (.05) .38 (.49)
-------- -------- -------- -------- -------- --------
Total from investment operations .............. (.30) .58 .93 .58 1.01 .14
-------- -------- -------- -------- -------- --------
Less distributions from net investment income . (.30) (.61) (.62) (.63) (.63) (.62)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ................ $ 11.23 $ 11.83 $ 11.86 $ 11.55 $ 11.60 $ 11.22
======== ======== ======== ======== ======== ========
Total return* ................................. (2.62%) 5.12% 8.21% 5.13% 9.19% 1.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $471,951 $483,664 $427,022 $384,003 $375,415 $349,458
Ratios to average net assets:
Expenses ..................................... .66%** .67% .67% .66% .66% .65%
Net investment income ........................ 4.98%** 5.00% 5.33% 5.52% 5.51% 5.71%
Portfolio turnover rate ....................... 15.60% 10.65% 12.18% 4.47% 6.52% 26.44%
CLASS C
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.90 $ 11.92 $ 11.61 $ 11.65 $ 11.23
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................ .26 .53 .56 .56 .47
Net realized and unrealized gains (losses) ... (.59) -- .31 (.04) .41
-------- -------- -------- -------- --------
Total from investment operations .............. (.33) .53 .87 .52 .88
-------- -------- -------- -------- --------
Less distributions from net investment income . (.26) (.55) (.56) (.56) (.46)
-------- -------- -------- -------- --------
Net asset value, end of period ................ $ 11.31 $ 11.90 $ 11.92 $ 11.61 $ 11.65
======== ======== ======== ======== ========
Total return* ................................. (2.88%) 4.59% 7.66% 4.59% 7.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 36,911 $ 32,962 $ 15,946 $ 7,100 $ 2,044
Ratios to average net assets:
Expenses ..................................... 1.22%** 1.23% 1.22% 1.23% 1.24%**
Net investment income ........................ 4.44%** 4.44% 4.74% 4.93% 4.87%**
Portfolio turnover rate ....................... 15.60% 10.65% 12.18% 4.47% 6.52%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior to May
1, 1994, dividends from net investment income were reinvested at the offering
price.
**Annualized
***Based on average shares outstanding.
(1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.4%
BONDS 99.3%
Bay Area Health District Hospital Facility Authority,
Health Facilities Revenue, Evergreen Court Project, 7.25%, 10/01/14 .............. $ 2,000,000 $ 2,087,040
Benton County Hospital Facilities Authority Revenue,
Samaritan Health Services Project, Refunding,
5.20%, 10/01/17 ................................................................. 4,000,000 3,728,960
5.125%, 10/01/28 ................................................................ 4,500,000 4,011,975
Benton County Hospital Facilities Authority,
Good Samaritan Hospital, Corvallis, Pre-Refunded, 6.25%, 10/01/09 ................ 1,125,000 1,195,088
Chemeketa Community College District,
FGIC Insured, Pre-Refunded, 5.80%, 6/01/12 ....................................... 1,000,000 1,062,870
Clackamas Community College District,
MBIA Insured, Pre-Refunded, 5.80%, 6/01/26 ....................................... 1,000,000 1,062,870
Clackamas County Health Facilities Authority Hospital Revenue,
Adventist Health, Refunding, Series A, MBIA Insured, 6.35%, 3/01/09 .............. 4,945,000 5,214,601
Clackamas County Hospital Facilities Authority Revenue,
Gross Willamette Falls, Refunding, 5.75%, 4/01/15 ............................... 2,250,000 2,224,823
Jennings Lodge Project, GNMA Secured, 7.50%, 10/20/31 ........................... 2,990,000 3,094,680
Kaiser Permanente, Series A, 6.50%, 4/01/11 ..................................... 1,635,000 1,700,923
Kaiser Permanente, Series A, 5.375%, 4/01/14 .................................... 2,500,000 2,420,150
Kaiser Permanente, Series A, 6.25%, 4/01/21 ..................................... 4,950,000 5,094,689
Sisters of Providence Project, 8.125%, 10/01/07 ................................. 110,000 110,628
(b)Willamette Falls Hospital Project, 6.00%, 4/01/19 ............................. 1,000,000 985,240
Willamette View Inc. Project, Refunding, 6.10%, 11/01/12 ........................ 500,000 501,825
Willamette View Inc. Project, Refunding, 6.30%, 11/01/21 ........................ 1,500,000 1,499,835
Clackamas County USD No. 115,
AMBAC Insured, Pre-Refunded, 6.15%, 6/01/14 ...................................... 4,000,000 4,347,160
Clairmont Water District Revenue, 6.50%, 2/01/12 ................................... 1,125,000 1,140,761
Deschutes County Hospital Facilities Authority
Hospital Revenue, St. Charles Medical Center, 6.00%, 1/01/13 ..................... 3,000,000 3,115,980
Douglas County Hospital Facilities Authority Revenue,
Catholic Health Facilities, Series B, MBIA Insured, 6.00%, 11/15/15 .............. 1,950,000 2,044,907
Emerald People's Utility District Electric System Revenue,
Series B, AMBAC Insured, Pre-Refunded, 7.30%, 11/01/11 ........................... 500,000 502,975
Eugene Electric Utility System Revenue, Pre-Refunded,
6.65%, 8/01/10 .................................................................. 655,000 684,514
6.70%, 8/01/11 .................................................................. 700,000 732,172
Eugene Public Safety Facilities, FGIC Insured, 5.70%, 6/01/16 ...................... 500,000 510,320
Eugene Trojan Nuclear Project Revenue, Refunding, 5.90%, 9/01/09 ................... 840,000 845,166
Guam Airport Authority Revenue, Series B,
6.60%, 10/01/10 ................................................................. 750,000 796,275
6.70%, 10/01/23 ................................................................. 1,900,000 2,021,239
Guam Power Authority Revenue,
Refunding, Series A, 5.25%, 10/01/34 ............................................ 10,000,000 8,960,000
Refunding, Series A, 5.125%, 10/01/29 ........................................... 2,000,000 1,780,320
Series A, Pre-Refunded, 6.30%, 10/01/12 ......................................... 825,000 887,279
Hermiston GO, AMBAC Insured, 6.00%, 8/01/15 ........................................ 1,000,000 1,040,810
Hillsborough Hospital Facilities Authority Revenue, Refunding, 5.75%, 10/01/12 ..... 205,000 205,580
Klamath Falls Intercommunity Hospital Revenue, Merle West Medical Center Project,
7.00%, 6/01/02 .................................................................. 1,175,000 1,233,832
7.25%, 6/01/06 .................................................................. 2,310,000 2,429,496
Lane County PCR, Weyerhaeuser Co. Project, Refunding, 6.50%, 7/01/09 ............... 11,575,000 12,277,834
Lebanon Wastewater Revenue, Refunding, 5.875%, 6/01/20 ............................. 2,425,000 2,386,224
Marion County COP, Courthouse Square Project,
Series A, MBIA Insured, 5.00%, 6/01/23 ........................................... 1,000,000 910,650
Marion County Housing Authority Revenue,
Elliott Residence Project, GNMA Secured, 7.50%, 10/20/25 ......................... 1,240,000 1,353,733
Medford Hospital Facilities Authority Revenue,
Asante Health System, Series A, MBIA Insured, 5.00%, 8/15/18 .................... 9,500,000 8,797,380
Asante Health System, Series A, MBIA Insured, 5.00%, 8/15/24 .................... 6,300,000 5,732,055
Asante Health Systems, Series B, MBIA Insured, 5.125%, 8/15/28 .................. 6,000,000 5,561,400
Gross Rogue Valley Health Services, MBIA Insured,
Pre-Refunded, 6.75%, 12/01/20 .............................................. 4,475,000 4,712,265
Metropolitan Service District Convention Center GO, Series A, 6.25%, 1/01/13 ....... 4,865,000 4,988,620
Multnomah County COP, Series A, 4.75%, 8/01/16 ..................................... 1,825,000 1,627,389
Multnomah Educational Service District, FSA Insured, 5.40%, 6/01/17 ................ 1,000,000 993,150
Northern Mariana Islands Commonwealth Ports Authority
Seaport Revenue, Series A, 6.85%, 3/15/28 ........................................ 3,440,000 3,527,342
Oak Lodge Water District GO, AMBAC Insured,
7.40%, 12/01/08 ................................................................. 215,000 238,629
7.50%, 12/01/09 ................................................................. 215,000 238,667
Ontario Catholic Health Revenue,
Dominican Sisters Holy Rosary, 6.10%, 11/15/17 ................................... 1,500,000 1,559,985
Oregon City Sewer Revenue, Pre-Refunded, 6.875%, 10/01/19 .......................... 4,000,000 4,480,800
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
<S> <C> <C>
Oregon Health Sciences University Revenue, Series A, MBIA Insured, 5.25%,
7/01/25 ............................................................................... $ 100,000 $ 95,901
7/01/28 ............................................................................... 1,750,000 1,677,200
Oregon State Department of Administrative Services COP,
Series A, AMBAC Insured, 5.00%, 5/01/24 ............................................... 35,000,000 31,731,000
Series A, AMBAC Insured, Pre-Refunded, 5.80%, 5/01/24 ................................. 5,000,000 5,351,750
Series C, MBIA Insured, 5.75%, 5/01/17 ................................................ 2,000,000 2,045,800
Oregon State Department of General Services COP,
Real Property Financing Program,
Series A, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/15 .......................... 750,000 792,645
Real Property Financing Program,
Series A, MBIA Insured, Pre-Refunded, 7.20%, 1/15/15 ........................... 10,000 10,326
Refunding, Series D, MBIA Insured, 5.80%, 3/01/15 ..................................... 1,000,000 1,023,430
Series B, MBIA Insured, Pre-Refunded, 7.20%, 1/15/15 .................................. 150,000 154,886
Series F, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/15 ................................. 950,000 1,004,017
Series G, AMBAC Insured, 6.25%, 9/01/15 ............................................... 750,000 781,395
Oregon State Department of Transportation Revenue GO,
Regional Light Rail Federal Westside Project, MBIA Insured,
6.10%, 6/01/07 ........................................................................ 2,000,000 2,134,760
6.20%, 6/01/08 ........................................................................ 2,500,000 2,674,525
6.25%, 6/01/09 ........................................................................ 1,750,000 1,882,773
Oregon State EDR, Georgia Pacific Corp. Project,
Refunding, Series 183, 5.70%, 12/01/25 ................................................ 1,500,000 1,397,730
Series CLVII, 6.35%, 8/01/25 .......................................................... 18,500,000 18,790,080
Oregon State Elderly Housing GO, Series A, 7.125%, 8/01/30 ............................... 475,000 485,545
Oregon State GO
Alternative Energy Project, Refunding, Series D, 5.00%, 1/01/28 ....................... 4,265,000 3,847,457
Board of Higher Education, 6.50%, 10/01/17 ............................................ 750,000 773,993
Board of Higher Education, Baccalaureate, Series A, 5.00%, 8/01/22 .................... 5,000,000 4,585,000
Board of Higher Education, Baccalaureate, Series A, 5.00%, 8/01/27 .................... 6,000,000 5,431,860
Board of Higher Education, Series A, 5.65%, 8/01/27 ................................... 4,440,000 4,453,098
Board of Higher Education, Series C, 5.65%, 8/01/27 ................................... 1,460,000 1,464,307
Elderly and Disabled Housing Authority, Series A, 6.00%, 8/01/15 ...................... 910,000 940,640
Elderly and Disabled Housing Authority, Series A, 6.00%, 8/01/21 ...................... 455,000 467,676
Elderly and Disabled Housing Authority, Series A, 5.375%, 8/01/28 ..................... 1,950,000 1,839,572
Elderly and Disabled Housing Authority, Series B, 6.10%, 8/01/17 ...................... 1,410,000 1,458,095
Elderly and Disabled Housing Authority, Series B, 6.25%, 8/01/23 ...................... 2,015,000 2,112,586
Elderly and Disabled Housing Authority, Series B, 6.375%, 8/01/24 ..................... 2,155,000 2,258,397
Elderly and Disabled Housing Authority, Series C, 6.50%, 8/01/22 ...................... 6,000,000 6,332,880
Veteran's Welfare, Series 75, 5.85%, 10/01/15 ......................................... 800,000 830,168
Veteran's Welfare, Series 75, 5.875%, 10/01/18 ........................................ 460,000 475,649
Veteran's Welfare, Series 75, 6.00%, 4/01/27 .......................................... 2,655,000 2,740,518
Veteran's Welfare, Series 76-A, 6.05%, 10/01/28 ....................................... 3,000,000 3,121,410
Veteran's Welfare, Series 77, 5.30%, 10/01/29 ......................................... 5,000,000 4,782,750
Oregon State Health, Housing, Educational and Cultural Facilities Authority Revenue,
Lewis and Clark College Project, Series A, MBIA Insured, 6.125%, 10/01/24 ........ 10,500,000 10,998,855
Oregon State Housing and Community Services Department Finance Housing Revenue SFM,
Series A, 5.75%, 7/01/12 .............................................................. 850,000 857,446
Series A, 6.35%, 7/01/14 .............................................................. 2,860,000 2,957,126
Series A, 6.40%, 7/01/18 .............................................................. 1,315,000 1,355,094
Series A, 6.45%, 7/01/26 .............................................................. 2,830,000 2,908,334
Series B, 6.875%, 7/01/28 ............................................................. 12,000,000 12,576,600
Series C, 6.20%, 7/01/15 .............................................................. 2,115,000 2,160,747
Series C, 6.40%, 7/01/26 .............................................................. 1,015,000 1,041,867
Series D, 6.80%, 7/01/27 .............................................................. 1,750,000 1,812,755
Series E, 5.80%, 7/01/16 .............................................................. 790,000 782,400
Series F, 5.65%, 7/01/28 .............................................................. 1,000,000 973,560
Series H, 5.65%, 7/01/28 .............................................................. 2,000,000 1,936,300
Oregon State Housing and Community Services
Department Finance Housing Revenue, Multi-Unit,
Series A, 6.80%, 7/01/13 .............................................................. 6,710,000 6,976,521
Series A, 6.15%, 7/01/21 .............................................................. 910,000 934,206
Series C, 6.85%, 7/01/22 .............................................................. 180,000 186,858
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (unaudited) (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Oregon State Housing and Community Services
Department Mortgage Revenue, SFM Program, Series A, 5.15%, 7/01/27 ........................ $ 2,000,000 $ 1,881,720
Port Astoria GO, MBIA Insured, Pre-Refunded, 6.60%, 9/01/11 ................................. 450,000 471,159
Port Morrow PCR, Idaho Power Co., Boardman Project, 7.25%, 8/01/08 .......................... 2,200,000 2,227,236
Port of Portland International Airport Revenue, Portland International Airport,
Series 7A, MBIA Insured, Pre-Refunded, 6.75%, 7/01/09 .................................... 1,500,000 1,582,590
Series 7B, MBIA Insured, Pre-Refunded, 7.10%, 7/01/21 .................................... 2,800,000 3,251,668
Series 7B, MBIA Insured, Pre-Refunded, 7.10%, 7/01/21 .................................... 200,000 211,686
Series 10, FGIC Insured, 5.75%, 7/01/25 .................................................. 300,000 297,579
Series 12C, FGIC Insured, 5.00%, 7/01/28 ................................................. 2,500,000 2,218,125
Series 12C, FGIC Insured., 5.00%, 7/01/18 ................................................ 1,500,000 1,371,525
Port of Portland International Airport Special
Obligation Revenue, Delta Airlines Inc. Project, 6.20%, 9/01/22 ........................... 4,000,000 4,042,640
Port St. Helens PCR,
Boise Cascade Corp. Project, Refunding, 5.65%, 12/01/27 .................................. 7,750,000 7,164,875
Portland General Electric Co. Project, Series A, 5.25%, 8/01/14 .......................... 3,600,000 3,428,100
Port Umpqua PCR, International Paper Co. ....................................................
Project, Refunding, Series B, 5.20%, 6/01/11 .............................................. 2,200,000 2,137,696
(b)Portland Airport Revenue, Portland International
Airport, Series A, AMBAC Insured, 5.50%, 7/01/24 .......................................... 22,000,000 21,388,840
Portland Airport Way-Urban Renewal and
Redevelopment Tax Increment, Sub-Series B-3, FGIC Insured, Pre-Refunded, 7.60%, 6/01/10 .... 2,825,000 2,903,450
Portland GO, Central City Streetcar Project, Series A,
4.75%, 4/01/21 ........................................................................... 3,600,000 3,153,960
5.00%, 4/01/24 ........................................................................... 2,000,000 1,830,800
Portland Hospital Facilities Authority
Hospital Revenue, Legacy Health System, Refunding,
Series A, AMBAC Insured, 6.70%, 5/01/21 .................................................. 5,500,000 5,735,565
Series B, AMBAC Insured, 6.70%, 5/01/21 .................................................. 8,475,000 8,849,002
Portland Housing Authority MFR, Berry Ridge Project, 6.30%, 5/01/29 ......................... 1,500,000 1,506,075
Portland Housing Authority Revenue, 7.10%, 7/01/15 .......................................... 1,000,000 1,036,540
Portland Hydroelectric Power Revenue,
Bull Run Project, Series C, 7.00%, 10/01/16 ............................................... 635,000 635,210
Portland MFHR, Civic Stadium Housing Project, Series A, 6.00%, 3/01/17 ...................... 1,000,000 1,005,140
Portland Oregon GO, Revenue, Limited Tax, Series A, 5.00%, 4/01/18 .......................... 3,380,000 3,162,328
Portland Sewer System Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 6/01/15 ........................................ 500,000 474,355
Series A, Pre-Refunded, 6.25%, 6/01/15 ................................................... 9,100,000 9,834,279
Portland Urban Renewal and Redevelopment,
Downtown Waterfront, Refunding, Series A, 6.40%, 6/01/08 .................................. 5,555,000 5,802,253
Portland Water System Revenue, Series A, 5.00%, 8/01/16 ..................................... 1,000,000 951,700
Puerto Rico Commonwealth Aqueduct and
Sewer Authority Revenue, Series A, FSA Insured,
Pre-Refunded, 9.00%, 7/01/09 .............................................................. 75,000 88,425
Puerto Rico Commonwealth GO,
Pre-Refunded, 6.45%, 7/01/17 ............................................................. 1,000,000 1,101,290
Public Improvement, Refunding, 5.375%, 7/01/25 ........................................... 1,000,000 956,250
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series Q, Pre-Refunded, 8.00%, 7/01/18 ................................................... 4,000,000 4,222,360
Series Y, 5.50%, 7/01/36 ................................................................. 13,000,000 12,619,750
Series Y, 5.50%, 7/01/26 ................................................................. 7,275,000 7,065,917
Puerto Rico Commonwealth Infrastructure Financing
Authority Special Tax Revenue, Series A, 7.75%, 7/01/08 ................................... 280,000 284,228
Puerto Rico Electric Power Authority Revenue,
Series DD, 5.00%, 7/01/28 ................................................................ 6,000,000 5,338,800
Series R, Pre-Refunded, 6.25%, 7/01/17 ................................................... 2,070,000 2,205,502
Series X, 5.50%, 7/01/25 ................................................................. 2,600,000 2,547,116
Series X, 6.00%, 7/01/15 ................................................................. 2,500,000 2,591,275
Puerto Rico HFC Revenue, Sixth Portfolio,
Section 8 Assisted, FHA Mortgage Insured,
Pre-Refunded, 7.75%, 12/01/26 ............................................................. 395,000 463,722
Puerto Rico HFC, SFMR, Portfolio No. 1,
Series B, GNMA Secured, 7.65%, 10/15/22 ................................................... 180,000 186,368
Puerto Rico Housing Bank and Financing Authority
SFMR, Homeownership Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ......................... 500,000 514,080
Puerto Rico PBA Revenue, Government Facilities, Series B, 5.25%, 7/01/21 .................... 3,700,000 3,488,841
Puerto Rico PBA, Public Education and Health Facilities,
Refunding, Series M, 5.75%, 7/01/15 ....................................................... 2,500,000 2,540,550
Puerto Rico Telephone Authority Revenue,
Series L, Pre-Refunded, 6.125%, 1/01/22 ................................................... 1,100,000 1,155,902
Salem Educational Facilities Revenue,
Willamette University, Refunding, 6.10%, 4/01/14 .......................................... 1,000,000 1,024,380
Salem-Keizer GO, School District No. 24J, 5.00%, 6/01/19 .................................... 15,000,000 13,982,550
Taft-Nelscott-Delake Rural Fire Protection District, 6.00%, 6/01/16 ......................... 1,110,000 1,141,435
Tri-County Metropolitan Transportation District Revenue,
Limited Obligation, Airport Light Rail, Series 1, 5.65%, 6/01/29 .......................... 14,080,000 13,722,509
Unified Sewer Agency Sewer Revenue, Pre-Refunded, 7.00%, 11/01/09 ............................ 2,700,000 2,714,553
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Virgin Islands PFA Revenue, Fund Loan Notes, Senior Lien, Refunding, Series A, 5.50%
10/01/15 .............................................................................. $ 1,635,000 $ 1,579,099
10/01/18 .............................................................................. 2,400,000 2,298,768
Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.30%,
7/01/18 ............................................................................... 2,500,000 2,336,000
7/01/21 ............................................................................... 1,400,000 1,294,286
Wasco County Hospital Facility Authority Hospital Revenue, 7.375%, 7/01/00 ............. 1,035,000 1,054,924
Washington County Housing Authority MFHR,
Bethany Meadows II Project, 5.85%, 9/01/27 ............................................ 1,435,000 1,436,062
Terrace View Project, FNMA Insured, 5.50%, 12/01/17 ................................... 1,725,000 1,711,114
Terrace View Project, FNMA Insured, 5.60%, 12/01/22 ................................... 1,360,000 1,340,740
Washington County School District No. 088 GO, J Sherwood, FSA Insured,
6.10%, 6/01/12 ........................................................................ 190,000 200,404
Pre-Refunded, 6.10%, 6/01/12 .......................................................... 810,000 869,810
Washington County Unified Sewer Agency Revenue, Senior Lien, Series A,
AMBAC Insured, 6.20%, 10/01/10 ........................................................ 470,000 496,503
AMBAC Insured, Pre-Refunded, 6.125%, 10/01/12 ......................................... 1,000,000 1,073,930
Pre-Refunded, 6.20%, 10/01/10 ......................................................... 3,530,000 3,802,869
Western Lane Hospital District Hospital Facilities Authority Revenue, Sisters of
St. Joseph of Peace Health and Hospital Services, Refunding,
MBIA Insured, 5.875%, 8/01/12 ....................................................... 4,400,000 4,598,880
Yamhill County GO, USD No. 029J Newberg, FSA Insured, Pre-Refunded, 6.10%, 6/01/11 ..... 5,000,000 5,371,800
-------------
TOTAL BONDS ............................................................................ 505,046,682
-------------
ZERO COUPON BONDS .1%
(d)Oregon Health Sciences University Revenue, Capital Appreciation, Refunding,
Series A, MBIA Insured, 7/01/21 ........................................................ 2,200,000 642,378
-------------
TOTAL LONG TERM INVESTMENTS (COST $505,153,136) ........................................ 505,689,060
-------------
(a)SHORT TERM INVESTMENTS 3.2%
Oregon State GO,
Series 73E, Weekly VRDN and Put, 3.00%, 12/01/16 ...................................... 2,300,000 2,300,000
Series 73F, Weekly VRDN and Put, 3.00%, 12/01/17 ...................................... 9,300,000 9,300,000
Port of Portland International Airport Special Obligation Revenue, Horizon
Airlines Inc. Project, Daily VRDN and Put, 3.20%, 6/15/27 ............................ 100,000 100,000
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA
Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ........................................ 4,700,000 4,700,000
-------------
TOTAL SHORT TERM INVESTMENTS (COST $16,400,000) ........................................ 16,400,000
TOTAL INVESTMENTS (COST $521,553,136) 102.6% ........................................... 522,089,060
OTHER ASSETS, LESS LIABILITIES (2.6%) .................................................. (13,226,847)
-------------
NET ASSETS 100.0% ...................................................................... $ 508,862,213
=============
</TABLE>
See glossary of terms on page 110
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
(d) Zero coupon/step-up bonds. The current effective yield may vary. The
original accretion rate will remain constant.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 --------------------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 10.52 $ 10.56 $ 10.39 $ 10.44 $ 10.16 $ 10.56
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .27 .55 .58 .60 .62 .62
Net realized and unrealized gains (losses) ... (.53) (.02) .32 (.04) .29 (.41)
-------------------------------------------------------------------------------
Total from investment operations .............. (.26) .53 .90 .56 .91 .21
-------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.28)(3) (.55) (.58) (.61) (.63) (.61)
In excess of net investment income ........... -- (.01) (.01) -- -- --
Net realized gains ........................... -- (.01) (.14) -- -- --
-------------------------------------------------------------------------------
Total distributions ........................... (.28) (.57) (.73) (.61) (.63) (.61)
-------------------------------------------------------------------------------
Net asset value, end of period ................ $ 9.98 $ 10.52 $ 10.56 $ 10.39 $ 10.44 $ 10.16
===============================================================================
Total return* ................................. (2.61%) 5.11% 8.90% 5.53% 9.15% 2.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $707,102 $758,942 $713,141 $658,339 $639,847 $587,366
Ratios to average net assets:
Expenses ..................................... .66%** .65% .65% .64% .64% .63%
Net investment income ........................ 5.16%** 5.17% 5.49% 5.84% 5.96% 6.15%
Portfolio turnover rate ....................... 12.92% 11.11% 12.74% 22.24% 9.71% 12.91%
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 10.57 $ 10.61 $ 10.43 $ 10.47 $ 10.17
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .24 .49 .52 .55 .47
Net realized and unrealized gains (losses) ... (.54) (.03) .33 (.05) .30
-------------------------------------------------------------------------------
Total from investment operations .............. (.30) .46 .85 .50 .77
-------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.24)(2) (.49)(2) (.53) (.54) (.47)
Net realized gains ........................... -- (.01) (.14) -- --
-------------------------------------------------------------------------------
Total distributions ........................... (.24) (.50) (.67) (.54) (.47)
-------------------------------------------------------------------------------
Net asset value, end of period ................ $ 10.03 $ 10.57 $ 10.61 $ 10.43 $ 10.47
===============================================================================
Total return* ................................. (2.87%) 4.50% 8.35% 4.98% 7.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $44,774 $41,917 $25,899 $11,935 $ 3,110
Ratios to average net assets:
Expenses ..................................... 1.22%** 1.21% 1.21% 1.21% 1.22%**
Net investment income ........................ 4.60%** 4.61% 4.89% 5.22% 5.36%**
Portfolio turnover rate ....................... 12.92% 11.11% 12.74% 22.24% 9.71%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior
to May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.004.
(3) Includes distributions in excess of net investment income in the amount of
$.005.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.5%
BONDS 98.8%
Abington School, FGIC Insured, Pre-Refunded, 6.00%, 5/15/26 ................................... $ 2,000,000 $ 2,147,800
Allegheny County Airport Revenue, Pittsburgh International Airport, Refunding,
Series B, MBIA Insured, 5.00%, 1/01/19 ....................................................... 6,000,000 5,498,220
Allegheny County COP, AMBAC Insured, 5.00%, 12/01/28 .......................................... 4,000,000 3,546,440
Allegheny County Higher Education Building Authority, Duquesne University Project,
AMBAC Insured, 5.00%, 3/01/21 ................................................................ 1,000,000 913,880
Allegheny County Hospital Development Authority Revenue,
Allegheny General Hospital Project, Series A, MBIA Insured, 6.25%, 9/01/20 ................... 10,000,000 9,926,100
Allegheny Hospital, South Hills Health System, Series A, MBIA Insured, 5.875%, 5/01/26 ....... 1,700,000 1,713,039
Health Center, Canterbury Place, AMBAC Insured, 5.375%, 12/01/21 ............................. 5,000,000 4,712,050
Health Center, University of Pittsburgh Medical Center, Series B, MBIA Insured,
5.00%, 7/01/16 ............................................................................... 4,000,000 3,707,400
University of Pittsburgh Health Center, Refunding, Series A, MBIA Insured,
5.625%, 4/01/27 .............................................................................. 10,450,000 10,199,305
Allegheny County IDAR,
Environmental Improvement, Refunding, 6.10%, 1/15/18 ......................................... 2,000,000 2,001,240
Environmental Improvement, USX Corp., Refunding, 5.50%, 12/01/29 ............................. 10,000,000 8,973,100
Environmental Improvement, USX Corp., Refunding, 5.60%, 9/01/30 .............................. 7,530,000 6,853,580
Kaufmann Medical Project, Refunding, Series A, MBIA Insured, 6.80%, 3/01/15 .................. 1,000,000 1,065,720
Allegheny County RDAR, Home Improvement Loan, Refunding, Series A, 5.90%, 2/01/11 ............. 1,555,000 1,563,133
Allegheny County Residential Finance Authority Mortgage Revenue SFM,
Series DD-1, GNMA Secured, 5.35%, 11/01/19 ................................................... 885,000 841,980
Series DD-2, GNMA Secured, 5.40%, 11/01/29 ................................................... 2,000,000 1,873,020
Allegheny County Residential Finance Authority Mortgage Revenue,
Ladies Grand Army Republic Health Facilities Project, Series G, FHA Insured,
6.35%, 10/01/36 .............................................................................. 1,950,000 1,993,154
Lexington Home, Series E, 7.125%, 2/01/27 .................................................... 3,680,000 3,768,283
MFMR, Series D, FHA Insured, 7.50%, 6/01/33 .................................................. 1,400,000 1,440,754
Series J, GNMA Secured, 7.50%, 6/01/17 ....................................................... 1,795,000 1,821,817
Series K, GNMA Secured, 7.75%, 12/01/22 ...................................................... 1,705,000 1,731,223
SFMR, Series M, GNMA Secured, 7.90%, 6/01/11 ................................................. 885,000 914,285
SFMR, Series T, GNMA Secured, 6.95%, 5/01/17 ................................................. 810,000 835,596
Ambridge Area School District, Refunding, Series A, FGIC Insured, 5.25%, 11/01/16 ............. 2,730,000 2,634,041
Beaver County Hospital Authority Revenue, Beaver County Medical Center Inc.,
AMBAC Insured, Pre-Refunded, 6.625%, 7/01/10 ................................................. 5,000,000 5,398,900
Beaver County IDA, PCR,
Beaver Valley Project, Pennsylvania Power and Light, Refunding, Series A, 7.15%, 9/01/21 ..... 4,400,000 4,599,892
Ohio Edison Project, Series A, Pre-Refunded, 7.75%, 9/01/24 .................................. 6,475,000 6,604,500
Bensalem Township, Refunding, FGIC Insured, 5.75%, 12/01/16 ................................... 3,000,000 3,123,720
Berks County Municipal Authority Revenue, FGIC Insured, Pre-Refunded, 7.00%, 5/15/18 .......... 4,000,000 4,422,600
Bethlehem Area School District, MBIA Insured, Pre-Refunded, 6.00%, 3/01/16 .................... 4,000,000 4,288,120
Bradford County IDA, Solid Waste Disposal Revenue, International Paper Co. Projects,
Series A, 6.60%, 3/01/19 ..................................................................... 2,500,000 2,618,625
Butler Area School District, Refunding, Series B, FGIC Insured, 5.00%, 10/01/26 ............... 5,000,000 4,513,400
Butler County IDA, PCR, Witco Corp. Project, Refunding, 5.85%, 12/01/23 ....................... 2,000,000 1,934,460
Cambria County HDA, Hospital Revenue, Conemaugh Valley Memorial Hospital, Refunding,
Series B, Connie Lee Insured, Pre-Refunded, 6.375%, 7/01/18 ................................. 3,500,000 3,746,435
Cambria County IDA, PCR, Pennsylvania Electric Co. Project, Refunding,
Series A, MBIA Insured, 5.80%, 11/01/20 ...................................................... 5,000,000 5,070,900
Chartiers Valley Industrial and Commercial Development Authority Revenue,
First Mortgage, Asbury Place Project, Refunding, 6.50%, 2/01/36 ............................. 4,250,000 4,431,178
Clarion County Hospital Authority Revenue, Clarion Hospital Project, Refunding,
5.40%, 7/01/07 ............................................................................... 1,000,000 979,330
5.55%, 7/01/09 ............................................................................... 2,365,000 2,308,879
5.60%, 7/01/10 ............................................................................... 600,000 582,426
5.75%, 7/01/12 ............................................................................... 1,795,000 1,728,675
5.75%, 7/01/17 ............................................................................... 700,000 657,615
5.625%, 7/01/21 .............................................................................. 1,500,000 1,360,860
Cranberry Township Municipal Authority Water and Sewer Revenue, MBIA Insured,
5.125%, 12/01/26 ............................................................................. 1,450,000 1,337,118
Dauphin County General Authority Health System Revenue, Pinnacle Health System
Project, Refunding, MBIA Insured, 5.50%, 5/15/17 ............................................. 4,280,000 4,222,477
Dauphin County General Authority Hospital Revenue, Hapsco-Western Hospital Project,
Refunding, Series A, MBIA Insured, 6.50%, 7/01/12 ............................................ 4,500,000 4,746,465
Series B, MBIA Insured, 6.25%, 7/01/16 ....................................................... 5,000,000 5,199,550
Dauphin County General Authority, Sub Series 0003, AMBAC Insured, 4.75%, 6/01/26 .............. 1,000,000 1,004,220
Deer Lakes School District, Series A, FSA Insured, 5.00%, 1/15/23 ............................. 1,000,000 912,560
Delaware County Authority College Revenue, Eastern College, Series C, 5.625%, 10/01/28 ........ 2,210,000 2,039,631
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Delaware County Authority Health Facility Revenue, Mercy Health Corp. Project, ETM,
6.00%, 12/15/26 ............................................................................ $10,800,000 $11,383,740
Delaware County Authority Healthcare Revenue, Mercy Health Corp. Southeastern,
Series B, Pre-Refunded, 6.00%, 11/15/07 .................................................... 9,000,000 9,458,730
Delaware County Authority Revenue, Elwyn Inc. Project, Pre-Refunded, 8.35%, 6/01/15 ......... 2,000,000 2,106,100
Delaware County IDAR, Philadelphia Electric, Refunding, Series 1991, 7.375%, 4/01/21 ........ 5,000,000 5,284,350
Delaware River Port Authority Pennsylvania and New Jersey Revenue, Series 1995,
FGIC Insured, 5.50%, 1/01/26 ............................................................... 7,350,000 7,258,787
Delaware Valley Regional Finance Authority Local Government Revenue, Series B,
AMBAC Insured, 5.60%, 7/01/17 .............................................................. 5,000,000 5,044,600
Erie County Hospital Authority Revenue,
Nursing Home, Sarah A. Reed Retirement Center, Refunding, 5.625%, 7/01/14 .................. 3,660,000 3,481,282
St. Vincent Health Center Project, Series A, MBIA Insured, 6.375%, 7/01/22 ................. 7,000,000 7,317,170
Erie-Western Pennsylvania Port Authority General Revenue,
6.875%, 6/15/16 ............................................................................ 920,000 972,937
Pre-Refunded, 8.625%, 6/15/10 .............................................................. 1,850,000 1,955,191
Exeter Township, Refunding, Series B, FGIC Insured, 5.30%, 7/15/21 .......................... 6,100,000 5,818,729
Harrisburg Authority Revenue, Series I, MBIA Insured, 5.625%, 4/01/19 ....................... 6,000,000 5,961,000
Hazleton Area School District, Series B, FGIC Insured, 5.00%, 3/01/23 ....................... 4,455,000 4,064,697
Hazleton Health Services Authority Hospital Revenue, Hazleton General Hospital,
5.50%, 7/01/27 ............................................................................. 2,475,000 2,225,347
Interboro School District GO, Delaware County, MBIA Insured, 5.375%, 8/15/22 ................ 2,335,000 2,244,215
Jeannette County Municipal Authority Sewer Revenue, Pre-Refunded, 7.00%, 7/01/17 ............ 1,250,000 1,336,463
Jeannette Health Service Authority Hospital Revenue, Jeannette District Memorial
Hospital, Refunding, Series A, 6.00%, 11/01/18 ............................................. 785,000 782,268
Lancaster County Hospital Authority Revenue, Health Center, Masonic Homes Project,
Refunding, AMBAC Insured, 5.00%, 11/15/20 .................................................. 1,600,000 1,453,920
Lawrence County IDA, PCR, Pennsylvania Power Co., New Castle Project, Refunding,
7.15%, 3/01/17 ............................................................................. 5,595,000 5,851,307
Lebanon County Good Samaritan Hospital Authority Revenue, Good Samaritan Hospital
Project, Refunding, 6.00%, 11/15/18 ........................................................ 2,500,000 2,491,275
Lehigh County General Purpose Authority Revenue,
Good Shepard Rehabilitation Hospital, Refunding, AMBAC Insured, 5.25%, 11/15/27 ............ 5,500,000 5,096,300
Hospital Lehigh Valley, Health Network, Series A, MBIA Insured, 5.00%, 7/01/28 ............. 4,000,000 3,528,760
Lehigh Valley Hospital Inc., Refunding, Series A, MBIA Insured, 5.875%, 7/01/15 ............ 1,000,000 1,027,340
Muhlenburg Hospital Center, Series A, Pre-Refunded, 6.60%, 7/15/22 ......................... 5,800,000 6,318,694
Lehigh County IDA, PCR, Pennsylvania Power and Light Co. Project, Refunding,
Series A, MBIA Insured, 6.40%, 11/01/21 .................................................... 5,000,000 5,276,900
Series A, MBIA Insured, 6.15%, 8/01/29 ..................................................... 5,550,000 5,789,427
Series B, MBIA Insured, 6.40%, 9/01/29 ..................................................... 10,000,000 10,713,200
Lower Providence Township Sewer Authority Revenue, Refunding, MBIA Insured,
5.25%, 5/01/14 ............................................................................. 2,000,000 1,946,040
Luzerne County IDA, Exempt Facility Revenue, Gas and Water Co. Project, Refunding,
Series A, AMBAC Insured,
7.00%, 12/01/17 ............................................................................ 5,000,000 5,520,800
6.05%, 1/01/19 ............................................................................. 4,750,000 4,801,680
Meadville GO, Series A, AMBAC Insured, 5.25%, 10/01/25 ...................................... 2,285,000 2,143,216
Montgomery County GO, Refunding, Series B, 5.375%, 10/15/21 ................................. 3,400,000 3,282,530
Montgomery County Higher Education and Health Authority Revenue,
Holy Redeemer Hospital, Series A, AMBAC Insured, Pre-Refunded, 7.625%, 2/01/20 ............. 2,375,000 2,413,285
Jeanes Health System Project, Pre-Refunded, 8.75%, 7/01/20 ................................. 5,000,000 5,301,850
Pottstown Memorial Medical Center Project, Pre-Refunded, 7.35%, 11/15/05 ................... 1,315,000 1,427,393
St. Joseph's University, Refunding, Connie Lee Insured, 6.50%, 12/15/22 .................... 1,750,000 1,868,615
Montgomery County IDA, Retirement Community Revenue,
Act Retirement-Life Communities, 5.25%, 11/15/28 ........................................... 5,000,000 4,368,250
Adult Community Total Services, Refunding, Series A, 5.875%, 11/15/22 ...................... 4,850,000 4,720,845
Adult Community Total Services, Series B, 5.75%, 11/15/17 .................................. 3,000,000 2,927,040
Montgomery County IDAR,
Hill School Project, MBIA Insured, 5.35%, 8/15/27 .......................................... 9,000,000 8,490,060
PCR, Philadelphia Electric Co., Refunding, Series A, 7.60%, 4/01/21 ........................ 2,530,000 2,682,433
PCR, Philadelphia Electric Co., Series B, MBIA Insured, 6.70%, 12/01/21 .................... 5,000,000 5,302,500
Resource Recovery, 7.50%, 1/01/12 .......................................................... 10,000,000 10,335,800
Mount Pleasant Business District Authority Hospital Revenue, Frick Hospital, Refunding,
5.70%, 12/01/13 ............................................................................ 1,205,000 1,149,510
5.75%, 12/01/17 ............................................................................ 500,000 469,855
5.75%, 12/01/27 ............................................................................ 1,600,000 1,466,688
Neshaminy School District GO, FGIC Insured, Pre-Refunded, 7.00%, 2/15/14 .................... 1,000,000 1,110,740
New Wilmington Municipal Authority College Revenue, Westminster College, 5.35%, 3/01/28 ..... 2,250,000 2,014,943
North Hampton County IDAR, PCR, Metropolitan Edison Co., Refunding,
Series A, MBIA Insured, 6.10%, 7/15/21 ..................................................... 6,100,000 6,275,802
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Northeastern Pennsylvania Hospital and Educational Authority Revenue,
Kings College Project, Refunding, Series B, 6.00%, 7/15/11 ................................. $ 1,000,000 $ 1,003,830
Kings College Project, Refunding, Series B, 6.00%, 7/15/18 ................................. 1,000,000 1,000,400
Wilkes University, Refunding, 6.125%, 10/01/11 ............................................. 5,000,000 4,999,900
Pennsylvania Convention Center Authority Revenue, Refunding, Series A, 6.60%, 9/01/09 ....... 5,000,000 5,352,150
Pennsylvania Economic Development Financing Authority, Solid Waste Disposal
Revenue, USG Corp. Project, 6.00%, 6/01/31 ................................................. 10,650,000 10,283,108
Pennsylvania EDA,
Financing Authority Revenue, Macmillan, LP Project, Pre-Refunded, 7.60%, 12/01/20 .......... 3,000,000 3,480,540
Financing Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 ........... 5,000,000 5,445,250
Pennsylvania HFA,
Rental Housing, Refunding, FNMA Insured, 5.75%, 7/01/14 .................................... 10,000,000 10,077,800
SFM, Refunding, Series Y, 7.45%, 4/01/16 ................................................... 2,115,000 2,159,182
SFM, Series 29, 7.375%, 10/01/16 ........................................................... 2,530,000 2,612,023
SFM, Series 30, 7.30%, 10/01/17 ............................................................ 1,505,000 1,561,994
SFM, Series 34-A, 6.85%, 4/01/16 ........................................................... 3,000,000 3,117,570
SFM, Series 34-B, 7.00%, 4/01/24 ........................................................... 6,000,000 6,207,660
SFM, Series 38, 6.125%, 10/01/24 ........................................................... 4,535,000 4,611,914
SFM, Series 1991, 7.15%, 4/01/15 ........................................................... 4,370,000 4,529,243
(b)SFM, Series 67A, 5.85%, 10/01/18 ........................................................... 5,000,000 5,007,000
SFM, Series W, Pre-Refunded, 7.80%, 10/01/20 ............................................... 1,965,000 2,010,333
SFMR, Refunding, Series 54-A, 6.15%, 10/01/22 .............................................. 1,500,000 1,523,880
Pennsylvania Infrastructure Investment Authority Revenue, Pennvest Loan Pool Program,
MBIA Insured, 5.625%,
9/01/13 .................................................................................... 6,010,000 6,126,774
9/01/14 .................................................................................... 2,870,000 2,911,443
Pennsylvania Intergovernmental Cooperative Authority Special Tax Revenue,
Philadelphia Funding Program, FGIC Insured, Pre-Refunded, 7.00%, 6/15/14 ................... 6,000,000 6,716,940
Refunding, FGIC Insured, 5.00%, 6/15/21 .................................................... 10,000,000 9,132,100
Pennsylvania State Financial Authority Revenue, Municipal Capital Improvements Program,
Refunding, 6.60%, 11/01/09 ................................................................. 12,565,000 13,569,572
Pennsylvania State Higher Educational Facilities Authority Health Services Revenue,
Allegheny Delaware Valley Obligation Group, Refunding, Series A, MBIA Insured,
5.875%, 11/15/21 ........................................................................... 17,000,000 16,528,250
University of Pennsylvania Health Services, Refunding, Series A, 5.75%, 1/01/22 ............ 10,000,000 9,470,400
Pennsylvania State Higher Educational Facilities Authority Revenue,
Allegheny College Project, Refunding, Series B, 6.125%, 11/01/13 ........................... 1,000,000 1,021,730
Allegheny College Project, Series B, Pre-Refunded, 6.00%, 11/01/22 ......................... 3,140,000 3,371,355
Allegheny College, Refunding, Series A, MBIA Insured, 5.00%, 11/01/22 ...................... 3,300,000 2,981,187
Drexel University, Refunding, 6.375%, 5/01/17 .............................................. 5,220,000 5,485,698
Drexel University, Refunding, MBIA Insured, 5.75%, 5/01/22 ................................. 4,385,000 4,397,497
Geneva College, 5.45%, 4/01/18 ............................................................. 2,360,000 2,171,082
La Salle University, MBIA Insured, 5.25%, 5/01/23 .......................................... 1,500,000 1,407,240
La Salle University, Refunding, MBIA Insured, 5.625%, 5/01/17 .............................. 4,000,000 4,006,440
Philadelphia College of Textiles and Science, 6.75%, 4/01/20 ............................... 3,040,000 3,148,893
State System of Higher Education, Series N, MBIA Insured, 5.80%, 6/15/24 ................... 3,000,000 3,023,100
State System of Higher Education, Series R, FSA Insured, 5.00%, 6/15/24 .................... 3,140,000 2,834,478
State Systems of Higher Education, Series O, AMBAC Insured, 5.125%, 6/15/24 ................ 1,990,000 1,833,984
Temple University, 7.40%, 10/01/10 ......................................................... 30,000 30,309
Thomas Jefferson University, AMBAC Insured, 5.00%, 7/01/19 ................................. 3,000,000 2,758,920
University of Pennsylvania, 5.50%, 7/15/38 ................................................. 10,000,000 9,627,500
Pennsylvania State IDAR, Economic Revenue, AMBAC Insured, 6.00%, 1/01/12 .................... 4,250,000 4,480,138
Pennsylvania State University, Series A, 5.00%, 8/15/22 ..................................... 1,000,000 896,840
Philadelphia Airport Revenue, Philadelphia Airport System, Series A, AMBAC Insured,
6.10%, 6/15/25 ............................................................................. 5,000,000 5,181,000
Philadelphia Gas Works Revenue,
1st Series A, FSA Insured, 5.00%, 7/01/26 .................................................. 6,000,000 5,357,880
2nd Series, FSA Insured, 5.00%, 7/01/29 .................................................... 10,000,000 8,896,300
12th Series B, MBIA Insured, ETM, 7.00%, 5/15/20 ........................................... 1,000,000 1,143,420
14th Series A, Pre-Refunded, 6.375%, 7/01/26 ............................................... 3,360,000 3,644,357
Refunding, 14th Series, 6.375%, 7/01/26 .................................................... 6,740,000 7,053,949
Philadelphia GO, FSA Insured, 5.00%, 3/15/28 ................................................ 10,000,000 8,992,800
Philadelphia Hospitals and Higher Education Facilities Authority Revenue,
Albert Einstein Medical Center, Pre-Refunded, 7.30%, 10/01/08 .............................. 5,225,000 5,642,948
Temple University Hospital, 5.875%, 11/15/23 ............................................... 5,000,000 4,626,650
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Philadelphia Hospitals and Higher Educational Facilities Authority Revenue,
Children's Hospital, Refunding, Series A, 5.00%, 2/15/21 ..................................... $ 2,465,000 $ 2,188,698
Children's Seashore House, Series A, 7.00%, 8/15/17 .......................................... 1,000,000 1,064,940
Children's Seashore House, Series B, 7.00%, 8/15/22 .......................................... 2,600,000 2,768,116
Frankford Hospital, Series A, ETM, 6.00%, 6/01/14 ............................................ 2,500,000 2,651,325
Philadelphia Municipal Authority Revenue, Lease, Refunding, Series D, 6.30%, 7/15/17 .......... 2,000,000 2,064,980
Philadelphia Parking Authority Parking Revenue,
Airport, FSA Insured, 5.25%, 9/01/29 ......................................................... 12,000,000 11,050,920
Airport, Refunding, AMBAC Insured, 5.50%, 9/01/18 ............................................ 1,000,000 987,240
Series A, AMBAC Insured, 5.25%, 2/15/29 ...................................................... 6,000,000 5,528,580
Philadelphia RDA, Home Improvement Loan Revenue,
Series A, FHA Insured, 7.375%, 6/01/03 ....................................................... 40,000 40,400
Series B, FHA Insured, 6.10%, 6/01/17 ........................................................ 600,000 608,850
Philadelphia School District GO, Series B, AMBAC Insured,
5.50%, 9/01/15 ............................................................................... 3,785,000 3,809,300
5.375%, 4/01/22 .............................................................................. 2,995,000 2,879,452
Philadelphia Water and Sewer Revenue, Series 10, ETM, 7.35%, 9/01/04 .......................... 6,840,000 7,479,540
Philadelphia Water and Wastewater Revenue, Refunding, 5.75%, 6/15/13 .......................... 10,000,000 9,980,200
Pittsburgh and Allegheny County Public Auditorium Revenue, Regional Asset District
Sales Tax, AMBAC Insured, 5.25%, 2/01/31 .................................................... 11,610,000 10,597,723
Pittsburgh Urban RDA,
Mortgage Revenue, Series A, 7.15%, 10/01/27 .................................................. 840,000 874,751
Mortgage Revenue, Series A, FNMA Insured, 5.25%, 10/01/29 .................................... 3,345,000 3,071,144
(b)Mortgage Revenue, Series C, FNMA Insured, GNMA Secured, 5.70%, 4/01/30 ....................... 1,525,000 1,473,591
Mortgage Revenue, Series D, 6.25%, 10/01/17 .................................................. 1,695,000 1,763,291
Oliver Garage Project, FGIC Insured, 5.45%, 6/01/28 .......................................... 3,500,000 3,391,080
SFMR, Series B, GNMA Secured, 7.375%, 12/01/16 ............................................... 1,770,000 1,796,372
Pittsburgh Water and Sewer System Authority Revenue, Refunding, FGIC Insured, ETM, 7.25%,
9/01/14 ..................................................................................... 1,250,000 1,446,312
Schuylkill County IDA, Resource Recovery Revenue, Schuylkill Energy Resources Inc., 6.50%,
1/01/10 ..................................................................................... 16,350,000 16,381,555
Schuylkill County RDA, Lease Revenue, Series A, FGIC Insured, 7.125%, 6/01/13 ................. 1,500,000 1,586,460
South Fork Municipal Authority Hospital Revenue, Conemaugh Valley Memorial Hospital Project,
Series A, MBIA Insured, 5.75%, 7/01/26 ...................................................... 10,000,000 9,985,500
Southeastern Pennsylvania Transportation Authority Special Revenue, FGIC Insured, 5.375%,
3/01/22 ..................................................................................... 7,000,000 6,696,480
State Public School Building Authority Revenue,
Cornell School District Project, Refunding, Series B, MBIA Insured, 5.375%, 9/01/12 ........... 2,165,000 2,159,976
Shenandoah Valley School District Project, Refunding, AMBAC Insured, 7.375%, 9/15/10 ........ 1,000,000 1,020,920
University of Pittsburgh Revenue, Higher Education, Refunding, Series B, MBIA Insured, 5.00%,
6/01/21 ..................................................................................... 10,000,000 9,132,900
Upper St. Clair Township School District GO, Refunding, 5.20%, 7/15/27 ........................ 5,000,000 4,652,650
Westtown Township Sewer Revenue, FSA Insured, 5.25%, 12/15/27 ................................. 3,270,000 3,059,870
Wilkes Barre Area School District GO,
FGIC Insured, Pre-Refunded, 6.375%, 4/01/15 .................................................. 3,000,000 3,255,510
Refunding, FGIC Insured, 5.25%, 4/01/16 ...................................................... 1,385,000 1,337,370
------------
TOTAL BONDS ................................................................................... 743,011,247
------------
(d)ZERO COUPON BONDS .7%
Pennsylvania HFA,
SFM, Series 63A, 4/01/30 ..................................................................... 11,000,000 1,783,100
SFMR, Series 64, 4/01/30 ..................................................................... 6,000,000 3,219,840
------------
TOTAL ZERO COUPON BONDS ....................................................................... 5,002,940
------------
TOTAL INVESTMENTS (COST $742,244,661) 99.5% ................................................... 748,014,187
OTHER ASSETS, LESS LIABILITIES .5% ............................................................ 3,861,530
------------
NET ASSETS 100.0% ............................................................................. $751,875,717
============
</TABLE>
See glossary of terms on page 110.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
(d) Zero coupon/step-up bonds. The current effective yield may vary. The
original accretion rate will remain constant.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Highlights
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1999 --------------------------------------------------
CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.88 $ 11.86 $ 11.51 $ 11.59 $ 11.31 S 11.83
------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .29 .60 .62 .65 .66 .67
Net realized and unrealized gains (losses) ... (.49) .06 .36 .02 .30 (.50)
------------------------------------------------------------------
Total from investment operations .............. (.20) .66 .98 .67 .96 .17
------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.29)(2) (.60)(3) (.62) (.65)(3) (.67)(2) (.69)
Net realized gains ........................... (.02) (.04) (.01) (.10) (.01) --
------------------------------------------------------------------
Total distributions ........................... (.31) (.64) (.63) (.75) (.68) (.69)
------------------------------------------------------------------
Net asset value, end of period ................ $ 11.37 $ 11.88 $ 11.86 $ 11.51 $ 11.59 $ 11.31
==================================================================
Total return* ................................. (1.74%) 5.68% 8.78% 6.03% 8.68% 1.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $211,036 $218,753 $210,325 $192,525 $190,577 $176,888
Ratios to average net assets:
Expenses ..................................... .76%** .74% .75% .73% .74% .73%
Net investment income ........................ 4.98%** 4.98% 5.35% 5.62% 5.71% 5.95%
Portfolio turnover rate ....................... 6.14% 20.19% 7.94% 21.09% 27.99% 18.30%
CLASS C
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 11.89 $ 11.87 $ 11.53 $ 11.62 $ 11.32
---------------------------------------------------------
Income from investment operations:
Net investment income ........................ .26 .53 .56 .58 .50
Net realized and unrealized gains (losses) ... (.48) .06 .34 .02 .30
---------------------------------------------------------
Total from investment operations .............. (.22) .59 .90 .60 .80
---------------------------------------------------------
Less distributions from:
Net investment income ........................ (.26)(2) (.53)(4) (.55) (.59) (.49)
Net realized gains ........................... (.02) (.04) (.01) (.10) (.01)
---------------------------------------------------------
Total distributions ........................... (.28) (.57) (.56) (.69) (.50)
---------------------------------------------------------
Net asset value, end of period ................ $ 11.39 $ 11.89 $ 11.87 $ 11.53 $ 11.62
=========================================================
Total return* ................................. (1.94%) 5.09% 8.07% 5.33% 7.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 8,002 $ 7,050 $ 3,615 $ 1,679 $ 533
Ratios to average net assets:
Expenses ..................................... 1.32%** 1.30% 1.31% 1.30% 1.32%**
Net investment income ........................ 4.42%** 4.43% 4.78% 5.04% 5.16%**
Portfolio turnover rate ....................... 6.14% 20.19% 7.94% 21.09% 27.99%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year. Prior
to May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
*** Based on average shares outstanding.
(1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class
C.
(2) Includes distributions in excess of net investment income in the amount of
$.001.
(3) Includes distributions in excess of net investment income in the amount of
$.006.
(4) Includes distributions in excess of net investment income in the amount of
$.004.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.0%
Guam Airport Authority Revenue, Series B,
6.60%, 10/01/10 .............................................................................. $1,675,000 $1,778,348
6.70%, 10/01/23 .............................................................................. 5,800,000 6,170,098
Guam Government GO, Series A,
5.90%, 9/01/05 ............................................................................... 4,575,000 4,603,045
6.00%, 9/01/06 ............................................................................... 1,085,000 1,091,543
Guam Government Limited Obligation Highway Revenue, Refunding, Series A, FSA
Insured, 6.30%, 5/01/12 ...................................................................... 5,590,000 5,899,574
Guam Housing Corp. SFR, MBS, Mortgage Guaranteed, Series A, 5.35%, 9/01/18 .................... 5,000,000 4,787,350
Guam Power Authority Revenue,
Refunding, Series A, 5.25%, 10/01/34 ......................................................... 6,065,000 5,434,240
Series A, Pre-Refunded, 6.30%, 10/01/22 ...................................................... 6,190,000 6,657,283
Series A, Pre-Refunded, 6.75%, 10/01/24 ...................................................... 2,680,000 2,996,240
Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue,
Series A, 6.85%, 3/15/28 ..................................................................... 6,905,000 7,080,318
Puerto Rico Commonwealth GO,
Pre-Refunded, 6.40%, 7/01/11 ................................................................. 2,000,000 2,198,280
Refunding, MBIA Insured, 5.75%, 7/01/24 ...................................................... 2,000,000 2,036,380
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series Q, Pre-Refunded, 7.75%, 7/01/10 ....................................................... 350,000 368,750
Series Y, Pre-Refunded, 6.00%, 7/01/22 ....................................................... 8,000,000 8,688,240
Puerto Rico Commonwealth IDC, General Purpose Revenue, Series B, 5.375%, 7/01/16 .............. 5,000,000 4,867,400
Puerto Rico Commonwealth Infrastructure Financing Authority
Special Tax Revenue, Series A,
7.90%, 7/01/07 ............................................................................... 580,000 586,525
7.75%, 7/01/08 ............................................................................... 300,000 304,530
7.50%, 7/01/09 ............................................................................... 660,000 668,389
Puerto Rico Commonwealth Urban Renewal and Housing Corp. Commonwealth Appropriation,
Refunding, 7.875%, 10/01/04 .................................................................. 3,350,000 3,424,973
Puerto Rico Electric Power Authority Revenue,
Refunding, Series U, 6.00%, 7/01/14 .......................................................... 700,000 737,534
Series DD, 5.00%, 7/01/28 .................................................................... 930,000 827,514
Series P, Pre-Refunded, 7.00%, 7/01/11 ....................................................... 615,000 658,376
Series P, Pre-Refunded, 7.00%, 7/01/21 ....................................................... 1,000,000 1,070,530
Series T, Pre-Refunded, 6.375%, 7/01/24 ...................................................... 5,000,000 5,487,600
Series X, Pre-Refunded, 6.125%, 7/01/21 ...................................................... 7,225,000 7,885,221
Puerto Rico HFC Revenue,
MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ................................................... 1,470,000 1,511,160
MF, Portfolio A, Series I, 7.50%, 10/01/15 ................................................... 420,000 431,760
Sixth Portfolio, Section 8 Assisted, FHA Mortgage Insured, Pre-Refunded, 7.75%, 12/01/26 ..... 2,060,000 2,418,399
Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ............... 2,320,000 2,411,130
Puerto Rico Housing Bank and Financing Authority SFMR,
Affordable Housing Mortgage, First Portfolio, 6.25%, 4/01/29 ................................. 2,075,000 2,143,164
Homeownership Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ................................. 955,000 981,893
Puerto Rico Industrial Medical and Environmental PCFA Revenue,
6.45%, 12/01/25 .............................................................................. 2,000,000 2,075,460
PepsiCo Inc. Project, 6.25%, 11/15/13 ........................................................ 900,000 959,184
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities,
Ana G. Mendez University Systems Project, Refunding, 5.375%, 2/01/19 ......................... 2,000,000 1,883,880
Ana G. Mendez University Systems Project, Refunding, 5.375%, 2/01/29 ......................... 4,000,000 3,692,520
Inter American University, Series A, MBIA Insured, 5.00%, 10/01/22 ........................... 5,500,000 5,061,870
Puerto Rico Industrial Tourist Educational Medical and Environmental Control
Facilities Financing Authority Hospital Revenue,
Dr. Pila Hospital Project, Refunding, FHA Insured, 6.25%, 8/01/32 ............................ 500,000 516,320
Dr. Pila Hospital Project, Refunding, FHA Insured, 6.125%, 8/01/25 ........................... 2,500,000 2,531,850
Hospital Auxilio Mutuo Obligation, MBIA Insured, 5.50%, 7/01/17 .............................. 2,750,000 2,768,453
Hospital Auxilio Mutuo Obligation, Series A, MBIA Insured, 6.25%, 7/01/24 .................... 8,445,000 8,988,942
Mennonite General Hospital Project, 5.625%, 7/01/17 .......................................... 915,000 869,982
Mennonite General Hospital Project, 6.50%, 7/01/26 ........................................... 5,000,000 5,200,150
Mennonite General Hospital Project, 5.625%, 7/01/27 .......................................... 2,000,000 1,848,240
Refunding, San Lucas and Cristo Project, Series A, 5.75%, 6/01/19 ............................ 3,000,000 2,853,690
</TABLE>
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Financing Authority Industrial Revenue,
Fuaynabo Warehouse, Series A., 5.20%, 7/01/24 .............................................. $ 4,120,000 $ 3,726,375
Guaynabo Municipal Government, 5.625%, 7/01/15 ............................................. 6,550,000 6,405,245
Guaynabo Municipal Government, 5.625%, 7/01/22 ............................................. 3,160,000 3,055,309
Teacher's Retirement System Revenue, 5.50%, 7/01/16 ........................................ 3,175,000 3,147,251
Teacher's Retirement System Revenue, Series B, 5.50%, 7/01/21 .............................. 6,585,000 6,429,133
Puerto Rico Municipal Finance Agency GO, Series A, 6.50%, 7/01/19 ........................... 2,000,000 2,149,840
Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured, 5.75%, 7/01/22 ..... 1,000,000 1,022,660
Puerto Rico Port Authority Revenue,
Series D, FGIC Insured, 6.00%, 7/01/21 ..................................................... 1,250,000 1,262,125
Special Facilities, American Airlines, Series A, 6.30%, 6/01/23 ............................ 5,500,000 5,656,420
Special Facilities, American Airlines, Series A, 6.25%, 6/01/26 ............................ 1,900,000 1,956,468
Puerto Rico Telephone Authority Revenue,
Series L, Pre-Refunded, 6.125%, 1/01/22 .................................................... 6,450,000 6,777,789
Series N, Pre-Refunded, 5.50%, 1/01/13 ..................................................... 300,000 314,652
Series N, Pre-Refunded, 5.50%, 1/01/22 ..................................................... 2,375,000 2,490,995
University of Puerto Rico Revenues, Series M, MBIA Insured,
5.50%, 6/01/15 ............................................................................. 4,000,000 4,055,000
5.25%, 6/01/25 ............................................................................. 6,145,000 5,885,312
Virgin Islands HFA, SFR, Refunding, Series A, GNMA Secured,
6.45%, 3/01/16 ............................................................................. 365,000 376,348
6.50%, 3/01/25 ............................................................................. 865,000 891,850
Virgin Islands PFA Revenue,
Senior Lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 ......................... 3,000,000 2,873,460
Senior Lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/22 ......................... 3,000,000 2,849,610
Senior Lien, Fund Loan Notes, Refunding, Series A, 5.625%, 10/01/25 ........................ 3,000,000 2,879,160
Virgin Islands Water and Power Authority Electric System Revenue,
Refunding, 5.30%, 7/01/18 .................................................................. 1,700,000 1,588,480
Refunding, 5.30%, 7/01/21 .................................................................. 1,000,000 924,490
Series A, Pre-Refunded, 7.40%, 7/01/11 ..................................................... 4,905,000 5,209,895
Virgin Islands Water and Power Authority Water System Revenue, Refunding,
5.25%, 7/01/12 ............................................................................. 4,000,000 3,686,760
5.50%, 7/01/17 ............................................................................. 4,000,000 3,620,076
------------
TOTAL LONG TERM INVESTMENTS (COST $209,404,604) ............................................. 214,691,031
------------
(a)SHORT TERM INVESTMENTS .6%
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured,
Weekly VRDN and Put, 2.85%, 12/01/15 ....................................................... 1,200,000 1,200,000
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ............................... 200,000 200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,400,000) .............................................. 1,400,000
TOTAL INVESTMENTS (COST $210,804,604) 98.6% ................................................. 216,091,031
OTHER ASSETS, LESS LIABILITIES 1.4% ......................................................... 2,947,450
------------
NET ASSETS 100.0% ........................................................................... $219,038,481
============
</TABLE>
See glossary of terms on page 110.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
GLOSSARY OF TERMS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1915 Act - Improvement Bond Act of 1915
ABAG - The Association of Bay Area Governments
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co. (acquired by MBIA in 1989 and no longer does business under this name).
CDA - Community Development Authority/Agency
CDD - Community Development District
CFD - Community Facilities District
COP - Certificate of Participation
CRDA - Community Redevelopment Authority/Agency
DATES - Demand Adjustable Tax-Exempt Securities
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
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance (some of the securities shown as FSA Insured were originally issued by Capital
Guaranty Insurance Co. (CGIC) which was acquired by FSA in 1995 and no longer does business under this name).
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
HFC - Housing Finance Corp.
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
IDC - Industrial Development Corp.
IDR - Industrial Development Revenue
IPC - Industrial Pollution Control
ISD - Independent School District
LLC - Limited Liability Corporation
LP - Limited Partnership
MAC - Municipal Assistance Corporation
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage Backed Securities
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCC - Pollution Control Corporation
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
PUD - Public Utility District
RDA - Redevelopment Authority/Agency
RDAR - Redevelopment Authority/Agency Revenue
SF - Single Family
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
UHSD - Unified High School District
USD - Unified School District
</TABLE>
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FEDERAL
ARIZONA COLORADO CONNECTICUT INTERMEDIATE-
TAX-FREE TAX-FREE TAX-FREE TERM TAX FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities:
Cost ...................................................... $851,195,085 $305,514,568 $260,569,138 $192,966,527
=================================================================
Value ..................................................... 861,569,433 306,977,800 262,300,172 192,846,793
Cash ....................................................... 36,662,937 74,929 94,822 40,563
Receivables:
Investment securities sold ................................ -- -- 13,276,238 --
Capital shares sold ....................................... 636,725 1,462,199 159,476 777,475
Interest .................................................. 10,609,960 5,020,259 3,704,099 2,567,838
----------------------------------------------------------------
Total assets ............................................ 909,479,055 313,535,187 279,534,807 196,232,669
----------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ........................... 48,821,700 995,778 12,502,330 12,474,834
Capital shares redeemed ................................... 1,386,642 261,900 370,835 1,219,555
Affiliates ................................................ 520,432 214,592 198,152 110,596
Shareholders .............................................. 7,365 2,387 4,518 830
Distributions to shareholders .............................. 1,628,748 577,431 429,742 308,728
Other liabilities .......................................... 74,961 33,973 7,833 61,130
----------------------------------------------------------------
Total liabilities ....................................... 52,439,848 2,086,061 13,513,410 14,175,673
----------------------------------------------------------------
Net assets, at value .................................. $857,039,207 $311,449,126 $266,021,397 $182,056,996
=================================================================
Net assets consist of:
Undistributed net investment income ........................ $ -- $ -- $ -- $ 48,336
Accumulated distributions in excess of net
investment income ....................................... (1,175,788) (242,731) (259,060) --
Net unrealized appreciation (depreciation) ................. 10,374,348 1,463,232 1,731,034 (119,734)
Accumulated net realized loss .............................. (4,205,319) (237,137) (5,434,133) (1,180,744)
Capital shares ............................................. 852,045,966 310,465,762 269,983,556 183,309,138
----------------------------------------------------------------
Net assets, at value .................................. $857,039,207 $311,449,126 $266,021,397 $182,056,996
================================================================
CLASS A:
Net assets, at value ....................................... $832,231,128 $288,951,992 $239,180,146 $182,056,996
================================================================
Shares outstanding ......................................... 77,147,383 25,345,237 22,471,651 16,747,073
================================================================
Net asset value per share* ................................. $ 10.79 $ 11.40 $ 10.64 $ 10.87
================================================================
Maximum offering price per share (net asset value
per share divided by 95.75%) ............................. $ 11.27 $ 11.91 $ 11.11 $ 11.12**
================================================================
CLASS C:
Net assets, at value ....................................... $ 24,808,079 $ 22,497,134 $ 26,841,251 --
================================================================
Shares outstanding ......................................... 2,284,706 1,963,038 2,513,847 --
================================================================
Net asset value per share* ................................. $ 10.86 $ 11.46 $ 10.68 --
================================================================
Maximum offering price per share (net asset value
per share divided by 99%) ................................ $ 10.97 $ 11.58 $ 10.79 --
================================================================
</TABLE>
* Redemption price 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 $10.87 divided by 97.75%.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
HIGH-YIELD NEW JERSEY OREGON PENNSYLVANIA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities:
Cost .............................................. $ 6,356,224,371 $ 709,621,163 $ 521,553,136 $ 742,244,661
========================================================================
Value ............................................. 6,405,994,768 722,197,489 522,089,060 748,014,187
Cash ................................................ 1,392,961 1,920,018 -- 341,094
Receivables:
Investment securities sold ......................... -- 4,864,906 3,788,579 --
Capital shares sold ................................ 10,780,484 1,607,898 292,311 898,041
Interest ........................................... 116,321,034 9,811,557 7,138,935 12,639,999
------------------------------------------------------------------------
Total assets ..................................... 6,534,489,247 740,401,868 533,308,885 761,893,321
------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ................... 83,014,924 8,210,391 22,408,648 6,572,099
Capital shares redeemed ........................... 12,422,193 696,369 832,328 1,422,014
Affiliates ........................................ 4,006,002 501,857 338,769 506,669
Shareholders ...................................... 89,577 8,498 5,623 12,013
Distributions to shareholders ....................... 11,674,134 1,189,538 809,937 1,425,815
Other liabilities ................................... 379,311 85,665 51,367 78,994
------------------------------------------------------------------------
Total liabilities ................................ 111,586,141 10,692,318 24,446,672 10,017,604
------------------------------------------------------------------------
Net assets, at value ........................... $ 6,422,903,106 $ 729,709,550 $ 508,862,213 $ 751,875,717
========================================================================
Net assets consist of:
Undistributed net investment income ................. $ -- $ -- $ 447,937 $ --
Accumulated distributions in excess of net
investment income ................................. (6,603,653) (439,145) -- (1,179,813)
Net unrealized appreciation ......................... 49,770,397 12,576,326 535,925 5,769,526
Accumulated net realized loss ....................... (1,599,033) (681,296) (87,629) (302,857)
Capital shares ...................................... 6,381,335,395 718,253,665 507,965,980 747,588,861
----------------------------------------------------------------------
Net assets, at value ........................... $ 6,422,903,106 $ 729,709,550 $ 508,862,213 $ 751,875,717
========================================================================
CLASS A:
Net assets, at value ................................ $ 5,719,162,790 $ 677,939,267 $ 471,951,440 $707,101,932
========================================================================
Shares outstanding .................................. 519,949,609 59,429,031 42,020,964 70,885,795
========================================================================
Net asset value per share* .......................... $ 11.00 $ 11.41 $ 11.23 $ 9.98
========================================================================
Maximum offering price per share (net asset value
per share / 95.75%) ............................... $ 11.49 $ 11.92 $ 11.73 $ 10.42
========================================================================
CLASS B:
Net assets, at value ................................ $ 72,071,370 -- -- --
========================================================================
Shares outstanding .................................. 6,529,532 -- -- --
========================================================================
Net asset value and maximum offering price
per share* .......................................... $ 11.04 -- -- --
========================================================================
CLASS C:
Net assets, at value ................................ $ 631,668,946 $ 51,770,283 $ 36,910,773 $ 44,773,785
========================================================================
Shares outstanding .................................. 57,035,604 4,514,135 3,264,632 4,465,635
========================================================================
Net asset value per share* .......................... $ 11.07 $ 11.47 $ 11.31 $ 10.03
========================================================================
Maximum offering price per share (net asset value
per share / 99.00%) ............................... $ 11.18 $ 11.59 $ 11.42 $ 10.13
========================================================================
</TABLE>
* Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN
PUERTO RICO
TAX-FREE
INCOME FUND
<S> <C>
Assets:
Investments in securities:
Cost ............................................................................................... $ 210,804,604
=============
Value .............................................................................................. 216,091,031
Cash ................................................................................................. 8,219
Receivables:
Capital shares sold ................................................................................ 283,514
Interest ........................................................................................... 3,351,834
-------------
Total assets ..................................................................................... 219,734,598
-------------
Liabilities:
Payables:
Capital shares redeemed ............................................................................ 122,948
Affiliates ......................................................................................... 161,120
Shareholders ....................................................................................... 3,187
Distributions to shareholders ........................................................................ 392,874
Other liabilities .................................................................................... 15,988
-------------
Total liabilities ................................................................................ 696,117
-------------
Net assets, at value ........................................................................... $ 219,038,481
=============
Net assets consist of:
Accumulated distributions in excess of net investment income ......................................... (176,294)
Net unrealized appreciation .......................................................................... 5,286,427
Accumulated net realized gain ........................................................................ 517,294
Capital shares ....................................................................................... 213,411,054
-------------
Net assets, at value ........................................................................... $ 219,038,481
=============
CLASS A:
Net assets, at value ................................................................................. $ 211,036,024
=============
Shares outstanding ................................................................................... 18,554,661
=============
Net asset value per share* ........................................................................... $ 11.37
=============
Maximum offering price per share (net asset value per share / 95.75%) ................................ $ 11.87
=============
CLASS C:
Net assets, at value ................................................................................. $ 8,002,457
=============
Shares outstanding ................................................................................... 702,550
=============
Net asset value per share* ........................................................................... $ 11.39
=============
Maximum offering price per share (net asset value per share / 99.00%) ................................ $ 11.51
=============
</TABLE>
* Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FEDERAL
ARIZONA COLORADO CONNECTICUT INTERMEDIATE-
TAX-FREE TAX-FREE TAX-FREE TERM TAX FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Interest .................................................. $ 25,412,459 $ 9,106,626 $ 7,847,623 $ 5,082,637
------------------------------------------------------------------
Expenses:
Management fees (Note 3) .................................. 2,107,342 843,719 735,683 535,483
Distribution fees (Note 3)
Class A ................................................. 406,453 146,321 118,489 96,383
Class C ................................................. 82,852 73,010 85,105 --
Transfer agent fees (Note 3) .............................. 149,238 61,611 53,374 33,857
Custodian fees ............................................ 4,536 1,555 1,277 886
Reports to shareholders ................................... 44,712 17,173 20,013 12,843
Registration and filing fees .............................. 13,637 5,740 4,510 28,197
Professional fees ......................................... 11,778 2,946 1,989 3,152
Trustees' fees and expenses ............................... 3,699 1,928 1,196 883
Other ..................................................... 30,946 14,565 7,292 18,916
------------------------------------------------------------------
Total expenses ......................................... 2,855,193 1,168,568 1,028,928 730,600
Expenses waived/paid by affiliate (Note 3) ............. -- -- -- (7,550)
------------------------------------------------------------------
Net expenses ......................................... 2,855,193 1,168,568 1,028,928 723,050
------------------------------------------------------------------
Net investment income ............................... 22,557,266 7,938,058 6,818,695 4,359,587
------------------------------------------------------------------
Realized and unrealized gains (losses):
Net realized loss from investments ........................ (4,197,864) (234,341) (1,876,462) (65,336)
Net unrealized depreciation on investments ................ (39,437,050) (16,810,677) (13,489,393) (7,290,958)
------------------------------------------------------------------
Net realized and unrealized loss ........................... (43,634,914) (17,045,018) (15,365,855) (7,356,294)
------------------------------------------------------------------
Net decrease in net assets resulting from operations ....... $(21,077,648) $ (9,106,960) $ (8,547,160) $ (2,996,707)
==================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
HIGH-YIELD NEW JERSEY OREGON PENNSYLVANIA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Interest .............................................. $ 210,277,270 $ 21,164,886 $ 14,732,327 $ 22,850,950
-----------------------------------------------------------------------
Expenses:
Management fees (Note 3) .............................. 14,956,384 1,792,457 1,299,328 1,886,693
Distribution fees (Note 3)
Class A ................................................ 2,670,095 329,127 233,449 358,746
Class B ................................................ 150,841 -- -- --
Class C ................................................ 2,106,042 170,024 116,186 145,356
Transfer agent fees (Note 3) .......................... 1,304,887 186,971 95,531 211,117
Custodian fees ........................................ 31,833 3,472 2,521 4,289
Reports to shareholders ............................... 425,663 60,877 37,478 62,634
Registration and filing fees .......................... 426,800 10,020 4,719 9,236
Professional fees ..................................... 163,489 8,768 3,511 10,817
Trustees' fees and expenses ........................... 29,909 3,615 2,692 3,589
Other ................................................. 129,274 20,478 16,030 20,839
-----------------------------------------------------------------------
Total expenses ......................................... 22,395,217 2,585,809 1,811,445 2,713,316
-----------------------------------------------------------------------
Net investment income ................................. 187,882,053 18,579,077 12,920,882 20,137,634
-----------------------------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............. (1,560,744) (680,193) 16,268 (304,544)
Net unrealized depreciation on investments ............ (280,426,945) (33,853,248) (26,849,750) (41,112,717)
-----------------------------------------------------------------------
Net realized and unrealized loss ....................... (281,987,689) (34,533,441) (26,833,482) (41,417,261)
-----------------------------------------------------------------------
Net decrease in net assets resulting from operations ... $ (94,105,636) $ (15,954,364) $ (13,912,600) $ (21,279,627)
=======================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN
PUERTO RICO
TAX-FREE
INCOME FUND
-----------
<S> <C>
Investment income:
Interest ........................................................................................... $ 6,426,507
-----------
Expenses:
Management fees (Note 3) ........................................................................... 622,641
Distribution fees (Note 3)
Class A ............................................................................................. 103,232
Class C ............................................................................................. 25,290
Transfer agent fees (Note 3) ....................................................................... 69,474
Custodian fees ..................................................................................... 1,169
Reports to shareholders ............................................................................ 21,008
Registration and filing fees ....................................................................... 14,904
Professional fees .................................................................................. 4,354
Trustees' fees and expenses ........................................................................ 1,158
Other .............................................................................................. 5,416
-----------
Total expenses ...................................................................................... 868,646
-----------
Net investment income .............................................................................. 5,557,861
-----------
Realized and unrealized gains (losses):
Net realized gain from investments ................................................................. 518,377
Net unrealized depreciation on investments ......................................................... (9,927,417)
-----------
Net realized and unrealized loss .................................................................... (9,409,040)
-----------
Net decrease in net assets resulting from operations ................................................ $(3,851,179)
===========
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN ARIZONA FRANKLIN COLORADO
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-----------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 22,557,266 $ 43,743,520 $ 7,938,058 $ 14,775,876
Net realized gain (loss) from investments (4,197,864) 3,918,445 (234,341) 1,022,077
Net unrealized depreciation on investments (39,437,050) (4,679,698) (16,810,677) (713,406)
-----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ........... (21,077,648) 42,982,267 (9,106,960) 15,084,547
Distributions to shareholders from:
Net investment income:
Class A ................................. (21,981,770) (42,890,425) (7,445,049) (14,188,201)
Class C ................................. (575,496) (853,095) (439,009) (709,062)
In excess of net investment income:
Class A ................................. (449,770) (112,500) (221,295) (6,459)
Class C ................................. (11,769) (2,296) (14,654) (323)
Net realized gains:
Class A ................................. (2,664,218) (3,662,232) (297,996) (1,791,554)
Class C ................................. (79,831) (79,205) (21,969) (102,076)
-----------------------------------------------------------------------
Total distributions to shareholders ........ (25,762,854) (47,599,753) (8,493,972) (16,797,675)
Capital share transactions: (Note 2)
Class A ................................. 16,695,904 55,297,029 3,946,648 36,395,512
Class C ................................. 2,292,919 9,424,466 1,823,345 11,143,387
-----------------------------------------------------------------------
Total capital share transactions ........... 18,988,823 64,721,495 5,769,993 47,538,899
Net increase (decrease) in net assets . (27,851,679) 60,104,009 (11,830,939) 45,825,771
Net assets:
Beginning of period ..................... 884,890,886 824,786,877 323,280,065 277,454,294
-----------------------------------------------------------------------
End of period ........................... $ 857,039,207 $ 884,890,886 $ 311,449,126 $ 323,280,065
=======================================================================
Accumulated distributions in excess of net
investment income included in net assets:
End of period ............................ $ (1,175,788) $ (714,249) $ (242,731) $ (6,782)
=======================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN CONNECTICUT FRANKLIN FEDERAL INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX FREE INCOME FUND
-----------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 6,818,695 $ 11,874,815 $ 4,359,587 $ 7,442,059
Net realized gain (loss) from investments (1,876,462) 631,807 (65,336) 146,469
Net unrealized appreciation (depreciation)
on investments ......................... (13,489,393) 175,555 (7,290,958) 632,241
-----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .......... (8,547,160) 12,682,177 (2,996,707) 8,220,769
-----------------------------------------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ................................ (6,238,710) (11,204,717) (4,378,086) (7,539,385)
Class C ................................ (579,985) (670,098) -- --
In excess of net investment income:
Class A ................................ (99,254) (53,408) -- --
Class C ................................ (9,220) (3,194) -- --
-----------------------------------------------------------------------
Total distributions to shareholders ........ (6,927,169) (11,931,417) (4,378,086) (7,539,385)
Capital share transactions: (Note 2)
Class A ................................. 8,145,949 40,666,725 (6,166,579) 55,372,039
Class C ................................. 4,890,732 14,762,426 -- --
-----------------------------------------------------------------------
Total capital share transactions ........... 13,036,681 55,429,151 (6,166,579) 55,372,039
Net increase (decrease) in net assets (2,437,648) 56,179,911 (13,541,372) 56,053,423
Net assets:
Beginning of period ..................... 268,459,045 212,279,134 195,598,368 139,544,945
-----------------------------------------------------------------------
End of period ........................... $ 266,021,397 $ 268,459,045 $ 182,056,996 $ 195,598,368
=======================================================================
Undistributed net investment income
(accumulated distributions
in excess of net investment income)
included in net assets:
End of period ........................... $ (259,060) $ (150,586) $ 48,336 $ 66,835
=======================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN HIGH-YIELD FRANKLIN NEW JERSEY
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 187,882,053 $ 360,598,786 $ 18,579,077 $ 35,124,421
Net realized gain (loss) from investments (1,560,744) 21,319,398 (680,193) 596,765
Net unrealized appreciation (depreciation)
on investments ......................... (280,426,945) (120,400,244) (33,853,248) 2,362,264
-------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ........... (94,105,636) 261,517,940 (15,954,364) 38,083,450
Distributions to shareholders from:
Net investment income:
Class A ................................. (170,252,508) (332,249,669) (17,489,429) (33,973,510)
Class B ................................. (1,141,317) (46,213) -- --
Class C ................................. (16,488,228) (27,314,370) (1,164,596) (1,728,570)
In excess of net investment income:
Class A ................................. (2,803,993) -- (411,729) --
Class B ................................. (18,797) -- -- --
Class C ................................. (271,555) -- (27,416) --
Net realized gains:
Class A ................................. (1,469,024) (7,966,666) (187,763) --
Class B ................................. (13,236) -- -- --
Class C ................................. (159,598) (819,741) (14,225) --
-------------------------------------------------------------------------------
Total distributions to shareholders ........ (192,618,256) (368,396,659) (19,295,158) (35,702,080)
Capital share transactions: (Note 2)
Class A .................................. (12,492,037) 342,918,876 28,886,265 42,629,937
Class B .................................. 58,872,870 15,504,687 -- --
Class C .................................. 27,580,492 217,918,008 5,539,618 20,454,134
-------------------------------------------------------------------------------
Total capital share transactions ........... 73,961,325 576,341,571 34,425,883 63,084,071
Net increase (decrease) in net assets .. (212,762,567) 469,462,852 (823,639) 65,465,441
Net assets:
Beginning of period ....................... 6,635,665,673 6,166,202,821 730,533,189 665,067,748
-------------------------------------------------------------------------------
End of period ............................. $ 6,422,903,106 $ 6,635,665,673 $ 729,709,550 $ 730,533,189
===============================================================================
Undistributed net investment income
(accumulated distributions in excess of net
investment income) included in net assets:
End of period ............................ $ (6,603,653) $ (3,528,808) $ (439,145) $ 74,948
===============================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN OREGON FRANKLIN PENNSYLVANIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-----------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 12,920,882 $ 23,901,350 $ 20,137,634 $ 39,708,987
Net realized gain (loss) from investments ....... 16,268 1,677,443 (304,544) 1,071,826
Net unrealized depreciation on investments ...... (26,849,750) (1,943,787) (41,112,717) (2,242,080)
-----------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ............................. (13,912,600) 23,635,006 (21,279,627) 38,538,733
Distributions to shareholders from:
Net investment income:
Class A ....................................... (12,374,602) 23,518,284 (19,127,655) (38,182,843)
Class C ....................................... (790,873) 1,142,332 (1,009,979) (1,526,144)
In excess of net investment income:
Class A ....................................... -- -- (330,491) (418,611)
Class C ....................................... -- -- (17,430) (16,732)
Net realized gains:
Class A ....................................... -- -- (14,418) (985,591)
Class C ....................................... -- -- (865) (51,198)
-----------------------------------------------------------------------
Total distributions to shareholders ............... (13,165,475) (24,660,616) (20,500,838) (41,181,119)
Capital share transactions: (Note 2)
Class A .......................................... 13,498,480 57,633,801 (12,438,722) 48,325,952
Class C .......................................... 5,815,128 17,049,844 5,235,356 16,135,478
-----------------------------------------------------------------------
Total capital share transactions .................. 19,313,608 74,683,645 (7,203,366) 64,461,430
Net increase (decrease) in net assets ......... (7,764,467) 73,658,035 (48,983,831) 61,819,044
Net assets:
Beginning of period .............................. 516,626,680 442,968,645 800,859,548 739,040,504
-----------------------------------------------------------------------
End of period .................................... $ 508,862,213 $ 516,626,680 $ 751,875,717 $ 800,859,548
=======================================================================
Undistributed net investment income
(accumulated distributions
in excess of net investment income)
included in net assets:
End of period .................................... $ 447,937 $ 692,530 $ (1,179,813) $ (831,892)
=======================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
AND THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
FRANKLIN PUERTO RICO
TAX-FREE INCOME FUND
--------------------------------
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
--------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................................... $ 5,557,861 $ 10,900,493
Net realized gain from investments .............................. 518,377 836,253
Net unrealized appreciation (depreciation) on investments ....... (9,927,417) 296,087
--------------------------------
Net increase (decrease) in net assets resulting from operations (3,851,179) 12,032,833
Distributions to shareholders from:
Net investment income:
Class A ........................................................ (5,388,805) (10,664,385)
Class C ........................................................ (169,056) (236,108)
In excess of net investment income:
Class A ........................................................ (13,609) (112,508)
Class C ........................................................ (427) (2,491)
Net realized gains:
Class A ........................................................ (289,652) (682,528)
Class C ........................................................ (10,841) (19,507)
--------------------------------
Total distributions to shareholders ............................... (5,872,390) (11,717,527)
Capital share transactions: (Note 2)
Class A .......................................................... 1,664,672 8,116,885
Class C .......................................................... 1,294,168 3,431,283
--------------------------------
Total capital share transactions .................................. 2,958,840 11,548,168
Net increase (decrease) in net assets ......................... (6,764,729) 11,863,474
Net assets:
Beginning of period .............................................. 225,803,210 213,939,736
--------------------------------
End of period ..................................................... $ 219,038,481 $ 225,803,210
================================
Accumulated distributions in excess of net
investment income included in net assets:
End of period .................................................... $ (176,294) $ (162,258)
================================
</TABLE>
See notes to financial statements.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax Free Trust (the Trust) is registered under the Investment Company
Act of 1940 as an open-end investment company, consisting of twenty-six separate
series (the Funds). All Funds included in this report are diversified except the
Franklin Connecticut Tax-Free Income Fund and the Franklin Federal
Intermediate-Term Tax-Free Income Fund. The Funds' investment objective is to
provide tax-free income.
The following summarizes the Funds' significant accounting policies.
a. SECURITY VALUATION
Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. 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. Securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.
b. INCOME TAXES
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount and
premium are amortized on an income tax basis. Distributions to shareholders are
recorded on the ex-dividend date.
Realized and unrealized gains and 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.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. 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. SHARES OF BENEFICIAL INTEREST
The classes of shares offered within each of the funds are indicated below.
Effective January 1, 1999, Class I and Class II were renamed Class A and Class
C, respectively, and the Franklin High Yield Tax-Free Income Fund began offering
a new class of shares, Class B. The shares differ by their initial sales load,
distribution fees, voting rights on matters affecting a single class and the
exchange privilege of each class.
<TABLE>
<CAPTION>
CLASS A CLASS A & CLASS C CLASS A, CLASS B, & CLASS C
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Intermediate-Term Tax-Free Income Fund Arizona Tax-Free Income Fund High Yield Tax-Free Income Fund
Colorado Tax-Free Income Fund
Connecticut Tax-Free Income Fund
New Jersey Tax-Free Income Fund
Oregon Tax-Free Income Fund
Pennsylvania Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST (CONT.)
At August 31, 1999, there were an unlimited number of shares authorized (no par
value). Transactions in the funds' shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN ARIZONA FRANKLIN COLORADO FRANKLIN CONNECTICUT
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold .................... 6,282,923 $ 70,329,414 1,787,591 $ 21,099,468 2,080,096 $ 22,978,618
Shares issued in reinvestment
of distributions ............. 933,549 10,394,618 331,498 3,907,276 278,425 3,067,722
Shares redeemed ................ (5,745,254) (64,028,128) (1,784,615) (21,060,096) (1,628,844) (17,900,391)
--------------------------------------------------------------------------------------------
Net increase ................... 1,471,218 $ 16,695,904 334,474 $ 3,946,648 729,677 $ 8,145,949
============================================================================================
Year ended February 28, 1999
Shares sold .................... 11,526,533 $131,398,899 4,827,831 $ 58,439,307 5,343,819 $ 60,218,484
Shares issued in reinvestment
of distributions ............. 1,678,671 19,132,729 655,996 7,932,374 494,190 5,562,097
Shares redeemed ................ (8,347,885) (95,234,599) (2,479,532) (29,976,169) (2,231,916) (25,113,856)
--------------------------------------------------------------------------------------------
Net increase ................... 4,857,319 $ 55,297,029 3,004,295 $ 36,395,512 3,606,093 $ 40,666,725
============================================================================================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold .................... 486,096 $ 5,479,148 407,690 $ 4,834,841 593,582 $ 6,596,395
Shares issued in reinvestment
of distributions ............. 35,642 399,197 31,467 372,946 35,209 388,564
Shares redeemed ................ (321,677) (3,585,426) (284,368) (3,384,442) (189,101) (2,094,227)
--------------------------------------------------------------------------------------------
Net increase ................... 200,061 $ 2,292,919 154,789 $ 1,823,345 439,690 $ 4,890,732
============================================================================================
Year ended February 28, 1999
Shares sold .................... 1,020,350 $ 11,705,629 1,064,599 $ 12,955,209 1,442,047 $ 16,291,315
Shares issued in reinvestment
of distributions ............. 48,448 555,594 47,188 573,490 36,934 417,159
Shares redeemed ................ (247,506) (2,836,757) (195,768) (2,385,312) (172,113) (1,946,048)
--------------------------------------------------------------------------------------------
Net increase ................... 821,292 $ 9,424,466 916,019 $ 11,143,387 1,306,868 $ 14,762,426
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN
FEDERAL INTERMEDIATE-TERM FRANKLIN HIGH YIELD FRANKLIN NEW JERSEY
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold ................... 6,986,185 $ 77,622,449 44,692,642 $ 505,535,053 5,771,005 $ 67,905,725
Shares issued in reinvestment
of distributions ............ 249,580 2,773,371 6,659,720 75,233,051 804,420 9,449,372
Shares redeemed ............... (7,797,952) (86,562,399) (52,578,848) (593,260,141) (4,133,020) (48,468,832)
-------------------------------------------------------------------------------------------
Net increase (decrease) ....... (562,187) $ (6,166,579) (1,226,486) $ (12,492,037) 2,442,405 $ 28,886,265
===========================================================================================
Year ended February 28, 1999
Shares sold ................... 11,604,328 $130,996,084 109,439,514 $ 1,270,904,703 9,025,737 $107,896,711
Shares issued in reinvestment
of distributions ............ 424,605 4,788,679 12,599,576 146,168,778 1,485,157 17,759,368
Shares redeemed ............... (7,120,171) (80,412,724) (92,381,330) (1,074,154,605) (6,947,075) (83,026,142)
-------------------------------------------------------------------------------------------
Net increase .................. 4,908,762 $ 55,372,039 29,657,760 $ 342,918,876 3,563,819 $ 42,629,937
===========================================================================================
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST (CONT.)
<TABLE>
<CAPTION>
FRANKLIN HIGH YIELD FRANKLIN NEW JERSEY
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------------------------------------------------
CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold .................... 5,243,800 $ 59,546,003
Shares issued in reinvestment
of distributions ............. 58,905 663,195
Shares redeemed ................ (117,829) (1,336,328)
-----------------------------
Net increase ................... 5,184,876 $ 58,872,870
=============================
Period ended February 28, 1999(1)
Shares sold .................... 1,351,940 $ 15,588,944
Shares issued in reinvestment
of distributions ............. 1,920 22,138
Shares redeemed ................ (9,204) (106,395)
-----------------------------
Net increase ................... 1,344,656 $ 15,504,687
=============================
CLASS C SHARES:
Six months ended August 31, 1999
Shares sold .................... 7,164,225 $ 81,745,693 790,642 $ 9,411,756
Shares issued in reinvestment
of distributions ............. 868,047 9,867,827 64,374 760,015
Shares redeemed ................ (5,643,231) (64,033,028) (391,738) (4,632,153)
--------------------------------------------------------------
Net increase ................... 2,389,041 $ 27,580,492 463,278 $ 5,539,618
==============================================================
Year ended February 28, 1999
Shares sold .................... 23,491,348 $274,591,698 2,039,721 $24,514,544
Shares issued in reinvestment
of distributions ............. 1,434,609 16,744,689 92,442 1,111,258
Shares redeemed ................ (6,290,089) (73,418,379) (430,504) (5,171,668)
--------------------------------------------------------------
Net increase ................... 18,635,868 $217,918,008 1,701,659 $20,454,134
==============================================================
</TABLE>
(1) For the period January 1, 1999 (effective date) to February 28, 1999.
<TABLE>
<CAPTION>
FRANKLIN OREGON FRANKLIN PENNSYLVANIA FRANKLIN PUERTO RICO
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------------------------------------------------------------------
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold ................... 3,780,700 $ 44,079,472 3,620,175 $ 37,454,979 1,096,548 $ 12,845,076
Shares issued in reinvestment
of distributions ............ 586,066 6,790,452 850,041 8,764,397 236,974 2,771,555
Shares redeemed ............... (3,231,276) (37,371,444) (5,701,793) (58,658,098) (1,193,771) (13,951,959)
-------------------------------------------------------------------------------------
Net increase (decrease) ....... 1,135,490 $ 13,498,480 (1,231,577) $(12,438,722) 139,751 $ 1,664,672
=====================================================================================
Year ended February 28, 1999
Shares sold ................... 7,610,561 $ 90,155,831 10,273,081 $108,316,940 2,024,140 $ 24,064,112
Shares issued in reinvestment
of distributions ............ 1,100,982 13,038,139 1,721,278 18,145,017 469,863 5,585,862
Shares redeemed ............... (3,846,398) (45,560,169) (7,413,012) (78,136,005) (1,811,759) (21,533,089)
-------------------------------------------------------------------------------------
Net increase .................. 4,865,145 $ 57,633,801 4,581,347 $ 48,325,952 682,244 $ 8,116,885
=====================================================================================
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST (CONT.)
<TABLE>
<CAPTION>
FRANKLIN OREGON FRANKLIN PENNSYLVANIA FRANKLIN PUERTO RICO
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-----------------------------------------------------------------------------------------
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended August 31, 1999
Shares sold ................... 809,245 $ 9,460,098 715,896 $ 7,467,294 181,905 $ 2,137,193
Shares issued in reinvestment
of distributions ............ 46,539 542,550 61,976 641,762 8,475 99,259
Shares redeemed (359,990) (4,187,520) (276,140) (2,873,700) (80,553) (942,284)
-----------------------------------------------------------------------------------------
Net increase .................. 495,794 $ 5,815,128 501,732 $ 5,235,356 109,827 $ 1,294,168
=========================================================================================
Year ended February 28, 1999
Shares sold ................... 1,560,923 $ 18,592,323 1,872,749 $ 19,847,633 361,675 $ 4,306,325
Shares issued in reinvestment
of distributions ............ 70,444 839,644 96,080 1,017,661 13,159 156,658
Shares redeemed ............... (199,919) (2,382,123) (447,006) (4,729,816) (86,636) (1,031,700)
-----------------------------------------------------------------------------------------
Net increase .................. 1,431,448 $ 17,049,844 1,521,823 $ 16,135,478 288,198 $ 3,431,283
=========================================================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), Franklin/Templeton Investor Services, Inc. (Investor Services),
and Franklin Templeton Services, Inc. (FT Services), the Funds' investment
manager, principal underwriter, transfer agent, and administrative manager,
respectively.
The Funds pay an investment management fee to Advisers, based on the average net
assets of the Funds as follows:
ANNUALIZED
FEE RATE MONTH-END NET ASSETS
- ----------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.
Advisers agreed in advance to waive management fees for the Franklin Federal
Intermediate-Term Tax-Free Income Fund, as noted in the Statements of
Operations.
The Funds reimburse Distributors up to .10%, .65%, and .65% per year of their
average daily net assets of Class A, Class B, and Class C, respectively, for
costs incurred in marketing the Funds' shares.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
Distributors received (paid) net commissions on sales of the Funds' shares, and
received contingent deferred sales charges for the period as follows:
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN
ARIZONA COLORADO CONNECTICUT 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>
Net commissions paid ................... $(164,008) $(23,412) $(34,802) $(176,686) $(2,684,590)
Contingent deferred sales charges ...... $ 25,563 $ 11,257 $ 13,316 $ 32,198 $ 287,989
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
NEW JERSEY OREGON PENNSYLVANIA PUERTO RICO
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net commissions (paid) ............................... $(130,797) $(124,116) $(28,028) $(7,972)
Contingent deferred sales charges .................... $ 18,701 $ 46,440 $ 13,622 $ 5,706
</TABLE>
The Funds paid transfer agent fees of $2,166,060, of which $1,814,406 was paid
to Investor Services.
4. INCOME TAXES
At February 28, 1999, the Funds had tax basis capital losses which may be
carried over to offset future capital gains. Such losses expire as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FEDERAL FRANKLIN
CONNECTICUT INTERMEDIATE- OREGON
TAX-FREE TERM TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
--------------------------------------------------------
<S> <C> <C> <C>
Capital loss carryovers expiring in: 2003 ................... $3,162,502 $ -- $ 36,444
2004 ................... 46,957 920,152 --
2005 ................... 322,502 99,478 67,453
2006 ................... -- 95,778 --
-------------------------------------------------------
$3,531,961 $1,115,408 $103,897
=======================================================
</TABLE>
Distributions of income to shareholders may not equal net investment income due
to differing treatments of dividend distributions for book and tax purposes.
Net realized capital gains (losses) differ for financial statement and tax
purposes primarily due to differing treatment of wash sales.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At August 31, 1999, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN FEDERAL
ARIZONA COLORADO CONNECTICUT INTERMEDIATE-
TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments at cost ......................... $851,198,867 $305,514,568 $260,592,791 $192,966,527
=========================================================================
Unrealized appreciation ..................... $ 28,739,329 $ 7,920,569 $ 8,458,007 $ 3,148,185
Unrealized depreciation ..................... (18,368,763) (6,457,337) (6,750,626) (3,267,919)
-------------------------------------------------------------------------
Net unrealized appreciation (depreciation) .. $ 10,370,566 $ 1,463,232 $ 1,707,381 $ (119,734)
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
HIGH YIELD NEW JERSEY OREGON PENNSYLVANIA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments at cost ................ $6,356,590,151 $709,621,163 $521,553,136 $742,244,661
=================================================================================
Unrealized appreciation ............ $ 261,347,974 $ 24,722,680 $ 13,467,666 $ 20,928,319
Unrealized depreciation ............ (211,943,357) (12,146,354) (12,931,741) (15,158,793)
----------------------------------------------------------------------------------
Net unrealized appreciation ........ $ 49,404,617 $ 12,576,326 $ 535,925 $ 5,769,526
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN
PUERTO RICO
TAX-FREE
INCOME FUND
-----------
<S> <C>
Investments at cost .................................................................................. $210,804,604
============
Unrealized appreciation .............................................................................. $ 8,722,705
Unrealized depreciation .............................................................................. (3,436,278)
------------
Net unrealized appreciation .......................................................................... $ 5,286,427
============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended August 31, 1999, were as follows:
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN
ARIZONA COLORADO CONNECTICUT 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 ............. $134,424,983 $51,533,776 $55,967,064 $ 25,677,519 $933,218,561
Sales ................. $118,507,262 $44,564,080 $41,148,016 $ 22,679,888 $778,046,402
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
NEW JERSEY OREGON PENNSYLVANIA PUERTO RICO
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases ................................. $72,465,241 $84,524,581 $101,305,625 $14,784,595
Sales ..................................... $40,797,815 $80,404,134 $100,570,677 $13,548,878
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited) (continued)
6. CREDIT RISK AND DEFAULTED SECURITIES
The Franklin High Yield Tax-Free Income Fund has 33.8% of its portfolio invested
in lower rated and comparable quality unrated high yield securities, which tend
to be more sensitive to economic conditions than higher rated securities. The
risk of loss due to default by the issuer may be significantly greater for the
holders of high yielding securities because such securities are generally
unsecured and are often subordinated to other creditors of the issuer. At August
31, 1999, the Franklin Federal Intermediate-Term Tax-Free Income Fund and the
Franklin High Yield Tax-Free Income Fund held defaulted securities with a value
aggregating $910,000 and $17,550,000 representing .50% and .27%, respectively,
of the Funds' net assets. For information as to specific securities, see the
accompanying Statements of Investments.
For financial reporting purposes, the Funds discontinue accruing income on
defaulted bonds and provide an estimate for losses on interest receivable.
The Funds have investments in excess of 10% of their total net assets in their
respective states and/or U.S. territories and possessions except the Franklin
Intermediate-Term Tax-Free Income Fund and the Franklin High Yield Tax-Free
Income Fund which have investments in excess of 10% of their total net assets in
the states of California and/or New York. Such concentration may subject the
Funds more significantly to economic changes occurring within those states
and/or U.S. territories and possessions.
