FORM OF OPINION
_____________, 2000
Board of Trustees
Franklin Tax-Free Trust
777 Mariners Island Boulevard
San Mateo, CA 94404
RE: AGREEMENT AND PLAN OF REORGANIZATION DATED _________, 2000
(THE "PLAN"), MADE BY FRANKLIN TAX-FREE TRUST (THE "TRUST"),
ON BEHALF OF ITS SERIES, FRANKLIN ARIZONA INSURED TAX-FREE
FUND (THE "ACQUIRED FUND") AND FRANKLIN ARIZONA TAX-FREE FUND
(THE "ACQUIRING FUND") ___________
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income
tax consequences of the reorganization of the Acquired Fund and the Acquiring
Fund, which will consist of: (i) the acquisition, by the Acquiring Fund, of
substantially all of the property, assets and goodwill of the Acquired Fund,
in exchange solely for Class A shares of beneficial interest, without par
value, of the Acquiring Fund (the "Acquiring Fund Shares"); (ii) the
distribution by the Acquired Fund of the Acquiring Fund Shares in complete
liquidation of the Acquired Fund; and (iii) the subsequent dissolution of
the Acquired Fund, as soon as is practicable after the closing (the
"Reorganization"), all upon and subject to the terms and conditions of the
Plan.
In rendering our opinion, we have reviewed and relied upon: (a)
the Plan, dated ____________, 2000, made by the Trust on behalf of the
Acquired Fund and the
Board of Trustees
Franklin Tax-Free Trust
_______________, 2000
Page 2
Acquiring Fund; (b) the proxy materials provided to shareholders of the
Acquired Fund in connection with the Special Meeting of Shareholders of the
Acquired Fund held on February 21, 2001; (c) certain representations
concerning the Reorganization made to us by the Trust in a letter dated
____________, 2000 (the "Representation Letter"); (d) all other documents,
financial and other reports and corporate minutes we deemed relevant or
appropriate; and (e) such statutes, regulations, rulings and decisions as we
deemed material in rendering this opinion. All terms used herein, unless
otherwise defined, are used as defined in the Plan.
For purposes of this opinion, we have assumed that the Acquired
Fund, on the date of the Reorganization, satisfies, and immediately following
the Reorganization, the Acquiring Fund will satisfy, the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
for qualification as a regulated investment company.
Based on the foregoing, and provided the Reorganization is carried
out in accordance with the applicable laws of The Commonwealth of
Massachusetts, the Plan and the Representation Letter, it is our opinion that:
1. The acquisition by the Acquiring Fund of substantially all of
the assets of the Acquired Fund in exchange for the Acquiring Fund Shares,
followed by the distribution by the Acquired Fund to its shareholders of the
Acquiring Fund Shares in complete liquidation of the Acquired Fund, will
qualify as a reorganization within the meaning of Section 368(a)(1) of the
Code, and the Acquired Fund and the Acquiring Fund will each be a "party to
the reorganization" within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by the Acquired Fund upon
the transfer of substantially all of its assets to the Acquiring Fund in
exchange solely for the Acquiring Fund Shares under Section 361(a) and
Section 357(a) of the Code.
3. No gain or loss will be recognized by the Acquiring Fund upon
the receipt by it of substantially all of the assets of the Acquired Fund in
exchange solely for the Acquiring Fund Shares under Section 1032(a) of the
Code.
4. No gain or loss will be recognized by the Acquired Fund upon
the distribution of the Acquiring Fund Shares to its shareholders in
liquidation of the Acquired Fund under Section 361(c)(1) of the Code.
5. The basis of the assets of the Acquired Fund received by the
Acquiring Fund will be the same as the basis of such assets to the Acquired
Fund immediately prior to the Reorganization pursuant to Section 362(b) of
the Code.
Board of Trustees
Franklin Tax-Free Trust
___________________, 2000
Page 3
6. The holding period of the assets of the Acquired Fund received
by the Acquiring Fund will include the period during which such assets were
held by the Acquired Fund under Section 1223(2) of the Code.
7. No gain or loss will be recognized by the shareholders of the
Acquired Fund upon the exchange of their shares of the Acquired Fund (the
"Acquired Fund Shares") for the Acquiring Fund Shares (including fractional
shares to which they may be entitled), under Section 354(a) of the Code.
8. The basis of the Acquiring Fund Shares received by the
shareholders of the Acquired Fund (including fractional shares to which they
may be entitled) will be the same as the basis of the Acquired Fund Shares
exchanged therefor under Section 358(a)(1) of the Code.
9. The holding period of the Acquiring Fund Shares received by
the shareholders of the Acquired Fund (including fractional shares to which
they may be entitled) will include the holding period of the Acquired Fund
Shares surrendered in exchange therefor, provided that the Acquired Fund
Shares were held as a capital asset on the date of the Reorganization, under
Section 1223(1) of the Code.
10. The Acquiring Fund will succeed to and take into account, as
of the date of the transfer as defined in Section 1.381(b)-1(b) of the
regulations issued by the United States Treasury (the "Treasury
Regulations"), the items of the Acquired Fund described in Section 381(c) of
the Code, subject to the conditions and limitations specified in Sections
381, 382, 383 and 384 of the Code and the Treasury Regulations.
Our opinion is based upon the Code, the applicable Treasury
Regulations promulgated thereunder, the present positions of the Internal
Revenue Service (the "Service") as are set forth in published revenue rulings
and revenue procedures, present administrative positions of the Service, and
existing judicial decisions, all of which are subject to change either
prospectively or retroactively. We do not undertake to make any continuing
analysis of the facts or relevant law following the date of this opinion.
Our opinion is conditioned upon the performance by the Acquiring
Fund and the Acquired Fund of their undertakings in the Plan and the
Representation Letter.
Board of Trustees
Franklin Tax-Free Trust
___________________, 2000
Page 4
This opinion is being rendered to the Acquiring Fund and the
Acquired Fund, and may be relied upon only by such Funds and the shareholders
of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By: ______________________________________
