ftftarpt0412.htm - Generated by SEC Publisher for SEC Filing

For the 12 months ended February 29, 2012, the municipal bond market posted healthy gains as measured by the +12.42% return of the Barclays Capital (BC) Municipal Bond Index, which tracks investment-grade securities.¹Over the reporting period municipal bonds generally outperformed Treasuries, which returned +9.60% according to the BC U.S. Treasury Index, which tracks various U.S. Treasury securities.¹

During the reporting period, domestic and global events affected the municipal bond market. Domestically, the Federal Reserve Board’s (Fed’s) commitment to maintain an accommodative monetary policy stance with historically low interest rates supported the municipal market. The market was further supported by an extended period of low supply, thus reducing the availability of bonds to meet investor demand. In Europe, several countries struggled with financial challenges that resulted in a flight to quality benefiting the U.S. Treasury market, as well as the municipal bond market.

From a credit perspective, on August 2, 2011, the U.S. raised its debt ceiling and avoided defaulting on its debt obligations. Independent credit rating agency Standard & Poor’s (S&P) lowered the country’s long-term Treasury bond rating to AA+ from AAA, citing political risks and a rising debt burden.²All municipal bonds backed by the U.S. government or government-sponsored enterprises (GSEs) were also downgraded along with the country’s rating and those of GSEs. S&P’s downgrade of U.S. Treasury securities led to the review of more than 11,000 municipal credits supported by federal programs and agency escrows. Primarily, prerefunded municipal bonds and housing bonds tied to federal subsidy programs were affected by the downgrade, although they generally still carried high-grade ratings. Furthermore, on July 19, 2011, independent credit rating agency Moody’s Investors Service placed five Aaa-rated states on its watch list for potential rating cuts partly based on their dependency on federal funding. After the debt ceiling was raised, Moody’s reconfirmed the Aaa rating to states and public finance issuers previously identified as directly or indirectly linked to the U.S. government.²The same credits are currently assigned a negative outlook based on the identification of certain shared characteristics.

1. Source: © 2012 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Congress enacted the Budget Control Act of 2011 with the potential to reduce the federal deficit by approximately $2 trillion by 2021. While the plan of action is unknown, one can expect reduced federal funding, which would impact state and local programs dependent on federal subsidies. State and local officials may need to reevaluate current budget forecasts and the potential effects. Despite facing fiscal restraints and broad budget cuts to achieve balance, many states continued to show mild growth in revenues, and the actual default rate for municipal bonds was very low.

At period-end, we maintained our positive view of the municipal bond market. We believe municipal bonds continue to be an attractive asset class among fixed income securities, and we intend to follow our solid discipline of investing to maximize income while seeking value in the municipal bond market.

The foregoing information reflects our analysis and opinions as of February 29, 2012, the end of the reporting period. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

We use a consistent, disciplined strategy in an effort to maximize tax-exempt income for our shareholders by seeking to maintain exposure to higher coupon securities while balancing risk and return within each Fund’s range of allowable investments. We generally employ a buy-and-hold approach and invest in securities we believe should provide the most relative value in the market. As we invest during different interest rate environments, each Fund’s portfolio remains diversified with a broad range of securities. This broad diversification may help mitigate interest rate risk. We do not use leverage or exotic derivatives, nor do we use hedging techniques that could add volatility and contribute to under-performance in adverse markets. We generally stay fully invested to help maximize income distribution.

Based on the combination of our value-oriented philosophy of investing primarily for income and a positive-sloping municipal yield curve, we favored the use of longer term bonds. Consistent with our strategy, we sought to purchase bonds from 15 to 30 years in maturity with good call features for the long-term funds, 10 to 15 years for the intermediate-term fund, and five years or less for the limited-term fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.

We invite you to read your Fund report for more detailed performance and portfolio information. Thank you for your participation in Franklin Tax-Free Trust. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of February 29, 2012, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Your Fund’s Goal and Main Investments: Franklin Double Tax-Free Income Fund seeks to provide as high a level of income exempt from federal and state personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its net assets in securities that pay interest free from such taxes.¹The Fund focuses on municipal securities issued by U.S. territories such as Puerto Rico, Guam and the U.S. Virgin Islands, and currently invests primarily in Puerto Rican municipal securities.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.

The Fund’s Class A share price, as measured by net asset value, increased from $11.12 on February 28, 2011, to $12.31 on February 29, 2012. The Fund’s

1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 78.

Class A shares paid dividends totaling 53.26 cents per share for the same period.²The Performance Summary beginning on page 10 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 4.05%, based on an annualization of the current 4.34 cent per share dividend and the maximum offering price of $12.86 on February 29, 2012. An investor in the 2012 maximum federal income tax bracket of 35.00% would need to earn a distribution rate of 6.23% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Class C and Advisor shares’ performance, please see the Performance Summary.

We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the discussion on page 6 for details. Franklin Double Tax-Free Income Fund is the

2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

first mutual fund to offer both state and federal income tax exemptions in all 50 states. We do this by focusing on investments in U.S. territories such as Puerto Rico, the U.S. Virgin Islands and Guam. This can be particularly appealing to residents of states such as Illinois, Iowa and Wisconsin, where income from their own municipal securities may be fully taxable.

The Fund was well diversified with 120 different positions across 10 different sectors as of February 29, 2012. Issuers represented in the portfolio included Puerto Rico (74.6% of the Fund’s total long-term investments), Guam (14.9%) and the U.S. Virgin Islands (10.5%).

Many municipal bond funds purchase U.S. territory paper, mainly Puerto Rico’s, as an alternative for their specialty state funds when the supply within a particular state is running low. This strong demand for territory paper can help to keep bond values high relative to other states. Puerto Rico’s municipal bond market is widely traded because of its dual tax-exemption advantages.

Thank you for your continued participation in Franklin Double Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.

The foregoing information reflects our analysis, opinions and portfolio holdings as of February 29, 2012, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only; Advisor Class: no sales charges.


Class A				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	15.85	%	+	27.51	%	+	64.20	%
Average Annual Total Return²			+	10.96	%	+	4.07	%	+	4.63	%
Avg. Ann. Total Return (3/31/12)³			+	11.74	%	+	3.97	%	+	4.74	%
Distribution Rate⁴	4.05	%
Taxable Equivalent Distribution Rate⁵	6.23	%
30-Day Standardized Yield⁶	3.24	%
Taxable Equivalent Yield⁵	4.98	%
Total Annual Operating Expenses⁷	0.67	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	15.26	%	+	24.04	%	+	55.70	%
Average Annual Total Return²			+	14.26	%	+	4.40	%	+	4.53	%
Avg. Ann. Total Return (3/31/12)³			+	14.96	%	+	4.30	%	+	4.62	%
Distribution Rate⁴	3.66	%
Taxable Equivalent Distribution Rate⁵	5.63	%
30-Day Standardized Yield⁶	2.84	%
Taxable Equivalent Yield⁵	4.37	%
Total Annual Operating Expenses⁷	1.22	%
Advisor Class⁸				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	16.04	%	+	28.03	%	+	64.87	%
Average Annual Total Return²			+	16.04	%	+	5.07	%	+	5.13	%
Avg. Ann. Total Return (3/31/12)³			+	16.75	%	+	4.94	%	+	5.23	%
Distribution Rate⁴	4.33	%
Taxable Equivalent Distribution Rate⁵	6.66	%
30-Day Standardized Yield⁶	3.49	%
Taxable Equivalent Yield⁵	5.37	%
Total Annual Operating Expenses⁷	0.57	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Total return represents the change in value of an investment over the periods shown. It includes any current, applicable, maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. Since the Fund may concentrate its investments in a single U.S. territory, it may be subject to greater risk of adverse economic and regulatory changes in that territory than a geographically diversified fund. The Fund is classified as a nondiversified Fund because it may invest a greater portion of its assets in the municipal securities of one issuer than a diversified fund. The Fund’s prospectus also includes a description of the main investment risks.

Class C: Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares.

Advisor Class: Shares are available to certain eligible investors as described in the prospectus.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Classes C and Advisor) per share on 2/29/12.

5. Taxable equivalent distribution rate and yield assume the 2012 maximum federal income tax rate of 35.00%.

6. The 30-day standardized yield for the month ended 2/29/12 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends paid to shareholders) or the income reported in the Fund’s financial statements.

7. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

8. Effective 7/15/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 7/15/09, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 7/15/09, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 7/15/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +28.93% and +10.17%.

9. Source: © 2012 Morningstar. The BC Municipal Bond Index is a market value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must be fixed rate, have at least one year to final maturity and be rated investment grade (Baa3/BBB- or higher) by at least two of the following agencies: Moody’s, Standard & Poor’s and Fitch. The Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of the inflation rate.

The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.

*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.67%; C: 1.23%; and Advisor: 0.57%), multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Your Fund’s Goal and Main Investments: Franklin Federal Intermediate-Term Tax-Free Income Fund seeks to provide as high a level of income exempt from federal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.¹The Fund maintains a dollar-weighted average portfolio maturity (the time in which the debt must be repaid) of three to 10 years.

*Standard & Poor’s (S&P) is the primary independent rating agency source. Moody’s is secondary, and Fitch, if available, is used for securities not rated by Moody’s or S&P. The ratings are an indication of an issuer’s creditworthiness, with long-term ratings typically ranging from AAA (highest) to Below Investment Grade (lowest; includes ratings BB to D). This methodology differs from that used in Fund marketing materials.

We are pleased to bring you Franklin Federal Intermediate-Term Tax-Free Income Fund’s annual report for the fiscal year ended February 29, 2012.

The Fund’s Class A share price, as measured by net asset value, increased from $11.43 on February 28, 2011, to $12.39 on February 29, 2012. The Fund’s

1. Dividends are generally subject to state and local taxes, if any. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 85.

*Assumes shares were purchased and held for the entire accrual period, which differs from the calendar month. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

**The December per-share dividend distribution consisted of payments on 12/20/11 and 12/30/11 for each class as follows: Class A, 3.13 cents and 1.00 cent; Class C, 2.56 cents and 0.82 cents; and Advisor Class, 3.23 cents and 1.04 cents.

Class A shares paid dividends totaling 39.10 cents per share for the same period.²The Performance Summary beginning on page 19 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 2.82%, based on an annualization of the current 2.98 cent per share dividend and the maximum offering price of $12.68 on February 29, 2012. An investor in the 2012 maximum federal income tax bracket of 35.00% would need to earn a distribution rate of 4.34% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Class C and Advisor shares’ performance, please see the Performance Summary. The reduction in dividend distributions from the start to the end of the period under review reflected generally declining interest rates. Additionally, investor demand was strong for municipal bonds in an environment of limited tax-exempt supply. These factors resulted in reduced income for the portfolio and caused dividends to decline overall.

2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Class A: 2.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only; Advisor Class: no sales charges.


Class A				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	12.02	%	+	29.60	%	+	61.15	%
Average Annual Total Return²			+	9.53	%	+	4.85	%	+	4.65	%
Avg. Ann. Total Return (3/31/12)³			+	9.16	%	+	4.68	%	+	4.73	%
Distribution Rate⁴	2.82	%
Taxable Equivalent Distribution Rate⁵	4.34	%
30-Day Standardized Yield⁶	1.64	%
Taxable Equivalent Yield⁵	2.52	%
Total Annual Operating Expenses⁷	0.66	%
Class C				1-Year			5-Year			Inception (7/1/03)
Cumulative Total Return¹			+	11.38	%	+	26.10	%	+	39.07	%
Average Annual Total Return²			+	10.38	%	+	4.75	%	+	3.88	%
Avg. Ann. Total Return (3/31/12)³			+	10.04	%	+	4.60	%	+	3.72	%
Distribution Rate⁴	2.31	%
Taxable Equivalent Distribution Rate⁵	3.55	%
30-Day Standardized Yield⁶	1.14	%
Taxable Equivalent Yield⁵	1.75	%
Total Annual Operating Expenses⁷	1.21	%
Advisor Class⁸				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	12.10	%	+	30.18	%	+	61.88	%
Average Annual Total Return²			+	12.10	%	+	5.42	%	+	4.93	%
Avg. Ann. Total Return (3/31/12)³			+	11.76	%	+	5.25	%	+	5.01	%
Distribution Rate⁴	2.99	%
Taxable Equivalent Distribution Rate⁵	4.60	%
30-Day Standardized Yield⁶	1.78	%
Taxable Equivalent Yield⁵	2.74	%
Total Annual Operating Expenses⁷	0.56	%

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Classes C and Advisor) per share on 2/29/12.

5. Taxable equivalent distribution rate and yield assume the 2012 maximum federal income tax rate of 35.00%.

8. Effective 12/1/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 12/1/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 12/1/08, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 12/1/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +32.10% and +8.96%.

9. Source: © 2012 Morningstar. The BC Municipal Bond Index: 10-Year Component is the 10-year (8-12) component of the Municipal Bond Index, which is a market value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must be fixed rate, have at least one year to final maturity and be rated investment grade (Baa3/BBB- or higher) by at least two of the following agencies: Moody’s, Standard & Poor’s and Fitch. The Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of the inflation rate.

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.

*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.66%; C: 1.21%; and Advisor: 0.56%), multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Your Fund’s Goal and Main Investments: Franklin Federal Limited-Term Tax-Free Income Fund seeks to provide as high a level of income exempt from federal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.¹The Fund maintains a dollar-weighted average portfolio maturity (the time in which the debt must be repaid) of five years or less.

*Standard & Poor’s (S&P) is the primary independent rating agency source. Moody’s is secondary, and Fitch, if available, is used for securities not rated by Moody’s or S&P. The ratings are an indication of an issuer’s creditworthiness, with short-term ratings typically ranging from SP-1 and MIG 1 (highest) to SP-3 and SG (lowest) and long-term ratings typically ranging from AAA (highest) to Below Investment Grade (lowest; includes ratings BB to D). This methodology differs from that used in Fund marketing materials.

We are pleased to bring you Franklin Federal Limited-Term Tax-Free Income Fund’s annual report for the fiscal year ended February 29, 2012.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 102.

**The December per-share dividend distribution consisted of payments on 12/20/11 and 12/30/11 for each class as follows: Class A, 1.62 cents and 0.52 cents; and Advisor Class, 1.75 cents and 0.56 cents.

The Fund’s Class A share price, as measured by net asset value, increased from $10.29 on February 28, 2011, to $10.60 on February 29, 2012. The Fund’s Class A shares paid dividends totaling 19.51 cents per share for the same period.²The Performance Summary beginning on page 28 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 1.79%, based on an annualization of the current 1.62 cent per share dividend and the maximum offering price of $10.84 on February 29, 2012. An investor in the 2012 maximum federal income tax bracket of 35.00% would need to earn a distribution rate of 2.75% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Advisor shares’ performance, please see the Performance Summary.

2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the discussion on page 6 for details.

Consistent with our investment strategy, we invested in bonds we believed could provide the most relative value from an income perspective. Seeking a dollar-weighted average portfolio maturity of five years or less, we concentrated in the one- to five-year range in an effort to insulate investors against bond market volatility. As a result of our strategy, we believe the Fund was positioned to capture changes in short-term interest rates, preserve capital and produce tax-free income.

Thank you for your continued participation in Franklin Federal Limited-Term Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.

The foregoing information reflects our analysis, opinions and portfolio holdings as of February 29, 2012, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Class A: 2.25% maximum initial sales charge; Advisor Class: no sales charges.


Class A				1-Year			5-Year			Inception (9/2/03)
Cumulative Total Return²			+	4.95	%	+	20.80	%	+	28.57	%
Average Annual Total Return³			+	2.56	%	+	3.38	%	+	2.73	%
Avg. Ann. Total Return (3/31/12)⁴			+	2.06	%	+	3.25	%	+	2.66	%
Distribution Rate⁵	1.79	%
Taxable Equivalent Distribution Rate⁶	2.75	%
30-Day Standardized Yield⁷	0.79	%
Taxable Equivalent Yield⁶	1.22	%
Total Annual Operating Expenses⁸
Without Waiver	0.87	%
With Waiver	0.60	%
Advisor Class⁹				1-Year			5-Year			Inception (9/2/03)
Cumulative Total Return²			+	5.00	%	+	20.86	%	+	28.64	%
Average Annual Total Return³			+	5.00	%	+	3.86	%	+	3.01	%
Avg. Ann. Total Return (3/31/12)⁴			+	4.49	%	+	3.74	%	+	2.94	%
Distribution Rate⁵	1.98	%
Taxable Equivalent Distribution Rate⁶	3.05	%
30-Day Standardized Yield⁷	0.96	%
Taxable Equivalent Yield⁶	1.48	%
Total Annual Operating Expenses⁸
Without Waiver	0.72	%
With Waiver	0.45	%

The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses (excluding Rule 12b-1 fees and acquired fund fees and expenses) for each class of the Fund do not exceed 0.45% (other than certain nonroutine expenses) until 6/30/12.

Total return represents the change in value of an investment over the periods shown. It includes any current maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

1. If the manager and administrator had not waived fees, the Fund’s distribution rate and total return would have been lower, and yield for the period would have been 0.54% for Class A and 0.70% for Advisor Class.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated.

4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

5. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Advisor Class) per share on 2/29/12.

6. Taxable equivalent distribution rate and yield assume the 2012 maximum federal income tax rate of 35.00%.

7. The 30-day standardized yield for the month ended 2/29/12 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends paid to shareholders) or the income reported in the Fund’s financial statements.

8. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

9. Effective 2/1/11, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 2/1/11, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 2/1/11, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 2/1/11 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +5.34% and +4.96%.

10. Source: © 2012 Morningstar. The BC Municipal Bond Index: 5-Year Component is the 5-year (4-6) component of the Municipal Bond Index, which is a market value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must be fixed rate, have at least one year to final maturity and be rated investment grade (Baa3/BBB- or higher) by at least two of the following agencies: Moody’s, Standard & Poor’s and Fitch. The Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of the inflation rate.

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

*Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, annualized for each class (A: 0.60%; and Advisor: 0.45%), multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Your Fund’s Goals and Main Investments: Franklin High Yield Tax-Free Income Fund seeks to provide a high current yield exempt from federal income taxes by investing at least 80% of its net assets in securities that pay interest free from such taxes.¹Its secondary goal is capital appreciation to the extent possible and consistent with the Fund’s principal investment goal.

We are pleased to bring you Franklin High Yield Tax-Free Income Fund’s annual report for the fiscal year ended February 29, 2012.

The Fund’s Class A share price, as measured by net asset value, increased from $9.60 on February 28, 2011, to $10.59 on February 29, 2012. The Fund’s Class A shares paid dividends totaling 52.43 cents per share for the

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 115.

same period.²The Performance Summary beginning on page 37 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 4.39%, based on an annualization of the current 4.05 cent per share dividend and the maximum offering price of $11.06 on February 29, 2012. An investor in the 2012 maximum federal income tax bracket of 35.00% would need to earn a distribution rate of 6.75% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Class B, C and Advisor shares’ performance, please see the Performance Summary. The reduction in dividend distributions from the start to the end of the period under review reflected generally declining interest rates. Additionally, investor demand was strong for municipal bonds in an environment of limited tax-exempt supply. These factors resulted in reduced income for the portfolio and caused dividends to decline overall.

2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the discussion on page 6 for details.

During the reporting period, the Fund continued to generate high, current, tax-free income for its shareholders. Consistent with our strategy, the Fund did not use leverage or credit derivatives to boost short-term returns, and we were careful to not overexpose the portfolio to any one credit sector.

Thank you for your continued participation in Franklin High Yield Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.

The foregoing information reflects our analysis, opinions and portfolio holdings as of February 29, 2012, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only; Advisor Class: no sales charges.


Class A				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	16.20	%	+	25.49	%	+	71.15	%
Average Annual Total Return²			+	11.22	%	+	3.74	%	+	5.06	%
Avg. Ann. Total Return (3/31/12)³			+	11.90	%	+	3.78	%	+	5.15	%
Distribution Rate⁴	4.39	%
Taxable Equivalent Distribution Rate⁵	6.75	%
30-Day Standardized Yield⁶	3.70	%
Taxable Equivalent Yield⁵	5.69	%
Total Annual Operating Expenses⁷	0.63	%
Class B				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	15.56	%	+	22.13	%	+	63.56	%
Average Annual Total Return²			+	11.56	%	+	3.75	%	+	5.04	%
Avg. Ann. Total Return (3/31/12)³			+	12.33	%	+	3.79	%	+	5.14	%
Distribution Rate⁴	3.98	%
Taxable Equivalent Distribution Rate⁵	6.12	%
30-Day Standardized Yield⁶	3.31	%
Taxable Equivalent Yield⁵	5.09	%
Total Annual Operating Expenses⁷	1.18	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	15.68	%	+	22.17	%	+	62.07	%
Average Annual Total Return²			+	14.68	%	+	4.09	%	+	4.95	%
Avg. Ann. Total Return (3/31/12)³			+	15.32	%	+	4.13	%	+	5.03	%
Distribution Rate⁴	3.95	%
Taxable Equivalent Distribution Rate⁵	6.08	%
30-Day Standardized Yield⁶	3.32	%
Taxable Equivalent Yield⁵	5.11	%
Total Annual Operating Expenses⁷	1.18	%
Advisor Class⁸				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	16.37	%	+	26.25	%	+	72.29	%
Average Annual Total Return²			+	16.37	%	+	4.77	%	+	5.59	%
Avg. Ann. Total Return (3/31/12)³			+	17.02	%	+	4.82	%	+	5.67	%
Distribution Rate⁴	4.67	%
Taxable Equivalent Distribution Rate⁵	7.18	%
30-Day Standardized Yield⁶	3.98	%
Taxable Equivalent Yield⁵	6.12	%
Total Annual Operating Expenses⁷	0.53	%

All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. In general, an investor is paid a higher yield to assume a greater degree of credit risk. The Fund’s prospectus also includes a description of the main investment risks.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Classes B, C and Advisor) per share on 2/29/12.

5. Taxable equivalent distribution rate and yield assume the 2012 maximum federal income tax rate of 35.00%.

8. Effective 1/3/06, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 1/3/06, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 1/3/06, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 1/3/06 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +37.01% and +5.25%.

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.65%; B: 1.20%; C: 1.20%; and Advisor: 0.55%), multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Your Fund’s Goal and Main Investments: Franklin Insured Tax-Free Income Fund seeks to provide as high a level of income exempt from federal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.¹The Fund invests predominantly in insured municipal securities.²

The Fund’s Class A share price, as measured by net asset value, increased from $11.39 on February 28, 2011, to $12.37 on February 29, 2012. The Fund’s

2. Fund shares are not insured by any U.S. or other government agency. They are subject to market risks and will fluctuate in value.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 147.


Dividend Distributions*
Franklin Insured Tax-Free Income Fund
		Dividend per Share
Month	Class A	Class B	Class C	Advisor Class
March 2011	4.30 cents	3.82 cents	3.80 cents	4.39 cents
April 2011	4.30 cents	3.82 cents	3.80 cents	4.39 cents
May 2011	4.30 cents	3.82 cents	3.80 cents	4.39 cents
June 2011	4.35 cents	3.86 cents	3.84 cents	4.44 cents
July 2011	4.35 cents	3.86 cents	3.84 cents	4.44 cents
August 2011	4.35 cents	3.86 cents	3.84 cents	4.44 cents
September 2011	4.35 cents	3.81 cents	3.80 cents	4.44 cents
October 2011	4.35 cents	3.81 cents	3.80 cents	4.44 cents
November 2011	4.35 cents	3.81 cents	3.80 cents	4.44 cents
December 2011**	5.48 cents	4.69 cents	4.72 cents	5.63 cents
January 2012	2.82 cents	2.41 cents	2.42 cents	2.89 cents
February 2012	4.15 cents	3.55 cents	3.57 cents	4.26 cents

**The December per-share dividend distribution consisted of payments on 12/20/11 and 12/30/11 for each class as follows: Class A, 4.15 cents and 1.33 cents; Class B, 3.55 cents and 1.14 cents; Class C, 3.57 cents and 1.15 cents; and Advisor Class, 4.26 cents and 1.37 cents.

Class A shares paid dividends totaling 51.50 cents per share for the same period.³The Performance Summary beginning on page 47 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.67%, based on an annualization of the current 3.95 cent per share dividend and the maximum offering price of $12.92 on February 29, 2012. An investor in the 2012 maximum federal income tax bracket of 35.00% would need to earn a distribution rate of 5.65% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Class B, C and Advisor shares’ performance, please see the Performance Summary. The reduction in dividend distributions from the start to the end of the period under review reflected generally declining interest rates. Additionally, investor demand was strong for municipal bonds in an environment of limited tax-exempt supply. These factors resulted in reduced income for the portfolio and caused dividends to decline overall.

3. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the discussion on page 6 for details.

During the reporting period, we limited Fund purchases to bonds insured by Assured Guaranty and non-insured bonds rated AA or higher by independent credit rating agencies. The municipal bond insurance industry has gone through significant downgrades since the 2008 financial crisis. As a result, Assured Guaranty was the only major municipal bond insurer currently providing new municipal bond insurance. Aside from Berkshire Hathaway Assurance, Assured Guaranty was the only insurer that carried a rating in the AA category. Since October 2010, when Standard & Poor’s downgraded Assured Guaranty to AA+ from AAA, no municipal bond insurers have been rated AAA.

We will continue to closely monitor the municipal insurance industry’s progress and the market for insured bonds. As always, we strive for solid performance on a relative value basis with a focus on income and credit safety.

Thank you for your continued participation in Franklin Insured Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.

The foregoing information reflects our analysis, opinions and portfolio holdings as of February 29, 2012, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only; Advisor Class: no sales charges.


Class A				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	13.40	%	+	25.06	%	+	58.98	%
Average Annual Total Return²			+	8.54	%	+	3.66	%	+	4.29	%
Avg. Ann. Total Return (3/31/12)³			+	8.95	%	+	3.64	%	+	4.43	%
Distribution Rate⁴	3.67	%
Taxable Equivalent Distribution Rate⁵	5.65	%
30-Day Standardized Yield⁶	2.78	%
Taxable Equivalent Yield⁵	4.28	%
Total Annual Operating Expenses⁷	0.63	%
Class B				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	12.73	%	+	21.66	%	+	52.18	%
Average Annual Total Return²			+	8.73	%	+	3.65	%	+	4.29	%
Avg. Ann. Total Return (3/31/12)³			+	9.20	%	+	3.62	%	+	4.43	%
Distribution Rate⁴	3.24	%
Taxable Equivalent Distribution Rate⁵	4.98	%
30-Day Standardized Yield⁶	2.36	%
Taxable Equivalent Yield⁵	3.63	%
Total Annual Operating Expenses⁷	1.18	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	12.72	%	+	21.78	%	+	50.70	%
Average Annual Total Return²			+	11.72	%	+	4.02	%	+	4.19	%
Avg. Ann. Total Return (3/31/12)³			+	12.19	%	+	3.99	%	+	4.33	%
Distribution Rate⁴	3.22	%
Taxable Equivalent Distribution Rate⁵	4.95	%
30-Day Standardized Yield⁶	2.37	%
Taxable Equivalent Yield⁵	3.65	%
Total Annual Operating Expenses⁷	1.18	%
Advisor Class⁸				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	13.42	%	+	25.42	%	+	59.43	%
Average Annual Total Return²			+	13.42	%	+	4.63	%	+	4.78	%
Avg. Ann. Total Return (3/31/12)³			+	13.90	%	+	4.62	%	+	4.93	%
Distribution Rate⁴	3.93	%
Taxable Equivalent Distribution Rate⁵	6.05	%
30-Day Standardized Yield⁶	3.01	%
Taxable Equivalent Yield⁵	4.63	%
Total Annual Operating Expenses⁷	0.53	%

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Classes B, C and Advisor) per share on 2/29/12.

5. Taxable equivalent distribution rate and yield assume the 2012 maximum federal income tax rate of 35.00%.

8. Effective 7/1/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 7/1/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 7/1/08, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 7/1/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +22.98% and +5.81%.

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.62%; B: 1.18%; C: 1.17%; and Advisor: 0.52%), multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Your Fund’s Goal and Main Investments: Franklin Massachusetts Tax-Free Income Fund seeks to provide as high a level of income exempt from federal and Massachusetts personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.¹

We are pleased to bring you Franklin Massachusetts Tax-Free Income Fund’s annual report for the fiscal year ended February 29, 2012.

The Fund’s Class A share price, as measured by net asset value, increased from $11.11 on February 28, 2011, to $12.02 on February 29, 2012. The Fund’s Class A shares paid dividends totaling 46.68 cents per share for the same period.²The Performance Summary beginning on page 58 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was

2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 166.

**The December per-share dividend distribution consisted of payments on 12/20/11 and 12/30/11 for each class as follows: Class A, 3.88 cents and 1.25 cents; Class C, 3.33 cents and 1.07 cents; and Advisor Class, 3.97 cents and 1.28 cents.

3.60%, based on an annualization of the current 3.77 cent per share dividend and the maximum offering price of $12.55 on February 29, 2012. An investor in the 2012 maximum combined effective federal and Massachusetts personal income tax bracket of 38.45% would need to earn a distribution rate of 5.85% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Class C and Advisor shares’ performance, please see the Performance Summary.

Massachusetts’s diverse economy continued to recover at a faster pace than the national average. While the commonwealth’s housing market remained weak, it showed signs of improvement as its foreclosure rate remained well below the national average and the number of housing permits continued to grow. The commonwealth’s improving economy resulted in job gains for sectors such as professional and business services, leisure and hospitality, and other services. Sectors that lost jobs included information, financial activities and construction. Massachusetts’s unemployment rate was 6.9% in February

2012, remaining well below the 8.3% national rate.³Massachusetts has led the New England region in recovery, and its key economic anchors, centered on higher education, health care, and technology and defense contracting, are expected to contribute to further economic growth prospects over time. Ongoing challenges include high business and housing costs, slow population growth with negative migration trends, net job losses during the last two recessions and subsequent expansions, and the potential for future health care industry downsizing.

The commonwealth has effectively managed its finances during economic downturns and promptly identified and closed budget gaps through new revenues, spending cuts and prudent use of reserves. It ended fiscal year 2011 with a general fund surplus due to higher-than-expected tax revenues. Preliminary reports of tax collections for fiscal year 2012 through the end of December indicated continued revenue growth despite a decrease in personal income tax estimated payments. The enacted fiscal year 2012 budget was balanced by reducing expenditures while drawing from the Budget Stabilization Fund, which could result in a slight cushion, although the withdrawal would be subject to reduction or elimination if revenue collections increase.

Massachusetts’s debt levels were among the nation’s highest, with net tax-supported debt at 9.5% of personal income and $4,711 per capita, compared with the 2.8% and $1,066 national medians.⁴Independent credit rating agency Moody’s Investors Service affirmed its Aa1 rating and stable outlook on Massachusetts’s general obligation bonds.⁵The rating reflected the commonwealth’s high wealth and education attainment levels, demonstrated willingness to increase revenues and cut expenditures to balance the budget, as well as a sizable and high-wage education and health services sector that has helped offset job losses and maintain a degree of economic stability, high debt levels and adequate budget reserves. One future challenge may be its relatively low pension funding levels. The outlook reflected the commonwealth’s improving revenues, efforts to regain structural budget balance by reducing use of onetime resources, and Moody’s expectation that Massachusetts would continue to proactively close any budget gaps and rebuild reserves as its economic recovery continues.

4. Source: Moody’s Investors Service, “Special Comment: 2011 State Debt Medians Report,” 6/3/11.

We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the discussion on page 6 for details.

Thank you for your continued participation in Franklin Massachusetts Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.

The foregoing information reflects our analysis, opinions and portfolio holdings as of February 29, 2012, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.


Class A				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	12.65	%	+	24.18	%	+	58.42	%
Average Annual Total Return²			+	7.89	%	+	3.53	%	+	4.25	%
Avg. Ann. Total Return (3/31/12)³			+	7.97	%	+	3.42	%	+	4.35	%
Distribution Rate⁴	3.60	%
Taxable Equivalent Distribution Rate⁵	5.85	%
30-Day Standardized Yield⁶	2.54	%
Taxable Equivalent Yield⁵	4.13	%
Total Annual Operating Expenses⁷	0.66	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	12.01	%	+	20.90	%	+	50.18	%
Average Annual Total Return²			+	11.01	%	+	3.87	%	+	4.15	%
Avg. Ann. Total Return (3/31/12)³			+	11.16	%	+	3.75	%	+	4.24	%
Distribution Rate⁴	3.16	%
Taxable Equivalent Distribution Rate⁵	5.13	%
30-Day Standardized Yield⁶	2.12	%
Taxable Equivalent Yield⁵	3.44	%
Total Annual Operating Expenses⁷	1.21	%
Advisor Class⁸				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	12.76	%	+	24.51	%	+	58.83	%
Average Annual Total Return²			+	12.76	%	+	4.48	%	+	4.74	%
Avg. Ann. Total Return (3/31/12)³			+	13.00	%	+	4.38	%	+	4.84	%
Distribution Rate⁴	3.87	%
Taxable Equivalent Distribution Rate⁵	6.29	%
30-Day Standardized Yield⁶	2.76	%
Taxable Equivalent Yield⁵	4.48	%
Total Annual Operating Expenses⁷	0.56	%

All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. Since the Fund concentrates its investments in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund’s prospectus also includes a description of the main investment risks.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Classes C and Advisor) per share on 2/29/12.

5. Taxable equivalent distribution rate and yield assume the published rates as of 12/28/11 for the maximum combined effective federal and Massachusetts personal income tax rate of 38.45%, based on the federal income tax rate of 35.00%.

8. Effective 7/1/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 7/1/09, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 7/1/09, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 7/1/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +21.57% and +7.61%.

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.66%; C: 1.21% and Advisor: 0.56%), multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

Your Fund’s Goal and Main Investments: Franklin New Jersey Tax-Free Income Fund seeks to provide as high a level of income exempt from federal and New Jersey personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its net assets in securities that pay interest free from such taxes.¹

We are pleased to bring you Franklin New Jersey Tax-Free Income Fund’s annual report for the fiscal year ended February 29, 2012.

The Fund’s Class A share price, as measured by net asset value, increased from $11.49 on February 28, 2011, to $12.55 on February 29, 2012. The Fund’s Class A shares paid dividends totaling 52.47 cents per share for the same period.²The Performance Summary beginning on page 68 shows that at the

1. For state personal income taxes, the 80% minimum is measured by total Fund assets. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds,

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 173.


Dividend Distributions*
Franklin New Jersey Tax-Free Income Fund
		Dividend per Share
Month	Class A	Class B	Class C	Advisor Class
March 2011	4.34 cents	3.84 cents	3.83 cents	4.43 cents
April 2011	4.34 cents	3.84 cents	3.83 cents	4.43 cents
May 2011	4.34 cents	3.84 cents	3.83 cents	4.43 cents
June 2011	4.36 cents	3.86 cents	3.85 cents	4.45 cents
July 2011	4.36 cents	3.86 cents	3.85 cents	4.45 cents
August 2011	4.36 cents	3.86 cents	3.85 cents	4.45 cents
September 2011	4.36 cents	3.83 cents	3.79 cents	4.45 cents
October 2011	4.36 cents	3.83 cents	3.79 cents	4.45 cents
November 2011	4.36 cents	3.83 cents	3.79 cents	4.45 cents
December 2011**	5.54 cents	4.86 cents	4.82 cents	5.68 cents
January 2012	3.18 cents	2.78 cents	2.76 cents	3.26 cents
February 2012	4.36 cents	3.82 cents	3.79 cents	4.47 cents

**The December per-share dividend distribution consisted of payments on 12/21/11 and 12/30/11 for each class as follows: Class A, 4.36 cents and 1.18 cents; Class B, 3.82 cents and 1.04 cents; Class C, 3.79 cents and 1.03 cents; and Advisor Class, 4.47 cents and 1.21 cents.

end of this reporting period the Fund’s Class A shares’ distribution rate was 3.90%, based on an annualization of the current 4.26 cent per share dividend and the maximum offering price of $13.11 on February 29, 2012. An investor in the 2012 maximum combined effective federal and New Jersey personal income tax bracket of 40.83% would need to earn a distribution rate of 6.59% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Class B, C and Advisor shares’ performance, please see the Performance Summary.

New Jersey’s broad and diverse economy, with an industry mix that mirrors the nation’s, continued to recover at a slower pace than the nation. Although its wealth and income levels per capita continued to be higher than for most states, its per-capita household debt was above average with a delinquency rate among the nation’s highest. The state’s foreclosure rate remained well below the national average and new housing permit issuance increased; however, home prices continued to decease in many areas. The state’s slowly improving

economy experienced sluggish job growth and resulted in a significant loss for the information sector. Most other sectors delivered gains, led by increases in education and health services, other services and construction. New Jersey’s unemployment rate remained elevated, at 9.0% in February 2012, compared to the 8.3% national rate.³

The state has solid budget management practices, with formally scheduled revenue and expenditure forecast updates and a strong executive system that gives the governor some flexibility in reducing enacted budgets without legislative approval. The state’s reliance on appropriation-backed debt backed up by consistent related funding is also favorable. New Jersey closed its fiscal year 2011 budget with a positive fund balance about twice the amount originally budgeted, as a result of relatively flat appropriations and better-than-expected revenue growth during the second half of the fiscal year. The enacted fiscal year 2012 budget absorbed the loss of federal stimulus funds and decreased reliance on nonrecurring resources, although remaining structurally balanced could be challenging. While the total budget was slightly less than in fiscal year 2011, state officials expected supplemental appropriations might be needed if savings on Transitional Aid to cities and other categories were not realized. In addition to decreasing Transitional Aid, fiscal year 2012 budget savings included pension reform, health care reform and plan redesign, and prepayment of fiscal year 2012 school construction aid during fiscal year 2011. An ongoing lawsuit regarding reforms to the state’s largest pension fund may reverse these reforms and related savings, and underfunding of pensions in general is a concern. Other challenges include decreased reserves and liquidity, and revenue growth that may not keep up with fixed costs.

New Jersey’s debt levels were among the nation’s highest, with net tax-supported debt at 7.9% of personal income and $3,940 per capita, compared with the 2.8% and $1,066 national medians.⁴Independent credit rating agency Moody’s Investors Service assigned the state’s general obligation bonds a rating of Aa3 with a stable outlook.⁵The rating reflected the state’s relatively weak finances and the expectation that recovery would be unlikely in the medium term due to rapidly rising fixed costs, slow economic recovery and no specific plan to improve reserves. The outlook reflected recent state revenue growth that indicated some economic stability, less reliance on nonrecurring resources to balance the fiscal year 2012 budget and proactive steps to control long-term liability growth, including pension and other post-employment benefit reforms.

4. Source: Moody’s Investors Service, “Special Comment: 2011 State Debt Medians Report,” 6/3/11.

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only; Advisor Class: no sales charges.


Class A				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	14.09	%	+	27.38	%	+	64.02	%
Average Annual Total Return²			+	9.24	%	+	4.06	%	+	4.61	%
Avg. Ann. Total Return (3/31/12)³			+	10.03	%	+	4.05	%	+	4.78	%
Distribution Rate⁴	3.90	%
Taxable Equivalent Distribution Rate⁵	6.59	%
30-Day Standardized Yield⁶	2.63	%
Taxable Equivalent Yield⁵	4.44	%
Total Annual Operating Expenses⁷	0.63	%
Class B				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	13.42	%	+	23.90	%	+	57.09	%
Average Annual Total Return²			+	9.42	%	+	4.04	%	+	4.62	%
Avg. Ann. Total Return (3/31/12)³			+	10.30	%	+	4.04	%	+	4.78	%
Distribution Rate⁴	3.46	%
Taxable Equivalent Distribution Rate⁵	5.85	%
30-Day Standardized Yield⁶	2.20	%
Taxable Equivalent Yield⁵	3.72	%
Total Annual Operating Expenses⁷	1.17	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	13.52	%	+	24.05	%	+	55.26	%
Average Annual Total Return²			+	12.52	%	+	4.41	%	+	4.50	%
Avg. Ann. Total Return (3/31/12)³			+	13.21	%	+	4.39	%	+	4.66	%
Distribution Rate⁴	3.45	%
Taxable Equivalent Distribution Rate⁵	5.83	%
30-Day Standardized Yield⁶	2.20	%
Taxable Equivalent Yield⁵	3.72	%
Total Annual Operating Expenses⁷	1.18	%
Advisor Class⁸				1-Year			5-Year			10-Year
Cumulative Total Return¹			+	14.20	%	+	27.83	%	+	64.60	%
Average Annual Total Return²			+	14.20	%	+	5.03	%	+	5.11	%
Avg. Ann. Total Return (3/31/12)³			+	15.00	%	+	5.04	%	+	5.27	%
Distribution Rate⁴	4.18	%
Taxable Equivalent Distribution Rate⁵	7.06	%
30-Day Standardized Yield⁶	2.86	%
Taxable Equivalent Yield⁵	4.83	%
Total Annual Operating Expenses⁷	0.53	%

All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. Since the Fund concentrates its investments in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund’s prospectus also includes a description of the main investment risks.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Classes B, C and Advisor) per share on 2/29/12.

5. Taxable equivalent distribution rate and yield assume the published rates as of 12/28/11 for the maximum combined effective federal and New Jersey personal income tax rate of 40.83%, based on the federal income tax rate of 35.00%.

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.64%; B: 1.18%; C: 1.19%; and Advisor: 0.53%), multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dEffective September 1, 2008, the redemption fee was eliminated.
^eAmount rounds to less than $0.01 per share.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

Annual Report | The accompanying notes are an integral part of these financial statements. | 75

76 | The accompanying notes are an integral part of these financial statements. | Annual Report

^aFor the year ended February 29.
^bFor the period July 15, 2009 (effective date) to February 28, 2010.
^cThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^dBased on average daily shares outstanding.
^eTotal return is not annualized for periods less than one year.
^fRatios are annualized for periods less than one year.

Annual Report | The accompanying notes are an integral part of these financial statements. | 77


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Double Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
U.S. Territories (continued)
Puerto Rico (continued)
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Financing Authority Industrial Revenue,
Guaynabo Municipal Government, 5.625%, 7/01/15	$	3,305,000	$	3,312,436
Guaynabo Municipal Government, 5.625%, 7/01/22		3,160,000		3,162,718
Guaynabo Warehouse, Series A, 5.15%, 7/01/19		1,015,000		1,041,847
Guaynabo Warehouse, Series A, 5.20%, 7/01/24		4,120,000		4,220,240
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Financing Authority Revenue,
Ana G. Mendez University System Project, Refunding, 5.375%, 12/01/21		1,865,000		1,897,376
Ana G. Mendez University System Project, Refunding, 5.375%, 2/01/29		7,850,000		7,852,119
Inter American University of Puerto Rico Project, NATL Insured, 4.25%, 10/01/24		1,000,000		1,000,940
Inter American University of Puerto Rico Project, NATL Insured, 4.375%, 10/01/25		1,000,000		1,006,860
Inter American University of Puerto Rico Project, NATL Insured, 4.50%, 10/01/29		3,750,000		3,755,288
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Revenue,
Cogeneration Facility, AES Puerto Rico Project, 6.625%, 6/01/26		5,970,000		5,971,015
Puerto Rico Infrastructure Financing Authority Revenue, Ports Authority Project, Series B,
5.25%, 12/15/26		9,485,000		10,181,768
Puerto Rico Municipal Finance Agency GO, Series A, AGMC Insured,
5.75%, 8/01/12		7,500,000		7,527,225
5.00%, 8/01/27		3,500,000		3,516,940
5.00%, 8/01/30		3,500,000		3,623,795
Puerto Rico PBA Guaranteed Revenue, Government Facilities,
Refunding, Series M, 6.25%, 7/01/21		5,000,000		5,953,750
Refunding, Series N, 5.00%, 7/01/32		5,000,000		5,157,400
Refunding, Series N, 5.00%, 7/01/37		10,000,000		10,200,500
Refunding, Series P, 6.50%, 7/01/30		5,000,000		5,776,000
Refunding, Series P, 6.75%, 7/01/36		5,000,000		5,755,350
Refunding, Series Q, 5.625%, 7/01/39		8,985,000		9,585,917
Series D, Pre-Refunded, 5.375%, 7/01/33		4,070,000		4,135,527
Series I, 5.25%, 7/01/33		2,450,000		2,517,669
Series I, 5.00%, 7/01/36		4,000,000		4,050,440
Series I, Pre-Refunded, 5.25%, 7/01/33		50,000		55,464
Series I, Pre-Refunded, 5.375%, 7/01/34		5,000,000		5,560,800
Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Refunding, Series B,
5.50%, 8/01/31		5,000,000		5,359,950
Puerto Rico Sales Tax FICO Sales Tax Revenue,
Capital Appreciation, first sub., Series A, zero cpn. to 8/01/19, 6.25% thereafter,
8/01/33		7,000,000		5,720,960
first sub., Series A, 5.75%, 8/01/37		1,000,000		1,111,170
first sub., Series A, 6.00%, 8/01/42		17,850,000		20,203,522
first sub., Series C, 5.25%, 8/01/41		2,500,000		2,691,525
Series A, 5.25%, 8/01/57		15,000,000		15,925,200
Series C, 5.25%, 8/01/40		4,560,000		5,059,594
				548,229,562

82 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 83


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
California (continued)
California State GO, (continued)
Various Purpose, 5.25%, 10/01/24	$	9,780,000	$	11,652,772
Various Purpose, 5.25%, 10/01/25		5,000,000		5,866,300
Various Purpose, XLCA Insured, 5.00%, 11/01/22		4,805,000		5,538,772
California State Public Works Board Lease Revenue, Various Capital Projects,
Series A, 5.00%, 10/01/20		2,000,000		2,298,700
Series A, 5.25%, 10/01/22		3,300,000		3,842,091
Series A, 5.25%, 10/01/23		5,365,000		6,179,514
Series A, 5.25%, 10/01/24		3,000,000		3,429,060
Series A, 5.25%, 10/01/25		3,000,000		3,392,550
Series G, Sub Series G-1, 5.25%, 10/01/18		5,605,000		6,548,546
Series G, Sub Series G-1, 5.25%, 10/01/19		10,000,000		11,743,000
Series G, Sub Series G-1, 5.00%, 10/01/21		15,055,000		16,982,943
Series I, 5.00%, 11/01/18		4,000,000		4,620,120
Series I, 5.25%, 11/01/20		5,000,000		5,782,700
California Statewide CDA Revenue,
Enloe Medical Center, Series A, California Mortgage Insured, 5.25%, 8/15/19		1,990,000		2,260,541
Enloe Medical Center, Series A, California Mortgage Insured, 5.375%, 8/15/20		1,650,000		1,856,432
Sutter Health, Refunding, Series A, 5.25%, 8/15/24		4,000,000		4,739,000
El Dorado Irrigation District COP, Refunding, Series A, Assured Guaranty,
5.00%, 8/01/22		2,610,000		2,941,340
5.25%, 8/01/23		2,860,000		3,245,785
Livermore-Amador Valley Water Management Agency Sewer Revenue, Refunding, 5.00%,
8/01/24		5,660,000		6,606,805
8/01/25		4,765,000		5,532,356
Los Angeles Department of Water and Power Revenue, Refunding, Series B, 5.25%,
7/01/24		17,000,000		20,247,680
Los Angeles Department of Water and Power Waterworks Revenue, Refunding, Series B,
NATL Insured, 4.25%, 7/01/17		4,000,000		4,199,600
Los Angeles Municipal Improvement Corp. Lease Revenue, Capital Equipment, Refunding,
Series A, Assured Guaranty,
5.00%, 4/01/17		3,215,000		3,762,579
5.25%, 4/01/18		2,495,000		2,987,987
5.25%, 4/01/19		3,180,000		3,809,672
Los Angeles USD, GO,
Election of 2004, Series F, FGIC Insured, 5.00%, 7/01/24		6,700,000		7,548,890
Series A, NATL Insured, Pre-Refunded, 4.25%, 7/01/16		2,500,000		2,631,925
Series F, 5.00%, 7/01/22		5,675,000		6,701,948
Orange County Airport Revenue, 5.00%,
7/01/20		3,465,000		4,041,229
7/01/21		7,545,000		8,690,708
San Francisco City and County COP, Multiple Capital Improvement Projects, Series A,
5.00%, 4/01/25		4,000,000		4,367,680
5.25%, 4/01/26		2,500,000		2,770,275
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation,
Refunding, Series A, 5.65%, 1/15/17		3,000,000		3,064,320
San Jose RDA Tax Allocation, Merged Area, Refunding, Series D, Assured Guaranty, 5.00%,
8/01/21		10,000,000		10,576,100
8/01/22		10,000,000		10,526,100

				Annual Report \| 87


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Louisiana (continued)
New Orleans GO, Radian Insured, 5.00%, 12/01/25	$	7,915,000	$	8,404,384
Orleans Parish Parishwide School District GO, Refunding, AGMC Insured, 5.00%, 9/01/18		5,000,000		5,905,200
St. John the Baptist Parish EDR, USX Corp. Project, Refunding, 5.35%, 12/01/13		4,000,000		4,002,800
				59,730,164
Maryland 0.4%
Maryland State EDC Student Housing Revenue, University of Maryland College Park Projects,
Refunding, Assured Guaranty, 5.00%,
6/01/19		1,445,000		1,568,764
6/01/20		1,000,000		1,077,360
Maryland State Health and Higher Educational Facilities Authority Revenue,
Peninsula Regional Medical Center, 5.00%, 7/01/18		1,600,000		1,764,240
Peninsula Regional Medical Center, 5.00%, 7/01/19		1,430,000		1,551,722
Peninsula Regional Medical Center, 5.00%, 7/01/20		1,000,000		1,076,260
Washington County Hospital, 5.25%, 1/01/22		1,000,000		1,066,970
Washington County Hospital, 5.25%, 1/01/23		1,250,000		1,330,375
Western Maryland Health, Refunding, Series A, NATL Insured, 5.00%, 1/01/19		2,920,000		3,299,016
				12,734,707
Massachusetts 0.6%
Massachusetts State Department of Transportation Metropolitan Highway System Revenue,
Contract Assistance, Series B, 5.00%, 1/01/20		5,000,000		6,158,350
Senior, Refunding, Series B, 5.00%, 1/01/17		5,000,000		5,790,850
Senior, Refunding, Series B, 5.00%, 1/01/18		5,000,000		5,850,350
Massachusetts State Health and Educational Facilities Authority Revenue, CareGroup,
Series B-2, NATL Insured, 5.375%, 2/01/26		1,720,000		1,922,392
				19,721,942
Michigan 4.8%
Detroit GO,
Distribution State Aid, 5.00%, 11/01/19		6,775,000		7,835,830
Distribution State Aid, 5.00%, 11/01/20		6,000,000		6,918,480
Series A-1, NATL Insured, 5.00%, 4/01/19		5,000,000		4,571,900
Series B, AGMC Insured, 5.00%, 4/01/18		2,635,000		2,713,075
Series B, AGMC Insured, 5.00%, 4/01/19		2,515,000		2,561,226
Michigan Municipal Bond Authority Revenue, Local Government Loan Program, Group A,
Refunding, Series B, AMBAC Insured, 5.00%,
12/01/17		1,000,000		1,045,820
12/01/18		1,000,000		1,032,460
Michigan State Finance Authority Revenue,
School District of The City of Detroit, AGMC Insured, 5.00%, 6/01/17		10,000,000		10,625,200
School District of the City of Detroit, Refunding, 5.25%, 6/01/17		10,640,000		11,689,210
School District of the City of Detroit, Refunding, 5.50%, 6/01/21		6,000,000		6,611,100
Michigan State GO, Refunding, Series A, 5.25%, 11/01/22		10,000,000		11,576,500
Michigan State HDA, SFMR, Series A, 5.00%, 12/01/19		10,000,000		10,596,700
Michigan State Hospital Finance Authority Revenue, Trinity Health Credit Group, Mandatory
Put 12/01/17, Refunding, Series A, 6.00%, 12/01/34		10,000,000		12,397,000
Michigan State Revenue, Grant Anticipation Bonds, AGMC Insured, 5.25%, 9/15/20		7,500,000		8,604,525


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Michigan (continued)
Michigan State Strategic Fund Limited Obligation Revenue,
Detroit Edison Co. Exempt Facilities Project, Mandatory Put 8/01/16, Refunding,
Series ET-2, 5.50%, 8/01/29	$	7,000,000	$	8,172,990
Michigan House of Representatives Facilities, Series A, Assured Guaranty, 5.25%,
10/15/22		4,000,000		4,502,760
Michigan House of Representatives Facilities, Series A, Assured Guaranty, 5.25%,
10/15/23		1,000,000		1,118,720
Royal Oak Hospital Finance Authority Hospital Revenue, William Beaumont Hospital,
Refunding, 6.25%, 9/01/14		3,000,000		3,308,820
Saginaw-Midland Municipal Water Supply Corp. Revenue GO, Water Supply System, Refunding,
NATL Insured, 4.25%, 9/01/13		1,245,000		1,286,471
South Lyon Community Schools GO, Refunding, NATL RE, FGIC Insured, 5.00%, 5/01/16		3,040,000		3,556,709
Wayne State University Revenues, Refunding, Series A, 5.00%,
11/15/18		4,265,000		4,918,355
11/15/19		5,210,000		6,064,857
11/15/20		5,255,000		6,034,369
Wayne-Westland Community Schools GO, Refunding,
4.50%, 5/01/12		1,035,000		1,041,831
4.625%, 5/01/13		1,095,000		1,147,494
AGMC Insured, 5.00%, 5/01/16		2,825,000		3,069,080
Wyandotte Electric Revenue, Refunding, Assured Guaranty, 5.00%, 10/01/17		3,955,000		4,517,085
				147,518,567
Minnesota 0.6%
Minnesota Agricultural and Economic Development Board Revenue, Health Care Facilities,
Essentia, Series C-1, Assured Guaranty,
5.00%, 2/15/21		4,165,000		4,807,160
5.00%, 2/15/22		5,570,000		6,373,305
5.25%, 2/15/23		5,000,000		5,782,250
				16,962,715
Missouri 0.8%
Hannibal IDA Health Facilities Revenue, Refunding, 5.00%, 3/01/19		1,675,000		1,760,140
Jackson County Reorganized School District No. 7 Lee’s Summit GO, School Building,
NATL Insured, 5.00%, 3/01/16		2,000,000		2,179,980
Missouri Joint Municipal Electric Utility Commission Power Project Revenue, Plum Point
Project, NATL Insured, 5.00%,
1/01/17		1,500,000		1,621,035
1/01/19		1,000,000		1,064,970
Springfield Public Utility Revenue, NATL RE, FGIC Insured, 4.50%, 8/01/21		15,245,000		16,729,406
				23,355,531
Nevada 1.4%
Clark County Airport Revenue, System, sub. lien, Series C, AGMC Insured, 5.00%,
7/01/22		5,000,000		5,705,700
7/01/23		15,000,000		17,000,550
Clark County School District GO, Refunding, Series A, NATL RE, FGIC Insured, 4.50%,
6/15/19		5,000,000		5,725,300


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Nevada (continued)
Clark County Water Reclamation District GO,
Series A, 5.25%, 7/01/21	$	3,435,000	$	4,088,680
Series A, 5.25%, 7/01/22		3,120,000		3,690,742
Series B, 5.25%, 7/01/21		3,430,000		4,082,729
Series B, 5.25%, 7/01/22		3,615,000		4,276,292
				44,569,993
New Jersey 8.9%
Hudson County Improvement Authority Facility Lease Revenue, Hudson County Lease Project,
Refunding, AGMC Insured, 5.375%,
10/01/22		5,220,000		6,304,351
10/01/23		5,375,000		6,515,467
10/01/24		2,050,000		2,489,500
New Jersey EDA Revenue, School Facilities Construction, Refunding,
Series DD-1, 5.00%, 12/15/18		20,000,000		24,350,800
Series EE, 5.25%, 9/01/24		12,210,000		14,540,645
New Jersey Health Care Facilities Financing Authority Revenue, Barnabas Health, Refunding,
Series A, 5.00%,
7/01/20		10,000,000		10,774,800
7/01/21		20,535,000		22,052,536
New Jersey State COP, Equipment Lease Purchase, Series A,
5.25%, 6/15/22		10,000,000		11,425,700
5.25%, 6/15/23		17,945,000		20,440,611
AMBAC Insured, 5.00%, 6/15/17		5,000,000		5,312,650
New Jersey State Educational Facilities Authority Revenue, Kean University, Refunding,
Series A, 5.00%, 9/01/21		6,000,000		6,921,240
New Jersey State Higher Education Assistance Authority Student Loan Revenue,
Refunding, Series 1A, 5.00%, 12/01/17		3,250,000		3,755,050
Refunding, Series 1A, 5.25%, 12/01/19		2,500,000		2,931,000
Refunding, Series 1A, 4.75%, 12/01/21		7,500,000		8,301,825
Refunding, Series 1A, 4.75%, 12/01/22		10,000,000		10,939,800
Series A, 5.375%, 6/01/24		15,000,000		16,712,850
New Jersey State Transportation Trust Fund Authority Revenue, Transportation System,
Refunding, Series A, 5.25%, 12/15/21		10,000,000		12,294,000
Refunding, Series A, 5.50%, 12/15/22		25,000,000		31,373,750
Refunding, Series A, Assured Guaranty, 5.50%, 12/15/22		11,465,000		14,388,002
Series D, AGMC Insured, 5.00%, 6/15/19		5,630,000		6,275,085
New Jersey State Turnpike Authority Turnpike Revenue, Series H, 5.00%,
1/01/20		10,000,000		11,820,100
1/01/21		20,000,000		23,349,600
				273,269,362
New York 9.6%
Erie County IDA School Facility Revenue, City School District of the City of Buffalo Project,
Series A,
5.00%, 5/01/22		14,840,000		17,151,330
AGMC Insured, 5.75%, 5/01/22		5,000,000		5,905,950
Liverpool Central School District GO, Refunding, AGMC Insured, 5.00%, 7/15/14		1,560,000		1,582,760


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New York (continued)
Long Island Power Authority Electric System Revenue, General, Refunding,
Series A, NATL RE, FGIC Insured, 5.00%, 12/01/19	$	7,000,000	$	7,903,980
Series E, NATL RE, FGIC Insured, 5.00%, 12/01/18		8,500,000		9,813,675
MTA Revenue, Transportation,
Refunding, Series F, 5.00%, 11/15/15		1,250,000		1,422,100
Series A, AGMC Insured, 5.00%, 11/15/20		5,000,000		5,631,150
Series A, AGMC Insured, 5.50%, 11/15/20		4,365,000		5,463,801
Series C, 5.00%, 11/15/16		1,150,000		1,337,439
Series C, 5.75%, 11/15/18		15,000,000		17,563,200
Nassau County Local Economic Assistance and FICO Revenue, Catholic Health Services,
Refunding, 5.00%, 7/01/21		9,000,000		10,477,800
New York City GO,
Refunding, Series C, NATL Insured, 5.875%, 8/01/16		5,000		5,021
Refunding, Series G, 5.00%, 8/01/21		7,000,000		8,168,440
Refunding, Series H, 5.00%, 8/01/17		4,330,000		4,787,594
Series D, 5.00%, 12/01/21		5,000,000		5,883,450
Series F, 4.75%, 1/15/16		1,535,000		1,586,376
Series F, Pre-Refunded, 4.75%, 1/15/16		1,465,000		1,522,194
Series H, 5.00%, 8/01/16		3,000,000		3,325,440
Series J, Sub Series J-1, AGMC Insured, 5.00%, 6/01/20		10,000,000		11,547,800
Series O, 5.00%, 6/01/19		5,000,000		5,623,800
New York City Transitional Finance Authority Building Aid Revenue, Fiscal 2009,
Series S-3, 5.00%, 1/15/23		5,000,000		5,831,500
Series S-4, 5.00%, 1/15/21		4,665,000		5,482,775
New York City Transitional Finance Authority Revenue, Future Tax Secured,
Refunding, Sub Series A-1, 5.00%, 11/01/23		11,500,000		14,152,015
Series C, 5.00%, 11/01/23		12,805,000		15,481,757
Series D, 5.00%, 11/01/24		7,620,000		9,303,487
New York State Dormitory Authority Lease Revenue, Third General Resolution, State University
Educational Facilities, Refunding, Series A, 5.00%,
5/15/23		8,435,000		10,313,559
5/15/24		7,000,000		8,495,760
New York State Dormitory Authority Revenue, Mortgage, St. Barnabas Hospital, Series B,
FHA Insured, 4.25%, 8/01/14		2,355,000		2,390,631
New York State Dormitory Authority Revenues,
Non-State Supported Debt, School Districts, Financing Program, Series A,
Assured Guaranty, 5.00%, 10/01/24		5,000,000		5,683,650
State Supported Debt, City University System, Consolidated Fifth General Resolution,
Series A, NATL RE, FGIC Insured, 5.50%, 7/01/23		7,915,000		10,198,398
State Supported Debt, Mental Health Services Facilities Improvement, Refunding, 5.50%,
2/15/18		10,000,000		12,234,800
State Supported Debt, Mental Health Services Facilities Improvement, Refunding, 5.00%,
2/15/19		3,245,000		3,915,287
State Supported Debt, Mental Health Services Facilities Improvement, Refunding,
Series D, NATL Insured, 5.00%, 8/15/17		190,000		190,173
New York State Local Government Assistance Corp. Revenue, sub. lien, Refunding, Series B,
5.00%, 4/01/21		12,000,000		14,801,880


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New York (continued)
New York State Thruway Authority General Revenue, Refunding, Series H, NATL RE,
FGIC Insured, 5.00%, 1/01/22	$	10,000,000	$	11,652,800
New York State Thruway Authority Revenue, Local Highway and Bridge Service Contract,
Refunding, 5.00%, 4/01/19		9,570,000		11,744,591
New York State Urban Development Corp. Revenue, Service Contract, Refunding, Series A-1,
5.00%, 1/01/20		6,500,000		7,754,760
Rockland County Solid Waste Management Authority Revenue, Refunding, Series A,
Assured Guaranty, 5.375%, 12/15/18		5,365,000		6,328,286
Suffolk County EDC Revenue, Catholic Health Services, Refunding, 5.00%, 7/01/22		10,000,000		11,518,900
				294,178,309
North Carolina 2.2%
Charlotte-Mecklenburg Hospital Authority Health Care System Revenue, Carolinas HealthCare
System, Series A, AGMC Insured, 5.00%, 1/15/22		10,000,000		10,935,900
North Carolina Eastern Municipal Power Agency Power System Revenue,
Refunding, Series A, 5.00%, 1/01/21		10,000,000		11,959,200
Refunding, Series A, Assured Guaranty, 5.25%, 1/01/19		15,000,000		17,720,550
Series C, Assured Guaranty, 6.00%, 1/01/19		2,500,000		2,916,750
North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue, Refunding,
Series A, 5.25%, 1/01/20		4,500,000		5,346,180
Series B, 5.00%, 1/01/20		8,000,000		9,665,280
Oak Island Enterprise System Revenue, Assured Guaranty, 5.50%, 6/01/23		1,735,000		2,014,040
Wake County GO, Public Improvement, Pre-Refunded, 4.50%, 3/01/14		6,400,000		6,400,000
				66,957,900
Ohio 4.1%
Akron GO, Various Purpose, Improvement, NATL Insured, Pre-Refunded, 4.125%,
12/01/14		1,000,000		1,029,190
Allen County GO, Refunding, AMBAC Insured, 4.75%, 12/01/17		2,180,000		2,207,904
American Municipal Power-Ohio Inc. Revenue, Refunding, 5.25%,
2/15/20		6,000,000		6,988,980
2/15/21		11,500,000		13,284,800
Cleveland Airport System Revenue, Refunding, Series A, AGMC Insured, 5.00%,
1/01/25		5,000,000		5,565,850
1/01/26		5,000,000		5,517,950
Cleveland Municipal School District GO, AGMC Insured, 5.00%,
12/01/14		1,915,000		2,091,754
12/01/15		1,510,000		1,646,187
12/01/16		1,400,000		1,526,924
Cuyahoga County EDR, Medical Mart Center, Series G, 5.00%,
12/01/20		7,000,000		8,371,930
12/01/21		7,300,000		8,667,655
Hamilton City School District GO, School Improvement, AGMC Insured, 5.00%, 12/01/24		5,000,000		5,468,550
Lake Local School District Wood County GO, NATL Insured, 5.20%, 12/01/17		375,000		379,714
Lakewood City School District GO, School Improvement, Refunding, AGMC Insured, 4.50%,
12/01/22		2,900,000		3,187,013
Mason City School District GO, School Improvement, Refunding, NATL RE, FGIC Insured,
5.00%, 12/01/15		2,670,000		3,096,159


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Ohio (continued)
Montgomery County Revenue, Miami Valley Hospital, Mandatory Put 11/15/14, Refunding,
Series B, 5.25%, 11/15/39	$	4,000,000	$	4,389,000
Nordonia Hills City School District GO, School Improvement, Refunding, NATL RE,
FGIC Insured, 4.50%, 12/01/21		2,360,000		2,567,420
Ohio State Building Authority Revenue, Refunding, Series C, 5.00%, 10/01/22		5,780,000		6,820,227
Ohio State Turnpike Commission Revenue, Refunding, Series A, NATL RE, FGIC Insured,
5.50%, 2/15/24		10,000,000		12,724,900
University of Cincinnati General Receipts Revenue, Series C, Assured Guaranty, 5.00%,
6/01/21		11,810,000		14,076,811
6/01/22		11,675,000		13,779,769
Youngstown GO, AMBAC Insured, 6.125%, 12/01/15		1,050,000		1,102,448
				124,491,135
Oregon 0.7%
Deschutes County Hospital Facilities Authority Hospital Revenue, Cascade Healthcare,
Refunding, 7.375%, 1/01/23		2,000,000		2,451,600
Oregon State Department of Administrative Services COP, Series A, NATL RE, FGIC Insured,
5.00%, 11/01/19		2,340,000		2,670,665
Oregon State Department of Transportation Highway User Tax Revenue, senior lien, Series A,
5.00%, 11/15/22		5,840,000		6,965,251
Portland Sewer System Revenue, second lien, Series B, NATL Insured, 5.00%,
6/15/18		3,135,000		3,623,151
6/15/19		3,290,000		3,755,042
Salem Water and Sewer Revenue,
NATL Insured, 4.10%, 6/01/16		1,035,000		1,073,481
Refunding, AGMC Insured, 4.50%, 6/01/12		2,250,000		2,273,153
				22,812,343
Pennsylvania 5.9%
Allegheny County Hospital Development Authority Revenue, University of Pittsburgh Medical
Center,
Series A, 5.00%, 5/15/19		9,000,000		10,707,570
Series A, 5.00%, 5/15/20		7,500,000		8,844,750
Series B, 5.00%, 6/15/18		5,000,000		5,449,200
Allegheny County IDAR, Pollution Control, Refunding, Series A, AMBAC Insured, 4.35%,
12/01/13		5,000,000		5,263,950
Commonwealth Financing Authority Revenue, Series C-1, AGMC Insured, 5.00%,
6/01/22		4,130,000		4,918,045
6/01/23		4,345,000		5,134,921
Pennsylvania State Turnpike Commission Turnpike Revenue,
Series B, 5.00%, 12/01/19		32,230,000		39,336,070
Series E, 5.00%, 12/01/24		5,000,000		5,978,850
Series E, 5.00%, 12/01/25		10,000,000		11,863,500
Subordinate, Refunding, Series C, Sub Series C-1, Assured Guaranty, 6.00%, 6/01/23		10,000,000		12,048,300
Subordinate, Series A, Assured Guaranty, 5.00%, 6/01/22		6,070,000		7,034,098
Philadelphia GO, Refunding, Series A, Assured Guaranty, 5.25%, 8/01/22		20,000,000		23,068,200
Philadelphia Municipal Authority Revenue, Lease, 6.00%, 4/01/22		7,065,000		8,167,635


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Pennsylvania (continued)
Philadelphia Water and Wastewater Revenue,
Refunding, Series A, AGMC Insured, 5.00%, 6/15/17	$	10,000,000	$	11,775,000
Refunding, Series A, AGMC Insured, 5.00%, 6/15/18		5,000,000		5,958,700
Refunding, Series A, AGMC Insured, 5.00%, 6/15/19		5,000,000		5,984,900
Series A, 5.00%, 1/01/20		1,210,000		1,380,683
Series A, 5.25%, 1/01/21		3,655,000		4,200,107
Series A, 5.25%, 1/01/22		2,330,000		2,661,978
				179,776,457
South Carolina 0.5%
Rock Hill Utility System Revenue, Refunding and Improvement, Series A, AGMC Insured,
4.00%, 1/01/14		2,000,000		2,055,680
Scago Educational Facilities Corp. for Pickens School District Revenue, Pickens County Project,
AGMC Insured, 5.00%, 12/01/18		5,000,000		5,743,150
South Carolina Jobs EDA Hospital Revenue, Palmetto Health, Refunding and Improvement,
5.375%, 8/01/22		6,000,000		6,811,860
				14,610,690
Texas 3.7%
Brownsville Utility System Revenue, Refunding and Improvement, Series A, AGMC Insured,
5.00%, 9/01/22		8,455,000		9,186,527
Dallas County Utility and Reclamation District GO, Refunding,
Series A, AMBAC Insured, 5.15%, 2/15/21		3,025,000		3,235,570
Series B, AMBAC Insured, 5.15%, 2/15/21		8,025,000		8,583,620
Dallas Waterworks and Sewer System Revenue, Refunding, AMBAC Insured, 4.50%,
10/01/19		10,000,000		11,499,700
Dallas-Fort Worth International Airport Revenue, Joint, Refunding, Series A, 5.00%,
11/01/23		1,500,000		1,673,580
11/01/24		1,000,000		1,110,590
Harris County Hospital District Revenue, senior lien, Refunding, Series A, NATL Insured,
5.00%, 2/15/22		4,165,000		4,422,980
Houston GO, Public Improvement, Refunding, Series A, 5.00%, 3/01/22		10,000,000		12,081,800
Laredo ISD Public Facility Corp. Lease Revenue, Series C, AMBAC Insured, 5.00%,
8/01/19		1,000,000		1,010,110
Lower Colorado River Authority Transmission Contract Revenue, LCRA Transmission Services
Corp. Project, Refunding,
Series A, 5.00%, 5/15/24		6,000,000		6,828,480
Series B, 5.00%, 5/15/24		10,620,000		12,086,410
North Texas Tollway Authority Revenue, Special Projects System, Series D, 5.00%,
9/01/24		12,000,000		14,023,080
Sabine River Authority PCR, Southwestern Electric Co., Refunding, NATL Insured, 4.95%,
3/01/18		15,000,000		16,723,050
Tyler Health Facilities Development Corp. Hospital Revenue, East Texas Medical Center,
Refunding and Improvement, Series A, 5.25%,
11/01/22		5,000,000		5,243,600
11/01/23		5,000,000		5,243,600
				112,952,697


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Utah 0.8%
Salt Lake County College Revenue, Refunding, 5.00%, 10/01/19	$	2,585,000	$	2,722,057
Utah State Board of Regents Student Loan Revenue, Refunding, Series EE-2, 5.00%,
11/01/20		9,000,000		11,176,290
11/01/21		9,000,000		10,991,880
				24,890,227
Virginia 1.0%
Virginia Beach Development Authority Public Facility Revenue, Refunding, Series B, 5.00%,
8/01/19		12,635,000		15,514,769
8/01/20		13,450,000		16,522,384
				32,037,153
Washington 2.2%
Seattle Municipal Light and Power Revenue, Refunding and Improvement, Series B, 5.00%,
2/01/19		6,805,000		8,381,855
2/01/20		7,000,000		8,684,410
^aWashington State GO, Various Purpose, Series D, 5.00%,
2/01/23		12,655,000		15,716,751
2/01/24		13,285,000		16,340,151
2/01/25		13,955,000		17,012,819
				66,135,986
U.S. Territories 2.4%
Guam 0.1%
Guam Government Limited Obligation Revenue, Section 30, Series A, 5.50%,
12/01/18		1,540,000		1,706,813
12/01/19		1,025,000		1,142,270
				2,849,083
Puerto Rico 2.3%
Puerto Rico Commonwealth GO,
Public Improvement, Refunding, Series A, 5.50%, 7/01/18		8,455,000		9,632,359
Public Improvement, Series A, 5.25%, 7/01/23		3,500,000		3,686,060
Public Improvement, Series A, FGIC Insured, 5.50%, 7/01/21		2,500,000		2,799,600
Series A, 5.00%, 7/01/23		4,000,000		4,175,840
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Transport, Series K, 5.00%, 7/01/19		5,000,000		5,258,700
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Refunding,
Series C, AMBAC Insured, 5.50%, 7/01/24		10,000,000		11,168,400
Puerto Rico Electric Power Authority Power Revenue, Refunding,
Series DDD, 5.00%, 7/01/21		8,745,000		9,832,353
Series SS, NATL Insured, 5.00%, 7/01/24		10,000,000		10,527,100
Series ZZ, 5.25%, 7/01/19		8,000,000		9,300,640
Puerto Rico Sales Tax FICO Sales Tax Revenue, Series C, 5.00%, 8/01/22		3,500,000		4,196,815
				70,577,867
Total U.S. Territories				73,426,950
Total Municipal Bonds before Short Term Investments
(Cost $2,505,704,797)				2,746,292,559


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Short Term Investments 10.2%
Municipal Bonds 10.2%
California 0.6%
^bMetropolitan Water District of Southern California Waterworks Revenue,
Refunding, Series B-3, Daily VRDN and Put, 0.06%, 7/01/35	$	10,500,000	$	10,500,000
Series B, Weekly VRDN and Put, 0.13%, 7/01/27		8,000,000		8,000,000
				18,500,000
Colorado 0.3%
^bColorado Educational and Cultural Facilities Authority Revenue, National Jewish Federation
Bond Program, Refunding, Series A-8, Daily VRDN and Put, 0.13%, 9/01/35		10,225,000		10,225,000
Florida 0.2%
^bFlorida State Municipal Power Agency Revenue, All-Requirements Power Supply Project,
Refunding, Series C, Daily VRDN and Put, 0.20%, 10/01/35		5,600,000		5,600,000
Kentucky 0.9%
^bKentucky Economic Development Finance Authority Hospital Facilities Revenue, Baptist
Healthcare System, Refunding, Series B-2, Daily VRDN and Put, 0.10%, 8/15/38		28,340,000		28,340,000
Maryland 0.6%
^bMaryland State EDC, EDR, U.S. Pharmacopeial Convention Inc. Project, Refunding, Series B,
Daily VRDN and Put, 0.25%, 7/01/38		13,200,000		13,200,000
^bMontgomery County GO, BAN, Refunding, Series A, Daily VRDN and Put, 0.09%, 6/01/26		3,910,000		3,910,000
				17,110,000
Massachusetts 1.3%
^bMassachusetts State Health and Educational Facilities Authority Revenue,
Museum of Fine Arts, Series A-1, Daily VRDN and Put, 0.20%, 12/01/37		21,450,000		21,450,000
Museum of Fine Arts, Series A-2, Daily VRDN and Put, 0.13%, 12/01/37		6,800,000		6,800,000
Tufts University, Refunding, Series N-2, Daily VRDN and Put, 0.12%, 8/15/34		7,300,000		7,300,000
Wellesley College, Refunding, Series I, Daily VRDN and Put, 0.09%, 7/01/39		5,100,000		5,100,000
				40,650,000
Michigan 0.1%
^bEastern Michigan University Revenues, General, Refunding, Series A, Daily VRDN and Put,
0.16%, 3/01/49		3,600,000		3,600,000
^bMichigan Higher Education Facilities Authority Revenue, Limited Obligation, University of
Detroit Mercy Project, Refunding, Daily VRDN and Put, 0.12%, 11/01/36		1,000,000		1,000,000
				4,600,000
Minnesota 0.7%
^bMinneapolis and St. Paul Housing and RDA Health Care System Revenue, Allina Health
System, Refunding,
Series B-1, Daily VRDN and Put, 0.13%, 11/15/35		15,825,000		15,825,000
Series B-2, Daily VRDN and Put, 0.10%, 11/15/35		5,200,000		5,200,000
				21,025,000
Missouri 3.3%
^bMissouri Development Finance Board Cultural Facilities Revenue, The Nelson Gallery
Foundation, Refunding, Series A, Daily VRDN and Put, 0.10%, 12/01/37		23,000,000		23,000,000
^bMissouri State Health and Educational Facilities Authority Educational Facilities Revenue,
St. Louis University,
Daily VRDN and Put, 0.12%, 7/01/32		4,350,000		4,350,000
Refunding, Series A-2, Daily VRDN and Put, 0.12%, 10/01/35		13,440,000		13,440,000
Refunding, Series B-1, Daily VRDN and Put, 0.10%, 10/01/35		30,125,000		30,125,000
98 \| Annual Report


Franklin Federal Intermediate-Term Tax-Free Income Fund		Principal Amount		Value
Short Term Investments (continued)
Municipal Bonds (continued)
Missouri (continued)
^bMissouri State Health and Educational Facilities Authority Health Facilities Revenue,
SSM Health Care, Series C, Daily VRDN and Put, 0.19%, 6/01/45	$	29,930,000	$	29,930,000
				100,845,000
North Carolina 1.5%
^bThe Charlotte-Mecklenburg Hospital Authority Health Care System Revenue, Carolinas
HealthCare System,
Refunding, Series B, Daily VRDN and Put, 0.08%, 1/15/38		3,570,000		3,570,000
Series H, Daily VRDN and Put, 0.09%, 1/15/45		40,440,000		40,440,000
^bNorth Carolina Medical Care Commission Health Care Facilities Revenue, Wake Forest
University, Refunding, Series D, Daily VRDN and Put, 0.20%, 7/01/34		3,000,000		3,000,000
				47,010,000
Ohio 0.4%
^bCuyahoga County Revenue, Cleveland Clinic Health System Obligated Group, Series B,
Sub Series B-1, Daily VRDN and Put, 0.12%, 1/01/39		11,300,000		11,300,000
Pennsylvania 0.3%
^bGeisinger Authority Health System Revenue, Geisinger Health System,
Daily VRDN and Put, 0.12%, 11/15/32		3,550,000		3,550,000
Refunding, Series A, Daily VRDN and Put, 0.08%, 5/15/35		4,500,000		4,500,000
				8,050,000
Virginia 0.0%^†
^bVirginia Commonwealth University Revenue, General, Series B, AMBAC Insured, Daily VRDN
and Put, 0.13%, 11/01/30		330,000		330,000
Total Short Term Investments (Cost $313,585,000)				313,585,000
Total Investments (Cost $2,819,289,797) 99.6%				3,059,877,559
Other Assets, less Liabilities 0.4%				11,642,611
Net Assets 100.0%			$	3,071,520,170

^†Rounds to less than 0.1% of net assets.
^aSecurity purchased on a when-issued basis. See Note 1(b).
^bVariable 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. The coupon rate shown represents the rate at period end.

Annual Report | The accompanying notes are an integral part of these financial statements. | 99

100 | The accompanying notes are an integral part of these financial statements. | Annual Report

^aFor the year ended February 29.
^bFor the period February 1, 2011 (effective date) to February 28, 2011.
^cThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^dBased on average daily shares outstanding.
^eTotal return is not annualized for periods less than one year.
^fRatios are annualized for periods less than one year.

Annual Report | The accompanying notes are an integral part of these financial statements. | 101


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012


Franklin Federal Limited-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds 83.5%
Alabama 0.6%
Alabama State University Revenue, General Tuition and Fee, Assured Guaranty, 5.00%,
9/01/14	$	665,000	$	727,982
9/01/15		700,000		789,082
9/01/16		730,000		847,056
East Alabama Health Care Authority Health Care Facilities Revenue,
Mandatory Put 9/01/13, Series B, 5.00%, 9/01/33		1,000,000		1,059,890
Mandatory Put 9/01/18, Series A, 5.25%, 9/01/36		1,000,000		1,127,370
				4,551,380
Alaska 0.7%
Valdez Marine Terminal Revenue, BP Pipelines Inc. Project, Refunding, Series A, 5.00%,
1/01/16		5,000,000		5,723,800
Arizona 4.2%
Arizona State COP, Department of Administration, Series B, AGMC Insured, 5.00%,
10/01/15		11,975,000		13,396,313
Phoenix Civic Improvement Corp. Excise Tax Revenue, Light Rail Project, AMBAC Insured,
5.00%, 7/01/16		17,000,000		18,672,460
				32,068,773
California 7.9%
Alameda-Contra Costa Transit District COP, FHR Computer System Project, 4.00%, 8/01/12		245,000		248,317
Bennett Valley USD, GO, BANS, 4.00%, 1/01/15		2,130,000		2,278,397
California Health Facilities Financing Authority Revenue, Sutter Health, Series A, 5.00%,
8/15/12		1,000,000		1,020,900
California State Economic Recovery GO, Series A, 5.25%, 7/01/13		200,000		212,806
California State GO, Refunding, 5.00%, 4/01/15		500,000		562,140
California State Public Works Board Lease Revenue, Various Capital Projects, Series G,
Sub Series G-1, 5.00%, 10/01/13		10,685,000		11,318,834
California Statewide CDA, PCR, Southern California Edison Co., Mandatory Put 4/01/13,
Refunding, Series A, XLCA Insured, 4.10%, 4/01/28		1,500,000		1,555,860
California Statewide CDA Revenue,
CHF-Irvine LLC, UCI East Campus Apartments, Phase II, 5.00%, 5/15/14		1,000,000		1,069,870
Methodist Hospital of Southern California Project, FHA Insured, 5.50%, 2/01/13		2,430,000		2,526,957
Fontana PFA Lease Revenue, AMBAC Insured, 5.00%, 9/01/14		375,000		413,051
Fontana USD, GO,
BAN, 4.00%, 12/01/12		10,540,000		10,829,218
Capital Appreciation, BAN, zero cpn., 12/01/12		5,000,000		4,977,200
Gilroy USD, GO,
BAN, Measure P, 5.00%, 4/01/13		2,575,000		2,704,445
BAN, Measure P, ETM, 5.00%, 4/01/13		425,000		446,556
Capital Appreciation, BAN, Measure P, zero cpn., 4/01/13		2,000,000		1,959,860
Imperial Community College District GO, Capital Appreciation Bonds, zero cpn., 8/01/14		7,250,000		6,701,030
Los Angeles CRDA Community Redevelopment Financing Authority Revenue, Bunker Hill Project,
Series A, AGMC Insured, 5.00%, 12/01/13		1,000,000		1,055,750
Northern California Power Agency Public Power Revenue, Hydroelectric Project No. 1, Refunding,
Series C, Assured Guaranty, 5.00%, 7/01/15		1,000,000		1,126,870
Pacifica COP, AMBAC Insured, 4.50%, 1/01/13		525,000		538,556
Palo Verde Community College District COP, AMBAC Insured, 5.00%, 1/01/15		745,000		810,299


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Limited-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Indiana 0.6%
Indianapolis Thermal Energy System Revenue, Refunding, AGMC Insured, 4.00%, 10/01/14	$	4,640,000	$	4,958,304
Louisiana 0.1%
Louisiana Local Government Environmental Facilities and CDA Revenue, Shreveport Utility
System Projects, NATL Insured, 4.00%, 12/01/14		500,000		528,705
Massachusetts 0.3%
Massachusetts State Health and Educational Facilities Authority Revenue, Cape Cod Healthcare
Obligation, Assured Guaranty, 4.00%,
11/15/13		1,150,000		1,193,573
11/15/15		1,000,000		1,070,120
				2,263,693
Michigan 5.5%
Detroit GO, Distribution State Aid, 5.00%,
11/01/16		6,120,000		6,929,248
11/01/17		7,485,000		8,589,262
Garden City GO, Refunding, AGMC Insured,
2.00%, 4/01/13		1,025,000		1,033,815
4.00%, 4/01/14		1,015,000		1,066,359
4.00%, 4/01/15		1,215,000		1,294,911
4.00%, 4/01/16		1,415,000		1,523,403
Jackson GO, Capital Appreciation Downtown Development, AGMC Insured, zero cpn.,
6/01/16		1,370,000		1,207,038
Michigan Municipal Bond Authority Revenue, Local Government Loan Program, Charter County
of Wayne Local Project, Series B, Assured Guaranty, 5.00%, 11/01/13		4,000,000		4,223,280
Rochester Community School District GO, Refunding, AGMC Insured, 5.00%, 5/01/15		4,795,000		5,152,755
Royal Oak Hospital Finance Authority Hospital Revenue, William Beaumont Hospital, Refunding,
Series W, 5.25%, 8/01/17		7,000,000		7,637,910
Wyandotte Electric Revenue, Refunding, Assured Guaranty, 5.00%, 10/01/13		3,355,000		3,531,372
				42,189,353
Minnesota 2.1%
Farmington GO, Improvement, Series B, AGMC Insured, 3.50%, 2/01/14		455,000		479,784
Minneapolis Health Care System Revenue, Fairview Health Services, Series A, 5.00%,
11/15/12		1,000,000		1,028,730
Minnesota Agricultural and Economic Development Board Revenue, Health Care Facilities,
Essentia, Series C-1, Assured Guaranty, 5.00%, 2/15/15		1,335,000		1,468,673
Minnesota State Municipal Power Agency Electric Revenue, Series B, 4.00%, 10/01/13		5,000,000		5,013,400
Northern Municipal Power Agency Electric System Revenue, Refunding, Series A,
Assured Guaranty, 5.00%, 1/01/15		5,000,000		5,575,900
Otsego GO, Water, Refunding, Series C, AGMC Insured, 2.00%, 12/01/16		2,000,000		2,089,480
				15,655,967
Mississippi 0.1%
Mississippi Development Bank Special Obligation Revenue, Jackson Public School District GO
Bond Project, AGMC Insured, 5.00%, 4/01/12		500,000		501,705
Nebraska 0.6%
University of Nebraska Facilities Corp. Lease Rent Revenue, UNMC Health Professions, 5.00%,
8/15/13		4,000,000		4,268,960


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Limited-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New York (continued)
Suffolk County IDA Civic Facility Revenue, Westhampton Free Associates Library,
AMBAC Insured, 3.25%, 6/15/12	$	300,000	$	302,328
Syracuse GO, Public Improvement, Series A, AGMC Insured, 3.25%, 6/15/12		725,000		729,792
Triborough Bridge and Tunnel Authority Revenues, Refunding, Series C, 5.00%, 11/15/12		1,000,000		1,033,430
				69,208,685
Ohio 8.1%
Akron COP, District Energy Project, 2.75%, 12/01/16		1,895,000		1,937,334
Cleveland Airport System Revenue,
Refunding, Series A, AGMC Insured, 5.00%, 1/01/19		7,870,000		9,006,507
Series C, Assured Guaranty, 5.00%, 1/01/16		5,140,000		5,750,838
Hamilton GO, Various Purpose, Street Improvement and Building, Refunding, 2.00%,
11/01/12		1,350,000		1,362,339
11/01/14		1,455,000		1,489,935
11/01/15		1,465,000		1,500,424
Ohio State Air Quality Development Authority Revenue,
Environmental Improvement, Buckeye Power Inc. Project, 3.00%, 12/01/13		1,085,000		1,104,183
Pollution Control, FirstEnergy Solutions Corp., Mandatory Put 6/03/13, Refunding, Series A,
2.25%, 12/01/23		8,000,000		8,068,000
Ohio State Department of Administrative Services COP, Administrative Knowledge System,
Series A, NATL Insured, 5.25%, 9/01/15		6,205,000		6,917,334
Ohio State GO,
3.00%, 5/01/13		10,345,000		10,671,798
Refunding, 3.00%, 5/01/13		4,655,000		4,802,051
Toledo GO,
Capital Improvement, Refunding, Assured Guaranty, 3.25%, 12/01/14		2,860,000		2,995,335
Limited Tax, Various Purpose Improvement, Refunding, Assured Guaranty, 3.00%,
12/01/12		1,315,000		1,336,356
Limited Tax, Various Purpose Improvement, Refunding, Assured Guaranty, 3.00%,
12/01/13		1,210,000		1,250,329
Limited Tax, Various Purpose Improvement, Refunding, Assured Guaranty, 3.00%,
12/01/14		1,210,000		1,267,499
Limited Tax, Various Purpose Improvement, Refunding, Assured Guaranty, 3.00%,
12/01/15		1,185,000		1,252,924
Wright State University Revenue, General Receipts, Series A, 3.00%, 5/01/14		1,325,000		1,374,727
				62,087,913
Oklahoma 0.6%
Tulsa County Industrial Authority Educational Facilities Lease Revenue, Broken Arrow Public
Schools Project, 4.00%, 9/01/15		4,000,000		4,367,200
Oregon 0.5%
Oregon State Department of Administrative Services COP, Series A, 5.00%, 5/01/13		4,000,000		4,204,240
Pennsylvania 9.6%
Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue, PPL Energy
Supply LLC Project, Mandatory Put 9/01/15, Refunding, Series A, 3.00%, 12/01/38		10,000,000		10,373,100


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Limited-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Pennsylvania (continued)
Philadelphia Gas Works Revenue, 1998 General Ordinance, Refunding, Tenth Series,
AGMC Insured,
3.50%, 7/01/16	$	6,190,000	$	6,572,480
4.00%, 7/01/17		4,795,000		5,191,019
Philadelphia GO, Refunding, Series A, AGMC Insured, 5.25%, 8/01/17		10,000,000		11,718,700
Philadelphia Water and Wastewater Revenue, Refunding, Series A, AGMC Insured, 5.00%,
6/15/13		10,000,000		10,592,300
Reading School District GO, Refunding, Series A, 5.00%,
4/01/17		4,500,000		5,232,960
4/01/18		4,035,000		4,733,943
School District of Philadelphia GO, Refunding, Series C,
3.00%, 9/01/13		1,000,000		1,035,370
5.00%, 9/01/14		1,000,000		1,094,710
5.00%, 9/01/15		1,500,000		1,690,350
5.00%, 9/01/16		2,630,000		3,034,336
5.00%, 9/01/17		2,750,000		3,209,525
South Fork Municipal Authority Hospital Revenue, Conemaugh Valley Memorial, Refunding,
Series A, Assured Guaranty,
5.00%, 7/01/12		1,000,000		1,011,120
5.00%, 7/01/13		1,130,000		1,173,087
5.00%, 7/01/14		1,250,000		1,324,975
4.00%, 7/01/15		1,235,000		1,296,898
5.00%, 7/01/16		1,325,000		1,462,721
University of Pittsburgh of the Commonwealth System of Higher Education Revenue, University
Capital Project, Mandatory Put 9/15/13, Series A, 5.50%, 9/15/39		2,500,000		2,668,150
				73,415,744
South Carolina 1.0%
Piedmont Municipal Power Agency Electric Revenue, Refunding, Series A-2, 5.00%, 1/01/15		4,000,000		4,397,040
Scago Educational Facilities Corp. for Pickens School District Revenue, Pickens County Project,
AGMC Insured, 5.00%, 12/01/14		3,000,000		3,331,110
				7,728,150
Tennessee 3.6%
Memphis Electric System Revenue, sub. note, Refunding, 5.00%, 12/01/15		8,000,000		9,200,000
Memphis GO, BAN, Refunding, 4.00%, 5/01/12		5,000,000		5,029,750
Metropolitan Nashville Airport Authority Airport Revenue, Refunding and Improvement, Series B,
4.00%, 7/01/13		2,880,000		3,006,403
Sevier County PBA Revenue, Local Government Public Improvement, Series VII-D-1, 5.00%,
6/01/15		9,000,000		10,122,840
				27,358,993
Texas 2.4%
Brock ISD, GO, Capital Appreciation, PSF Guarantee, zero cpn., 8/15/16		460,000		442,980
Dallas-Fort Worth International Airport Revenue, Joint, Refunding, Series A, 5.00%,
11/01/14		3,235,000		3,585,836
Gulf Coast Waste Disposal Authority Environmental Facilities Revenue, BP Products North
America Inc., Mandatory Put 9/03/13, Refunding, 2.30%, 1/01/42		10,000,000		10,282,800


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Federal Limited-Term Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Texas (continued)
Harris County Health Facilities Development Corp. Revenue, Christus Health, Series A-5,
AGMC Insured, 3.00%, 7/01/12	$	1,500,000	$	1,511,850
San Antonio Water Revenue, System, Series A, AGMC Insured, Pre-Refunded, 5.50%,
5/15/13		500,000		505,195
Tarrant County Cultural Education Facilities Finance Corp. Revenue, Christus Health, Refunding,
Series A, Assured Guaranty, 5.75%, 7/01/18		1,860,000		2,039,304
				18,367,965
Washington 1.2%
King County Housing Authority Revenue, Birch Creek Apartments Project, 4.40%, 5/01/18		2,290,000		2,426,576
Snohomish County School District No. 2 Everett GO, Refunding, NATL RE, FGIC Insured, 5.00%,
12/01/14		250,000		279,037
Snohomish County School District No. 103 GO, Refunding, 2.50%, 12/01/15		3,895,000		4,086,868
Washington State Health Care Facilities Authority Revenue, MultiCare Health System,
Series A, AGMC Insured, 4.00%, 8/15/13		250,000		258,970
Series A, AGMC Insured, 4.00%, 8/15/14		310,000		325,779
Series B, AGMC Insured, 4.00%, 8/15/13		250,000		258,970
Series B, AGMC Insured, 4.00%, 8/15/14		600,000		634,230
Series B, AGMC Insured, 4.00%, 8/15/15		625,000		671,369
				8,941,799
U.S. Territories 3.0%
Guam 0.1%
Guam Government Limited Obligation Revenue, Section 30, Series A, 5.00%, 12/01/12		1,000,000		1,020,900
Puerto Rico 2.9%
Puerto Rico Commonwealth GO, Public Improvement, AGMC Insured, 5.50%, 7/01/15		5,000,000		5,556,250
Puerto Rico Commonwealth Government Development Bank Revenue, Refunding, NATL Insured,
4.75%, 12/01/15		5,000,000		5,154,350
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue, Refunding,
Series X, NATL Insured, 5.50%, 7/01/13		415,000		436,476
Puerto Rico Electric Power Authority Power Revenue, Series WW, 5.25%, 7/01/13		1,000,000		1,057,990
Puerto Rico Municipal Finance Agency GO, Series A, AGMC Insured, 5.75%, 8/01/12		3,000,000		3,010,890
Puerto Rico PBA Guaranteed Revenue,
Government Facilities, Mandatory Put 7/01/17, Refunding, Series M-2, 5.75%, 7/01/34		5,000,000		5,577,700
Mandatory Put 7/01/17, Refunding, AMBAC Insured, 5.50%, 7/01/35		750,000		827,588
				21,621,244
Total U.S. Territories				22,642,144
Total Municipal Bonds before Short Term Investments (Cost $610,594,043)				636,979,399
Short Term Investments 15.8%
Municipal Bonds 15.8%
California 0.2%
^aCalifornia PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C, Daily VRDN and Put,
0.10%, 11/01/26		1,900,000		1,900,000


Franklin Federal Limited-Term Tax-Free Income Fund		Principal Amount		Value
Short Term Investments (continued)
Municipal Bonds (continued)
Colorado 1.0%
^aColorado Educational and Cultural Facilities Authority Revenue, National Jewish Federation
Bond Program, Series A-11, Daily VRDN and Put, 0.13%, 8/01/27	$	4,700,000	$	4,700,000
^aPitkin County IDR, Aspen Skiing Co. Project, Refunding, Series A, Daily VRDN and Put, 0.12%,
4/01/16		3,000,000		3,000,000
				7,700,000
Florida 0.2%
^aFlorida State Municipal Power Agency Revenue, All-Requirements Power Supply Project,
Refunding, Series C, Daily VRDN and Put, 0.20%, 10/01/35		1,200,000		1,200,000
Kentucky 2.1%
^aLouisville and Jefferson County Metropolitan Government Health System Revenue,
Norton Healthcare, Series B, Daily VRDN and Put, 0.10%, 10/01/39		13,400,000		13,400,000
^aShelby County Lease Revenue, Series A, Daily VRDN and Put, 0.10%, 9/01/34		2,730,000		2,730,000
				16,130,000
Maryland 1.5%
^aMaryland State EDC, EDR, U.S. Pharmacopeial Convention Inc. Project, Refunding,
Series A, Daily VRDN and Put, 0.25%, 7/01/38		7,900,000		7,900,000
Series B, Daily VRDN and Put, 0.25%, 7/01/38		400,000		400,000
^aMontgomery County GO, BAN, Refunding, Series A, Daily VRDN and Put, 0.09%, 6/01/26		3,545,000		3,545,000
				11,845,000
Michigan 0.4%
^aEastern Michigan University Revenues, General, Refunding, Series A, Daily VRDN and Put,
0.16%, 3/01/49		800,000		800,000
Garden City GO, Refunding, AGMC Insured, 2.00%, 4/01/12		1,010,000		1,010,919
^aMichigan Higher Education Facilities Authority Revenue, Limited Obligation, University of
Detroit Mercy Project, Refunding, Daily VRDN and Put, 0.12%, 11/01/36		1,365,000		1,365,000
				3,175,919
Minnesota 0.6%
^aMinneapolis and St. Paul Housing and RDA Health Care System Revenue, Allina Health System,
Refunding, Series B-1, Daily VRDN and Put, 0.13%, 11/15/35		4,500,000		4,500,000
Missouri 2.3%
^aMissouri Development Finance Board Cultural Facilities Revenue, The Nelson Gallery Foundation,
Refunding, Series A, Daily VRDN and Put, 0.10%, 12/01/37		5,350,000		5,350,000
^aMissouri State Health and Educational Facilities Authority Educational Facilities Revenue,
St. Louis University, Daily VRDN and Put, 0.12%, 7/01/32		4,500,000		4,500,000
The Washington University, Series B, Daily VRDN and Put, 0.13%, 2/15/33		7,900,000		7,900,000
				17,750,000
New Hampshire 0.3%
^aNew Hampshire Health and Education Facilities Authority Revenue, Dartmouth College,
Refunding, Series A, Daily VRDN and Put, 0.14%, 6/01/31		2,370,000		2,370,000
New York 3.3%
^aMTA Dedicated Tax Fund Revenue, Refunding, Series B, AGMC Insured, Weekly VRDN and Put,
0.75%, 11/01/22		25,000,000		25,000,000


Franklin Federal Limited-Term Tax-Free Income Fund		Principal Amount		Value
Short Term Investments (continued)
Municipal Bonds (continued)
North Carolina 2.0%
^aCharlotte-Mecklenburg Hospital Authority Health Care System Revenue, Carolinas,
Refunding, Series B, Daily VRDN and Put, 0.08%, 1/15/38	$	11,900,000	$	11,900,000
Series H, Daily VRDN and Put, 0.09%, 1/15/45		1,100,000		1,100,000
^aNorth Carolina Medical Care Commission Health Care Facilities Revenue, Wake Forest University,
Refunding, Series D, Daily VRDN and Put, 0.20%, 7/01/34		2,100,000		2,100,000
				15,100,000
Ohio 1.3%
^aCuyahoga County Revenue, Cleveland Clinic Health System Obligated Group, Series B,
Sub Series B-1, Daily VRDN and Put, 0.12%, 1/01/39		9,100,000		9,100,000
Wright State University Revenue, General Receipts, Series A, 2.00%, 5/01/12		550,000		551,298
				9,651,298
Pennsylvania 0.6%
^aGeisinger Authority Health System Revenue, Geisinger Health System,
Daily VRDN and Put, 0.12%, 11/15/32		1,100,000		1,100,000
Refunding, Series A, Daily VRDN and Put, 0.08%, 5/15/35		3,200,000		3,200,000
				4,300,000
Total Short Term Investments (Cost $120,622,348)				120,622,217
Total Investments (Cost $731,216,391) 99.3%				757,601,616
Other Assets, less Liabilities 0.7%				5,099,179
Net Assets 100.0%			$	762,700,795

^aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end.

110 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 111

112 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 113

114 | The accompanying notes are an integral part of these financial statements. | Annual Report


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds 92.5%
Alabama 0.4%
Alabama State Port Authority Docks Facilities Revenue, Refunding, 6.00%, 10/01/40	$	6,000,000	$	6,558,180
Camden IDB Exempt Facilities Revenue, Weyerhaeuser,
Series A, Pre-Refunded, 6.125%, 12/01/24		3,000,000		3,302,280
Series B, Pre-Refunded, 6.375%, 12/01/24		1,750,000		1,921,010
Courtland IDB Environmental Improvement Revenue, International Paper Co. Projects,
Refunding, Series B, 6.25%, 8/01/25		2,500,000		2,584,350
Cullman County Health Care Authority GO, Refunding, 7.00%, 2/01/36		7,500,000		7,589,100
Phenix City IDB Environmental Improvement Revenue, MeadWestvaco-Mead Coated Board
Project, Refunding, Series B, 6.10%, 5/15/30		5,800,000		5,808,178
Prattville IDB Environmental Improvement Revenue, International Paper Co. Projects, Series A,
9.25%, 3/01/33		5,500,000		7,032,740
Selma IDBR, Gulf Opportunity Zone, International Paper Co. Projects, Series A, 5.80%,
5/01/34		3,000,000		3,208,620
				38,004,458
Alaska 0.1%
Alaska Industrial Development and Export Authority Power Revenue, Upper Lynn Canal
Regional Power,
5.80%, 1/01/18		1,495,000		1,496,077
5.875%, 1/01/32		5,730,000		5,679,805
				7,175,882
Arizona 4.0%
Apache County IDA,
IDR, Tucson Electric Power Co. Project, Refunding, Series C, 5.85%, 3/01/26		16,500,000		16,523,100
PCR, Tucson Electric Power Co. Project, Refunding, Series A, 5.85%, 3/01/28		53,150,000		53,218,563
PCR, Tucson Electric Power Co. Project, Refunding, Series B, 5.875%, 3/01/33		33,800,000		33,832,786
Arizona Health Facilities Authority Hospital System Revenue, John C. Lincoln Health Network,
Pre-Refunded, 6.375%, 12/01/37		2,500,000		2,635,575
Arizona Health Facilities Authority Revenue, Catholic Healthcare West, Series B1, 5.25%,
3/01/39		10,000,000		10,686,700
Casa Grande IDA Hospital Revenue, Casa Grande Regional Medical Center, Series A, 7.25%,
12/01/32		14,500,000		14,714,455
Downtown Phoenix Hotel Corp. Revenue, sub. bond, Series B, NATL RE, FGIC Insured, 5.00%,
7/01/36		10,000,000		10,159,100
Maricopa County IDA Health Facility Revenue, Catholic Healthcare West Project, Refunding,
Series A, 5.50%, 7/01/26		7,500,000		8,013,075
Maricopa County PCC, PCR,
El Paso Electric Co. Project, Series A, 7.25%, 4/01/40		20,000,000		23,604,400
Southern California Edison Co., Refunding, Series A, 5.00%, 6/01/35		6,025,000		6,554,236
Various, Public Service Co., Palo Verde Project, Refunding, Series A, 6.25%, 1/01/38		15,000,000		16,180,950
Navajo County PCC Revenue, Mandatory Put 6/01/16, Series D, 5.75%, 6/01/34		10,750,000		12,342,398
Phoenix Civic Improvement Corp. Airport Revenue,
junior lien, Series A, 5.00%, 7/01/40		24,000,000		25,318,080
senior lien, Series A, 5.00%, 7/01/38		15,000,000		15,924,450
Pima County IDAR, Industrial Development, Tucson Electric Power Co., Series A, 6.375%,
9/01/29		35,000,000		35,791,000
Pinal County Electric District No. 3 Revenue, Refunding, 5.25%, 7/01/41		10,000,000		10,627,900


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Arizona (continued)
Salt Verde Financial Corp. Senior Gas Revenue,
5.25%, 12/01/25	$	6,000,000	$	6,469,740
5.50%, 12/01/29		11,105,000		12,053,256
University Medical Center Corp. Hospital Revenue,
6.00%, 7/01/24		250,000		284,510
6.25%, 7/01/29		1,000,000		1,125,320
5.00%, 7/01/35		10,175,000		10,199,013
6.50%, 7/01/39		1,500,000		1,679,310
Yuma County IDA Water and Sewer Exempt Facility Revenue, Water and Sewer, Refunding,
Series A, 6.375%, 12/01/37		15,500,000		14,666,565
				342,604,482
Arkansas 0.1%
Arkansas State Development Finance Authority Industrial Facilities Revenue, Potlatch Corp.
Projects, Series A, 7.75%, 8/01/25		3,800,000		3,910,352
Baxter County IDR, Aeroquip Corp. Project, Refunding, 5.80%, 10/01/13		2,400,000		2,519,904
Warren Solid Waste Disposal Revenue, Potlatch Corp. Project, 7.00%, 4/01/12		3,150,000		3,159,450
				9,589,706
California 17.9%
Aliso Viejo CFD No. 2005-01 Special Tax, Glenwood at Aliso Viejo, 6.00%, 9/01/38		5,200,000		5,152,264
Alvord USD, GO, Election of 2007, Refunding, Series B, AGMC Insured, zero cpn.,
8/01/41		30,750,000		5,940,592
Anaheim City School District GO,
AGMC Insured, zero cpn., 8/01/30		5,000,000		2,003,900
Election of 2002, AGMC Insured, zero cpn., 8/01/29		7,000,000		2,993,760
Anaheim PFAR, Refunding, Series A-2, NATL RE, FGIC Insured, 4.75%, 9/01/29		24,000,000		24,891,120
Azusa Special Tax, Escrow, CFD No. 2005-1, Improvement Area 1, 5.00%, 9/01/37		5,370,000		4,448,615
Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Refunding, Series F-1,
5.50%, 4/01/43		29,765,000		32,824,247
Beaumont Financing Authority Local Agency Revenue, Improvement Area No. 19C, Series A,
5.35%, 9/01/36		3,680,000		3,501,741
Beaumont PFAR, Sewer Enterprise Project, Series A, Pre-Refunded, 6.90%, 9/01/23		3,700,000		4,286,820
California County Tobacco Securitization Agency Tobacco Revenue, Asset-Backed, Alameda
County Tobacco Asset Securitization Corp., 5.875%, 6/01/35		3,700,000		3,279,088
California Health Facilities Financing Authority Revenue,
Children’s Hospital of Orange County, Series A, 6.50%, 11/01/24		5,000,000		6,051,750
Children’s Hospital of Orange County, Series A, 6.50%, 11/01/38		8,000,000		9,261,520
Marshall Medical Center, Series A, California Mortgage Insured, 5.00%, 11/01/24		2,295,000		2,366,168
Marshall Medical Center, Series A, California Mortgage Insured, 5.00%, 11/01/29		2,220,000		2,267,996
Marshall Medical Center, Series A, California Mortgage Insured, 5.00%, 11/01/33		3,130,000		3,174,039
California HFAR, Home Mortgage, Series K, 4.70%, 8/01/31		20,000,000		17,703,000
California Infrastructure and Economic Development Bank Revenue, Department of Social
Services Administration Building, AMBAC Insured, 5.00%,
12/01/30		10,300,000		11,422,597
12/01/35		5,000,000		5,379,250
California Municipal Finance Authority Revenue, Harbor Regional Center Project, 8.50%,
11/01/39		5,000,000		5,691,900


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
California (continued)
California PCFA Water Facilities Revenue, American Water Capital Corp. Project, 5.25%,
8/01/40	$	6,000,000	$	6,034,920
California State GO,
Refunding, 5.25%, 4/01/30		50,000		50,080
Refunding, 5.25%, 4/01/32		40,000		40,055
Various Purpose, 6.00%, 4/01/38		28,725,000		33,052,708
Various Purpose, 5.25%, 11/01/40		47,000,000		51,224,360
Various Purpose, Refunding, 5.25%, 3/01/30		70,000,000		78,472,800
Various Purpose, Refunding, 5.50%, 3/01/40		60,000,000		66,231,600
Various Purpose, Refunding, 5.00%, 10/01/41		10,000,000		10,665,500
California State Public Works Board Lease Revenue, Trustees of California State University,
Series J, 6.00%,
11/01/29		7,365,000		8,683,851
11/01/34		17,560,000		19,732,172
California Statewide CDA Revenue,
American Baptist Home West, Refunding, 6.00%, 10/01/29		3,125,000		3,257,875
American Baptist Home West, Refunding, 6.25%, 10/01/39		5,000,000		5,201,200
Elder Care Alliance, Series A, Pre-Refunded, 8.25%, 11/15/32		13,090,000		14,070,572
Monterey Institute International, 5.50%, 7/01/31		13,240,000		14,827,344
St. Joseph Health System, Series B, FGIC Insured, 5.75%, 7/01/47		5,000,000		5,411,650
St. Joseph Health System, Series E, AGMC Insured, 5.25%, 7/01/47		10,000,000		10,447,200
Sutter Health, Refunding, Series A, 5.00%, 11/15/43		25,000,000		25,642,000
Thomas Jefferson School of Law, Refunding, Series A, 7.25%, 10/01/38		11,730,000		12,398,727
California Statewide CDA Special Tax Revenue, CFD 2007-1, Orinda, 6.00%, 9/01/37		10,000,000		9,757,900
Chabot-Las Positas Community College District GO, Capital Appreciation Bonds, Series C,
AMBAC Insured, zero cpn.,
8/01/33		21,015,000		6,844,375
8/01/34		10,000,000		3,037,100
8/01/45		34,035,000		5,257,386
Chino CFD Special Tax, No. 03-3, Improvement Area 2, 5.00%, 9/01/36		2,215,000		2,000,854
Chula Vista CFD Special Tax,
No. 07-I, Otay Ranch Village Eleven, 5.875%, 9/01/34		2,890,000		2,915,548
No. 13-I, Otay Ranch Village Seven, 5.35%, 9/01/36		2,155,000		1,855,671
El Dorado County CFD No. 2001-1 Special Tax, Promontory Specific Plan, 6.30%,
9/01/31		3,500,000		3,516,695
Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding,
5.85%, 1/15/23		35,000,000		35,839,300
zero cpn., 1/15/22		49,115,000		27,413,537
zero cpn., 1/15/31		4,000,000		1,252,960
zero cpn., 1/15/34		4,500,000		1,123,335
zero cpn., 1/15/36		4,000,000		871,360
Fullerton CFD No. 1 Special Tax, Amerige Heights, 6.20%, 9/01/32		3,500,000		3,515,470
Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue,
Asset-Backed, Refunding, Senior Series A-1, 5.00%, 6/01/33		9,960,000		7,619,699
Asset-Backed, Series A-3, Pre-Refunded, 7.875%, 6/01/42		10,000,000		10,929,300
Enhanced, Asset-Backed, Refunding, Series A, 5.00%, 6/01/45		30,750,000		30,811,500
Enhanced, Asset-Backed, Refunding, Series A, AMBAC Insured, 5.00%, 6/01/45		13,250,000		13,276,500


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
California (continued)
Lake Elsinore 1915 Act Special Assessment, AD No. 93-1, Limited Obligation, Refunding,
7.00%, 9/02/30	$	7,195,000	$	7,255,582
Lee Lake Water District CFD No. 3 Special Tax, Retreat, 5.95%, 9/01/34		5,000,000		5,006,200
Livermore CFD Special Tax, No. 06-1, Shea Properties, 5.40%, 9/01/36		6,595,000		5,821,736
Los Angeles Department of Airports Airport Revenue, Los Angeles International Airport,
Senior, Refunding, Series A, 5.00%, 5/15/40		25,500,000		28,031,640
senior bond, Series D, 5.00%, 5/15/40		52,685,000		58,191,109
Los Angeles MFR, Refunding,
Series J-1B, 7.125%, 1/01/24		60,000		60,034
Series J-1C, 7.125%, 1/01/24		335,000		325,978
Series J-2B, 8.50%, 1/01/24		280,000		280,011
^aSeries J-2C, 8.50%, 1/01/24		1,400,000		1,352,344
Los Angeles USD, GO, Series KRY, 5.25%, 7/01/34		36,625,000		41,869,700
Los Angeles Wastewater System Revenue, Refunding, Series A, NATL Insured, 5.00%,
6/01/30		7,530,000		7,926,906
M-S-R Energy Authority Gas Revenue,
Series B, 6.125%, 11/01/29		30,505,000		35,518,192
Series B, 7.00%, 11/01/34		20,000,000		26,068,200
Series C, 6.50%, 11/01/39		20,000,000		24,676,200
Murrieta 1915 Act Special Tax, CFD No. 2000-1, 6.375%, 9/01/30		3,955,000		4,000,997
Novato RDA Tax Allocation, Hamilton Field Redevelopment Project, 6.75%, 9/01/40		3,750,000		4,101,637
Perris UHSD Financing Authority Revenue,
5.75%, 9/01/30		1,690,000		1,743,100
6.00%, 9/01/33		2,570,000		2,651,649
6.125%, 9/01/41		5,500,000		5,672,920
Poway USD Special Tax,
CFD No. 10, Area A, Pre-Refunded, 6.10%, 9/01/31		1,995,000		1,995,000
CFD No. 11, Area A, 5.375%, 9/01/28		2,965,000		2,981,159
CFD No. 11, Area A, 5.375%, 9/01/34		2,235,000		2,202,011
CFD No. 14, Del Sur, 5.25%, 9/01/36		7,500,000		6,973,350
Rocklin Special Tax, CFD No. 10, Whitney, 5.00%, 9/01/35		7,030,000		5,985,834
Romoland School District Special Tax, CFD No. 1,
Improvement Area 1, 5.35%, 9/01/28		7,015,000		7,041,447
Improvement Area 1, 5.40%, 9/01/36		6,175,000		6,117,017
Improvement Area 2, 5.35%, 9/01/38		7,900,000		7,222,891
Roseville Special Tax, CFD No. 1, Westpark, 5.25%, 9/01/25		1,550,000		1,523,557
San Buenaventura Revenue, Community Memorial Health System,
8.00%, 12/01/31		10,000,000		11,881,000
7.50%, 12/01/41		15,000,000		16,958,700
San Francisco City and County COP, Multiple Capital Improvement Projects, Series A, 5.00%,
4/01/29		10,000,000		10,795,700
San Francisco City and County RDA Lease Revenue, George R. Moscone Center, zero cpn.,
7/01/12		4,500,000		4,484,115
7/01/13		4,250,000		4,182,212
7/01/14		2,250,000		2,175,255
San Francisco Uptown Parking Corp. Parking Revenue, Union Square, NATL Insured, 6.00%,
7/01/31		8,920,000		9,116,686


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Colorado (continued)
Denver Health and Hospital Authority Healthcare Revenue, Series A, Pre-Refunded, 6.25%,
12/01/33	$	4,000,000	$	4,630,800
E-470 Public Highway Authority Revenue,
Capital Appreciation, Refunding, Series B, NATL Insured, zero cpn., 9/01/37		15,720,000		3,381,844
Capital Appreciation, Refunding, Series B, NATL Insured, zero cpn., 9/01/38		20,000,000		4,040,400
Capital Appreciation, Refunding, Series B, NATL Insured, zero cpn., 9/01/39		30,000,000		5,690,400
Capital Appreciation, Series A, NATL Insured, zero cpn., 9/01/28		15,000,000		6,160,950
Capital Appreciation, Series B, NATL Insured, zero cpn., 9/01/29		10,000,000		3,785,700
Capital Appreciation, Series B, NATL Insured, zero cpn., 9/01/30		17,300,000		6,139,424
Capital Appreciation, Series B, NATL Insured, zero cpn., 9/01/31		10,000,000		3,319,000
Series A1, NATL Insured, 5.50%, 9/01/24		10,000,000		10,822,200
Series C, 5.375%, 9/01/26		5,000,000		5,364,150
Series C1, NATL Insured, 5.50%, 9/01/24		3,000,000		3,246,660
Series D1, NATL Insured, 5.50%, 9/01/24		6,000,000		6,493,320
Eagle County Sports and Housing Facilities Revenue, Vail Associate Project, Refunding,
6.95%, 8/01/19		41,200,000		41,683,276
Public Authority for Colorado Energy Natural Gas Purchase Revenue,
6.125%, 11/15/23		2,465,000		2,845,399
6.25%, 11/15/28		12,500,000		14,819,500
6.50%, 11/15/38		90,100,000		113,165,600
Regional Transportation District COP, Series A, 5.00%, 6/01/25		13,500,000		15,330,735
Superior Metropolitan District No. 1 Special Revenue, Refunding, AMBAC Insured, 5.00%,
12/01/28		7,640,000		7,772,248
^a,bVillages Castle Rock Metropolitan District No. 4 Revenue, Refunding, 8.50%, 6/01/31		3,000,000		2,911,140
				337,919,145
Connecticut 0.2%
Connecticut State Development Authority PCR, Western Massachusetts Electric Co.,
Refunding, Series A, 5.85%, 9/01/28		12,500,000		12,569,125
Connecticut State Health and Educational Facilities Authority Revenue, St. Mary’s Hospital,
Refunding, Series E, 5.50%, 7/01/20		5,650,000		5,650,000
				18,219,125
District of Columbia 2.4%
District of Columbia Ballpark Revenue, Series B-1, NATL RE, FGIC Insured, 5.00%,
2/01/35		18,000,000		18,151,560
District of Columbia Hospital Revenue, Children’s Hospital Obligated Group, Assured Guaranty,
5.25%, 7/15/38		11,000,000		11,594,330
District of Columbia Revenue,
Assn. of American Medical Colleges, Series B, 5.25%, 10/01/36		12,425,000		13,383,216
Capital Appreciation, Georgetown University, Growth and Income Securities,
AMBAC Insured, zero cpn. to 3/31/18, 5.00% thereafter, 4/01/36		27,105,000		20,327,937
The Catholic University of America, Refunding, 5.00%, 10/01/34		3,750,000		3,975,863
Center for Strategic and International Studies Inc. Issue, Refunding, 6.375%, 3/01/31		5,200,000		5,595,616
Center for Strategic and International Studies Inc. Issue, Refunding, 6.625%, 3/01/41		5,500,000		5,893,910
Deed Tax, Series A, 5.00%, 6/01/40		13,000,000		13,588,120
Methodist Home Issue, 6.00%, 1/01/29		4,750,000		4,607,785
Methodist Home Issue, Series A, 7.375%, 1/01/30		2,525,000		2,591,887
Methodist Home Issue, Series A, 7.50%, 1/01/39		4,150,000		4,257,028


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Florida (continued)
Stonegate CDD Special Assessment Revenue, 6.00%, 5/01/24	$	1,835,000	$	1,853,699
Tara CDD No. 1 Capital Improvement Revenue, Series A, 7.15%, 5/01/31		1,175,000		1,176,175
Venetian CDD Capital Improvement Revenue, Series A, 6.75%, 5/01/34		7,905,000		7,927,529
Verandah East CDD Revenue, Capital Improvement, Series A, 5.40%, 5/01/37		1,875,000		977,288
Verandah West CDD Revenue, Series A, 6.625%, 5/01/33		7,835,000		7,858,192
Village CDD No. 8 Special Assessment Revenue, 6.375%, 5/01/38		8,900,000		9,555,396
Village CDD No. 9 Special Assessment Revenue,
6.75%, 5/01/31		9,035,000		10,156,153
7.00%, 5/01/41		8,000,000		8,981,920
Refunding, 5.00%, 5/01/22		2,045,000		2,075,798
Refunding, 5.25%, 5/01/31		2,280,000		2,313,904
Refunding, 5.50%, 5/01/42		2,250,000		2,283,053
Village Center CDD Recreational Revenue,
sub. bond, Series B, 6.25%, 1/01/13		910,000		923,868
Sub Series B, 8.25%, 1/01/17		1,095,000		1,099,479
Sub Series C, 7.375%, 1/01/19		1,725,000		1,732,883
Waterlefe CDD Capital Improvement Revenue, Series A, 6.95%, 5/01/31		1,040,000		1,041,092
Waters Edge CDD Capital Improvement Revenue, 5.30%, 5/01/36		1,700,000		1,499,893
Westchase East CDD Capital Improvement Revenue, 7.10%, 5/01/21		1,020,000		1,020,347
Winter Garden Village at Fowler Groves CDD Special Tax, 5.65%, 5/01/37		1,900,000		1,919,437
				471,475,188
Georgia 3.0%
Atlanta Airport Revenue, General, Series A, 5.00%, 1/01/40		10,000,000		10,624,000
Atlanta Tax Allocation, Princeton Lakes Project, 5.50%, 1/01/31		1,035,000		1,017,063
Atlanta Water and Wastewater Revenue, Refunding,
Series A, 6.25%, 11/01/34		30,000,000		35,342,400
Series B, AGMC Insured, 5.25%, 11/01/34		30,000,000		33,348,600
Baldwin County Hospital Authority Revenue, Oconee Regional Medical Center, 5.375%,
12/01/28		1,470,000		1,289,014
Burke County Development Authority PCR, Oglethorpe Power Corp., Vogtle Project,
Series C, 5.70%, 1/01/43		55,000,000		58,749,900
Series E, 7.00%, 1/01/23		25,000,000		29,774,250
Floyd County Development Authority Environmental Improvement Revenue, Temple-Inland Inc.,
Refunding, 5.70%, 12/01/15		1,575,000		1,610,910
Forsyth County Hospital Authority Revenue, Anticipation Certificates, Georgia Baptist Health
Care System Project, ETM,
6.25%, 10/01/18		4,565,000		5,312,291
6.375%, 10/01/28		8,000,000		10,642,880
Fulton County Residential Care Revenue, Lenbrook Project, Series A, 5.00%, 7/01/27		5,000,000		4,138,600
Gainesville RDA Educational Facilities Revenue, Riverside Military Academy, Refunding,
5.125%, 3/01/37		6,500,000		5,279,755
Henry County Hospital Authority Revenue, Henry Medical Center Inc. Project, Refunding,
NATL Insured, 5.00%, 7/01/34		15,000,000		15,611,400
Main Street Natural Gas Inc. Gas Project Revenue, Series A, 5.50%,
9/15/25		5,000,000		5,529,250
9/15/27		4,000,000		4,443,440
9/15/28		10,000,000		11,046,000


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Georgia (continued)
McDuffie County Development Authority Waste Disposal Revenue, Temple-Inland Forest
Products, 6.95%, 12/01/23	$	5,120,000	$	5,254,963
Richmond County Development Authority Environmental Improvement Revenue, International
Paper Co. Project, Series A, 6.25%, 11/01/33		7,000,000		7,761,530
Savannah EDA Revenue, Recovery Zone Facility, International Paper Co. Project, Series A,
6.25%, 11/01/33		4,865,000		5,394,263
				252,170,509
Hawaii 0.1%
Hawaii State Department of Budget and Finance Special Purpose Revenue, Hawaiian Electric
Co. and Subsidiary, 6.50%, 7/01/39		7,500,000		8,401,500
Idaho 0.7%
Idaho Health Facilities Authority Revenue, St. Luke’s Health System Project, Series A, 6.75%,
11/01/37		12,500,000		14,395,875
Idaho State Housing and Finance Assn. EDR, TDF Facility Project, Recovery Zone Facilities,
Series A, 7.00%, 2/01/36		13,305,000		14,547,554
Nez Perce County PCR,
Potlatch 84, 7.00%, 12/01/14		5,000,000		5,242,200
Potlatch Corp. Project, Refunding, 6.00%, 10/01/24		22,500,000		22,593,150
				56,778,779
Illinois 5.9%
Antioch Village Special Service Area No. 1 Special Tax, Deercrest Project, 6.625%,
3/01/33		3,218,000		2,686,354
Bolingbrook Special Service Area No. 1 Special Tax, Augusta Village Project, Pre-Refunded,
6.25%, 3/01/32		3,496,000		3,565,920
6.75%, 3/01/32		5,046,000		5,146,920
Bourbonnais Industrial Project Revenue, Olivet Nazarene University Project, 5.50%,
11/01/40		3,570,000		3,716,834
Bryant PCR, Central Illinois Light Co. Project, Refunding, NATL Insured, 5.90%, 8/01/23		11,000,000		11,034,980
Cary Special Tax, Refunding, Radian Insured, 5.00%, 3/01/30		3,035,000		2,889,654
Chicago Board of Education GO,
Refunding, 5.00%, 12/01/31		12,500,000		13,470,875
Series A, 5.50%, 12/01/39		6,500,000		7,274,085
Chicago GO,
Project, Series A, 5.25%, 1/01/35		7,000,000		7,639,240
Refunding, Series A, AGMC Insured, 5.00%, 1/01/27		34,105,000		37,749,801
Chicago O’Hare International Airport Revenue,
General Airport Third Lien, Series A, NATL RE, FGIC Insured, 5.00%, 1/01/33		15,000,000		15,429,450
Passenger Facility, Series B, 5.00%, 1/01/35		12,555,000		13,166,805
Passenger Facility, Series B, 5.00%, 1/01/40		20,430,000		21,150,566
Refunding, Series A, AGMC Insured, 5.00%, 1/01/38		16,500,000		17,226,495
Chicago Sales Tax Revenue, Refunding, Series A, 5.00%, 1/01/41		10,000,000		10,830,500
Chicago Transit Authority Sales Tax Receipts Revenue, 5.25%, 12/01/36		11,000,000		12,230,790
Cook County GO, Refunding,
Series A, 5.25%, 11/15/33		8,720,000		9,689,141
Series G, 5.00%, 11/15/28		50,000,000		55,419,500


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Illinois (continued)
Illinois Finance Authority Revenue,
Institute Technology, 6.50%, 2/01/23	$	1,000,000	$	1,014,330
Institute Technology, 7.125%, 2/01/34		1,500,000		1,564,905
Lutheran Hillside Village, Refunding, 5.25%, 2/01/37		7,500,000		7,101,150
Navistar International, Recovery Zone Facility, 6.50%, 10/15/40		8,500,000		9,124,410
Resurrection Health Care, Series A, AGMC Insured, 5.25%, 5/15/29		15,500,000		16,352,655
Riverside Health System, 6.25%, 11/15/35		5,000,000		5,601,300
Roosevelt University Project, Refunding, 6.50%, 4/01/39		15,000,000		16,304,700
Rush University Medical Center Obligated Group, Series B, 7.25%, 11/01/38		10,000,000		12,050,500
Sherman Health System, Series A, 5.50%, 8/01/37		17,240,000		17,504,462
Illinois Finance Authority Water Facility Revenue, American Water Capital Corp. Project,
5.25%,
10/01/39		6,050,000		6,106,144
5/01/40		10,415,000		10,476,032
Illinois Health Facilities Authority Revenue, Thorek Hospital and Medical Center, Refunding,
5.375%, 8/15/28		8,595,000		8,599,727
Illinois State Development Finance Authority PCR, Ameren Corp. and Central Illinois Public
Service Co., Refunding, Series A, 5.50%, 3/01/14		3,515,000		3,525,405
Illinois State Finance Authority Student Housing Revenue,
CHF-DeKalb II LLC, Northern Illinois University Project, 6.875%, 10/01/43		15,000,000		16,471,350
Normal LLC, Illinois State University, 7.00%, 4/01/43		7,500,000		8,283,450
Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue, McCormick Place
Expansion Project, Series A, 5.50%, 6/15/50		10,475,000		11,304,096
Metropolitan Pier and Exposition Authority Hospitality Facilities Revenue, McCormick Place
Convention Center, ETM, 7.00%, 7/01/26		7,500,000		10,809,750
Minooka Special Assessment, Improvement, Prairie Ridge Project, 6.875%, 3/01/33		3,000,000		2,712,720
Otter Creek Water Reclamation District Kane County GO, Separate Waterworks and Sewage
System, Refunding, XLCA Insured, 5.00%, 1/01/39		4,500,000		4,619,835
Plano Special Service Area No. 2 Special Tax, Lakewood Springs Project, Series B, 6.375%,
3/01/34		7,751,000		7,665,197
Railsplitter Tobacco Settlement Authority Revenue,
6.25%, 6/01/24		6,000,000		6,691,920
Refunding, 6.00%, 6/01/28		24,650,000		27,875,699
University of Illinois University Revenues, Auxiliary Facilities System, Refunding,
NATL Insured, 5.00%, 4/01/32		22,430,000		23,461,780
Wauconda Special Service Area No. 1 Special Tax, Liberty Lakes Project,
6.00%, 3/01/33		4,415,000		4,111,557
6.625%, 3/01/33		5,174,000		5,176,018
Yorkville United City Special Service Area Special Tax,
No. 2003-101, Windett Ridge Project, 6.875%, 3/01/33		3,380,000		2,707,650
No. 2004-104, MPI Grande Reserve Project, 6.375%, 3/01/34		4,219,000		3,330,858
No. 2005-108, Autumn Creek Project, 6.00%, 3/01/36		4,852,000		4,001,105
				504,866,615
Indiana 1.1%
Delaware County Hospital Authority Hospital Revenue, Cardinal Health System, 5.25%,
8/01/36		5,000,000		5,013,350


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Indiana (continued)
Goshen Industrial Revenue, Greencroft Hospital Assn. Inc., Refunding, 5.75%,
8/15/19	$	3,000,000	$	2,999,760
8/15/28		5,000,000		4,657,750
Indiana Health and Educational Facility Financing Authority Hospital Revenue, 5.50%,
3/01/37		8,000,000		8,328,480
Indiana Health and Educational Facility Financing Authority Revenue, Baptist Homes of
Indiana, Refunding, 5.25%, 11/15/35		12,000,000		12,113,640
Indiana Health Facility Financing Authority Hospital Revenue,
6.25%, 3/01/25		5,900,000		6,211,697
6.00%, 3/01/34		12,000,000		12,504,480
Indiana Municipal Power Agency Power Supply System Revenue, Indiana Municipal Power
Agency, Series B, 6.00%, 1/01/39		4,000,000		4,493,560
Indiana State Finance Authority Revenue,
Baptist Homes of Indiana Senior Living, 5.75%, 11/15/41		5,000,000		5,284,900
Educational Facilities, Marian University Project, 6.375%, 9/15/41		12,500,000		12,964,625
Jasper County PCR, Northern Indiana Public Service Co., Refunding, Series C, NATL Insured,
5.60%, 11/01/16		10,000,000		11,269,700
5.85%, 4/01/19		5,000,000		5,730,350
				91,572,292
Iowa 0.1%
Iowa Higher Education Loan Authority Revenue, Private College Facility, Upper Iowa University
Project, Refunding, 6.00%, 9/01/39		11,000,000		11,636,350
Kansas 0.1%
Kansas State Development Finance Authority Hospital Revenue, Adventist Health, Refunding,
5.75%, 11/15/38		6,250,000		7,056,125
Kentucky 1.4%
Kentucky Economic Development Finance Authority Health System Revenue,
Norton Healthcare Inc.,
Refunding, Series C, NATL Insured, 6.10%, 10/01/22		10,650,000		11,215,834
Refunding, Series C, NATL Insured, 6.15%, 10/01/27		3,995,000		4,185,122
Series C, NATL Insured, Pre-Refunded, 6.10%, 10/01/22		5,325,000		5,853,134
Series C, NATL Insured, Pre-Refunded, 6.15%, 10/01/27		6,005,000		6,605,260
Kentucky Economic Development Finance Authority Hospital Facilities Revenue, Owensboro
Medical Health System, Refunding, Series A, 6.50%, 3/01/45		18,330,000		20,734,529
Kentucky Economic Development Finance Authority Hospital System Revenue, Appalachian
Regional Health Center Facility, Refunding and Improvement, 5.875%, 10/01/22		10,825,000		10,826,083
Kentucky Economic Development Finance Authority Louisville Arena Project Revenue,
Louisville Arena, Sub Series A-1, Assured Guaranty, 6.00%, 12/01/42		5,000,000		5,426,250
Louisville and Jefferson County Metropolitan Government College Revenue, Improvement,
Bellarmie University Inc. Project,
5.625%, 5/01/29		5,555,000		5,907,520
6.125%, 5/01/39		5,000,000		5,376,800
Louisville and Jefferson County Metropolitan Government Health Facilities Revenue, Jewish
Hospital and St. Mary’s HealthCare Inc. Project, Refunding, 6.125%, 2/01/37		11,500,000		12,220,245
Ohio County PCR, Big Rivers Electric Corp. Project, Refunding, Series A, 6.00%, 7/15/31		7,500,000		7,991,025


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Kentucky (continued)
Owen County Waterworks System Revenue, American Water Co. Project, Series A,
6.25%, 6/01/39	$	8,000,000	$	8,711,760
5.375%, 6/01/40		10,000,000		10,290,700
				115,344,262
Louisiana 3.7%
Beauregard Parish Revenue, Boise Cascade Corp. Project, Refunding, 6.80%, 2/01/27		13,990,000		13,323,097
Louisiana Local Government Environmental Facilities and CDA Revenue, Westlake Chemical
Corp. Projects,
6.75%, 11/01/32		41,250,000		45,339,113
Series A, 6.50%, 8/01/29		9,000,000		10,060,740
Series A-2, 6.50%, 11/01/35		8,000,000		8,786,960
Louisiana Public Facilities Authority Hospital Revenue, Franciscan Missionaries of Our Lady
Health System Project, 6.75%, 7/01/39		10,000,000		11,483,600
Louisiana Public Facilities Authority Revenue,
Entergy Gulf States Louisiana, Refunding, Series A, 5.00%, 9/01/28		25,000,000		26,229,750
Entergy LLC Project, Refunding, 5.00%, 6/01/30		8,500,000		8,973,280
FHA Insured Mortgage, Baton Rouge General Medical Center Project, NATL Insured,
5.25%, 7/01/33		20,000,000		21,373,000
Ochsner Clinic Foundation Project, 6.50%, 5/15/37		5,000,000		5,574,300
Ochsner Clinic Foundation Project, 6.75%, 5/15/41		15,500,000		17,454,085
Ochsner Clinic Foundation Project, Series B, 5.25%, 5/15/38		10,000,000		10,153,500
Ochsner Clinic Foundation Project, Series B, 5.50%, 5/15/47		10,000,000		10,175,100
Louisiana State Gasoline and Fuels Tax Revenue, second lien, Series B, 5.00%, 5/01/45		26,340,000		28,769,338
New Orleans GO,
Limited Tax, NATL Insured, 5.00%, 3/01/21		5,000,000		5,356,350
Public Improvement, Series A, Radian Insured, 5.25%, 12/01/36		13,480,000		13,895,993
St. John the Baptist Parish Revenue, Marathon Oil Corp. Project, Series A, 5.125%,
6/01/37		79,225,000		82,195,937
				319,144,143
Maine 0.2%
Maine Health and Higher Educational Facilities Authority Revenue, MaineGeneral Medical
Center Issue,
6.75%, 7/01/36		4,250,000		4,672,025
7.00%, 7/01/41		10,000,000		11,127,900
Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 7/01/20		4,800,000		4,719,840
				20,519,765
Maryland 0.6%
Harford County Special Obligation Tax Allocation, Beachtree Estates Project, 7.50%,
7/01/40		7,000,000		7,420,070
Maryland State Community Development Administration Development Housing and CDR,
Housing, Series A, 5.875%, 7/01/16		880,000		880,783
Maryland State EDC Port Facilities Revenue, CNX MarineTerminals Inc., Refunding, 5.75%,
9/01/25		8,600,000		9,060,530


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Maryland (continued)
Maryland State EDC Revenue, Chesapeake Bay Conference Center Project, senior lien,
Refunding,
Series A, 5.00%, 12/01/16	$	3,000,000	$	2,590,620
Series A, 5.00%, 12/01/31		10,000,000		6,613,900
Series B, 5.00%, 12/01/16		500,000		431,770
Series B, 5.25%, 12/01/31		2,000,000		1,369,920
Maryland State EDC, EDR, 5.75%, 6/01/35		13,070,000		13,823,616
Maryland State Health and Higher Educational Facilities Authority Revenue,
Anne Arundel Health System, Series A, 6.75%, 7/01/39		3,000,000		3,601,170
Edenwald, Series A, 5.40%, 1/01/37		1,200,000		1,161,672
Washington County Hospital, 6.00%, 1/01/43		6,000,000		6,287,040
				53,241,091
Massachusetts 0.9%
Massachusetts Bay Transportation Authority Revenue, General Transportation System, Series A,
7.00%, 3/01/21		1,070,000		1,405,627
ETM, 7.00%, 3/01/21		930,000		1,105,212
Massachusetts State Development Finance Agency Revenue,
Berkshire Retirement Project, first mortgage, 5.60%, 7/01/19		870,000		870,618
Berkshire Retirement Project, first mortgage, 5.625%, 7/01/29		1,620,000		1,620,243
Curry College, Series A, ACA Insured, 5.00%, 3/01/36		2,000,000		1,997,220
Loomis Community Project, first mortgage, Refunding, Series A, 5.625%, 7/01/15		1,140,000		1,140,923
Loomis Community Project, first mortgage, Refunding, Series A, 5.75%, 7/01/23		3,500,000		3,501,050
Massachusetts State Development Finance Agency Solid Waste Disposal Revenue, Mandatory
Put 5/01/19, Refunding, 5.75%, 12/01/42		3,700,000		4,355,899
Massachusetts State Health and Educational Facilities Authority Revenue, St. Memorial
Medical Center, Refunding, Series A, 6.00%, 10/01/23		5,050,000		4,213,064
Massachusetts State Port Authority Special Facilities Revenue, ConRAC Project, Series A,
5.125%, 7/01/41		10,340,000		11,112,191
Massachusetts State Special Obligation Dedicated Tax Revenue, Refunding, NATL RE,
FGIC Insured, 5.50%, 1/01/34		40,000,000		49,008,800
				80,330,847
Michigan 3.9%
Delta County EDC Environmental Improvement Revenue, Mead Escanaba Paper, Series A,
Pre-Refunded, 6.25%, 4/15/27		10,500,000		10,571,085
Detroit City School District GO, School Building and Site Improvement, Series A,
AGMC Insured, 6.00%, 5/01/29		15,900,000		18,941,829
Detroit GO, Distribution State Aid, 5.25%, 11/01/35		23,000,000		24,325,260
Detroit Sewage Disposal System Revenue, second lien,
Series A, NATL Insured, 5.00%, 7/01/35		25,750,000		26,109,727
Series B, Assured Guaranty, 5.00%, 7/01/36		10,000,000		10,107,700
Series B, NATL Insured, 5.00%, 7/01/36		3,000,000		3,032,310
Series B, NATL RE, FGIC Insured, 5.50%, 7/01/29		5,000,000		5,733,900
Detroit Water Supply System Revenue,
Refunding, Series D, NATL Insured, 5.00%, 7/01/33		20,430,000		21,027,986
second lien, Refunding, Series C, AGMC Insured, 5.00%, 7/01/33		11,000,000		11,217,470
Ecorse City GO, Financial Recovery, Dedicated Tax, 6.50%, 11/01/35		5,215,000		5,576,973


	Franklin Tax-Free Trust

	Statement of Investments, February 29, 2012 (continued)


	Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
	Municipal Bonds (continued)
	Michigan (continued)
	Garden City Hospital Finance Authority Hospital Revenue, Garden City Hospital Obligated
	Group, Refunding, Series A,
	5.75%, 9/01/17	$	465,000	$	465,270
	5.00%, 8/15/38		5,250,000		4,102,508
	Michigan State Building Authority Revenue, Facilities Program, Refunding,
	Series I, 6.00%, 10/15/38		6,000,000		6,825,120
	Series I, AMBAC Insured, 5.00%, 10/15/33		13,495,000		13,875,424
	Series IA, NATL RE, FGIC Insured, 5.00%, 10/15/31		9,500,000		10,039,410
	Series II, NATL Insured, 5.00%, 10/15/29		16,585,000		16,962,972
	Series II-A, 5.375%, 10/15/41		10,000,000		11,266,400
	Michigan State Finance Authority Revenue, School District of the City of Detroit, Refunding,
	5.50%, 6/01/21		10,000,000		11,018,500
	Michigan State Hospital Finance Authority Revenue,
	Marquette General Hospital Obligated Group, Series A, 5.00%, 5/15/34		6,000,000		5,669,040
	Memorial Healthcare Center, Refunding, 5.75%, 11/15/15		825,000		827,921
	Mercy Health Services, Series Q, AMBAC Insured, ETM, 5.75%, 8/15/16		6,210,000		6,230,555
Mid	-Michigan Obligated Group, Series A, 6.125%, 6/01/34		4,065,000		4,570,361
	Oakwood Obligated Group, Refunding, Series A, 5.00%, 7/15/37		3,680,000		3,733,323
	Michigan State Strategic Fund Limited Obligation Revenue, Dow Chemical,
	Mandatory Put 6/02/14, Refunding, Series A-1, 6.75%, 12/01/28		2,800,000		3,101,112
	Refunding, Series B-2, 6.25%, 6/01/14		20,050,000		22,218,407
	Michigan Tobacco Settlement Finance Authority Revenue, Tobacco Settlement Asset,
	Senior Series A, 6.00%,
	6/01/34		13,675,000		10,652,825
	6/01/48		10,000,000		7,579,300
	Royal Oak Hospital Finance Authority Hospital Revenue, William Beaumont Hospital,
	Refunding,
	8.25%, 9/01/39		20,000,000		25,193,800
	Series W, 6.00%, 8/01/39		33,120,000		36,305,150
	Tawas City Hospital Finance Authority Revenue, Tawas St. Joseph’s Hospital Project, Series A,
	ETM, 5.60%, 2/15/13		230,000		230,888
					337,512,526
	Minnesota 0.6%
	Hubbard County Solid Waste Disposal Revenue, Potlatch Corp. Project, 7.25%, 8/01/14		9,000,000		9,418,140
	Mahtomedi Senior Housing Revenue, St. Andrews Village Project, Refunding, 5.75%,
	12/01/40		5,000,000		4,705,700
	Minneapolis Health Care Facility Revenue, Augustana Chapel View Homes, Series D, 5.875%,
	6/01/35		5,075,000		4,202,303
	Minneapolis Health Care System Revenue, Fairview Health Services, Series A,
	6.625%, 11/15/28		11,000,000		12,856,250
	6.75%, 11/15/32		6,250,000		7,318,250
	Minnesota Agricultural and Economic Development Board Revenue, Health Care System,
	Refunding, Series A, 6.375%, 11/15/29		175,000		175,705
	Minnesota State HFAR, Rental Housing, Refunding, Series D, NATL Insured, 5.95%,
	2/01/18		225,000		225,165
	St. Paul Housing and RDA Hospital Revenue, Healtheast Project, 6.00%, 11/15/35		10,000,000		10,164,200
					49,065,713


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New Mexico (continued)
New Mexico State Hospital Equipment Loan Council Hospital Revenue, St. Vincent Hospital,
Series A, Radian Insured, Pre-Refunded,
5.25%, 7/01/30	$	4,360,000	$	5,007,199
5.00%, 7/01/35		3,470,000		3,956,633
				145,651,800
New York 5.5%
Long Island Power Authority Electric System Revenue, General, Refunding, Series A, 6.00%,
5/01/33		12,500,000		14,652,250
MAC for City of Troy Revenue, Capital Appreciation, Series C, NATL Insured, zero cpn.,
7/15/21		428,010		324,787
1/15/22		649,658		482,475
MTA Revenue, Transportation,
Refunding, Series D, 5.25%, 11/15/40		10,000,000		11,056,700
Series A, 5.00%, 11/15/41		15,500,000		16,631,500
Series F, 5.00%, 11/15/30		7,000,000		7,541,730
New York City GO,
Refunding, Series H, 6.25%, 8/01/15		20,000		20,084
Refunding, Series H, 6.125%, 8/01/25		10,000		10,038
Refunding, Series J, 6.00%, 8/01/21		5,000		5,019
Series B, 7.00%, 2/01/18		115,000		115,562
Series D, 7.625%, 2/01/14		5,000		5,026
Series F, 7.50%, 2/01/21		85,000		85,422
Series G, 7.50%, 2/01/22		10,000		10,050
New York City IDA Civic Facility Revenue,
Amboy Properties Corp. Project, Refunding, 6.75%, 6/01/20		5,370,000		5,208,041
Series C, 6.80%, 6/01/28		5,000,000		5,155,400
Staten Island University Hospital Project, Series C, Pre-Refunded, 6.45%, 7/01/32		1,395,000		1,435,748
New York City IDA Special Facility Revenue,
^dAmerican Airlines Inc., JFK International Airport Project, 7.625%, 8/01/25		31,860,000		30,182,890
^dAmerican Airlines Inc., JFK International Airport Project, 7.75%, 8/01/31		15,000,000		14,216,250
^dAmerican Airlines Inc., JFK International Airport Project, Series A, 8.00%, 8/01/12		30,000,000		28,811,700
British Airways PLC Project, 7.625%, 12/01/32		15,550,000		15,757,126
New York City IDAR, Liberty, 7 World Trade Center Project,
Series A, 6.25%, 3/01/15		45,000,000		45,065,700
Series A, 6.50%, 3/01/35		50,000,000		50,041,500
Series B, 6.75%, 3/01/15		5,000,000		5,009,100
New York City Municipal Water Finance Authority Water and Sewer System Revenue, Series E,
5.00%, 6/15/34		10,000,000		10,452,800
New York Liberty Development Corp. Liberty Revenue, Second Priority, Bank of America Tower
at One Bryant Park Project, Class 3, Refunding, 6.375%, 7/15/49		18,500,000		20,060,290
New York Liberty Development Corp. Revenue, Goldman Sachs Headquarters, 5.25%,
10/01/35		65,000,000		71,935,500
New York State Dormitory Authority Revenues, Non-State Supported Debt, Orange Regional
Medical Center,
6.125%, 12/01/29		16,000,000		16,747,520
6.25%, 12/01/37		30,000,000		31,062,000


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Texas (continued)
Matagorda County Navigation District No. 1 PCR, Central Power and Light Co. Project,
Refunding, Series A, 6.30%, 11/01/29	$	10,000,000	$	11,417,800
Matagorda County Navigation District No. 1 Revenue, CenterPoint Energy Houston Electric LLC
Project, Refunding, 5.60%, 3/01/27		12,000,000		12,441,720
North Texas Tollway Authority Revenue,
Special Projects System, Capital Appreciation, first tier, Refunding, Series I, zero cpn. to
1/01/15, 6.50% thereafter, 1/01/43		25,000,000		24,997,250
Special Projects System, Capital Appreciation, Series B, zero cpn., 9/01/37		7,500,000		1,754,475
Special Projects System, Capital Appreciation, Series C, zero cpn. to 9/01/23,
7.00% thereafter, 9/01/43		10,000,000		6,672,800
Special Projects System, Capital Appreciation, Series C, zero cpn. to 9/01/21,
6.75% thereafter, 9/01/45		25,000,000		18,979,000
System, first tier, Refunding, Series A, 5.625%, 1/01/33		1,000,000		1,097,200
System, first tier, Refunding, Series A, 6.25%, 1/01/39		12,500,000		14,140,000
System, first tier, Refunding, Series A, 5.75%, 1/01/48		30,000,000		31,994,700
System, first tier, Refunding, Series B, 5.00%, 1/01/38		10,000,000		10,644,800
System, first tier, Refunding, Series B, 5.75%, 1/01/40		11,680,000		12,586,952
System, first tier, Refunding, Series K-2, 6.00%, 1/01/38		15,000,000		16,755,750
System, second tier, Refunding, Series F, 5.75%, 1/01/38		20,000,000		21,329,800
Red River Health Facilities Development Corp. First Mortgage Revenue, Eden Home Project,
7.25%, 12/15/42		11,000,000		10,984,820
Sabine River Authority PCR, TXU Electric Co. Project, Refunding,
Series A, 5.80%, 7/01/22		1,000,000		135,150
Series B, 6.15%, 8/01/22		13,115,000		1,836,756
Series C, 5.20%, 5/01/28		29,945,000		3,746,419
Sam Rayburn Municipal Power Agency Revenue, Refunding, 6.00%,
10/01/16		8,500,000		8,647,305
10/01/21		1,500,000		1,522,560
Tarrant County Cultural Education Facilities Finance Corp. Revenue, Texas Health Resources,
Refunding, 5.00%, 11/15/40		15,225,000		16,263,649
Texas State Municipal Power Agency Revenue, sub. lien, Transmission, Refunding, 5.00%,
9/01/40		15,250,000		16,509,650
Texas State Turnpike Authority Central Turnpike System Revenue,
Capital Appreciation, AMBAC Insured, zero cpn., 8/15/32		51,000,000		15,133,740
Series A, AMBAC Insured, 5.75%, 8/15/38		31,000,000		31,594,890
Trinity River Authority PCR, TXU Electric Co. Project, Refunding, 6.25%, 5/01/28		445,000		62,349
Tyler Health Facilities Development Corp. Hospital Revenue,
East Texas Medical Center, Refunding and Improvement, Series A, 5.375%, 11/01/37		8,000,000		8,067,280
Mother Frances Hospital, Series B, 5.00%, 7/01/37		3,400,000		3,442,534
Wood County Central Hospital District Hospital Revenue, East Texas Medical Center Quitman
Project, 6.00%, 11/01/41		9,350,000		10,028,810
				579,994,953
Virginia 0.2%
James City County EDA Residential Care Facility Revenue, first mortgage, Williamsburg
Landing, Series A, 5.35%, 9/01/26		750,000		741,068
Peninsula Ports Authority Coal Terminal Revenue, Dominion Terminal Associates, Refunding,
6.00%, 4/01/33		9,500,000		9,694,655


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Wyoming 0.3%
Campbell County Solid Waste Facilities Revenue, Basin Electric Power Cooperative, Series A,
5.75%, 7/15/39	$	5,500,000	$	6,126,725
West Park Hospital District Revenue, West Park Hospital Project, Series A, 7.00%,
6/01/40		5,500,000		6,474,820
Wyoming CDA Student Housing Revenue, CHF-Wyoming LLC, University of Wyoming Project,
6.25%, 7/01/31		600,000		640,992
6.50%, 7/01/43		1,600,000		1,708,112
Wyoming Municipal Power Agency Power Supply Revenue, Series A,
5.50%, 1/01/28		1,350,000		1,501,551
5.50%, 1/01/33		2,360,000		2,583,138
5.50%, 1/01/38		2,810,000		3,035,924
5.00%, 1/01/42		1,000,000		1,054,250
5.375%, 1/01/42		2,750,000		2,940,080
				26,065,592
U.S. Territories 5.7%
Guam 1.2%
Guam Government Department of Education COP, John F. Kennedy High School, Series A,
6.625%, 12/01/30		5,065,000		5,462,906
6.875%, 12/01/40		4,000,000		4,291,040
Guam Government GO,
Refunding, Series A, 5.125%, 11/15/27		7,270,000		7,112,241
Refunding, Series A, 5.25%, 11/15/37		37,000,000		33,972,290
Series A, 6.00%, 11/15/19		8,000,000		8,778,000
Series A, 6.75%, 11/15/29		10,000,000		10,684,100
Series A, 7.00%, 11/15/39		15,000,000		16,016,550
Guam Government Waterworks Authority Water and Wastewater System Revenue,
6.00%, 7/01/25		4,000,000		4,115,800
5.875%, 7/01/35		8,000,000		8,113,440
5.625%, 7/01/40		4,000,000		4,032,680
				102,579,047
Northern Mariana Islands 0.3%
Northern Mariana Islands Commonwealth GO, Refunding, Series B, 5.00%, 10/01/33		24,885,000		20,486,078
Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.60%,
3/15/28		7,020,000		6,710,629
				27,196,707
Puerto Rico 3.6%
Children’s Trust Fund Puerto Rico Tobacco Settlement Revenue, Asset-Backed Bonds,
Refunding,
5.50%, 5/15/39		11,500,000		11,307,835
5.625%, 5/15/43		3,500,000		3,466,645
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, senior lien,
Refunding, Series A, 5.75%, 7/01/37		13,000,000		13,842,530
Series A, 6.00%, 7/01/44		5,200,000		5,603,936


Franklin High Yield Tax-Free Income Fund		Principal Amount		Value
Short Term Investments (continued)
Municipal Bonds (continued)
Connecticut 0.2%
^eConnecticut State Health and Educational Facilities Authority Revenue, Greater Hartford
YMCA, Series B, Daily VRDN and Put, 0.20%, 7/01/38	$	15,480,000	$	15,480,000
District of Columbia 0.6%
^eMetropolitan Washington D.C. Airports Authority Airport System Revenue, Refunding, Series D,
Sub Series D-2, Daily VRDN and Put, 0.14%, 10/01/39		51,635,000		51,635,000
Florida 0.2%
^eFlorida State Municipal Power Agency Revenue, All-Requirements Power Supply Project,
Refunding, Series C, Daily VRDN and Put, 0.20%, 10/01/35		19,500,000		19,500,000
Kentucky 0.2%
^eKentucky Economic Development Finance Authority Hospital Facilities Revenue, Baptist
Healthcare System, Refunding, Series B-2, Daily VRDN and Put, 0.10%, 8/15/38		15,030,000		15,030,000
Maryland 0.2%
^eMaryland State EDC, EDR, U.S. Pharmacopeial Convention Inc. Project, Refunding, Series A,
Daily VRDN and Put, 0.25%, 7/01/38		15,800,000		15,800,000
Massachusetts 0.2%
^eMassachusetts State Health and Educational Facilities Authority Revenue, Museum of Fine
Arts, Series A-1, Daily VRDN and Put, 0.20%, 12/01/37		15,900,000		15,900,000
Michigan 0.0%^†
^eUniversity of Michigan Revenue, General, Series A, Daily VRDN and Put, 0.12%, 4/01/38		3,850,000		3,850,000
Minnesota 0.1%
^eMinneapolis and St. Paul Housing and RDA Health Care System Revenue, Allina Health
System, Refunding, Series B-2, Daily VRDN and Put, 0.10%, 11/15/35		4,700,000		4,700,000
Missouri 0.5%
^eMissouri State Health and Educational Facilities Authority Educational Facilities Revenue,
St. Louis University,
Refunding, Series A-1, Daily VRDN and Put, 0.10%, 10/01/35		13,465,000		13,465,000
Series B, Daily VRDN and Put, 0.16%, 10/01/24		13,300,000		13,300,000
^eMissouri State Health and Educational Facilities Authority Health Facilities Revenue,
SSM Health Care, Series C, Daily VRDN and Put, 0.19%, 6/01/45		18,545,000		18,545,000
				45,310,000
New Jersey 0.2%
^eNew Jersey Health Care Facilities Financing Authority Revenue, Virtua Health, Series C,
Daily VRDN and Put, 0.15%, 7/01/43		12,865,000		12,865,000
New York 1.3%
^eNew York City GO,
Refunding, Series J, Sub Series J-4, Daily VRDN and Put, 0.19%, 8/01/25		42,685,000		42,685,000
Series A, Sub Series A-7, Daily VRDN and Put, 0.09%, 8/01/20		8,100,000		8,100,000
Series A, Sub Series A-10, Daily VRDN and Put, 0.14%, 8/01/16		4,500,000		4,500,000
Series E, Sub Series E-2, Daily VRDN and Put, 0.19%, 8/01/34		10,000,000		10,000,000
Series L, Sub Series L-6, Daily VRDN and Put, 0.10%, 4/01/32		46,805,000		46,805,000
				112,090,000

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dAmount rounds to less than $0.01 per share.
^eEffective September 1, 2008, the redemption fee was eliminated.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

Annual Report | The accompanying notes are an integral part of these financial statements. | 143

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dAmount rounds to less than $0.01 per share.
^eEffective September 1, 2008, the redemption fee was eliminated.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

144 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 145

^aFor the year ended February 29.
^bFor the period July 1, 2008 (effective date) to February 28, 2009.
^cThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^dBased on average daily shares outstanding.
^eTotal return is not annualized for periods less than one year.
^fRatios are annualized for periods less than one year.

146 | The accompanying notes are an integral part of these financial statements. | Annual Report


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds 92.9%
Alabama 4.0%
Alabama Drinking Water Finance Authority Revenue, Revolving Fund Loan, Series A,
AMBAC Insured, 5.25%, 8/15/21	$	2,490,000	$	2,493,486
Bessemer GO, wts., XLCA Insured, 5.00%, 2/01/35		2,000,000		1,895,460
Birmingham Airport Authority Airport Revenue, AGMC Insured, 5.50%, 7/01/40		20,000,000		21,867,800
Birmingham Waterworks Board Water Revenue, Series A, Assured Guaranty, 5.25%,
1/01/39		5,000,000		5,369,650
Chatom IDB Gulf Opportunity Zone Revenue, PowerSouth Energy Cooperative, Refunding,
Series A, Assured Guaranty, 5.00%,
8/01/30		5,250,000		5,933,235
8/01/37		5,000,000		5,428,100
Helena Utilities Board Water and Sewer Revenue, NATL Insured, Pre-Refunded, 5.25%,
4/01/27		3,260,000		3,304,466
4/01/33		4,890,000		4,956,700
Houston County Health Care Authority Revenue, Series A, AMBAC Insured, 5.125%,
10/01/24		5,855,000		6,085,453
10/01/25		6,065,000		6,279,458
Leeds Public Educational Building Authority Educational Facilities Revenue, Assured Guaranty,
5.125%, 4/01/38		10,865,000		11,596,323
Limestone County Water and Sewer Authority Water Revenue, AMBAC Insured, 5.00%,
12/01/35		9,100,000		9,310,028
Orange Beach Water Sewer and Fire Protection Authority Revenue, NATL Insured, 5.00%,
5/15/35		3,665,000		3,788,107
Pell City GO, wts.,
Refunding, XLCA Insured, 5.00%, 2/01/24		1,020,000		1,083,791
XLCA Insured, 5.00%, 2/01/34		5,195,000		5,292,458
Phenix City Water and Sewer Revenue, wts., Series A, AGMC Insured, 5.00%, 8/15/40		8,090,000		8,858,874
Tuscaloosa Public Educational Building Authority Student Housing Revenue, Ridgecrest
Student Housing LLC, University of Alabama Ridgecrest Residential Project,
Assured Guaranty, 6.75%, 7/01/38		5,000,000		5,815,600
University of Alabama at Birmingham Hospital Revenue, Refunding, Series A, AMBAC Insured,
5.00%, 9/01/41		5,000,000		5,143,550
				114,502,539
Alaska 0.4%
Alaska Energy Authority Power Revenue, Bradley Lake Project, Refunding, NATL Insured,
6.25%, 7/01/21		5,000		5,019
Matanuska-Susitna Borough Lease Revenue, Goose Creek Correctional Center,
Assured Guaranty, 6.00%, 9/01/32		10,000,000		11,785,800
				11,790,819
Arizona 2.7%
Arizona State COP, Department of Administration,
Series A, AGMC Insured, 5.25%, 10/01/26		8,500,000		9,675,635
Series A, AGMC Insured, 5.25%, 10/01/28		10,000,000		11,289,700
Series A, AGMC Insured, 5.00%, 10/01/29		5,000,000		5,481,050
Series B, AGMC Insured, 5.00%, 10/01/27		8,000,000		8,914,720
Downtown Phoenix Hotel Corp. Revenue,
Senior Series A, FGIC Insured, 5.00%, 7/01/36		15,000,000		13,391,100
sub. bond, Series B, NATL RE, FGIC Insured, 5.00%, 7/01/36		6,450,000		6,552,619


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Colorado (continued)
Denver City and County Airport Revenue, Series C, NATL Insured, ETM, 6.125%,
11/15/25	$	3,590,000	$	4,913,202
11/15/25		4,410,000		4,422,613
Denver Convention Center Hotel Authority Revenue, senior bond, Refunding, XLCA Insured,
5.00%, 12/01/35		15,000,000		14,863,050
				66,572,965
Connecticut 0.2%
Connecticut State Health and Educational Facilities Authority Revenue, Child Care Facilities
Program, Series G, Assured Guaranty, 6.00%, 7/01/38		5,000,000		5,681,900
District of Columbia 0.7%
District of Columbia Hospital Revenue, Children’s Hospital Obligated Group, Sub Series 1,
AGMC Insured, 5.45%, 7/15/35		19,540,000		21,108,280
Florida 8.8%
Brevard County Local Option Fuel Tax Revenue, NATL RE, FGIC Insured, 5.00%,
8/01/32		12,440,000		12,837,334
8/01/37		13,000,000		13,183,690
Broward County HFAR,
5.65%, 11/01/22		405,000		405,356
5.70%, 11/01/29		225,000		225,133
Broward County School Board COP,
NATL Insured, 5.00%, 7/01/28		2,000,000		2,042,760
Series A, AGMC Insured, 5.00%, 7/01/26		2,850,000		2,869,323
Series A, AGMC Insured, 5.00%, 7/01/30		2,000,000		2,086,840
Cape Coral Water and Sewer Revenue, AMBAC Insured, 5.00%, 10/01/36		2,000,000		2,042,500
Celebration CDD Special Assessment, Series B, NATL Insured, 5.50%, 5/01/19		170,000		170,644
Coral Gables Health Facilities Authority Hospital Revenue, Baptist Health South Florida
Obligated Group, AGMC Insured, Pre-Refunded, 5.00%, 8/15/29		1,000,000		1,113,340
Dade County HFA, MFMR, Siesta Pointe Apartments, Series A, 5.75%, 9/01/29		1,890,000		1,891,191
Destin Capital Improvement Revenue, NATL Insured, 5.00%, 8/01/27		1,315,000		1,334,857
Escambia County Utilities Authority Utility System Revenue, NATL RE, FGIC Insured, 5.00%,
1/01/31		1,775,000		1,776,864
Florida Gulf Coast University FICO Capital Improvement Revenue, Housing Project, Series A,
NATL Insured, 5.00%, 2/01/37		10,000,000		10,208,700
Florida HFAR, Spinnaker Cove Apartments, Series G, AMBAC Insured, 6.50%, 7/01/36		1,600,000		1,600,416
Florida HFC Revenue,
Housing, Logan’s Pointe Apartments, Series F-1, AGMC Insured, 5.90%, 12/01/19		1,080,000		1,081,188
Marina Bay Apartments, Series S, AGMC Insured, 5.85%, 2/01/41		1,070,000		1,070,642
Florida Intergovernmental Finance Commission Capital Revenue, Series A, AMBAC Insured,
5.00%, 8/01/32		3,570,000		3,589,314
Florida State Board of Education Capital Outlay GO, Public Education, Series B, NATL RE,
FGIC Insured, Pre-Refunded, 5.00%, 6/01/23		5,395,000		5,511,802
Florida State Board of Education GO,
Series C, NATL Insured, Pre-Refunded, 5.00%, 6/01/27		4,245,000		4,315,170
Series F, NATL Insured, 5.00%, 6/01/28		2,000,000		2,043,300
Florida State Correctional Privatization Commission COP, Series B, AMBAC Insured, 5.00%,
8/01/25		2,000,000		2,132,400


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Florida (continued)
Florida State Department of Environmental Protection Preservation Revenue, Florida Forever,
Series A, NATL Insured, Pre-Refunded, 5.00%, 7/01/21	$	3,000,000	$	3,076,620
Hernando County School Board COP, NATL Insured, 5.00%, 7/01/30		1,150,000		1,191,147
Hillsborough County School Board COP, Master Lease Program, Refunding, Series A,
NATL Insured, 5.00%, 7/01/26		1,670,000		1,763,954
Indian Trail Water Control District Improvement Revenue, NATL Insured, 5.75%, 8/01/16		820,000		823,296
Jacksonville Capital Improvement Revenue, Refunding, Series C, AMBAC Insured, 5.00%,
10/01/25		4,000,000		4,066,960
Jacksonville Guaranteed Entitlement Revenue, Refunding and Improvement, NATL RE,
FGIC Insured, 5.00%, 10/01/32		1,000,000		1,008,800
Jacksonville Sales Tax Revenue,
AMBAC Insured, 5.00%, 10/01/30		5,000,000		5,004,100
Better Jacksonville, NATL Insured, 5.00%, 10/01/30		1,500,000		1,527,630
Jacksonville Transportation Revenue, NATL Insured,
5.00%, 10/01/26		2,000,000		2,004,900
5.25%, 10/01/29		11,000,000		11,025,190
Lake County School Board COP, Series A, AMBAC Insured, 5.00%, 6/01/30		2,080,000		2,143,752
Lee County Airport Revenue, Refunding, AGMC Insured, 5.00%, 10/01/33		3,530,000		3,672,541
Lee Memorial Health System Hospital Revenue, Series A, AMBAC Insured, 5.00%,
4/01/32		1,460,000		1,503,406
4/01/37		11,000,000		11,216,590
Leon County COP, AMBAC Insured, 5.00%, 7/01/25		8,935,000		9,508,448
Maitland CDA Revenue, AMBAC Insured, 5.00%, 7/01/34		2,595,000		2,711,801
Marion County Utility System Revenue, NATL RE, FGIC Insured, 5.00%, 12/01/31		880,000		891,678
Martin County Health Facilities Authority Revenue, Martin Memorial Medical Center,
AGMC Insured, 5.50%, 11/15/42		3,800,000		4,158,150
Miami Beach Water and Sewer Revenue, AMBAC Insured, 5.00%, 9/01/30		3,000,000		3,018,510
Miami-Dade County Aviation Revenue, Miami International Airport, Hub of the Americas,
Refunding, Series A, CIFG Insured, 5.00%, 10/01/38		1,625,000		1,641,331
Series B, NATL RE, FGIC Insured, 5.75%, 10/01/29		2,500,000		2,516,100
Series B, NATL RE, FGIC Insured, 5.00%, 10/01/30		3,500,000		3,607,975
Miami-Dade County GO, Building Better Communities Program, NATL RE, FGIC Insured,
5.00%, 7/01/33		2,000,000		2,087,480
Miami-Dade County Public Facilities Revenue, Jackson Health System, Series A,
NATL Insured, 5.00%, 6/01/31		1,650,000		1,689,484
Miami-Dade County School Board COP, Series A, NATL RE, FGIC Insured, 5.00%,
5/01/25		5,000,000		5,439,300
Orange County Health Facilities Authority Revenue, Hospital, Orlando Regional Healthcare
System, Refunding, Series B, AGMC Insured, 5.00%, 12/01/32		7,000,000		7,543,480
Orange County School Board COP, Series A, NATL Insured, 5.00%, 8/01/27		10,000,000		10,090,900
Orlando-Orange County Expressway Authority Revenue,
junior lien, NATL RE, FGIC Insured, 6.50%, 7/01/12		225,000		229,347
Series B, AMBAC Insured, 5.00%, 7/01/35		20,000,000		20,375,600
Osceola County School Board COP, Series A, AMBAC Insured, Pre-Refunded, 5.25%,
6/01/27		13,000,000		13,287,560
Osceola County Tourist Development Tax Revenue, NATL RE, FGIC Insured, 5.00%,
10/01/32		3,000,000		3,026,400
Panama City Beach Utility Revenue, Refunding, AMBAC Insured, 5.00%, 6/01/32		2,000,000		2,026,280


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Florida (continued)
Pasco County Guaranteed Entitlement Revenue, Refunding, AGMC Insured, 5.00%,
12/01/33	$	2,185,000	$	2,240,084
Pembroke Pines Public Improvement Revenue,
Series A, AMBAC Insured, 5.00%, 10/01/29		2,000,000		2,074,620
Series B, AMBAC Insured, 5.00%, 10/01/34		2,000,000		2,066,660
Pinellas County Health Facilities Authority Revenue, Baycare Health System, AGMC Insured,
5.00%, 11/15/30		4,000,000		4,005,200
Pinellas County Sewer Revenue, AGMC Insured, 5.00%, 10/01/32		3,000,000		3,078,840
Polk County Public Facilities Revenue, NATL Insured, 5.00%, 12/01/33		2,000,000		2,094,880
Polk County Utility System Revenue, Series A, NATL RE, FGIC Insured, 5.00%, 10/01/30		1,000,000		1,046,100
Port Orange GO, NATL Insured, 5.00%, 4/01/33		1,755,000		1,873,989
Port St. Lucie Utility Revenue, NATL Insured, 5.00%, 9/01/34		8,420,000		8,794,185
Sumter County School District Revenue, Multi-District Loan Program, AGMC Insured, ETM,
7.15%, 11/01/15		245,000		301,732
Sunrise Utilities System Revenue,
AMBAC Insured, Pre-Refunded, 5.20%, 10/01/22		860,000		1,043,937
Refunding, AMBAC Insured, 5.20%, 10/01/22		1,140,000		1,322,468
Tavares Water and Sewer Revenue, AMBAC Insured, 5.50%, 10/01/30		1,000,000		1,002,500
University of Central Florida Athletics Assn. Inc. COP, Series A, NATL RE, FGIC Insured,
5.00%,
10/01/27		1,000,000		1,007,110
10/01/30		1,485,000		1,486,381
				250,850,160
Georgia 5.1%
Albany Dougherty Payroll Development Authority Revenue, Darton College Project,
Assured Guaranty, 5.75%, 6/15/41		5,550,000		6,129,531
Athens Housing Authority Student Housing Lease Revenue, University of Georgia,
AMBAC Insured, Pre-Refunded, 5.00%, 12/01/33		6,000,000		6,211,621
Atlanta Airport Revenue, General, Series A, AGMC Insured, 5.00%, 1/01/40		9,215,000		9,790,016
Atlanta Water and Wastewater Revenue,
AGMC Insured, 5.00%, 11/01/37		15,000,000		15,538,200
Refunding, Series B, AGMC Insured, 5.375%, 11/01/39		23,000,000		25,385,560
Series A, NATL RE, FGIC Insured, 5.00%, 11/01/29		4,750,000		4,755,225
Brunswick Water and Sewer Revenue, Improvement, NATL Insured, ETM, 6.10%,
10/01/14		1,535,000		1,663,694
Bulloch County Development Authority Student Housing Revenue, Georgia Southern University
Housing Foundation Four, Assured Guaranty, 5.25%, 7/01/33		14,825,000		16,275,478
Cherokee County Water and Sewer Authority Revenue, NATL Insured, 6.90%, 8/01/18		15,000		15,071
Columbus Building Authority Lease Revenue, Series A, NATL RE, FGIC Insured, 5.00%,
1/01/31		3,500,000		3,608,290
Dahlonega Water and Wastewater Revenue, Series A, Assured Guaranty, 5.50%, 9/01/37		6,450,000		7,009,602
East Point Building Authority Revenue, Water and Sewer Project, Series A, XLCA Insured,
5.00%, 2/01/30		11,360,000		10,879,813
Fulton County Development Authority Revenue, Georgia Institute of Technology Athletic Assn.,
Refunding, AMBAC Insured, 5.125%, 10/01/32		9,000,000		9,033,210
Georgia State Higher Education Facilities Authority Revenue, USG Real Estate Foundation III
LLC Project, Series A, Assured Guaranty, 5.00%, 6/15/38		9,250,000		9,683,270


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Georgia (continued)
Medical Center Hospital Authority Revenue, Anticipation Certificates, Columbus Regional
Healthcare System, Refunding, AGMC Insured, 5.00%, 8/01/41	$	7,500,000	$	7,644,000
Savannah EDA Revenue, SSU Community Development LLC Project, Series I,
Assured Guaranty, 5.75%, 6/15/41		10,000,000		11,014,900
				144,637,481
Hawaii 0.1%
Hawaii County GO, Refunding and Improvement, Series A, NATL RE, FGIC Insured, 5.60%,
5/01/12		1,000,000		1,008,460
5/01/13		1,000,000		1,061,930
				2,070,390
Illinois 6.0%
Chicago Board of Education GO, Refunding, Series C, Assured Guaranty, 5.25%,
12/01/26		12,575,000		13,980,885
Chicago GO, Refunding, Series A, AGMC Insured, 5.00%,
1/01/28		29,885,000		33,100,327
1/01/29		13,345,000		14,694,180
1/01/30		6,200,000		6,795,696
Chicago O’Hare International Airport Revenue,
AGMC Insured, 5.25%, 1/01/35		26,635,000		29,018,832
Refunding, Series A, AGMC Insured, 5.00%, 1/01/28		24,915,000		26,921,405
Illinois Finance Authority Revenue,
Edward Hospital, Series A, AMBAC Insured, 5.50%, 2/01/40		4,000,000		4,201,000
Southern Illinois HealthCare, AGMC Insured, 5.375%, 3/01/35		8,500,000		9,142,005
Illinois Health Facilities Authority Revenue, Northwestern Medical Facility Foundation,
Refunding, NATL Insured, 5.125%, 11/15/28		5,000,000		5,002,450
Illinois State GO, Refunding, AGMC Insured, 5.00%, 1/01/23		10,000,000		11,090,400
Regional Transportation Authority Revenue, Series A, AMBAC Insured, 7.20%, 11/01/20		285,000		344,907
Saline Valley Conservancy District Waterworks Revenue, Saline Valley Conservancy District,
Refunding, Series A, AMBAC Insured, 5.00%, 1/01/41		7,000,000		7,367,430
St. Clair County School District No. 189 East St. Louis GO, Alternate Revenue Source,
Refunding, AMBAC Insured, 5.125%, 1/01/28		7,135,000		7,570,663
				169,230,180
Indiana 0.5%
Indiana Health and Educational Facility Finance Authority Revenue, St. Francis, Series E,
AGMC Insured, 5.25%, 5/15/41		3,750,000		3,951,037
Indianapolis Local Public Improvement Bond Bank Revenue, Waterworks Project, Series A,
Assured Guaranty, 5.50%, 1/01/38		8,650,000		9,558,769
				13,509,806
Kansas 0.6%
Overland Park Development Corp. Revenue, second tier, Overland Park Convention Center
Hotel, Refunding, Series B, AMBAC Insured, 5.125%, 1/01/32		20,000,000		17,857,400


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Kentucky 1.3%
Kentucky Economic Development Finance Authority Health System Revenue,
Norton Healthcare Inc.,
Refunding, Series C, NATL Insured, 6.05%, 10/01/20	$	8,505,000	$	9,001,692
Series C, NATL Insured, Pre-Refunded, 6.05%, 10/01/20		4,255,000		4,673,692
Series C, NATL Insured, Pre-Refunded, 6.15%, 10/01/26		12,195,000		13,414,012
Kentucky State Municipal Power Agency Power System Revenue, Prairie State Project,
Series A, NATL Insured, 5.00%, 9/01/37		10,000,000		10,368,700
				37,458,096
Louisiana 2.9%
Lafayette Public Trust Financing Authority Revenue, Ragin’ Cajun Facilities, Housing and
Package Project, Assured Guaranty,
5.00%, 10/01/25		5,500,000		6,119,190
5.50%, 10/01/41		15,000,000		16,323,600
Louisiana Local Government Environmental Facilities and CDA Revenue,
LCTCS Facilities Corp. Project, Series B, Assured Guaranty, 5.00%, 10/01/26		2,750,000		3,039,575
Parking Facilities Corp. Garage Project, Series A, AMBAC Insured, 5.375%, 10/01/31		5,480,000		5,480,164
Southeastern Louisiana University, Series A, AGMC Insured, 5.00%, 10/01/40		8,545,000		9,440,345
Louisiana State Citizens Property Insurance Corp. Assessment Revenue,
^aRefunding, AGMC Insured, 5.00%, 6/01/24		5,250,000		5,975,813
Series C-2, Assured Guaranty, 6.75%, 6/01/26		21,000,000		25,053,630
Louisiana State Gasoline and Fuels Tax Revenue, Series A, AMBAC Insured, 5.00%,
6/01/27		10,000,000		10,044,600
				81,476,917
Maine 1.0%
Maine Educational Loan Authority Student Loan Revenue, Series A-3, Assured Guaranty,
5.875%, 12/01/39		16,910,000		18,212,577
Maine State Health and Higher Educational Facilities Authority Revenue, Series C,
AGMC Insured, 6.20%, 7/01/25		100,000		100,278
Portland Airport Revenue, General, AGMC Insured,
5.25%, 1/01/35		3,000,000		3,237,030
5.00%, 1/01/40		6,000,000		6,353,760
				27,903,645
Maryland 1.1%
Baltimore Convention Center Hotel Revenue, Senior Series A, XLCA Insured, 5.00%,
9/01/32		10,000,000		9,205,500
Baltimore Project Revenue, Water Projects, Refunding, Series A, NATL RE, FGIC Insured,
5.125%, 7/01/42		11,000,000		11,103,290
Maryland State Health and Higher Educational Facilities Authority Revenue,
LifeBridge Health, Refunding, Assured Guaranty, 5.00%, 7/01/34		9,000,000		9,427,140
University of Maryland Medical System, Series B, NATL RE, FGIC Insured, 7.00%,
7/01/22		200,000		243,108
				29,979,038


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Massachusetts 2.8%
Massachusetts State Development Finance Agency Revenue, Worcester Polytechnic Institute,
NATL Insured, 5.00%, 9/01/47	$	25,050,000	$	26,023,193
Massachusetts State GO, Consolidated Loan, Series D, NATL Insured,
ETM, 5.00%, 8/01/27		3,535,000		3,604,180
Pre-Refunded, 5.00%, 8/01/27		855,000		871,732
Massachusetts State Health and Educational Facilities Authority Revenue,
CareGroup Issue, Refunding, Series A, NATL Insured, 5.00%, 7/01/25		2,810,000		2,813,681
CareGroup Issue, Series A, NATL Insured, Pre-Refunded, 5.00%, 7/01/25		750,000		910,598
Emmanuel College, NATL Insured, 5.00%, 7/01/37		21,685,000		21,784,100
Harvard Pilgrim Health, Series A, AGMC Insured, 5.00%, 7/01/18		3,000,000		3,004,500
Simmons College, Series C, NATL Insured, 5.125%, 10/01/28		4,260,000		4,261,661
Massachusetts State Water Resources Authority Revenue, Series J, AGMC Insured,
Pre-Refunded, 5.00%, 8/01/32		16,250,000		16,568,013
				79,841,658
Michigan 7.3%
Birmingham City School District GO, School Building and Site, AGMC Insured, 5.00%,
11/01/33		8,135,000		8,500,424
Central Michigan University Revenue, Series A, AMBAC Insured, 5.05%, 10/01/32		8,650,000		8,735,548
Detroit City School District GO, School Building and Site Improvement, Series A,
AGMC Insured, Pre-Refunded, 5.125%, 5/01/31		6,500,000		6,550,245
Detroit GO, Series A-1, NATL Insured, 5.00%, 4/01/21		12,390,000		11,044,446
Detroit Sewage Disposal System Revenue,
second lien, Series B, NATL Insured, 5.00%, 7/01/36		15,000,000		15,161,550
senior lien, Refunding, Series A, AGMC Insured, 5.00%, 7/01/32		2,905,000		2,940,005
senior lien, Series B, AGMC Insured, 7.50%, 7/01/33		6,000,000		7,480,860
Detroit Water Supply System Revenue,
second lien, Series B, AGMC Insured, 7.00%, 7/01/36		5,000,000		5,992,750
senior lien, Series A, AGMC Insured, 5.00%, 7/01/34		7,040,000		7,193,050
senior lien, Series A, NATL Insured, 5.00%, 7/01/34		10,150,000		10,228,053
Jackson County Hospital Finance Authority Revenue, W.A. Foote Memorial Hospital, Refunding,
Series C, Assured Guaranty, 5.00%, 6/01/26		15,000,000		16,597,500
Michigan State Building Authority Revenue, Refunding, Series IA,
AGMC Insured, 5.00%, 10/15/36		28,895,000		30,099,633
NATL RE, FGIC Insured, 5.00%, 10/15/36		10,000,000		10,416,900
Michigan State Hospital Finance Authority Revenue,
Hospital, Botsford Obligated Group, Refunding, Series A, NATL Insured, 5.25%,
2/15/22		2,000,000		2,000,960
Oakwood Obligated Group, Refunding, Series A, AGMC Insured, 5.00%, 8/15/31		10,000,000		10,008,600
Sparrow Obligated Group, Refunding, NATL Insured, 5.00%, 11/15/36		13,000,000		13,182,780
St. John’s Hospital, Refunding, Series A, AMBAC Insured, ETM, 6.00%, 5/15/13		1,105,000		1,126,746
Trinity Health Credit Group, Series A, 6.50%, 12/01/33		25,000,000		29,449,500
Michigan State Strategic Fund Limited Obligation Revenue, Detroit Edison Co. Pollution
Control Bonds Project, Refunding, Collateralized Series BB, AMBAC Insured, 7.00%,
5/01/21		250,000		326,953
Michigan State Strategic Fund Resources Recovery Limited Obligation Revenue, Detroit
Education Exempt Facilities, Refunding, Series D, XLCA Insured, 5.25%, 12/15/32		10,000,000		10,069,700
				207,106,203


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
Minnesota 0.6%
Minneapolis and St. Paul Metropolitan Airports Commission Airport Revenue, sub. bond,
Refunding, Series A, AMBAC Insured, 5.00%, 1/01/35	$	15,000,000	$	15,391,650
Minnesota Agricultural and Economic Development Board Revenue, Health Care System,
Refunding, Series A, NATL Insured, 5.75%, 11/15/26		180,000		180,257
Minnesota State HFAR, Rental Housing, Refunding, Series D, NATL Insured, 6.00%,
2/01/22		130,000		130,130
				15,702,037
Mississippi 0.4%
Harrison County Wastewater Management District Revenue, Wastewater Treatment Facilities,
Series A, FGIC Insured, ETM, 8.50%, 2/01/13		80,000		85,920
Mississippi Development Bank Special Obligation Revenue, Municipal Energy Agency,
Series A, XLCA Insured, 5.00%, 3/01/36		10,915,000		11,024,914
				11,110,834
Missouri 0.8%
Bi-State Development Agency Missouri-Illinois Metropolitan District Mass Transit Sales Tax
Revenue, Metrolink Cross County Extension, Assured Guaranty, 5.00%, 10/01/39		6,000,000		6,556,440
Missouri State Health and Educational Facilities Authority Health Facilities Revenue,
St. Luke’s Health System, Series B, AGMC Insured, 5.50%, 11/15/35		15,000,000		16,290,750
				22,847,190
Nebraska 0.1%
Lancaster County Hospital Authority Revenue, Bryan Memorial Hospital Project No. 1,
NATL Insured, ETM, 6.70%, 6/01/22		2,500,000		3,195,800
Nevada 1.1%
Clark County GO, Series A, AMBAC Insured, 6.50%, 6/01/17		250,000		308,765
Clark County Passenger Facility Charge Revenue, Las Vegas, McCarran International Airport,
Series A,
AGMC Insured, 5.25%, 7/01/42		5,000,000		5,271,600
Assured Guaranty, 5.25%, 7/01/39		20,000,000		21,318,000
Reno Hospital Revenue, Washoe Medical Center, Refunding, Series C, AGMC Insured,
5.375%, 6/01/39		5,000,000		5,280,400
				32,178,765
New Hampshire 0.2%
Manchester General Airport Revenue, General, Refunding, Series A, AGMC Insured, 5.125%,
1/01/30		6,000,000		6,537,480
New Jersey 1.8%
Essex County Improvement Authority Revenue, Garden State Cancer Center Project,
AMBAC Insured, 6.00%, 12/01/20		1,940,000		1,947,391
New Brunswick Parking Authority Revenue, Guaranteed Parking, Series A, NATL Insured,
5.00%, 9/01/34		1,500,000		1,510,215
New Jersey EDA Revenue,
Motor Vehicle Surcharge Revenue, Series A, NATL Insured, 5.00%, 7/01/29		3,450,000		3,722,860
Motor Vehicle Surcharge Revenue, Series A, NATL Insured, 5.00%, 7/01/34		21,250,000		22,748,975
Municipal Rehabilitation, Series A, AMBAC Insured, 5.00%, 4/01/28		4,000,000		4,103,800


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New Jersey (continued)
New Jersey State Transportation Trust Fund Authority Revenue, Transportation System,
Series A,
6.00%, 12/15/38	$	9,620,000	$	11,115,910
Pre-Refunded, 6.00%, 12/15/38		5,380,000		7,130,168
New Jersey State Turnpike Authority Turnpike Revenue,
Refunding, Series C, AMBAC Insured, 6.50%, 1/01/16		50,000		56,155
Series C, AMBAC Insured, ETM, 6.50%, 1/01/16		20,000		23,023
Series C, AMBAC Insured, Pre-Refunded, 6.50%, 1/01/16		175,000		201,455
				52,559,952
New York 6.3%
Hudson Yards Infrastructure Corp. Revenue, Series A, AGMC Insured, 5.00%, 2/15/47		16,475,000		17,361,026
MTA Revenue,
Series B, NATL Insured, 5.00%, 11/15/28		20,000,000		20,820,400
Transportation, Series A, AGMC Insured, 5.00%, 11/15/33		20,000,000		21,503,600
MTA Service Contract Revenue, Series B, NATL Insured, 5.00%, 1/01/31		7,000,000		7,091,560
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Refunding, Series AA, 5.00%, 6/15/44		21,550,000		23,590,138
Second Generation Resolution, Refunding, Series GG, 5.00%, 6/15/43		25,000,000		27,572,500
New York City Transitional Finance Authority Building Aid Revenue, Sub Series S1-A, 5.25%,
7/15/37		25,000,000		28,210,000
New York City Transitional Finance Authority Revenue,
Future Tax Secured, Series A, NATL RE, FGIC Insured, 5.125%, 8/01/33		14,590,000		15,175,059
Refunding, Series B, NATL Insured, 5.00%, 8/01/32		2,230,000		2,318,442
New York State Dormitory Authority Revenues,
State Supported Debt, Mental Health Services Facilities Improvement, Series B,
NATL Insured, 5.25%, 8/15/31		5,530,000		5,540,507
Vassar Brothers Hospital, AGMC Insured, 5.375%, 7/01/25		4,000,000		4,014,720
Triborough Bridge and Tunnel Authority Revenues, Refunding, NATL Insured, 5.00%,
11/15/32		5,000,000		5,138,000
				178,335,952
North Carolina 0.3%
Raleigh Combined Enterprise System Revenue, 5.00%, 3/01/40		7,915,000		9,020,251
North Dakota 1.2%
Cass County Health Facilities Revenue, Health Care, Essentia Obligation, Series D,
Assured Guaranty, 5.00%, 2/15/40		31,970,000		33,200,206
Ohio 2.7%
Akron Income Tax Revenue, Community Learning Centers, Series A, NATL RE, FGIC Insured,
5.00%, 12/01/33		5,000,000		5,171,400
Cleveland Airport System Revenue,
Refunding, Series A, AGMC Insured, 5.00%, 1/01/27		4,190,000		4,591,528
Refunding, Series A, AGMC Insured, 5.00%, 1/01/28		9,500,000		10,377,895
Series A, AGMC Insured, 5.00%, 1/01/31		13,780,000		13,818,997
Jefferson Area Local School District GO, School Facilities Construction and Improvement,
NATL RE, FGIC Insured, 5.00%, 12/01/31		4,085,000		4,279,814
Ohio State Higher Educational Facility Commission Revenue, Summa Health System,
2010 Project, Refunding, Assured Guaranty, 5.25%, 11/15/40		15,000,000		15,974,400


Franklin Insured Tax-Free Income Fund		Principal Amount		Value
Short Term Investments (continued)
Municipal Bonds (continued)
Colorado 0.5%
^bColorado Educational and Cultural Facilities Authority Revenue, National Jewish Federation
Bond Program, Series A-10, Daily VRDN and Put, 0.25%, 9/01/37	$	14,875,000	$	14,875,000
Florida 0.4%
^bFlorida State Municipal Power Agency Revenue, All-Requirements Power Supply Project,
Refunding, Series C, Daily VRDN and Put, 0.20%, 10/01/35		4,000,000		4,000,000
^bHillsborough County School Board COP, Master Lease Program, Series C, NATL Insured,
Daily VRDN and Put, 0.15%, 7/01/30		6,400,000		6,400,000
				10,400,000
Georgia 0.0%^†
^bAthens-Clarke County Unified Government Development Authority Revenue, University of
Georgia Athletic Assn. Project, Daily VRDN and Put, 0.24%, 8/01/33		1,100,000		1,100,000
Kentucky 0.3%
^bKentucky Economic Development Finance Authority Hospital Facilities Revenue, Baptist
Healthcare System, Refunding, Series B-2, Daily VRDN and Put, 0.10%, 8/15/38		7,700,000		7,700,000
Maryland 0.1%
^bMaryland State EDC, EDR, U.S. Pharmacopeial Convention Inc. Project, Refunding, Series B,
Daily VRDN and Put, 0.25%, 7/01/38		2,200,000		2,200,000
Massachusetts 1.0%
^bMassachusetts State Health and Educational Facilities Authority Revenue,
Stonehill College, Series K, Daily VRDN and Put, 0.20%, 7/01/37		9,090,000		9,090,000
Tufts University, Refunding, Series N-1, Daily VRDN and Put, 0.14%, 8/15/40		6,600,000		6,600,000
Tufts University, Refunding, Series N-2, Daily VRDN and Put, 0.12%, 8/15/34		13,300,000		13,300,000
				28,990,000
Missouri 0.8%
^bMissouri Development Finance Board Cultural Facilities Revenue, The Nelson Gallery
Foundation, Refunding, Series A, Daily VRDN and Put, 0.10%, 12/01/37		13,650,000		13,650,000
^bMissouri State Health and Educational Facilities Authority Educational Facilities Revenue,
St. Louis University,
Refunding, Series B-1, Daily VRDN and Put, 0.10%, 10/01/35		1,800,000		1,800,000
Series B, Daily VRDN and Put, 0.16%, 10/01/24		8,500,000		8,500,000
				23,950,000
New Hampshire 0.1%
^bNew Hampshire Health and Education Facilities Authority Revenue, Dartmouth College,
Refunding, Series A, Daily VRDN and Put, 0.14%, 6/01/31		1,600,000		1,600,000
New York 0.8%
^bNew York City GO, Refunding, Series J, Sub Series J-4, Daily VRDN and Put, 0.19%,
8/01/25		21,915,000		21,915,000
North Carolina 1.1%
^bCharlotte-Mecklenburg Hospital Authority Health Care System Revenue, Carolinas, Refunding,
Series B, Daily VRDN and Put, 0.08%, 1/15/38		31,000,000		31,000,000
Ohio 0.1%
^bCuyahoga County Revenue, Cleveland Clinic Health System Obligated Group, Series B,
Sub Series B-1, Daily VRDN and Put, 0.12%, 1/01/39		2,650,000		2,650,000

				Annual Report \| 161

See Abbreviations on page 206.

^†Rounds to less than 0.1% of net assets.
^aSecurity purchased on a when-issued basis. See Note 1(b).
^bVariable 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. The coupon rate shown represents the rate at period end.

162 | The accompanying notes are an integral part of these financial statements. | Annual Report

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dAmount rounds to less than $0.01 per share.
^eEffective September 1, 2008, the redemption fee was eliminated.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

Annual Report | The accompanying notes are an integral part of these financial statements. | 163

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dAmount rounds to less than $0.01 per share.
^eEffective September 1, 2008, the redemption fee was eliminated.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

164 | The accompanying notes are an integral part of these financial statements. | Annual Report

^aFor the year ended February 29.
^bFor the period July 1, 2009 (effective date) to February 28, 2010.
^cThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^dBased on average daily shares outstanding.
^eAmount rounds to less than $0.01 per share.
^fTotal return is not annualized for periods less than one year.
^gRatios are annualized for periods less than one year.

Annual Report | The accompanying notes are an integral part of these financial statements. | 165


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012


Franklin Massachusetts Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds 98.5%
Massachusetts 97.1%
Auburn GO, AMBAC Insured, 5.125%, 6/01/24	$	1,465,000	$	1,593,319
Boston Convention Center Act of 1997 Revenue, Special Obligation, Series A, AMBAC Insured,
Pre-Refunded, 5.00%, 5/01/27		3,970,000		3,999,934
Dudley-Charlton Regional School District GO, Series B, NATL RE, FGIC Insured, 5.25%,
5/01/19		3,140,000		3,761,594
Holyoke Gas and Electric Department Revenue, Series A, NATL Insured, 5.00%, 12/01/26		9,805,000		9,885,793
Martha’s Vineyard Land Bank Revenue, AMBAC Insured,
4.875%, 5/01/22		2,000,000		2,056,480
5.00%, 5/01/34		7,000,000		7,193,830
Massachusetts Bay Transportation Authority Revenue, General Transportation System, Series C,
NATL RE, FGIC Insured, 5.25%, 3/01/15		2,000,000		2,282,760
Massachusetts Bay Transportation Authority Sales Tax Revenue, senior bond, Series A,
FGIC Insured, Pre-Refunded, 5.00%, 7/01/27		5,000,000		5,078,550
Massachusetts Educational Financing Authority Education Loan Revenue,
Issue I, Refunding, Series A, 5.50%, 1/01/22		3,000,000		3,471,750
Series I, 6.00%, 1/01/28		10,305,000		11,647,432
Massachusetts State College Building Authority Project Revenue,
Refunding, Series B, XLCA Insured, 5.50%, 5/01/39		5,000,000		6,668,750
Series A, Assured Guaranty, 5.00%, 5/01/33		10,000,000		11,151,800
Series A, XLCA Insured, Pre-Refunded, 5.00%, 5/01/43		2,000,000		2,110,500
Series B, 5.00%, 5/01/40		4,625,000		5,099,525
Massachusetts State Department of Transportation Metropolitan Highway System Revenue,
Contract Assistance, Series B, 5.00%, 1/01/35		10,000,000		11,097,600
Massachusetts State Development Finance Agency Revenue,
Boston University, Series T-1, AMBAC Insured, 5.00%, 10/01/35		3,600,000		3,724,668
Boston University, Series T-1, AMBAC Insured, 5.00%, 10/01/39		18,630,000		19,206,412
Brandeis University, Series N, 5.00%, 10/01/39		5,000,000		5,250,950
Broad Institute, Series A, 5.375%, 4/01/41		15,000,000		16,223,700
Massachusetts College of Pharmacy and Allied Health Sciences, Series E, Assured Guaranty,
5.00%, 7/01/31		5,000,000		5,311,150
Massachusetts College of Pharmacy and Allied Health Sciences, Series E, Assured Guaranty,
5.00%, 7/01/37		5,035,000		5,264,143
Massachusetts/Saltonstall Redevelopment Building Corp., Series A, NATL Insured, 5.125%,
2/01/34		22,400,000		22,399,776
Partners Healthcare, Refunding, Series L, 5.00%, 7/01/41		5,000,000		5,454,750
Series P, NATL Insured, 4.75%, 7/01/42		11,000,000		11,601,810
Sterling and Francine Clark Art Institute, 5.00%, 7/01/41		12,900,000		14,243,535
Western New England College, Refunding, Series A, Assured Guaranty, 5.00%, 9/01/33		12,200,000		12,629,684
WGBH Educational Foundation, Refunding, Series A, Assured Guaranty, 5.00%, 1/01/36		15,945,000		16,813,365
Worcester Polytechnic Institute, Refunding, NATL Insured, 5.00%, 9/01/37		12,850,000		13,496,997
Massachusetts State GO,
Consolidated Loan, Series A, AGMC Insured, Pre-Refunded, 5.00%, 3/01/24		5,000,000		5,679,450
Consolidated Loan, Series C, AMBAC Insured, 5.00%, 8/01/37		10,000,000		10,928,200
Consolidated Loan, Series C, FGIC Insured, Pre-Refunded, 5.25%, 11/01/30		6,205,000		6,411,440
Consolidated Loan, Series D, NATL Insured, ETM, 5.00%, 8/01/27		3,430,000		3,497,125
Consolidated Loan, Series D, NATL Insured, Pre-Refunded, 5.00%, 8/01/27		965,000		983,885
NATL Insured, Pre-Refunded, 5.00%, 8/01/22		4,100,000		4,180,237
Refunding, Series A, AMBAC Insured, 5.50%, 8/01/30		15,340,000		20,702,250
Series C, FGIC Insured, Pre-Refunded, 5.25%, 11/01/30		3,440,000		3,554,449

166 \| Annual Report

168 | The accompanying notes are an integral part of these financial statements. | Annual Report

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dAmount rounds to less than $0.01 per share.
^eEffective September 1, 2008, the redemption fee was eliminated.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

Annual Report | The accompanying notes are an integral part of these financial statements. | 169

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dAmount rounds to less than $0.01 per share.
^eEffective September 1, 2008, the redemption fee was eliminated.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

170 | The accompanying notes are an integral part of these financial statements. | Annual Report

^aFor the year ended February 29.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dAmount rounds to less than $0.01 per share.
^eEffective September 1, 2008, the redemption fee was eliminated.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

Annual Report | The accompanying notes are an integral part of these financial statements. | 171

^aFor the year ended February 29.
^bFor the period July 1, 2008 (effective date) to February 28, 2009.
^cThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^dBased on average daily shares outstanding.
^eAmount rounds to less than $0.01 per share.
^fEffective September 1, 2008, the redemption fee was eliminated.
^gTotal return is not annualized for periods less than one year.
^hRatios are annualized for periods less than one year.

172 | The accompanying notes are an integral part of these financial statements. | Annual Report


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin New Jersey Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New Jersey (continued)
New Jersey Health Care Facilities Financing Authority Revenue, (continued)
South Jersey Hospital, 5.00%, 7/01/36	$	10,000,000	$	10,237,200
South Jersey Hospital, 5.00%, 7/01/46		27,200,000		27,769,840
South Jersey Hospital, Pre-Refunded, 5.875%, 7/01/21		10,000,000		10,183,700
South Jersey Hospital, Pre-Refunded, 6.00%, 7/01/32		18,600,000		18,949,122
St. Barnabas Health Care System, Series A, 5.00%, 7/01/29		7,000,000		7,142,660
St. Mary’s Hospital, ETM, 5.875%, 7/01/12		545,000		554,919
St. Peters University Hospital, Refunding, 6.00%, 7/01/26		1,000,000		1,092,400
St. Peters University Hospital, Refunding, 6.25%, 7/01/35		3,400,000		3,666,016
Virtua Health, Assured Guaranty, 5.50%, 7/01/38		10,000,000		10,890,400
New Jersey Health Care Facilities Financing Authority State Contract Revenue, Hospital Asset
Transformation Program, Series A,
5.75%, 10/01/31		10,000,000		11,279,400
5.25%, 10/01/38		15,000,000		16,073,850
New Jersey State COP, Equipment Lease Purchase, Series A, 5.25%, 6/15/29		1,000,000		1,100,730
New Jersey State Educational Facilities Authority Revenue,
College of New Jersey, Refunding, Series D, AGMC Insured, 5.00%, 7/01/28		5,940,000		6,568,808
College of New Jersey, Refunding, Series D, AGMC Insured, 5.00%, 7/01/35		11,000,000		11,824,670
Kean University, Refunding, Series A, 5.50%, 9/01/36		6,500,000		7,072,975
Kean University, Series B, NATL Insured, Pre-Refunded, 5.00%, 7/01/30		5,240,000		6,212,334
Kean University, Series D, AGMC Insured, 5.00%, 7/01/39		1,000,000		1,053,830
Kean University, Series D, FGIC Insured, Pre-Refunded, 5.00%, 7/01/33		10,000,000		10,599,100
Kean University, Series D, NATL RE, FGIC Insured, 5.00%, 7/01/39		4,695,000		4,924,679
Montclair State University, Refunding, Series A, AMBAC Insured, 5.00%, 7/01/31		10,000,000		10,473,600
Montclair State University, Refunding, Series A, AMBAC Insured, 5.00%, 7/01/36		20,000,000		20,882,400
Montclair State University, Series J, 5.25%, 7/01/38		2,000,000		2,130,280
Princeton University, Refunding, Series A, 5.00%, 7/01/30		5,000,000		5,434,250
Princeton University, Refunding, Series E, 5.00%, 7/01/33		5,000,000		5,574,250
Princeton University, Series B, 5.00%, 7/01/39		15,000,000		17,396,850
Princeton University, Series D, Pre-Refunded, 5.00%, 7/01/29		1,000,000		1,108,930
Ramapo College of New Jersey, Series D, NATL Insured, Pre-Refunded, 5.00%, 7/01/36		6,745,000		7,996,602
Refunding, Series D, 5.00%, 7/01/27		1,325,000		1,380,147
Refunding, Series D, 5.00%, 7/01/33		1,000,000		1,019,570
Richard Stockton College, Refunding, Series A, 5.375%, 7/01/38		5,000,000		5,468,000
Richard Stockton College, Refunding, Series F, AMBAC Insured, 5.00%, 7/01/28		2,370,000		2,499,497
Rowan University, Refunding, Series D, AMBAC Insured, 5.00%, 7/01/24		1,755,000		1,888,169
Seton Hall University, Refunding, Series E, 6.25%, 7/01/37		5,000,000		5,800,550
Stevens Institute of Technology, Refunding, Series A, 5.00%, 7/01/34		4,750,000		4,851,982
Stevens Institute of Technology, Refunding, Series I, 5.00%, 7/01/18		590,000		590,956
Stevens Institute of Technology, Refunding, Series I, 5.00%, 7/01/28		865,000		865,528
Stevens Institute of Technology, Series I, ETM, 5.00%, 7/01/18		510,000		551,754
Stevens Institute of Technology, Series I, ETM, 5.00%, 7/01/28		710,000		812,410
William Paterson University, Series C, Assured Guaranty, 5.00%, 7/01/38		5,500,000		5,797,990
New Jersey State Higher Education Assistance Authority Student Loan Revenue,
Refunding, Series 1, 5.875%, 12/01/33		2,140,000		2,272,616
Refunding, Series 1A, 5.00%, 12/01/25		4,150,000		4,512,876


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin New Jersey Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New Jersey (continued)
New Jersey State Higher Education Assistance Authority Student Loan Revenue, (continued)
Refunding, Series 1A, 5.00%, 12/01/26	$	2,000,000	$	2,160,880
Refunding, Series 1A, 5.125%, 12/01/27		5,000,000		5,405,450
Refunding, Series 1A, 5.25%, 12/01/28		5,000,000		5,426,000
Series 2, 5.00%, 12/01/26		4,125,000		4,458,052
Series 2, 5.00%, 12/01/27		3,000,000		3,219,240
Series 2, 5.00%, 12/01/28		2,955,000		3,157,447
Series 2, 5.00%, 12/01/30		1,500,000		1,583,550
Series 2, 5.00%, 12/01/36		1,000,000		1,035,730
Series A, 5.625%, 6/01/30		14,500,000		15,843,425
Series A, Assured Guaranty, 6.125%, 6/01/30		10,000,000		10,857,600
New Jersey State Housing and Mortgage Finance Agency MFHR,
Series A1, AGMC Insured, 6.35%, 11/01/31		2,000,000		2,002,140
Series B, AGMC Insured, 6.25%, 11/01/26		970,000		971,242
Series D, AGMC Insured, 5.50%, 5/01/22		630,000		630,000
Series E1, AGMC Insured, 5.70%, 5/01/20		2,405,000		2,407,982
Series E1, AGMC Insured, 5.75%, 5/01/25		1,090,000		1,091,123
Series I, 5.75%, 11/01/38		2,680,000		2,809,176
New Jersey State Housing and Mortgage Finance Agency Revenue, Series AA, 6.50%,
10/01/38		5,555,000		5,864,580
New Jersey State Transportation Trust Fund Authority Revenue,
Capital Appreciation, Transportation System, Series A, zero cpn., 12/15/29		5,000,000		2,151,550
Capital Appreciation, Transportation System, Series C, AGMC Insured, zero cpn.,
12/15/33		10,000,000		3,462,400
Transportation System, Refunding, Series B, AMBAC Insured, 5.25%, 12/15/23		5,000,000		6,125,750
Transportation System, Series A, 6.00%, 12/15/38		16,110,000		18,615,105
Transportation System, Series A, 5.50%, 6/15/41		5,000,000		5,756,150
Transportation System, Series A, AGMC Insured, 5.00%, 12/15/34		15,000,000		16,158,900
Transportation System, Series A, AMBAC Insured, 5.00%, 12/15/34		10,000,000		10,750,900
Transportation System, Series A, Pre-Refunded, 6.00%, 12/15/38		8,890,000		11,782,006
Transportation System, Series A, zero cpn., 12/15/32		10,000,000		3,627,800
Transportation System, Series B, 5.00%, 6/15/42		5,000,000		5,457,000
New Jersey State Turnpike Authority Turnpike Revenue,
Growth and Income Securities, Series B, AMBAC Insured, zero cpn. to 1/01/15,
5.15% thereafter, 1/01/35		7,500,000		6,777,600
Refunding, Series I, 5.00%, 1/01/35		5,000,000		5,537,950
Series A, AMBAC Insured, 5.00%, 1/01/30		13,500,000		14,072,535
Series E, 5.25%, 1/01/40		25,000,000		27,955,000
Series H, 5.00%, 1/01/36		14,000,000		15,308,440
Newark Housing Authority Port Authority Revenue, Newark Marine Terminal, NATL Insured,
Pre-Refunded,
5.00%, 1/01/26		3,245,000		3,521,312
5.50%, 1/01/27		3,240,000		3,545,305
5.50%, 1/01/28		2,000,000		2,188,460
5.00%, 1/01/34		15,000,000		16,277,250


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin New Jersey Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
New Jersey (continued)
North Hudson Sewer Authority Sewer Revenue, Series C, NATL Insured, 5.00%,
8/01/22	$	1,000,000	$	1,002,070
8/01/31		1,000,000		1,001,190
Passaic County Improvement Authority Parking Facilities Revenue, 200 Hospital Plaza Corp.
Project, 5.00%, 5/01/42		3,200,000		3,495,136
Rutgers State University Revenue, Series F, 5.00%, 5/01/39		20,000,000		21,883,600
Salem County PCFA, PCR, Atlantic City Electric, Refunding, Series A, 4.875%, 6/01/29		5,000,000		5,495,000
South Jersey Transportation Authority Transportation System Revenue, AMBAC Insured, 5.00%,
11/01/29		12,000,000		12,011,640
Sussex County Municipal Utilities Authority Wastewater Facilities Revenue,
Capital Appreciation, Series B, AGMC Insured, zero cpn.,
12/01/35		2,815,000		965,235
12/01/36		2,810,000		888,241
12/01/37		2,815,000		838,729
12/01/38		2,810,000		788,093
Tobacco Settlement FICO Revenue, Asset-Backed, Pre-Refunded, 6.00%, 6/01/37		13,000,000		13,180,960
University of Medicine and Dentistry COP,
AMBAC Insured, 5.00%, 4/15/32		2,000,000		2,016,240
NATL Insured, 5.00%, 6/15/36		12,500,000		12,668,125
Series A, NATL Insured, 5.00%, 9/01/22		1,700,000		1,745,254
University of Medicine and Dentistry Revenue, Series A, AMBAC Insured, 5.00%,
12/01/24		2,500,000		2,527,725
12/01/31		28,395,000		28,548,617
Upper Freehold Regional School District GO, NATL Insured, Pre-Refunded, 5.00%,
2/15/35		8,730,000		10,560,594
				1,036,275,366
New York 8.3%
Port Authority of New York and New Jersey Revenue, Consolidated,
One Hundred Fifty-Third Series, Refunding, 5.00%, 7/15/38		8,850,000		9,658,801
One Hundred Forty-Eighth Series, AGMC Insured, 5.00%, 8/15/34		10,000,000		10,934,500
One Hundred Forty-Eighth Series, AGMC Insured, 5.00%, 8/15/37		5,000,000		5,399,650
One Hundred Forty-Fourth Series, 5.00%, 10/01/29		5,000,000		5,635,900
One Hundred Forty-Ninth Series, 5.00%, 11/15/31		10,000,000		11,116,800
One Hundred Seventy-First Series, 4.50%, 7/15/36		20,000,000		21,516,600
One Hundred Sixtieth Series, Refunding, 5.00%, 9/15/36		15,000,000		16,708,500
One Hundred Sixty-First Series, 5.00%, 10/15/33		10,000,000		11,257,400
One Hundred Sixty-Sixth Series, Refunding, 5.25%, 7/15/36		5,000,000		5,751,900
One Hundred Twenty-Fifth Series, AGMC Insured, 5.00%, 4/15/32		23,950,000		24,292,485
Port Authority of New York and New Jersey Special Obligation Revenue, John F. Kennedy
International Airport Terminal, NATL Insured, 5.75%, 12/01/22		8,000,000		8,046,880
				130,319,416
Pennsylvania 1.3%
Delaware River Joint Toll Bridge Commission Bridge Revenue, Series A, NATL Insured, 5.00%,
7/01/35		5,000,000		5,296,300
Delaware River Port Authority Revenue, Series E, 5.00%, 1/01/35		14,000,000		14,980,140
				20,276,440


Franklin Tax-Free Trust

Statement of Investments, February 29, 2012 (continued)


Franklin New Jersey Tax-Free Income Fund		Principal Amount		Value
Municipal Bonds (continued)
U.S. Territories 20.5%
Puerto Rico 20.2%
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, senior lien, Series A,
6.00%, 7/01/44	$	4,100,000	$	4,418,488
Puerto Rico Commonwealth GO, Public Improvement,
Refunding, AGMC Insured, 5.125%, 7/01/30		8,350,000		8,357,014
Refunding, Series A-4, AGMC Insured, 5.00%, 7/01/31		5,000,000		5,383,400
Series A, 5.00%, 7/01/29		10,000,000		10,199,100
Series B, 5.00%, 7/01/35		1,825,000		1,867,559
Series B, Pre-Refunded, 5.00%, 7/01/35		3,175,000		3,776,123
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue,
Refunding, Series CC, AGMC Insured, 5.25%, 7/01/34		5,000,000		5,716,000
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Refunding, Series N, NATL Insured, 5.25%, 7/01/32		10,000,000		10,810,200
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue,
5.00%, 7/01/46		14,200,000		14,391,700
Series B, 5.00%, 7/01/37		8,000,000		8,148,720
Puerto Rico Electric Power Authority Power Revenue,
Series RR, FGIC Insured, Pre-Refunded, 5.00%, 7/01/35		30,000,000		34,452,900
Series TT, 5.00%, 7/01/32		17,000,000		17,658,070
Series TT, 5.00%, 7/01/37		17,925,000		18,403,598
Series WW, 5.50%, 7/01/38		16,620,000		17,817,305
Series XX, 5.25%, 7/01/40		19,000,000		19,898,130
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Financing Authority Educational Facilities Revenue, University Plaza Project, Series A,
NATL Insured, 5.00%, 7/01/33		1,000,000		1,001,010
Puerto Rico Infrastructure Financing Authority Revenue, Ports Authority Project, Series B,
5.25%, 12/15/26		11,250,000		12,076,425
Puerto Rico PBA Guaranteed Revenue, Government Facilities, Refunding,
Series D, 5.375%, 7/01/33		6,830,000		6,861,486
Series N, 5.00%, 7/01/32		20,000,000		20,629,600
Puerto Rico Sales Tax FICO Sales Tax Revenue,
first sub., Series A, 5.75%, 8/01/37		10,000,000		11,111,700
first sub., Series A, 5.50%, 8/01/42		17,000,000		18,556,520
first sub., Series A, 6.00%, 8/01/42		32,000,000		36,219,200
first sub., Series C, 5.50%, 8/01/40		20,000,000		21,898,600
Series C, 5.25%, 8/01/40		6,290,000		6,979,132
				316,631,980
U.S. Virgin Islands 0.3%
Virgin Islands PFAR, Gross Receipts Taxes Loan Note, Radian Insured, 5.00%, 10/01/33		5,000,000		5,085,450
Total U.S. Territories				321,717,430
Total Municipal Bonds before Short Term Investments
(Cost $1,420,943,031)				1,518,781,452

Annual Report | The accompanying notes are an integral part of these financial statements. | 179

180 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 181

182 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 183

184 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 185

186 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 187

188 | The accompanying notes are an integral part of these financial statements. | Annual Report

Annual Report | The accompanying notes are an integral part of these financial statements. | 189

Franklin Tax-Free Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of twenty-four separate funds, seven of which are included in this report (Funds). The financial statements of the remaining funds in the Trust are presented separately. The classes of shares offered within each of the Funds are indicated below. Each class of shares differs by its initial sales load, contingent deferred sales charges, distribution fees, voting rights on matters affecting a single class and its exchange privilege.

Franklin High Yield Tax-Free Income Fund Franklin Insured Tax-Free Income Fund Franklin New Jersey Tax-Free Income Fund

The Funds’ investments in securities and other financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Trust’s Board of Trustees, the Funds may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

The Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Funds

may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

The Funds purchase securities on a when-issued basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of February 29, 2012, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

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. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividends from net investment income are normally declared daily; these dividends may be reinvested or paid monthly to shareholders. Distributions from realized capital gains and other distributions, if any, are recorded on the ex-dividend date. Distributions to shareholders are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

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 of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

The scheduled payments of interest and principal for each insured municipal security in the Trust are insured by either a new issue insurance policy or a secondary insurance policy. Some municipal securities in the Funds are secured 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 or paid by a third party.

Insurance companies typically insure municipal bonds that tend to be of very high quality, with the majority of underlying municipal bonds rated A or better. However, an event involving an insurer could have an adverse effect on the value of the securities insured by that insurance company. There is no guarantee the insurer will be able to fulfill its obligations under the terms of the policy.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those estimates.

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

At February 29, 2012, there were an unlimited number of shares authorized (without par value).


Franklin Tax-Free Trust

Notes to Financial Statements (continued)


2. SHARES OF BENEFICIAL INTEREST (continued)

	Franklin Federal					Franklin
	Limited-Term					High Yield
	Tax-Free Income Fund					Tax-Free Income Fund
	Shares			Amount		Shares			Amount
Class A Shares:
Year ended February 29, 2012
Shares sold	28,326,395		$	296,353,591		92,336,308		$	933,780,298
Shares issued in reinvestment of
distributions	897,139			9,395,591		21,362,568			214,852,825
Shares redeemed	(27,140,809	)		(283,988,970	)	(93,280,641	)		(929,388,455	)
Net increase (decrease)	2,082,725		$	21,760,212		20,418,235		$	219,244,668
Year ended February 28, 2011
Shares sold	47,804,572		$	494,798,400		97,296,734		$	977,100,810
Shares issued in reinvestment of
distributions	685,744			7,097,403		19,020,088			189,973,012
Shares redeemed	(23,004,978	)		(237,602,249	)	(129,935,472	)		(1,282,312,373	)
Net increase (decrease)	25,485,338		$	264,293,554		(13,618,650	)	$	(115,238,551	)
Class B Shares:
Year ended February 29, 2012
Shares sold						34,691		$	352,807
Shares issued in reinvestment of
distributions						83,368			838,614
Shares redeemed						(2,301,875	)		(23,190,631	)
Net increase (decrease)						(2,183,816	)	$	(21,999,210	)
Year ended February 28, 2011
Shares sold						87,916		$	890,508
Shares issued in reinvestment of
distributions						150,334			1,518,140
Shares redeemed						(3,614,227	)		(36,439,830	)
Net increase (decrease)						(3,375,977	)	$	(34,031,182	)
Class C Shares:
Year ended February 29, 2012
Shares sold						23,666,251		$	243,439,127
Shares issued in reinvestment of
distributions						3,774,959			38,501,123
Shares redeemed						(16,446,490	)		(166,463,889	)
Net increase (decrease)						10,994,720		$	115,476,361
Year ended February 28, 2011
Shares sold						25,557,425		$	261,096,346
Shares issued in reinvestment of
distributions						3,262,596			33,020,628
Shares redeemed						(25,514,255	)		(254,166,873	)
Net increase (decrease)						3,305,766		$	39,950,101


Franklin Tax-Free Trust

Notes to Financial Statements (continued)


2. SHARES OF BENEFICIAL INTEREST (continued)

	Franklin New Jersey
	Tax-Free Income Fund
	Shares			Amount
Class B Shares:
Year ended February 29, 2012
Shares sold	11,216		$	133,608
Shares issued in reinvestment of distributions	26,178			313,723
Shares redeemed	(836,805	)		(10,026,101	)
Net increase (decrease)	(799,411	)	$	(9,578,770	)
Year ended February 28, 2011
Shares sold	9,060		$	109,359
Shares issued in reinvestment of distributions	57,866			698,723
Shares redeemed	(1,658,524	)		(20,055,744	)
Net increase (decrease)	(1,591,598	)	$	(19,247,662	)
Class C Shares:
Year ended February 29, 2012
Shares sold	3,492,449		$	42,727,315
Shares issued in reinvestment of distributions	662,955			8,029,107
Shares redeemed	(4,644,452	)		(55,621,713	)
Net increase (decrease)	(489,048	)	$	(4,865,291	)
Year ended February 28, 2011
Shares sold	6,003,031		$	73,210,281
Shares issued in reinvestment of distributions	674,149			8,133,129
Shares redeemed	(7,012,230	)		(83,065,636	)
Net increase (decrease)	(335,050	)	$	(1,722,226	)
Advisor Class Shares:
Year ended February 29, 2012
Shares sold	3,794,589		$	45,048,650
Shares issued in reinvestment of distributions	94,087			1,137,776
Shares redeemed	(1,011,249	)		(12,153,524	)
Net increase (decrease)	2,877,427		$	34,032,902
Year ended February 28, 2011
Shares sold	1,889,953		$	22,850,704
Shares issued in reinvestment of distributions	11,993			139,920
Shares redeemed	(843,475	)		(9,915,616	)
Net increase (decrease)	1,058,471		$	13,075,008

The Trust’s Board of Trustees has adopted distribution plans for each share class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods.

In addition, under the funds’ Class B and C compensation distribution plans, the funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised

the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:

For the year ended February 29, 2012, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:

FT Services and Advisers have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Franklin Federal Limited-Term Tax-Free Income Fund so that the common expenses (i.e. a combination of management fees, administrative fees, and other expenses, but excluding distribution fees, and acquired fund fees and expenses) for each class of the Fund do not exceed 0.45% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until June 30, 2012. Prior to July 1, 2011, common expenses were limited to 0.35%.

For tax purposes, capital losses may be carried over to offset future capital gains, if any. Under the Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Funds in taxable years beginning after December 22, 2010 are not subject to expiration and such losses retain their character as either short-term or long-term, rather than being considered short-term as under previous law. Post-enactment capital losses must be fully utilized prior to utilizing any losses incurred in pre-enactment tax years.

At February 29, 2012, the cost of investments, net unrealized appreciation (depreciation), and undistributed tax exempt and ordinary income for income tax purposes were as follows:

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, bond discounts, and wash sales.

Purchases and sales of investments (excluding short term securities) for the year ended February 29, 2012, were as follows:

At February 29, 2012, the Franklin High Yield Tax-Free Income Fund had 19.40% of its portfolio invested in high yield or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Franklin High Yield Tax-Free Income Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At February 29, 2012, the aggregate value of these securities was $75,492,950, representing 0.88% of the fund’s net assets. The fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified on the accompanying Statement of Investments.

The Franklin Double Tax-Free Income Fund, Franklin Massachusetts Tax-Free Income Fund and Franklin New Jersey Tax-Free Income Fund invest a large percentage of their total assets in obligations of issuers within their respective state and U.S. territories. Such concentration may subject the funds to risks associated with industrial or regional matters, and economic, political or legal developments occurring within those states and U.S. territories. In addition, investments in these securities are sensitive to interest rate changes and credit risk of the issuer and may subject the funds to increased market volatility. The market for these investments may be limited, which may make them difficult to buy or sell.

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which matures on January 18, 2013. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statements of Operations. During the year ended February 29, 2012, the Funds did not use the Global Credit Facility.

The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ investments and are summarized in the following fair value hierarchy:

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

At February 29, 2012, all of the Funds’ investments in securities carried at fair value were valued using Level 2 inputs.

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The

amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Funds believe the adoption of this ASU will not have a material impact on their financial statements.

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Federal Limited-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Tax-Free Income Fund and Franklin New Jersey Tax-Free Income Fund (separate portfolios of Franklin Tax-Free Trust, hereafter referred to as the “Funds”) at February 29, 2012, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

Under Section 852(b)(5)(A) of the Internal Revenue Code (Code), the Funds hereby report 100% of the distributions paid from net investment income as exempt-interest dividends for the fiscal year ended February 29, 2012. A portion of the Funds’ exempt-interest dividends may be subject to the federal alternative minimum tax. By mid-February 2013, shareholders will be notified of amounts for use in preparing their 2012 income tax returns.

Under Section 852(b)(3)(C) of the Code, the Franklin Massachusetts Tax-Free Income Fund hereby reports the maximum amount allowable but no less than $28,553 as a long term capital gain dividend for the fiscal year ended February 29, 2012.

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Fund, principal occupations during at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

At a meeting held February 28, 2012, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the separate tax-exempt funds within the Trust (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for each Fund, as well as periodic reports on expenses, shareholder services, legal and compliance matters, pricing, and other services provided by the Investment Manager (Manager) and its affiliates. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the Franklin Templeton Investments organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager.

In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.

NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Funds and their shareholders. In addition to investment performance and expenses discussed later, the Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for each Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders

from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continuous efforts and expenditures in establishing back-up systems and recovery procedures to function in the event of a natural disaster, it being noted that such systems and procedures had functioned smoothly during the Florida hurricanes and blackouts experienced in previous years. Consideration was also given to the experience of each Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager and the continuous enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continuous monitoring of counterparty credit risk and attention given to derivatives and other complex instruments. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Funds and other accounts managed by Franklin Templeton Investments to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its subsidization of money market funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of each Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewals. The Lipper reports prepared for each individual Fund showed its investment performance or that of its Class A shares for a Fund having multiple share classes in comparison to a performance universe selected by Lipper. Comparative performance for each Fund was shown for the one-year period ended December 31, 2011, and for additional periods ended that date up to 10 years depending on when a particular Fund commenced operations. Investment performance was shown on an income return basis, as well as a total return basis for each Fund. Except as mentioned below, the Lipper reports showed both the income and total return of each Fund to be above the median of its Lipper performance universe during 2011, with most being in the highest or second-highest performing quintile of such universe during such year, as well as for most of the applicable previous three-, five- and 10-year periods on an annualized basis. The Board was satisfied with the relative performance of these Funds as shown in the Lipper report. The Lipper report showed the income return for Franklin High Yield Tax-Free Income Fund to be below the median of its Lipper performance universe for 2011 and for the previous three-year period on an annualized

basis, but to be above the median and in the second-highest performing quintile of such universe during the previous five- and 10-year periods, respectively, on an annualized basis. The Lipper report showed the total return of Franklin High Yield Tax-Free Income Fund during 2011 to be in the highest performing quintile of its performance universe, and on an annualized basis to also be in the highest performing quintile during the previous five- and 10-year periods and above the median of such universe for the previous three-year period. The Board believed the overall performance of this Fund to be acceptable, noting that its income return during 2011 and the previous three-year annualized period were in each case within 13 basis points of the performance universe median.

COMPARATIVE EXPENSES. Consideration was given to the management fee and total expense ratios of each Fund in comparison with those of a group of funds selected by Lipper as its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on each Fund’s contractual investment management fee in comparison with the contractual investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expenses of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes an administrative charge as being part of the investment management fee, and total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares for Funds having multiple share classes. The Lipper reports showed that the contractual investment management fee rates for each Fund were at or below the median of their respective Lipper expense groups, with the exception of Franklin New Jersey Tax-Free Income Fund and Franklin Federal Intermediate-Term Tax-Free Income Fund, whose fee rates in each case were within one-and-a-half basis points of their respective expense group medians. The contractual investment management fee rate for Franklin Federal Limited-Term Tax-Free Income Fund was also above its Lipper expense group median, but its actual management fee rate paid was below its expense group median as a result of fee waivers. The Lipper reports further showed that the actual total expense ratios for all Funds were in the least expensive quintiles of their respective Lipper expense groups, except for Franklin Intermediate-Term Tax-Free Income Fund whose total expense ratio was in the second least expensive quintile of its Lipper expense group. Based on the above, the Board was satisfied with the investment management fee and total expense ratios of each Fund in comparison to its Lipper expense group as shown in the Lipper reports.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2011, being the

most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, attention was given to the methodology followed in allocating costs to each Fund, it being recognized that allocation methodologies are inherently subjective and various allocation methodologies may each be reasonable while producing different results. In this respect, the Board noted that while being continuously refined and reflecting changes in the Manager’s own cost accounting, such allocation methodology was consistent with that followed in profitability report presentations for the Funds made in prior years and that the Funds’ independent registered public accounting firm had been engaged by the Manager to review the reasonableness of the allocation methodologies solely for use by the Funds’ Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Funds grow larger and the extent to which this is reflected in the level of management fees charged. While recognizing any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some Funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such Fund. The Board also noted that any economies of scale are shared with each of these Funds and their shareholders through management fee breakpoints existing in each of the Funds’ investment management agreements, so that as a Fund grows in size, its effective management fee rate declines. The fee structure under the investment management agreement with Franklin Federal Limited-Term Tax-Free Income Fund provides an initial fee of 0.70% on the first $100 million of assets, 0.65% on the next $150 million of assets, 0.625% on the next $250 million of assets, and 0.60% on assets in excess of $500 million. While the assets of such Fund at December 31, 2011, amounted to $743 million, its expenses continued to be subsidized through management fee waivers. The fee structure under the investment management agreement with each other Fund provides an initial fee of 0.625% on the first $100 million of assets, 0.5% on the next $150 million of assets, 0.45% on assets in excess of $250 million, with

additional breakpoints beginning at 0.44% on assets in excess of $7.5 billion, 0.43% on assets in excess of $10 billion and continuing thereafter until reaching a final breakpoint of 0.36% on assets in excess of $20 billion. In reviewing such structure, management stated its belief that this fee structure reaches a relatively low rate quickly as a Fund grows and that such low rate, in effect, reflects anticipated economies of scale as a Fund’s assets increase. In support of such position, management pointed out the favorable effective management fee and total expense comparisons for each Fund within its Lipper expense group as previously discussed under “Comparative Expenses.” The Board noted that at December 31, 2011, none of these Funds had assets in excess of $10 billion and believed that to the extent economies of scale may be realized by the Manager and its affiliates, the schedule of fees under the investment management agreement for each Fund provides a sharing of benefits with the Fund and its shareholders.

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form NQ. Shareholders may view the filed Form NQ by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.

(2) The audit committee financial expert is John B. Wilson, and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $789,951 for the fiscal year ended February 29, 2012 and $814,407 for the fiscal year ended February 28, 2011.

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4.

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.

There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s

investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $75,000 for the fiscal year ended February 29, 2012 and $60,000 for the fiscal year ended February 28, 2011. The services for which these fees were paid included technical tax consultation for capital gain tax reporting to foreign governments, application of local country tax laws to investments and licensing securities with local country offices.

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended February 29, 2012 and $12,442 for the fiscal year ended February 28, 2011. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant other than services reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended February 29, 2012 and $132,358 for the fiscal year ended February 28, 2011. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.

(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:

(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;

(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii)

through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $75,000 for the fiscal year ended February 29, 2012 and $204,800 for the fiscal year ended February 28, 2011.

(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to

ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By /s/LAURA F. FERGERSON
Laura F. Fergerson
Chief Executive Officer –
Finance and Administration
Date April 26, 2012

By /s/GASTON GARDY
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date April 26, 2012


Price and Distribution Information
Class A (Symbol: FPRTX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.19	$	12.31	$	11.12
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5326
Class C (Symbol: FPRIX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.20	$	12.37	$	11.17
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4700
Advisor Class (Symbol: FDBZX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.20	$	12.33	$	11.13
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5435

1	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.


		Beginning Account		Ending Account		Expenses Paid During
Class A		Value 9/1/11		Value 2/29/12		*Period 9/1/11–2/29/12**
Actual	$	1,000	$	1,086.70	$	3.48
Hypothetical (5% return before expenses)	$	1,000	$	1,021.53	$	3.37
Class C
Actual	$	1,000	$	1,084.20	$	6.37
Hypothetical (5% return before expenses)	$	1,000	$	1,018.75	$	6.17
Advisor Class
Actual	$	1,000	$	1,087.10	$	2.96
Hypothetical (5% return before expenses)	$	1,000	$	1,022.03	$	2.87


Dividend Distributions*
Franklin Federal Intermediate-Term Tax-Free Income Fund
		Dividend per Share
Month	Class A	Class C	Advisor Class
March 2011	3.23 cents	2.72 cents	3.32 cents
April 2011	3.23 cents	2.72 cents	3.32 cents
May 2011	3.23 cents	2.72 cents	3.32 cents
June 2011	3.38 cents	2.87 cents	3.47 cents
July 2011	3.38 cents	2.87 cents	3.47 cents
August 2011	3.38 cents	2.87 cents	3.47 cents
September 2011	3.28 cents	2.73 cents	3.38 cents
October 2011	3.28 cents	2.73 cents	3.38 cents
November 2011	3.28 cents	2.73 cents	3.38 cents
December 2011**	4.13 cents	3.38 cents	4.27 cents
January 2012	2.13 cents	1.74 cents	2.19 cents
February 2012	3.13 cents	2.56 cents	3.23 cents


Price and Distribution Information
Class A (Symbol: FKITX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.96	$	12.39	$	11.43
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.3910
Class C (Symbol: FCITX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.96	$	12.42	$	11.46
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.3263
Advisor Class (Symbol: FITZX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.96	$	12.41	$	11.45
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4025


Portfolio Breakdown
Franklin Double Tax-Free Income Fund
2/29/12
% of Total
Long-Term Investments*
Utilities	21.7	%
General Obligation	19.2	%
Tax-Supported	18.5	%
Transportation	11.2	%
Other Revenue	7.7	%
Subject to Government Appropriations	7.4	%
Refunded	7.2	%
Housing	3.0	%
Higher Education	2.9	%
Hospital & Health Care	1.2	%

*Does not include short-term investments and other
net assets.


Class C:	Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares.

Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.


Franklin Federal Limited-Term Tax-Free Income Fund
	Dividend per Share
Month	Class A	Advisor Class
March 2011	1.62 cents	1.70 cents
April 2011	1.62 cents	1.70 cents
May 2011	1.62 cents	1.70 cents
June 2011	1.62 cents	1.74 cents
July 2011	1.62 cents	1.74 cents
August 2011	1.62 cents	1.74 cents
September 2011	1.62 cents	1.77 cents
October 2011	1.62 cents	1.77 cents
November 2011	1.62 cents	1.77 cents
December 2011**	2.14 cents	2.31 cents
January 2012	1.10 cents	1.19 cents
February 2012	1.62 cents	1.75 cents


Price and Distribution Information
Class A (Symbol: FFTFX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.31	$	10.60	$	10.29
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.1951
Advisor Class (Symbol: FTFZX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.30	$	10.59	$	10.29
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.2097


Class A: Advisor Class:	Prior to 2/1/06, these shares were offered without an initial sales charge; thus actual total returns would have differed. Shares are available to certain eligible investors as described in the prospectus.


Utilities	19.0	%
Transportation	18.0	%
Hospital & Health Care	17.2	%
Tax-Supported	10.6	%
General Obligation	9.0	%
Corporate-Backed	6.3	%
Subject to Government Appropriations	5.6	%
Other Revenue	5.6	%
Refunded	5.3	%
Higher Education	2.3	%
Housing	1.1	%


Price and Distribution Information
Class A (Symbol: FRHIX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.99	$	10.59	$	9.60
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5243
Class B (Symbol: FYIBX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.00	$	10.68	$	9.68
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4705
Class C (Symbol: FHYIX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.02	$	10.75	$	9.73
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4696
Advisor Class (Symbol: FHYVX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.00	$	10.63	$	9.63
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5340


Price and Distribution Information
Class A (Symbol: FTFIX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.98	$	12.37	$	11.39
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5150
Class B (Symbol: FBITX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.98	$	12.43	$	11.45
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4511
Class C (Symbol: FRITX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.99	$	12.52	$	11.53
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4503
Advisor Class (Symbol: FINZX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.97	$	12.36	$	11.39
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5265


Dividend Distributions*
Franklin Massachusetts Tax-Free Income Fund
		Dividend per Share
Month	Class A	Class C	Advisor Class
March 2011	3.88 cents	3.40 cents	3.97 cents
April 2011	3.88 cents	3.40 cents	3.97 cents
May 2011	3.88 cents	3.40 cents	3.97 cents
June 2011	3.88 cents	3.38 cents	3.97 cents
July 2011	3.88 cents	3.38 cents	3.97 cents
August 2011	3.88 cents	3.38 cents	3.97 cents
September 2011	3.88 cents	3.34 cents	3.97 cents
October 2011	3.88 cents	3.34 cents	3.97 cents
November 2011	3.88 cents	3.34 cents	3.97 cents
December 2011**	5.13 cents	4.40 cents	5.25 cents
January 2012	2.63 cents	2.26 cents	2.69 cents
February 2012	3.88 cents	3.33 cents	3.97 cents


Higher Education	23.1	%
Other Revenue	16.3	%
Tax-Supported	13.0	%
Refunded	12.8	%
Transportation	9.1	%
Hospital & Health Care	8.7	%
General Obligation	8.1	%
Utilities	6.8	%
Housing	2.1	%


Price and Distribution Information
Class A (Symbol: FMISX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.91	$	12.02	$	11.11
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4668
Long-Term Capital Gain	$	0.0007
Total	$	0.4675
Class C (Symbol: FMAIX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.92	$	12.14	$	11.22
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4042
Long-Term Capital Gain	$	0.0007
Total	$	0.4049
Advisor Class (Symbol: n/a)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	0.91	$	12.02	$	11.11
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4777
Long-Term Capital Gain	$	0.0007
Total	$	0.4784

U.	S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.
2.	All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative


Price and Distribution Information
Class A (Symbol: FRNJX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.06	$	12.55	$	11.49
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5247
Class B (Symbol: FNJBX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.06	$	12.62	$	11.56
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4620
Class C (Symbol: FNIIX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.08	$	12.68	$	11.60
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.4593
Advisor Class (Symbol: FNJZX)				Change		2/29/12		2/28/11
Net Asset Value (NAV)			+$	1.06	$	12.55	$	11.49
Distributions (3/1/11–2/29/12)
Dividend Income	$	0.5362

1.	ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
a.	Financial Instrument Valuation (continued)

1.	ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
d.	Security Transactions, Investment Income, Expenses and Distributions (continued)

3.	TRANSACTIONS WITH AFFILIATES (continued)
c.	Distribution Fees

3.	TRANSACTIONS WITH AFFILIATES (continued)
d.	Sales Charges/Underwriting Agreements (continued)