-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QAaoV/gVjMfwo2xlU75KDWu/CqD7HNYgxrzSGIs+P4Jdeg2WioNHXQ5b/2AQXt3/ TgOMQiF1FRBfJpIIj+HxhQ== 0000757010-99-000021.txt : 19991115 0000757010-99-000021.hdr.sgml : 19991115 ACCESSION NUMBER: 0000757010-99-000021 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN TAX FREE TRUST CENTRAL INDEX KEY: 0000757010 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04149 FILM NUMBER: 99746622 BUSINESS ADDRESS: STREET 1: 777 MARINERS ISLAND BLVD CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: 4153122000 MAIL ADDRESS: STREET 1: 777 MARINERS ISLAND BLVD CITY: SAN MATEO STATE: CA ZIP: 94404 N-30D 1 SHAREHOLDER LETTER Dear Shareholder: This semiannual report for Franklin Tax-Free Trust covers the period ended August 31, 1999. During the six months under review, the U.S. bond markets continued to experience challenging times. The yield on the benchmark 30-year Treasury bond steadily increased, from 5.57% on February 28, 1999, to 6.07% on August 31, 1999 -- reaching a high of 6.25% on August 10, 1999. Although many of the uncertainties associated with hedge funds and 1998's financial stresses on Asia, Latin America and Eastern Europe either dissipated or stabilized, the Federal Reserve Board's (the Fed's) position toward domestic inflationary tendencies renewed investor concern. At its June 30 meeting, the Federal Open Market Committee (FOMC) raised the federal funds target rate to 5.00%, while announcing a neutral bias toward further increases, which most investors initially viewed as positive. However, most bond investors became cautious as they perceived Alan Greenspan's testimony before the U.S. House of Representatives on July 22, 1999, as a change by the Fed from a neutral bias to one of possibly raising rates. Indeed, the FOMC raised its target for the federal funds rate another quarter-percentage point to 5.25% and again adopted a neutral bias at its August 24, 1999, meeting, which appeared to stabilize the bond markets for the short term. The economy's future direction and its effect on inflationary pressures will ultimately determine the level of volatility that impacts the bond markets in the near future. During the period under review, many investors uncharacteristically reacted very swiftly to new releases of economic data or Fed announcements, and in many instances the market overcorrected. Investors with short-term investment horizons may view such instability as unfavorable. However, we prefer to take a long-term approach toward investing and find that recent market conditions afforded us opportunities not only to increase the funds' income-earning potential, but also to enhance the portfolios' overall structure. Our conservative, long-term, buy-and-hold philosophy enables us to produce comparatively high credit-quality portfolios that distribute favorable tax-free income.(1) We do not purchase exotic derivative products or use everage as part of our investment strategy to increase yield because we also strive to maintain low share-price volatility. We encourage you to examine the credit quality of your tax-free fund, as well as its yield when evaluating your investment needs. CONTENTS Shareholder Letter 1 Special Feature: Uncovering Tax-Free Opportunities 5 Fund Reports Franklin Arizona Insured Tax-Free Income Fund 8 Franklin Florida Insured Tax-Free Income Fund 12 Franklin Insured Tax-Free Income Fund 16 Franklin Massachusetts Insured Tax-Free Income Fund 19 Franklin Michigan Insured Tax-Free Income Fund 23 Franklin Minnesota Insured Tax-Free Income Fund 26 Franklin Ohio Insured Tax-Free Income Fund 30 Municipal Bond Ratings 33 Financial Highlights & Statement of Investments 35 Financial Statements 84 Notes to Financial Statements 92 [PYRAMID GRAPH] 1. For investors subject to the federal or state alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. With municipal bond insurance prevalent over the past few years, the difference in yields between high- and lower-rated bonds has narrowed compared to historical levels. As a result, many of our funds in recent years chose to invest in high-rated bonds because of the risk versus return characteristics in the marketplace. At the end of this reporting period, many of our tax-free funds held a large percentage of AAA-rated bonds, reflecting the portfolios' high quality. Our disciplined, long-term, income-oriented investment approach, along with our ability to recognize value, enables us to offer funds providing attractive tax-free yields while enjoying excellent credit quality characteristics compared to their peers. Historically more than 85% of total return for municipal bonds is derived from the income component. In light of this, we choose to concentrate on income and risk-adjusted total return in managing our funds, and on this basis, most of our tax-free funds compare very favorably to their peers. As the interest-rate outlook stabilizes and inflationary concerns diminish, we expect the fixed-income markets to become more stable. Overall, we expect municipal bonds to perform well, as at the end of the reporting period the ratio of yields for the Bond Buyer 40 Municipal Index versus the 30-year Treasury bond approached 95%, considerably higher than the historical average of 89%, which means municipal bonds are relatively inexpensive. Furthermore, municipal bond supply for 1999 is expected to be approximately 18% less than in 1998, with about $230 billion coming to market. The reduced supply should enhance the performance of municipal bonds going forward. Please keep in mind that interest rates and thus, bond prices, rise and fall depending on the economy. Such fluctuations are a normal part of investing, and one should expect this when investing in any security, including municipal bonds. Municipal bond funds can help lower such volatility, as they offer a level of diversification that is difficult for individual investors to achieve on their own. They continue to be an attractive investment for those investors seeking tax-free income as well as providing an opportunity to reduce risk in their portfolios. Depending on your federal and state tax rates, a taxable investment would need to offer a higher yield than the taxable equivalent yield of a tax-free investment. We encourage you to discuss your financial goals with an investment representative. As always, we appreciate your support, welcome your questions and look forward to serving your investment needs in the years ahead. Sincerely, /s/ Charles B. Johnson - ------------------------------ Charles B. Johnson Chairman Franklin Tax-Free Trust /s/ Thomas J. Kenny - ------------------------------ Thomas J. Kenny Director Franklin Municipal Bond Department - -------------------------------------------------------------------------------- WHAT DOES "TAXABLE EQUIVALENT" MEAN FOR YOU? For yield and distribution rate, the taxable equivalent is the amount a taxable investment would have to earn to match a tax-free investment such as municipal bonds.(1) You can find your fund's taxable equivalent distribution rate and yield in the Performance Summary that follows your fund's report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OVERALL MORNINGSTART RATINGS (TM) - -------------------------------------------------------------------------------- These funds in Franklin Tax-Free Trust were rated against a universe of 1,591; 1,210 and 372 municipal bond funds for the 3-, 5- and 10-year periods, respectively, ended August 31, 1999. - -------------------------------------------------------------------------------- FRANKLIN MUNICIPAL BOND FUNDS ARE STAR QUALITY You may be pleased to know how well your Franklin Tax-Free Income Fund compares with the competition. Morningstar, a leading mutual fund rating company, awarded 33 Franklin municipal bond funds their highest ratings, four or five stars. With one of the largest municipal bond departments in the industry, Franklin Templeton has the resources needed to identify attractive municipal bond opportunities and the know-how to purchase them at favorable prices. We offer investors more high-quality choices than any other fund group followed by Morningstar. [4 STARS] FOUR-STAR FRANKLIN TAX-FREE INCOME FUNDS (1),(2) - -------------------------------------------------------------------------------- FRANKLIN INSURED TAX-FREE INCOME FUND - CLASS A FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND - CLASS A FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND - CLASS A FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND - CLASS A FRANKLIN OHIO INSURED TAX-FREE INCOME FUND - CLASS A (1.) For investors subject to federal or state alternative minimum tax, all or a portion of the dividends may be subject to such tax, depending on the fund. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. (2.) For the 3-, 5- and 10-year periods ended August 31, 1999, the respective Morningstar ratings were as follows: Insured Tax-Free Income 4, 4, 4; Massachusetts Insured Tax-Free Income 3, 4, 4; Michigan Insured Tax-Free Income 4, 4, 4; Minnesota Insured Tax-Free Income 4, 4, 4; Ohio Insured Tax-Free Income 4, 4, 4. Morningstar proprietary ratings reflect historical risk-adjusted performance and can change monthly. They are calculated from the fund's 3-, 5- and 10-year average annual returns in excess of 90-day Treasury bill returns with appropriate sales charge adjustments, and a risk factor reflecting performance below 90-day T-bill returns. The top 10% of funds in a broad asset class receive five stars, the next 22.5% four stars, the next 35% three stars, the next 22.5% two stars, and the bottom 10% one star. Ratings are for Class A shares only; other classes may vary. Past performance does not guarantee future results. You have previously received a prospectus for Franklin Tax-Free Trust in which you are a shareholder. Franklin Templeton Distributors, Inc. is the principal underwriter of the Trust. This page is not part of the shareholder report. UNCOVERING TAX-FREE OPPORTUNITIES [PHOTO - RAFAEL COSTAS] Rafael Costas, Senior Vice President and Director of Franklin's Municipal Research Department, discusses how research is an integral part of Franklin's tax-free income funds' success. Q: Could you provide an overview of Franklin's research department? RAFAEL COSTAS: We have one of the industry's largest municipal research staffs, allowing us to routinely analyze more than 2,000 debt issuers a year. The research department analysts work closely with our portfolio managers, who rely on these analysts when making buy and sell decisions. With a focus on in-depth research and the discipline to buy when others are selling, we often are able to find exciting opportunities at temporarily depressed prices. Generally, we concentrate on investment-grade issues. Of course, for our high yield funds, we also look for below investment-grade bonds that we feel offer appropriate rewards for the increased risk. Q: What are some advantages of Franklin's size and reputation? RAFAEL: Today, Franklin is one of the nation's leading tax-free fund managers. Our size, with approximately $50 billion of tax-free investments, often enables us to purchase investments at advantageous prices, which in turn, can help keep investment costs low. We pass on these savings to shareholders in the form of higher tax-free yields.(1) In addition, our size often makes us a favorite of new issuers, as many prefer to work with a minimum number of investors. Q: What type of tax-free bonds do you favor? RAFAEL: We typically look for investment-grade bonds, as we try to provide our shareholders high, current income with a relatively low level of risk. Most of our investment-grade tax-free bond funds are composed of a high percentage of securities rated AAA or AA, the highest ratings bonds can receive from national credit rating agencies.(2) In addition, many of our purchases are insured because of the prevalence of insurance in the municipal bond marketplace in the past few years. Insured securities normally are rated AAA, further improving the quality of our funds. For our high yield funds, we look for bonds which may be out of favor but, in our view, still have solid fundamentals and the potential to be upgraded. In fact, we devote much of our research efforts to finding such bonds in the low investment-grade, high yield sectors. (1.)For investors subject to the federal or state alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. (2.)Ratings can change. Q: How do you research a bond? RAFAEL: We emphasize detailed, high-quality research, which often enables us to uncover attractive investments that others may have overlooked. When presented with an opportunity, our analysts carefully consider such factors as the bond's purpose, who will repay the bond, if the projections are reasonable, the payment schedule and the issuer's credit history. We incorporate all of the numerical findings in our internal, proprietary databases and spreadsheets created by our analysts. With the processed information and analysis, we meet with our portfolio managers to discuss the merits of each individual issue. The portfolio manager's decision to buy a security will depend largely on our analysis of the bond's credit quality and price. We continue to monitor our investments closely after the purchase, looking for signs of potential problems as well as additional opportunities. Q: Do you feel it is important to personally meet management and municipal officials? RAFAEL: Very much so. Each year Franklin's analysts and portfolio managers visit hundreds of sites to garner an understanding that can be obtained only through personal inspection. They meet face-to-face with the project's management and municipal officials to discuss firsthand any potential problems. Our analysts also can use these meetings to discover new opportunities, often before they are widely known. Q: Do issuers and investment bankers ever come to Franklin? RAFAEL: Our sizable presence in the municipal bond market frequently means that issuers and their bankers come to us with new issues. In a typical day, we may receive between 50 and 100 calls from brokers offering new and secondary issues. Approximately three times a week, investment bankers visit our offices, usually as part of an issue's road show. We view these as excellent opportunities not only to buy issues at favorable prices, but also to propose changes to the issue, enhancing its quality and appeal to our distinct standards. [PHOTO - TWO WOMEN LOOKING AT PC MONITOR] Municipal research analyst Molly Butler discusses a bond issue with portfolio manager Stella Wong. Q: How can Franklin's research influence the portfolio managers' investment decisions? RAFAEL: Our extensive research allows us to use a contrarian approach to investing, because we firmly believe that near-term volatility can create opportunities for greater long-term yields. For example, when Moody's, Standard & Poor's or Fitch, three national credit rating agencies, downgrade a bond, many investors sell the issue, sometimes reducing prices to what we believe are attractive levels. As we evaluate our investments based on our internal assessments, we can use these valuable opportunities to purchase what we believe are high-quality issues at temporarily depressed prices. External events can also lead to situations where bonds become undervalued. Over the past few years, for example, Medicare reform negatively affected the hospital bond sector, even for those hospitals in strong financial shape. As many hospitals' credit profiles weakened, we were able to find value selectively through our analysts' expertise. Seeking to take advantage of this, we recommended such bonds to our portfolio managers who purchased them at a time when the market seemed to be shunning these issues. Q: Could you provide an example of a successful outcome of your research? RAFAEL: Sure. A perfect example is Tucson Electric Power (TEP). It issued $579 million in tax-exempt debt in 1997-98. However, the utility had a long, troubled history and its debt was rated below investment grade. So, Molly Butler, our electric utility analyst, and I flew to Tucson and spent an entire day with TEP's top executives and division heads. We discussed their history, current position and future plans as well as challenged and questioned many of their projections and assumptions. At the end of the day, we were satisfied that their management team had a clear vision and a realistic plan for the future. Q: How is TEP doing today? RAFAEL: Since then, the rating agencies have raised TEP's credit rating and the bonds have seen a significant increase in value. Of course, the ratings can change again in the future. However, the bonds are still offering above-market yields for our shareholders, because we were able to purchase the securities when they were unpopular. We have an excellent relationship with management and they often call Ms. Butler to discuss the latest releases of information. THANK YOU, RAFAEL. WHAT IS A ROAD SHOW? Before a new issue is brought to the public, the issuer and its investment bankers travel around the country making presentations to potential investors concerning the issuer's financial information and outlook. FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND - -------------------------------------------------------------------------------- Your Fund's Goal: Franklin Arizona Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Arizona state personal income taxes through a portfolio consisting primarily of insured Arizona municipal bonds.(1) - -------------------------------------------------------------------------------- STATE UPDATE [MAP - ARIZONA] Arizona's economy continues to surpass optimistic forecasts, driven by employment growth, population increases, a favorable business environment, new home construction and six consecutive years of tax reductions. The job base began dramatically diversifying several years ago, within the expanding high-tech manufacturing and international trade sectors, along with the more traditional mining, agriculture, tourism and retirement industries. The state saw increased but more limited job growth during the reporting period. The state boasts an unemployment rate below the national average, at 4.2% in July 1999, which is even more impressive given the massive influx of new residents.(2) Such growth is extremely important to the state's economic health. The number of companies interested in relocating to Arizona is soaring, while many existing companies have announced major expansions. In the Phoenix area alone, almost 2,000 new jobs were created in June 1999.(3) Furthermore, these new residents need somewhere to live, fueling the important construction industry. Home building permits in 1999 may break 1998's record of 36,001.(4) The state has seen its personal income figures increase more than 65% since 1990.(5) Arizona, not immune to world economic problems, struggled as three of Arizona's largest copper producers laid off 2,850 workers during the reporting period, as the price of copper remains depressed due to oversupply caused by the Asian crisis.(6) However, these job losses should be easily offset by continued new job growth. One concern for Arizona's economy is that rising interest rates could cause a slowdown in construction spending. Arizona's future looks very bright. Presently, Arizona has the second fastest-growing population of any state. The favorable climate should continue to draw retiring baby-boomers, and the broad-based economy's ample supply of new jobs should add to the state's younger population. (1.) For investors subject to the federal alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Fund shares are not insured by any U.S. or other government agency, are subject to market risks and will fluctuate in value. Insurance relates only to the payment of principal and interest on the portfolio's insured securities and the terms of the insurance as outlined in the prospectus. No representation is made as to any insurer's ability to meet its commitments. A non-diversified fund may be subject to greater risk of adverse economic or regulatory developments in that state than a fund with broader geographical diversification. (2.) Source: Bureau of Labor Statistics, 8/99. (3.) Source: Arizona Dept. of Commerce, The Gold Sheet, 8/99. (4.) Source: The Arizona Republic, Arizona Boom Still Booming, 8/99. (5.) Source: Arizona Dept. of Commerce, The Gold Sheet, 7/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 36 of this report. PORTFOLIO NOTES Franklin Arizona Insured Tax-Free Income Fund participated in the largest Arizona deal of the year, the $366 million Mesa Arizona Industrial and Development Agency Revenue (IDAR) bonds for Discovery Health Systems, during the reporting period. We made this issue one of the portfolio's core positions. The bonds were insured and offered at extremely attractive yields for Arizona, which is considered a "specialty state." Arizona bonds typically trade at yield levels below the national average for municipal bonds due to supply and demand characteristics. Such purchases gave us the opportunity to restructure the portfolio, and we sold other bonds to book tax losses that can be carried forward and used to help offset future capital gains and reduce our shareholders' tax liabilities. Some of the fund's other purchases during the reporting period were Phoenix Civic Improvement Corp. and McDowell Mountain Ranch Community Facilities District general obligation (GO) bonds. The fund's dividend came under pressure during the reporting period resulting in two decreases. At the end of the reporting period, the dividend was relatively stable and will continue to be for the upcoming quarter. The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of securities in the fund's portfolio, was off 8.25%.(7) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.7%. The fund's total net assets increased 4.2% during the reporting period, from $80.7 million on February 28, 1999, to $84.1 million on August 31, 1999. As always, your fund invested primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1) PORTFOLIO BREAKDOWN Franklin Arizona Insured Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------ ----------- General Obligation 28.0% Hospital & Health Care 22.0% Utilities 17.9% Prerefunded 7.3% Housing 6.6% Transportation 4.9% Tax Supported Debt 4.8% Subject to Government Appropriation 3.9% Higher Education 3.5% Other Revenue 1.1% (6.) Source: Tucson Citizen, Copper Down, But Hopes Rise, 7/99. (7.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. DIVIDEND DISTRIBUTIONS* Franklin Arizona Insured Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND MONTH PER SHARE - ----- --------- March 4.2 cents April 4.2 cents May 4.2 cents June 4.0 cents July 4.0 cents August 4.0 cents - ------ --------- Total 24.6 cents
Arizona's new bond issuance for the first half of 1999 was $1.34 billion, down 43.6% from the same period last year. This reduced new-issue supply combined with strong retail demand for Arizona municipal bonds should help support the value of the portfolio's holdings. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. *Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.62 $10.22 $10.84
DISTRIBUTIONS (3/1/99-8/31/99) ------------------------------ Dividend Income $0.246
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR (4/30/93) - ------- ------- ------ ------ --------- Cumulative Total Return (1) -3.45% -1.39% +36.63% +40.91% Average Annual Total Return (2) -7.55% -5.56% +5.52% +4.85% Distribution Rate (3) 4.50% Taxable Equivalent Distribution Rate (4) 7.85% 30-Day Standardized Yield (5) 4.36% Taxable Equivalent Yield (4) 7.60%
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a higher initial sales charge; thus actual total returns may be slightly lower. Past expense reductions by the fund's manager increased the fund's total return. (1.) Cumulative total return represents the change in value of an investment over the periods indicated and does not include the sales charge. (2.) Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge. Six-month return has not been annualized. (3.) Distribution rate is based on an annualization of the current 4.0 cent per share monthly dividend and the maximum offering price of $10.67 on August 31, 1999. (4.) Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Arizona state personal income tax bracket of 42.6%, based on the federal income tax rate of 39.6%. (5.) Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND PORTFOLIO BREAKDOWN Franklin Florida Insured Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------ ----------- Utilities 37.2% Other Revenue 13.5% Hospital & Health Care 12.4% Tax Supported Debt 11.8% Prerefunded 11.6% Housing 6.9% Subject to Government Appropriation 3.9% Transportation 1.9% General Obligation 0.8%
Your Fund's Goal: Franklin Florida Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal income tax through a portfolio consisting primarily of insured Florida municipal bonds. (1) In addition, the fund's shares are free from Florida's annual intangibles tax. STATE UPDATE (2) [MAP - FLORIDA] Florida continues to be one of the fastest growing states in the nation. Its personal income has grown 6.2% per year since 1994, compared with 5.6% nationally for the same period, ranking 20th among the states. Non-agricultural job growth for 1998 was 4.1%, compared with 2.6% nationally. This trend should continue through 1999 with an expected 4% increase over 1998. Florida's double-digit population growth for each of the past two decades is expected to continue as aging baby-boomers begin to retire and move to the state. Such strong population growth has been the main fuel of the state's economy, but has also driven the need for expanded government services including education, corrections, transportation and health and human services. The state's debt has risen with its growth, and both are expected to continue expanding. 1999 debt per capita was $863 compared with $505 for the national state median. Florida decreased its intangible personal property tax during the reporting period. The new tax rate will reduce the levy from $2 million currently to $1.5 million. The net effect will have only a small impact on the future revenues relative to the state's total income. (1.) For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Fund shares are not insured by any U.S. or other government agency, are subject to market risks and will fluctuate in value. Insurance relates only to the payment of principal and interest on the portfolio's insured securities and the terms of the insurance as outlined in the prospectus. No representation is made as to any insurer's ability to meet its commitments. A non-diversified fund may be subject to greater risk of adverse economic or regulatory developments in that state than a fund with broader geographical diversification. (2.) Source: Moody's Investors Service, 8/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 39 of this report. Projections for general revenue growth indicate a slowdown to 5.0% in 1999 from a strong 7.6% in 1998. The state enacted a constitutional amendment adding a Budget Stabilization Fund, which is required to be funded at 5% of the previous year's General Fund receipts. Additionally, the state has constitutionally enacted a revenue limitation to control spending growth by limiting the amount of taxes and other revenue that can be raised in any given year. Exempt from this cap are monies pledged to existing and new bond issues, to mitigate risk to bondholders. As of July 1999, Florida's state agency computer systems are 99% Year-2000 compliant, with the remaining 1% anticipated to be by October 1999. Florida's outlook remains stable because of ample revenues from the state's rapid population growth, a strong Budget Stabilization Fund and a proven willingness by the state government to deal with economic weakening, by maintaining budget balance during past recessions. PORTFOLIO NOTES Municipal bond new issuance in Florida declined 12.8% for the first half of 1999. Many issuers enhanced their debt's credit quality by purchasing insurance for their upcoming issues, giving them greater access to new money or better opportunities to refinance existing debt. However, as interest rates rose, prerefunding activity decreased because there was less opportunity for issuers to find interest rate savings. The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of securities in the fund's portfolio, was off 8.25%.(3) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.2%. During the reporting period, the fund sought to generate tax losses, which can be carried forward in the portfolio to help offset current or future taxable capital gains and potentially lower shareholders' tax liabilities. The fund sold prerefunded bonds to capture the premium and decrease the fund's call exposure. Some of the fund's purchases during the six-month period were Florida Housing Finance Corporation Revenue - Housing Logans Pointe Apartments; Saint Lucie West Services District Special Assessment Revenue - Water Management Benefit; Alachua County Public Improvement Revenue; Lakeland Utilities Tax Revenue; and Miami-Dade County Water and Sewer Revenue bonds. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. (3.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. DIVIDEND DISTRIBUTIONS* Franklin Florida Insured Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND MONTH PER SHARE - ----- --------- March 4.10 cents April 4.10 cents May 4.10 cents June 3.95 cents July 3.95 cents August 3.95 cents - ------ ----------- Total 24.15 cents
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. The fund intends to maintain the investment strategy of buying current coupon bonds at a slight discount as we seek to provide shareholders with high, current, tax-free income. As always, your fund invested primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1) Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.55 $9.98 $10.53
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2415
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR (4/30/93) - ------- ------- ------ ------ --------- Cumulative Total Return (1) -2.92% -0.65% +37.51% +37.58% Average Annual Total Return (2) -7.07% -4.89% +5.65% +4.45% Distribution Rate (3) 4.55% Taxable Equivalent Distribution Rate (4) 7.53% 30-Day Standardized Yield (5) 4.42% Taxable Equivalent Yield (4) 7.32%
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a higher initial sales charge; thus actual total returns may be slightly lower. The fund's manager agreed in advance to waive a portion of its management fees, which reduces operating expenses and increases yield, distribution rate and total return to shareholders. Without these reductions, the fund's distribution rate and total return would have been lower, and yield for the period would have been 4.41%. The fee waiver may be discontinued at any time upon notification to the fund's Board of Trustees. (1.) Cumulative total return represents the change in value of an investment over the periods indicated and does not include the sales charge. (2.) Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge. Six-month return has not been annualized. (3.) Distribution rate is based on an annualization of the current 3.95 cent per share monthly dividend and the maximum offering price of $10.42 on August 31, 1999. (4.) Taxable equivalent distribution rate and yield assume the 1999 maximum federal income tax rate of 39.6%. (5.) Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN INSURED TAX-FREE INCOME FUND Your Fund's Goal: Franklin Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal income tax through a portfolio consisting primarily of insured municipal bonds.(1) PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of securities in the fund's portfolio, was off 8.25%.(2) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.1%. Franklin Insured Tax-Free Income Fund sought to take advantage of the recent volatility in the municipal bond marketplace to purchase "specialty state" bonds at national yield levels. Specialty states are those that generally trade at lower yields than other states due to supply or demand characteristics. As the market stabilizes, the yield ratios between the specialty states and the national levels should return to normal, so we expect that the specialty state names will outperform other states' bonds going forward. Some of the fund's purchases were Atlanta, Georgia, Water and Wastewater Revenue; University of Colorado Hospital Authority Revenue; Minneapolis and St. Paul Metropolitan Airport Commission Revenue; and Mesa, Arizona, Industrial Development Authority Revenue (IDAR) - Discovery Health Systems. Most of our purchases during the reporting period were in the new-issue market as many deals were priced attractively. Furthermore, we sold bonds in the secondary market attempting to take tax losses that can be used to help offset current or future capital gains, possibly lowering shareholders' tax liabilities. In general, our strategy worked very well for the fund, and we were able to restructure the portfolio with more specialty state bonds as well as purchase bonds at relatively higher yields. As always, your fund invested primarily in insured municipal bonds guaranteed by AAA-rated bond insurers. (1) (1.) Dividend income is generally subject to state and local taxes, if any. For investors subject to federal or state alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Fund shares are not insured by any U.S. or other government agency, are subject to market risks and will fluctuate in value. Insurance relates only to the payment of principal and interest on the portfolio's insured securities and the terms of the insurance as outlined in the prospectus. No representation is made as to any insurer's ability to meet its commitments. (2.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 42 of this report. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Insured Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE MONTH CLASS A CLASS C - ----- ------- ------- March 5.10 cents 4.47 cents April 5.10 cents 4.47 cents May 5.10 cents 4.47 cents June 5.05 cents 4.50 cents July 5.05 cents 4.50 cents August 5.05 cents 4.50 cents Total 30.45 cents 26.91 cents
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PORTFOLIO BREAKDOWN Franklin Insured Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------ ----------- Hospital & Health Care 28.5% Prerefunded 19.1% Utilities 19.0% Transportation 8.3% General Obligation 6.4% Higher Education 6.1% Housing 3.8% Subject to Government Appropriation 3.3% Tax Supported Debt 2.6% Other Revenue 2.1% Corporate Backed 0.8%
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. (1.) Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. (2.) Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. (3.) Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. (4.) Taxable equivalent distribution rate and yield assume the 1999 maximum federal income tax rate of 39.6%. (5.) Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.62 $11.64 $12.26
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.3045 Long-Term Capital Gain $0.0179 Short-Term Capital Gain $0.0032 Total $0.3256
CLASS C CHANGE 8/31/99 2/28/99 Net Asset Value -$0.61 $11.72 $12.33
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2691 Long-Term Capital Gain $0.0179 Short-Term Capital Gain $0.0032 Total $0.2902
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85) - ------- ------- ------ -------------- -------- Cumulative Total Return (1) -2.39% -0.29% +30.60% +91.08% +196.15% Average Annual Total Return (2) -6.50% -4.54% +4.58% +6.23% +7.50% Distribution Rate (3) 4.98% Taxable Equivalent Distribution Rate (4) 8.25% 30-Day Standardized Yield (5) 4.49% Taxable Equivalent Yield (4) 7.43%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------- ------- ------ ------ -------- Cumulative Total Return(1) -2.58% -0.76% +14.41% +23.41% Average Annual Total Return(2) -4.46% -2.72% +4.25% +4.73% Distribution Rate (3) 4.59% Taxable Equivalent Distribution Rate (4) 7.60% 30-Day Standardized Yield (5) 4.08% Taxable Equivalent Yield (4) 6.75%
Past performance is not predictive of future results. FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND Your Fund's Goal: Franklin Massachusetts Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Massachusetts state personal income taxes through a portfolio consisting primarily of insured Massachusetts municipal bonds.(1) COMMONWEALTH UPDATE(2) [MASSACHUSETTS MAP] Massachusetts continued to have the strongest economy in New England, as it has for the past five years. The commonwealth had the third-highest per-capita income nationally, at 124% of the national average for 1998, the most recent annual figure available. Personal income rose 5.6%, also above national gains. Employment growth weathered recent declines in manufacturing, which were mostly offset by gains in construction and services, with a 1.8% growth rate in 1998. The commonwealth has developed a reputation for highly responsible fiscal operations after a very difficult economic period during the early 1990s. It has built up its financial reserves every year since 1992, to be in the position to enact $900 million in tax cuts in 1999 with more planned for next year. One factor impairing Massachusetts' strong credit rating is its high debt load. It has a per capita debt load of $2,511, compared with $505 nationally, and debt as a percent of income was 7.7%, compared with the 2.0% national median. The commonwealth's outlook remains stable due to its diverse economy, high wealth level, strong fiscal control, sound budget performance and a strong balance sheet. (1.) For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Fund shares are not insured by any U.S. or other government agency, are subject to market risks and will fluctuate in value. Insurance relates only to the payment of principal and interest on the portfolio's insured securities and the terms of the insurance as outlined in the prospectus. No representation is made as to any insurer's ability to meet its commitments. (2.) Source: Moody's Investors Service, 5/17/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 59 of this report. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. PORTFOLIO NOTES The rise in interest rates during the reporting period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of securities in the fund's portfolio, was off 8.25%.3 By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.0%. However, the rise in interest rates created an excellent opportunity for Franklin Massachusetts Insured Tax-Free Income Fund to take tax losses by selling some holdings and reinvesting the proceeds at significantly higher yields. We continued to buy municipal securities with current coupons at a slight discount in our effort to maximize the tax-free income paid out to shareholders. The fund also sought bonds with at least ten-year call protection in an attempt to protect the fund's long-term income stream. As a result, our disciplined investment approach helped protect the fund's share value and maintain a competitive yield. Additionally, we continued to manage the fund's exposure to prerefunded bonds, now only 15.9% of total long-term investments as of August 31, 1999. Some of the fund's purchases during the reporting period include Dudley Charleston Regional School District general obligation (GO), Plymouth County Certificate of Participation (COP) - Correctional Facility Project, Massachusetts State Port Authority Revenue Bonds, and Massachusetts State Industrial Finance Agency Assisted Living Facility Revenue - Arbors at Taunton Project. These purchases maintained diversification in a broad range of credits, which help reduce the fund's exposure to risk and volatility that might affect any one credit. As always, your fund invested primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1) (3.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. We closely monitor the supply of Massachusetts' tax-exempt municipal bonds. For the first six months of 1999 the commonwealth issued $4.3 billion, a 17.7% decrease from the same period last year. Going forward, we expect Massachusetts' growing need for infrastructure should result in further borrowing. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Massachusetts Insured Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE MONTH CLASS A CLASS C - ----- ------- ------- March 4.75 cents 4.18 cents April 4.75 cents 4.18 cents May 4.75 cents 4.18 cents June 4.75 cents 4.24 cents July 4.75 cents 4.24 cents August 4.75 cents 4.24 cents - ------ ----------- ----------- Total 28.50 cents 25.26 cents
PORTFOLIO BREAKDOWN Franklin Massachusetts Insured Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------ ----------- Hospital & Health Care 27.5% Transportation 17.2% Prerefunded 15.9% Higher Education 15.4% General Obligation 11.2% Housing 5.1% Utilities 3.8% Other Revenue 3.0% Subject to Government Appropriation 0.9%
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. (1.) Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. (2.) Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. (3.) Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. (4.) Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Massachusetts state personal income tax bracket of 43.2%, based on the federal income tax rate of 39.6%. (5.) Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.59 $11.12 $11.71
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.285
CLASS C CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.58 $11.18 $11.76
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2526
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85) - ------- ------- ------ ------- ------- -------- Cumulative Total Return(1) -2.59% -0.68% +30.71% +87.90% +170.76% Average Annual Total Return(2) -6.73% -4.88% +4.60% +6.05% +6.84% Distribution Rate(3) 4.91% Taxable Equivalent Distribution Rate(4) 8.64% 30-Day Standardized Yield(5) 4.37% Taxable Equivalent Yield(4) 7.69%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------- ------- ------ ------ --------- Cumulative Total Return(1) -2.77% -1.15% +13.01% +22.91% Average Annual Total Return(2) -4.70% -3.08% +3.80% +4.64% Distribution Rate(3) 4.50% Taxable Equivalent Distribution Rate(4) 7.92% 30-Day Standardized Yield(5) 3.94% Taxable Equivalent Yield(4) 6.94%
Past performance is not predictive of future results. FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND Your Fund's Goal: Franklin Michigan Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Michigan state personal income taxes through a portfolio consisting primarily of insured Michigan municipal bonds.(1) STATE UPDATE [GRAPHIC OF THE STATE OF MICHIGAN] Michigan's economy has remained strong through recent times despite its reliance on cyclical industries such as durable goods manufacturing. Its employment base has diversified away from durable goods manufacturing toward trade and services. Although still strongly dependent on the auto industry, corporate actions in that industry have made it less susceptible to cyclical swings. The state also maintains a relatively strong Rainy Day Fund for fiscal shortfalls and future uncertainties. Continuing the pattern of the past few years, the state's unemployment rate has remained below the national average. Projections for personal income growth are 4.2% for 1999.(2) The state traditionally has had, and still maintains, low debt levels, although they have increased recently due to school funding needs. Michigan eliminated overspending of appropriations, which created a sizable deficit in 1990, and has balanced the state's budget. Michigan's strong economy, conservative budget practices, traditionally low debt levels and high reserve levels have earned the state an AA+ rating from Standard & Poor's, a national credit rating agency.(3) PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.6%. (1.) For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Fund shares are not insured by any U.S. or other government agency, are subject to market risks and will fluctuate in value. Insurance relates only to the payment of principal and interest on the portfolio's insured securities and the terms of the insurance as outlined in the prospectus. No representation is made as to any insurer's ability to meet its commitments. (2.) Source: Standard & Poor's, CreditWeek Municipal, 4/99. (3.) This does not indicate Standard & Poor's rating for the fund. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 64 of this report. PORTFOLIO BREAKDOWN FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------ ----------- Prerefunded 34.7% General Obligation 24.6% Hospital & Health Care 19.0% Utilities 11.2% Transportation 4.6% Higher Education 2.2% Other Revenue 1.6% Tax Supported Debt 1.0% Housing 0.5% Subject to Government Appropriation 0.5% Corporate Backed 0.1%
Franklin Michigan Insured Tax-Free Income Fund sought to take advantage of the recent volatility in the municipal bond marketplace by attempting to purchase on the dips in the market. Most of our purchases were in the new-issue market, as many deals were priced attractively. Furthermore, we sold bonds in the secondary market attempting to take tax losses that can be used to help offset current or future capital gains, possibly reducing shareholders' tax liabilities. In general, our strategy worked very well for the fund, and we were able to purchase some bonds at relatively higher yields. Some of the fund's purchases during the six-month period were Charlotte Public School District general obligation (GO), Detroit Sewage Disposal Revenue, Kent County Building Authority GO, and Wayne Charter County Airport Revenue - Detroit Metropolitan Wayne County. As always, your fund invested primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1) Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Michigan Insured Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE MONTH CLASS A CLASS C - ----- ------- ------- March 4.95 cents 4.32 cents April 4.95 cents 4.32 cents May 4.95 cents 4.32 cents June 4.95 cents 4.36 cents July 4.95 cents 4.36 cents August 4.95 cents 4.36 cents - ------ ---------- ---------- Total 29.70 cents 26.04 cents
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. (4.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.56 $11.72 $12.28
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2970 Long-Term Capital Gain $0.0003 Total $0.2973
CLASS C CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.56 $11.80 $12.36
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2604 Long-Term Capital Gain $0.0003 Total $0.2607
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85) - ------- ------- ------ ------- ------- ---------- Cumulative Total Return(1) -2.11% 0.47% 32.10% 91.79% 186.11% Average Annual Total Return(2) -6.31% -3.84% 4.82% 6.27% 7.25% Distribution Rate(3) 4.85% Taxable Equivalent Distribution Rate(4) 8.40% 30-Day Standarized Yield(5) 4.33% Taxable Equivalent Yield(4) 7.50%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------- ------- ------ ------- ---------- Cumulative Total Return(1) -2.40% -0.08% 15.69% 24.86% Average Annual Total Return(2) -4.28% -1.99% 4.63% 5.01% Distribution Rate(3) 4.44% Taxable Equivalent Distribution Rate(4) 7.69% 30-Day Standarized Yield(5) 3.90% Taxable Equivalent Yield(4) 6.75%
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. (1.) Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. (2.) Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. (3.) Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. (4.) Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Michigan state personal income tax bracket of 42.3%, based on the federal income tax rate of 39.6%. (5.) Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND Your Fund's Goal: Franklin Minnesota Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Minnesota state personal income taxes through a portfolio consisting primarily of insured Minnesota municipal bonds.(1) State Update(2) [GRAPHIC OF THE STATE OF MINNESOTA] Moody's, a national credit rating agency, has assigned Minnesota its highest rating of Aaa for the state's strong financial performance, robust and diverse economic base and moderate debt levels. Audited 1998 financial statements show a remarkable 8.6% growth for the state's General Fund while expenditures increased only 2.2% for the same period. This strong performance gave Minnesota the opportunity to reduce sales and income taxes while significantly increasing education spending. Income growth has been one of the main drivers behind the state's fiscal performance. Income tax receipts increased 8.2% in fiscal 1998, giving the state more money than expected. Minnesota's debt structure is relatively simple and moderate, $527 per capita compared with the national median of $505. Diverse employment is one of the state's best assets. Mirroring the nation's employment mix, this diversity strengthens the state's economy and buffers it from economic volatility. The outlook for the state remains positive. Institutionalized financial practices enacted to maintain a balanced budget, such as formalized four- and six-year planning cycles, coupled with healthy economic performance, should help Minnesota continue to prosper. (1.) For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. The fund seeks to comply with Minnesota requirements for the pass-through of tax-exempt income dividends Fund shares are not insured by any U.S. or other government agency, are subject to market risks and will fluctuate in value. Insurance relates only to the payment of principal and interest on the portfolio's insured securities and the terms of the insurance as outlined in the prospectus. No representation is made as to any insurer's ability to meet its commitments. (2.) Source: Moody's Investors Service, 7/29/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 72 of this report. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of securities in the fund's portfolio, was off 8.25%.(3) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.0%. Franklin Minnesota Insured Tax-Free Income Fund sought to take advantage of the recent volatility in the municipal bond marketplace by attempting to purchase on the dips in the market. Most of our purchases were in the new-issue market, as many deals were priced attractively. Furthermore, we sold bonds in the secondary market attempting to take tax losses that can be used to help offset current or future capital gains, possibly reducing shareholders' tax liabilities. In general, our strategy worked very well for the fund, and we were able to purchase some bonds at relatively higher yields. Some of the fund's purchases were Minnesota Agriculture and Economic Development Board Revenue, Dakota County Housing and Redevelopment Authority Multi-Family Housing Revenue, Park Rapids Independent School District No. 309, and Minnesota State Housing and Finance Authority Single Family Housing Revenue bonds. As always, your fund invested primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1) We also sold $10 million in Puerto Rico Commonwealth general obligation (GO) bonds, reducing the percentage of Puerto Rico bonds held in the portfolio. The state of Minnesota limits the fund to territory holdings of 5%, so the reduction in Puerto Rico bonds provides the fund more flexibility to take advantage of market opportunities in the future. During a period of limited diversification choices, a fund may choose to purchase Puerto Rico issues, which enjoy tax-free status in a majority of states and are in general highly liquid and well-received in the marketplace. PORTFOLIO BREAKDOWN Franklin Minnesota Insured Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------ ----------- General Obligation 24.8% Hospital & Health Care 22.9% Housing 14.0% Utilities 11.3% Prerefunded 9.6% Transportation 9.4% Subject to Government Appropriation 3.2% Tax Supported Debt 2.4% Higher Education 1.3% Other Revenue 1.1%
(3.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Minnesota Insured Tax-Free Income Fund 3/1/99 - 8/31/99
Dividend per Share ------------------ Month Class A Class C - ----- ------- ------- March 5.0 cents 4.42 cents April 5.0 cents 4.42 cents May 5.0 cents 4.42cents June 4.9 cents 4.36 cents July 4.9 cents 4.36 cents August 4.9 cents 4.36 cents - ------ --------- ---------- Total 29.7 cents 26.34 cents
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.61 $11.53 $12.14
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2970 Long-Term Capital Gain $0.0237 TOTAL $0.3207
CLASS C CHANGE 8/31/99 2/28/99 - ------- ------ ------- ------- Net Asset Value -$0.61 $11.58 $12.19
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2634 Long-Term Capital Gain $0.0237 TOTAL $0.2871
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85) - ------- ------- ------ ------ ------- -------- Cumulative Total Return(1) -2.37% -0.36% +28.01% +82.86% +180.78% Average Annual Total Return(2) -6.53% -4.58% +4.15% +5.76% +7.11% Distribution Rate(3) 4.83% Taxable Equivalent Distribution Rate(4) 8.74% 30-Day Standardized Yield(5) 4.44% Taxable Equivalent Yield(4) 8.03%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------- ------- ------ ------ -------- Cumulative Total Return(1) -2.64% -0.93% +13.10% +20.87% Average Annual Total Return(2) -4.53% -2.83% +3.84% +4.23% Distribution Rate(3) 4.41% Taxable Equivalent Distribution Rate(4) 7.98% 30-Day Standardized Yield(5) 4.03% Taxable Equivalent Yield(4) 7.29%
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. (1.) Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. (2.) Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. (3.) Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. (4.) Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Minnesota state personal income tax bracket of 44.7%, based on the federal income tax rate of 39.6%. (5.) Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN OHIO INSURED TAX-FREE INCOME FUND Your Fund's Goal: Franklin Ohio Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Ohio state personal income taxes through a portfolio consisting primarily of insured Ohio municipal bonds.(1) STATE UPDATE(2) [GRAPHIC OF THE STATE OF OHIO] Ohio's employment trends mirror the nation's as it has a developed industrial base with growth in the services and construction sectors. The state's unemployment rate, lower than the nation's for 1998, remains so in 1999, with the May 1999 rate at 3.7%, compared with 4.0% nationally. Ohio's personal income is slightly below the national average, estimated at 95% for 1998. Ohio has a moderate per capita debt level of $683, compared with the national median of $505. One area of concern for the state is the Ohio State Supreme Court decision requiring major changes to the state's school funding arrangements, which most likely will increase education spending. Ohio's general obligation bonds are rated Aa1 by Moody's, a national credit rating agency, for the state's stable outlook, large and diverse economy, moderate debt levels and prudent financial management.(3) The state has strong control over its financial expenditures, which, coupled with steady economic growth, has produced a seven-year trend of large operating surpluses for the state. Its Budget Stabilization Fund's balance has reached $906 million for fiscal 1999 and is expected to increase further through the calendar year. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the types of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.9%. (1.) For investors subject to the federal alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Fund shares are not insured by any U.S. or other government agency, are subject to market risks and will fluctuate in value. Insurance relates only to the payment of principal and interest on the portfolio's insured securities and the terms of the insurance as outlined in the prospectus. No representation is made as to any insurer's ability to meet its commitments. (2.) Source: Moody's Investors Service, 7/23/99. (3.) This does not indicate Moody's rating for the fund. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 77 of this report. Franklin Ohio Insured Tax-Free Income Fund sought to take advantage of the recent volatility in the municipal bond marketplace by attempting to purchase on the dips in the market. Most of our purchases were in the new-issue market, as many deals were priced attractively. Furthermore, we sold bonds in the secondary market attempting to take tax losses that can be used to help offset current or future capital gains, possibly reducing shareholders' tax liabilities. In general, our strategy worked very well for the fund, and we were able to purchase some bonds at relatively higher yields. Some of the fund's purchases during the reporting period were University of Akron General Receipts, Medina City School District general obligation (GO), Edgewood City School District GO, Ohio State Air Quality Development Authority Revenue, and Lorain County Hospital Revenue - Catholic Healthcare Partners. As always, your fund invested primarily in insured municipal bonds guaranteed by AAA-rated bond insurers.(1) Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Ohio Insured Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE ------------------ MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 5.1 cents 4.50 cents April 5.1 cents 4.50 cents May 5.1 cents 4.50 cents June 5.0 cents 4.44 cents July 5.0 cents 4.44 cents August 5.0 cents 4.44 cents - -------------------------------------------------------------------------------- TOTAL 30.3 CENTS 26.82 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PORTFOLIO BREAKDOWN Franklin Ohio Insured Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - -------------------------------------------------------------------------------- General Obligation 26.7% Utilities 25.7% Prerefunded 15.7% Hospital & Health Care 12.5% Higher Education 5.9% Housing 3.7% Transportation 3.6% Corporate Backed 3.1% Subject to Government Appropriation 2.2% Other Revenue 0.6% Tax Supported Debt 0.3%
(4.) Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. FRANKLIN OHIO INSURED TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.61 $11.88 $12.49
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.3030 Long-Term Capital Gain $0.0171 TOTAL $0.3201
CLASS C CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.61 $11.95 $12.56
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2682 Long-Term Capital Gain $0.0171 TOTAL $0.2853
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85) - -------------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.31% +0.16% +31.31% +90.79% +185.16% Average Annual Total Return(2) -6.43% -4.06% +4.69% +6.21% +7.22% Distribution Rate(3) 4.83% Taxable Equivalent Distribution Rate(4) 8.58% 30-Day Standardized Yield(5) 4.45% Taxable Equivalent Yield(4) 7.91%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ---------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.57% -0.41% +14.89% +24.12% Average Annual Total Return(2) -4.51% -2.37% +4.39% +4.86% Distribution Rate(3) 4.41% Taxable Equivalent Distribution Rate(4) 7.83% 30-Day Standardized Yield(5) 4.02% Taxable Equivalent Yield(4) 7.14%
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. (1.) Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. (2.) Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. (3.) Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. (4.) Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Ohio state personal income tax bracket of 43.7%, based on the federal income tax rate of 39.6%. (5.) Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. MUNICIPAL BOND RATINGS MOODY'S Aaa: Best quality. They carry the smallest degree of investment risk and generally are referred to as "gilt-edged." Interest payments are protected by a large or exceptionally stable margin, and principal is secure. Although the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: High quality by all standards. Together with the Aaa group, they comprise what generally are known as high-grade bonds. Aa bonds are rated lower than Aaa because margins of protection may not be as large, fluctuation of protective elements may be of greater amplitude, or there may be other elements which make the long-term risks appear larger. A: Possess many favorable investment attributes and are considered upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Ba: Contain speculative elements. Often the protection of interest and principal payments may be very moderate and, thereby, not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Poor standing. Such issues may be in default, or elements of danger with respect to principal or interest may be present. Ca: Obligations that are highly speculative. Such issues are often in default or have other marked shortcomings. C: Lowest-rated class of bonds. Issues rated C can be regarded as having extremely poor prospects of ever attaining any real investment standing. S&P(R) AAA: The highest rating assigned by S&P to a debt obligation and indicates the ultimate degree of protection as to principal and interest. AA: Also qualify as high-grade obligations, and, in the majority of instances, differ from AAA issues only in a small degree. A: Generally regarded as upper medium-grade. They have considerable investment strength but are not entirely free from adverse effects of changes in economic and trade conditions. Interest and principal are regarded as safe. BBB: Regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such bonds likely will have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C: Reserved for income bonds on which no interest is being paid. D: Debt rated "D" is in default and payment of interest and/or repayment of principal is in arrears. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, (UNAUDITED)*** 1999 1998 1997 1996 1995 PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) NET ASSET VALUE, BEGINNING OF PERIOD ............... $10.84 $10.77 $10.36 $10.36 $9.80 $10.28 --------------------------------------------------------------------------- Income from investment operations: Net investment income ............................. .24 .53 .54 .55 .55 .55 Net realized and unrealized gains (losses) ........ (.61) .07 .42 -- .57 (.48) --------------------------------------------------------------------------- Total from investment operations ................... (.37) .60 .96 .55 1.12 .07 --------------------------------------------------------------------------- Less distributions from net investment income ...... (.25)(1) (.53) (.55) (.55) (.56) (.55) --------------------------------------------------------------------------- Net asset value, end of period ..................... $10.22 $10.84 $10.77 $10.36 $10.36 $9.80 =========================================================================== Total return* ...................................... (3.45)% 5.75% 9.53% 5.55% 11.64% .94% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .................. $84,095 $80,684 $58,059 $39,693 $38,199 $20,794 Ratios to average net assets: Expenses .......................................... .80%** .37% .30% .25% .16% .10% Expenses excluding waiver and payments by affiliate .80%** .84% .82% .86% .86% .96% Net investment income ............................. 4.48%** 4.87% 5.11% 5.45% 5.51% 5.80% Portfolio turnover rate ............................ 12.96% 10.68% 17.44% 18.27% 4.12% 44.61%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)Includes distributions in excess of net investment income in the amount of $.004. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 99.9% Arizona Health Facilities Authority Hospital System Revenue, Northern Arizona Healthcare System, AMBAC Insured, 5.00%, 10/01/23 ................................................................ $3,500,000 $3,181,080 Refunding, AMBAC Insured, 4.75%, 10/01/30 ..................................................... 1,000,000 845,760 Arizona State University Revenue, Refunding, Series A, MBIA Insured, 5.50%, 7/01/19 .............. 1,000,000 992,760 Arizona State Wastewater Management Authority Wastewater Financial Assistance Revenue, AMBAC Insured, 5.75%, 7/01/15 ................................................................. 750,000 762,210 Casa Grande Excise Tax Revenue, FGIC Insured, 6.00%, 4/01/10 ..................................... 400,000 419,836 Douglas Municipal Property Corp. Municipal Facilities Excise Tax Revenue, MBIA Insured, 5.75%, 7/01/15 .................................................................. 525,000 532,639 Gilbert GO, Projects of 1988, Series C, MBIA Insured, 5.50%, 7/01/23 ............................. 1,000,000 982,970 Glendale IDA, Midwestern University, Series A, MBIA Insured, 5.375%, 5/15/28 ..................... 2,000,000 1,927,640 La Paz County School District No. 4, Quartzsite Elementary School Improvement, MBIA Insured, 5.70%, 7/01/16 .................................................................. 480,000 485,400 Marana Municipal Property Corp. Municipal Facilities Revenue, Refunding, MBIA Insured, 5.25%, 7/01/22 .................................................................. 1,100,000 1,054,746 Maricopa County GO, Hospital District No. 1, AMBAC Insured, 5.00%, 6/01/21 ........................................ 1,250,000 1,156,263 School District No. 8, Osborn, Refunding, Series A, FGIC Insured, 5.875%, 7/01/14 ............. 500,000 520,915 School District No. 11, Peoria Unified, Refunding, AMBAC Insured, 6.10%, 7/01/10 .............. 700,000 737,814 School District No. 28, Kyrene Elementary, Series B, FGIC Insured, 6.00%, 7/01/14 ............. 500,000 516,625 School District No. 31, Series A, AMBAC Insured, Pre-Refunded, 6.20%, 7/01/13 ................. 570,000 616,700 School District No. 66, Roosevelt Elementary, Projects of 1996, Series B, FGIC Insured, 5.30%, 7/01/13 ............................................................... 1,540,000 1,538,383 School District No. 68, Alhambra Elementary, Refunding and Improvement, AMBAC Insured, 5.125%, 7/01/13 ............................................................. 500,000 490,980 School District No. 98, Fountain Hills Unified, AMBAC Insured, 5.75%, 7/01/12 ................. 500,000 518,870 School District No. 98, Fountain Hills Unified, Series A, MBIA Insured, Pre-Refunded, 6.20%, 7/01/10 ............................................................... 235,000 254,254 USD No. 9, Wickenburg Projects of 1997, AMBAC Insured, 5.55%, 7/01/14 ......................... 1,000,000 1,011,940 USD No. 9, Wickenburg Projects of 1997, AMBAC Insured, 5.65%, 7/01/16 ......................... 1,055,000 1,069,548 USD No. 80, Chandler, FGIC Insured, 5.85%, 7/01/13 ............................................ 435,000 451,991 USD No. 80, Chandler, Projects of 1995, Series E, FGIC Insured, 5.00%, 7/01/13 ................ 1,750,000 1,693,878 USD No. 95, Queens Creek, Series A, AMBAC Insured, 5.70%, 7/01/14 ............................. 400,000 409,852 Maricopa County IDA, MFHR, Metro Gardens, Mesa Ridge Project, Series A, MBIA Insured, 5.15%, 7/01/29 ............... 2,350,000 2,143,576 MFHR, Stanford Court Apartments Project, Series A, MBIA Insured, 5.30%, 7/01/28 ............... 1,000,000 951,760 MFHR, Villas De Merced Apartment Project, Series A, GNMA Secured, 5.50%, 12/20/37 ............. 570,000 537,938 Water System Revenue Improvement, Chaparral Water Co., Series A, AMBAC Insured, 5.40%, 12/01/22 ................................................................... 1,000,000 956,570 Water System Revenue, Series B, AMBAC Insured, 5.30%, 12/01/22 ................................ 515,000 486,067 Maricopa County School District No 3, Tempe Elementary, AMBAC Insured, Pre-Refunded, 6.00%, 7/01/13 ................................................... 255,000 275,760 Refunding, AMBAC Insured, 6.00%, 7/01/13 ...................................................... 445,000 466,244 McDowell Mountain Ranch Community Facilities District GO, Refunding, AMBAC Insured, 5.00%, 7/15/22 ................................................................. 3,745,000 3,452,441 Mesa GO, FGIC Insured, 5.00%, 7/01/18 ............................................................ 500,000 466,980 Mesa IDAR, (b)Discovery Health Systems, Series A, MBIA Insured, 5.75%, 1/01/25 ............................ 5,000,000 5,011,900 (b)Discovery Health Systems, Series A, MBIA Insured, 5.625%, 1/01/29 ........................... 2,000,000 1,970,160 Lutheran Health Systems, Refunding, Series A-1, MBIA Insured, 5.00%, 1/01/19 .................. 1,490,000 1,371,932 Mesa Street and Highway Revenue, FGIC Insured, 5.00%, 7/01/17 .................................... 1,000,000 933,870 Mesa Utility System Revenue, FGIC Insured, 5.25%, 7/01/16 ................................................................................ 500,000 489,575 5.375%, 7/01/17 ............................................................................... 500,000 493,475 Mohave County GO Hospital District No. 1, Kingman Regional Medical Center Project, FGIC Insured, 6.50%, 6/01/15 .................................................................. 610,000 640,219 Navajo County PCR, Arizona Public Service Co., Series A, AMBAC Insured, 5.50%, 8/15/28 ................................................................. 2,400,000 2,355,600 MBIA Insured, 5.875%, 8/15/28 ................................................................. 2,450,000 2,479,915 Oro Valley Municipal Property Corp. Excise Tax Revenue, Refunding, FGIC Insured, 5.00%, 7/01/19 ................................................................................ 1,035,000 959,952 Oro Valley Municipal Property Corp. Revenue, Municipal Water System, MBIA Insured, 5.55%, 7/01/17 ................................................................................ 700,000 703,332 Phoenix Civic Improvement Corp. Airport Revenue, senior lien, Series A, FSA Insured, 5.00%, 7/01/25 ................................................................................ 1,500,000 1,370,145 Phoenix Civic Improvement Corp. Municipal Facilities Excise Tax Revenue, MBIA Insured, Pre-Refunded, 6.90%, 7/01/21 .................................................... 1,000,000 1,120,080 Phoenix Civic Improvement Corp. Water System Revenue, junior lien, AMBAC Insured, 5.50%, 7/01/21 ................................................................. 500,000 494,945 FGIC Insured, 5.50%, 7/01/24 .................................................................. 1,000,000 985,270 MBIA Insured, 5.375%, 7/01/22 ................................................................. 1,000,000 972,380 Phoenix IDA, SFMR, Statewide, Series C, GNMA Secured, 5.30%, 4/01/20 ............................. 1,500,000 1,420,830
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Pima County IDA, SFMR, GNMA Secured, 6.625%, 11/01/14 ........................................... $540,000 $562,156 Pima County USD, No. 6, Marana Projects of 1995, Series B, FGIC Insured, 5.00%, 7/01/17 ......... 1,600,000 1,507,984 Pinal County USD, No. 43, Apache Junction, Series C, FGIC Insured, 5.00%, 7/01/15 ............... 1,000,000 954,650 Prescott Municipal Property Corp. Municipal Facility Revenue, FGIC Insured, 5.125%, 1/01/18 ..... 1,000,000 948,120 Puerto Rico Commonwealth GO, MBIA Insured, Pre-Refunded, 6.45%, 7/01/17 ......................... 845,000 930,590 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Puerto Rico State Infrastructure, MBIA Insured, 5.00%, 7/01/28 .............................. 1,960,000 1,784,776 Puerto Rico Electric Power Authority Revenue, Series R, FSA Insured, Pre-Refunded, 6.25%, 7/01/17 ................................................................. 800,000 854,576 Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Hospital Revenue, Hospital Auxilio Mutuo Obligation, Series A, MBIA Insured, 6.25%, 7/01/24 .................... 840,000 894,104 Puerto Rico PBA Revenue, Government Facilities, Series B, AMBAC Insured, 5.00%, 7/01/27 ......... 1,800,000 1,634,364 Salt River Project Agricultural Improvement and Power District Electric System Revenue, Refunding, Series D, 5.50%, 1/01/25 .......................................................... 1,000,000 990,470 Series D, 6.25%, 1/01/27 ..................................................................... 1,205,000 1,259,635 Series D, Pre-Refunded, 6.25%, 1/01/27 ....................................................... 295,000 313,140 Santa Cruz County USD No. 1, Nogales, Series B, AMBAC Insured, Pre-Refunded, 6.10%, 7/01/14 ..... 250,000 267,390 Sierra Vista Municipal Property Corp. Facilities Revenue, AMBAC Insured, 6.15%, 1/01/15 ............................................................................... 360,000 377,759 5.00%, 1/01/18 ............................................................................... 1,250,000 1,160,588 Tucson GO, Series A, MBIA Insured, 5.375%, 7/01/19 ...................................................... 500,000 488,345 Series 1984-G, FGIC Insured, Pre-Refunded, 6.25%, 7/01/18 .................................... 650,000 704,652 Tucson Water Revenue, Refunding, FGIC Insured, 5.125%, 7/01/20 .................................. 2,000,000 1,879,220 University of Arizona COP, Administrative and Packaging Facility Project, Series B, MBIA Insured, 6.00%, 7/15/16 ........ 500,000 521,640 Administrative and Packaging Facility Project, Series B, MBIA Insured, 6.00%, 7/15/23 ........ 1,625,000 1,680,201 Residence Life Project, Series A, FSA Insured, 5.80%, 9/01/13 ................................ 1,000,000 1,033,030 Yavapai County GO, Elementary School District No. 6 Cottonwood-Oak Creek, Project of 1993, Series B, AMBAC Insured, 6.70%, 7/01/09 ................................................................ 250,000 270,425 USD No. 22 Humboldt, Project of 1995, Series C, FGIC Insured, 5.40%, 7/01/14 ................. 575,000 576,691 USD No. 28 Camp Verde, Refunding, FGIC Insured, 6.00%, 7/01/09 ............................... 775,000 821,136 Yavapai County IDA, Residential Care Facility Revenue, Margaret T. Morris Center, Series A, GNMA Secured, 5.40%, 2/20/38 ....................................................... 1,585,000 1,490,074 Yuma County GO, Elementary School District No. 1, MBIA Insured, 5.50%, 7/01/14 ................................................................. 1,000,000 1,010,510 Series A, MBIA Insured, 5.75%, 7./01/14 ...................................................... 500,000 515,305 Yuma County Jail District Revenue, AMBAC Insured, 5.25%, 7/01/12 ................................ 1,000,000 1,001,630 Yuma IDA, Hospital Revenue, Regency Apartments, Refunding, Series A, GNMA Secured, 5.50%, 12/20/32 ....................... 920,000 883,338 Yuma Regional Medical Center, Refunding, MBIA Insured, 5.50%, 8/01/17 ........................ 1,000,000 995,438 ----------- TOTAL LONG TERM INVESTMENTS (Cost $84,898,590) .................................................. 83,995,907 ----------- (a)SHORT TERM INVESTMENTS 2.5% Maricopa County PCC, PCR, Arizona Public Service Co., Refunding, Series D, Daily VRDN and Put, 2.75%, 5/01/29 ............................................................. 1,800,000 1,800,000 Maricopa County PCR, El Paso Electric Co. Project, Series A, Weekly VRDN and Put, 3.30%, 7/01/14 ................................................................................. 350,000 350,000 ----------- TOTAL SHORT TERM INVESTMENTS (COST $2,150,000) ................................................. 2,150,000 ----------- TOTAL INVESTMENTS (COST $87,048,590) 102.4% .................................................... 86,145,907 OTHER ASSETS, LESS LIABILITIES (2.4%) .......................................................... (2,050,722) ----------- NET ASSETS 100.0% .............................................................................. $84,095,185 ===========
See glossary of terms on page 83. (a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b)Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, (UNAUDITED)*** 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............... $10.53 $10.43 $9.99 $10.02 $9.53 $10.07 --------------------------------------------------------------------------- Income from investment operations: Net investment income ............................. .24 .51 .53 .53 .53 .52 Net realized and unrealized gains (losses) ........ (.54) .10 .44 (.03) .49 (.53) --------------------------------------------------------------------------- Total from investment operations ................... (.30) .61 .97 .50 1.02 (.01) --------------------------------------------------------------------------- Less distributions from net investment income ...... (.25)(1) (.51) (.53) (.53) (.53) (.53) --------------------------------------------------------------------------- Net asset value, end of period ..................... $9.98 $10.53 $10.43 $9.99 $10.02 $9.53 =========================================================================== Total return* ...................................... (2.92)% 6.01% 9.94% 5.17% 10.95% .21% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .................. $120,590 $124,488 $101,506 $77,177 $69,583 $46,847 Ratios to average net assets: Expenses .......................................... .75%** .42% .35% .35% .35% .35% Expenses excluding waiver and payments by affiliate .77%** .79% .80% .80% .82% .88% Net investment income ............................. 4.60%** 4.88% 5.16% 5.36% 5.37% 5.61% Portfolio turnover rate ............................ 9.32% 1.81% 8.08% 32.23% 24.36% 43.71%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)Includes distributions in excess of net investment income in the amount of $.004. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 99.1% Alachua County Public Improvement Revenue, AMBAC Insured, 5.25%, 8/01/29 .......................... $2,500,000 $2,342,650 Alachua County School Board COP, AMBAC Insured, 5.00%, 7/01/18 .................................... 1,000,000 927,360 Bay Medical Center Hospital Revenue, Bay Medical Center Project, AMBAC Insured, 5.00%, 10/01/27 ................................................................................ 2,025,000 1,824,930 Broward County HFA, FSA Insured, 5.60%, 11/01/17 ................................................................................ 630,000 615,220 5.65%, 11/01/22 ................................................................................ 885,000 861,530 5.70%, 11/01/29 ................................................................................ 1,345,000 1,292,545 Canaveral Port Authority Revenue, Refunding, Series B, FGIC Insured, 5.625%, 6/01/21 .............. 1,000,000 999,280 Celebration CDD, Special Assessment, Series A, MBIA Insured, 5.50%, 5/01/18 ....................... 535,000 531,255 Citrus County PCR, Florida Power Corp., Refunding, MBIA Insured, 6.625%, 1/01/27 .................. 2,435,000 2,571,847 Cocoa Beach Improvement Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/20 ........................ 1,000,000 996,170 Cocoa Water and Sewer Improvement Revenue, FGIC Insured, Pre-Refunded, 5.875%, 10/01/22 ........... 1,000,000 1,078,060 Dade County HFA, MFMR, Siesta Pointe Apartments, Series A, FSA Insured, 5.75%, 9/01/29 ............ 1,890,000 1,868,681 Dade County Water and Sewer System Revenue, FGIC Insured, 5.25%, 10/01/21 ......................... 1,000,000 953,480 Escambia County Utilities Authority Utility System Revenue, FGIC Insured, 5.625%, 1/01/27 ......... 1,500,000 1,502,100 First Florida Governmental Financing Commission Revenue, Refunding, AMBAC Insured, 5.375%, 7/01/18 ................................................................................ 1,475,000 1,443,273 Florida HFA, Spinnaker Cove Apartments, Series G, AMBAC Insured, 6.50%, 7/01/36 ................... 1,600,000 1,675,360 (b)Florida Housing Finance Corp. Revenue, Housing Logans Pointe Apartments, Series F-1, FSA Insured, 5.90%, 12/01/19 ................................................................... 1,205,000 1,208,000 (b)Florida State Department of General Services Division Facilities Management Revenue, Florida Facilities Pool, Series B, FSA Insured, 5.50%, 9/01/28 ................................. 550,000 540,760 Gainesville Public Improvements, Refunding, AMBAC Insured, 5.50%, 8/01/17 ......................... 1,000,000 996,560 Gulf Breeze Revenue, Local Government Loan Program, FGIC Insured, 6.05%, 12/01/13 ................. 1,915,000 2,033,577 Hernando County Water and Sewer Revenue, FGIC Insured, 6.00%, 6/01/19 ................................................................................. 1,035,000 1,078,584 Pre-Refunded, 6.00%, 6/01/19 ................................................................... 965,000 1,024,917 Hillsborough County IDA, PCR, Tampa Electric Co. Project, Refunding, MBIA Insured, 6.25%, 12/01/34 ................................................................................ 1,500,000 1,580,040 Hillsborough County IDAR, University Community Hospital, MBIA Insured, 5.80%, 8/15/24 ............. 2,000,000 2,025,000 Indian River County Water and Sewer Revenue, FGIC Insured, 5.50%, 9/01/26 ......................... 1,250,000 1,232,700 Indian Trace CDD, Water Management Special Benefit Assessment, MBIA Insured, 5.00%, 5/01/27 ................................................................................. 1,000,000 901,780 Indian Trail Water Control District Improvement Bonds, MBIA Insured, 5.75%, 8/01/16 ................................................................................. 1,090,000 1,110,470 5.60%, 8/01/17 ................................................................................. 1,000,000 1,004,820 5.50%, 8/01/22 ................................................................................. 500,000 494,835 Jacksonville Sales Tax Revenue, River City Renaissance Project, FGIC Insured, 5.375%, 10/01/18 ............................................................................... 1,000,000 978,370 Jacksonville Water and Sewer Revenue, United Water Project, AMBAC Insured, 6.35%, 8/01/25 ......... 1,000,000 1,060,450 Lake Clarke Shores Utility Systems Revenue, Refunding and Improvement, FGIC Insured, 5.80%, 10/01/18 .................................................................. 1,415,000 1,434,569 Lake Mary Public Improvement Revenue, FGIC Insured, 5.25%, 9/01/15 ................................ 1,000,000 989,340 Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding, MBIA Insured, 5.25%, 11/15/16 .................................................................. 2,000,000 1,942,500 Lakeland Utilities Tax Revenue, Refunding and Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 .................................................................. 500,000 523,110 Lee County Capital and Transportation Facilities Revenue, Refunding, Series A, MBIA Insured, 5.55%, 10/01/18 .................................................................. 3,000,000 2,996,340 Lee County IDA Utilities Revenue, Bonita Springs Utilities Project, Refunding, MBIA Insured, 6.05%, 11/01/15 ....................................................................................... 2,000,000 2,091,440 11/01/20 ....................................................................................... 1,500,000 1,563,540 Lee County Solid Waste System Revenue, MBIA Insured, 5.375%, 10/01/15 ............................. 2,000,000 1,963,000 Lynn Haven Capital Improvement Revenue, Series A, MBIA Insured, 5.75%, 12/01/16 ................... 1,000,000 1,017,620 Martin County Consolidated Utilities System Revenue, FGIC Insured, Pre-Refunded, 6.00%, 10/01/24 .................................................... 685,000 742,732 Refunding, FGIC Insured, 6.00%, 10/01/24 ....................................................... 215,000 223,004 Martin County Health Facilities Authority Hospital Revenue, Martin Memorial Medical Center Project, AMBAC Insured, 5.00%, 11/15/28 ......................... 3,000,000 2,698,800 Martin County Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/14 ...................... 1,000,000 1,057,730 Martin County Utilities System Revenue, Refunding, FGIC Insured, 5.00%, 10/01/24 .................. 1,500,000 1,360,725 Miami-Dade County School Board COP, Refunding, Series C, FSA Insured, 5.00%, 8/01/25 .............. 2,000,000 1,811,540 Miami-Dade County Water and Sewer Revenue, Series A, FGIC Insured, 5.00%, 10/01/29 ................ 1,800,000 1,622,016 Miramar Wastewater Improvement Assessment Revenue, FGIC Insured, Pre-Refunded, 6.75%, 10/01/25 ................................................................................ 2,000,000 2,220,040 Ocoee Water and Sewer System Revenue, AMBAC Insured, 5.625%, 10/01/26 ............................. 5,220,000 5,228,926 Okaloosa County Gas District Revenue, Gas System, MBIA Insured, 5.50%, 10/01/21 ................................................................................ 2,795,000 2,749,274 Okeechobee Utility Authority Utility System Revenue, Capital Improvement, Refunding, FSA Insured, 5.00%, 10/01/25 ........................................................... 2,000,000 1,811,020
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Orange County Capital Improvement Revenue, AMBAC Insured, Pre-Refunded, 6.00%, 10/01/22 ................................................. $500,000 $533,460 Refunding, AMBAC Insured, 6.00%, 10/01/22 .................................................... 490,000 511,266 Orange County Health Facilities Authority Revenue, Adventist/Sunbelt, Series B, FSA Insured, 6.75%, 11/15/21 .................................... 1,000,000 1,059,470 Orlando Regional Healthcare, Refunding, Series A, MBIA Insured, 6.00%, 11/01/24 .............. 2,400,000 2,505,576 Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ........................ 1,000,000 1,038,150 Orange County Sales Tax Revenue, FGIC Insured, 5.375%, 1/01/24 ...................................................................................... 1,000,000 965,070 Orange County School Board COP, Series A, MBIA Insured, 5.375%, 8/01/22 ......................... 875,000 851,918 Osceola County HFA, MFHR, Tierra Vista Apartment Project, Series A, FSA Insured, 5.70%, 12/01/17 .............................................................................. 630,000 624,998 Osceola County School Board COP, Series A, AMBAC Insured, Pre-Refunded, 6.00%, 6/01/19 .......... 1,900,000 2,052,855 Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured, 6.10%, 4/01/17 ............................................................................... 1,225,000 1,271,869 Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured, 6.00%, 6/01/15 ............. 1,000,000 1,048,980 Pinellas County Sewer Revenue, FGIC Insured, Pre-Refunded, 6.00%, 10/01/24 ...................... 1,250,000 1,333,650 Port Orange Water and Sewer Revenue, junior lien, Refunding, AMBAC Insured, 5.25%, 10/01/21 .............................................................................. 1,500,000 1,430,220 Port St.Lucie Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured, 5.125%, 9/01/27 .............................................................................. 4,000,000 3,706,440 Puerto Rico Commonwealth GO, FSA Insured, Pre-Refunded, 6.00%, 7/01/22 .......................... 1,000,000 1,061,620 Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured, 5.50%, 7/01/25 ......... 1,000,000 997,180 Saint Lucie West Services District Special Assessment Revenue, Port Saint Lucie, Water Management Benefit, Refunding, senior lien, Series A, MBIA Insured, 5.25%, 5/01/25 ....................................................... 5,000,000 4,756,300 Sarasota County Utilities System Revenue, FGIC Insured, 5.75%, 10/01/27 ......................... 520,000 525,918 Seminole County School Board COP, Series A, MBIA Insured, Pre-Refunded, 6.125%, 7/01/14 ...................................................................................... 1,000,000 1,086,780 7/01/19 ...................................................................................... 1,000,000 1,086,780 South Miami Health Facilities Authority Hospital Revenue, Baptist Health System Obligation Group, MBIA Insured, 5.00%, 11/15/28 ........................... 3,000,000 2,698,800 St. John's County IDA, IDR, Series A, MBIA Insured, 5.25%, 3/01/11 ............................................................................... 1,250,000 1,256,488 5.50%, 3/01/17 ............................................................................... 1,000,000 991,130 St. Lucie County Water and Sewer Revenue, Refunding, AMBAC Insured, 5.50%, 10/01/17 ............. 500,000 498,275 Stuart Utilities Revenue, FGIC Insured, Pre-Refunded, 6.70%, 10/01/14 .............................................................................. 500,000 541,895 6.80%, 10/01/24 .............................................................................. 500,000 543,745 Sunrise Utilities System Revenue, Refunding, AMBAC Insured, 5.20%, 10/01/22 ..................... 2,000,000 1,901,960 Tampa Occupational License Tax, Refunding, Series B, FGIC Insured, 5.50%, 10/01/27 .............. 1,000,000 985,880 Tampa Sports Authority Revenue, Tourist Development, FSA Insured, 5.25%, 1/01/27 ................ 2,000,000 1,889,120 Titusville Water and Sewer Revenue, MBIA Insured, Pre-Refunded, 6.20%, 10/01/14 ................. 490,000 535,702 Vero Beach Electric Revenue, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ................ 1,500,000 1,444,320 Village Center CDD, Recreational Revenue, Refunding, Series A, MBIA Insured, 5.00%, 11/01/21 .... 1,000,000 913,630 West Melbourne Water and Sewer Revenue, Refunding and Improvement, FGIC Insured, 6.75%, 10/01/14 ............................................................................... 500,000 544,555 West Palm Beach Utilities System Revenue, Series B, FGIC Insured, 5.40%, 10/01/23 ............... 1,500,000 1,452,824 ------------ TOTAL LONG TERM INVESTMENTS (Cost $119,111,902) ................................................. 119,448,694 ------------ (a)SHORT TERM INVESTMENTS .9% Jacksonville Educational Facilities Revenue, Jacksonville University Project, Weekly VRDN and Put, 3.25%, 10/01/22 ............................................................ 800,000 800,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ............................................................ 300,000 300,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $1,100,000) .................................................. 1,100,000 ------------ TOTAL INVESTMENTS (COST $120,211,902) 100.0% .................................................... 120,548,694 OTHER ASSETS, LESS LIABILITIES .................................................................. 41,502 ------------ NET ASSETS 100.0% ............................................................................... $120,590,196 ============
See glossary of terms on page 83. (a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b)Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $12.26 $12.31 $12.15 $12.27 $11.97 $12.45 ------------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .30 .63 .66 .69 .71 .71 Net realized and unrealized gains (losses) ... (.58) .06 .29 (.11) .30 (.48) ------------------------------------------------------------------------------- Total from investment operations .............. (.28) .69 .95 .58 1.01 .23 ------------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.30) (.63) (.66) (.70) (.71) (.71) In excess of net investment income ........... (.01) (.01) (.01) -- -- -- Net realized gains ........................... (.02) (.10) (.12) -- -- -- ------------------------------------------------------------------------------- Total distributions ........................... (.33) (.74) (.79) (.70) (.71) (.71) ------------------------------------------------------------------------------- Net asset value, end of period ................ $11.65 $12.26 $12.31 $12.15 $12.27 $11.97 =============================================================================== Total return* ................................. (2.39)% 5.72% 8.09% 4.88% 8.66% 2.03% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $1,613,824 $1,727,014 $1,685,260 $1,662,087 $1,705,038 $1,683,234 Ratios to average net assets: Expenses ..................................... .62%** .62% .61% .60% .60% .59% Net investment income ........................ 5.08%** 5.11% 5.44% 5.68% 5.81% 6.00% Portfolio turnover rate ....................... 11.56% 13.16% 27.77% 18.66% 13.52% 14.42%
CLASS C - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $12.33 $12.38 $12.21 $12.31 $11.98 ----------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .27 .57 .60 .62 .54 Net realized and unrealized gains (losses) ... (.58) .05 .29 (.09) .32 ----------------------------------------------------------------------- Total from investment operations .............. (.31) .62 .89 .53 .86 ----------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.27) (.57)(2) (.60) (.63) (.53) In excess of net investment income ........... (.01) -- -- -- -- Net realized gains ........................... (.02) (.10) (.12) -- -- ----------------------------------------------------------------------- Total distributions ........................... (.30) (.67) (.72) (.63) (.53) ----------------------------------------------------------------------- Net asset value, end of period ................ $11.72 $12.33 $12.38 $12.21 $12.31 ======================================================================= Total return* ................................. (2.58)% 5.12% 7.52% 4.42% 7.32% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $65,137 $65,166 $38,057 $21,521 $8,152 Ratios to average net assets: Expenses ..................................... 1.18%** 1.18% 1.18% 1.17% 1.18%** Net investment income ........................ 4.52%** 4.54% 4.86% 5.10% 5.21%** Portfolio turnover rate ....................... 11.56% 13.16% 27.77% 18.66% 13.52%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2)Includes distributions in excess of net investment income in the amount of $.004. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 100.3% ALABAMA 3.4% Alabama State Board Educational Revenue, Southern Union State Junior College, MBIA Insured, Pre-Refunded, 6.50%, 7/01/12 ...................................................... $1,000,000 $1,065,420 Alabama Water Pollution Control Authority Revolving Fund Loan, AMBAC Insured, 6.25%, 8/15/14 ................................................................... 100,000 102,422 Series A, AMBAC Insured, 5.60%, 8/15/16 ......................................................... 2,000,000 2,005,920 Anniston Regional Medical Center Board, Series A, AMBAC Insured, 5.25%, 6/01/18 .................................................................................. 5,000,000 4,798,050 5.125%, 6/01/28 ................................................................................. 3,000,000 2,757,270 Auburn Governmental Utility Services Corp. Wastewater Treatment Revenue, Merscot-Auburn LP Project, FGIC Insured, 7.30%, 1/01/12 ......................................... 1,420,000 1,457,133 Bessemer Governmental Utility Services Corp., Water Supply Revenue, MBIA Insured, 5.25%, 6/01/32 .................................................................... 5,000,000 4,674,500 Birmingham Airport Authority Revenue, MBIA Insured, 5.625%, 7/01/26 ................................ 2,000,000 2,000,520 Birmingham Baptist Medical Center Special Care Facilities Financing Authority Revenue, Baptist Health System Inc.,Refunding, MBIA Insured, 5.875%, 11/15/19 ............................ 3,500,000 3,266,655 Daphne Utilities Board Water Gas and Sewer Revenue, Capital Improvement Bonds, Series B, FGIC Insured, 7.35%, 6/01/20 ............................... 2,000,000 2,069,720 Refunding, Series B, FGIC Insured, 7.30%, 6/01/10 ............................................... 4,030,000 4,188,379 East Alabama Health Care Authority Health Care Facilities Revenue, Tax Anticipation Bond, Series A, MBIA Insured, 5.25%, 9/01/28 .......................................................... 8,500,000 7,769,935 Fort Payne Waterworks Board of Water Revenue, MBIA Insured, 5.45%, 7/01/21 ......................... 3,550,000 3,496,289 Huntsville Health Care Authority Facilities Revenue, Series A, MBIA Insured, 6.375%, 6/01/22 ....... 300,000 315,471 Huntsville Health Care Authority, Series A, MBIA Insured, 5.00%, 6/01/23 ........................... 2,000,000 1,797,300 Jefferson County Sewer Revenue, wts., Series D, FGIC Insured, 5.75%, 2/01/22 ....................... 5,000,000 4,962,350 Montgomery Medical Clinic Board Health Care Facilities Revenue, Jackson Hospital and Clinic, Refunding, AMBAC Insured, 6.00%, 3/01/26 ....................................................... 4,000,000 4,131,520 Pelham GO, AMBAC Insured, 5.50%, 12/01/26 .......................................................... 2,000,000 1,947,500 University of Alabama Hospital Revenues, Huntsville, Refunding, Series A, MBIA Insured, 5.50%, 5/01/18 ..................................................................................... 4,000,000 3,944,600 ---------- 56,750,954 ---------- ALASKA 3.2% Alaska Energy Authority Power Revenue, Bradley Lake Hydro Project, Series 1, MBIA Insured, 7.25%, 7/01/21 .............................. 5,795,000 6,028,481 Bradley Lake Project, BIG Insured, 6.25%, 7/01/21 ............................................... 5,000 5,018 Alaska Energy Authority Utilities Revenue, Refunding, FSA Insured, 5.20%, 7/01/17 .................................................................................. 3,000,000 2,859,030 5.375%, 7/01/20 ................................................................................. 5,000,000 4,832,450 Alaska Industrial Development and Export Authority, Refunding, Series A, MBIA Insured, 6.125%, 4/01/27 ................................................................... 5,000,000 5,103,100 Alaska State HFC, Refunding, Series A, MBIA Insured, 6.00%, 6/01/27 .................................................................................. 5,000,000 5,062,000 5.875%, 12/01/30 ................................................................................ 485,000 488,254 6.10%, 12/01/37 ................................................................................. 5,000,000 5,083,850 Anchorage Electric Utility Revenue, senior lien, Municipal Light and Power, Series C, AMBAC Insured, 5.125%, 12/01/26 ............................ 5,000,000 4,559,300 Series B, MBIA Insured, 5.50%, 2/01/26 ............................................................. 4,000,000 3,854,280 Anchorage GO, General Purpose, AMBAC Insured, Pre-Refunded, 7.30%, 8/01/10 .................................... 2,765,000 2,855,250 Refunding, AMBAC Insured, 7.20%, 6/01/17 ........................................................ 5,000,000 5,062,500 Refunding, AMBAC Insured, 6.25%, 6/01/23 ........................................................ 3,505,000 3,546,359 University of Alaska COP, Series 1990, FSA Insured, 7.375%, 10/01/07 ............................... 500,000 529,270 University of Alaska Revenues, Series B, AMBAC Insured, 6.50%, 10/01/17 ........................................................ 250,000 265,910 Series G, FSA Insured, 5.45%, 10/01/22 .......................................................... 3,155,000 3,118,118 ---------- 53,253,170 ---------- ARIZONA 3.6% Arizona State Municipal Financing Program COP, Series 1986-20, BIG Insured, ETM, 7.70%, 8/01/10 ............................................................................. 6,000,000 7,104,420 Chandler Water and Sewer Revenue, Refunding, FGIC Insured, 7.00%, 7/01/12 .......................... 2,200,000 2,305,292 Cochise County USD, No. 68, Sierra Vista, Refunding, FGIC Insured, 7.50%, 7/01/10 ......................................................... 500,000 603,025 Series B, FGIC Insured, Pre-Refunded, 7.625%, 7/01/10 ........................................... 3,000,000 3,126,000
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) ARIZONA (CONT.) Maricopa County GO, UHSD, No. 216, FGIC Insured, 6.70%, 7/01/11 .................................................... $325,000 $334,604 UHSD, No. 216, FGIC Insured, Pre-Refunded, 6.70%, 7/01/11 ...................................... 675,000 698,315 USD No. 80, Chandler, FGIC Insured, Pre-Refunded, 7.20%, 7/01/07 ............................... 775,000 804,892 USD No. 80, Chandler, FGIC Insured, Pre-Refunded, 7.20%, 7/01/08 ............................... 825,000 856,820 USD No. 80, Chandler, FGIC Insured, Pre-Refunded, 7.25%, 7/01/09 ............................... 500,000 519,490 Maricopa County IDA, Hospital Facility Revenue, Samaritan Health Service Hospital, Refunding, Series A, MBIA Insured, 7.00%, 12/01/16 ............................................. 300,000 352,644 (b)Mesa IDAR, Discovery Health Systems, Series A, MBIA Insured, 5.75%, 1/01/25 ................................................................................. 25,000,000 25,059,500 5.625%, 1/01/29 ................................................................................ 7,400,000 7,289,592 Navajo County PCR, Arizona Public Service Co., Series A, MBIA Insured, 5.875%, 8/15/28 ............ 3,925,000 3,972,924 Pima County Sewer Revenue, Refunding, FGIC Insured, 6.75%, 7/01/15 ................................ 270,000 282,577 Salt River Project Agricultural Improvement and Power District Electric System Revenue, Refunding, Series A, FGIC Insured, 5.50%, 1/01/19 .............................................. 1,150,000 1,141,789 Tucson Water Revenue, Series 1994-A, MBIA Insured, Pre-Refunded, 6.00%, 7/01/21 ................... 5,000,000 5,411,900 ---------- 59,863,784 ---------- ARKANSAS .1% Arkansas State Development Finance Authority Water Revenue, Refunding, Series A, MBIA Insured, 6.50%, 7/01/10 ................................................................... 2,000,000 2,225,300 Pulaski County Health Facilities Board Hospital Revenue, St. Vincent's Infirmary, MBIA Insured, Pre-Refunded, 10.00%, 9/01/12 .................................................... 25,000 25,000 ---------- 2,250,300 ---------- CALIFORNIA 2.9% California Statewide CDA Revenue, COP, John Muir/Mt. Diablo Health System, MBIA Insured, 5.25%, 8/15/27 ................................................................................. 3,085,000 2,883,827 Corona COP, Corona Community Hospital Project, Pre-Refunded, 9.425%, 9/01/20 ...................... 15,000,000 19,693,500 El Centro Financing Authority Water and Wastewater Revenue, Series A, AMBAC Insured, 5.125%, 10/01/27 ............................................................................... 1,800,000 1,658,160 Lancaster RDA, Tax Allocation, Lancaster Residential Redevelopment, Refunding, MBIA Insured, 6.10%, 8/01/19 ................................................................................. 1,515,000 1,568,843 Los Angeles County MTA, Sales Tax Revenue, Proposition C, Series B-2, AMBAC Insured, 5.25%, 7/01/23 ................................................................................. 2,000,000 1,898,280 Oakland RDA, Central District Redevelopment, Refunding, AMBAC Insured, 5.50%, 2/01/14 250,000 255,743 Sacramento MUD, Electric Revenue, Refunding, Series D, MBIA Insured, 5.25%, 11/15/20 4,000,000 3,827,160 San Francisco BART District Sales Tax Revenue, FGIC Insured, 5.50%, 7/01/20 1,035,000 1,026,047 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 ................................................................................ 5,000,000 4,810,600 5.25%, 1/15/30 ................................................................................. 5,000,000 4,662,900 San Jose-Santa Clara Water Financing Authority Sewer Revenue, Series A, FGIC Insured, 5.375%, 11/15/20 ............................................................................... 2,670,000 2,605,466 Stockton East Water District COP, 1990 Project, Series A, AMBAC Insured, 6.40%, 4/01/22 ........... 1,460,000 1,538,139 Yuba City USD, COP, Refunding, Series A, MBIA Insured, 5.25%, 2/01/22 ............................. 1,750,000 1,665,825 ---------- 48,094,490 ---------- COLORADO 5.8% Arapahoe County COP, Arapahoe County Building Finance Corp., FSA Insured, Pre-Refunded, 7.50%, 12/01/10 ............. 1,000,000 1,043,600 Refunding, FSA Insured, 6.625%, 12/01/16 ....................................................... 8,695,000 9,232,177 Castle Pines Metropolitan District GO, Refunding and Improvement, FSA Insured, Pre-Refunded, 7.625%, 12/01/15 ............................................................................... 1,500,000 1,596,255 Centennial Water and Sanitation District, Water and Sewer Revenue, Refunding, Series A, FSA Insured, 5.125%, 12/01/17 .................................................................. 5,000,000 4,724,800 Colorado Association of School Boards COP, Pueblo School District No. 60 Project, Series A, MBIA Insured, Pre-Refunded, 7.25%, 12/01/09 .................................................... 2,400,000 2,444,928 Colorado Health Facilities Authority Revenue, Community Provider Pooled Loan Program, Series A, FSA Insured, 7.25%, 7/15/17 .......................................................... 1,174,000 1,237,302 Colorado Public Highway Authority Revenue, Highway E-470, Refunding, Senior Series A, MBIA Insured, 5.00%, 9/01/21 ................................................................... 5,000,000 4,535,250 Colorado Springs Hospital Revenue, Refunding, MBIA Insured, 6.00%, 12/15/24 ....................... 2,455,000 2,527,324 Colorado Springs Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured, 5.125%, 11/15/18 ............................................................................... 1,000,000 936,650 Colorado State Board of Agriculture Revenue, MBIA Insured, 6.40%, 3/01/11 ........................................................................................ 350,000 367,052 3/01/17 ........................................................................................ 440,000 457,851 Colorado Water Resource and Power Development Authority Small Water Resource Revenue, Series A, FGIC Insured, 6.70%, 11/01/12 ........................................................ 2,000,000 2,137,880
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) COLORADO (CONT.) Denver City and County Airport Revenue, Series A, MBIA Insured, 5.50%, 11/15/25 ....................................................... $7,250,000 $7,043,665 Series C, MBIA Insured, 6.125%, 11/15/25 ...................................................... 4,410,000 4,528,761 Series C, MBIA Insured, ETM, 6.125%, 11/15/25 ................................................. 3,590,000 3,867,758 Series D, MBIA Insured, 5.50%, 11/15/25 ....................................................... 3,900,000 3,783,858 Series E, MBIA Insured, 5.50%, 11/15/25 ....................................................... 5,000,000 4,857,700 Denver City and County Board of Water Commissioners COP, FGIC Insured, 6.625%, 11/15/11 .......... 545,000 574,953 Pre-Refunded, 6.625%, 11/15/11 ................................................................... 955,000 1,013,484 Denver City and County Revenue, Children's Hospital Association Project, FGIC Insured, 6.00%, 10/01/15 ................................................................. 3,000,000 3,095,190 El Paso County SFMR, Series A, GNMA Secured, 8.00%, 9/01/22 ...................................... 210,000 216,497 Garfield, Pitkin and Eagle Counties Reorganized School District No. 1, MBIA Insured, Pre-Refunded, 6.60%, 12/15/14 ................................................................. 3,600,000 3,954,132 Goldsmith Metropolitan District, Refunding, MBIA Insured, 6.125%, 12/01/12 ....................... 2,000,000 2,077,960 Jefferson County COP, Refunding, MBIA Insured, 6.65%, 12/01/08 ................................... 5,000,000 5,367,950 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ....................... 170,000 177,630 La Plata County School District No. R-9, Durango City, FGIC Insured, 6.55%, 11/01/12 ............. 490,000 520,385 Morgan County PCR, First Mortgage, Public Service Co., Refunding, Series A, MBIA Insured, 5.50%, 6/01/12 .................................................................. 1,000,000 1,014,480 Mountain College Residence Hall Revenue Authority, MBIA Insured, 5.625%, 6/01/12 ............................................................................... 1,900,000 1,956,867 5.75%, 6/01/23 ................................................................................ 3,000,000 3,020,190 Parker Water and Sanitation District Water and Sewer Revenue, Refunding, FGIC Insured, 6.20%, 10/01/15 .................................................................... 275,000 283,685 Postsecondary Educational Facilities Authority Revenue, University of Denver Project, Refunding, Connie Lee Insured, 6.00%, 3/01/10 ................................................. 1,000,000 1,034,270 Regional Transportation District Sales Tax Revenue, FGIC Insured, 6.25%, 11/01/12 ................ 235,000 249,159 University of Colorado Hospital Authority Revenue, Refunding, Series A, AMBAC Insured, 5.20%, 11/15/17 ........................................... 5,675,000 5,398,855 Refunding, Series A, AMBAC Insured, 5.25%, 11/15/22 ........................................... 8,800,000 8,260,824 Series A, AMBAC Insured, 5.00%, 11/15/29 ...................................................... 5,000,000 4,413,250 ---------- 97,952,572 ---------- CONNECTICUT .5% Connecticut State Health and Educational Facilities Authority Revenue, Danbury Hospital, Series E, MBIA Insured, 6.50%, 7/01/14 ...................................... 2,000,000 2,094,240 Mansfield Nursing Home, AMBAC Insured, 6.00%, 11/01/22 ........................................ 2,450,000 2,522,079 Trinity College, Series D, FGIC Insured, Pre-Refunded, 6.125%, 7/01/24 ........................ 2,000,000 2,178,120 New Haven Air Rights Parking Facility Revenue, Refunding, MBIA Insured, 6.50%, 12/01/15 .......... 2,000,000 2,114,780 ---------- 8,909,219 ---------- DELAWARE .3% Delaware State EDA Revenue, PCR, Refunding, Series B, AMBAC Insured, 6.75%, 5/01/19 .............. 1,000,000 1,061,060 Delaware State Health Facilities Authority Revenue, Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 10/01/15 ................................................................. 2,900,000 3,199,309 ---------- 4,260,369 ---------- FLORIDA 2.9% Bay Medical Center Hospital Revenue, Bay Medical Center Project, Refunding, AMBAC Insured, 5.65%, 10/01/26 ................................................................ 2,500,000 2,499,875 Cape Coral Franchise Fees Revenue, AMBAC Insured, 5.40%, 12/01/13 ................................ 1,800,000 1,832,706 Celebration CDD, Special Assessment, Series B, MBIA Insured, 5.50%, 5/01/19 ...................... 2,375,000 2,352,295 Dade County Seaport Revenue, Refunding, Series E, MBIA Insured, 8.00%, 10/01/08 .................. 200,000 244,818 Fort Myers Utility Revenue, Refunding, Series A, 6.00%, 10/01/19 ................................. 25,000 25,029 Greater Orlando Aviation Authority Orlando Airport Facilities Revenue, Series B, FGIC Insured, 5.25%, 10/01/28 ................................................................. 2,500,000 2,381,875 Hillsborough County IDA, PCR, Tampa Electric Co. Project, Refunding, MBIA Insured, 6.25%, 12/01/34 ............................................................................... 1,000,000 1,053,360 Hillsborough County IDAR, University Community Hospital, MBIA Insured, 5.80%, 8/15/24 ............ 3,000,000 3,037,500 Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding, MBIA Insured, 5.25%, 11/15/25 ................................................................. 1,250,000 1,173,838 Lee County IDA Utilities Revenue, Bonita Springs Utilities Project, Refunding, MBIA Insured, 6.05%, 11/01/15 ...................................................................................... 1,000,000 1,045,720 11/01/20 ...................................................................................... 1,000,000 1,042,360 Lee County Solid Waste System Revenue, MBIA Insured, 5.375%, 10/01/15 ............................ 2,000,000 1,963,000 Manatee County School Board COP, MBIA Insured, Pre-Refunded, 6.125%, 7/01/21 ..................... 5,000,000 5,484,450
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) FLORIDA (CONT.) Opa-Locka Capital Improvement Revenue, FGIC Insured, 6.125%, 1/01/24 .............................. $1,000,000 $1,040,510 Orange County Health Facilities Authority Revenue, Orlando Regional Healthcare, Refunding, Series A, MBIA Insured, 6.00%, 11/01/24 ................ 1,000,000 1,043,990 South Central Nursing, Series A, FSA Insured, 5.50%, 7/01/32 ................................... 3,000,000 2,941,650 Orlando and Orange County Expressway Authority Expressway Revenue, junior lien, FGIC Insured, 6.50%, 7/01/10 ........................................................................................ 100,000 112,773 7/01/12 ........................................................................................ 225,000 251,888 Orlando Utilities Commission Water and Electric Revenue, Series A, AMBAC Insured, 5.50%, 10/01/26 ................................................................................... 2,535,000 2,499,764 Osceola County School Board COP, Refunding, Series A, AMBAC Insured, 5.50%, 6/01/19 ............... 1,000,000 990,400 Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured, 6.10%, 4/01/17 .................................................................................... 1,000,000 1,038,260 Panama City Water and Sewer Revenue, Refunding and Improvement, AMBAC Insured, 5.625%, 6/01/19 ................................................................................... 1,000,000 1,001,760 Polk County IDAR, Winter Haven Hospital, Series 2, MBIA Insured, 6.25%, 9/01/15 ................... 985,000 1,051,172 Polk County School Board COP, Series A, FSA Insured, 5.00%, 1/01/24 ............................... 5,000,000 4,542,000 Reedy Creek ID, Utilities Revenue, Refunding, Series 1, MBIA Insured, 5.00%, 10/01/19 ............. 3,500,000 3,232,705 Sumter County School District Revenue, Multi-District Loan Program, FSA Insured, 7.15%, 11/01/15 ................................................................................... 250,000 299,768 Sunrise Utilities System Revenue, Refunding, AMBAC Insured, 5.20%, 10/01/22 ....................... 2,000,000 1,901,960 Volusia County Educational Facility Authority Revenue, Embry Riddle Aeronautical University, Refunding, Series B, 5.25%, 10/15/19 ..................... 3,500,000 3,361,190 ---------- 49,446,616 ---------- GEORGIA 3.8% Atlanta GO, Refunding, FGIC Insured, 5.00%, 12/01/20 ....................................................................................... 4,775,000 4,398,969 12/01/23 ....................................................................................... 6,000,000 5,465,940 Atlanta Water and Wastewater Revenue, Refunding, Series A, FGIC Insured, 5.00%, 11/01/29 .......... 10,000,000 8,904,700 Brunswick Water and Sewer Revenue, Refunding and Improvement, MBIA Insured, 6.10%, 10/01/14 ....... 1,535,000 1,657,462 Burke County Development Authority PCR, Georgia Power Co. Plant Vogtle, 7th Series, MBIA Insured, 6.625%, 10/01/24 ..................................................... 2,000,000 2,042,520 Refunding, 2nd Series, AMBAC Insured, 5.25%, 5/01/34 ........................................... 5,450,000 5,019,178 Cherokee County Water and Sewage Authority Revenue, FGIC Insured, 5.00%, 8/01/27 ................................................................... 1,500,000 1,334,970 Refunding, MBIA Insured, 6.90%, 8/01/18 ........................................................ 1,000,000 1,053,680 Columbia County Water and Sewage Revenue, Refunding, AMBAC Insured, 6.25%, 6/01/12 ................ 1,500,000 1,578,510 Fitzgerald Housing Authority Mortgage Revenue, Bridge Creek, Refunding, Series A, MBIA Insured, 6.50%, 7/01/24 ................................................................... 1,020,000 1,045,918 Macon-Bibb County Urban Development Authority Revenue, MF Housing, Refunding, Series A, MBIA Insured, 5.55%, 1/01/24 ......................................................... 1,590,000 1,564,846 (b)Medical Center Hospital Authority Revenue, Anticipation Certificates, Columbus Regional Healthcare System, MBIA Insured, 5.50%, 8/01/19 ................................. 15,000,000 14,557,950 8/01/25 ........................................................................................ 10,000,000 9,625,700 Municipal Electric Authority, Project One, Refunding, Sub Series A, MBIA Insured, 5.375%, 1/01/19 ................................................................................ 5,000,000 4,822,050 Upper Oconee Basin Water Authority Revenue, FGIC Insured, 5.25%, 7/01/27 .......................... 1,340,000 1,256,237 ---------- 64,328,630 ---------- Hawaii 1.7% Hawaii County GO, Refunding and Improvement, Series A, FGIC Insured, 5.60%, 5/01/12 ........................................................................................ 1,000,000 1,028,270 5/01/13 ........................................................................................ 1,000,000 1,023,930 Hawaii State Airports System Revenue, Second Series 1990, FGIC Insured, 7.50%, 7/01/20 ............ 5,000,000 5,202,250 Hawaii State Department of Budget and Finance Special Purpose Mortgage Revenue, Hawaiian Electric Co. and Subsidiaries, MBIA Insured, 6.55%, 12/01/22 .......................... 3,000,000 3,196,890 St. Francis Medical Centers, Refunding, FSA Insured, 6.50%, 7/01/22 ............................ 4,000,000 4,240,880 Hawaii State Department of Budget and Finance Special Purpose Revenue, Hawaiian Electric Co. Project, Series A, MBIA Insured, 5.65%, 10/01/27 ............................ 5,000,000 4,923,650 Series B, MBIA Insured, 5.875%, 12/01/26 ....................................................... 2,000,000 2,008,980
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) HAWAII (CONT.) Hawaii State Harbor Capital Improvement Revenue, FGIC Insured, 6.40%, 7/01/05 ........................................................................................ $535,000 $568,454 7/01/06 ........................................................................................ 605,000 642,831 7/01/07 ........................................................................................ 610,000 647,308 Honolulu City and County GO, Series C, FGIC Insured, 5.00%, 7/01/20 ............................... 6,250,000 5,677,563 ----------- 29,161,006 ----------- IDAHO .1% Boise State University Revenues, Student Fee, MBIA Insured, Pre-Refunded, 6.50%, 4/01/19 ................................................................................. 1,000,000 1,093,060 ----------- ILLINOIS 3.2% Aurora SFMR, GNMA Secured, AMBAC Insured, 7.80%, 12/01/15 .......................................... 265,000 271,622 Blue Island Waterworks and Sewer Revenue, MBIA Insured, 5.55%, 12/01/24 ........................... 2,270,000 2,186,305 Chicago Board of Education GO, Chicago School Reform, Series A, AMBAC Insured, 5.25%, 12/01/30 .... 2,000,000 1,815,280 Chicago Board of Education Lease COP, Refunding, Series A, MBIA Insured, 6.25%, 1/01/09 ........... 320,000 346,771 Chicago Heights GO, MBIA Insured, Pre-Refunded, 7.40%, 12/01/03 ................................... 100,000 106,733 Cicero GO, FSA Insured, 6.90%, 12/01/12 ........................................................... 1,500,000 1,624,365 Cook County Community College District No. 508 COP, FGIC Insured, 8.50%, 1/01/02 ................................................................................. 7,470,000 8,139,910 8.75%, 1/01/05 ................................................................................. 5,000,000 5,936,300 Illinois Health Facilities Authority Revenue, Community Provider Pooled Loan Program, Series A, FSA Insured, 7.35%, 8/15/10 .................. 4,452,000 4,736,794 Michael Reese Hospital, Series A, FSA Insured, ETM, 7.60%, 2/15/05 ............................. 4,280,000 4,631,260 Northwestern Medical Facility Foundation, Refunding, MBIA Insured, 5.125%, 11/15/28 ............ 5,000,000 4,475,750 Refunding, Series B, MBIA Insured, ETM, 7.90%, 8/15/03 ......................................... 403,000 441,837 Series 1990, FSA Insured, 7.75%, 8/15/10 ....................................................... 2,525,000 2,642,514 Series 1990, FSA Insured, ETM, 7.75%, 8/15/10 .................................................. 105,000 128,321 Series B, MBIA Insured, 7.90%, 8/15/03 ............................................................ 1,695,000 1,701,187 Silver Cross Hospital, MBIA Insured, Pre-Refunded, 7.00%, 8/15/21 .............................. 1,000,000 1,071,880 Illinois State COP, FSA Insured, Pre-Refunded, 6.95%, 7/01/13 ..................................... 5,750,000 6,258,013 Macon County and Decatur COP, Decatur Public Building Commission, FGIC Insured, 6.50%, 1/01/06 ................................................................................. 300,000 326,670 Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue, McCormick Place Expansion Project, Refunding,Series A, AMBAC Insured, 5.25%, 6/15/27 ........... 4,225,000 3,922,237 Onterie Center HFC, Mortgage Revenue, Refunding, MBIA Insured, 7.05%, 7/01/27 ..................... 2,000,000 2,098,360 Regional Transportation Authority Revenue, Series A, AMBAC Insured, 7.20%, 11/01/20 ............... 300,000 352,968 ----------- 53,215,077 ----------- INDIANA .2% Fort Wayne Hospital Authority Hospital Revenue, Ancillary System Inc., Parkview Memorial Hospital, Series A, FGIC Insured, Pre-Refunded, 7.50%, 11/15/11 .............. 250,000 256,885 Indiana Health Facility Financing Authority Hospital Revenue, Community Hospital Project, Refunding and Improvement, MBIA Insured, 6.40%, 5/01/12 ........................................ 250,000 264,720 Indianapolis Gas Utility Revenue, Refunding, Series B, FGIC Insured, 4.00%, 6/01/15 ............... 500,000 421,170 Jasper County PCR, Northern Indiana Public Service Co., Refunding, MBIA Insured, 7.10%, 7/01/17 ................................................................... 500,000 527,215 Patoka Lake Regional Water and Sewer District Waterworks Revenue, Series A, AMBAC Insured, Pre-Refunded, 6.45%, 1/01/15 .................................................... 1,500,000 1,624,275 Rockport PCR, Michigan Power Co., Refunding, Series B, FGIC Insured, 7.60%, 3/01/16 ............... 185,000 196,274 ----------- 3,290,539 ----------- IOWA .1% Davenport Hospital Revenue, St. Lukes Hospital, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 7/01/20 ................................................................... 200,000 209,978 Greater Kentucky Housing Assistance Corp. Mortgage Revenue, Logan Park Project, Refunding, Series B, MBIA Insured, 6.50%, 1/01/24 .............................................. 2,110,000 2,167,244 ----------- 2,377,222 -----------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) KANSAS .5% Burlington PCR, Kansas Gas and Electric Co. Project, Refunding, MBIA Insured, 7.00%, 6/01/31 .................................................................................. $3,350,000 $3,539,644 Cowley and Shawnee Counties SFMR, AMBAC Insured, GNMA Secured, 7.35%, 12/01/11 ..................... 795,000 824,820 Kansas State Development Finance Authority Health Facility Revenue, MBIA Insured, 5.80%, 11/15/21 ................................................................................. 1,330,000 1,357,292 Wichita Hospital Revenue, St., Francis, Refunding and Improvement, MBIA Insured, 6.25%, 10/01/10 ................................................................................. 2,000,000 2,120,080 Wichita Water and Sewer Utility Revenue, Refunding and Improvement, Series B, FGIC Insured, Pre-Refunded, 6.00%, 10/01/12 ..................................................... 1,000,000 1,033,980 ---------- 8,875,816 ---------- KENTUCKY 1.9% Jefferson County Capital Projects Corp. Lease Revenue, MBIA Insured, 5.375%, 6/01/22 ................................................................................. 2,000,000 1,942,340 5.50%, 6/01/28 ................................................................................. 2,750,000 2,664,860 Jefferson County Health Facilities Revenue, Alliant Health System Inc., Refunding, MBIA Insured, 5.125%, 10/01/27 ........................... 10,000,000 9,056,600 Jewish Hospital Healthcare Services Inc., AMBAC Insured, 6.55%, 5/01/22 ......................... 1,000,000 1,053,060 Jefferson County Health System Revenue, Alliant Health System Inc., MBIA Insured, 5.20%, 10/01/28 ................................................................................. 7,000,000 6,486,760 Kenton County Water District No. 001 Waterworks Revenue, Series B, FGIC Insured, 5.70%, 2/01/20 .................................................................................. 1,250,000 1,265,025 Kentucky Economic Development Finance Authority Hospital Facilities Revenue, Baptist Healthcare System, Refunding, MBIA Insured, 5.00%, 8/15/24 .............................. 2,000,000 1,792,740 St. Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%, 12/01/22 ................... 2,375,000 2,447,794 Kentucky Economic Development Finance Authority Medical Center Revenue, Ashland Hospital Corp., Refunding and Improvement, Series A, FSA Insured, 6.125%, 2/01/12 ....... 1,000,000 1,055,600 Louisville and Jefferson County Metropolitan Sewer District Sewer and Drain System Revenue, Series A, AMBAC Insured, Pre-Refunded, 6.75%, 5/15/25 ........................................... 2,000,000 2,240,120 Northern Kentucky University COP, Student Housing Facilities, FSA Insured, Pre-Refunded, 7.25%, 1/01/12 .................................................................... 2,000,000 2,119,160 ---------- 32,124,059 ---------- LOUISIANA .3% Jefferson Parish Hospital Service District No. 2 Hospital Revenue, FSA Insured, 5.00%, 7/01/28 .................................................................................. 5,000,000 4,429,900 New Orleans GO, Public Improvement, FGIC Insured, Pre-Refunded, 7.50%, 9/01/21 ..................... 500,000 544,215 4,974,115 MAINE .5% Maine State Health and Higher Educational Facilities Authority Revenue, Eastern Maine Health Care, FGIC Insured, Pre-Refunded, 6.625%, 10/01/11 ......................... 2,000,000 2,135,460 Series B, FSA Insured, Pre-Refunded, 7.00%, 7/01/24 ............................................. 2,000,000 2,248,760 Series C, FSA Insured, 6.20%, 7/01/25 ........................................................... 2,015,000 2,107,468 Old Orchard Beach GO, MBIA Insured, Pre-Refunded, 6.65%, 9/01/11 ......................................................................................... 1,180,000 1,267,827 9/01/12 ......................................................................................... 535,000 584,578 ---------- 8,344,093 ---------- MARYLAND .4% Maryland State CDA, Department of Housing and Community Development, Infrastructure Financing, Series A, AMBAC Insured, 6.625%, 6/01/12 .............................. 245,000 259,607 Pre-Refunded, 6.625%, 6/01/12 ................................................................... 1,755,000 1,894,452 Pre-Refunded, 6.70%, 6/01/22 .................................................................... 820,000 886,732 Maryland State Health and Higher Educational Facilities Authority Revenue, University of Maryland Medical System, Refunding, FGIC Insured, 5.00%, 7/01/20 .................. 3,000,000 2,762,790 Series B, FGIC Insured, 7.00%, 7/01/22 .......................................................... 200,000 232,644 ---------- 6,036,225 ---------- MASSACHUSETTS 7.2% Boston Water and Sewer Commission Revenue, Series A, FGIC Insured, Pre-Refunded, 6.00%, 11/01/21 ................................................................................. 3,700,000 3,846,076 Central Berkshire Religious School District GO, Series B, FSA Insured, 5.125%, 3/01/18 ............. 1,125,000 1,058,996 Massachusetts Municipal Wholesale Electric Co. Power Supply System Revenue, Refunding, Series A, AMBAC Insured, 6.00%, 7/01/18 .............................................. 4,455,000 4,560,138 Massachusetts State Health and Educational Facilities Authority Revenue, Bay State Medical Center, Series E, FSA Insured, 6.00%, 7/01/26 ................................. 10,000,000 10,156,400 Beverly Hospital, Series E, MBIA Insured, Pre-Refunded, 7.70%, 7/01/20 .......................... 1,500,000 1,579,110
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) MASSACHUSETTS (CONT.) Massachusetts State Health and Educational Facilities Authority Revenue, (cont.) Boston Medical Center, Series A, MBIA Insured, 5.00%, 7/01/29 ................................ $2,785,000 $2,441,972 Caregroup Issue, Refunding, Series A, MBIA Insured, 5.00%, 7/01/18 ........................... 2,000,000 1,837,320 Caregroup Issue, Refunding, Series A, MBIA Insured, 5.00%, 7/01/25 ........................... 5,000,000 4,412,750 Central New England Health, Series B, AMBAC Insured, 5.20%, 8/01/28 .......................... 5,000,000 4,568,500 Harvard Pilgrim Health, Series A, FSA Insured, 5.00%, 7/01/18 ................................ 3,000,000 2,755,980 Lahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 7/01/23 ......................... 1,000,000 947,870 Massachusetts General Hospital, Series F, AMBAC Insured, Pre-Refunded, 6.25%, 7/01/20 ........ 9,220,000 9,994,111 Massachusetts Medical Center, Series A, AMBAC Insured, Pre-Refunded, 7.10%, 7/01/21 .......... 1,000,000 1,071,350 McLean Hospital, Series C, FGIC Insured, Pre-Refunded, 6.625%, 7/01/15 ....................... 1,085,000 1,173,069 Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ............................. 8,500,000 9,042,215 Partners Healthcare System, Series A, MBIA Insured, 5.375%, 7/01/24 .......................... 12,200,000 11,521,192 Simmons College, Series C, MBIA Insured, 5.125%, 10/01/28 .................................... 8,000,000 7,224,480 Stonehill College, Series E, MBIA Insured, 6.60%, 7/01/20 .................................... 1,120,000 1,192,206 Stonehill College, Series E, MBIA Insured, Pre-Refunded, 6.60%, 7/01/20 ...................... 880,000 950,849 Youville Hospital, Refunding, Series B, MBIA Insured, 6.00%, 2/15/25 ......................... 2,000,000 2,036,240 Massachusetts State Industrial Finance Agency Revenue, Babson College, Series A, MBIA Insured, Pre-Refunded, 6.50%, 10/01/22 ........................ 3,000,000 3,248,130 Combined Jewish Philanthropies, Refunding, Series A, AMBAC Insured, 6.375%, 2/01/15 .......... 5,000,000 5,355,450 Suffolk University, AMBAC Insured, 5.25%, 7/01/17 ............................................ 3,000,000 2,895,420 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ................................. 690,000 704,966 Brandeis University, Series C, MBIA Insured, Pre-Refunded, 6.80%, 10/01/19 ................... 4,310,000 4,406,846 Massachusetts State Port Authority Revenue, Refunding, Series A, FGIC Insured, 6.00%, 7/01/23 ............................................ 4,000,000 4,112,240 Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/20 ........................... 1,590,000 1,562,127 Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/21 ........................... 1,560,000 1,526,304 Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/23 ........................... 2,155,000 2,098,302 Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/24 ........................... 2,910,000 2,831,983 Massachusetts State Turnpike Authority Metropolitan Highway System Revenue, sub. lien, Refunding, Series B, MBIA Insured, 5.125%, 1/01/37 ........................................... 2,100,000 1,869,819 Massachusetts State Water Resources Authority Revenue, Series A, FGIC Insured, Pre-Refunded, 5.50%, 11/01/21 ................................................................ 3,000,000 3,175,200 Monson GO, School District, Series 1990, MBIA Insured, Pre-Refunded, 7.70%, 10/15/10 ............ 2,000,000 2,122,260 Palmer GO, Series B, AMBAC Insured, Pre-Refunded, 7.70%, 10/01/10 ............................... 2,300,000 2,443,750 ----------- 120,723,621 ----------- MICHIGAN 4.2% Chippewa Valley Schools GO, Refunding, AMBAC Insured, 5.00%, 5/01/27 ............................ 1,000,000 896,680 Detroit Sewage Disposal Revenue, MBIA Insured, 5.00%, 7/01/25 ................................... 6,000,000 5,375,700 Ecorse Public School District, FGIC Insured, 5.50%, 5/01/27 ..................................... 7,250,000 6,999,875 Jackson County Hospital Finance Authority Hospital Revenue, W.A. Foote Memorial Hospital, Series A, AMBAC Insured, 5.25%, 6/01/17 ...................................................... 750,000 721,463 Kalamazoo Hospital Finance Authority Hospital Facility Revenue, Bronson Methodist Hospital, Refunding and Improvement, MBIA Insured, 5.875%, 5/15/26 ..................................... 5,500,000 5,579,805 Series A, MBIA Insured, Pre-Refunded, 6.375%, 5/15/17 ........................................ 2,000,000 2,168,840 Kent Hospital Finance Authority Health Care Revenue, Butterworth Health System, Series A, MBIA Insured, Pre-Refunded, 5.625%, 1/15/26 .................................................. 10,000,000 10,652,100 Marquette City Hospital Finance Authority Revenue, Marquette General Hospital, Refunding, Series D, FSA Insured, 6.10%, 4/01/19 ............................................. 5,000,000 5,223,550 Michigan State Hospital Finance Authority Revenue, Hospital Botsford Obligation, Refunding, Series A, MBIA Insured, 5.25%, 2/15/22 .............. 2,000,000 1,877,120 Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.125%, 8/15/25 .................. 6,725,000 6,077,988 Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.00%, 8/15/31 ................... 10,000,000 8,725,100 St. John's Hospital and Medical Center, AMBAC Insured, 5.25%, 5/15/26 ........................ 3,000,000 2,784,720 St. John's Hospital, Refunding, Series A, AMBAC Insured, 6.00%, 5/15/13 ...................... 2,500,000 2,588,625 Michigan State Strategic Fund Limited Obligation Revenue, Detroit Edison Co., Pollution Project, Refunding, FGIC Insured, 6.875%, 12/01/21 ................................. 200,000 211,384 Series BB, AMBAC Insured, 7.00%, 5/01/21 ..................................................... 250,000 293,230
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) MICHIGAN (CONT.) Saginaw Valley State University Revenue, AMBAC Insured, 5.30%, 7/01/28 ............................. $3,400,000 $3,203,752 Yale Public Schools District GO, FSA Insured, 5.375%, 5/01/27 ...................................... 3,845,000 3,646,175 Zeeland Public Schools GO, Refunding, MBIA Insured, 5.25%, 5/01/24 ................................. 3,180,000 2,979,501 ---------- 70,005,608 ---------- MINNESOTA 2.3% Eden Prairie MFHR, Olympic Ridge, Refunding, Series A, GNMA Secured, 6.25%, 1/20/31 ................ 2,000,000 2,064,400 Minneapolis and St. Paul Metropolitan Airport Commission Airport Revenue, Series A, FGIC Insured, 5.125%, 1/01/25 ................................................................... 5,000,000 4,648,300 Minnesota Agriculture and Economic Development Board Revenue, Health Care System, Fairview Hospital, Refunding, Series A, MBIA Insured, 5.75%, 11/15/26 ........................... 5,000,000 5,007,150 Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured, 6.00%, 2/01/22 ............. 2,085,000 2,124,907 Northern Municipal Power Agency Electric System Revenue, Refunding, Series B, AMBAC Insured, 5.50%, 1/01/18 ................................................................... 2,100,000 2,085,447 Southern Minnesota Municipal Power Agency Power Supply System Revenue, Series A, AMBAC Insured, 5.75%, 1/01/18 ................................................................... 2,870,000 2,894,596 St. Louis Park Health Care Facilities Revenue, Health System of Minnesota Obligated Group, Refunding, Series A, AMBAC Insured, 5.20%, 7/01/16 .............................................. 8,200,000 7,905,456 Washington County GO, Governmental Housing, Scandia II Project, Series B, FGIC Insured, 6.30%, 7/01/24 ................ 1,200,000 1,239,672 Raymie Johnson Apartments, Refunding, Series C, FGIC Insured, 6.30%, 1/01/20 .................... 2,415,000 2,498,607 Western Minnesota Municipal Power Agency Power Supply Revenue, Series A, MBIA Insured, 6.125%, 1/01/16 ................................................................................. 8,350,000 8,373,965 ---------- 38,842,500 ---------- MISSISSIPPI Harrison County Wastewater Management District Revenue, Wastewater Treatment Facilities, Refunding, Series A, FGIC Insured, 8.50%, 2/01/13 ............................................... 200,000 264,992 ---------- MISSOURI .9% Kansas City IDA, Mortgage Revenue, Presidential Gardens, Refunding, Series A, FNMA Insured, 5.55%, 8/01/25 .................................................................... 1,000,000 982,420 Missouri State HDC, SFMR, Series B, GNMA Secured, 7.75%, 6/01/22 ................................... 730,000 751,951 Missouri State Health and Educational Facilities Authority Health Facilities Revenue, Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 ................................. 1,000,000 1,053,710 Richmond Heights COP, Capital Improvement Projects, Series A, MBIA Insured, 5.30%, 8/15/17 .................................................................................. 2,000,000 1,943,560 St. Charles County Public Facilities Authority Leasehold Revenue, FGIC Insured, 6.375%, 3/15/07 ................................................................................. 2,850,000 3,004,271 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 9/01/19 ................................... 265,000 268,315 St. Louis Municipal Finance Corp. Leasehold Revenue, City Justice Center, Refunding, Series A, AMBAC Insured, 5.95%, 2/15/16 ......................... 2,000,000 2,076,520 Refunding and Improvement, FGIC Insured, Pre-Refunded, 6.25%, 2/15/12 ........................... 2,025,000 2,182,363 St. Louis School District GO, Refunding, FGIC Insured, 6.00%, 4/01/12 .............................. 2,950,000 3,068,915 ---------- 15,332,025 ---------- MONTANA 1.2% Forsyth County PCR, Puget Sound Power and Light Co. Project, AMBAC Insured, 6.80%, 3/01/22 .................................................................................. 4,475,000 4,734,326 Forsyth PCR, Washington Water Co., Refunding, Series A, MBIA Insured, 7.125%, 12/01/13 ................................................................................ 5,000,000 5,129,300 Helena Water Revenue, Series C, FGIC Insured, 6.65%, 11/01/12 ...................................... 750,000 801,878 Montana State Board Workers Compensation Investment Program, MBIA Insured, ETM, 6.875%, 6/01/20 ............................................................................ 8,500,000 8,953,305 Montana State University Revenue, Higher Education Facilities, Acquisition and Improvement, Series C, MBIA Insured, 6.00%, 11/15/14 ......................................................... 1,000,000 1,001,150 ---------- 20,619,959 ---------- NEBRASKA 1.2% Lancaster County Hospital Authority Revenue, Bryan Memorial Hospital Project No. 1, MBIA Insured, ETM, 6.70%, 6/01/22 ............................................................... 2,500,000 2,768,450 Series A, MBIA Insured, 5.375%, 6/01/19 ......................................................... 2,715,000 2,614,083 Series B, MBIA Insured, 5.375%, 6/01/17 ......................................................... 5,000,000 4,852,150 Lincoln Hospital Revenue, Lincoln General Hospital, Series A, FSA Insured, Pre-Refunded, 6.20%, 12/01/14 ................................................................... 2,000,000 2,100,020 Municipal Energy Agency of Nebraska Power Supply System Revenue, Refunding, Series A, AMBAC Insured, 6.00%, 4/01/15 ......................................................................................... 2,000,000 2,083,380 4/01/17 ......................................................................................... 1,350,000 1,402,326
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) NEBRASKA (CONT.) Nebraska Educational Finance Authority Revenue, Creighton University Project, AMBAC Insured, 5.95%, 1/01/11 ................................................................................... $1,000,000 $1,056,350 Nebraska Investment Finance Authority Health Facilities Revenue, Children's Healthcare Services, AMBAC Insured, 5.50%, 8/15/27 .................................................................... 2,000,000 1,922,740 Nebraska Investment Finance Authority SFMR, Refunding, Series B, FGIC Insured, 8.00%, 7/15/17 ....... 1,575,000 1,591,947 ---------- 20,391,446 ---------- NEVADA .5% Carson City Hospital Revenue, Series B, AMBAC Insured, 5.40%, 3/01/17 ............................... 1,000,000 971,360 Clark County GO, Series A, AMBAC Insured, 6.50%, 6/01/17 ............................................ 250,000 278,070 Clark County School District, Series A, MBIA Insured, 7.00%, 6/01/10 ................................ 4,000,000 4,618,720 Sparks GO, AMBAC Insured, Pre-Refunded, 7.50%, 10/01/09 ............................................. 1,695,000 1,733,917 ---------- 7,602,067 ---------- NEW HAMPSHIRE 1.2% New Hampshire Higher Education and Health Facilities Authority Revenue, Concord Hospital, Refunding, AMBAC Insured, 6.00%, 10/01/26 ...................................... 4,300,000 4,411,628 Mary Hitchcock Memorial Hospital, FGIC Insured, 5.75%, 8/15/23 ................................... 11,000,000 11,030,800 University System, Refunding, MBIA Insured, 6.25%, 7/01/20 ....................................... 4,000,000 4,202,800 ---------- 19,645,228 ---------- NEW JERSEY 1.2% Essex County Improvement Authority Lease, Jail and Youth House Projects, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/24 ..................................................... 3,000,000 3,397,140 Refunding, AMBAC Insured, 5.35%, 12/01/24 ........................................................ 4,000,000 3,834,080 Essex County Improvement Authority Revenue, Garden State Cancer Center Project, AMBAC Insured, 6.00%, 12/01/20 ................................................................... 2,525,000 2,597,417 Mantua Township School District COP, MBIA Insured, Pre-Refunded, 7.25%, 6/30/10 ..................... 1,700,000 1,782,603 Middlesex County COP, MBIA Insured, 5.30%, 6/15/29 .................................................. 3,575,000 3,356,246 Mount Laurel Township Municipal Utilities Authority System Revenue, Refunding, Series A, MBIA Insured, 6.00%, 7/01/15 ........................................................... 2,000,000 2,057,920 New Jersey Health Care Facilities Financing Authority Revenue, Muhlenberg Regional Medical Center, Series B, AMBAC Insured, 8.00%, 7/01/18 ...................... 3,000,000 3,045,900 New Jersey State Housing and Mortgage Finance Agency Revenue, Home Buyer, Series C, MBIA Insured, 7.375%, 10/01/17 ................................................................... 485,000 495,384 New Jersey State Turnpike Authority Revenue, Refunding, Series C, AMBAC Insured, 6.50%, 1/01/16 ................................................................................... 300,000 334,629 ---------- 20,901,319 ---------- NEW MEXICO .5% Farmington PCR, Public Service Co. of New Mexico, Refunding, Series A, AMBAC Insured, 6.375%, 12/15/22 ................................................................................. 5,000,000 5,268,550 Gallup PCR, Plains Electric Generation, Refunding, MBIA Insured, 6.65%, 8/15/17 ..................... 2,000,000 2,032,680 New Mexico Mortgage Finance Authority SFM Program, Series C, FGIC Insured, 8.625%, 7/01/17 .................................................................................. 650,000 656,747 ---------- 7,957,977 ---------- NEW YORK 7.4% Central Square GO, Central School District, FGIC Insured, 6.50%, 6/15/10 ............................ 900,000 1,007,406 Dutchess County IDA, Civic Facilities Revenue, Bard College Project, AMBAC Insured, 5.375%, 6/01/27 .................................................................................. 3,945,000 3,782,900 New York City GO, Series C, Sub Series C-1, MBIA Insured, Pre-Refunded, 6.625%, 8/01/12 ............. 105,000 113,239 New York City Municipal Water Finance Authority Water and Sewer System Revenue, Series A, MBIA Insured, Pre-Refunded, 7.25%, 6/15/15 ............................................. 2,000,000 2,085,380 New York City Trust Cultural Resources Revenue, New York Botanical Garden, MBIA Insured, 5.80%, 7/01/26 ................................................................................... 2,000,000 2,024,900 New York State Dormitory Authority Revenue, Brooklyn Law School, FSA Insured, 6.40%, 7/01/11 ................................................. 4,000,000 4,192,360 City University, Series C, FGIC Insured, 7.00%, 7/01/14 .......................................... 6,110,000 6,373,524 City University, Series C, FGIC Insured, Pre-Refunded, 7.00%, 7/01/14 ............................ 2,545,000 2,664,844 Mount Sinai School of Medicine, Refunding, MBIA Insured, 6.75%, 7/01/15 .......................... 1,500,000 1,577,715 Pace University, MBIA Insured, 5.70%, 7/01/22 .................................................... 7,500,000 7,578,000 Pace University, Refunding, MBIA Insured, 5.75%, 7/01/26 ......................................... 2,500,000 2,527,825 Pooled Capital Program, FGIC Insured, 7.80%, 12/01/05 ............................................ 1,010,000 1,026,110 St. John's University, MBIA Insured, 5.70%, 7/01/26 .............................................. 15,000,000 15,102,000 Vassar Brothers Hospital, FSA Insured, 5.375%, 7/01/25 ........................................... 4,000,000 3,799,120 New York State Energy Research and Development Authority Electric Facilities Revenue, Consolidated Edison Project, Series A, MBIA Insured, 6.75%, 1/15/27 .............................. 5,000,000 5,162,550
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) NEW YORK (CONT.) New York State Energy Research and Development Authority PCR, Central Hudson Gas, Series A, FGIC Insured, Pre-Refunded, 7.375%, 10/01/14 ....................... $2,000,000 $2,064,780 Niagara Mohawk Power Corp., Refunding, Series A, FGIC Insured, 6.625%, 10/01/13 .................. 3,500,000 3,691,695 Rochester Gas and Electric Project, Refunding, Series B, MBIA Insured, 6.50%, 5/15/32 ............ 5,000,000 5,249,650 New York State Medical Care Facilities Finance Agency Revenue, North Shore University Hospital, Mortgage Project, Series A, MBIA Insured, Pre-Refunded, 7.20%, 11/01/20 .......................... 3,000,000 3,171,300 New York State Tollway Authority General Revenue, Series B, MBIA Insured, 5.00%, 1/01/20 ........................................................... 6,635,000 6,072,153 Series C, FGIC Insured, Pre-Refunded, 6.00%, 1/01/25 ............................................. 7,815,000 8,460,441 Niagara Frontier Transportation Authority Airport Revenue, Greater Buffalo International Airport, Series A, AMBAC Insured, 6.25%, 4/01/24 .......................................................... 9,000,000 9,367,830 Port Authority of New York and New Jersey Revenue, Consolidated, 102nd Series, MBIA Insured, 5.625%, 10/15/17 ..................................................... 5,000,000 5,062,750 102nd Series, MBIA Insured, 5.875%, 10/15/27 ..................................................... 10,000,000 10,291,000 109th Series, FGIC Insured, 5.375%, 7/15/22 ...................................................... 10,000,000 9,748,900 Upper Mohawk Valley Regional Water Finance Authority Water System Revenue, Refunding, Series A, FSA Insured, 5.125%, 10/01/26 .......................................................... 1,495,000 1,363,619 ----------- 123,561,991 ----------- NORTH CAROLINA 1.9% Asheville Water System Revenue, FGIC Insured, 5.70%, 8/01/25 ........................................ 1,000,000 1,009,680 Catawba County Hospital Revenue, Catawba Memorial Hospital Project, Refunding, AMBAC Insured, 5.00%, 10/01/17 ................................................................... 1,125,000 1,041,593 New Hanover County Hospital Revenue, New Hanover Regional Medical Center Project, AMBAC Insured, 5.75%, 10/01/26 ................................................................... 1,150,000 1,156,394 MBIA Insured, 5.00%, 10/01/28 .................................................................... 7,000,000 6,235,180 North Carolina Medical Care Commission Health Care Facilities Revenue, Novant Health Project, Series B, MBIA Isured, 5.00%, 10/01/28 ........................................................... 11,300,000 10,065,362 North Carolina Medical Care Commission Hospital Revenue, Rex Healthcare Project, AMBAC Insured, 5.00%, 6/01/17 ............................................ 5,000,000 4,617,300 Wyne Memorial Hospital Project, Refunding, AMBAC Insured, 5.00%, 10/01/21 ........................ 5,000,000 4,545,750 North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue, MBIA Insured, 6.50%, 1/01/10 ................................................................................... 80,000 82,024 ETM, 6.50%, 1/01/10 .............................................................................. 20,000 21,938 Wilmington COP, Series A, MBIA Insured, 5.35%, 6/01/24 .............................................. 3,300,000 3,168,627 ----------- 31,943,848 ----------- NORTH DAKOTA .3% Grand Forks Health Care System Revenue, Altru Health System Obligation Group, MBIA Insured, 5.625%, 8/15/27 .................................................................... 5,500,000 5,419,810 North Dakota State Building Authority Revenue, Refunding, Series A, AMBAC Insured, 6.75%, 6/01/11 ... 300,000 313,383 ----------- 5,733,193 ----------- OHIO 4.1% Clermont County Building and Road Improvement, Refunding, AMBAC Insured, 5.60%, 9/01/14 ............. 2,000,000 2,032,520 Cleveland Airport Systems Revenue, Series A, FSA Insured, 5.125%, 1/01/27 ........................... 6,000,000 5,424,840 Cleveland Waterworks Revenue, Refunding and Improvement, Series I, FSA Insured, 5.00%, 1/01/23 ................................. 2,750,000 2,499,805 Series F, AMBAC Insured, Pre-Refunded, 6.50%, 1/01/11 ............................................ 1,625,000 1,733,826 Cuyahoga County Hospital Revenue, University Hospitals Health System Inc., Refunding, AMBAC Insured, 5.50%, 1/15/30 ............................................................ 5,000,000 4,821,100 Elyria GO, FGIC Insured, 5.40%, 12/01/17 ............................................................ 2,400,000 2,340,000 Hamilton County Sales Tax, Hamilton County Football, Project B, MBIA Insured, 5.00%, 12/01/27 ....... 3,250,000 2,911,285 Hamilton Wastewater System Revenue, Series A, FSA Insured, 5.15%, 10/15/17 .......................... 3,015,000 2,874,803 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ....................... 1,750,000 1,821,890 Lucas County Hospital Revenue, Promedia Healthcare Obligation Group, AMBAC Insured, 5.375%, 11/15/29 ................................................................................. 5,000,000 4,752,900 Medina City School District GO, FGIC Insured, 5.25%, 12/01/28 ....................................... 7,500,000 6,971,400 Ohio HFA, SFMR, Series D, GNMA Secured, 7.05%, 9/01/16 .............................................. 2,915,000 3,012,886 Ohio Municipal Electric Generation Agency Joint Venture 5, Certificates of Beneficial Interest, AMBAC Insured, 5.375%, 2/15/24 ................................................................... 5,500,000 5,386,260
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) OHIO (CONT.) Ohio State Turnpike Commission Turnpike Revenue, Series A, MBIA Insured, Pre-Refunded, 5.50%, 2/15/26 ........................................................................................$15,900,000 $16,835,874 University of Cincinnati COP, University Center Project, MBIA Insured, 5.125%, 6/01/24 ................ 2,950,000 2,737,276 West Holmes Local School District GO, MBIA Insured, 5.375%, 12/01/17 .................................. 3,100,000 3,013,727 ---------- 69,170,392 ---------- OKLAHOMA .4% Grady County HFA, SFMR, Refunding, Series A, FGIC Insured, 6.70%, 1/01/12 ............................. 595,000 618,979 McGee Creek Authority Water Revenue, MBIA Insured, 6.00%, 1/01/23 ..................................... 300,000 313,890 Muskogee County, HFAR, SFMR, Refunding, Series A, FGIC Insured, 7.60%, 12/01/10 ....................... 290,000 297,746 Oklahoma State Turnpike Authority Turnpike Revenue, First Senior, Series A, AMBAC Insured, 6.00%, 1/01/12 ..................................................................................... 2,000,000 2,097,040 Pottawatomie County Development Authority Water Revenue, North Deer Creek Reservoir Project, AMBAC Insured, Pre-Refunded, 7.375%, 7/01/26 ....................................................... 250,000 262,423 Tulsa County Home Finance Authority Mortgage Revenue, Series D, GNMA Secured, 6.95%, 12/01/22 ......... 230,000 237,349 Tulsa Industrial Authority Revenue, Holland Hall School Project, FSA Insured, Pre-Refunded, 6.75%, 12/01/14 ......................................................................... 3,270,000 3,665,081 ---------- 7,492,508 ---------- OREGON 1.9% Chemeketa Community College District, FGIC Insured, Pre-Refunded, 5.95%, 6/01/16 ...................... 3,000,000 3,214,350 Clackamas Community College District, MBIA Insured, Pre-Refunded, 5.80%, 6/01/26 ...................... 2,500,000 2,657,175 Deschutes and Jefferson Counties School District No. 2-J, Redmond, MBIA Insured, 5.60%, 6/01/09 ....... 1,500,000 1,528,725 Josephine County School District No. 7, FGIC Insured, Pre-Refunded, 5.70%, 6/01/13 .................... 5,000,000 5,141,200 Medford Hospital Facilities Authority Revenue, Asante Health System, Series A, MBIA Insured, 5.00%, 8/15/24 ..................................................................................... 2,250,000 2,047,163 Northern Wasco County Peoples Utilities District Electric Revenue, FGIC Insured, 5.625%, 12/01/22 ..... 1,000,000 1,008,480 Ontario Catholic Health Revenue, Holy Rosary Medical Center, MBIA Insured, 5.50%, 11/15/12 ............ 700,000 716,163 Oregon Health Sciences University Revenue, Series B, MBIA Insured, 5.25%, 7/01/15 ..................... 1,500,000 1,482,420 Oregon State Department of Administrative Services COP, Series A, AMBAC Insured, Pre-Refunded, 5.80%, 5/01/24 ........................................................ 5,000,000 5,351,750 MBIA Insured, 5.70%, 5/01/17 ....................................................................... 1,000,000 1,019,790 Port of Portland International Airport Revenue, Portland International Airport, Series 11, FGIC Insured, 5.625%, 7/01/26 ......................................................................... 1,000,000 974,920 Washington County Unified Sewer Agency Revenue, Senior lien, FGIC Insured, 5.50%, 10/01/16 ......................................................... 1,845,000 1,854,077 Senior lien, Series A, AMBAC Insured, Pre-Refunded, 6.125%, 10/01/12 ............................... 1,000,000 1,073,930 Western Lane Hospital District Hospital Facilities Authority Revenue, Sisters of St. Joseph of Peace Health and Hospital Services, Refunding, MBIA Insured, 5.875%, 8/01/12 .................................................................................... 3,000,000 3,135,600 ---------- 31,205,743 ---------- PENNSYLVANIA 1.7% Beaver County GO, Series A, MBIA Insured, Pre-Refunded, 5.90%, 10/01/26 ............................... 2,000,000 2,143,000 Cambria County HDA, Hospital Revenue, Conemaugh Valley Memorial Hospital, Refunding, Series B, Pre-Refunded, Connie Lee Insured, 6.375%, 7/01/18 ........................................ 5,000,000 5,352,050 Lehigh County General Purpose Authority Revenue, Hospital Healtheast Inc., Refunding, Series A, MBIA Insured, 7.00%, 7/01/15 ............................................................. 100,000 103,753 Montgomery County IDAR, PCR, Philadelphia Electric Co., Series B, MBIA Insured, 6.70%, 12/01/21 ........................................................................................... 8,000,000 8,484,000 Pennsylvania Convention Center Authority Revenue, Series A, FGIC Insured, ETM, 6.00%, 9/01/19 ......... 500,000 533,870 Pennsylvania State Turnpike Oil Commission Franchise Tax Revenue, Refunding, Series P, AMBAC Insured, 6.00%, 12/01/17 ..................................................................... 500,000 518,110 Philadelphia Airport Revenue, Philadelphia Airport System, Series A, AMBAC Insured, 6.10%, 6/15/25 ..................................................................................... 4,000,000 4,144,800 Philadelphia Water and Wastewater Revenue, Refunding, FSA Insured, 5.50%, 6/15/15 ..................... 1,000,000 996,780 Pittsburgh and Allegheny County Public Auditorium Revenue, Regional Asset District Sales Tax, AMBAC Insured, 5.25%, 2/01/31 ...................................................................... 6,000,000 5,476,860 Pittsburgh Water and Sewer System Authority Revenue, Refunding, FGIC Insured, ETM, 7.25%, 9/01/14 ..... 90,000 104,135 ---------- 27,857,358 ---------- RHODE ISLAND 1.3% Kent County Water Authority General Revenue, Series A, MBIA Insured, 6.35%, 7/15/14 ................... 2,100,000 2,255,883 Providence GO, Series A, FSA Insured, 5.70%, 7/15/19 .................................................. 3,000,000 3,017,760 Rhode Island Clean Water Financing Agency Revenue, Cranston Wastewater Treatment System, MBIA Insured, 5.80%, 9/01/22 ....................................................................... 10,000,000 10,045,100 Rhode Island Port Authority and EDC Revenue, Shepard Building Project, Series B, AMBAC Insured, Pre-Refunded, 6.75%, 6/01/25 ....................................................................... 2,000,000 2,219,800 Rhode Island State GO, Series A, FGIC Insured, 6.25%, 6/15/07 ......................................... 175,000 185,390
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) RHODE ISLAND (CONT.) Rhode Island State Health and Educational Building Corp. Revenue, Higher Educational Facilities, Roger Williams Facility, Connie Lee Insured, Pre-Refunded, 7.25%, 11/15/24 ................................................................................ $2,000,000 $2,281,020 Hospital Financing Lifespan Obligation Group, MBIA Insured, 5.75%, 5/15/23 ..................... 1,750,000 1,749,825 ---------- 21,754,778 ---------- SOUTH CAROLINA .4% Charleston Waterworks and Sewer Revenue, Refunding and Improvement, AMBAC Insured, 6.00%, 1/01/16 .................................................................................... 250,000 258,815 Edgefield County School District, Refunding, FSA Insured, ETM, 8.50%, 2/01/01 ..................... 250,000 265,025 Lexington Water and Sewer Revenue, FSA Insured, 5.45%, 4/01/19 .................................... 2,320,000 2,276,106 Piedmont Municipal Power Agency Electric Revenue, Refunding, FGIC Insured, 6.25%, 1/01/21 ......... 200,000 217,886 Richland County Hospital Facilities Revenue, Community Provider, Pooled Loan Program, Series A, FSA Insured, ETM, 7.125%, 7/01/17 .................................................... 3,000,000 3,423,210 Spartanburg Sanitation Sewer District Sewer System Revenue, Implementation, MBIA Insured, Pre-Refunded, 5.50%, 6/01/27 ..................................................... 500,000 525,840 ---------- 6,966,882 ---------- SOUTH DAKOTA 1.0% Brookings COP, AMBAC Insured, 5.10%, 12/01/18 ..................................................... 5,000,000 4,607,800 Grant County PCR, Refunding, MBIA Insured, 5.90%, 6/01/23 ......................................... 4,800,000 4,867,056 Lawrence County COP, Courthouse, FSA Insured, Pre-Refunded, 7.65%, 7/01/10 ........................ 2,000,000 2,103,820 Sioux Falls Medical Clinic Revenue, AMBAC Insured, 8.00%, 9/01/08 ................................. 2,095,000 2,131,788 South Dakota Lease Revenue, Series A, FSA Insured, 6.75%, 12/15/16 ................................ 2,720,000 3,105,723 South Dakota State University Revenue, Housing and Auxiliary Facilities, Refunding, Series A, MBIA Insured, 5.50%, 4/01/17 .............................................. 20,000 19,799 ---------- 16,835,986 ---------- TENNESSEE .9% Cleveland Public Improvement, GO, FGIC Insured, 5.25%, 6/01/24 .................................... 1,655,000 1,560,897 Greater Tennessee Housing Assistance Revenue, Section 8, Refunding, Series A, MBIA Insured, 6.00%, 7/01/24 ................................................................... 1,410,000 1,427,174 Johnson City Health and Educational Revenue, Medical Center Hospital, Refunding and Improvement, MBIA Insured, 5.125%, 7/01/25 ................................................................................ 5,000,000 4,544,400 5.25%, 7/01/28 ................................................................................. 8,500,000 7,770,870 Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%, 7/01/15 .......... 200,000 210,926 ---------- 15,514,267 ---------- TEXAS 10.1% Austin Combined Utility System Revenue, BIG Insured, Pre-Refunded, 8.625%, 11/15/17 .................................................... 1,000,000 1,109,850 Series A, BIG Insured, Pre-Refunded, 8.00%, 11/15/16 ........................................... 3,000,000 3,191,490 (b)Austin Hotel Occupancy Tax Revenue, Refunding, sub. lien, AMBAC Insured, 5.625%, 11/15/21 ............................................................................... 2,355,000 2,323,938 5.80%, 11/15/29 ................................................................................ 13,750,000 13,769,663 Austin Utility System Revenue, FGIC Insured, Pre-Refunded, 6.00%, 5/15/15 ..................................................... 35,000 35,568 Refunding, FGIC Insured, 6.00%, 5/15/15 ........................................................ 15,000 15,108 Bell County Health Facilities Development Corporate Revenue, Hospital Cook Children's Medical, Refunding, FSA Insured, 5.30%, 12/01/23 ........................................................ 5,000,000 4,707,200 Bexar County HFC Revenue, Series A, GNMA Secured, 8.20%, 4/01/22 .................................. 2,510,000 2,560,326 Brazos River Authority Revenue, Houston Light and Power Co. Project, Refunding, Series A, AMBAC Insured, 6.70%, 3/01/17 ........................................................ 2,000,000 2,113,200 Coastal Bend Health Facilities Development Corp., Series B, AMBAC Insured, ETM, 6.30%, 1/01/17 ................................................................................. 12,230,000 12,824,745 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 ................................................... 645,000 668,859 East Texas HFC, SFMR, Series 1990, GNMA Secured, 7.85%, 12/01/10 .................................. 475,000 493,311 Faulkey Gully MUD GO, AMBAC Insured, 6.625%, 3/01/07 ................................................................................ 295,000 307,868 Pre-Refunded, 6.625%, 3/01/07 .................................................................. 1,225,000 1,292,571 Fort Bend County Levee ID No. 011, AMBAC Insured, 6.00%, 9/01/21 ........................................................................................ 1,395,000 1,423,081 9/01/22 ........................................................................................ 1,495,000 1,522,045 9/01/23 ........................................................................................ 1,610,000 1,639,125
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) TEXAS (CONT.) Grand Prairie Health Facilities Development Corp., Dallas/Fort Worth Medical Center Project, Refunding, AMBAC Insured, 6.875%, 11/01/10 ...................................................... $2,700,000 $2,728,782 Harris County Health Facilities Development Corp. Revenue, Christus Health, Refunding, Series A, MBIA Insured, 5.375%, 7/01/29 ......................................................... 22,000,000 20,590,460 Harris County Hospital District Mortgage Revenue, Refunding, AMBAC Insured, 7.40%, 2/15/10 ......... 2,350,000 2,709,315 Harris County Toll Road, Senior lien, Series A, AMBAC Insured, 6.50%, 8/15/17 ............................................ 1,580,000 1,680,046 Senior lien, Series B, AMBAC Insured, 6.625%, 8/15/17 ........................................... 240,000 242,352 Series A, FGIC Insured, 6.50%, 8/15/11 .......................................................... 35,000 37,366 Houston Airport System Revenue, sub. lien, Series A, FGIC Insured, 6.75%, 7/01/21 .................. 2,500,000 2,618,275 Houston Water and Sewer System Revenue, Junior lien, Refunding, Series C, AMBAC Insured, 6.375%, 12/01/17 ............................... 935,000 978,823 Junior lien, Refunding, Series C, MBIA Insured, 5.75%, 12/01/15 ................................. 500,000 512,665 Series A, MBIA Insured, 6.375%, 12/01/22 ........................................................ 1,840,000 1,952,350 Series A, MBIA Insured, Pre-Refunded, 6.375%, 12/01/22 .......................................... 4,540,000 4,905,470 Lubbock HFC, SFMR, Mortgage Extension Program, Refunding, Series B, 8.875%, 12/01/12 ............... 555,000 556,948 Matagorda County Navigation District No. 1 PCR, Central Power and Light Co. Project, AMBAC Insured, 7.50%, 12/15/14 .................................................................. 200,000 207,746 Refunding, Series E, MBIA Insured, 6.10%, 7/01/28 ............................................... 12,850,000 13,232,159 Matagorda County Navigation District No. 1 Revenue, Houston Industries Inc. Project, Refunding, Series A, MBIA Insured, 5.25%, 11/01/29 ............. 3,185,000 2,923,862 Houston Industries Inc. Project, Refunding, Series B, MBIA Insured, 5.15%, 11/01/29 ............. 2,750,000 2,482,123 Houston Light and Power Co., Refunding, Series E, FGIC Insured, 7.20%, 12/01/18 ................. 100,000 102,654 Palo Duro River Authority, Refunding, FSA Insured, 6.375%, 8/01/08 ................................. 6,000,000 6,060,780 Portland Community Center Complex Development Corp. Sales Tax Revenue, Refunding, AMBAC Insured, 5.45%, 2/15/25 ................................................................... 1,450,000 1,397,800 Sabine River Authority PCR, Texas Utilities Electric Co. Project, Collateralized, Refunding, FGIC Insured, 6.55%, 10/01/22 ........................................................ 3,250,000 3,432,455 San Antonio Water Revenue, Refunding and Improvement, MBIA Insured, 5.60%, 5/15/21 ......................................... 3,250,000 3,197,610 Senior lien, MBIA Insured, 6.50%, 5/15/10 ....................................................... 2,920,000 3,106,909 San Marcos Waterworks and Sewer Systems Revenue, Series 1998, FSA Insured, 5.125%, 8/15/20 ................................................................................. 2,870,000 2,653,085 San Patricio County COP, MBIA Insured, Pre-Refunded, 6.60%, 4/01/07 ................................ 2,500,000 2,640,650 Smithville HDC, Mortgage Revenue, Smithville Retirement, Refunding, Series A, MBIA Insured, 6.40%, 1/01/22 .................................................................................. 1,045,000 1,074,041 Southeast HDC Mortgage Revenue, Stonegate Retirement, MBIA Insured, 6.40%, 1/01/24 ................. 1,170,000 1,206,867 Tarrant County Health Facilities Development Corp. Health Systems Revenue, Harris Methodist Health, MBIA Insured, ETM, 6.00%, 9/01/24 ...................................... 3,250,000 3,359,233 Tarrant County Health Facilities Development Corp. Hospital Revenue, Fort Worth Osteopathic Hospital, MBIA Insured, 5.125%, 5/15/21 .................................. 2,905,000 2,661,067 Texas Health Facilities Development Corp. Hospital Revenue, All Saints Episcopal Hospitals, Refunding, Series B, MBIA Insured, 6.25%, 8/15/22 .................................................................................. 2,500,000 2,627,575 6.375%, 8/15/23 ................................................................................. 4,885,000 5,158,218 Texas State Turnpike Authority Revenue, Dallas North Tollway, Refunding, AMBAC Insured, 5.00%, 1/01/20 ................................................................... 7,250,000 6,570,240 Tyler Health Facilities Development Corp. Hospital Revenue, East Texas Medical Center Project, Series B, FSA Insured, 5.50%, 11/01/17 .......................................................... 1,000,000 984,130 Series C, FSA Insured, 5.60%, 11/01/27 .......................................................... 1,430,000 1,404,046 Series D, FSA Insured, 5.375%, 11/01/27 ......................................................... 14,500,000 13,553,585 ----------- 169,547,635 ----------- US TERRITORIES District of Columbia HFA, RMR, Series 1986-1, FGIC Insured, 7.75%, 9/01/16 ......................... 710,000 716,213 ----------- UTAH 1.3% Intermountain Power Agency Power Supply Revenue, Refunding, Series A, AMBAC Insured, 5.50%, 7/01/20 ......................................................... 4,680,000 4,583,077 Series B, MBIA Insured, 5.75%, 7/01/19 .......................................................... 3,250,000 3,271,515 Provo Electric System Revenue, Refunding, Series A, AMBAC Insured, ETM, 10.375%, 9/15/15 ........... 40,000 55,443 Utah County Hospital Revenue, IHC Health Services Inc., MBIA Insured, 5.25%, 8/15/21 ......................................................................................... 5,000,000 4,702,200 8/15/26 ......................................................................................... 5,000,000 4,640,050
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) UTAH (CONT.) Utah State Board of Regents Student Loan Revenue, Series H, AMBAC Insured, 6.70%, 11/01/15 ......... $1,080,000 $1,136,192 White City Water Implementation District GO, Refunding, AMBAC Insured, 5.30%, 2/01/25 .............. 3,435,000 3,255,968 ---------- 21,644,445 ---------- VERMONT .7% Swanton Village Electric System Revenue, Refunding, MBIA Insured, 5.75%, 12/01/19 .................. 1,740,000 1,759,958 Vermont COP, MBIA Insured, Pre-Refunded, 7.25%, 6/15/11 ............................................ 2,205,000 2,308,966 Vermont HFA, Home Mortgage Purchase, Series B, MBIA Insured, 7.60%, 12/01/24 ....................... 6,630,000 6,788,324 Vermont Municipal Bond Bank, Series 2, FSA Insured, 6.25%, 12/01/19 ................................ 1,000,000 1,052,420 ---------- 11,909,668 ---------- VIRGINIA 1.5% Chesapeake Bay Bridge and Tunnel Commission District Revenue, General Resolution, MBIA Insured, Pre-Refunded, 5.75%, 7/01/25 ...................................................... 9,850,000 10,120,481 Chesapeake IDA, Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%, 6/01/12 .................................................................................. 5,000,000 5,313,750 Danville IDA, Hospital Revenue, Danville Regional Medical Center, FGIC Insured, Pre-Refunded, 6.50%, 10/01/24 ................................................................... 1,000,000 1,098,780 Hampton Roads Regional Jail Authority Jail Facilities Revenue, Series A, MBIA Insured, 5.00%, 7/01/28 .................................................................................. 3,405,000 3,064,875 Spotsylvania County Water and Sewer System Revenue, MBIA Insured, 5.40%, 6/01/27 ................... 3,850,000 3,731,305 Winchester IDA, Educational Facilities Revenue, First Mortgage, Shenandoah University Project, MBIA Insured, 5.00%, 10/01/18 ................................................................................. 1,000,000 922,460 5.25%, 10/01/28 ................................................................................. 1,420,000 1,345,095 ---------- 25,596,746 ---------- WASHINGTON 5.6% Bellingham Housing Authority Revenue, Pacific Rim and Cascade Meadows Project, Refunding, MBIA Insured, 5.20%, 11/01/27 ................................................................... 4,000,000 3,715,600 Douglas County PUD No. 1 Electric Systems Revenue, MBIA Insured, 6.00%, 1/01/15 .................... 900,000 938,880 Everett COP, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 4/01/09 ................................. 850,000 890,868 Grant County PUD No. 2, Wanapum Hydroelectric Revenue, Series B, AMBAC Insured, 6.75%, 1/01/23 .................................................................................. 1,060,000 1,124,628 Pre-Refunded, 6.75%, 1/01/23 .................................................................... 940,000 1,004,851 King County Public Hospital District No. 001 Hospital Facilities Revenue, Valley Medical Center, King County Sewer, MBIA Insured, 6.125%, 1/01/33 ......................... 3,000,000 3,074,640 Kitsap County School District No. 100-C, MBIA Insured, Pre-Refunded, 6.60%, 12/01/08 ............... 1,015,000 1,064,837 Klickitat County PUD No. 001 Electric Revenue, FGIC Insured, 5.65%, 10/01/15 ................................................................................. 1,000,000 1,009,230 5.75%, 10/01/27 ................................................................................. 1,000,000 1,003,980 Mason County GO, School District No. 402, Pioneer, MBIA Insured, Pre-Refunded, 6.60%, 12/01/11 ................................................................................. 1,040,000 1,141,941 Pierce County GO, School District No. 003 Puyallup, FGIC Insured, 5.70%, 12/01/15 .................. 1,000,000 1,020,990 Port of Longview GO, MBIA Insured, 6.00%, 11/01/15 ................................................. 2,000,000 2,072,720 Seatac Storm Water Revenue, MBIA Insured, Pre-Refunded, 6.50%, 12/01/13 ............................ 2,890,000 3,172,815 Seattle Municipality Metropolitan Sewer Revenue, Series W, MBIA Insured, Pre-Refunded, 6.30%, 1/01/33 .................................................................... 11,000,000 11,837,100 Seattle Water System Revenue, FGIC Insured, 5.625%, 8/01/26 ........................................ 2,000,000 1,984,800 Snohomish County PUD No. 1 Electric Revenue, Generation System, FGIC Insured, ETM, 6.65%, 1/01/16 ............................................................................. 4,250,000 4,516,348 Spokane Public Facilities District Hotel Motel and Sales Use Tax Revenue, Multi-Purpose Arena Project, AMBAC Insured, 6.50%, 1/01/18 ...................................... 5,000,000 5,229,050 Tacoma Electric System Revenue, Refunding, AMBAC Insured, 6.25%, 1/01/11 ................................................................... 500,000 524,365 FGIC Insured, 6.25%, 1/01/15 .................................................................... 6,190,000 6,505,504 Tacoma GO, Series A, MBIA Insured, 5.625%, 12/01/22 ................................................ 3,400,000 3,362,736 Thurston and Pierce Counties Community Schools, Series B, AMBAC Insured, 6.65%, 12/01/09 ........... 1,305,000 1,404,376 Washington State Health Care Facilities Authority Revenue, Swedish Health Services, Refunding, AMBAC Insured, 5.50%, 11/15/28 ....................................................... 15,370,000 14,765,037 Washington State Health Care Facilities Authority Revenue, Providence Services, MBIA Insured, 5.50%, 12/01/26 ................................................................... 7,000,000 6,685,910 Washington State Housing Finance Commission MFMR, Series A, GNMA Secured, 7.70%, 7/01/32 ........... 2,845,000 2,909,098 Washington State Public Power Supply System Revenue, Nuclear Project No. 1, Refunding, Series A, MBIA Insured, 6.25%, 7/01/17 ............................................... 420,000 436,943 Series C, FGIC Insured, Pre-Refunded, 7.75%, 7/01/08 ............................................ 2,500,000 2,630,750 Washington State University Revenues, Housing and Dining System, Refunding, MBIA Insured, 6.40%, 10/01/24 ................................................................... 6,130,000 6,515,577
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) WASHINGTON (CONT.) Western Washington University Revenue, Housing and Dining System, MBIA Insured, 6.375%, 10/01/22 ............................................................... $80,000 $83,460 Refunding, MBIA Insured, 6.70%, 10/01/11 ..................................................... 235,000 243,860 Refunding, MBIA Insured, 6.375%, 10/01/21 .................................................... 770,000 788,626 Whatcom County School District No. 501, GO, Bellingham, FGIC Insured, Pre-Refunded, 6.125%, 12/01/13 ............................................................................. 2,000,000 2,152,100 Yakima-Tieton Irrigation District Revenue, Refunding, FSA Insured, 6.20%, 6/01/19 ............... 350,000 366,097 ------------- 94,177,717 ------------- WEST VIRGINIA 1.6% Harrison County Community Solid Waste Disposal Revenue, Potomac Edison Co., Series C, AMBAC Insured, 6.75%, 8/01/24 ...................................................... 11,560,000 12,366,426 Monongalia County Building Community Hospital Revenue, Monongalia General Hospital Refunding, Series B, MBIA Insured, 6.50%, 7/01/17 ............................................ 1,000,000 1,035,550 West Virginia State GO, Series A, FGIC Insured, 5.00%, 11/01/21 ................................. 5,000,000 4,538,950 West Virginia State University Revenue, Refunding, AMBAC Insured, 6.00%, 4/01/12 ................ 2,250,000 2,382,548 West Virginia State Water Development Authority Revenue, Loan Program II, Series B, FSA Insured, Pre-Refunded, 7.50%, 11/01/29 ........................ 3,000,000 3,078,450 Loan Program, Refunding, Series A, FSA Insured, 7.00%, 11/01/25 .............................. 2,750,000 2,908,208 ------------- 26,310,132 ------------- WISCONSIN 1.1% Superior Limited Obligation Revenue, Midwest Energy Resources, Refunding, Series E, FGIC Insured, 6.90%, 8/01/21 ................................................................. 3,000,000 3,492,780 Wisconsin State Health and Educational Facilities Authority Revenue, Aurora Health Care Inc., Refunding, MBIA Insured, 5.25%, 8/15/27 ............................. 11,000,000 10,124,820 SSM Health Care, Refunding, Series AA, MBIA Insured, 6.25%, 6/01/20 .......................... 500,000 516,055 Wisconsin State Health and Educational Revenue, Community Provider Program, Series A, FSA Insured, 7.50%, 1/15/04 ............................ 1,753,000 1,788,481 Series A, FSA Insured, 7.50%, 1/15/09 ........................................................ 2,000,000 2,041,960 ------------- 17,964,096 ------------- WYOMING 1.3% Gillette Health Facilities Revenue, Lutheran Hospital and Home Society, Refunding, MBIA Insured, 5.90%, 1/01/16 ................................................................. 500,000 513,960 Natrona County Hospital Revenue, Wyoming Medical Center Projects, Refunding, AMBAC Insured, 6.00%, 9/15/24 ................................................................ 9,885,000 10,177,102 University of Wyoming Revenues, Facilities, MBIA Insured, 7.10%, 6/01/10 ........................ 2,245,000 2,295,625 Wyoming CDA, SFMR, Series A, AMBAC Insured, 6.00%, 6/01/23 ...................................... 6,750,000 6,824,250 Wyoming Municipal Power Agency Power Supply System Revenue, Series A, MBIA Insured, Pre-Refunded, 6.125%, 1/01/16 ................................................................ 2,000,000 2,141,460 ------------- 21,952,397 ------------- TOTAL LONG TERM INVESTMENTS (COST $1,660,560,473) ............................................... 1,684,744,053 ------------- (a)SHORT TERM INVESTMENTS 1.9% ALASKA .4% Valdez Marine Terminal Revenue, Exxon Pipeline Co. Project, Refunding, Series A, Daily VRDN and Put, 2.70%, 12/01/33 ..................................... 3,400,000 3,400,000 Series B, Daily VRDN and Put, 2.70%, 12/01/33 ................................................ 3,400,000 3,400,000 ------------- 6,800,000 ------------- CALIFORNIA .3% Irvine Ranch Water District COP, Capital Improvement Project, Daily VRDN and Put, 2.60%, 8/01/16 4,900,000 4,900,000 ------------- LOUISIANA Louisiana State Offshore Terminal Authority Deepwater Port Revenue, Loop Inc., 1st Stage, ACES, Refunding, Daily VRDN and Put, 2.70%, 9/01/06 ............................... 500,000 500,000 ------------- MARYLAND .1% Howard County MFR, Avalon Meadows Project, Refunding, FNMA Insured, Weekly VRDN and Put, 3.15%, 6/15/26 .......................................................... 800,000 800,000 Maryland State Health and Higher Educational Facilities Authority Revenue, Catholic Health Initiatives, Series B, Weekly VRDN and Put, 3.25%, 12/01/15 .................. 500,000 500,000 ------------- 1,300,000 -------------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ (a)SHORT TERM INVESTMENTS (CONT.) MICHIGAN .2% Delta County EDC, Environmental Improvement Revenue, Mead Escanaba Paper Project, Refunding, Series C, Daily VRDN and Put, 2.80%, 12/01/23 ................................... $1,200,000 $1,200,000 Grand Rapids Water Supply System Revenue, FGIC Insured, Daily VRDN and Put, 3.15%, 1/01/20 .... 650,000 650,000 Midland County EDC, Limited Obligation Revenue, Dow Chemical Co. Project, Refunding, Series B, Daily VRDN and Put, 2.85%, 12/01/15 .............................................. 800,000 800,000 -------------- 2,650,000 -------------- NEW MEXICO Farmington PCR, Arizona Public Service Co., Refunding, Series B, Daily VRDN and Put, 2.70%, 9/01/24 .................................... 700,000 700,000 Series A, Daily VRDN and Put, 2.70%, 5/01/24 ............................................... 200,000 200,000 -------------- 900,000 -------------- NEW YORK .3% Long Island Power Authority Electric System Revenue, Sub Series 5, Daily VRDN and Put, 2.70%, 5/01/33 ............................................................................. 1,400,000 1,400,000 New York City Municipal Water Finance Authority Water and Sewer System Revenue, Series C, FGIC Insured, Daily VRDN and Put, 2.80%, 6/15/23 ................................. 2,400,000 2,400,000 Series G, FGIC Insured, Daily VRDN and Put, 2.70%, 6/15/24 ................................. 1,200,000 1,200,000 -------------- 5,000,000 -------------- NORTH CAROLINA Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co., Series A, Weekly VRDN and Put, 3.30%, 5/01/15 .............................................. 100,000 100,000 -------------- OHIO .1% Cuyahoga County EDR, Cleveland Orchestra Project, Daily VRDN and Put, 2.70%, 4/01/28 .......... 600,000 600,000 Cuyahoga County Hospital Revenue, Refunding, Series B, AMBAC Insured, Weekly VRDN and Put, 3.30%, 1/01/16 ........................................................ 500,000 500,000 Cuyahoga County IDR, Allen Group Inc. Project, Weekly VRDN and Put, 3.20%, 12/01/15 ........... 200,000 200,000 -------------- 1,300,000 -------------- TENNESSEE .2% Bradley County IDB, Industrial Revenue, Olin Corp. Project, Refunding, Series C, Daily VRDN and Put, 2.85%, 11/01/17 ........................................................ 2,700,000 2,700,000 -------------- TEXAS .1% Gulf Coast Waste Disposal Authority PCR, AMOCO Oil Co. Project, Refunding, Daily VRDN and Put, 2.70%, 10/01/17 ........................................................ 300,000 300,000 Lubbock Health Facilities Development Corp. Revenue, St. Joseph Health System, Daily VRDN and Put, 2.75%, 7/01/13 ......................................................... 1,400,000 1,400,000 -------------- 1,700,000 -------------- US TERRITORIES Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ....................................................... 300,000 300,000 -------------- WASHINGTON .2% Washington State Health Care Facilities Authority Revenue, Sisters of Providence, Series D, Daily VRDN and Put, 2.70%, 10/01/05 .............................................. 3,200,000 3,200,000 -------------- Total Short Term Investments (Cost $31,350,000) ............................................... 31,350,000 -------------- Total Investments (Cost $1,691,910,473) 102.2% ................................................ 1,716,094,053 Other Assets, less Liabilities (2.2%) ......................................................... (37,133,779) -------------- Net Assets 100.0% ............................................................................. $1,678,960,274 ==============
See glossary of terms on page 83. (a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b)Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............ $ 11.71 $ 11.75 $ 11.54 $ 11.65 $ 11.34 $ 11.81 --------------------------------------------------------------------------------- Income from investment operations: Net investment income .......................... .29 .59 .61 .63 .66 .66 Net realized and unrealized gains (losses) ..... (.59) .03 .35 (.10) .31 (.47) --------------------------------------------------------------------------------- Total from investment operations ................ (.30) .62 .96 .53 .97 .19 --------------------------------------------------------------------------------- Less distributions from: Net investment income .......................... (.29)(3) (.59) (.61) (.64)(2) (.66) (.66) In excess of net investment income ............. -- -- (.01) -- -- -- Net realized gains ............................. -- (.07) (.13) -- -- -- --------------------------------------------------------------------------------- Total distributions ............................. (.29) (.66) (.75) (.64) (.66) (.66) --------------------------------------------------------------------------------- Net asset value, end of period .................. $ 11.12 $ 11.71 $ 11.75 $ 11.54 $ 11.65 $ 11.34 ================================================================================ Total return* ................................... (2.59)% 5.36% 8.50% 4.75% 8.80% 1.83% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............... $ 331,351 $ 340,109 $ 328,147 $ 325,065 $ 301,529 $ 288,331 Ratios to average net assets: Expenses ....................................... .69%** .68% .68% .68% .69% .67% Net investment income .......................... 5.01%** 4.99% 5.21% 5.51% 5.67% 5.89% Portfolio turnover rate ......................... 13.05% 6.80% 30.46% 29.22% 10.29% 16.90% CLASS C - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............ $ 11.76 $ 11.80 $ 11.59 $ 11.69 $ 11.36 ----------------------------------------------------------------- Income from investment operations: Net investment income .......................... .26 .52 .55 .57 .50 Net realized and unrealized gains (losses) ..... (.58) .03 .34 (.09) .32 ----------------------------------------------------------------- Total from investment operations ................ (.32) .55 .89 .48 .82 ----------------------------------------------------------------- Less distributions from: Net investment income .......................... (.26)(4) (.52) (.55) (.58)(2) (.49) Net realized gains ............................. -- (.07) (.13) -- -- ----------------------------------------------------------------- Total distributions ............................. (.26) (.59) (.68) (.58) (.49) ----------------------------------------------------------------- Net asset value, end of period .................. $ 11.18 $ 11.76 $ 11.80 $ 11.59 $ 11.69 ================================================================= Total return* ................................... (2.77)% 4.74% 7.86% 4.22% 7.36% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............... $ 27,969 $ 26,271 $ 13,937 $ 6,378 $ 2,759 Ratios to average net assets: Expenses ....................................... 1.25%** 1.24% 1.25% 1.25% 1.26%** Net investment income .......................... 4.44%** 4.44% 4.59% 4.96% 5.06%** Portfolio turnover rate ......................... 13.05% 6.80% 30.46% 29.22% 10.29%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2)Includes distributions in excess of net investment income in the amount of $.001. (3)Includes distributions in excess of net investment income in the amount of $.004. (4)Includes distributions in excess of net investment income in the amount of $.003. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 97.5% Amesbury GO, FGIC Insured, 5.00%, 3/15/18 ............................................................ $ 1,500,000 $ 1,390,470 Ashburnham and Westminister Regional School District, MBIA Insured, 6.00%, 12/15/13 .................. 2,700,000 2,858,220 Attleboro Municipal Purpose GO, AMBAC Insured, 6.00%, 7/01/11 ........................................................................................... 1,045,000 1,102,266 7/01/12 ........................................................................................... 1,045,000 1,109,424 7/01/13 ........................................................................................... 685,000 724,559 7/01/14 ........................................................................................... 755,000 798,156 Blackstone-Milville School District, AMBAC Insured, Pre-Refunded, 6.50%, 5/01/08 ........................................................................................... 705,000 757,628 5/01/09 ........................................................................................... 750,000 805,988 5/01/10 ........................................................................................... 795,000 854,347 Boston GO, Refunding, Series B, FGIC Insured, 5.25%, 4/01/14 ......................................... 3,335,000 3,284,808 Boston Revenue, Boston City Hospital, Refunding, Series B, MBIA Insured, 5.75%, 2/15/23 .............. 10,500,000 10,505,250 Boston Water and Sewer Commission Revenue, Series A, GNMA Secured, Pre-Refunded, 7.10%, 11/01/19 ..... 1,400,000 1,435,728 Central Berkshire GO, School District, MBIA Insured, Pre-Refunded, 7.25%, 6/01/08 .................... 1,095,000 1,145,589 Chelsea GO, State Qualified, Refunding, AMBAC Insured, 5.125%, 6/15/16 ............................... 1,750,000 1,669,308 Dudley Charleston Regional School District GO, Series B, FGIC Insured, 5.25%, 5/01/19 ................ 3,140,000 2,995,372 Framingham Housing Authority Mortgage Revenue, Beaver Terrace Apartments, Series A, GNMA Secured, 6.65%, 2/20/32 ...................................................................... 1,650,000 1,730,141 Greenfield GO, MBIA Insured, Pre-Refunded, 6.50%, 10/15/08 .......................................................................................... 500,000 533,555 10/15/09 .......................................................................................... 500,000 533,555 Holyoke GO, School Project Loans, MBIA Insured, Pre-Refunded, 8.05%, 6/15/04 ......................... 1,000,000 1,126,200 Hudson GO, MBIA Insured, 6.00%, 5/15/13 ........................................................................................... 250,000 263,918 5/15/14 ........................................................................................... 240,000 253,500 Lenox GO, Refunding, AMBAC Insured, 6.60%, 10/15/11 ................................................................................... 1,000,000 1,055,090 6.625%, 10/15/15 .................................................................................. 500,000 528,830 Leominster GO, MBIA Insured, Pre-Refunded, 7.50%, 4/01/09 ............................................ 450,000 468,824 Ludlow GO, School Project, Limited Tax, MBIA Insured, 7.30%, 11/01/07 ................................................................................... 210,000 243,856 7.30%, 11/01/08 ................................................................................... 210,000 245,301 7.40%, 11/01/09 ................................................................................... 210,000 248,646 Lynn Water and Sewer Commission General Revenue, Series A, FSA Insured, 5.125%, 12/01/17 ..................................................................... 3,000,000 2,854,620 MBIA Insured, Pre-Refunded, 7.25%, 12/01/10 ....................................................... 4,000,000 4,241,200 Mansfield Municipal Purpose Loan, FGIC Insured, 5.125%, 8/15/17 ...................................... 1,685,000 1,600,548 Martha's Vineyard Regional High School District No. 100, AMBAC Insured, Pre-Refunded, 6.55%, 12/15/10 ................................................................................... 830,000 904,625 6.60%, 12/15/11 ................................................................................... 725,000 793,273 6.65%, 12/15/12 ................................................................................... 880,000 966,196 6.70%, 12/15/14 ................................................................................... 210,000 229,612 Mashpee GO, MBIA Insured, 5.50%, 2/01/17 ............................................................. 2,000,000 1,980,020 Mashpee Water District GO, MBIA Insured, 6.40%, 10/15/12 ............................................. 500,000 532,095 Massachusetts Bay Transportation Authority COP, BIG Insured, 7.75%, 1/15/06 .......................... 2,500,000 2,814,250 Massachusetts Bay Transportation Authority Revenue, General Transportation System, Series A, FSA Insured, Pre-Refunded, 5.625%, 3/01/26 .............................................. 1,470,000 1,560,449 Series B, AMBAC Insured, 5.375%, 3/01/25 .......................................................... 4,570,000 4,359,780 Massachusetts Education Loan Authority Revenue, Issue D, Series A, MBIA Insured, 7.25%, 1/01/09 ...... 1,655,000 1,714,232 Massachusetts Municipal Wholesale Electric Co. Power Supply System Revenue, Series D, MBIA Insured, 6.125%, 7/01/19 ........................................................... 4,395,000 4,558,626 Massachusetts State GO, Series B, AMBAC Insured, 6.50%, 8/01/11 ..................................................................... 1,665,000 1,754,893 MBIA Insured, 6.50%, 8/01/11 ...................................................................... 855,000 901,161 Massachusetts State Health and Educational Facilities Authority Revenue, Bay State Medical Center, Refunding, Series D, FGIC Insured, 6.00%, 7/01/15 ....................... 1,500,000 1,546,620 Bay State Medical Center, Series E, FSA Insured, 6.00%, 7/01/26 ................................... 5,000,000 5,078,200 Bentley College, Series I, MBIA Insured, 6.125%, 7/01/17 .......................................... 1,250,000 1,303,025 Berkshire Health System, Series D, MBIA Insured, 6.00%, 10/01/19 .................................. 5,500,000 5,608,900
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Massachusetts State Health and Educational Facilities Authority Revenue, (cont.) Beverly Hospital, Lot 1, Refunding, Series D, MBIA Insured, 7.30%, 7/01/13 ...................... $ 1,900,000 $ 1,954,340 Boston College, Series J, FGIC Insured, 6.625%, 7/01/21 ......................................... 20,000 21,033 Boston College, Series J, FGIC Insured, Pre-Refunded, 6.625%, 7/01/21 ........................... 2,230,000 2,370,646 Cable Housing and Health Services, Series A, MBIA Insured, 5.25%, 7/01/23 ....................... 1,000,000 931,810 Children's Hospital, Refunding, Series E, AMBAC Insured, 6.20%, 10/01/16 ........................ 2,200,000 2,318,602 Community College Program, Series A, Connie Lee Insured, Pre-Refunded, 6.50%, 10/01/09 .......... 1,000,000 1,082,710 Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/18 ............................. 5,595,000 5,535,637 Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/25 ............................. 7,720,000 7,449,491 Dana-Farber Cancer Institute, Refunding, Series F, FGIC Insured, 6.00%, 12/01/15 ................ 1,000,000 1,032,950 Lahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 7/01/23 ............................ 26,730,000 25,336,565 Massachusetts General Hospital, Refunding, Series F, AMBAC Insured, 6.00%, 7/01/15 .............. 2,500,000 2,565,125 Massachusetts General Hospital, Series F, AMBAC Insured, Pre-Refunded, 6.25%, 7/01/20 ........... 9,000,000 9,755,640 McLean Hospital, Series C, FGIC Insured, Pre-Refunded, 6.625%, 7/01/15 .......................... 1,280,000 1,383,898 Milton Hospital, Series B, MBIA Insured, 7.00%, 7/01/16 ......................................... 2,400,000 2,494,488 Mt. Auburn Hospital, Series B-1, MBIA Insured, 6.30%, 8/15/24 ................................... 6,500,000 6,815,835 New England Deaconess Hospitals, Series D, AMBAC Insured, Pre-Refunded, 6.875%, 4/01/22 ......... 1,895,000 2,050,617 Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 7/01/18 ............................... 1,300,000 1,329,172 Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 7/01/25 ............................... 6,750,000 6,850,305 Northeastern University, Series D, AMBAC Insured, 7.125%, 10/01/10 .............................. 1,250,000 1,310,900 Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ................................ 3,900,000 4,148,781 Partners Healthcare System, Series A, MBIA Insured, 5.375%, 7/01/24 ............................. 5,000,000 4,721,800 Simmons College, Series C, MBIA Insured, 5.125%, 10/01/28 ....................................... 2,600,000 2,347,956 Springfield College, AMBAC Insured, 5.00%, 10/15/27 ............................................. 2,500,000 2,214,650 Stonehill College, MBIA Insured, 6.55%, 7/01/12 ................................................. 495,000 528,170 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.65%, 7/01/10 ........................ 1,025,000 1,078,649 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.70%, 7/01/20 ........................ 515,000 542,161 Stonehill College, Series E, MBIA Insured, 6.60%, 7/01/20 ....................................... 1,550,000 1,649,929 Stonehill College, Series E, MBIA Insured, Pre-Refunded, 6.55%, 7/01/12 ......................... 395,000 426,280 Stonehill College, Series E, MBIA Insured, Pre-Refunded, 6.60%, 7/01/20 ......................... 1,450,000 1,566,740 Stonehill College, Series F, AMBAC Insured, 5.75%, 7/01/26 ...................................... 1,690,000 1,685,268 Suffolk University, Series B, Connie Lee Insured, 6.35%, 7/01/22 ................................ 3,000,000 3,139,650 Tufts University, FGIC Insured, 5.95%, 8/15/18 .................................................. 5,000,000 5,098,350 University Hospital, Series C, MBIA Insured, Pre-Refunded, 7.25%, 7/01/19 ....................... 1,500,000 1,572,390 Wellesley College, Series F, 5.125%, 7/01/39 .................................................... 5,000,000 4,477,400 Wentworth Institute of Technology, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 4/01/10 ........ 1,820,000 1,895,093 Williams College, Series F, MBIA Insured, 5.50%, 7/01/26 ........................................ 2,500,000 2,408,225 Massachusetts State HFA, Housing Development, Series D, MBIA Insured, 5.40%, 6/01/20 ..................................... 4,270,000 4,104,879 Housing Revenue, SF, Series 53, MBIA Insured, 6.15%, 12/01/29 ................................... 2,500,000 2,549,250 Housing Revenue, SF, Series 57, MBIA Insured, 5.55%, 6/01/25 .................................... 10,000 9,564 Housing Revenue, SF, Series 59, AMBAC Insured, 5.50%, 12/01/30 .................................. 5,000,000 4,702,100 Housing Revenue, SFMR, Series 18, MBIA Insured, 7.35%, 12/01/16 ................................. 1,450,000 1,498,909 MFHR, Section 8 Assisted, Series A, GNMA Secured, ETM, 7.00%, 4/01/21 ........................... 430,000 490,716 Massachusetts State Industrial Finance Agency Assisted Living Facility Revenue, Arbors at Taunton Project, GNMA Secured, 5.50%, 6/20/40 ............................................................ 2,000,000 1,853,780 Massachusetts State Industrial Finance Agency Electrical Utility Revenue, Nantucket Electric Co., Series A, AMBAC Insured, 5.875%, 7/01/17 ......................................................... 4,000,000 4,072,640 Massachusetts State Industrial Finance Agency Revenue, Babson College, Series A, MBIA Insured, Pre-Refunded, 6.50%, 10/01/22 ........................... 3,105,000 3,361,815 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 .................................... 860,000 878,653 Brandeis University, Series C, MBIA Insured, Pre-Refunded, 6.80%, 10/01/19 ...................... 6,215,000 6,354,651 College of the Holy Cross, Refunding, MBIA Insured, 5.625%, 3/01/26 ............................. 1,000,000 980,430 Combined Jewish Philanthropies, Refunding, Series A, AMBAC Insured, 6.375%, 2/01/15 ............. 2,010,000 2,152,891 Milton Academy, Series A, MBIA Insured, Pre-Refunded, 7.25%, 9/01/19 ............................ 1,000,000 1,020,000 Saint Marks School Issue, MBIA Insured, 5.375%, 1/01/21 ......................................... 2,665,000 2,558,640 Simons Rock College, AMBAC Insured, 5.50%, 6/01/17 .............................................. 1,000,000 993,190 Simons Rock College, AMBAC Insured, 5.50%, 6/01/27 .............................................. 1,560,000 1,501,906
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Massachusetts State Industrial Finance Agency Revenue, (cont.) Suffolk University, AMBAC Insured, 5.25%, 7/01/17 ................................................... $ 3,510,000 $3,387,641 Suffolk University, AMBAC Insured, 5.25%, 7/01/27 ................................................... 2,000,000 1,856,600 Trustees Deerfield Academy, 5.25%, 10/01/27 ......................................................... 2,800,000 2,643,116 Western New England College, AMBAC Insured, 5.00%, 7/01/28 .......................................... 4,000,000 3,538,840 WGBH Educational Foundation, Refunding, AMBAC Insured, 5.00%, 3/01/28 ............................... 4,000,000 3,541,280 Worcester Polytechnic Institute, Refunding, MBIA Insured, 5.125%, 9/01/17 ........................... 3,720,000 3,525,295 Worcester Polytechnic Institute, Refunding, Series II, MBIA Insured, 5.50%, 9/01/21 ................. 3,500,000 3,412,850 Worcester Polytechnic Institute, Refunding, Series II, MBIA Insured, 5.125%, 9/01/27 ................ 4,000,000 3,628,400 Massachusetts State Port Authority Revenue, Series A, FGIC Insured, 7.50%, 7/01/20 .............................................................. 3,980,000 4,145,648 Series A, FGIC Insured, Pre-Refunded, 7.50%, 7/01/20 ................................................ 1,220,000 1,280,829 Series A, FSA Insured, 5.125%, 7/01/17 .............................................................. 5,000,000 4,761,000 Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/19 .................................. 2,215,000 2,184,876 Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/22 .................................. 2,610,000 2,545,925 Special Facilities, Bosfuel Project, MBIA Insured, 5.625%, 7/01/27 .................................. 1,500,000 1,449,765 Special Facilities, Bosfuel Project, MBIA Insured, 5.75%, 7/01/29 ................................... 7,450,000 7,272,914 Special Facilities, Bosfuel Project, MBIA Insured, 5.75%, 7/01/39 ................................... 3,000,000 2,930,970 US Air Project, Series A, MBIA Insured, 5.875%, 9/01/23 ............................................. 4,500,000 4,468,500 Massachusetts State Turnpike Authority Metropolitan Highway System Revenue, Series A, MBIA Insured, 5.00%, 1/01/27 .............................................................. 4,500,000 4,020,345 Series A, MBIA Insured, 5.00%, 1/01/37 .............................................................. 10,000,000 8,715,000 Sub. lien, Refunding, Series B, MBIA Insured, 5.125%, 1/01/37 ....................................... 10,000,000 8,903,900 Massachusetts State Turnpike Authority Western Turnpike Revenue, Series A, MBIA Insured, 5.55%, 1/01/17 1,865,000 1,862,781 Massachusetts State Water Resources Authority Revenue, Refunding, Series B, MBIA Insured, 5.00%, 3/01/22 1,500,000 1,357,245 Melrose Municipal Purpose GO, MBIA Insured, 6.00%, 8/15/11 ...................................................................................... 200,000 211,134 6.05%, 8/15/12 ...................................................................................... 200,000 210,876 6.10%, 8/15/13 ...................................................................................... 200,000 212,578 6.10%, 8/15/14 ...................................................................................... 200,000 212,668 Millis School Project GO, Unlimited Tax, AMBAC Insured, 7.40%, 5/01/06 ............................................................................................. 270,000 280,301 5/01/07 ............................................................................................. 270,000 280,209 5/01/08 ............................................................................................. 270,000 280,282 Norfolk GO, AMBAC Insured, 6.00%, 1/15/10 ............................................................................................. 450,000 470,277 1/15/11 ............................................................................................. 425,000 443,947 1/15/12 ............................................................................................. 375,000 393,154 1/15/13 ............................................................................................. 300,000 315,300 North Andover GO, FGIC Insured, 5.50%, 1/15/14 ............................................................................................. 850,000 860,489 1/15/15 ............................................................................................. 420,000 423,641 North Andover Municipal Purpose GO, Limited Tax, MBIA Insured, 7.40%, 9/15/09 .......................... 300,000 316,710 North Attleborough GO, Limited Tax, AMBAC Insured, Pre-Refunded, 7.20%, 6/01/09 ............................................ 125,000 130,730 MBIA Insured, 5.70%, 1/15/16 ........................................................................ 850,000 869,797 Northhampton GO, MBIA Insured, 5.60%, 5/15/17 .......................................................... 1,085,000 1,085,705 Plymouth County COP, Correctional Facility Project, AMBAC Insured, 5.00%, 4/01/22 ...................... 3,500,000 3,166,170 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ........................ 190,000 196,722 Salem GO, AMBAC Insured, 6.70%, 8/15/05 ...................................................................................... 425,000 448,983 6.80%, 8/15/07 ...................................................................................... 500,000 528,655 Somerville Housing Authority Revenue, Clarendon Hill, GNMA Secured, 7.95%, 11/20/30 .................... 3,000,000 3,095,670 South Essex Sewer District GO, AMBAC Insured, 6.25%, 11/01/11 ...................................................................... 330,000 346,061 Series B, MBIA Insured, Pre-Refunded, 7.00%, 6/01/24 ................................................ 2,800,000 3,150,112 Southbridge GO, AMBAC Insured, 6.375%, 1/01/12 ......................................................... 2,375,000 2,506,338
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Whately GO, AMBAC Insured, 6.20%, 1/15/07 ................................................................................. $ 215,000 $ 225,339 6.30%, 1/15/08 ................................................................................. 215,000 225,765 6.40%, 1/15/10 ................................................................................. 200,000 210,732 Worcester GO, Refunding, Series E, MBIA Insured, 6.00%, 10/01/15 .................................. 1,335,000 1,411,856 Worcester Municipal Purpose Loan, Refunding, Series A, AMBAC Insured, 5.25%, 8/01/16 .............. 1,410,000 1,368,413 ------------ TOTAL LONG TERM INVESTMENTS (COST $346,590,859) ................................................... 350,458,458 ------------ (a)SHORT TERM INVESTMENTS 1.3% Massachusetts State Health and Educational Facilities Authority Revenue, Capital Assets Program, Series D, MBIA Insured, Daily VRDN and Put, 2.80%, 1/01/35 (Cost $4,700,000) .................... 4,700,000 4,700,000 ------------ TOTAL INVESTMENTS (COST $351,290,859) 98.8% ....................................................... 355,158,458 OTHER ASSETS, LESS LIABILITIES 1.2% ............................................................... 4,161,783 ------------ NET ASSETS 100.0% ................................................................................. $359,320,241 ============
See glossary of terms on page 83. (a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ---------------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ... $ 12.28 $ 12.20 $ 12.00 $ 12.09 $ 11.76 $ 12.24 ---------------------------------------------------------------------------------------- Income from investment operations: Net investment income ................. .30 .61 .63 .66 .68 .69 Net realized and unrealized gains (losses) ....................... (.56) .13 .34 (.09) .34 (.48) ---------------------------------------------------------------------------------------- Total from investment operations ....... (.26) .74 .97 .57 1.02 .21 ---------------------------------------------------------------------------------------- Less distributions from: Net investment income ................. (.30)(4) (.61) (.63) (.66)(3) (.69)(2) (.69) In excess of net investment income .... -- -- (.01) -- -- -- Net realized gains .................... -- (.05) (.13) -- -- -- ---------------------------------------------------------------------------------------- Total distributions .................... (.30) (.66) (.77) (.66) (.69) (.69) ---------------------------------------------------------------------------------------- Net asset value, end of period ......... $ 11.72 $ 12.28 $ 12.20 $ 12.00 $ 12.09 $ 11.76 ======================================================================================== Total return* .......................... (2.11)% 6.23% 8.37% 4.90% 8.86% 1.87% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ...... $ 1,151,515 $1,161,345 $1,142,565 $1,111,537 $1,115,454 $1,037,717 Ratios to average net assets: Expenses .............................. .64%** .63% .63% .62% .62% .61% Net investment income ................. 4.98%** 4.98% 5.24% 5.52% 5.65% 5.87% Portfolio turnover rate ................ 3.87% 7.37% 20.08% 30.03% 9.38% 9.12% CLASS C - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ... $ 12.36 $ 12.27 $ 12.07 $ 12.14 $ 11.77 ------------ ---------- ---------- ---------- ---------- Income from investment operations: Net investment income ................. .27 .55 .57 .59 .51 Net realized and unrealized gains (losses) ...................... (.56) .13 .33 (.07) .37 ------------ ---------- ---------- ---------- ---------- Total from investment operations ....... (.29) .68 .90 .52 .88 ------------ ---------- ---------- ---------- ---------- Less distributions from: Net investment income ................. (.27)4 (.54) (.57) (.59) (.51) Net realized gains .................... -- (.05) (.13) -- -- ------------ ---------- ---------- ---------- ---------- Total distributions .................... (.27) (.59) (.70) (.59) (.51) ------------ ---------- ---------- ---------- ---------- Net asset value, end of period ......... $ 11.80 $ 12.36 $ 12.27 $ 12.07 $ 12.14 ====================================================================== Total return* .......................... (2.40)% 5.71% 7.70% 4.44% 7.58% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ...... $ 53,635 $ 49,970 $ 32,873 $ 20,162 $ 6,683 Ratios to average net assets: Expenses .............................. 1.20%** 1.19% 1.20% 1.19% 1.20%** Net investment income ................. 4.42%** 4.42% 4.67% 4.94% 5.03%** Portfolio turnover rate ................ 3.87% 7.37% 20.08% 30.03% 9.38%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2)Includes distributions in excess of net investment income in the amount of $.001. (3)Includes distributions in excess of net investment income in the amount of $.002. (4)Includes distributions in excess of net investment income in the amount of $.004. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.5% Allegan Public School, AMBAC Insured, Pre-Refunded, 5.75%, 5/01/22 ................................ $ 4,165,000 $ 4,415,858 Allendale Public School, MBIA Insured, 5.875%, 5/01/14 ............................................................................... 1,335,000 1,390,149 Pre-Refunded, 5.875%, 5/01/14 ................................................................... 665,000 708,996 School Building, Pre-Refunded, 6.00%, 5/01/24 ................................................... 3,750,000 4,017,638 Almont Community Schools, FGIC Insured, 5.50%, 5/01/26 ............................................. 1,925,000 1,862,149 Alpena Public Schools GO, MBIA Insured, Pre-Refunded, 5.625%, 5/01/22 .............................. 1,665,000 1,752,062 Anchor Bay School District, MBIA Insured, Pre-Refunded, 5.50%, 5/01/26 ............................. 7,380,000 7,707,377 Avondale School District, AMBAC Insured, Pre-Refunded, 5.75%, 5/01/22 .............................. 4,000,000 4,240,920 Bath Community Schools GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/25 .............................. 1,625,000 1,734,265 Battle Creek Downtown Development Authority, Refunding, MBIA Insured, 5.125%, 5/01/20 .............. 4,500,000 4,198,185 Berkley City School District, FGIC Insured, Pre-Refunded, 5.625%, 1/01/15 ................................................................................. 2,060,000 2,172,785 6.00%, 1/01/19 .................................................................................. 2,125,000 2,278,595 Big Rapids Public School District, Building and Site, FGIC Insured, Pre-Refunded, 5.625%, 5/01/25 .. 1,470,000 1,554,099 Brandon School District, FGIC Insured, Pre-Refunded, 5.875%, 5/01/16 ......................................................................................... 5,540,000 5,948,852 5/01/26 ......................................................................................... 7,000,000 7,516,600 Breitung Township School District GO, FSA Insured, Pre-Refunded, 7.20%, 5/01/19 ....................................................... 7,500,000 7,673,325 Refunding, MBIA Insured, 6.30%, 5/01/15 ......................................................... 2,935,000 3,086,974 Byron Center Public Schools, MBIA Insured, Pre-Refunded, 5.875%, 5/01/24 ..................................................... 5,115,000 5,470,697 Refunding, MBIA Insured, 5.875%, 5/01/24 ........................................................ 135,000 136,060 Cadillac Area Public Schools GO, FGIC Insured, 5.50%, 5/01/22 .................................................................................. 2,605,000 2,535,733 Pre-Refunded, 5.50%, 5/01/22 .................................................................... 2,770,000 2,895,287 Caledonia Community Schools, MBIA Insured, Pre-Refunded, 5.85%, 5/01/22 ...................................................... 4,500,000 4,799,565 Refunding, AMBAC Insured, 6.625%, 5/01/14 ....................................................... 3,750,000 3,979,050 Refunding, AMBAC Insured, 5.50%, 5/01/22 ........................................................ 1,500,000 1,460,115 Calumet, Laurium and Keweenaw Public Schools GO, FSA Insured, Pre-Refunded, 5.875%, 5/01/20 ........ 875,000 936,451 Cedar Springs Public School District, MBIA Insured, Pre-Refunded, 5.875%, 5/01/19 ......................................................................................... 2,425,000 2,595,308 5/01/24 ......................................................................................... 3,875,000 4,138,694 Central Michigan University Revenue, FGIC Insured, 5.00%, 10/01/27 ................................................................................. 500,000 441,095 Pre-Refunded, 5.625%, 10/01/22 .................................................................. 2,500,000 2,638,925 Charlotte Public School District GO, FGIC Insured, 5.375%, 5/01/29 ................................. 8,850,000 8,379,534 Chelsea School District, FGIC Insured, Pre-Refunded, 5.875%, 5/01/25 ............................... 3,140,000 3,358,356 Chippewa County Hospital Financing Authority Revenue, Chippewa County War Memorial Hospital, Refunding, Series B, 5.625%, 11/01/14 ........................................ 650,000 622,778 Coldwater Community Schools, MBIA Insured, Pre-Refunded, 6.20%, 5/01/15 .................................................................................. 1,100,000 1,196,613 6.30%, 5/01/23 .................................................................................. 1,700,000 1,856,383 De Witt Public Schools, AMBAC Insured, Pre-Refunded, 5.70%, 5/01/21 .................................................................................. 6,905,000 7,298,930 5.50%, 5/01/26 .................................................................................. 5,500,000 5,743,980 Dearborn EDC Hospital Revenue, Oakwood Obligation Group, Refunding, Series A, MBIA Insured, 5.25%, 8/15/21 ............................................... 1,000,000 954,850 Series A, FGIC Insured, 5.75%, 11/15/15 ......................................................... 100,000 101,425 Series A, FGIC Insured, 5.875%, 11/15/25 ........................................................ 4,400,000 4,478,276 Detroit GO, City School District, Series A, AMBAC Insured, Pre-Refunded, 5.70%, 5/01/25 ............ 14,000,000 14,997,220 Detroit Local Development Finance Authority, Refunding, Series A, 5.375%, 5/01/21 .................. 100,000 94,435 Detroit Sewage Disposal Revenue, Refunding, Series B, MBIA Insured, 5.25%, 7/01/21 ............................................... 12,585,000 11,957,009 Series A, MBIA Insured, 5.50%, 7/01/20 .......................................................... 215,000 210,803 Series A, MBIA Insured, 5.00%, 7/01/27 .......................................................... 20,000,000 17,827,000
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Detroit Water Supply System Revenue, FGIC Insured, Pre-Refunded, 7.25%, 7/01/20 ................................................. $ 3,500,000 $ 3,670,380 Refunding, FGIC Insured, ETM, 6.25%, 7/01/12 ............................................... 5,000,000 5,227,850 Series A, MBIA Insured, 5.00%, 7/01/27 ..................................................... 5,750,000 5,096,340 Detroit/Wayne County Stadium Authority, FGIC Insured, 5.25%, 2/01/27 .......................... 5,500,000 5,115,385 Dexter Community Schools, Refunding, AMBAC Insured, 5.70%, 5/01/14 ............................ 1,050,000 1,067,147 East Detroit School District GO, FGIC Insured, 6.10%, 5/01/16 ............................................................................. 1,025,000 1,070,746 Pre-Refunded, 6.10%, 5/01/16 ............................................................... 4,975,000 5,405,537 East Lansing Building Authority GO, Refunding, AMBAC Insured, 7.00%, 10/01/16 ................. 1,250,000 1,277,413 Eastern Michigan University Revenue, FGIC Insured, 5.50%, 6/01/27 ............................................................... 9,100,000 8,822,359 Refunding, AMBAC Insured, 6.375%, 6/01/14 .................................................. 1,000,000 1,047,950 Eaton Rapids Public Schools, Building and Site, MBIA Insured, Pre-Refunded, 5.50%, 5/01/20 .... 2,435,000 2,558,089 Ecorse Public School District, FGIC Insured, 5.50%, 5/01/17 ................................... 5,000,000 4,932,950 Farmington Hills EDC Revenue, Botsford Continuing Care, Series A, MBIA Insured, 5.75%, 2/15/25 .................................................... 100,000 100,537 Farmington Hills Hospital Finance Authority Revenue, Botsford General Hospital, Refunding, Series A, MBIA Insured, Pre-Refunded, 7.10%, 2/15/14 ........................... 10,140,000 10,759,351 Ferndale School District GO, FGIC Insured, 5.50%, 5/01/22 ............................................................... 4,525,000 4,404,680 Refunding, FGIC Insured, 5.375%, 5/01/21 ................................................... 4,185,000 4,016,679 Ferris State College Revenue, AMBAC Insured, Pre-Refunded, 6.15%, 10/01/14 ............................................................................ 1,000,000 1,082,160 6.25%, 10/01/19 ............................................................................ 1,000,000 1,085,860 Ferris State University Revenue, AMBAC Insured, Pre-Refunded, 5.75%, 10/01/17 ............................................................................ 2,500,000 2,666,725 5.85%, 10/01/22 ............................................................................ 2,500,000 2,682,450 5.90%, 10/01/26 ............................................................................ 6,840,000 7,360,729 Fowlerville Community School District, MBIA Insured, Pre-Refunded, 5.60%, 5/01/21 ................................................. 2,000,000 2,101,420 Refunding, FGIC Insured, 5.75%, 5/01/20 .................................................... 2,150,000 2,155,977 Gladstone Area Public Schools GO, AMBAC Insured, 5.50%, 5/01/26 ............................................................................. 695,000 672,308 Pre-Refunded, 5.50%, 5/01/26 ............................................................... 805,000 840,710 Godfrey-Lee Public School District GO, MBIA Insured, 5.50%, 5/01/27 ........................... 1,150,000 1,110,325 Gogebic-Iron Wastewater Authority Wastewater Treatment System Revenue, Refunding, MBIA Insured, 5.95%, 1/01/15 ................................................... 1,015,000 1,045,186 6.05%, 1/01/25 ............................................................................. 500,000 514,130 Grand Haven Area Public Schools GO, MBIA Insured, Pre-Refunded, 6.05%, 5/01/14 ................................................. 4,540,000 4,871,057 Refunding, MBIA Insured, 6.05%, 5/01/14 .................................................... 460,000 485,042 Grand Ledge Public School District GO, MBIA Insured, Pre-Refunded, 6.60%, 5/01/24 ................................................. 10,000,000 11,044,800 Refunding, MBIA Insured, 5.375%, 5/01/24 ................................................... 13,105,000 12,493,521 Grand Rapids Downtown Development Authority Tax Increment Revenue, MBIA Insured, 6.875%, 6/01/24 ............................................................ 7,500,000 8,132,400 Grand Rapids Sanitary Sewer System Revenue, Refunding and Improvement, MBIA Insured, Pre-Refunded, 6.00%, 1/01/20 ............................................... 3,850,000 3,877,951 Grand Rapids Water Supply System Revenue, FGIC Insured, Pre-Refunded, 7.25%, 1/01/20 .......... 5,375,000 5,541,840 Grand Traverse County Building Authority GO, AMBAC Insured, Pre-Refunded, 5.75%, 9/01/15 ...... 1,700,000 1,792,480 Grand Traverse County Hospital Revenue, Munson Healthcare, Series A, AMBAC Insured, 6.25%, 7/01/12 ............................................................................. 815,000 860,086 6.25%, 7/01/22 ............................................................................. 2,395,000 2,508,667 Pre-Refunded, 6.25%, 7/01/12 ............................................................... 1,685,000 1,802,765 Pre-Refunded, 6.25%, 7/01/22 ............................................................... 5,505,000 5,889,744 Greenville Public School Building GO, MBIA Insured, Pre-Refunded, 5.75%, 5/01/19 .............. 2,010,000 2,132,530 Grosse-Ile Township School District GO, FGIC Insured, Pre-Refunded, 6.00%, 5/01/22 ............ 5,250,000 5,649,473 Hamilton Community School District GO, Refunding, FGIC Insured, 5.00%, 5/01/24 ................ 2,000,000 1,808,300 Hancock Hospital Finance Authority Revenue, Portage Health, MBIA Insured, 5.45%, 8/01/47 ...... 4,400,000 4,131,248 Harrison Community Schools GO, AMBAC Insured, Pre-Refunded, 6.25%, 5/01/13 .................... 4,715,000 5,138,926
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Haslett Public School District GO, FSA Insured, Pre-Refunded, 7.50%, 5/01/20 ................................................ $ 4,000,000 $ 4,139,240 MBIA Insured, Pre-Refunded, 5.70%, 5/01/26 ............................................... 3,900,000 4,122,495 Refunding, FSA Insured, 6.625%, 5/01/19 .................................................. 3,875,000 4,102,695 Hastings School District GO, FGIC Insured, Pre-Refunded, 5.625%, 5/01/15 .................... 1,000,000 1,057,210 Holland School District GO, Refunding, AMBAC Insured, 6.375%, 5/01/10 ....................... 2,000,000 2,106,220 Holly Area School District GO, FGIC Insured, Pre-Refunded, 5.625%, 5/01/25 .................. 8,775,000 9,277,018 Hopkins Public Schools GO, FGIC Insured, Pre-Refunded, 5.70%, 5/01/21 ........................................................................... 4,000,000 4,228,200 5.50%, 5/01/26 ........................................................................... 1,000,000 1,044,360 Houghton-Portage Township School District GO, Refunding, AMBAC Insured, 6.00%, 5/01/14 ...... 2,000,000 2,091,320 Howell Public Schools GO, MBIA Insured, 5.60%, 5/01/21 ...................................... 3,475,000 3,431,771 Hudsonville Public Schools GO, Series B, FGIC Insured, Pre-Refunded, 6.05%, 5/01/19 ........................................................................... 2,000,000 2,163,160 6.10%, 5/01/24 ........................................................................... 2,000,000 2,167,320 Huron Valley School District GO, FGIC Insured, Pre-Refunded, 5.875%, 5/01/16 .............................................. 100,000 106,816 FGIC Insured, Pre-Refunded, 5.75%, 5/01/22 ............................................... 2,450,000 2,597,564 Refunding, FGIC Insured, 6.125%, 5/01/20 ................................................. 11,535,000 11,829,950 Jenison Public Schools GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/16 ....................... 130,000 138,674 Kalamazoo Downtown Development, Refunding, 5.35%, 4/01/18 ................................... 200,000 195,844 Kalamazoo Hospital Finance Authority Hospital Facility Revenue, Borgess Medical Center, Series A, AMBAC Insured, 5.625%, 6/01/14 ......................... 3,805,000 3,832,054 Bronson Methodist Hospital, Refunding and Improvement, MBIA Insured, 5.875%, 5/15/26 ..... 26,165,000 26,544,636 Bronson Methodist Hospital, Refunding and Improvement, Series A, MBIA Insured, Pre-Refunded, 6.25%, 5/15/12 ........................................................... 5,000,000 5,401,000 Bronson Methodist Hospital, Refunding and Improvement, Series A, MBIA Insured, Pre-Refunded, 6.375%, 5/15/17 .......................................................... 2,460,000 2,667,673 Bronson Methodist Hospital, Refunding, MBIA Insured, 5.25%, 5/15/18 ...................... 250,000 237,693 Bronson Methodist Hospital, Refunding, MBIA Insured, 5.50%, 5/15/28 ...................... 15,000,000 14,454,150 Kelloggsville Public School District GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/13 ......... 1,000,000 1,058,610 Kenowa Hills Public Schools, MBIA Insured, 5.875%, 5/01/21 .................................................................................. 1,510,000 1,524,345 5/01/26 .................................................................................. 9,000,000 9,140,220 Kent County Building Authority GO, 5.00%, 6/01/26 ........................................... 21,885,000 19,545,931 Kent Hospital Finance Authority Health Care Revenue, Butterworth Health System, Series A, MBIA Insured, Pre-Refunded, 5.625%, 1/15/26 ................................... 15,500,000 16,510,755 Lake Linden-Hubbell Public Schools, FSA Insured, 5.40%, 5/01/18 ........................................................................... 825,000 801,331 5.50%, 5/01/23 ........................................................................... 675,000 654,966 Lake Orion Community School District GO, Refunding, AMBAC Insured, 5.50%, 5/01/20 ........... 2,200,000 2,149,400 Lake Shore Public Schools GO, Macomb County, FSA Insured, 5.50%, 5/01/17 .................................................................................. 4,500,000 4,439,655 5/01/20 .................................................................................. 3,540,000 3,458,580 Lake Superior State University Revenue, AMBAC Insured, Pre-Refunded, 6.375%, 11/15/15 ....... 1,500,000 1,654,260 Lakeshore Public Schools GO, Berrien County, MBIA Insured, 5.70%, 5/01/22 ................... 3,500,000 3,495,275 Lakeview Community Schools GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/16 ............................................... 100,000 106,023 Refunding, MBIA Insured, 6.75%, 5/01/13 .................................................. 1,500,000 1,577,220 Lakewood Public Schools GO, MBIA Insured, 5.375%, 5/01/20 .......................................................................... 3,300,000 3,174,369 5.75%, 5/01/22 ........................................................................... 2,200,000 2,204,620 Lansing Building Authority, Refunding, MBIA Insured, 5.60%, 6/01/19 ......................... 1,470,000 1,456,006 Lenawee County Hospital Finance Authority Hospital Revenue, Lenawee Health Alliance, Refunding, Series A, AMBAC Insured, 5.20%, 7/01/19 ..................................... 2,115,000 1,994,974 Leslie Public Schools GO, Ingham and Jackson Counties, AMBAC Insured, Pre-Refunded, 6.00%, 5/01/25 ............................................................ 3,500,000 3,764,950 Lincoln Consolidated School District GO, FSA Insured, 5.00%, 5/01/28 ........................ 2,000,000 1,795,520 Lincoln Consolidated School District, FGIC Insured, Pre-Refunded, 5.85%, 5/01/21 ............................................... 130,000 139,524 Refunding, FGIC Insured, 5.85%, 5/01/21 .................................................. 10,000 10,081
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Lincoln Park School District, FGIC Insured, Pre-Refunded, 5.85%, 5/01/15 ...................................................... $ 2,885,000 $ 3,093,845 FGIC Insured, Pre-Refunded, 5.90%, 5/01/26 ...................................................... 6,050,000 6,505,081 Refunding, FGIC Insured, 5.00%, 5/01/26 ......................................................... 400,000 359,808 Marquette City Hospital Finance Authority Revenue, Marquette General Hospital, Refunding, Series D, FSA Insured, 5.875%, 4/01/11 ................................................................................. 4,525,000 4,711,747 6.10%, 4/01/19 .................................................................................. 5,225,000 5,458,610 Marysville Public School District, MBIA Insured, Pre-Refunded, 5.75%, 5/01/22 ...................... 1,100,000 1,167,056 Mason Public School District GO, FGIC Insured, 5.40%, 5/01/21 ...................................... 1,400,000 1,348,004 Menominee Area Public School District GO, Refunding, AMBAC Insured, 6.00%, 5/01/20 ................. 2,675,000 2,727,350 Merrill Community School District GO, FGIC Insured, 5.60%, 5/01/26 ................................. 4,000,000 4,202,840 Michigan Higher Education Student Loan Authority Revenue, Series XIII-A, MBIA Insured, 7.40%, 10/01/04 ................................................................................. 1,360,000 1,407,029 7.55%, 10/01/08 ................................................................................. 1,325,000 1,368,646 Michigan Municipal Bond Authority Revenue, Local Government Loan Program Revenue Sharing, 5.20%, 11/01/19 .................................. 330,000 302,580 Local Government Loan Program, Refunding, Series G, AMBAC Insured, 6.75%, 11/01/14 .............. 6,490,000 7,176,123 Local Government Loan Program, Refunding, Series G, AMBAC Insured, 6.80%, 11/01/14 .............. 1,650,000 1,799,606 Local Government Loan Program, Refunding, Series G, AMBAC Insured, 6.80%, 11/01/23 .............. 825,000 910,495 Local Government Loan Program, Series C, MBIA Insured, 6.00%, 11/01/10 .......................... 3,790,000 3,979,045 Michigan State Building Authority Revenue, Detroit Regional Prisons, Series I, MBIA Insured, Pre-Refunded, 7.25%, 10/01/08 ................. 10,000,000 10,028,300 Facilities Program, Refunding, Series 1, 4.75%, 10/15/21 ........................................ 500,000 431,105 Refunding, Series I, AMBAC Insured, 6.25%, 10/01/20 ............................................. 1,500,000 1,558,440 Series II, MBIA Insured, 6.25%, 10/01/20 ........................................................ 4,645,000 4,839,997 Series II, MBIA Insured, ETM, 7.40%, 4/01/01 .................................................... 2,140,000 2,176,915 Michigan State Comprehensive Transportation Revenue, Series A, MBIA Insured, 5.50%, 5/15/22 ........ 4,500,000 4,391,370 Michigan State HDA, Rental Housing Revenue, Series A, AMBAC Insured, 6.00%, 4/01/16 ................................. 200,000 204,682 SFMR, Refunding, Series B, 6.20%, 6/01/27 ....................................................... 70,000 71,796 SFMR, Refunding, Series E, 6.20%, 12/01/27 ...................................................... 295,000 300,994 SFMR, Series A, AMBAC Insured, 5.95%, 6/01/17 ................................................... 2,500,000 2,525,500 SFMR, Series A, AMBAC Insured, 6.05%, 12/01/27 .................................................. 1,000,000 1,015,330 SFMR, Series D, 5.95%, 12/01/16 ................................................................. 250,000 254,598 Michigan State Hospital Finance Authority Revenue, Crittenton Hospital, Series A, FGIC Insured, 6.75%, 3/01/20 ..................................... 1,750,000 1,795,973 Detroit Medical Center Obligation Group, Refunding, Series A, AMBAC Insured, 5.50%, 8/15/24 ..... 15,000,000 14,277,150 Detroit Medical Center Obligation Group, Refunding, Series A, AMBAC Insured, 5.25%, 8/15/27 ..... 10,000,000 9,217,300 Henry Ford Health, Refunding, Series A, 5.25%, 11/15/25 ......................................... 10,000,000 9,051,300 Holland Community Hospital, AMBAC Insured, 5.625%, 1/01/28 ...................................... 3,000,000 2,959,980 Hospital-Charity Obligation Group, Series A, 5.125%, 11/01/29 ................................... 800,000 706,920 Mercy Health Services, Refunding, Series T, MBIA Insured, 5.75%, 8/15/15 ........................ 10,525,000 10,691,927 Mercy Health Services, Series Q, AMBAC Insured, 5.375%, 8/15/26 ................................. 12,090,000 11,424,808 Mercy Health Services, Series R, AMBAC Insured, 5.375%, 8/15/16 ................................. 1,500,000 1,460,115 Mercy Health Services, Series R, AMBAC Insured, 5.375%, 8/15/26 ................................. 1,750,000 1,653,715 Mercy Health Services, Series U, 5.75%, 8/15/26 ................................................. 300,000 293,556 Mercy Health Services, Series U, MBIA Insured, 5.75%, 8/15/26 ................................... 2,300,000 2,301,633 Mercy Health Services, Series W, FSA Insured, 5.25%, 8/15/27 .................................... 8,605,000 7,976,147 Mid Michigan Obligation Group, Refunding, Series A, FSA Insured, 5.375%, 6/01/27 ................ 7,500,000 7,091,775 Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.00%, 8/15/31 ...................... 7,050,000 6,151,196 Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.125%, 8/15/25 ..................... 10,375,000 9,376,821 Oakwood Obligation Group, Refunding, Series A, FSA Insured, 5.00%, 8/15/26 ...................... 500,000 441,465 Presbyterian Villages Obligation Group, 6.375%, 1/01/15 ......................................... 225,000 228,528 Presbyterian Villages Obligation Group, 6.375%, 1/01/25 ......................................... 1,250,000 1,260,775 Sparrow Obligation Group, MBIA Insured, 5.90%, 11/15/26 ......................................... 100,000 101,693 Sparrow Obligation Group, Refunding, MBIA Insured, 6.50%, 11/15/11 .............................. 1,500,000 1,577,595 St. John's Hospital, Refunding, Series A, AMBAC Insured, 6.00%, 5/15/13 ......................... 3,445,000 3,567,125
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Michigan State Hospital Finance Authority Revenue, (cont.) St. John's Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 5/15/14 ........................ $ 9,545,000 $ 9,994,760 St. John's Hospital, Refunding, Series A, AMBAC Insured, 5.125%, 5/15/17 ....................... 14,500,000 13,592,300 Michigan State Strategic Fund Limited Obligation Revenue, Detroit Edison Co., Pollution Project, Refunding, FGIC Insured, 6.875%, 12/01/21 ............... 20,000,000 21,138,400 Detroit Edison Co., Pollution Project, Refunding, Series AA, FGIC Insured, 6.95%, 5/01/11 ...... 5,000,000 5,771,700 Detroit Edison Co., Pollution Project, Refunding, Series BB, AMBAC Insured, 7.00%, 5/01/21 ..... 3,000,000 3,518,760 Detroit Edison Co., Pollution Project, Refunding, Series BB, MBIA Insured, 6.05%, 10/01/23 ..... 1,285,000 1,329,063 Detroit Edison Co., Pollution Project, Refunding, Series BB, MBIA Insured, 6.20%, 8/15/25 ...... 10,250,000 10,760,450 Detroit Edison Co., Pollution Project, Refunding, Series CC, FGIC Insured, 6.95%, 9/01/21 ...... 5,540,000 5,859,326 Detroit Edison Co., Pollution Project, Refunding, Series CC, MBIA Insured, 6.05%, 10/01/23 ..... 5,825,000 6,024,739 Hope Network Project, Refunding, Series B, 5.125%, 9/01/13 ..................................... 600,000 579,372 St. John-Bon Secours Continuing Care, 7.90%, 11/15/16 .......................................... 1,800,000 1,826,154 Worthington Armstrong Venture, 5.75%, 10/01/22 ................................................. 350,000 339,549 Michigan State Trunk Line, Refunding, Series A, MBIA Insured, 5.00%, 11/01/26 ............................................. 5,500,000 4,894,615 Refunding, Series B, AMBAC Insured, 5.50%, 10/01/21 ............................................ 1,400,000 1,396,388 Refunding, Series B, MBIA Insured, 5.50%, 10/01/21 ............................................. 4,500,000 4,488,390 Series A, FGIC Insured, 5.50%, 10/01/21 ........................................................ 1,475,000 1,471,195 Series A, FGIC Insured, Pre-Refunded, 5.625%, 11/01/20 ......................................... 2,765,000 2,938,642 Series A, FGIC Insured, Pre-Refunded, 5.80%, 11/15/24 .......................................... 6,000,000 6,458,640 Series A, FGIC Insured, Pre-Refunded, 5.625%, 11/01/26 ......................................... 8,990,000 9,554,572 Monroe County PCR, Detroit Edison Co., Series 1, MBIA Insured, 6.875%, 9/01/22 ........................................................ 4,000,000 4,255,600 Series 1-B, MBIA Insured, 6.55%, 9/01/24 ....................................................... 4,000,000 4,203,680 Series CC, AMBAC Insured, 7.50%, 12/01/19 ...................................................... 10,000,000 10,366,200 Series CC, MBIA Insured, 6.55%, 6/01/24 ........................................................ 1,150,000 1,206,362 Morley-Stanwood Community Schools, Building and Site, FGIC Insured, Pre-Refunded, 5.625%, 5/01/21 ................................................................ 2,000,000 2,114,420 Muskegon Public Schools GO, Series 95, FGIC Insured, 5.25%, 5/01/18 ........................................................................................ 1,900,000 1,812,885 5/01/21 ........................................................................................ 2,000,000 1,888,680 Northern Michigan University Revenue, AMBAC Insured, Pre-Refunded, 5.60%, 12/01/13 ................ 1,715,000 1,815,568 Northview Public School District GO, Refunding, FGIC Insured, 5.00%, 5/01/21 ...................... 3,450,000 3,151,472 Northview Public Schools District GO, MBIA Insured, 5.80%, 5/01/21 ................................................................................. 235,000 236,567 Pre-Refunded, 5.80%, 5/01/21 ................................................................... 4,265,000 4,561,673 Novi Community School District GO, Building and Site, FGIC Insured, 5.30%, 5/01/21 ................................................ 1,960,000 1,863,000 FGIC Insured, Pre-Refunded, 6.125%, 5/01/18 .................................................... 4,750,000 5,108,293 Oakland County EDC, Limited Obligation Revenue, Cranbrook Educational Community, Refunding, 5.00%, 11/01/17 ................................................................... 500,000 455,935 Oakland, Washtenaw, etc. Counties Community College District, AMBAC Insured, 6.65%, 5/01/11 ....... 3,500,000 3,765,160 Oakridge Public Schools GO, FSA Insured, 5.00%, 5/01/23 ................................................................................. 500,000 452,995 5.125%, 5/01/28 ................................................................................ 500,000 456,315 Paw Paw Public School District, Building and Site, FGIC Insured, Pre-Refunded, 5.625%, 5/01/25 .... 3,500,000 3,673,215 Petoskey Hospital Finance Authority Facilities Revenue, Northern Michigan Hospital, MBIA Insured, Pre-Refunded, 7.00%, 11/15/07 ................................................................................ 4,500,000 4,620,015 6.75%, 11/15/19 ................................................................................ 1,000,000 1,026,180 Pinckney Community Schools, Livingston and Washtenaw Counties, FGIC Insured, 5.50%, 5/01/27 ....... 10,700,000 10,330,850 Plymouth-Canton Community School District, Refunding, AMBAC Insured, 5.50%, 5/01/13 ....................................................... 4,000,000 4,017,040 Series C, FGIC Insured, Pre-Refunded, 6.50%, 5/01/16 ........................................... 3,500,000 3,756,690 Series C, MBIA Insured, Pre-Refunded, 6.50%, 5/01/16 ........................................... 3,000,000 3,220,020 Port Huron School District, FSA Insured, Pre-Refunded, 7.25%, 5/01/15 ...................................................... 5,500,000 5,736,280 Refunding, AMBAC Insured, 6.00%, 5/01/12 ....................................................... 4,500,000 4,696,065 Portage Lake Water and Sewer Authority GO, Refunding, AMBAC Insured, 6.10%, 10/01/14 ................................................................................ 770,000 817,286 6.20%, 10/01/20 ................................................................................ 670,000 700,666
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Portage Public Schools GO, MBIA Insured, Pre-Refunded, 5.625%, 5/01/19 ............................. $ 2,750,000 $ 2,899,683 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured, ETM, 8.75%, 7/01/00 ............................................................................ 500,000 521,110 Pre-Refunded, 9.00%, 7/01/09 ................................................................... 2,500,000 2,947,500 Puerto Rico Commonwealth GO, Public Improvement, MBIA Insured, 6.75%, 7/01/06 ..................... 830,000 840,956 Puerto Rico Electric Power Authority Revenue, Refunding, Series U, FSA Insured, 6.00%, 7/01/14 .... 3,400,000 3,592,338 Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ................... 1,290,000 1,340,671 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 7/01/14 ........................ 8,700,000 9,193,029 Redford USD GO, FGIC Insured, Pre-Refunded, 6.00%, 5/01/22 ........................................ 14,090,000 15,229,599 Rockford Public Schools GO, Refunding, AMBAC Insured, 5.875%, 5/01/19 ................................................................. 3,900,000 3,931,980 FGIC Insured, 5.25%, 5/01/22 ................................................................... 1,250,000 1,177,313 FGIC Insured, 5.25%, 5/01/27 ................................................................... 3,000,000 2,793,270 FSA Insured, 5.875%, 5/01/19 ................................................................... 3,150,000 3,175,830 MBIA Insured, 5.875%, 5/01/12 .................................................................. 1,850,000 1,919,542 MBIA Insured, 5.875%, 5/01/19 .................................................................. 1,925,000 1,940,785 Romulus Community Schools GO, Refunding, FGIC Insured, 5.75%, 5/01/13 ........................................................................................ 690,000 706,312 5/01/17 ........................................................................................ 1,200,000 1,207,368 5/01/22 ........................................................................................ 5,435,000 5,444,892 Royal Oak Hospital Finance Authority Revenue, Refunding, MBIA Insured, 6.25%, 1/01/19 ............. 5,000,000 5,169,400 Saginaw Hospital Finance Authority Revenue, Covenant Medical Center, Refunding, Series E, MBIA Insured, 5.375%, 7/01/19 .................... 4,850,000 4,636,067 Covenant Medical Center, Refunding, Series E, MBIA Insured, 5.50%, 7/01/24 ..................... 2,750,000 2,624,545 St. Luke's Hospital Project, Refunding, Series C, MBIA Insured, 6.875%, 7/01/14 ................ 5,325,000 5,572,187 St. Luke's Hospital Project, Refunding, Series C, MBIA Insured, 6.75%, 7/01/17 ................. 2,000,000 2,085,340 St. Luke's Hospital Project, Refunding, Series C, MBIA Inusred, 6.00%, 7/01/21 ................. 3,875,000 3,913,246 St. Luke's Hospital Project, Refunding, Series D, MBIA Insured, 6.50%, 7/01/11 ................. 1,000,000 1,046,590 Saginaw Valley State University Revenue, AMBAC Insured, 5.25%, 7/01/19 ............................ 2,540,000 2,419,553 Saranac Community School District GO, MBIA Insured, 5.25%, 5/01/21 ................................ 1,350,000 1,274,859 Sault Ste. Marie Water Treatment GO, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/10 .................. 2,000,000 2,040,000 Schoolcraft Community School District GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/21 ................................................................... 3,575,000 3,790,323 Pre-Refunded, 5.375%, 5/01/26 .................................................................. 1,000,000 1,036,430 Shelby Public School District GO, MBIA Insured, Pre-Refunded, 5.625%, 5/01/21 ..................... 1,925,000 2,032,319 South Haven Public Schools GO, Refunding, FGIC Insured, 5.50%, 5/01/13 ........................................................................................ 1,000,000 1,009,110 5/01/17 ........................................................................................ 1,725,000 1,701,868 South Redford School District GO, FGIC Insured, 5.50%, 5/01/22 ................................................................................. 3,155,000 3,071,109 Pre-Refunded, 5.50%, 5/01/22 ................................................................... 1,455,000 1,519,544 St. Clair County Building Authority GO, MBIA Insured, 5.25%, 4/01/18 ........................................................................................ 2,065,000 1,970,630 4/01/21 ........................................................................................ 2,400,000 2,266,752 St. Clair County EDC, PCR, Detroit Edison Co., Refunding, Series DD, AMBAC Insured, 6.05%, 8/01/24 ................................................................. 7,745,000 7,962,557 St. John's Public Schools, FGIC Insured, Pre-Refunded, 5.625%, 5/01/20 ................................................................................ 7,000,000 7,400,470 5.75%, 5/01/25 ................................................................................. 2,000,000 2,126,760 Sturgis Public School District, MBIA Insured, Pre-Refunded, 6.10%, 5/01/18 ........................ 1,000,000 1,070,330 Thornapple Kellogg School District, FGIC Insured, 5.375%, 5/01/22 ................................. 1,960,000 1,876,955 Three Rivers Community Schools, Building and Site, MBIA Insured, Pre-Refunded, 6.00%, 5/01/23 ..... 2,400,000 2,594,112 Traverse City Area Public Schools GO, Building and Site, Series I, MBIA Insured, Pre-Refunded, 5.70%, 5/01/20 .................................................................. 4,550,000 4,827,141 University of Michigan Revenues, Medical Service Plan, MBIA Insured, Pre-Refunded, 6.50%, 12/01/21 ................................................................ 2,365,000 2,527,476 Vestaburg Community Schools GO, Refunding, MBIA Insured, 5.50%, 5/01/26 ........................... 1,000,000 967,350 Vicksburg Community Schools GO, Refunding, MBIA Insured, 5.625%, 5/01/12 ........................................................................................ 2,175,000 2,234,682 5/01/20 ........................................................................................ 1,000,000 992,070
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Walled Lake Consolidated School District GO, Refunding, MBIA Insured, 5.50%, 5/01/22 .......... $ 3,000,000 $ 2,920,230 Wayland USD GO, FGIC Insured, Pre-Refunded, 6.75%, 5/01/24 .................................... 2,000,000 2,225,360 Wayne Charter County Airport Revenue, Detroit Metropolitan Wayne County, Series A, MBIA Insured, 5.25%, 12/01/18 ................................................... 5,500,000 5,175,775 Series A, MBIA Insured, 5.00%, 12/01/22 ................................................... 10,100,000 9,003,948 Sub. lien, Refunding, Series C, MBIA Insured, 5.25%, 12/01/21 ............................. 1,000,000 958,160 Sub. lien, Series B, MBIA Insured, 6.875%, 12/01/11 ....................................... 300,000 317,736 Sub. lien, Series B, MBIA Insured, 6.75%, 12/01/21 ........................................ 2,000,000 2,109,040 Wayne County Airport Revenue, sub. lien, Series B, AMBAC Insured, 6.00%, 12/01/20 ............ 10,585,000 10,664,493 Wayne State University Revenue, FGIC Insured, 5.125%, 11/15/29 ............................... 8,150,000 7,369,475 Wayne-Westland Community Schools GO, Refunding, FGIC Insured, 6.10%, 5/01/13 ................. 2,275,000 2,387,408 West Ottawa Public School District GO, FGIC Insured, 5.60%, 5/01/21 .............................................................. 2,355,000 2,325,704 FGIC Insured, 5.60%, 5/01/26 .............................................................. 12,100,000 11,869,132 Refunding, FGIC Insured, 6.00%, 5/01/20 ................................................... 6,630,000 6,739,594 Western School District GO, Refunding, MBIA Insured, 5.50%, 5/01/20 .......................... 1,660,000 1,621,820 Western Townships Utilities Authority GO, Sewer Disposal System, Refunding, FSA Insured, 6.75%, 1/01/15 ............................................................................ 18,710,000 19,456,903 6.50%, 1/01/19 ............................................................................ 4,915,000 5,080,144 White Cloud Public Schools GO, Refunding, FSA Insured, 5.50%, 5/01/20 ........................ 1,000,000 977,000 Williamston Community School District GO, MBIA Insured, 5.375%, 5/01/15 ...................... 4,900,000 4,856,145 Williamston County GO, Refunding, AMBAC Insured, 6.90%, 11/01/17 ............................. 1,800,000 1,913,274 Wyandotte City School District GO, Refunding, FSA Insured, 5.625%, 5/01/13 ................... 1,800,000 1,827,270 Wyandotte Electric Revenue, Refunding, MBIA Insured, 6.25%, 10/01/17 ......................... 9,980,000 10,505,647 Yale Public Schools District GO, AMBAC Insured, 5.375%, 5/01/17 ........................................................................... 2,000,000 1,945,400 5.50%, 5/01/19 ............................................................................ 1,500,000 1,469,880 Ypsilanti School District GO, FGIC Insured, Pre-Refunded, 5.75%, 5/01/20 ................................................ 4,700,000 4,983,081 Refunding, FGIC Insured, 5.375%, 5/01/26 .................................................. 4,750,000 4,514,353 Zeeland Public Schools GO, FGIC Insured, 5.375%, 5/01/25 ............................................................. 6,040,000 5,745,308 Series B, MBIA Insured, Pre-Refunded, 6.05%, 5/01/19 ...................................... 3,000,000 3,244,740 Series B, MBIA Insured, Pre-Refunded, 6.10%, 5/01/24 ...................................... 4,000,000 4,334,640 -------------- TOTAL LONG TERM INVESTMENTS (COST $1,154,368,712) ............................................ 1,187,343,411 -------------- (a)SHORT TERM INVESTMENTS .3% Delta County EDC, Environmental Improvement Revenue, Mead Escanaba Paper Project, Refunding, Series C, Daily VRDN and Put, 2.80%, 12/01/23 ................................... 500,000 500,000 Farmington Hills Hospital Finance Authority Revenue, Botsford General Hospital, Series B, MBIA Insured, Daily VRDN and Put, 3.00%, 2/15/16 ........................................... 100,000 100,000 Flint Hospital Building Authority Revenue, Hurley Medical Center, Series B, Weekly VRDN and Put, 3.25%, 7/01/15 ........................................................ 200,000 200,000 Michigan State Strategic Fund Limited Obligation Revenue, Detroit Edison Co., Reserve 1, Refunding, Daily VRDN and Put, 2.80%, 9/01/30 ................................... 100,000 100,000 Midland County EDC, Limited Obligation Revenue, Dow Chemical Co. Project, Refunding, Series B, Daily VRDN and Put, 2.85%, 12/01/15 ................................... 1,300,000 1,300,000 Royal Oak Hospital Finance Authority Revenue, William Beaumont Hospital, Series L, Daily VRDN and Put, 3.00%, 1/01/27 ......................................................... 700,000 700,000 -------------- TOTAL SHORT TERM INVESTMENTS (COST $2,900,000) ............................................... 2,900,000 -------------- TOTAL INVESTMENTS (COST $1,157,268,712) 98.8% ................................................ 1,190,243,411 OTHER ASSETS, LESS LIABILITIES 1.2% .......................................................... 14,906,726 -------------- NET ASSETS 100.0% ............................................................................ $1,205,150,137 ==============
See glossary of terms on page 83. (a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ----------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.14 $ 12.16 $ 12.01 $ 12.14 $ 11.88 $ 12.33 ----------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .29 .61 .64 .65 .67 .69 Net realized and unrealized gains (losses) ... (.58) .01 .25 (.12) .27 (.45) ----------------------------------------------------------------------------- Total from investment operations .............. (.29) .62 .89 .53 .94 .24 ----------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.29) (.62)(3) (.64) (.66) (.68) (.69) In excess of net investment income ........... (.01) -- -- -- -- -- Net realized gains ........................... (.02) (.02) (.10) -- -- --(2) ----------------------------------------------------------------------------- Total distributions ........................... (.32) (.64) (.74) (.66) (.68) (.69) ----------------------------------------------------------------------------- Net asset value, end of period ................ $ 11.53 $ 12.14 $ 12.16 $ 12.01 $ 12.14 $ 11.88 ============================================================================= Total return* ................................. (2.37)% 5.18% 7.60% 4.54% 8.06% 2.12% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $490,291 $515,174 $495,315 $482,128 $492,139 $479,934 Ratios to average net assets: Expenses ..................................... .67%** .67% .65% .66% .66% .66% Net investment income ........................ 4.88%** 5.01% 5.29% 5.47% 5.58% 5.81% Portfolio turnover rate ....................... 6.29% 16.25% 14.87% 14.40% 17.72% 17.59% CLASS C - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.19 $ 12.21 $ 12.05 $ 12.17 $ 11.89 ------------------------------------------------------------- Income from investment operations: Net investment income ........................ .26 .54 .57 .59 .50 Net realized and unrealized gains (losses) ... (.58) .01 .26 (.12) .28 ------------------------------------------------------------- Total from investment operations .............. (.32) .55 .83 .47 .78 ------------------------------------------------------------- Less distributions from: Net investment income ........................ (.26) (.55)(3) (.57) (.59) (.50) In excess of net investment income ........... (.01) -- -- -- -- Net realized gains ........................... (.02) (.02) (.10) -- -- ------------------------------------------------------------- Total distributions ........................... (.29) (.57) (.67) (.59) (.50) ------------------------------------------------------------- Net asset value, end of period ................ $ 11.58 $ 12.19 $ 12.21 $ 12.05 $ 12.17 ============================================================= Total return* ................................. (2.64)% 4.58% 7.04% 3.98% 6.67% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 23,217 $ 20,896 $ 10,131 $ 4,844 $ 1,152 Ratios to average net assets: Expenses ..................................... 1.23%** 1.23% 1.22% 1.23% 1.25%** Net investment income ........................ 4.32%** 4.44% 4.72% 4.87% 4.94%** Portfolio turnover rate ....................... 6.29% 16.25% 14.87% 14.40% 17.72%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2)Includes distributions from net realized gains of $.004. (3)Includes distributions in excess of net investment income in the amount of $.001. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 101.2% Albany ISD No. 745, Series A, FSA Insured, 6.00%, 2/01/16 .............................................. $2,295,000 $2,411,563 Albert Lea Minnesota ISD No. 241, MBIA Insured, 5.00%, 2/01/18 ......................................... 2,000,000 1,869,660 Anoka County Housing and Redevelopment Authority, City of Ramsey, Housing Development, AMBAC Insured, 5.00%, 1/01/28 .................................. 2,045,000 1,868,864 Ice Arena, Series A, MBIA Insured, 5.70%, 2/01/23 ................................................... 2,195,000 2,201,453 Anoka County Resource Recovery Revenue, Northern States Power Co., AMBAC Insured, 7.15%, 12/01/08 ..................................................................................... 2,100,000 2,155,797 Becker GO, Tax Increment, Refunding, Series D, MBIA Insured, 6.25%, 8/01/15 ............................ 4,870,000 4,968,423 Benson ISD No. 777 GO, FSA Insured, 6.00%, 2/01/15 ..................................................... 290,000 296,348 Big Lake ISD No. 727, MBIA Insured, 5.625%, 2/01/19 ..................................................................................... 500,000 501,625 5.70%, 2/01/21 ...................................................................................... 3,085,000 3,103,325 Bloomington Health Care Facilities Revenue, Masonic Home Care Center, AMBAC Insured, 5.875%, 7/01/22 ..................................................................................... 2,685,000 2,728,094 Brainerd Health Care Facilities Revenue, Benedictine Health St. Joseph, Refunding, Series D, MBIA Insured, 5.875%, 2/15/13 ....................................................................... 3,500,000 3,622,500 Buffalo GO, AMBAC Insured, 5.55%, 6/01/17 ....................................................................... 1,000,000 1,007,170 ISD No. 877, Formerly Wright County ISD No.23, Refunding, MBIA Insured, 5.00%, 2/01/22 .............. 6,255,000 5,786,375 ISD No. 877, FSA Insured, 6.15%, 2/01/18 ............................................................ 2,800,000 2,934,540 Burnsville ISD, Series A, FSA Insured, 6.20%, 2/01/17 .................................................. 2,105,000 2,242,835 (b)Burnsville MFHR, Coventry Center, Refunding, Series A, GNMA Secured, 5.90%, 9/20/19 ...................................................................................... 400,000 399,520 (b)Burnsville MFR, Coventry Court, Refunding, Series A, GNMA Secured, 5.95%, 9/20/29 ...................................................................................... 1,275,000 1,273,177 6.00%, 9/20/34 ...................................................................................... 1,000,000 997,060 Champlin EDA, Housing Development, MBIA Insured, 5.625%, 2/01/26 ....................................... 1,000,000 992,470 Chanhassen Apartments Project GO, Series B, AMBAC Insured, 6.20%, 1/01/25 .............................. 2,975,000 3,085,045 Columbia Heights ISD, No. 013, FSA Insured, 5.375%, 2/01/19 ..................................................................................... 2,450,000 2,393,626 5.50%, 2/01/23 ...................................................................................... 6,000,000 5,898,900 (b)Dakota County Housing and Redevelopment Authority MFHR, Dakota Station Project, GNMA Secured, 5.65%, 1/20/24 ...................................................................................... 1,500,000 1,493,985 5.75%, 1/20/41 ...................................................................................... 6,000,000 5,971,380 Dakota County Housing and Redevelopment Authority SFMR, GNMA Secured, FNMA Insured, 5.75%, 4/01/18 .......................................................... 2,992,000 2,996,368 GNMA Secured, FNMA Insured, 5.85%, 10/01/30 ......................................................... 4,988,000 4,980,618 Refunding, GNMA Secured, 8.10%, 3/01/16 ............................................................. 180,000 185,175 Dakota County Housing and Redevelopment Authority, Governmental Housing Revenue, Eagan Senior Housing Facility, MBIA Insured, 5.40%, 1/01/27 ......................................... 1,315,000 1,283,703 Dakota, Washington and Stearns County SFMR, Series 1990, GNMA Secured, 7.80%, 12/01/10 ..................................................................................... 525,000 541,868 7.85%, 12/01/30 ..................................................................................... 1,950,000 2,011,055 Dilworth ISD No. 147, MBIA Insured, 6.00%, 2/01/15 ..................................................... 1,040,000 1,085,094 Duluth EDA, Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured, 6.20%, 11/01/12 ............. 2,880,000 3,092,947 Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured, 6.30%, 11/01/22 ............. 5,405,000 5,820,428 Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured, Pre-Refunded, 6.30%, 11/01/22 2,125,000 2,301,290 Hospital Facilities Revenue, St. Lukes Hospital, Series A, Connie Lee Insured, 6.40%, 5/01/12 ....... 3,000,000 3,067,560 (b)Eagan MFHR, Forest Ridge Apartments, Refunding, Series A, GNMA Secured, 5.95%, 9/20/29 ...................................................................................... 1,700,000 1,697,569 6.00%, 9/20/34 ...................................................................................... 1,480,000 1,475,649 Eagan MFMR, Forest Ridge Apartments, Refunding, BIG Insured, 7.50%, 3/01/27 ............................ 4,420,000 4,520,334 Eden Prairie ISD No. 272, Series A, FGIC Insured, Pre-Refunded, 5.45%, 2/01/08 .......................................................... 1,000,000 1,021,660 FSA Insured, Pre-Refunded, 5.75%, 2/01/15 ........................................................... 4,980,000 5,177,855 Eden Prairie MFHR, Olympic Ridge, Refunding, Series A, GNMA Secured, 6.25%, 1/20/31 .................... 2,000,000 2,064,400 Eveleth EDA, Housing Development, MBIA Insured, 5.80%, 7/01/25 ......................................... 1,000,000 1,008,870 Faribault ISD No. 656, FSA Insured, 5.75%, 6/01/15 ..................................................... 1,500,000 1,566,165 Ham Lake GO, Anoka County Housing, Senior Housing Project, Series B, MBIA Insured, 6.10%, 1/01/26 ...... 2,180,000 2,222,096
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Hennepin County GO, Series A, 5.125%, 12/01/17 .............................................................................................. $ 1,820,000 $ 1,745,908 12/01/19 .............................................................................................. 1,440,000 1,367,683 Hibbing Health Care Facilities Revenue, The Duluth Clinic Ltd., FSA Insured, Pre-Refunded, 5.00%, 11/01/25 9,300,000 9,014,862 Hopkins Elderly Housing Revenue, St. Therese Project, Refunding, Series A, GNMA Secured, 5.60%, 11/20/17 ....................................................................................... 750,000 741,495 5.70%, 11/20/32 ....................................................................................... 3,000,000 2,938,410 Inner Grove Heights Tax Increment, Series D, MBIA Insured, 5.50%, 2/01/19 ................................ 1,000,000 991,700 Kenyon Wanamingo ISD No. 2172, MBIA Insured, 6.00%, 2/01/22 .............................................. 4,030,000 4,251,972 Lakeville ISD No. 194, FGIC Insured, 5.40%, 2/01/13 .......................................................................... 1,000,000 1,020,080 Series C, MBIA Insured, 5.125%, 2/01/13 ............................................................... 5,325,000 5,231,067 Minneapolis and St. Paul Housing RDA, Health Care System Revenue, Children's Health Care, Series A, FSA Insured, 5.70%, 8/15/16 ......................................... 1,005,000 1,015,834 Health One Obligated Group, Series A, MBIA Insured, Pre-Refunded, 7.40%, 8/15/11 ...................... 10,390,000 10,943,995 Health One Obligated Group, Series A, MBIA Insured, Pre-Refunded, 6.75%, 8/15/14 ...................... 3,950,000 4,136,875 Minneapolis and St. Paul Metropolitan Airport Commission Airport Revenue, Series A, AMBAC Insured, 5.00%, 1/01/22 ........................................................................................ 11,750,000 10,745,140 5.20%, 1/01/24 ........................................................................................ 6,600,000 6,201,030 5.00%, 1/01/30 ........................................................................................ 33,405,000 29,782,228 Minneapolis CDA and St. Paul Housing RDA, Health Care Facilities Revenue, Carondelet Community Hospitals Inc., Series B, BIG Insured, Pre-Refunded, 8.875%, 11/01/15 ....................... 900,000 1,149,615 Minneapolis CDA, Tax Increment Revenue, Series 1990, MBIA Insured, 7.00%, 3/01/01 ........................ 2,100,000 2,186,793 Minneapolis GO, Sports Arena Project, Refunding, 5.20%, 10/01/24 ......................................... 3,750,000 3,553,838 Minneapolis Hospital Facilities Revenue, Fairview Hospital and Healthcare, Refunding, Series A, MBIA Insured, 6.50%, 1/01/11 ................................................................ 600,000 632,910 Series B, MBIA Insured, 6.70%, 1/01/17 ................................................................ 7,815,000 8,254,516 Minneapolis MFR, Riverside Plaza, Refunding, GNMA Secured, 5.20%, 12/20/30 ............................... 6,320,000 5,860,536 Minneapolis Revenue University Gateway Project, Series A, 5.25%, 12/01/24 ................................ 3,000,000 2,812,590 Minneapolis Special School District No. 001, Series A, MBIA Insured, 5.90%, 2/01/17 ...................... 5,000,000 5,090,350 Minneapolis St. Paul Housing Finance Board SFMR, Phase VI, Series A, GNMA Secured, 8.30%, 8/01/21 ...................................................... 1,700,000 1,708,755 Series A, GNMA Secured, 8.375%, 11/01/17 .............................................................. 320,000 324,010 Series C, GNMA Secured, 8.875%, 11/01/18 .............................................................. 255,000 258,198 Minnesota Agriculture and Economic Development Board Revenue, Benedictine Health, Refunding, Series A, MBIA Insured, 5.00%, 2/15/23 ................................. 6,850,000 6,184,591 Benedictine Health, Refunding, Series A, MBIA Insured, 5.125%, 2/15/29 ................................ 12,250,000 11,201,155 Evangelical Lutheran Good Samaritan, AMBAC Insured, 5.00%, 12/01/23 ................................... 2,750,000 2,478,493 Evangelical Lutheran Good Samaritan, Society Project, AMBAC Insured, 5.15%, 12/01/22 .................. 5,180,000 4,821,337 Health Care System, Fairview Hospital, Refunding, Series A, MBIA Insured, 5.75%, 11/15/26 ............. 14,000,000 14,020,020 Minnesota State GO, Refunding, MBIA Insured, 5.40%, 8/01/09 .............................................. 3,000,000 3,038,820 Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured, 5.90%, 8/01/15 ..................................... 1,225,000 1,249,280 Rental Housing, Refunding, Series D, MBIA Insured, 5.95%, 2/01/18 ..................................... 2,645,000 2,690,917 Rental Housing, Refunding, Series D, MBIA Insured, 6.00%, 2/01/22 ..................................... 3,100,000 3,159,334 SFHR, Series D, 5.45%, 1/01/26 ........................................................................ 5,000,000 4,719,800 SFMR, Series E, AMBAC Insured, 5.40%, 1/01/25 ......................................................... 9,000,000 8,501,580 SFMR, Series F, MBIA Insured, 6.30%, 7/01/25 .......................................................... 1,470,000 1,513,027 SFMR, Series G, AMBAC Insured, 6.25%, 7/01/26 ......................................................... 2,420,000 2,481,250 SFMR, Series I, MBIA Insured, 6.25%, 1/01/15 .......................................................... 1,365,000 1,402,101 Minnesota State Higher Education Facilities Authority Revenue, Bethel, Refunding, 5.10%, 4/01/28 ..................................................................... 4,100,000 3,816,403 Series 3, Connie Lee Insured, Pre-Refunded, 6.50%, 1/01/17 ............................................ 3,940,000 4,052,802 Minnetonka MFHR, Brier Creek Project, Refunding, Series A, GNMA Secured, 6.45%, 6/20/24 ................................ 2,720,000 2,818,926 Cedar Hills East Project, FGIC Insured, 7.40%, 12/01/07 ............................................... 350,000 361,211 Cedar Hills East Project, FGIC Insured, 7.50%, 12/01/27 ............................................... 1,000,000 1,024,230
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) New Hope MFR, North Ridge, Refunding, Series A, GNMA Secured, 6.05%, 1/01/17 ......................................................................................... $ 450,000 $ 462,717 6.20%, 1/01/31 ......................................................................................... 5,470,000 5,572,617 North Branch ISD No. 138 GO, Series A, FGIC Insured, 5.625%, 2/01/17 ...................................... 1,240,000 1,287,591 North St. Paul Maplewood ISD No. 622 GO, Refunding, Series A, 5.125%, 2/01/25 ................................................................... 2,275,000 2,117,684 Series A, MBIA Insured, Pre-Refunded, 7.10%, 2/01/19 ................................................... 2,000,000 2,234,980 Northeast Metropolitan ISD No. 916 GO, FSA Insured, 5.80%, 1/01/16 ........................................ 5,475,000 5,653,978 Northern Municipal Power Agency Electric System Revenue, Refunding, FSA Insured, 5.00%, 1/01/12 ................................................................. 1,780,000 1,735,126 Refunding, FSA Insured, 5.25%, 1/01/17 ................................................................. 1,000,000 968,960 Refunding, FSA Insured, 5.30%, 1/01/21 ................................................................. 1,000,000 959,240 Refunding, Series B, AMBAC Insured, 5.50%, 1/01/18 ..................................................... 8,150,000 8,093,521 Series C, AMBAC Insured, 6.125%, 1/01/20 ............................................................... 8,090,000 8,535,678 Owatonna Public Utilities Commission Public Utilities Revenue, Refunding, Series A, AMBAC Insured, 5.45%, 1/01/16 ................................................................................................ 3,350,000 3,338,979 Park Rapids ISD No. 309, MBIA Insured, 5.00%, 2/01/25 ..................................................... 9,090,000 8,331,985 Plymouth Health Facilities Revenue, Westhealth Project, Series A, FSA Insured, 6.25%, 6/01/16 ......................................................................................... 1,600,000 1,686,944 6.125%, 6/01/24 ........................................................................................ 1,815,000 1,887,346 Princeton Hospital Revenue, Fairview Hospital and Healthcare, Series C, MBIA Insured, 6.25%, 1/01/21 ...... 7,205,000 7,515,463 Princeton ISD, No. 477, Mille Lacs County, FSA Insured, 5.125%, 2/01/24 ........................................................................... 2,190,000 2,038,605 Series A, FSA Insured, 5.375%, 2/01/17 ................................................................. 2,540,000 2,499,004 Puerto Rico Commonwealth GO, Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 7/01/23 ............... 3,000,000 3,310,350 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ........................... 535,000 553,928 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 7/01/14 ................................ 1,300,000 1,373,671 Robbinsdale Hospital Revenue, North Memorial Medical Center Project, Refunding, Series A, AMBAC Insured, 5.45%, 5/15/13 ..................................................... 2,000,000 2,006,620 Refunding, Series A, AMBAC Insured, 5.55%, 5/15/19 ..................................................... 1,000,000 989,280 Series B, AMBAC Insured, 5.45%, 5/15/13 ................................................................ 2,900,000 2,916,675 Series B, AMBAC Insured, 5.50%, 5/15/23 ................................................................ 7,900,000 7,695,232 Rochester Health Care Facilities Revenue, Mayo Foundation, Series B, 5.50%, 11/15/27 ...................... 5,000,000 4,846,450 Roseville ISD No. 623, Series A, FGIC Insured, 6.00%, 2/01/23 ........................................................................... 1,250,000 1,263,013 FSA Insured, 5.80%, 2/01/19 ............................................................................ 1,200,000 1,210,596 FSA Insured, 5.85%, 2/01/24 ............................................................................ 2,470,000 2,490,822 FSA Insured, 6.00%, 2/01/25 ............................................................................ 4,260,000 4,370,291 Scott County Housing and Redevelopment Authority Facilities Lease Revenue, AMBAC Insured, 5.25%, 12/01/11 ........................................................................................ 2,380,000 2,390,877 5.50%, 12/01/15 ........................................................................................ 1,750,000 1,757,893 (b)5.70%, 2/01/29 ......................................................................................... 1,380,000 1,376,012 (b)Scott County Housing and Redevelopment Authority GO, Savage City, Hamilton Apartments Project, AMBAC Insured, 5.70%, 2/01/33 .......................................................................... 2,285,000 2,278,099 Scott County Housing and Redevelopment Authority Housing Development Revenue, River City Centre Project, Series A, FSA Insured, 5.35%, 2/01/20 ......................................................................................... 760,000 736,121 5.375%, 2/01/27 ........................................................................................ 1,520,000 1,455,871 Scott County Housing and Redevelopment Authority Special Benefits Tax Revenue, River City Centre Project, Series B, AMBAC Insured, 5.50%, 2/01/27 ..................................... 675,000 658,179 Scott County Housing and Redevelopment Authority Tax Increment Development Revenue, River City Centre Project, Series E, FSA Insured, 5.375%, 2/01/25 ...................................... 1,170,000 1,123,762 Shakopee Public Utilities Commission Revenue, AMBAC Insured, 5.60%, 8/01/18 ............................... 1,750,000 1,752,328 South Washington County ISD No. 833 GO, Refunding, Series A, FGIC Insured, 6.125%, 6/01/10 ................ 2,080,000 2,131,355 Southern Minnesota Municipal Power Agency Power Supply System Revenue, Refunding, Series A, MBIA Insured, ETM, 5.75%, 1/01/18 ................................................. 1,000,000 1,019,580 Series A, AMBAC Insured, 5.75%, 1/01/18 ................................................................ 2,250,000 2,269,283 Series A, FGIC Insured, 5.75%, 1/01/18 ................................................................. 1,000,000 1,008,570 Series A, MBIA Insured, 5.00%, 1/01/12 ................................................................. 5,975,000 5,834,946 Series A, MBIA Insured, 5.75%, 1/01/18 ................................................................. 8,865,000 8,940,973 Series B, AMBAC Insured, 6.00%, 1/01/16 ................................................................ 5,000,000 5,160,200 Series C, AMBAC Insured, 5.00%, 1/01/17 ................................................................ 1,000,000 933,930
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) St. Cloud Hospital Facilities Revenue, St. Cloud Hospital, Refunding, Series A, AMBAC Insured, 5.00%, 7/01/15 ................................................. $ 1,165,000 $ 1,115,744 Series C, AMBAC Insured, 5.30%, 10/01/20 ................................................ 1,230,000 1,183,149 St. Cloud Housing and RDA, Sales Tax Revenue, Paramount Theater Project, Refunding, Series A, FGIC Insured, 5.00%, 3/01/22 .................................................. 1,250,000 1,139,850 St. Francis ISD No. 015, Series A, FSA Insured, 6.35%, 2/01/13 .......................................................................... 1,500,000 1,617,495 6.375%, 2/01/16 ......................................................................... 5,465,000 5,900,506 St. Louis Park Health Care Facilities Revenue, Health System of Minnesota Obligated Group, Refunding, Series A, AMBAC Insured, 5.20%, 7/01/16 ................................................................................. 1,000,000 964,080 7/01/23 ................................................................................. 9,000,000 8,416,710 St. Louis Park Hospital Facilities Revenue, Methodist Hospital Project, Refunding, Series A, AMBAC Insured, 7.25%, 7/01/08 ................................................................................. 4,115,000 4,300,422 7/01/15 ................................................................................. 1,000,000 1,044,970 St. Paul Housing and Redevelopment Authority Parking Revenue, Series A, FSA Insured, 5.75%, 8/01/13 .......................................................................... 5,105,000 5,212,205 St. Paul ISD No. 625, Series A, FSA Insured, 5.75%, 2/01/16 ................................................... 3,500,000 3,582,985 Series C, MBIA Insured, 6.10%, 2/01/14 .................................................. 1,075,000 1,124,264 Series C, MBIA Insured, 6.10%, 2/01/15 .................................................. 500,000 522,510 St. Paul Port Authority IDR, Series K, FGIC Insured, 9.50%, 12/01/01 ................................................................................ 5,000 5,100 12/01/02 ................................................................................ 5,000 5,107 12/01/14 ................................................................................ 190,000 180,606 Stillwater ISD No. 834 GO, MBIA Insured, 5.75%, 2/01/15 .................................... 2,990,000 3,122,367 Todd Morrisson and Stearns Counties ISD No. 2753 GO, MBIA Insured, 5.00%, 4/01/17 .......... 2,500,000 2,354,800 Virginia Governmental Housing Project GO, Refunding, MBIA Insured, 5.90%, 2/01/26 .......... 2,915,000 2,959,395 Wadena ISD No. 819, GO, Refunding, AMBAC Insured, 5.60%, 2/01/20 ........................... 3,150,000 3,150,536 Washington County Housing and RDAR, Government Housing, Landfall Terrace Project, Refunding, 5.35%, 2/01/22 .......................................................................... 1,000,000 964,540 5.40%, 8/01/27 .......................................................................... 2,015,000 1,936,355 Washington County SFRMR, Housing and RDA, GNMA Secured, 7.60%, 12/01/11 .................... 85,000 85,097 Western Minnesota Municipal Power Agency Power Supply Revenue, Refunding, Series A, AMBAC Insured, 5.50%, 1/01/12 ........................................................... 2,745,000 2,794,300 AMBAC Insured, 5.50%, 1/01/13 ........................................................... 4,500,000 4,550,535 MBIA Insured, 5.50%, 1/01/15 ............................................................ 5,425,000 5,425,326 Western Minnesota Municipal Power Agency Transmission Project Revenue, Refunding, AMBAC Insured, 6.75%, 1/01/16 ........................................................... 2,000,000 2,086,440 Worthington ISD No. 518 GO, Series A, FSA Insured, 5.00%, 2/01/24 .......................... 5,675,000 5,217,538 ------------- TOTAL LONG TERM INVESTMENTS (COST $519,982,867) ............................................ 519,558,363 ------------- (a)SHORT TERM INVESTMENTS 1.1% Beltrami County Environmental Control Revenue, Northwood Panelboard, Refunding, Daily VRDN and Put, 2.80%, 12/01/21 ........................................................... 300,000 300,000 Duluth Tax Increment Revenue, Lake Superior Paper, Registered, Weekly VRDN and Put, 3.25%, 9/01/10 .......................................................................... 300,000 300,000 Minneapolis Convention Center, Weekly VRDN and Put, 3.15%, 12/01/18 ........................ 1,600,000 1,600,000 Minneapolis GO, Series B, Weekly VRDN and Put, 3.15%, 12/01/16 ............................. 3,500,000 3,500,000 ------------- SHORT TERM INVESTMENTS (COST $5,700,000) ................................................... 5,700,000 ------------- TOTAL INVESTMENTS (COST $525,682,867) 102.3% ............................................... 525,258,363 OTHER ASSETS, LESS LIABILITIES (2.3%) ...................................................... (11,750,485) ------------- NET ASSETS 100.0% .......................................................................... $ 513,507,878 =============
See glossary of terms on page 83. (a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b)Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 -------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.49 $ 12.45 $ 12.19 $ 12.22 $ 11.90 $ 12.40 -------- -------- -------- -------- -------- -------- Income from investment operations: Net investment income ........................ .30 .62 .64 .66 .68 .69 Net realized and unrealized gains (losses) ... (.58) .07 .33 (.03) .33 (.50) -------- -------- -------- -------- -------- -------- Total from investment operations .............. (.28) .69 .97 .63 1.01 .19 -------- -------- -------- -------- -------- -------- Less distributions from: Net investment income ........................ (.30) (.62) (.64)4 (.66)3 (.69)2 (.69) In excess of net investment income ........... (.01) -- -- -- -- -- Net realized gains ........................... (.02) (.03) (.07) -- -- -- -------- -------- -------- -------- -------- -------- Total distributions ........................... (.33) (.65) (.71) (.66) (.69) (.69) Net asset value, end of period ................ $ 11.88 $ 12.49 $ 12.45 $ 12.19 $ 12.22 $ 11.90 Total return* ................................. (2.31)% 5.63% 8.22% 5.35% 8.66% 1.74% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $754,531 $776,592 $741,079 $698,360 $685,783 $652,545 Ratios to average net assets: Expenses ..................................... .65%** .65% .64% .64% .64% .63% Net investment income ........................ 4.93%** 4.98% 5.24% 5.43% 5.58% 5.83% Portfolio turnover rate ....................... 5.79% 6.56% 12.84% 14.95% 11.47% 11.76% CLASS C - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.56 $ 12.51 $ 12.24 $ 12.26 $ 11.90 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ........................ .27 .55 .58 .59 .52 Net realized and unrealized gains (losses) ... (.58) .08 .34 (.02) .35 -------- -------- -------- -------- -------- Total from investment operations .............. (.31) .63 .92 .57 .87 -------- -------- -------- -------- -------- Less distributions from: Net investment income ........................ (.27) (.55) (.58) (.59) (.51) In excess of net investment income ........... (.01) -- -- -- -- Net realized gains ........................... (.02) (.03) (.07) -- -- -------- -------- -------- -------- -------- Total distributions ........................... (.30) (.58) (.65) (.59) (.51) -------- -------- -------- -------- -------- Net asset value, end of period ................ $ 11.95 $ 12.56 $ 12.51 $ 12.24 $ 12.26 ======== ======== ======== ======== ======== Total return* ................................. (2.57)% 5.10% 7.66% 4.79% 7.43% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 43,655 $ 42,258 $ 28,178 $ 15,786 $ 6,085 Ratios to average net assets: Expenses ..................................... 1.21%** 1.21% 1.20% 1.20% 1.22%** Net investment income ........................ 4.37%** 4.42% 4.67% 4.80% 4.99%** Portfolio turnover rate ....................... 5.79% 6.56% 12.84% 14.95% 11.47%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2)Includes distributions in excess of net investment income in the amount of $.001. (3)Includes distributions in excess of net investment income in the amount of $.003. (4)Includes distributions in excess of net investment income in the amount of $.007. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 99.1% Akron Bath Copley Joint Township Hospital Revenue, Akron General Medical Center Project, Refunding, AMBAC Insured, 5.375%, 1/01/17 ......................................................................................... $ 1,000,000 $ 991,580 1/01/22 ......................................................................................... 1,500,000 1,451,595 1/01/27 ......................................................................................... 1,000,000 959,180 Akron GO, Limited Tax, FGIC Insured, 7.50%, 9/01/05 ................................................ 500,000 573,245 Akron Sewer System Revenue, Refunding, MBIA Insured, 5.55%, 12/01/16 ............................... 3,660,000 3,676,470 Akron Waterworks System First Mortgage Revenue, FGIC Insured, 6.00%, 3/01/14 ....................... 1,000,000 1,050,910 Allen County GO, Refunding, AMBAC Insured, 5.30%, 12/01/15 ......................................... 1,250,000 1,235,150 Allen County Sewer Revenue, MBIA Insured, 5.70%, 12/01/13 .......................................... 1,200,000 1,226,016 Archbold Area Local School District GO, AMBAC Insured, 6.00%, 12/01/21 .................................................................. 2,000,000 2,049,660 Refunding, MBIA Insured, 5.90%, 12/01/11 ........................................................ 600,000 611,406 Aurora City School District GO, Refunding and Improvement, FGIC Insured, 5.80%, 12/01/16 ........... 1,075,000 1,117,699 Avon Local School District, AMBAC Insured, 6.00%, 12/01/20 ......................................... 2,500,000 2,558,425 Beavercreek Local School District GO, FGIC Insured, 5.70%, 12/01/20 ................................ 8,375,000 8,379,606 Belmont County Correctional Facility, MBIA Insured, 5.85%, 12/01/16 ................................ 500,000 521,520 Bluffton Exempt Village School District, AMBAC Insured, 5.50%, 12/01/16 ............................ 1,000,000 999,910 Brunswick City School District, AMBAC Insured, 6.90%, 12/01/12 ..................................... 2,295,000 2,444,519 Butler County GO, AMBAC Insured, 5.75%, 12/01/16 ................................................... 1,000,000 1,022,950 Butler County Hospital Facilities Revenue, Middletown Regional Hospital, Refunding and Improvement, FGIC Insured, 6.75%, 11/15/10 ...................................................... 2,150,000 2,292,803 Butler County Transportation Improvement, Series A, FSA Insured, 5.125%, 4/01/17 ................... 2,000,000 1,903,100 Butler County Waterworks Revenue, AMBAC Insured, 6.35%, 12/01/08 ................................................................................. 790,000 846,114 6.40%, 12/01/12 ................................................................................. 500,000 536,265 5.45%, 12/01/16 ................................................................................. 1,000,000 1,003,200 Canal Winchester Local School District GO, Franklin and Fairfield Co. Ohio, FGIC Insured, 5.30%, 12/01/25 ................................................................................. 5,705,000 5,366,180 Cardington and Lincoln Local School District, MBIA Insured, 6.60%, 12/01/14 ........................ 400,000 424,064 Celina Wastewater System Mortgage Revenue, FGIC Insured, Pre-Refunded, 6.55%, 11/01/16 ............. 1,200,000 1,270,608 Centerville GO, Capital Facilities, MBIA Insured, 5.65%, 12/01/18 .................................. 2,265,000 2,264,774 Chillicothe GO, Limited Tax, AMBAC Insured, 6.05%, 12/01/12 ........................................ 675,000 703,526 Claymont City School District, FGIC Insured, 5.70%, 12/01/21 ....................................... 1,000,000 999,900 Clermont County Hospital Facilities Revenue, Mercy Health System, Refunding, Series B, AMBAC Insured, 6.00%, 9/01/19 .............................................. 1,750,000 1,798,650 Series A, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/19 ........................................... 515,000 548,001 Clermont County Sewer System Revenue, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/15 .............. 4,280,000 4,401,552 Clermont County Waterworks Revenue, Refunding, AMBAC Insured, 5.80%, 12/01/18 ...................... 11,000,000 11,259,270 Cleveland Airport Systems Revenue, Series A, FGIC Insured, 6.25%, 1/01/20 .......................................................... 3,000,000 3,131,610 Series A, FSA Insured, 5.125%, 1/01/27 .......................................................... 5,900,000 5,334,426 Series B, FGIC Insured, Pre-Refunded, 6.10%, 1/01/24 ............................................ 1,450,000 1,565,319 Cleveland GO, Series 1994, MBIA Insured, Pre-Refunded, 6.70%, 11/15/18 ............................. 2,000,000 2,235,520 Cleveland Waterworks Revenue, Refunding and Improvement, Series I, FSA Insured, 5.00%, 1/01/28 ................................ 20,000,000 17,913,400 Refunding, Series F, AMBAC Insured, 6.25%, 1/01/16 .............................................. 2,000,000 2,097,000 Series F-92A, AMBAC Insured, Pre-Refunded, 6.25%, 1/01/15 ....................................... 1,000,000 1,061,490 Series H, MBIA Insured, Pre-Refunded, 5.75%, 1/01/26 ............................................ 19,750,000 21,166,668 Clinton-Massie Local School District, Issue I, AMBAC Insured, Pre-Refunded, 7.50%, 12/01/11 ........ 1,000,000 1,089,910 Columbiana County, Refunding, FSA Insured, 5.25%, 12/01/24 ......................................... 1,000,000 936,260 Columbus GO, Limited Tax, FGIC Insured, 9.50%, 4/15/03 ............................................. 975,000 1,140,575 Columbus Municipal Airport Authority Revenue, Airport Improvement, Port Columbus International, Series B, AMBAC Insured, 5.00%, 1/01/18 ............................................................ 3,815,000 3,525,670 Columbus State Community College General Receipts, AMBAC Insured, 5.75%, 12/01/16 .................. 2,100,000 2,135,931 Columbus Tax Increment Financing Revenue, Easton Project, AMBAC Insured, 5.30%, 12/01/19 ........... 2,500,000 2,380,550 Coshocton Sewer System GO, AMBAC Insured, 6.50%, 12/01/12 .......................................... 1,530,000 1,632,908 Crestview Local School District GO, Construction and Improvement, AMBAC Insured, 6.65%, 12/01/14 ................................................................................. 1,650,000 1,769,873 Cuyahoga County GO, Limited Tax, MBIA Insured, 9.375%, 10/01/04 .................................... 100,000 121,348
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Cuyahoga County Hospital Revenue, Metrohealth System Project, Refunding and Improvement, MBIA Insured, 5.50%, 2/15/27 .......... $ 3,915,000 $ 3,817,477 University Hospitals Health System Inc., Refunding, AMBAC Insured, 5.40%, 1/15/19 ............ 2,500,000 2,412,550 University Hospitals Health System Inc., Refunding, AMBAC Insured, 5.50%, 1/15/30 ............ 4,000,000 3,856,880 Cuyahoga County Utility System Revenue, AMBAC Insured, 5.125%, 2/15/28 ............................................................... 1,750,000 1,602,213 Medical Center Co. Project, Refunding, Series B, MBIA Insured, 6.10%, 8/15/15 ................ 2,945,000 3,057,440 Dayton Airport Revenue, Refunding, AMBAC Insured, 5.25%, 12/01/15 ............................... 2,000,000 1,967,640 Defiance GO, MBIA Insured, 6.10%, 12/01/14 .............................................................................. 1,000,000 1,066,500 6.20%, 12/01/20 .............................................................................. 750,000 781,403 Delaware City School District, FGIC Insured, 5.75%, 12/01/15 .................................... 1,640,000 1,680,787 Dover City School District, AMBAC Insured, 6.25%, 12/01/16 ...................................... 2,000,000 2,097,000 Dover Municipal Electric System Revenue, FGIC Insured, 6.00%, 12/01/19 .......................... 1,625,000 1,687,595 Dover Waterworks Systems Revenue, AMBAC Insured, 6.00%, 12/01/13 ................................ 1,100,000 1,154,483 East Liverpool Hospital Revenue, East Liverpool City Hospital Project, Series B, FSA Insured, 5.00%, 10/01/21 .............................................................................. 1,000,000 906,830 Edgewood City School District GO, Refunding, Series A, MBIA Insured, 5.25%, 12/01/25 ............ 6,575,000 6,140,195 Fairborn GO, Limited Tax, Series 1991, MBIA Insured, 7.00%, 10/01/11 ............................ 1,390,000 1,498,823 Fairfield City School District GO, FGIC Insured, 6.00%, 12/01/20 ................................ 1,000,000 1,018,620 Fairfield County GO, FGIC Insured, 5.25%, 6/01/24 ............................................... 4,220,000 3,953,465 Finneytown Local School District, FGIC Insured, 5.80%, 12/01/24 ................................. 1,980,000 1,990,435 Forest Hills Local School District, MBIA Insured, 5.70%, 12/01/16 ............................... 1,500,000 1,532,265 Fostoria City School District GO, AMBAC Insured, Pre-Refunded, 6.70%, 12/01/16 .................. 2,500,000 2,725,625 Franklin County Convention Facilities Authority Tax and Lease Revenue, Anticipation Bonds, MBIA Insured, 5.00%, 12/01/27 ................................................................ 2,000,000 1,786,460 Franklin County Hospital Revenue, Holy Cross Health Systems, AMBAC Insured, 5.875%, 6/01/21 ..... 2,500,000 2,558,925 Green County Sewer System Revenue, Governmental Enterprise, MBIA Insured, 5.25%, 12/01/25 ....... 6,000,000 5,704,560 Green County Water System Revenue, Series A, FGIC Insured, 6.125%, 12/01/21 ..................... 2,100,000 2,188,179 Green Local School District GO, Summit County, FGIC Insured, 5.875%, 12/01/14 ............................................................................. 2,800,000 3,024,924 5.90%, 12/01/19 .............................................................................. 5,150,000 5,569,674 Hamilton City Electric System Mortgage Revenue, Refunding, Series A, FGIC Insured, 6.00%, 10/15/23 ........................................... 18,450,000 19,029,330 Series B, FGIC Insured, 6.30%, 10/15/25 ......................................................... 2,340,000 2,465,354 Hamilton County Hospital Facilities Revenue, Bethesda Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 1/01/12 ........................ 3,650,000 3,878,855 Children's Hospital Medical Center, Series G, MBIA Insured, 5.00%, 5/15/23 ................... 5,000,000 4,511,600 Hamilton County Sewer System Revenue, Refunding, Series A, FGIC Insured, 6.05%, 12/01/15 ........ 3,010,000 3,183,617 Hamilton Wastewater System Revenue, Series A, FSA Insured, 5.90%, 10/15/21 .............................................................................. 3,040,000 3,114,541 5.20%, 10/15/23 .............................................................................. 7,525,000 7,109,921 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................... 4,665,000 4,856,638 Hillard School District GO, Refunding, FGIC Insured, 6.55%, 12/01/05 ............................ 500,000 550,080 Hudson Local School District GO, Refunding, FGIC Insured, 5.60%, 12/15/14 ....................... 2,750,000 2,796,283 Indian Lake Local School District GO, Construction and Improvement, FGIC Insured, 5.375%, 12/01/23 ............................................................................. 1,000,000 953,700 Indian Valley Local School District GO, AMBAC Insured, 5.75%, 12/01/19 .......................... 1,000,000 1,005,110 Ironton Building Improvement, AMBAC Insured, 5.50%, 12/01/22 .................................... 1,000,000 973,060 Jackson Local School District GO, Stark and Summit Counties School Building, Construction and Improvement, MBIA Insured, 5.40%, 12/01/13 .............................................................................. 2,750,000 2,761,660 5.50%, 12/01/21 .............................................................................. 3,060,000 2,983,102 Jackson Waterworks Revenue, AMBAC Insured, 5.60%, 12/01/18 ...................................... 500,000 500,625 Kent City School District, FGIC Insured, 5.75%, 12/01/21 ........................................ 1,500,000 1,505,610 Kent State University Revenues, General Receipts, AMBAC Insured, Pre-Refunded, 6.45%, 5/01/12 .................................................. 1,195,000 1,281,148 MBIA Insured, 5.50%, 5/01/28 ................................................................. 5,920,000 5,777,742 Kettering City School District, FGIC Insured, 5.25%, 12/01/22 ................................... 1,000,000 941,110 Lake County Hospital Facilities Revenue, Lake Hospital System Inc., AMBAC Insured, 5.00%, 8/15/23 ............................................................................... 7,500,000 6,764,175
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Lake County Hospital Improvement Revenue, Lake Hospital System Inc., Series B and C, AMBAC Insured, 7.875%, 1/01/05 ................................................................................ $ 1,810,000 $ 1,833,530 8.00%, 1/01/13 ................................................................................. 2,185,000 2,214,061 Lake Local School District GO, Stark County, AMBAC Insured, 6.25%, 12/01/09 ....................... 1,000,000 1,061,540 Lakota Local District GO, AMBAC Insured, Pre-Refunded, 6.125%, 12/01/17 ........................... 3,200,000 3,458,400 Lebanon Electric Revenue Mortgage, AMBAC Insured, 5.60%, 12/01/16 ................................. 795,000 798,570 Liberty Benton Local School District, AMBAC Insured, Pre-Refunded, 6.10%, 12/01/19 ................ 2,045,000 2,230,563 Licking Valley Local School GO, MBIA Insured, 5.00%, 12/01/25 ..................................... 3,000,000 2,700,570 Lincolnview Local School District, FGIC Insured, 5.50%, 12/01/25 .................................. 4,225,000 4,087,941 Lorain County Health Facilities Revenue, Catholic Healthcare Partners, Series A, AMBAC Insured, 5.50%, 9/01/29 ................................................................................. 6,500,000 6,296,030 Lorain County Hospital Revenue, Catholic Healthcare Partners, Refunding, Series B, MBIA Insured, 5.50%, 9/01/27 ................................................................................. 12,200,000 11,893,902 Loveland City School District GO, Refunding, Series A, MBIA Insured, 5.00%, 12/01/24 .............. 6,000,000 5,418,720 Lucas County GO, Limited Tax, FGIC Insured, 8.00%, 12/01/06 ....................................................................................... 120,000 143,088 12/01/08 ....................................................................................... 110,000 133,994 12/01/09 ....................................................................................... 120,000 147,379 12/01/10 ....................................................................................... 220,000 271,924 Lucas County Hospital Revenue, Promedia Healthcare Obligation Group, AMBAC Insured, 5.375%, 11/15/29 .......................... 2,000,000 1,901,160 Promedica Healthcare Obligation, Refunding, MBIA Insured, 5.75%, 11/15/14 ...................... 5,000,000 5,172,750 St. Vincent Medical Center, Refunding, Series B, MBIA Insured, 5.25%, 8/15/20 .................. 3,500,000 3,337,460 Mahoning County GO, Bridge Improvement, Limited Tax, AMBAC Insured, 7.20%, 12/01/09 .................................................... 1,500,000 1,539,435 Unlimited Tax, AMBAC Insured, 7.15%, 12/01/04 .................................................. 1,500,000 1,540,080 Mahoning County Hospital Facilities Revenue, Western Reserve Care, MBIA Insured, ETM, 5.50%, 10/15/25 ....................................... 5,000,000 5,009,400 Youngstown Hospital Inc. Project, Series B, MBIA Insured, Pre-Refunded, 7.00%, 10/15/08 ........ 2,000,000 2,157,640 Mansfield Hospital Improvement Revenue, Mansfield General Hospital Project, AMBAC Insured, 6.70%, 12/01/09 ................................................................................ 2,500,000 2,671,175 Marietta City School District, Series B, AMBAC Insured, 5.75%, 12/01/07 ........................... 1,000,000 1,039,740 Marietta Water Revenue, AMBAC Insured, 5.95%, 12/01/21 ............................................ 3,875,000 3,999,310 Marysville Exempted Village School District GO, MBIA Insured, 5.75%, 12/01/23 ..................... 1,000,000 1,001,070 Marysville Water Systems, Refunding, AMBAC Insured, 5.40%, 12/01/13 ................................................................................ 1,000,000 1,003,530 5.50%, 12/01/18 ................................................................................ 1,500,000 1,487,550 Mason Sewer Systems Revenue, FGIC Insured, 6.00%, 12/01/19 ........................................ 1,935,000 2,000,829 Maumee Hospital Revenue, Saint Luke's Hospital Project, Refunding, AMBAC Insured, 5.80%, 12/01/14 ................................................................................ 2,755,000 2,850,103 Medina City School District GO, FGIC Insured, 5.25%, 12/01/28 ..................................... 4,000,000 3,718,080 Mentor Exempted Village School District, MBIA Insured, 5.375%, 12/01/11 ............................................................................... 1,000,000 1,004,380 6.625%, 12/01/13 ............................................................................... 2,000,000 2,122,240 Pre-Refunded, 7.40%, 12/01/11 .................................................................. 2,040,000 2,099,405 Miami County Hospital Facilities Revenue, Upper Valley Medical Center, Nursing Care Inc., Series B, MBIA Insured, 6.50%, 5/01/21 ......................................................... 1,340,000 1,392,528 Middleburg Heights Hospital Revenue, Southwest General Health Center, Refunding, FSA Insured, 5.75%, 8/15/21 ................................................................................. 1,500,000 1,515,735 Montgomery County Hospital Facilities Revenue, Kettering Medical Center Facilities, MBIA Insured, 7.40%, 4/01/09 ................................................................................. 12,510,000 12,790,224 5.50%, 4/01/26 ................................................................................. 2,000,000 1,950,820 Montgomery County Revenue, Miami Valley Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 11/15/12 ..................... 1,600,000 1,703,776 Miami Valley Hospital, Refunding, Series A, AMBAC Insured, 6.25%, 11/15/16 ..................... 3,250,000 3,410,160 Sisters of Charity Health Care, Series A, MBIA Insured, 6.625%, 5/15/21 ........................ 1,565,000 1,640,089 Muskingum County GO, County Office Building Improvement, AMBAC Insured, 7.20%, 12/01/10 ............................. 1,000,000 1,048,900 Justice Center Improvement, AMBAC Insured, Pre-Refunded, 6.375%, 12/01/17 ...................... 1,695,000 1,831,448 Napoleon City School District GO, AMBAC Insured, 5.375%, 12/01/18 ................................. 1,000,000 967,890 New Lexington HDC, Mortgage Revenue, Lincoln Park, Refunding, Series A, MBIA Insured, 5.85%, 1/01/21 ................................................................................. 1,060,000 1,062,671 New Philadelphia City School District GO, School Improvement, AMBAC Insured, 6.25%, 12/01/17 ...... 2,000,000 2,091,480 New Richmond Exempted Village School District GO, AMBAC Insured, 7.125%, 9/01/09 .................. 1,500,000 1,534,230 North Olmsted GO, AMBAC Insured, 6.25%, 12/15/12 .................................................. 3,800,000 4,023,098
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) North Ridgeville GO, City School District, AMBAC Insured, 6.30%, 12/01/17 ......................... $ 2,900,000 $ 3,067,939 Northeastern Local School District GO, Clark County Improvement, FGIC Insured, 5.55%, 12/01/18 .... 1,000,000 988,260 Northridge Local School District GO, Licking, Knox and Del Counties Improvement, FSA Insured, 5.75%, 12/01/18 ...................................................................... 1,090,000 1,096,998 Northwest Local School District GO, Hamilton County, FGIC Insured, 5.15%, 12/01/22 ................................................. 3,400,000 3,156,322 Scioto County, AMBAC Insured, 7.05%, 12/01/14 .................................................. 2,000,000 2,160,720 Oak Hills Local School District GO, MBIA Insured, 5.45%, 12/01/21 ................................. 5,000,000 4,843,050 Ohio Capital Corp. HMR, Refunding, Series G, MBIA Insured, 6.35%, 7/01/22 .............................................. 2,000,000 2,058,220 Refunding, Series H, MBIA Insured, 6.90%, 7/01/24 .............................................. 4,215,000 4,351,903 Refunding, Series J, MBIA Insured, 6.50%, 1/01/25 .............................................. 3,500,000 3,580,815 Westview Apartments, Refunding, Series A, MBIA Insured, 6.125%, 1/01/15 ........................ 1,625,000 1,677,618 Westview Apartments, Refunding, Series A, MBIA Insured, 6.25%, 1/01/23 ............................ 2,565,000 2,634,537 Ohio HFA, MFHR, Northridge Apartments, FGIC Insured, 10.35%, 12/01/25 .................................... 755,000 807,888 MFHR, Wind River Apartment Project, Series A, GNMA Secured, 5.65%, 5/01/32 ..................... 2,035,000 1,967,214 RMR, Series A-1, GNMA Secured, 5.40%, 9/01/29 .................................................. 3,000,000 2,858,940 SFMR, Series A, GNMA Secured, 7.65%, 3/01/29 ................................................... 2,375,000 2,422,500 SFMR, Series B, GNMA Secured, 7.40%, 9/01/15 ................................................... 515,000 529,224 SFMR, Series C, GNMA Secured, 7.85%, 9/01/21 ................................................... 1,255,000 1,301,862 SFMR, Series D, GNMA Secured, 7.50%, 9/01/13 ................................................... 805,000 833,167 SFMR, Series D, GNMA Secured, 7.05%, 9/01/16 ................................................... 3,580,000 3,700,216 SFMR, Series I, GNMA Secured, 7.60%, 9/01/16 ................................................... 2,190,000 2,267,636 Ohio Municipal Electric Generation Agency Joint Venture 5, Certificates of Beneficial Interest, AMBAC Insured, 5.625%, 2/15/16 ................................................................................ 13,000,000 13,148,330 5.375%, 2/15/24 ................................................................................ 7,680,000 7,521,178 Ohio State Air Quality Development Authority Revenue, Cincinnati Gas and Electric, Refunding, Series B, MBIA Insured, 5.45%, 1/01/24 ................. 5,000,000 4,900,600 Columbus and Southern Power, Series A, FGIC Insured, 6.375%, 12/01/20 .......................... 4,000,000 4,228,160 JMG Funding LP Project, AMBAC Insured, 5.625%, 10/01/22 ........................................ 7,500,000 7,333,800 JMG Funding LP Project, Refunding, AMBAC Insured, 6.375%, 1/01/29 .............................. 1,230,000 1,290,122 JMG Funding LP Project, Refunding, AMBAC Insured, 6.375%, 4/01/29 .............................. 15,245,000 15,990,176 Ohio Power Co., Refunding, Series C, AMBAC Insured, 5.15%, 5/01/26 ............................. 7,500,000 6,937,425 PCR, Ohio Edison, Refunding, Series A, FGIC Insured, 7.45%, 3/01/16 ............................ 1,000,000 1,033,270 PCR, Ohio Edison, Refunding, Series B, AMBAC Insured, 5.625%, 11/15/29 ......................... 5,400,000 5,400,918 PCR, Pennsylvania Power Co., Refunding, Series A, AMBAC Insured, 6.45%, 5/01/27 ................ 7,000,000 7,379,330 Ohio State Building Authority Revenue, Adult Correctional Facilities, Series A, AMBAC Insured, 5.60%, 4/01/16 .................................................................. 2,000,000 2,017,600 MBIA Insured, 6.125%, 10/01/13 ................................................................. 13,000,000 13,798,590 Ohio State Department of Transportation COP, Panhandle Rail Line Project, FSA Insured, 6.50%, 4/15/12 .................................................................... 1,100,000 1,169,597 Ohio State Education Loan Revenue, Series A-1, AMBAC Insured, 5.85%, 12/01/19 ..................... 5,000,000 4,958,500 Ohio State Higher Educational Facility Commission Revenue, Higher Educational Facility Oberlin College, AMBAC Insured, 5.00%, 10/01/26 .................... 5,000,000 4,500,750 University Dayton Project, FGIC Insured, 5.80%, 12/01/14 ....................................... 1,300,000 1,333,059 University Dayton Project, FGIC Insured, 6.75%, 12/01/15 ....................................... 1,725,000 1,841,455 Xavier University Higher Educational Facility, MBIA Insured, 5.375%, 5/15/22 ................... 5,000,000 4,868,550 Ohio State Turnpike Commission Turnpike Revenue, Series A, FGIC Insured, Pre-Refunded, 5.75%, 2/15/24 ..................................................... 1,000,000 1,067,120 MBIA Insured, Pre-Refunded, 5.50%, 2/15/26 ..................................................... 19,400,000 20,541,884 Ohio State University General Receipts Revenue, Athens, FSA Insured, 5.00%, 12/01/24 .............. 3,025,000 2,728,217 Ohio State Water Development Authority PCR, Facilities Revenue, Pennsylvania Power Co. Project, Refunding, AMBAC Insured, 6.15%, 8/01/23 ....................... 3,420,000 3,556,150 Water Control Loan Fund, Water Quality Series, MBIA Insured, 5.125%, 6/01/19 ................... 5,000,000 4,700,900 Ohio State Water Development Authority Revenue, Cincinnati Gas, Refunding, Series A, MBIA Insured, 5.45%, 1/01/24 .............................. 4,000,000 3,920,480 Dayton Power, Refunding, Series A, AMBAC Insured, 6.40%, 8/15/27 ............................... 5,000,000 5,293,050 Fresh Water Service, AMBAC Insured, 5.90%, 12/01/21 ............................................ 8,750,000 9,006,375 Pure Water, Refunding and Improvement, AMBAC Insured, 5.50%, 12/01/11 .......................... 1,000,000 1,024,120
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Ohio State Water Development Authority Revenue, (cont.) Pure Water, Refunding and Improvement, AMBAC Insured, ETM, 5.50%, 12/01/18 ................. $ 4,450,000 $ 4,413,065 Pure Water, Series I, AMBAC Insured, ETM, 7.00%, 12/01/09 .................................. 2,000,000 2,242,340 Olentangy Local School District GO, BIG Insured, 7.75%, 12/01/08 ................................................................................... 375,000 449,321 12/01/09 ................................................................................... 375,000 453,154 12/01/10 ................................................................................... 375,000 458,839 Olmsted Falls Local School District, FGIC Insured, 5.85%, 12/15/17 ............................................................................ 1,500,000 1,547,340 Pre-Refunded, 7.05%, 12/15/11 .............................................................. 1,000,000 1,081,370 Ontario Local School District GO, FSA Insured, 5.125%, 12/01/18 ............................... 4,000,000 3,746,240 Orrville Water Systems Improvement Revenue, MBIA Insured, 6.125%, 12/01/18 .................... 1,150,000 1,200,727 Ottawa County GO, Catawba Isle, AMBAC Insured, Pre-Refunded, 7.00%, 9/01/11 ................... 1,500,000 1,600,305 Ottawa County Sewer System Revenue, Danbury Project, Refunding, AMBAC Insured, 5.50%, 10/01/14 ............................................................................ 1,950,000 1,969,656 Painesville Township Local School District GO, Lake County, FGIC Insured, 5.625%, 12/01/09 ........................................................................... 3,240,000 3,333,182 5.65%, 12/01/15 ............................................................................ 4,490,000 4,565,073 Perrysburg Exempted Village School District, AMBAC Insured, 6.00%, 12/01/15 ............................................................. 2,000,000 2,116,980 Series B, FSA Insured, 5.00%, 12/01/25 ..................................................... 5,000,000 4,500,950 Pickerington Local School District GO, AMBAC Insured, 5.00%, 12/01/25 ............................................................. 8,335,000 7,523,921 Refunding, AMBAC Insured, 5.55%, 12/01/07 .................................................. 1,000,000 1,035,610 Powell Village GO, Series A, MBIA Insured, 5.55%, 12/01/17 ............................................................................ 840,000 833,263 5.60%, 12/01/22 ............................................................................ 445,000 438,699 Puerto Rico Commonwealth GO, FSA Insured, 5.40%, 7/01/25 ................................................................ 3,000,000 2,926,320 Refunding, MBIA Insured, 5.75%, 7/01/24 .................................................... 2,000,000 2,036,380 Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured, 5.50%, 7/01/21 ....... 4,000,000 3,994,600 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 6.00%, 7/01/21 .................... 11,000,000 11,106,700 Revere Local School District GO, AMBAC Insured, 5.25%, 12/01/16 ............................................................................ 2,000,000 1,944,580 6.00%, 12/01/16 ............................................................................ 1,600,000 1,676,032 Reynoldsburg City School District GO, Refunding, FGIC Insured, 5.45%, 12/01/17 ................ 4,075,000 3,996,190 Salem GO, AMBAC Insured, 6.50%, 12/01/06 ...................................................... 2,000,000 2,208,360 South Range Local School District GO, MBIA Insured, 6.15%, 12/01/18 ........................... 700,000 721,840 SouthWest Regional Water District Revenue, MBIA Insured, 6.00%, 12/01/15 ................................................................................... 1,000,000 1,042,780 12/01/20 ................................................................................... 700,000 724,416 South-Western City School District of Ohio Franklin and Pickway Counties GO, FGIC Insured, ETM, 7.875%, 12/01/04 ................................................................................... 550,000 634,970 12/01/06 ................................................................................... 600,000 713,730 12/01/07 ................................................................................... 600,000 722,070 Springboro Sewer Systems Revenue, Refunding, MBIA Insured, 5.70%, 6/01/18 ..................... 1,410,000 1,422,422 Springboro Water Systems Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/18 ................... 1,125,000 1,113,008 St. Mary's Electric System Mortgage Revenue, AMBAC Insured, 6.65%, 12/01/11 ................... 600,000 638,982 St. Mary's Waterworks Revenue, AMBAC Insured, 6.65%, 12/01/11 ................................. 750,000 798,728 Stark County GO, Refunding, AMBAC Insured, 5.70%, 11/15/17 .................................... 2,775,000 2,793,426 Stark County Sewer District Improvement Bonds, FGIC Insured, 5.80%, 12/01/16 .................. 1,000,000 1,039,780 Steubenville City School District, Series A, AMBAC Insured, Pre-Refunded, 6.20%, 12/01/17 ..... 2,075,000 2,254,197 Struthers City School District, AMBAC Insured, 6.50%, 12/01/14 ................................ 1,750,000 1,869,333 Summit County GO, Limited Tax, Refunding, Series B, AMBAC Insured, 6.95%, 8/01/08 ............. 400,000 423,264 Sylvania City School District, FGIC Insured, 5.75%, 12/01/22 .................................. 4,830,000 4,840,868 Toledo GO, Limited Tax, AMBAC Insured, 5.95%, 12/01/15 ............................................................. 3,715,000 3,902,087 AMBAC Insured, 6.00%, 12/01/16 ............................................................. 1,000,000 1,058,030 FGIC Insured, 7.375%, 12/01/00 ............................................................. 500,000 521,050
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN OHIO INSURED TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Toledo GO, Limited Tax, (cont.) FGIC Insured, 7.375%, 12/01/02 ............................................................. $ 400,000 $ 435,576 FGIC Insured, 7.375%, 12/01/03 ............................................................. 650,000 720,883 FGIC Insured, 7.375%, 12/01/04 ............................................................. 650,000 733,142 FGIC Insured, 7.375%, 12/01/05 ............................................................. 650,000 739,694 FGIC Insured, 7.375%, 12/01/06 ............................................................. 625,000 717,081 Trumbull County Hospital Revenue, Refunding and Improvement, Series A, FGIC Insured, 6.25%, 11/15/12 ......................... 1,000,000 1,070,950 Refunding, Series B, FGIC Insured, 6.90%, 11/15/12 ......................................... 2,000,000 2,145,620 Twinsburg City School District, FSA Insured, 6.70%, 12/01/11 .................................. 4,000,000 4,236,720 (b)University of Akron General Receipts, FGIC Insured, 5.70%, 1/01/24 ............................................................... 7,300,000 7,270,800 University of Cincinnati COP, MBIA Insured, 6.75%, 12/01/09 ................................... 1,600,000 1,718,400 University of Cincinnati General Receipt, Series AD, MBIA Insured, 5.125%, 6/01/20 ................................................... 1,500,000 1,397,430 Series W, MBIA Insured, 5.85%, 6/01/16 ..................................................... 1,630,000 1,696,683 University of Puerto Rico Revenues, Series M, MBIA Insured, 5.25%, 6/01/25 .................... 6,000,000 5,746,440 University of Toledo General Receipt, FGIC Insured, 5.30%, 6/01/18 ............................................................... 2,000,000 1,944,280 Refunding, Series A, FGIC Insured, 5.90%, 6/01/20 .......................................... 5,500,000 5,596,030 Upper Arlington County School District GO, MBIA Insured, 5.25%, 12/01/22 ...................... 5,000,000 4,705,550 Urbana Wastewater Treatment Plant GO, Improvement, AMBAC Insured, 7.05%, 12/01/11 ............. 1,000,000 1,082,650 Valley Local School District, AMBAC Insured, 7.00%, 12/01/13 .................................. 1,400,000 1,537,483 Warren GO, MBIA Insured, 6.65%, 11/01/12 .............................................................. 2,415,000 2,661,620 Refunding, AMBAC Insured, 5.50%, 11/15/13 .................................................. 1,015,000 1,041,146 Wausen Exempt Village School District GO, Refunding and School Improvements, MBIA Insured, 5.50%, 12/01/17 .............................................................. 1,800,000 1,775,376 Wayne Local School District GO, Warren County, AMBAC Insured, 6.10%, 12/01/24 ................. 1,800,000 1,849,032 Westerville, Minerva Park, and Blendon Joint Township Hospital District Revenue, St. Ann's Hospital, Refunding, Series B, AMBAC Insured, ETM, 7.00%, 9/15/12 ................ 5,000,000 5,224,950 Wilmington City School District GO, FGIC Insured, 6.30%, 12/01/14 ............................. 2,000,000 2,107,660 Wilmington Sewer System Revenue, First Mortgage, Refunding, MBIA Insured, 5.30%, 2/15/18 ...... 1,170,000 1,137,767 Wilmington Water Revenue, First Mortgage System, AMBAC Insured, 5.90%, 6/15/14 ............................................................................. 1,275,000 1,329,162 6.00%, 6/15/21 ............................................................................. 2,510,000 2,601,565 Woodmore Local School District GO, Refunding, AMBAC Insured, 5.65%, 12/01/08 .................. 500,000 518,835 Wooster City School District GO, AMBAC Insured, 6.50%, 12/01/17 ............................... 8,700,000 9,432,975 Worthington City School District GO, Refunding, FGIC Insured, 6.375%, 12/01/12 ................ 2,350,000 2,481,412 Youngstown State University General Receipts, AMBAC Insured, 6.00%, 12/15/16 .................. 2,250,000 2,444,738 Zane Trace Local School District GO, AMBAC Insured, 5.45%, 12/01/19 ........................... 1,000,000 973,610 ------------ TOTAL LONG TERM INVESTMENTS (COST $777,028,864) ............................................... 791,263,286 ------------ (a)SHORT TERM INVESTMENTS .1% Cuyahoga County EDR, The Cleveland Orchestra Project, Daily VRDN and Put, 2.70%, 4/01/28 ...... 300,000 300,000 Cuyahoga County IDR, Allen Group Inc. Project, Weekly VRDN and Put, 3.20%, 12/01/15 ........... 100,000 100,000 Paulding County Solid Waste Disposal Revenue, LaFarge Corp. Project, Daily VRDN and Put, 2.75%, 8/01/26 ......................................................... 300,000 300,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $700,000) .................................................. 700,000 ------------ TOTAL INVESTMENTS (COST $777,728,864) 99.2% ................................................... 791,963,286 OTHER ASSETS, LESS LIABILITIES .8% ............................................................ 6,223,149 ------------ NET ASSETS 100.0% ............................................................................. $798,186,435 ============
See glossary of terms on page 83. (a)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b)Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.) GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ACES - Adjustable Convertible Exempt Securities AMBAC - American Municipal Bond Assurance Corp. BART - Bay Area Rapid Transit BIG - Bond Investors Guaranty Insurance Co. (acquired by MBIA in 1989 and no longer does business under this name). CDA - Community Development Authority/Agency CDD - Community Development District COP - Certificate of Participation EDA - Economic Development Authority EDC - Economic Development Corp. EDR - Economic Development Revenue ETM - Escrow to Maturity FGIC - Financial Guaranty Insurance Co. FNMA - Federal National Mortgage Association FSA - Financial Security Assistance (some of the securities shown as FSA Insured were originally issued by Capital Guaranty Insurance Co. (CGIC) which was acquired by FSA in 1995 and no longer does business under this name). GNMA - Government National Mortgage Association GO - General Obligation HDA - Housing Development Authority/Agency HDC - Housing Development Corp. HFA - Housing Finance Authority/Agency HFAR - Housing Finance Authority Revenue HFC - Housing Finance Corp. HMR - Home Mortgage Revenue ID - Improvement District IDA - Industrial Development Authority/Agency IDAR - Industrial Development Authority/Agency Revenue IDB - Industrial Development Board IDR - Industrial Development Revenue ISD - Independent School District LP - Limited Partnership MBIA - Municipal Bond Investors Assurance Corp. MF - Multi-Family MFHR - Multi-Family Housing Revenue MFMR - Multi-Family Mortgage Revenue MFR - Multi-Family Revenue MTA - Metropolitan Transit Authority MUD - Municipal Utility District PBA - Public Building Authority PCC - Pollution Control Corporation PCFA - Pollution Control Financing Authority PCR - Pollution Control Revenue PUD - Public Utility District RDA - Redevelopment Authority/Agency RDAR - Redevelopment Authority/Agency Revenue RMR - Residential Mortgage Revenue SF - Single Family SFM - Single Family Mortgage SFHR - Single Family Housing Revenue SFMR - Single Family Mortgage Revenue SFRMR - Single Family Residential Mortgage Revenue UHSD - Unified High School District USD - Unified School District FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN ARIZONA FLORIDA FRANKLIN INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INCOME FUND INCOME FUND INCOME FUND ----------------------------------------------------------- Assets: Investments in securities: Cost ............................................................... $ 87,048,590 $ 120,211,902 $ 1,691,910,473 ========================================================== Value .............................................................. 86,145,907 120,548,694 1,716,094,053 Cash ................................................................ 4,229,527 11,121 70,732 Receivables: Investment securities sold ......................................... -- 978,328 19,806,991 Capital shares sold ................................................ 174,997 216,795 1,282,250 Interest ........................................................... 852,360 2,101,391 23,179,698 ---------------------------------------------------------- Total assets ................................................... 91,402,791 123,856,329 1,760,433,724 ---------------------------------------------------------- Liabilities: Payables: Investment securities purchased .................................... 6,958,800 2,734,501 72,424,431 Capital shares redeemed ............................................ 146,831 228,897 4,703,648 Affiliates ......................................................... 55,810 77,934 1,029,519 Shareholders ....................................................... 636 1,358 24,096 Distributions to shareholders ....................................... 142,483 205,765 3,150,111 Other liabilities ................................................... 3,046 17,678 141,645 Total liabilities .............................................. 7,307,606 3,266,133 81,473,450 ---------------------------------------------------------- Net assets, at value .......................................... $ 84,095,185 $ 120,590,196 $ 1,678,960,274 ---------------------------------------------------------- Net assets consist of: Accumulated distributions in excess of net investment income ........ $ (33,491) $ (53,027) $ (2,683,746) Net unrealized appreciation (depreciation) .......................... (902,683) 336,792 24,183,580 Accumulated net realized gain (loss) ................................ (736,949) (1,330,151) 857,907 Capital shares ...................................................... 85,768,308 121,636,582 1,656,602,533 ---------------------------------------------------------- Net assets, at value .......................................... $ 84,095,185 $ 120,590,196 $ 1,678,960,274 ========================================================== CLASS A: Net assets, at value ................................................ $ 84,095,185 $ 120,590,196 $ 1,613,823,507 ========================================================== Shares outstanding .................................................. 8,229,255 12,081,189 138,584,985 ========================================================== Net asset value per share* .......................................... $ 10.22 $ 9.98 $ 11.65 ========================================================== Maximum offering price per share (net asset value per share / 95.75%) $ 10.67 $ 10.42 $ 12.17 ========================================================== CLASS C: Net assets, at value ................................................ -- -- $ 65,136,767 ========================================================== Shares outstanding .................................................. -- -- 5,559,964 ========================================================== Net asset value per share* .......................................... -- -- $ 11.72 ========================================================== Maximum offering price per share (net asset value per share / 99.00%) -- -- $ 11.84 ==========================================================
*Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONT.) AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN MASSACHUSETTS MICHIGAN MINNESOTA OHIO INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------------ Assets: Investments in securities: Cost ................................................... $ 351,290,859 $ 1,157,268,712 $ 525,682,867 $ 777,728,864 ====================================================================== Value .................................................. 355,158,458 1,190,243,411 525,258,363 791,963,286 Cash .................................................... 39,067 49,005 96,234 26,557 Receivables: Investment securities sold ............................. -- -- 1,745,594 9,219,819 Capital shares sold .................................... 386,977 554,084 62,140 1,158,004 Interest ............................................... 4,935,402 19,012,528 5,352,109 11,847,558 ---------------------------------------------------------------------- Total assets ....................................... 360,519,904 1,209,859,028 532,514,440 814,215,224 ---------------------------------------------------------------------- Liabilities: Payables: Investment securities purchased ........................ -- -- 17,025,033 13,265,075 Capital shares redeemed ................................ 250,594 1,617,535 619,800 692,602 Affiliates ............................................. 254,128 778,973 338,632 518,916 Shareholders ........................................... 3,951 16,328 6,873 9,967 Distributions to shareholders ........................... 658,234 2,176,221 930,682 1,439,804 Other liabilities ....................................... 32,756 119,834 85,542 102,425 ---------------------------------------------------------------------- Total liabilities .................................. 1,199,663 4,708,891 19,006,562 16,028,789 ---------------------------------------------------------------------- Net assets, at value .............................. $ 359,320,241 $ 1,205,150,137 $ 513,507,878 $ 798,186,435 ====================================================================== Net assets consist of: Accumulated distributions in excess of net investment income ................................................ $ (305,039) $ (1,469,627) $ (597,254) $ (521,523) Net unrealized appreciation (depreciation) .............. 3,867,599 32,974,699 (424,504) 14,234,422 Accumulated net realized gain (loss) .................... (915,006) (156,784) 118,859 (1,075,275) Capital shares .......................................... 356,672,687 1,173,801,849 514,410,777 785,548,811 ---------------------------------------------------------------------- Net assets, at value .............................. $ 359,320,241 $ 1,205,150,137 $ 513,507,878 $ 798,186,435 ====================================================================== CLASS A: Net assets, at value .................................... $ 331,350,903 $ 1,151,515,125 $ 490,290,829 $ 754,531,001 ====================================================================== Shares outstanding ...................................... 29,800,086 98,271,007 42,528,903 63,488,945 ====================================================================== Net asset value per share* .............................. $ 11.12 $ 11.72 $ 11.53 $ 11.88 ====================================================================== Maximum offering price per share (net asset value per share / 95.75%) ....................................... $ 11.61 $ 12.24 $ 12.04 $ 12.41 ====================================================================== CLASS C: Net assets, at value .................................... $ 27,969,338 $ 53,635,012 $ 23,217,049 $ 43,655,434 ====================================================================== Shares outstanding ...................................... 2,502,624 4,546,516 2,004,587 3,653,155 ====================================================================== Net asset value per share* .............................. $ 11.18 $ 11.80 $ 11.58 $ 11.95 ====================================================================== Maximum offering price per share (net asset value per share / 99.00%) ....................................... $ 11.29 $ 11.92 $ 11.70 $ 12.07 ======================================================================
*Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN ARIZONA FLORIDA FRANKLIN INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INCOME FUND INCOME FUND INCOME FUND ----------------------------------------------------- Investment income Interest .................................................................. $ 2,225,540 $ 3,366,808 $ 49,936,762 ----------------------------------------------------- Expenses: Management fees (Note 3) .................................................. 264,118 374,432 4,053,462 Distribution fees: (Note 3) Class A .................................................................. 42,481 62,948 753,232 Class C .................................................................. -- -- 215,741 Transfer agent fees (Note 3) .............................................. 11,412 20,227 366,003 Custodian fees ............................................................ 332 673 9,063 Reports to shareholders ................................................... 3,277 5,719 95,719 Registration and filing fees .............................................. 5,159 5,532 70,323 Professional fees ......................................................... 1,155 1,138 21,521 Trustees' fees and expenses ............................................... 380 574 8,347 Insurance ................................................................. -- -- 1,506 Other ..................................................................... 8,529 10,356 56,845 ----------------------------------------------------- Total expenses ....................................................... 336,843 481,599 5,651,762 Expenses waived/paid by affiliate (Note 3) ........................... -- (9,493) -- ----------------------------------------------------- Net expenses ........................................................ 336,843 472,106 5,651,762 ----------------------------------------------------- Net investment income .............................................. 1,888,697 2,894,702 44,285,000 ----------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments ................................. (554,114) (62,603) 866,544 Net unrealized depreciation on investments ................................ (4,376,924) (6,452,674) (86,709,540) ----------------------------------------------------- Net realized and unrealized loss ........................................... (4,931,038) (6,515,277) (85,842,996) ----------------------------------------------------- Net decrease in net assets resulting from operations ....................... $ (3,042,341) $ (3,620,575) $ (41,557,996) =====================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF OPERATIONS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN MASSACHUSETTS MICHIGAN MINNESOTA OHIO INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND --------------------------------------------------------------------------- Investment income: Interest ............................................. $ 10,527,359 $ 34,082,450 $ 14,761,345 $ 22,855,742 --------------------------------------------------------------------------- Expenses: Management fees (Note 3) ............................. 956,187 2,853,626 1,316,265 1,965,818 Distribution fees: (Note 3) Class A ............................................. 159,326 540,250 231,329 358,251 Class C ............................................. 89,369 176,745 73,685 142,786 Transfer agent fees (Note 3) ......................... 80,607 314,220 128,453 194,754 Custodian fees ....................................... 1,829 6,367 2,708 4,042 Reports to shareholders .............................. 28,611 87,726 49,042 64,985 Registration and filing fees ......................... 11,200 11,504 10,824 13,688 Professional fees .................................... 4,550 13,075 6,729 9,131 Trustees' fees and expenses .......................... 1,972 5,420 2,127 3,629 Insurance ............................................ -- 2,127 9,829 7,243 Other ................................................ 16,096 40,486 25,538 31,523 --------------------------------------------------------------------------- Total expenses .................................. 1,349,747 4,051,546 1,856,529 2,795,850 --------------------------------------------------------------------------- Net investment income .......................... 9,177,612 30,030,904 12,904,816 20,059,892 --------------------------------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments ............ (915,006) (42,324) 117,513 (1,075,016) Net unrealized depreciation on investments ........... (17,969,841) (56,673,850) (25,740,561) (38,006,193) --------------------------------------------------------------------------- Net realized and unrealized loss ...................... (18,884,847) (56,716,174) (25,623,048) (39,081,209) --------------------------------------------------------------------------- Net decrease in net assets resulting from operations .. $ (9,707,235) $ (26,685,270) $ (12,718,232) $ (19,021,317) ===========================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND ------------------------------------- SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 ------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ................................................................. $ 1,888,697 $ 3,274,625 Net realized gain (loss) from investments ............................................. (554,114) 64,058 Net unrealized appreciation (depreciation) on investments ............................. (4,376,924) 334,186 ------------------------------------- Net increase (decrease) in net assets resulting from operations ................... (3,042,341) 3,672,869 Distributions to shareholders from: Net investment income ................................................................. (1,956,393) (3,262,224) In excess of net investment income .................................................... (33,491) -- ------------------------------------- Total distributions to shareholders .................................................... (1,989,884) (3,262,224) Capital share transactions: (Note 2) ................................................... 8,442,985 22,215,047 ------------------------------------- Net increase (decrease) in net assets ............................................. 3,410,760 22,625,692 Net assets: Beginning of period .................................................................... 80,684,425 58,058,733 ------------------------------------- End of period .......................................................................... $ 84,095,185 $ 80,684,425 ===================================== Undistributed net investment income (accumulated distributions in excess of net ......... investment income) included in net assets: End of period ......................................................................... $ (33,491) $ 67,696 =====================================
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND ---------------------------------------- SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 ---------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ................................................................. $ 2,894,702 $ 5,520,101 Net realized gain (loss) from investments ............................................. (62,603) 2,867 Net unrealized appreciation (depreciation) on investments ............................. (6,452,674) 979,147 ---------------------------------------- Net increase (decrease) in net assets resulting from operations ................... (3,620,575) 6,502,115 Distributions to shareholders from: Net investment income ................................................................. (2,935,127) (5,528,406) In excess of net investment income .................................................... (53,027) -- ---------------------------------------- Total distributions to shareholders .................................................... (2,988,154) 5,528,406 Capital share transactions: (Note 2) ................................................... 2,711,103 22,008,531 ---------------------------------------- Net increase (decrease) in net assets ............................................. (3,897,626) 22,982,240 Net assets: Beginning of period .................................................................... 124,487,822 101,505,582 ---------------------------------------- End of period .......................................................................... $ 120,590,196 $ 124,487,822 ======================================== Undistributed net investment income (accumulated distributions in excess of net ......... investment income) included in net assets: End of period ......................................................................... $ (53,027) $ 40,425 ========================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN INSURED TAX-FREE INCOME FUND SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 Increase (decrease) in net assets: Operations: Net investment income ............................ $ 44,285,000 $ 89,621,811 Net realized gain (loss) from investments ........ 866,544 10,620,546 Net unrealized depreciation on investments ....... (86,709,540) (3,082,372) ----------------------------------------- Net increase (decrease) in net assets resulting from operations .................... (41,557,996) 97,159,985 Distributions to shareholders from: Net investment income: Class A ......................................... (42,820,609) (87,334,716) Class C ......................................... (1,464,391) (2,287,095) In excess of net investment income: Class A ......................................... (921,628) (856,324) Class C ......................................... (31,550) (22,408) Net realized gains: Class A ......................................... (2,955,081) (13,902,736) Class C ......................................... (115,840) (425,541) ----------------------------------------- Total distributions to shareholders ............... (48,309,099) (104,828,820) Capital share transactions: (Note 2) Class A ......................................... (26,714,806) 49,150,017 Class C ......................................... 3,362,101 27,381,709 ----------------------------------------- Total capital share transactions .................. (23,352,705) 76,531,726 Net increase (decrease) in net assets ........ (113,219,800) 68,862,891 Net assets: Beginning of period ............................... 1,792,180,074 1,723,317,183 ----------------------------------------- End of period ..................................... $ 1,678,960,274 $ 1,792,180,074 ========================================= Accumulated distributions in excess of net investment income included in net assets: End of period .................................... $ (2,683,746) $ (1,730,568) =========================================
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 ------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ............................ $ 9,177,612 $ 17,503,725 Net realized gain (loss) from investments ........ (915,006) 549,086 Net unrealized depreciation on investments ....... (17,969,841) (1,068) ------------------------------------- Net increase (decrease) in net assets resulting from operations .................... (9,707,235) 18,051,743 Distributions to shareholders from: Net investment income: Class A ......................................... (8,577,131) (16,632,794) Class C ......................................... (600,481) (844,761) In excess of net investment income: Class A ......................................... (112,772) -- Class C ......................................... (7,895) -- Net realized gains: Class A ......................................... -- (1,931,958) Class C ......................................... -- (108,794) ------------------------------------- Total distributions to shareholders ............... (9,298,279) (19,518,307) Capital share transactions: (Note 2) Class A ......................................... 8,837,206 13,335,276 Class C ......................................... 3,108,066 12,428,507 ------------------------------------- Total capital share transactions .................. 11,945,272 25,763,783 Net increase (decrease) in net assets ........ (7,060,242) 24,297,219 Net assets: Beginning of period ............................... 366,380,483 342,083,264 ------------------------------------- End of period ..................................... $ 359,320,241 $ 366,380,483 ===================================== Accumulated distributions in excess of net investment income included in net assets: End of period .................................... $ (305,039) $ (184,372) =====================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND ----------------------------------------- SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 ----------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ............................ $ 30,030,904 $ 59,062,198 Net realized gain (loss) from investments ........ (42,324) 2,222,023 Net unrealized appreciation (depreciation) on investments ................................... (56,673,850) 10,636,500 ----------------------------------------- Net increase (decrease) in net assets resulting from operations .................... (26,685,270) 71,920,721 Distributions to shareholders from: Net investment income: Class A ......................................... (28,865,796) (56,963,881) Class C ......................................... (1,165,108) (1,809,222) In excess of net investment income: Class A ......................................... (396,078) -- Class C ......................................... (15,988) -- Net realized gains: Class A ......................................... (29,037) (5,139,566) Class C ......................................... (1,392) (185,565) ----------------------------------------- Total distributions to shareholders ............... (30,473,399) (64,098,234) Capital share transactions: (Note 2) Class A ......................................... 44,779,236 11,242,515 Class C ......................................... 6,214,220 16,812,877 ----------------------------------------- Total capital share transactions .................. 50,993,456 28,055,392 Net increase (decrease) in net assets ........ (6,165,213) 35,877,879 Net assets: Beginning of period ............................... 1,211,315,350 1,175,437,471 ----------------------------------------- End of period ..................................... $ 1,205,150,137 $ 1,211,315,350 ========================================= Accumulated distributions in excess of net investment income included in net assets: End of period .................................... $ (1,469,627) $ (1,057,561) =========================================
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND --------------------------------- SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 --------------------------------- Increase (decrease) in net assets: Operations: Net investment income ............................ $ 12,904,816 $ 25,893,137 Net realized gain (loss) from investments ........ 117,513 1,829,574 Net unrealized appreciation (depreciation) on investments ................................... (25,740,561) (1,790,539) --------------------------------- Net increase (decrease) in net assets resulting from operations .................... (12,718,232) 25,932,172 Distributions to shareholders from: Net investment income: Class A ......................................... (12,421,652) (25,368,828) Class C ......................................... (483,164) (681,854) In excess of net investment income: Class A ......................................... (528,851) (46,601) Class C ......................................... (20,548) (1,254) Net realized gains: Class A ......................................... (1,012,401) (856,454) Class C ......................................... (45,306) (29,745) --------------------------------- Total distributions to shareholders ............... (14,511,922) (26,984,736) Capital share transactions: (Note 2) Class A ......................................... 1,172,088 20,874,563 Class C ......................................... 3,495,994 10,802,209 --------------------------------- Total capital share transactions .................. 4,668,082 31,676,772 Net increase (decrease) in net assets ........ (22,562,072) 30,624,208 Net assets: Beginning of period ............................... 536,069,950 505,445,742 --------------------------------- End of period ..................................... $ 513,507,878 $ 536,069,950 ================================= Accumulated distributions in excess of net investment income included in net assets: End of period .................................... $ (597,254) $ (47,855) =================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND -------------------------------------- SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 -------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .............................................................. $ 20,059,892 $ 39,188,055 Net realized gain (loss) from investments .......................................... (1,075,016) 2,482,460 Net unrealized appreciation (depreciation) on investments .......................... (38,006,193) 1,410,754 -------------------------------------- Net increase (decrease) in net assets resulting from operations ................ (19,021,317) 43,081,269 Distributions to shareholders from: Net investment income: Class A ........................................................................... (19,115,923) (37,252,026) Class C ........................................................................... (943,969) (1,528,613) In excess of net investment income: Class A ........................................................................... (470,693) -- Class C ........................................................................... (23,265) -- Net realized gains: Class A ........................................................................... (1,086,613) (1,823,769) Class C ........................................................................... (61,057) (89,688) -------------------------------------- Total distributions to shareholders ................................................. (21,701,520) (40,694,096) Capital share transactions: (Note 2) Class A ........................................................................... 16,488,181 33,237,755 Class C ........................................................................... 3,570,520 13,967,984 -------------------------------------- Total capital share transactions .................................................... 20,058,701 47,205,739 Net increase (decrease) in net assets .......................................... (20,664,136) 49,592,912 Net assets: Beginning of period ................................................................. 818,850,571 769,257,659 -------------------------------------- End of period ....................................................................... $ 798,186,435 $ 818,850,571 ====================================== Accumulated distributions in excess of net investment income included in net assets: End of period ....................................................................... $ (521,523) $ (27,565) ======================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Franklin Tax Free Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-six separate series (the Funds). All Funds included in this report are diversified except the Franklin Arizona Insured Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income Fund. The Funds' investment objective is to provide tax-free income. The following summarizes the Funds' significant accounting policies. a. SECURITY VALUATION Tax-free bonds generally trade in the over-the-counter market and are valued within the range of the latest quoted bid and asked prices. In the absence of a sale or reported bid and asked prices, information with respect to bond and note transactions, quotations from bond dealers, market transactions in comparable securities, and various relationships between securities are used to determine the value of the security. The Trust may utilize a pricing service, bank or broker/dealer experienced in such matters to perform any of the pricing functions under procedures approved by the Board of Trustees. Securities for which market quotations are not readily available are valued at fair value as determined by management in accordance with procedures established by the Board of Trustees. b. INCOME TAXES No provision has been made for income taxes because each Fund's policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income. c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Bond discount and premium are amortized on an income tax basis. Distributions to shareholders are recorded on the ex-dividend date. Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets. Other expenses are charged to each Fund on a specific identification basis. d. INSURANCE The scheduled payments of interest and principal for each insured long-term municipal security in the Trust are insured by either a new issue insurance policy, a portfolio insurance policy, a secondary insurance policy, or by collateral guaranteed by an agency of the U.S. government. Depending on the type of coverage, premiums for insurance are either added to the cost basis of the security, included as an expense of the fund, or paid by a third party. e. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense during the reporting period. Actual results could differ from those estimates. FRANKLIN TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST The Funds, except the Franklin Arizona Insured Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income Fund, offer two classes of shares: Class A and Class C. Effective January 1, 1999, Class I and Class II were renamed Class A and Class C, respectively. Each class of shares differs by their initial sales load, distribution fees, voting rights on matters affecting a single class and the exchange privilege of each class. At August 31, 1999, there were an unlimited number of shares authorized (no par value). Transactions in the Funds' shares were as follows:
FRANKLIN ARIZONA INSURED FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold ........................................... 1,274,981 $ 13,600,427 1,471,125 $ 15,225,161 Shares issued in reinvestment of distributions ........ 95,452 1,010,826 101,258 1,042,600 Shares redeemed ....................................... (584,153) (6,168,268) (1,317,077) (13,556,658) ------------------------------------------------------------------- Net increase ........................................... 786,280 $ 8,442,985 255,306 $ 2,711,103 =================================================================== Year ended February 28, 1999 Shares sold ........................................... 2,370,125 $ 25,660,758 3,700,444 $ 38,909,596 Shares issued in reinvestment of distributions ........ 146,945 1,590,252 182,603 1,917,371 Shares redeemed ....................................... (466,289) (5,035,963) (1,790,202) (18,818,436) ------------------------------------------------------------------- Net increase ........................................... 2,050,781 $ 22,215,047 2,092,845 $ 22,008,531 ===================================================================
FRANKLIN INSURED FRANKLIN MASSACHUSETTS TAX-FREE INCOME FUND INSURED TAX-FREE INCOME FUND ---------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold ......................................... 11,139,570 $ 134,005,873 2,637,949 $ 30,512,778 Shares issued in reinvestment of distributions ...... 1,733,470 20,809,731 349,517 4,014,947 Shares redeemed ..................................... (15,127,810) (181,530,410) (2,237,882) (25,690,519) ---------------------------------------------------------------------- Net increase (decrease) .............................. (2,254,770) $ (26,714,806) 749,584 $ 8,837,206 ====================================================================== Year ended February 28, 1999 Shares sold ......................................... 20,347,674 $ 250,574,059 3,673,445 $ 43,120,431 Shares issued in reinvestment of distributions ...... 3,787,915 46,606,128 740,160 8,686,439 Shares redeemed ..................................... (20,145,689) (248,030,170) (3,280,706) (38,471,594) ---------------------------------------------------------------------- Net increase ......................................... 3,989,900 $ 49,150,017 1,132,899 $ 13,335,276 ====================================================================== CLASS C SHARES: Six months ended August 31, 1999 Shares sold ......................................... 937,438 $ 11,366,087 468,689 $ 5,419,137 Shares issued in reinvestment of distributions ...... 83,467 1,007,454 35,972 415,011 Shares redeemed ..................................... (745,094) (9,011,440) (235,235) (2,726,082) ---------------------------------------------------------------------- Net increase ......................................... 275,811 $ 3,362,101 269,426 $ 3,108,066 ====================================================================== Year ended February 28, 1999 Shares sold ......................................... 2,858,182 $ 35,405,965 1,236,934 $ 14,603,154 Shares issued in reinvestment of distributions ...... 143,445 1,775,301 59,445 700,881 Shares redeemed ..................................... (791,952) (9,799,557) (243,865) (2,875,528) ---------------------------------------------------------------------- Net increase ......................................... 2,209,675 $ 27,381,709 1,052,514 $ 12,428,507 ======================================================================
FRANKLIN TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (CONT.)
FRANKLIN MICHIGAN INSURED FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND TAX-FREE INCOME FUND ---------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold .......................................... 6,827,181 $ 82,896,474 2,025,947 $ 24,208,577 Shares issued on merger (Note 7) ..................... 1,293,437 15,172,016 -- -- Shares issued in reinvestment of distributions ....... 1,221,826 14,718,399 619,005 7,364,887 Shares redeemed ...................................... (5,650,166) (68,007,653) (2,555,598) (30,401,376) ---------------------------------------------------------------------- Net increase .......................................... 3,692,278 $ 44,779,236 89,354 $ 1,172,088 ====================================================================== Year ended February 28, 1999 Shares sold .......................................... 8,062,766 $ 98,708,500 4,579,843 $ 55,803,476 Shares issued in reinvestment of distributions ....... 2,592,822 31,727,653 1,138,659 13,862,003 Shares redeemed ...................................... (9,743,467) (119,193,638) (4,006,455) (48,790,916) ---------------------------------------------------------------------- Net increase .......................................... 912,121 $ 11,242,515 1,712,047 $ 20,874,563 ====================================================================== Class C Shares: Six months ended August 31, 1999 Shares sold .......................................... 976,921 $ 11,930,254 392,127 $ 4,707,409 Shares issued in reinvestment of distributions ....... 65,911 798,929 31,681 378,405 Shares redeemed ...................................... (540,090) (6,514,963) (133,026) (1,589,820) ---------------------------------------------------------------------- Net increase .......................................... 502,742 $ 6,214,220 290,782 $ 3,495,994 ====================================================================== Year ended February 28, 1999 Shares sold .......................................... 1,687,220 $ 20,782,927 967,191 $ 11,818,508 Shares issued in reinvestment of distributions ....... 114,497 1,411,093 38,858 475,238 Shares redeemed ...................................... (437,096) (5,381,143) (121,981) (1,491,537) ---------------------------------------------------------------------- Net increase .......................................... 1,364,621 $ 16,812,877 884,068 $ 10,802,209 ======================================================================
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND --------------------------------------- CLASS A SHARES: SHARES AMOUNT --------------------------------------- Six months ended August 31, 1999 Shares sold ............................................................... 4,408,816 $ 54,313,646 Shares issued in reinvestment of distributions ............................ 841,193 10,299,389 Shares redeemed ........................................................... (3,931,289) (48,124,854) --------------------------------------- Net increase ............................................................... 1,318,720 $ 16,488,181 ======================================= Year ended February 28, 1999 Shares sold ............................................................... 7,474,825 $ 93,338,302 Shares issued in reinvestment of distributions ............................ 1,562,346 19,499,382 Shares redeemed ........................................................... (6,380,336) (79,599,929) --------------------------------------- Net increase ............................................................... 2,656,835 $ 33,237,755 ======================================= Class C Shares: Six months ended August 31, 1999 Shares sold ............................................................... 579,029 $ 7,158,834 Shares issued in reinvestment of distributions ............................ 58,733 722,614 Shares redeemed ........................................................... (349,773) (4,310,928) --------------------------------------- Net increase ............................................................... 287,989 $ 3,570,520 ======================================= Year ended February 28, 1999 Shares sold ............................................................... 1,355,256 $ 17,004,771 Shares issued in reinvestment of distributions ............................ 92,437 1,159,580 Shares redeemed ........................................................... (334,322) (4,196,367) --------------------------------------- Net increase ............................................................... 1,113,371 $ 13,967,984 =======================================
FRANKLIN TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES Certain officers and trustees of the Trust are also officers and/or directors of Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc. (Distributors), Franklin/Templeton Investor Services, Inc. (Investor Services), and Franklin Templeton Services, Inc. (FT Services), the Funds' investment manager, principal underwriter, transfer agent, and administrative manager, respectively. The Funds pay an investment management fee to Advisers based on the average net assets of the Funds as follows:
ANNUALIZED FEE RATE MONTH-END NET ASSETS ---------------------------------------------------------------------------- .625% First $100 million .500% Over $100 million, up to and including $250 million .450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Funds. Advisers agreed in advance to waive management fees for the Franklin Florida Insured Tax-Free Income Fund, as noted in the Statement of Operations. The Funds reimburse Distributors up to .10% and .65% per year of their average daily net assets of Class A and Class C, respectively, for costs incurred in marketing the Funds' shares. Distributors paid net commissions on sales of the Funds' shares, and received contingent deferred sales charges for the period as follows:
FRANKLIN FRANKLIN ARIZONA FRANKLIN FLORIDA FRANKLIN MASSACHUSETTS FRANKLIN MICHIGAN INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INSURED TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND -------------------------------------------------------------------------------------------- Net commissions paid .. $23,500 $2,417 $281,998 $78,996 $200,995 Contingent deferred sales charges ........ $ 5,822 $ 463 $ 31,115 $23,806 $ 20,922
FRANKLIN MINNESOTA FRANKLIN OHIO INSURED TAX-FREE INSURED TAX-FREE INCOME FUND INCOME FUND --------------------------------------------- Net commissions paid .......... $71,321 $148,845 Contingent deferred sales charges ................ $ 7,301 $ 15,675
The Funds paid transfer agent fees of $1,115,676, of which $930,078 was paid to Investor Services. 4. INCOME TAXES At February 28, 1999, the Funds had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows:
FRANKLIN ARIZONA FRANKLIN FLORIDA INSURED TAX-FREE INSURED TAX-FREE INCOME FUND INCOME FUND -------------------------------------- Capital loss carryovers expiring in: 2003 $165,472 $1,100,392 2005 17,363 167,156 -------------------------------------- $182,835 $1,267,548 ======================================
Distributions of income to shareholders may not equal net investment income due to differing treatments of dividend distributions for book and tax purposes. Net realized capital gains (losses) differ for financial statement and tax purposes primarily due to differing treatment of wash sales. FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) (continued) 4. INCOME TAXES (CONT.) At August 31, 1999, the net unrealized appreciation (depreciation) based on the cost of investments for income tax purposes was as follows:
Franklin Franklin Arizona Franklin Florida Franklin Massachusetts Franklin Michigan Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free Income Fund Income Fund Income Fund Income Fund Income Fund ---------------------------------------------------------------------------------------------------- Investments at cost ....... $ 87,048,590 $ 120,211,902 $ 1,691,913,592 $ 351,290,859 $ 1,157,380,738 ================================================================================================ Unrealized appreciation ... $ 1,545,940 $ 2,789,667 $ 54,647,080 $ 9,111,234 $ 48,566,788 Unrealized depreciation ... (2,448,623) (2,452,875) (30,466,619) (5,243,635) (15,704,115) ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) ........... $ (902,683) $ 336,792 $ 24,180,461 $ 3,867,599 $ 32,862,673 ================================================================================================
Franklin Minnesota Franklin Ohio Insured Tax-Free Insured Tax-Free Income Fund Income Fund --------------------------------------- Investments at cost .......... $ 525,682,867 $ 777,728,864 ================================= Unrealized appreciation ...... $ 11,775,783 $ 26,644,953 Unrealized depreciation ...... (12,200,287) (12,410,531) --------------------------------- Net unrealized appreciation (depreciation) .............. $ (424,504) $ 14,234,422 =================================
5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the period ended August 31, 1999, were as follows:
Franklin Franklin Arizona Franklin Florida Franklin Massachusetts Franklin Michigan Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-Free Income Fund Income Fund Income Fund Income Fund Income Fund ------------------------------------------------------------------------------------------------ Purchases .. $20,951,039 $16,608,009 $200,565,442 $56,621,334 $85,162,089 Sales ...... $10,662,803 $11,387,217 $203,740,699 $47,200,793 $46,182,572
Franklin Minnesota Franklin Ohio Insured Tax-Free Insured Tax-Free Income Fund Income Fund -------------------------------------------- Purchases .... $53,216,626 $65,525,510 Sales ........ $33,083,710 $46,828,991
6. CREDIT RISK The Funds have investments in excess of 10% of their total net assets in their respective states and/or U.S. territories and possessions except the Franklin Insured Tax-Free Income Fund which has investments in excess of 10% of its total net assets in the state of Texas. Such concentration may subject the Funds more significantly to economic changes occurring within those states and/or U.S. territories and possessions. 7. FUND MERGER On August 26, 1999, the Franklin Michigan Insured Tax-Free Income Fund acquired the net assets of Franklin Michigan Tax-Free Income Fund pursuant to a plan of reorganization approved by Franklin Michigan Tax-Free Income Fund's shareholders. The merger was accomplished by a tax-free exchange of 1,293,437 Class A shares of the Franklin Michigan Insured Tax-Free Income Fund (valued at $11.73) for the net assets of the Franklin Michigan Tax-Free Income Fund which aggregated $15,172,016, including $346,476 of unrealized depreciation. The merger was accounted for as a pooling-of-interests without restatement for financial reporting purposes. The combined net assets of the Franklin Michigan Insured Tax-Free Income Fund immediately after the merger were $1,206,193,329. SHAREHOLDER LETTER Dear Shareholder: This semiannual report for Franklin Tax-Free Trust covers the period ended August 31, 1999. During the six months under review, the U.S. bond markets continued to experience challenging times. The yield on the benchmark 30-year Treasury bond steadily increased, from 5.57% on February 28, 1999, to 6.07% on August 31, 1999 - --reaching a high of 6.25% on August 10, 1999. Although many of the uncertainties associated with hedge funds and 1998's financial stresses on Asia, Latin America and Eastern Europe either dissipated or stabilized, the Federal Reserve Board's (the Fed's) position toward domestic inflationary tendencies renewed investor concern. At its June 30 meeting, the Federal Open Market Committee (FOMC) raised the federal funds target rate to 5.00%, while announcing a neutral bias toward further increases, which most investors initially viewed as positive. However, most bond investors became cautious as they perceived Alan Greenspan's testimony before the U.S. House of Representatives on July 22, 1999, as a change by the Fed from a neutral bias to one of possibly raising rates. Indeed, the FOMC raised its target for the federal funds rate another quarter-percentage point to 5.25% and again adopted a neutral bias at its August 24 meeting, which appeared to stabilize the bond markets for the short term. The economy's future direction and its effect on inflationary pressures will ultimately determine the level of volatility that impacts the bond markets in the near future. During the period under review, many investors uncharacteristically reacted very swiftly to new releases of economic data or Fed announcements, and in many instances the market overcorrected. Investors with short-term investment horizons may view such instability as unfavorable. However, we prefer to take a long-term approach toward investing and find that recent market conditions afforded us opportunities not only to increase the funds' income earning potential, but also to enhance the portfolios' overall structure. Our conservative, long-term, buy-and-hold philosophy enables us to produce comparatively high credit-quality portfolios that distribute favorable tax-free income.(1) We do not purchase exotic derivative products or use leverage as part of our investment strategy to increase yield because we also strive to maintain low share-price volatility. We encourage you to examine the credit quality of your tax-free fund, as well as its yield when evaluating your investment needs. CONTENTS Shareholder Letter ...................................................... 1 Special Feature: Uncovering Tax-Free Opportunities ........................................................... 5 Fund Reports Franklin Alabama Tax-Free Income Fund .................................................... 8 Franklin Florida Tax-Free Income Fund .................................................... 12 Franklin Georgia Tax-Free Income Fund .................................................... 16 Franklin Kentucky Tax-Free Income Fund .................................................... 20 Franklin Louisiana Tax-Free Income Fund .................................................... 24 Franklin Maryland Tax-Free Income Fund .................................................... 28 Franklin Missouri Tax-Free Income Fund .................................................... 32 Franklin North Carolina Tax-Free Income Fund .................................................... 36 Franklin Texas Tax-Free Income Fund .................................................... 40 Franklin Virginia Tax-Free Income Fund .................................................... 44 Municipal Bond Ratings .................................................. 48 Financial Highlights & Statement of Investments ................................................ 50 Financial Statements .................................................... 97 Notes to Financial Statements ........................................... 108 FUND CATEGORY [PYRAMID GRAPHIC] With municipal bond insurance prevalent over the past few years, the difference in yields between high- and lower-rated bonds has narrowed compared to historical levels. As a result, many of our funds in recent years chose to invest in high-rated bonds because of the risk versus return characteristics in the marketplace. At the end of this reporting period, many of our tax-free funds held a large percentage of AAA-rated bonds, reflecting the portfolios' high quality. Our disciplined, long-term, income-oriented investment approach, along with our ability to recognize value, enables us to offer funds providing attractive tax-free yields while enjoying excellent credit quality characteristics compared to their peers. Historically more than 85% of total return for municipal bonds is derived from the income component. In light of this, we choose to concentrate on income and risk-adjusted total return in managing our funds, and on this basis, most of our tax-free funds compare very favorably to their peers. As the interest-rate outlook stabilizes and inflationary concerns diminish, we expect the bond markets to become more stable. Overall, we expect municipal bonds to perform well, as at the end of the reporting period the ratio of yields for the Bond Buyer 40 Municipal Index versus the 30-year Treasury bond approached 95%, considerably higher than the historical average of 89%, which means municipal bonds are relatively inexpensive. Furthermore, municipal bond supply for 1999 is expected to be approximately 18% less than in 1998, with about $230 billion coming to market. The reduced supply should enhance municipal bond performance going forward. 1. For investors subject to federal or state alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Please keep in mind that interest rates and thus, bond prices, rise and fall depending on the economy. Such fluctuations are a normal part of investing, and one should expect this when investing in any security, including municipal bonds. Municipal bond funds can help lower such volatility, as they offer a level of diversification that is difficult for individual investors to achieve on their own. They continue to be an attractive investment for those investors seeking tax-free income as well as providing an opportunity to reduce risk in their portfolios. Depending on your federal and state tax rates, a taxable investment would need to offer a higher yield than the taxable equivalent yield of a tax-free investment. We encourage you to discuss your financial goals with an investment representative. As always, we appreciate your support, welcome your questions and look forward to serving your investment needs in the years ahead. Sincerely, /s/ C. B. Johnson Charles B. Johnson Chairman Franklin Tax-Free Trust /s/ Thomas J. Kenny Thomas J. Kenny Director Franklin Municipal Bond Department WHAT DOES "TAXABLE EQUIVALENT" MEAN FOR YOU? For yield and distribution rate, the taxable equivalent is the amount a taxable investment would have to earn to match a tax-free investment such as municipal bonds. You can find your fund's taxable equivalent distribution rate and yield in the Performance Summary that follows your fund's report. OVERALL MORNINGSTAR RATINGS(TM) These funds in Franklin Tax-Free Trust were rated against a universe of 1,591; 1,210 and 372 municipal bond funds for the 3-, 5- and 10-year periods, respectively, ended August 31, 1999. FRANKLIN MUNICIPAL BOND FUNDS ARE STAR QUALITY You may be pleased to know how well your Franklin Tax-Free Income Fund compares with the competition. Morningstar, a leading mutual fund rating company, awarded 33 Franklin municipal bond funds their highest ratings, four or five stars. With one of the largest municipal bond departments in the industry, Franklin Templeton has the resources needed to identify attractive municipal bond opportunities and the know-how to purchase them at favorable prices. We offer investors more high-quality choices than any other fund group followed by Morningstar. ***** FIVE-STAR FRANKLIN TAX-FREE INCOME FUNDS(1,2) - -------------------------------------------------------------------------------- Franklin Florida Tax-Free Income Fund - Class A Franklin Texas Tax-Free Income Fund - Class A **** Four-Star Franklin Tax-Free Income Funds(1,2) - -------------------------------------------------------------------------------- Franklin Alabama Tax-Free Income Fund - Class A Franklin Georgia Tax-Free Income Fund - Class A Franklin Kentucky Tax-Free Income Fund - Class A Franklin Louisiana Tax-Free Income Fund - Class A Franklin Maryland Tax-Free Income Fund - Class A Franklin Missouri Tax-Free Income Fund - Class A Franklin North Carolina Tax-Free Income Fund - Class A Franklin Virginia Tax-Free Income Fund - Class A 1. For investors subject to federal or state alternative minimum tax, all or a portion of the dividends may be subject to such tax, depending on the fund. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. For the 3-, 5- and 10-year periods ended August 31, 1999, the respective Morningstar ratings were as follows: Alabama Tax-Free Income 3, 4, 4; Florida Tax-Free Income 4, 5, 5; Georgia Tax-Free Income 4, 4, 4; Kentucky Tax-Free Income 4, 4, N/A; Louisiana Tax-Free Income 4, 4, 4; Maryland Tax-Free Income 3, 4, 4; Missouri Tax-Free Income 4, 4, 4; North Carolina Tax-Free Income 4, 4, 4; Texas Tax-Free Income 4, 5, 5; Virginia Tax-Free Income 3, 4, 4. Morningstar proprietary ratings reflect historical risk-adjusted performance and can change monthly. They are calculated from the fund's 3-, 5- and 10-year average annual returns in excess of 90-day Treasury bill returns with appropriate sales charge adjustments, and a risk factor reflecting performance below 90-day T-bill returns. The top 10% of funds in a broad asset class receive five stars, the next 22.5% four stars, the next 35% three stars, the next 22.5% two stars, and the bottom 10% one star. Ratings are for Class A shares only; other classes may vary. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. You have previously received a prospectus for Franklin Tax-Free Trust in which you are a shareholder. Franklin Templeton Distributors, Inc. is the principal underwriter of the Trust. This page is not part of the shareholder report. [SPECIAL UPDATE GRAPHIC] UNCOVERING TAX-FREE OPPORTUNITIES [PHOTO OF RAFAEL COSTAS] Rafael Costas, Senior Vice President and Director of Franklin's Municipal Research Department, discusses how research is an integral part of Franklin's tax-free income funds' success. Q: Could you provide an overview of Franklin's research department? RAFAEL COSTAS: We have one of the industry's largest municipal research staffs, allowing us to routinely analyze more than 2,000 debt issuers a year. The research department analysts work closely with our portfolio managers, who rely on these analysts when making buy and sell decisions. With a focus on in-depth research and the discipline to buy when others are selling, we often are able to find exciting opportunities at temporarily depressed prices. Generally, we concentrate on investment-grade issues. Of course, for our high yield funds, we also look for below investment-grade bonds that we feel offer appropriate rewards for the increased risk. Q: What are some advantages of Franklin's size and reputation? RAFAEL: Today, Franklin is one of the nation's leading tax-free fund managers. Our size, with approximately $50 billion of tax-free investments, often enables us to purchase investments at advantageous prices, which in turn, can help keep investment costs low. We pass on these savings to shareholders in the form of higher tax-free yields.(1) In addition, our size often makes us a favorite of new issuers, as many prefer to work with a minimum number of investors. Q: What type of tax-free bonds do you favor? RAFAEL: We typically look for investment-grade bonds, as we try to provide our shareholders high, current income with a relatively low level of risk. Most of our investment-grade tax-free bond funds are composed of a high percentage of securities rated AAA or AA, the highest ratings bonds can receive from national credit rating agencies.(2) In addition, many of our purchases are insured because of the prevalence of insurance in the municipal bond marketplace in the past few years. Insured securities normally are rated AAA, further improving the quality of our funds. For our high yield funds, we look for bonds which may be out of favor but, in our view, still have solid fundamentals and the potential to be upgraded. In fact, we devote much of our research efforts to finding such bonds in the low investment-grade, high yield sectors. 1. For investors subject to the federal or state alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Ratings can change. Q: How do you research a bond? RAFAEL: We emphasize detailed, high-quality research, which often enables us to uncover attractive investments that others may have overlooked. When presented with an opportunity, our analysts carefully consider such factors as the bond's purpose, who will repay the bond, if the projections are reasonable, the payment schedule and the issuer's credit history. We incorporate all of the numerical findings in our internal, proprietary databases and spreadsheets created by our analysts. With the processed information and analysis, we meet with our portfolio managers to discuss the merits of each individual issue. The portfolio manager's decision to buy a security will depend largely on our analysis of the bond's credit quality and price. We continue to monitor our investments closely after the purchase, looking for signs of potential problems as well as additional opportunities. Q: Do you feel it is important to personally meet management and municipal officials? RAFAEL: Very much so. Each year Franklin's analysts and portfolio managers visit hundreds of sites to garner an understanding that can be obtained only through personal inspection. They meet face-to-face with the project's management and municipal officials to discuss firsthand any potential problems. Our analysts also can use these meetings to discover new opportunities, often before they are widely known. Q: Do issuers and investment bankers ever come to Franklin? RAFAEL: Our sizable presence in the municipal bond market frequently means that issuers and their bankers come to us with new issues. In a typical day, we may receive between 50 and 100 calls from brokers offering new and secondary issues. Approx- [PHOTO] Municipal research analyst Molly Butler discusses a bond issue with portfolio manager Stella Wong imately three times a week, investment bankers visit our offices, usually as part of an issue's road show. We view these as excellent opportunities not only to buy issues at favorable prices, but also to propose changes to the issue, enhancing its quality and appeal to our distinct standards. Q: How can Franklin's research influence the portfolio managers' investment decisions? RAFAEL: Our extensive research allows us to use a contrarian approach to investing, because we firmly believe that near-term volatility can create opportunities for greater long-term yields. For example, when Moody's, Standard & Poor's or Fitch, three national credit rating agencies, downgrade a bond, many investors sell the issue, sometimes reducing prices to what we believe are attractive levels. As we evaluate our investments based on our internal assessments, we can use these valuable opportunities to purchase what we believe are high-quality issues at temporarily depressed prices. External events can also lead to situations where bonds become undervalued. Over the past few years, for example, Medicare reform negatively affected the hospital bond sector, even for those hospitals in strong financial shape. As many hospitals' credit profiles weakened, we were able to find value selectively through our analysts' expertise. Seeking to take advantage of this, we recommended such bonds to our portfolio managers who purchased them at a time when the market seemed to be shunning these issues. Q: Could you provide an example of a successful outcome of your research? RAFAEL: Sure. A perfect example is Tucson Electric Power (TEP). It issued $579 million in tax-exempt debt in 1997-98. However, the utility had a long, troubled history and its debt was rated below investment grade. So, Molly Butler, our electric utility analyst, and I flew to Tucson and spent an entire day with TEP's top executives and division heads. We discussed their history, current position and future plans as well as challenged and questioned many of their projections and assumptions. At the end of the day, we were satisfied that their management team had a clear vision and a realistic plan for the future. Q: How is TEP doing today? RAFAEL: Since then, the rating agencies have raised TEP's credit rating and the bonds have seen a significant increase in value. Of course, the ratings can change again in the future. However, the bonds are still offering above-market yields for our shareholders, because we were able to purchase the securities when they were unpopular. We have an excellent relationship with management and they often call Ms. Butler to discuss the latest releases of information. THANK YOU, RAFAEL. WHAT IS A ROAD SHOW? Before a new issue is brought to the public, the issuer and its investment bankers travel around the country making presentations to potential investors concerning the issuer's financial information and outlook. FRANKLIN ALABAMA TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Alabama Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 63.4% AA - 4.7% A - 3.6% BBB - 23.5% Below Investment Grade - 4.8%
*Quality breakdown may include internal ratings for bonds not rated by a national rating agency. - -------------------------------------------------------------------------------- Your Fund's Goal: Franklin Alabama Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Alabama state personal income taxes through a portfolio consisting primarily of Alabama municipal bonds.(1) - -------------------------------------------------------------------------------- STATE UPDATE [GRAPHIC OF ALABAMA] Alabama's proactive economic development policies are producing gains statewide. Once overly dependent on the manufacturing sector, the state's economy has extensively diversified and now boasts a number of high-tech firms in the Huntsville area as well as health care and business services companies in Birmingham and Mobile. The service and trade sectors have provided 75% of net growth since 1990. As a result, per capita income has grown faster than the nation's, although it is still at 83% of the national average. Unemployment, historically above the national average, has been at par or below the national average since 1991.(2) While the manufacturing sector's significance has declined -- currently about 20% of employment compared with 27% in 1981 -- the sector has undergone a dramatic transformation. Textile and apparel jobs are leaving the state, as companies move abroad or suffer from cheaper imports. However, nondurable manufacturing is thriving. Mercedes-Benz, which opened its Alabama plant in 1997, is doing better than expected and is expanding its facilities in the state. Honda, Navistar and Boeing are significant manufacturers with extensive investments in Alabama that are expected to provide further employment opportunities in the future.(3) 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Standard & Poor's(R), CreditWeek Municipal, 4/99. 3. Source: Moody's Investors Service, State of Alabama, 7/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 51 of this report. Meanwhile, the state maintains a tight grip on its borrowing. Alabama has the 16th lowest net tax-supported debt in the nation, at $317 per capita compared with the $505 national average.(3) Based on this prudent financial management and solid economic growth, Standard & Poor's, a national credit rating agency, assigned Alabama an AA rating.(4) PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.88%. Alabama's $2.7 billion municipal bond supply from January through August 1999 represented a favorable 39% increase compared with the same period last year. Several large infrastructure deals accounted for the majority of the supply; however, the fund was also able to find value in a number of smaller deals. Some recently purchased revenue bonds included Florence Electric, Birmingham Water and Sewer, Jefferson County Sewer and Warrior River Water Authority Water. At the end of the reporting period, utilities remained the fund's largest sector weighting, increasing to 25.3% of the portfolio's total long-term investments from 21.8% on February 28, 1999. Portfolio quality also increased during the same period, as the fund's highest-rated, AAA bonds grew from 59.7% to 63.4% of total long-term investments. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. PORTFOLIO BREAKDOWN Franklin Alabama Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - ----------------------------------------------------------------------------------- Utilities 25.3% Hospital & Health Care 21.6% Corporate Backed 13.3% General Obligation 12.3% Prerefunded 6.7% Housing 6.2% Subject to Government Appropriation 4.0% Transportation 3.5% Higher Education 3.4% Other Revenue 2.0% Tax Supported Debt 1.7%
4. This does not indicate Standard & Poor's rating of the fund. 5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Alabama Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE ------------------------------------------- MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 5 cents 4.42 cents April 5 cents 4.42 cents May 5 cents 4.42 cents June 5 cents 4.46 cents July 5 cents 4.46 cents August 5 cents 4.46 cents - -------------------------------------------------------------------------------- TOTAL 30 CENTS 26.64 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.57 $11.11 $11.68
DISTRIBUTIONS (3/1/99 - 8/31/99) ------------------------------------------------ Dividend Income $0.3000 Long-Term Capital Gain $0.0072 TOTAL $0.3072
CLASS C CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.57 $11.17 $11.74
DISTRIBUTIONS (3/1/99 - 8/31/99) ------------------------------------------------ Dividend Income $0.2664 Long-Term Capital Gain $0.0072 TOTAL $0.2736
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ------------------------------------------------------------------------------------------------------------ Cumulative Total Return(1) -2.24% -0.27% +30.45% +90.77% +129.03% Average Annual Total Return(2) -6.41% -4.48% +4.54% +6.21% +6.76% Distribution Rate(3) 5.17% Taxable Equivalent Distribution Rate(4) 9.01% 30-Day Standardized Yield(5) 4.78% Taxable Equivalent Yield(4) 8.33%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - --------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.52% -0.83% +13.15% +23.12% Average Annual Total Return(2) -4.45% -2.76% +3.84% +4.68% Distribution Rate(3) 4.76% Taxable Equivalent Distribution Rate(4) 8.30% 30-Day Standardized Yield(5) 4.39% Taxable Equivalent Yield(4) 7.65%
FRANKLIN ALABAMA TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Alabama state personal income tax bracket of 42.6%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. CREDIT QUALITY BREAKDOWN* Franklin Florida Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 69.8% AA - 8.7% A - 10.9% BBB - 10.0% Below investment Grade - 06.%
*Quality breakdown may include internal ratings for bonds not rated by a national rating agency. FRANKLIN FLORIDA TAX-FREE INCOME FUND - -------------------------------------------------------------------------------- Your Fund's Goal: Franklin Florida Tax-Free Income Fund seeks to provide high, current income exempt from regular federal tax through a portfolio consisting primarily of Florida municipal bonds.(1) In addition, the fund's shares are free from Florida's annual intangibles tax. - -------------------------------------------------------------------------------- STATE UPDATE(2) [GRAPHIC OF FLORIDA] Florida continues to be one of the fastest growing states in the nation. Its personal income has grown 6.2% per year since 1994, compared with 5.6% nationally for the same period, ranking 20th among the states. Non-agricultural job growth for 1998 was 4.1%, compared with 2.6% nationally. This trend should continue throughout 1999 with an expected 4% increase over 1998. Florida's double-digit population growth for each of the past two decades is expected to continue as aging baby-boomers begin to retire and move to the state. Such strong population growth has been the main fuel of the state's economy, but has also driven the need for expanded government services including education, corrections, transportation and health and human services. The state's debt has risen with its growth, and both are expected to continue expanding. 1999 debt per capita was $863 compared with $505 for the national state median. Florida decreased its intangible personal property tax during the reporting period. The new tax rate will reduce the levy from $2 million currently to $1.5 million. The net effect will have only a small impact on the future revenues relative to the state's total income. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Moody's Investors Service, State of Florida, 8/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 55 of this report. 12 Projections for general revenue growth indicate a slowdown to 5.0% in 1999 from a strong 7.6% in 1998. The state enacted a constitutional amendment adding a Budget Stabilization Fund, which is required to be funded at 5% of the previous year's General Fund receipts. Additionally, the state has constitutionally enacted a revenue limitation to control spending growth by limiting the amount of taxes and other revenue that can be raised in any given year. Exempt from this cap are monies pledged to existing and new bond issues, to mitigate risk to bondholders. As of July 1999, Florida's state agency computer systems are 99% Year-2000 compliant, with the remaining 1% anticipated to be by October 1999. PORTFOLIO NOTES During the reporting period, many Florida municipal bond issuers enhanced their debt's credit quality by purchasing insurance for their upcoming offerings. The increased competitive environment among the various municipal insurers gave issuers the opportunity to purchase insurance at attractive prices, either for new money projects or to refinance existing debt. The majority of the new purchases were insured, thus enhancing the portfolio quality. Accordingly, our percentage of AAA-rated holdings increased slightly from 69.2% to 69.8% of total long-term investments during the period under review. Higher quality bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Some recent purchases included West Palm Beach Utility System Revenue; Wellington Public Service Tax Revenue; Miami-Dade County Housing Finance Authority Revenue - Home Ownership Mortgage; and Florida Housing Finance Corp. Revenue - Brenwood Trace Apartments bonds. Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(3) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.7%. PORTFOLIO BREAKDOWN Franklin Florida Tax-Free Income Fund 8/31/99
% OF TOTAL LONG TERM SECTOR INVESTMENTS - -------------------------------------------------------------------------------- Utilities 22.8% Prerefunded 21.3% Hospital & Health Care 13.1% Transportation 11.4% Housing 9.1% Tax Supported Debt 9.1% Other Revenue 5.3% General Obligation 3.7% Subject to Government Appropriation 3.3% Higher Education 0.6% Corporate Backed 0.3%
3. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. Florida's municipal bond issuance declined 14% for the first half of the calendar year compared with the same period a year ago. As interest rates continued to climb, there were fewer opportunities for issuers to refund existing debt. In this higher interest rate environment, the portfolio employed a strategy of booking tax losses. These losses can then be carried forward to help offset any current or future taxable capital gains, possibly lowering shareholders' tax liabilities. The fund also sold prerefunded bonds to capture the premium and decrease the portfolio's call exposure throughout the period under review. Looking forward, the fund will maintain its strategy of buying current coupon bonds at a slight discount as we seek to provide shareholders with high, current tax-free income. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Florida Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE --------------------------- MONTH CLASS A CLASS C - ---------------------------------------------------------------------------------- March 5 cents 4.43 cents April 5 cents 4.43 cents May 5 cents 4.43 cents June 5 cents 4.46 cents July 5 cents 4.46 cents August 5 cents 4.46 cents - ---------------------------------------------------------------------------------- TOTAL 30 CENTS 26.67 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.56 $11.35 $11.91
DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.3000 Long-Term Capital Gain $0.0009 TOTAL $0.3009
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.57 $11.44 $12.01
DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.2667 Long-Term Capital Gain $0.0009 TOTAL $0.2676
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - --------------------------------------------------------------------------------- Cumulative Total Return(1) -2.16% +0.18% +32.64% +96.48% +139.07% Average Annual Total Return(2) -6.33% -4.08% +4.90% +6.52% +7.14% Distribution Rate(3) 5.06% Taxable Equivalent Distribution Rate(4) 8.38% 30-Day Standardized Yield(5) 4.47% Taxable Equivalent Yield(4) 7.40%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - --------------------------------------------------------------------------------- Cumulative Total Return(1) -2.51% -0.47% +15.26% +25.05% Average Annual Total Return(2) -4.41% -2.39% +4.48% +5.06% Distribution Rate(3) 4.65% Taxable Equivalent Distribution Rate(4) 7.70% 30-Day Standardized Yield(5) 4.08% Taxable Equivalent Yield(4) 6.75%
FRANKLIN FLORIDA TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum federal personal income tax bracket of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. CREDIT QUALITY BREAKDOWN* Franklin Georgia Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA 62.4% AA 8.8% A 12.2% BBB 16.6% *Quality breakdown may include internal ratings for bonds not rated by a national rating agency. FRANKLIN GEORGIA TAX-FREE INCOME FUND - -------------------------------------------------------------------------------- Your Fund's Goal: Franklin Georgia Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Georgia state personal income taxes through a portfolio consisting primarily of Georgia municipal bonds.(1) - -------------------------------------------------------------------------------- STATE UPDATE [GRAPHIC OF GEORGIA] Georgia's debt has the highest credit rating from Moody's, Fitch and Standard & Poor's, three national credit rating agencies.(2) The state has followed the disciplined and sound policy of issuing only general obligation and guaranteed bonds for the past two decades. This simple debt structure allowed the state to restrain debt growth to a pace slower than revenue growth, and helped push the debt burden to low levels. Such financial practices, exercised for the past six years, have allowed Georgia to return its reserves to the same levels as those preceding the recession of the early 1990s. New job growth in Georgia outpaced the national average in 1998, increasing 3.3%. Meanwhile, unemployment remained at a low 4.2%, compared with 4.5% for the nation. Georgia ended fiscal 1999 with a $665 million cash surplus in addition to the $83 million surplus carried forward from 1998. The state plans to use these surpluses to buffer phased-in tax cuts taking full effect in fiscal 2000. The state's 1999 per capita debt, $679, was slightly above the $505 national median. Georgia has moved its economy from one dependent on agriculture to a modern, manufacturing-, trade- and services-based economy.(3) 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. This does not indicate a rating for the fund. 3. Source: Moody's Investors Service, State of Georgia, 7/26/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 64 of this report. Georgia's economic outlook is excellent. The state's disciplined debt policies, consistent maintenance of sound, conservative financial operations, coupled with strong growth expectations and a stable, broad-based economy, should lead the state to further economic success. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.89%. The rise in interest rates created an excellent opportunity for Franklin Georgia Tax-Free Income Fund to book tax losses and reinvest the proceeds at significantly higher yields. These losses can be carried forward to help offset current or future capital gains and reduce our shareholders' tax liabilities. In this process, we sold Atlanta General Obligation, Atlanta Water and Sewer Revenue, Savannah Hospital Authority Revenue and Lee County Utilities Authority Water and Sewer Revenue bonds during the reporting period. Our purchases during the six-month reporting period included Rome Water and Sewer Revenue; Rockdale County Water and Sewer Authority Revenue; Private Colleges and Universities Authority Revenue - Mercer University Project; Medical Center Hospital Authority - Columbus Regional Healthcare System; and Clarke County Hospital Authority - Athens Regional Medical Center Project bonds. These purchases maintained diversification in a broad range of sectors, helping reduce the fund's exposure to risk and volatility that may affect any one sector. In addition, the fund held 62.4% of total long-term investments in AAA quality bonds as of August 31, 1999, reflecting our holdings' fundamentally high quality. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. PORTFOLIO BREAKDOWN Franklin Georgia Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - -------------------------------------------------------------------------------- Utilities 21.5% Prerefunded 15.9% Hospital & Health Care 13.2% Housing 12.4% General Obligation 10.8% Corporate Backed 8.9% Higher Education 5.8% Transportation 4.4% Tax Supported Debt 3.4% Other Revenue 2.4% Subject to Government Appropriation 1.3%
4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. During the early part of 1999, before the rise in interest rates, issuers took full advantage of lower rates and refinanced outstanding debt. As a result, the fund's prerefunded bond exposure was approximately 16% at the end of the reporting period. In keeping with our strategy, we looked for opportunities to sell prerefunded bonds and reinvest the money in securities with at least ten-year call protection, in an attempt to protect the fund's long-term income stream. As of August 31, 1999, the fund's weighted average life-to-first call was 6.75 years. We bought municipal securities with current coupons, at a slight discount, seeking to maximize the tax-free income distributed to shareholders. As a result, this disciplined investment approach helped protect the fund's share value and maintain a competitive yield. We are closely monitoring Georgia's supply of tax-exempt municipal bonds. For the first six months of 1999, the state issued $2.8 billion worth, a 3.7% decrease from the same period in 1998. The state's relatively low debt burden and growing need for new infrastructure such as highways, schools and affordable housing should maintain new borrowing requirements. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Georgia Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE --------------------------- MONTH CLASS A CLASS C - ---------------------------------------------------------------------------------- March 4.95 cents 4.43 cents April 4.95 cents 4.43 cents May 4.95 cents 4.43 cents June 4.95 cents 4.42 cents July 4.95 cents 4.42 cents August 4.95 cents 4.42 cents - ---------------------------------------------------------------------------------- TOTAL 29.70 CENTS 26.55 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.59 $11.48 $12.07 DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.2970 Long-Term Capital Gain $0.0017 TOTAL $0.2987
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.60 $11.55 $12.15 DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.2655 Long-Term Capital Gain $0.0017 TOTAL $0.2672
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - -------------------------------------------------------------------------------- Cumulative Total Return(1) -2.39% -0.37% +30.39% +91.09% +130.93% Average Annual Total Return(2) -6.57% -4.61% +4.55% +6.23% +6.83% Distribution Rate(3) 4.95% Taxable Equivalent Distribution Rate(4) 8.72% 30-Day Standardized Yield(5) 4.48% Taxable Equivalent Yield(4) 7.89%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ----------------------------------------------------------------------------------- Cumulative Total Return(1) -2.73% -0.91% +13.72% +23.06% Average Annual Total Return(2) -4.62% -2.81% +4.02% +4.65% Distribution Rate(3) 4.43% Taxable Equivalent Distribution Rate(4) 7.80% 30-Day Standardized Yield(5) 4.08% Taxable Equivalent Yield(4) 7.19%
FRANKLIN GEORGIA TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Georgia state personal income tax bracket of 43.2%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. FRANKLIN KENTUCKY TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Kentucky Tax-Free Income Fund Based on Total Long-Term Investment 8/31/99 [PIE CHART] AAA - 67.2% AA - 7.1% A - 8.8% BBB - 16.1% Below Investment Grade - 0.8% - -------------------------------------------------------------------------------- Your Fund's Goal: Franklin Kentucky Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Kentucky state personal income taxes through a portfolio consisting primarily of Kentucky municipal bonds.(1) - -------------------------------------------------------------------------------- COMMONWEALTH UPDATE [GRAPHIC OF KENTUCKY] The Bluegrass State is attracting its share of attention. Kentucky has enjoyed positive in-migration during the past few years, in contrast to the 1980s' population declines resulting from the coal industry's downsizing. Employment growth also has been robust, providing jobs for many of the new arrivals. For the year ended February 1999, employment grew by 2.1%, in line with the national average.(2) Furthermore, the recent trend has been away from lower-paying jobs in tobacco, apparel and coal mining, toward higher-paying jobs in the automobile, transportation, health care and financial services sectors. Kentucky has significantly improved its financial condition in recent years. After running budget deficits in the early '90s, the commonwealth turned around and posted its fifth consecutive surplus in fiscal 1998. The current year looks encouraging as well; from January through April 1999, tax collections were 3.3% higher than the same period a year ago. While a strong economy naturally helps increase revenues, the commonwealth also has shown prudent spending control over the past five years. For fiscal years 1993 through 1998, actual expenditures were 96.5% of the budget.(2) Even more impressive is that Kentucky accomplished this while making substantial financial obligations to improving its education system. Still, Kentucky must deal with debt levels that are relatively high and slightly above national levels. In addition, per capita income remained below the national average, at 81.4% in 1998.(2) 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distribution of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Moody's Investors Service, State of Kentucky, 6/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 68 of this report. Based on Kentucky's solid economy and prudent fiscal management, Moody's, a national credit rating agency, assigned the commonwealth a strong Aa2 rating.(3) With Kentucky's strengths far outweighing its weaknesses, the commonwealth should continue to see above-average economic performance. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.23%. The rise in interest rates during the reporting period, created an excellent opportunity for Franklin Kentucky Tax-Free Income Fund to book tax losses and reinvest the proceeds at significantly higher yields. These losses can then be carried forward to help offset current or future capital gains and reduce our shareholders' tax liabilities. Since Kentucky bond supply is scarce, the fund sold Puerto Rico bonds and invested in Kentucky bonds when they became available. Sales of Puerto Rico Power Authority Power Revenue and Puerto Rico Commonwealth Highway and Transportation Authority Revenue bonds during the reporting period provided tax losses. Our purchases during the six-month reporting period included Hardin County Water District No. 2 Water System Revenue, Oldham County School District Finance Corp. School Building Revenue, Jefferson County School District Finance Corp. School Building Revenue, and Kentucky State Property and Buildings Commission Revenues bonds. These purchases maintained diversification in a broad range of sectors, helping reduce the fund's exposure to risk and volatility that may affect any one sector. In addition, the fund held 67.2% of total long-term investments in AAA quality securities at the end of the reporting period, reflecting our holdings' fundamentally high quality. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. PORTFOLIO BREAKDOWN Franklin Kentucky Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - ---------------------------------------------------------------------------------- Utilities 21.8% Hospital & Health Care 20.8% Housing 14.7% Subject to Government Appropriation 13.3% Transportation 8.8% Prerefunded 6.1% Corporate Backed 5.8% Other Revenue 5.6% Tax Supported Debt 2.9% Higher Education 0.2%
3. This does not indicate Moody's rating of the fund. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. DIVIDEND DISTRIBUTIONS* Franklin Kentucky Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND MONTH PER SHARE - -------------------------------------------------------------------------------- March 4.85 cents April 4.85 cents May 4.85 cents June 4.85 cents July 4.85 cents August 4.85 cents - -------------------------------------------------------------------------------- TOTAL 29.10 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. We are closely monitoring the supply of Kentucky tax-exempt municipal bonds. For the first six months of 1999, the commonwealth issued a total of $1.3 billion, a 4% decrease from the same period last year. The commonwealth's low debt burden and growing need for new infrastructure such as highways, schools and affordable housing should maintain the new borrowing requirement. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.60 $10.87 $11.47 DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.2910
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR (10/12/91) - -------------------------------------------------------------------------------- Cumulative Total Return(1) -2.69% -0.86% +35.02% +66.64% Average Annual Total Return(2) -6.83% -5.05% +5.27% +6.11% Distribution Rate(3) 5.10% Taxable Equivalent Distribution Rate(4) 8.98% 30-Day Standardized Yield(5) 4.85% Taxable Equivalent Yield(4) 8.54%
FRANKLIN KENTUCKY TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. The fund's manager agreed in advance to waive a portion of its management fees, which reduces operating expenses and increases distribution rate, yield and total return to shareholders. Without this waiver, the fund's distribution rate and total return would have been lower, and yield for the period would have been 4.52%. The fee waiver may be discontinued at any time upon notice to the fund's Board of Trustees. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the current 4.82 cent per share monthly dividend and the maximum offering price per share of $11.35 on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Kentucky state personal income tax bracket of 43.2%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN LOUISIANA TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Louisiana Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 61.0% AA - 2.4% A - 7.5% BBB - 21.8% Below Investment Grade - 7.3% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. - -------------------------------------------------------------------------------- Your Fund's Goal: Franklin Louisiana Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Louisiana state personal income taxes through a portfolio consisting primarily of Louisiana municipal bonds.(1) - -------------------------------------------------------------------------------- STATE UPDATE [GRAPHIC OF LOUISIANA] Rising income levels and better control of finances improved the state's financial picture. Louisiana's employment base has become slightly more diverse through the growth of service sector jobs, but the state remains highly dependent upon the oil and gas industry for a disproportionately large amount of employment and revenue. State income levels have increased but still lag that of the U.S., at 81% of the national average. Job growth has been 2.3% annually through the 1990s.(2) The state relies on broad-based sales taxes, individual and corporate income taxes, and severance and royalty taxes for its finances. These are all susceptible to cyclical economic swings. In November 1998, voters approved a rainy day fund to be funded from budget surpluses. Many other states have found such a fund to be beneficial during hard economic times. Louisiana's outlook is stable. The state has been trying to reverse its negative financial position by reducing government employment, controlling Medicaid spending, shrinking the debt burden and addressing some unfunded liabilities. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(3) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.18%. The rise in interest rates created an excellent opportunity for Franklin Louisiana Tax-Free Income Fund to book tax losses and reinvest the proceeds at significantly higher yields. These losses can be carried forward to help offset current or future capital gains and reduce our shareholders' tax liabilities. In the process, we sold Shreveport Airport System Revenue, New Orleans Aviation Board Revenue, Jefferson Parish Hospital Service District No.1 Hospital Revenue, Louisiana Stadium and Exposition District Hotel Occupancy Tax and Stadium Revenue, and Louisiana Public Facilities Authority Hospital Revenue - Franciscan Missionaries bonds during the reporting period. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Standard & Poor's, 7/5/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 71 of this report. Our purchases during the six-month reporting period included Greater New Orleans Expressway Commission Revenue; Louisiana Public Facilities Authority Revenue - Centenary College Project; Louisiana State Office Facilities Corp. Lease Revenue - - Capitol Complex Program; Louisiana Public Facilities Authority Hospital Revenue - Touro Infirmary Project; and De Soto Parish Pollution Control Revenue - - Cleco Utility Group Inc. Project bonds. These purchases maintained diversification in a broad range of sectors, helping reduce the fund's exposure to risk and volatility that may affect any one sector. In addition, the fund held 61% of total long-term investments in AAA-quality securities at the end of the reporting period, reflecting our holdings' fundamentally high quality. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. In keeping with our strategy, we looked for opportunities to sell prerefunded bonds and reinvest the money in securities with at least ten-year call protection, and we bought municipal securities with current coupons, at a slight discount, seeking to maximize the tax-free income distributed to shareholders. As of August 31, 1999, the fund's weighted average life-to-first call was 6.42 years. As a result, this disciplined investment approach helped protect the fund's share value and maintain a competitive yield. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. 3. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. PORTFOLIO BREAKDOWN Franklin Louisiana Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - -------------------------------------------------------------------------------- Utilities 17.4% Higher Education 15.3% Hospital & Health Care 14.7% Corporate Backed 11.4% Tax Supported Debt 9.8% Housing 8.9% General Obligation 6.5% Prerefunded 5.8% Subject to Government Appropriation 4.8% Transportation 3.1% Other Revenue 2.3%
We are closely monitoring the supply of Louisiana tax-exempt municipal bonds. From January through August 1999, the state issued a total of nearly $2 billion, a 17% decrease from the same period last year. The state's low debt burden and growing need for new infrastructure such as highways, schools and affordable housing should maintain the new borrowing requirement. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Louisiana Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE ---------------------------- MONTH CLASS A CLASS C - ---------------------------------------------------------------------------------- March 4.9 cents 4.33 cents April 4.9 cents 4.33 cents May 4.9 cents 4.33 cents June 4.9 cents 4.36 cents July 4.9 cents 4.36 cents August 4.9 cents 4.36 cents - ---------------------------------------------------------------------------------- TOTAL 29.4 CENTS 26.07 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. FRANKLIN LOUISIANA TAX-FREE INCOME FUND PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.60 $10.99 $11.59
DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.294
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.60 $11.06 $11.66
DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.2607
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ---------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.64% -0.62% +31.03% +91.10% +129.72% Average Annual Total Return(2) -6.74% -4.87% +4.65% +6.23% +6.79% Distribution Rate(3) 5.12% Taxable Equivalent Distribution Rate(4) 9.02% 30-Day Standardized Yield(5) 4.71% Taxable Equivalent Yield(4) 8.30%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ----------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.91% -1.18% +14.24% +24.46% Average Annual Total Return(2) -4.83% -3.12% +4.20% +4.93% Distribution Rate(3) 4.74% Taxable Equivalent Distribution Rate(4) 8.35% 30-Day Standardized Yield(5) 4.32% Taxable Equivalent Yield(4) 7.61%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Louisiana state personal income tax bracket of 43.2%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN MARYLAND TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Maryland Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 AAA 52.1% AA 15.5% A 22.3% BBB 10.1% *Quality breakdown may include internal ratings for bonds not rated by a national rating agency. - ------------------------------------------------------------------------------- Your Fund's Goal: Franklin Maryland Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Maryland state personal income taxes through a portfolio consisting primarily of Maryland municipal bonds.(1) - ------------------------------------------------------------------------------- STATE UPDATE [GRAPHIC OF MARYLAND] Maryland continues to receive an Aaa rating, the highest possible, from Moody's, a national credit rating agency.(2) The state's economy has seen improved growth over the past two years, turning around the trend that started with the recession of the early '90s and the federal downsizing during the mid-'90s. Employment growth was 3.6% in 1998 and has averaged about 2.5% for the first half of 1999. State tax collections have registered strong gains over 1998, providing the state with extra funds, while personal income tax collections have grown more than 4%. This increase occurred while the state implemented a five-year, 10% income tax reduction. Maryland has a high debt per capita of $850, making it 10th in the nation. Seeking to improve matters, the state, through a committee policy, established a total debt limit of 3.2% of personal income and debt service within 8% of revenues.(3) Maryland's outlook is excellent. Financial reserves are healthy, the state has implemented two-thirds of a multi-year income tax reduction, and its economic strength indicates sustained fiscal balance. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. A non-diversified fund may be subject to greater risk of adverse economic or regulatory developments in that state than a fund with broader geographical diversification. 2. This does not indicate Moody's rating for the fund. 3. Source: Moody's Investors Service, State of Maryland, 7/9/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 75 of this report. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.23%. Franklin Maryland Tax-Free Income Fund sought to take advantage of the recent volatility in the municipal bond marketplace by purchasing on the dips in the market. This strategy worked well for the fund as the recent volatility enabled us to invest at higher yields. Most of our purchases were in the new-issue market, as many deals were priced attractively. Recent purchases during the reporting period included Baltimore General Obligation; Maryland State Community Development Authority - Department of Housing and Community Development Single Family Housing Revenue Program; and Maryland State Health and Higher Educational Facilities Authority Revenue for Roland Park Place Project and Anne Arundel Medical Center bonds. One constant in your portfolio's investment strategy is the fund's emphasis on high quality and insured bond issues. As of August 31, 1999, 52.1% of the fund's total long-term investments were in highest-rated AAA securities. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Maryland's new-issue supply from January through August 1999 was down 38% from the same period a year ago. Due to the lack of supply for Maryland issues during the period under review, we did not have the opportunity to book tax losses. We made most of the fund's purchases to invest available funds. However, if more supply becomes available under the recent favorable market conditions, either via the new-issue or secondary market, the fund will attempt to book losses seeking to offset potential capital gains. BOOKING TAX LOSSES: For accounting purposes, a loss from the sale of a security can be kept on the books, with time restrictions, and used in a later accounting period to offset a profit. Such a strategy can help minimize the effect of taxes on profits. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. PORTFOLIO BREAKDOWN Franklin Maryland Tax-Free Income Fund 8/31/99
% OF TOTAL LONG-TERM SECTOR INVESTMENTS - --------------------------------------- Hospital & Health Care 22.4% Housing 19.2% Utilities 17.3% Subject to Government Appropriation 9.5% General Obligation 9.3% Prerefunded 7.1% Transportation 4.9% Other Revenue 4.1% Corporate Backed 3.4% Tax Supported Debt 1.8% Higher Education 1.0%
Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Maryland Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE ------------------------- MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 4.6 cents 4.04 cents April 4.6 cents 4.04 cents May 4.6 cents 4.04 cents June 4.6 cents 4.08 cents July 4.6 cents 4.08 cents August 4.6 cents 4.08 cents - -------------------------------------------------------------------------------- TOTAL 27.6 CENTS 24.36 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. FRANKLIN MARYLAND TAX-FREE INCOME FUND PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.61 $11.05 $11.66
DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.2760 Long-Term Capital Gain $0.0301 TOTAL $0.3061
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.61 $11.14 $11.75
DISTRIBUTIONS (3/1/99 - 8/31/99) ---------------------------------- Dividend Income $0.2436 Long-Term Capital Gain $0.0301 TOTAL $0.2737
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares.
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (10/3/88) - --------------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.61% -0.58% +33.10% +93.24% +107.01% Average Annual Total Return(2) -6.76% -4.80% +4.98% +6.34% +6.47% Distribution Rate(3) 4.78% Taxable Equivalent Distribution Rate(4) 8.58% 30-Day Standardized Yield(5) 4.57% Taxable Equivalent Yield(4) 8.20%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - --------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.86% -1.13% +14.71% +25.53% Average Annual Total Return(2) -4.79% -3.05% +4.34% +5.14% Distribution Rate(3) 4.35% Taxable Equivalent Distribution Rate(4) 7.81% 30-Day Standardized Yield(5) 4.17% Taxable Equivalent Yield(4) 7.49%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Maryland state and local personal income tax bracket of 44.3%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN MISSOURI TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Missouri Tax-free Income Fund Based on Total Long-term Investments 8/31/99 [PIE CHART] AAA - 62.9% AA - 13.4% A - 6.2% BBB - 16.6% Below Investment Grade - 0.9% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin Missouri Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Missouri state personal income taxes through a portfolio consisting primarily of Missouri municipal bonds.(1) STATE UPDATE [GRAPHIC OF MISSOURI] The Show Me State is showing its strength. Profiting from the booming national economy, Missouri's employment and personal income are increasing faster than national rates. For the past three fiscal years, employment has expanded by an average 2.1%, fueling personal income growth by 4.2% in fiscal 1998 and an estimated 5.0% in fiscal 1999.(2) As of June 1999, unemployment stood at just 3.8%, significantly below the national average.(3) Missouri enjoys an economy that is large, diverse and stable, which often shields it from a downturn in any one sector. Manufacturing, trade, services and agriculture are particularly important sectors within the state. Missouri's central location and extensive transportation infrastructure give the state a decided advantage over its neighbors for the trade and distribution of goods. Financially, Missouri's prudent fiscal management is paying big dividends. With a debt per capita of $249, the state has less than half the average national debt. At fiscal year-end 1998, Missouri had a positive general fund balance of $1.17 billion.(2) This combination is enabling the state to focus on improving the quality of life for its citizens. In its fiscal year 2000 budget, Missouri plans to reduce taxes, cut unnecessary expenditures and invest in such high priority projects as education, public safety and job preparation. Based on this positive financial picture, Standard and Poor's, a national credit rating agency, assigns the state its highest rating, AAA.(4) 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Standard and Poor's, CreditWeek Municipal, 6/14/99. 3. Source: Bureau of Labor Statistics, 8/99. You will find a complete listing of the fund's portfolios holdings, including dollar value and number of shares or principal amount, beginning on page 79 of this report. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.5%. During the six months under review, the higher interest-rate environment provided a favorable opportunity for Franklin Missouri Tax-Free Income Fund to sell some lower-yielding bonds at a loss and reinvest the proceeds in higher-yielding bonds. We can use the proceeds from such sales to help offset current or future capital gains, possibly reducing shareholders' tax liabilities. Missouri's $2 billion municipal bond supply for January through August 1999 was fairly light, a 45% decrease from issuance for the same period last year. However, we were still able to find value in a number of deals that came to market, including St. Charles County Public Water Supply District No. 2 Certificates of Participation; Kansas City Municipal Assistance - Leasehold Roe Bartle; University of Missouri Health Facilities Revenue - Health System; and St. Louis County Industrial Development Authority, Multi-Family Housing Revenue - - Lucas Hunt Village Project GNMA bonds. The hospital and health care sector remained the fund's largest category weighting, comprising 29.8% of total long-term investments on August 31, 1999. At the same time, the fund held 62.9% of total long-term investments in highest-rated AAA bonds. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. PORTFOLIO BREAKDOWN Franklin Missouri Tax-free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - -------------------------------------------------------- Hospital & Health Care 29.8% Subject to Government Appropriation 19.1% Prerefunded 11.2% Housing 11.0% Utilities 9.4% Corporate Backed 4.3% Tax Supported Debt 3.9% Higher Education 3.7% Transportation 3.2% Other Revenue 3.0% General Obligation 1.4% 4. This does not indicate Standard and Poor's rating of the fund. 5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Missouri Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ---------------------------- MONTH CLASS A CLASS C - --------------------------------------------------------------------- March 5 cents 4.42 cents April 5 cents 4.42 cents May 5 cents 4.42 cents June 5 cents 4.48 cents July 5 cents 4.48 cents August 5 cents 4.48 cents - --------------------------------------------------------------------- TOTAL 30 CENTS 26.70 CENTS *Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. FRANKLIN MISSOURI TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.67 $11.52 $12.19
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.3000 Long-Term Capital Gain $0.0135 TOTAL $0.3135
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.67 $11.57 $12.24
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2670 Long-Term Capital Gain $0.0135 TOTAL $0.2805
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ---------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.92% -0.88% +32.58% +96.11% +133.51% Average Annual Total Return(2) -7.04% -5.07% +4.89% +6.51% +6.93% Distribution Rate(3) 4.99% Taxable Equivalent Distribution Rate(4) 8.79% 30-Day Standardized Yield(5) 4.61% Taxable Equivalent Yield(4) 8.12%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------------------------------------------------------------------------------------------- Cumulative Total Return(1) -3.18% -1.44% +14.88% +25.07% Average Annual Total Return(2) -5.06% -3.33% +4.38% +5.04% Distribution Rate(3) 4.59% Taxable Equivalent Distribution Rate(4) 8.08% 30-Day Standardized Yield(5) 4.23% Taxable Equivalent Yield(4) 7.45%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Missouri state personal income tax bracket of 43.2%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin North Carolina Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 57.4% AA - 18.5% A - 12.2% BBB - 11.9% *Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin North Carolina Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and North Carolina state personal income taxes through a portfolio consisting primarily of North Carolina municipal bonds.(1) STATE UPDATE [GRAPHIC OF NORTH CAROLINA] North Carolina is rated AAA by Standard & Poor's, a national credit rating agency, for its economic growth coupled with the state's fiscal practices, which have rebuilt its financial position over the past seven years.(2) The state has continued to broaden its textile-, manufacturing- and tobacco-dominated economy into an employment mix relying more strongly on finance, services and trade. North Carolina's unemployment rate was 3.4% in 1998, well below that of the national level. Non-manufacturing growth is expected to average 2.4% through 2000. Sales tax collections were 4.3% in 1998, and income-tax revenues grew more than 12%. Despite an increase in the state's general obligation (GO) debt recently, its debt per capita is a very low $330.(3) North Carolina's outlook is positive. The state's economy is expected to continue expanding, and North Carolina's budgetary discipline and maintenance of strong financial operations, sufficient reserve levels and financial flexibility should allow it to take further advantage of the expected expansion. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. This does not indicate Standard & Poor's rating for the fund. 3. Source: Standard & Poor's, 7/9/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 84 of this report. PORTFOLIO NOTES During the reporting period, many of North Carolina municipal bond issuers enhanced their debt's credit quality by purchasing insurance for their upcoming offerings. The increased competitive environment among the various municipal insurers gave issuers the opportunity to purchase insurance at attractive prices, either for new money projects or to refinance existing debt. The majority of the new purchases were insured. As a result, the portfolio quality remained strong by maintaining 57.4% of the fund's total long-term investments in the highest-rated AAA securities as of August 31, 1999. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Some recent purchases included Appalachian State University Revenue; Johnston County Finance Corporation Installment Payment Revenue - School and Museum Project; and North Carolina Medical Care Commission Health Care Facilities Revenue - Scotland Memorial Hospital Project bonds. North Carolina's municipal bond issuance declined 23% for the first half of the calendar year compared with the same period in 1998. Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.18%. As interest rates continued to climb, there were fewer opportunities for issuers to refund existing debt. In this higher interest-rate environment, the portfolio employed a strategy of booking tax losses. These tax losses can then be carried forward to help offset any current or future taxable capital gains. The fund also sold prerefunded bonds to capture the premium and decrease the portfolio's call exposure throughout the period under review. Looking forward, the fund will maintain its strategy of buying current coupon bonds at a slight discount, seeking to provide shareholders with high, current tax-free income. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. PORTFOLIO BREAKDOWN Franklin North Carolina Tax-free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - --------------------------------------------------- Utilities 23.2% Hospital & Health Care 21.9% Prerefunded 18.1% Housing 11.1% Subject to Government Appropriation 9.0% Higher Education 4.9% Corporate Backed 4.7% Other Revenue 2.6% Tax Supported Debt 2.3% General Obligation 1.9% Transportation 0.3% Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin North Carolina Tax-free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ---------------------------- MONTH CLASS A CLASS C - --------------------------------------------------------------------- March 4.95 cents 4.36 cents April 4.95 cents 4.36 cents May 4.95 cents 4.36 cents June 4.95 cents 4.39 cents July 4.95 cents 4.39 cents August 4.95 cents 4.39 cents - --------------------------------------------------------------------- TOTAL 29.70 CENTS 26.25 CENTS * Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.63 $11.53 $12.16
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.297
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.64 $11.60 $12.24
DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2625
CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ----------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.73% -0.65% +31.59% +90.42% +131.78% Average Annual Total Return(2) -6.87% -4.86% +4.73% +6.19% +6.87% Distribution Rate(3) 4.93% Taxable Equivalent Distribution Rate(4) 8.85% 30-Day Standardized Yield(5) 4.55% Taxable Equivalent Yield(4) 8.17%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------------------------------------------------------------------------------------------- Cumulative Total Return(1) -3.08% -1.28% +14.83% +24.45% Average Annual Total Return(2) -4.96% -3.17% +4.36% +4.92% Distribution Rate(3) 4.52% Taxable Equivalent Distribution Rate(4) 8.11% 30-Day Standardized Yield(5) 4.16% Taxable Equivalent Yield(4) 7.47%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and North Carolina state personal income tax bracket of 44.3%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN TEXAS TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Texas Tax-free Income Fund Based on Long-term Investments 8/31/99 AAA - 53.5% AA - 6.7% A - 4.5% BBB - 35.3% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin Texas Tax-Free Income Fund seeks to provide high, current income exempt from regular federal income tax through a portfolio consisting primarily of Texas municipal bonds.(1) STATE UPDATE [GRAPHIC OF TEXAS] Add the Texas economy to the list of things for which Texans should be proud. The state has one of the nation's strongest economies and it continues to grow. Once overly reliant on the oil and agriculture industries, Texas has now diversified into a trade and service powerhouse. Such diversification has been so successful that the state barely felt a ripple from the oil price declines in 1997 and 1998. The high-technology sector in particular, which includes such leading companies as Dell and Texas Instruments, is seeing substantial growth. The state's financial management has been strong as well. For the past few years, Texas has maintained a cash surplus, and ended the 1998 fiscal year with a surplus of $3.3 billion. Its debt burden still remains relatively low with $296 net tax-supported debt per capita compared with $505 nationally, ranking 36th lowest in the nation.(2) Texas does face some challenges on the horizon. It is a fast-growing state, now the country's second most populous, which pressures the state to provide basic services such as education, health care and criminal justice. In addition, Internet and e-commerce growth also may pose a threat to the state's fiscal health. Texas is heavily dependent on sales taxes for its revenues, and at this time, there is no sales tax on items purchased in the electronic marketplace. The rapid increase of the Internet may take away sales from the traditional retailers, which could lower the state's sales tax collection.(3) 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Moody's Investors Service, State of Texas, 7/99. 3. Source: Moody's Investors Service, State of Texas, 6/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 89 of this report. Moody's, a national credit rating agency, assigned Texas an Aa1 rating, as a result of its strong economy.(4) Looking forward, the positive trends ought to remain in place, and the economy should continue to outpace the nation's. PORTFOLIO NOTES Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.17%. The rise in interest rates created an excellent opportunity for Franklin Texas Tax-Free Income Fund to book tax losses and reinvest the proceeds at significantly higher yields. These losses can be carried forward to help offset current or future capital gains and reduce our shareholders' tax liabilities. In the process, we sold Socorro Independent School District General Obligation (GO); Waxahachie Community Development Corp. Sales Tax Revenue; Gulf Coast Water Authority Texas Water Systems Contract Revenue - La Marque Project; and Port Corpus Christi Industrial Development Corp. Revenue - Valero bonds during the reporting period. Our purchases during the six-month reporting period included University of Texas University Revenues - Financing System; Brownsville Combined Tax and Revenue Certificates of Obligation; Denton County GO - Permanent Improvement; Decatur Hospital Authority Hospital Revenue; Houston Higher Education Finance Corp. Higher Education Revenue - Rice University Project; and Harris County Health Facilities Development Corp. Revenue - Christus Health bonds. These purchases maintained diversification in a broad range of sectors, helping reduce the fund's exposure to risk and volatility that may affect any one sector. In addition, the fund held 53.5% of total long-term investments in AAA quality securities as of August 31, 1999, reflecting our holdings' fundamentally high quality. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. PORTFOLIO BREAKDOWN Franklin Texas Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ----------------------------------------- Hospital & Health Care 24.6% Utilities 21.2% Corporate Backed 12.7% Prerefunded 11.0% General Obligation 8.4% Higher Education 7.4% Transportation 6.8% Housing 4.5% Tax Supported Debt 2.0% Other Revenue 1.4% 4. This does not indicate Moody's rating of the fund. 5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. We continued to buy municipal securities with current coupons at a slight discount, seeking to maximize the tax-free income distributed to shareholders. As in previous reporting periods, the fund actively managed its exposure to prerefunded bonds. They comprised only 11% of total long-term investments on August 31, 1999. As a result, this disciplined investment approach helped protect the fund's share value and maintain a competitive yield. We closely monitor the supply of Texas tax-exempt municipal bonds. From January through August 1999, the state issued more than $11.8 billion, a 2.4% increase from the same period in 1998. Going forward, Texas' growing population will continue to create sustained need for spending on education, transportation and water development, resulting in the need for further borrowing. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Texas Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE ---------------------------- MONTH CLASS A CLASS C - ---------------------------------------------------------------------------------- March 4.85 cents 4.28 cents April 4.85 cents 4.28 cents May 4.85 cents 4.28 cents June 4.80 cents 4.24 cents July 4.80 cents 4.24 cents August 4.80 cents 4.24 cents - ---------------------------------------------------------------------------------- TOTAL 28.95 CENTS 25.56 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.59 $10.83 $11.42 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2895 Long-Term Capital Gain $0.0397 TOTAL $0.3292
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.60 $10.97 $11.57 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2556 Long-Term Capital Gain $0.0397 TOTAL $0.2953
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ---------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.28% -0.53% +31.58% +93.52% +135.93% Average Annual Total Return(2) -6.46% -4.73% +4.74% +6.36% +7.03% Distribution Rate(3) 5.09% Taxable Equivalent Distribution Rate(4) 8.43% 30-Day Standardized Yield(5) 4.59% Taxable Equivalent Yield(4) 7.60%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.63% -1.09% +14.62% +25.68% Average Annual Total Return(2) -4.57% -3.02% +4.29% +5.18% Distribution Rate(3) 4.71% Taxable Equivalent Distribution Rate(4) 7.80% 30-Day Standardized Yield(5) 4.20% Taxable Equivalent Yield(4) 6.95%
FRANKLIN TEXAS TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum federal personal income tax bracket of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN VIRGINIA TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Virginia Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 AAA 57.5% AA 21.0% A 9.4% BBB 11.9% Below Investment Grade 0.2% *Quality breakdown may include internal ratings for bonds not rated by a national rating agency. - ------------------------------------------------------------------------------- Your Fund's Goal: Franklin Virginia Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Virginia state personal income taxes through a portfolio consisting primarily of Virginia municipal bonds.(1) - ------------------------------------------------------------------------------- COMMONWEALTH UPDATE [GRAPHIC OF VIRGINIA] Virginia is rated a strong AAA by Standard & Poor's, a national credit rating agency, for its healthy and diversified economy, low unemployment rates, above-average income levels, prudent financial management and low per capita debt burden.(2) Employment growth in high-technology and business services have offset job losses in manufacturing and federal government employment. The service sector, accounting for about 30% of the commonwealth's employment, should continue to lead job growth. Virginia's per capita income, $27,364 in 1998, is the highest of the southern states and slightly above the $26,397 national average. Personal income is expected to grow approximately 6% in each of the next three years. The Secretary of Finance and the Department of Planning and Budget monitor revenue collections and expenditures, and have done a skillful job adjusting their financial practices for economic trends. The commonwealth has an exceptionally low $190 per capita debt.(3) Virginia's outlook is positive. The commonwealth's steady economic growth coupled with its strong financial management practices should allow Virginia's favorable economic situation to continue. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. This does not indicate Standard & Poor's rating for the fund. 3. Source: Standard & Poor's, 7/9/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 92 of this report. PORTFOLIO NOTES During the reporting period, many Virginia municipal bond issuers enhanced their debt's credit quality by purchasing insurance for their upcoming offerings. The increased competitive environment among the various municipal insurers gave issuers the opportunity to purchase insurance at attractive prices, either for new money projects or to refinance existing debt. The majority of the new purchases were insured, thus enhancing the portfolio quality. Accordingly, our AAA-rated portfolio holdings increased from 55.1% to 57.5% of total long-term investments during the period under review. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Some recent purchases included Chesapeake Toll Road Revenue - Expressway; Newport News Redevelopment and Housing Authority Revenue; Virginia State Housing Development Authority - Multi-Family Housing; and Prince William County Service Authority Water and Sewer Systems Revenue bonds. Generally rising interest rates during the six-month period under review presented challenges for the municipal bond market, as bond prices fall when interest rates rise. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.30%. Virginia's municipal bond issuance declined significantly, down 39% for the first eight months of the calendar year compared with the same period a year ago. As interest rates continued to climb, there were fewer opportunities for issuers to refund existing debt. In this higher interest-rate environment, the portfolio employed a strategy of booking tax losses. These tax losses can then be carried forward to help offset any current or future taxable capital gains, possibly lowering shareholders' tax liabilities. The fund also sold prerefunded bonds to capture the premium and decrease the portfolio's call exposure throughout the period under review. Looking forward, the fund will maintain its strategy of buying current coupon bonds at a slight discount to provide shareholders with high, current tax-free income. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. PORTFOLIO BREAKDOWN Franklin Virginia Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ----------------------------------------------------- Utilities 18.6% Hospital & Health Care 16.1% Prerefunded 14.5% Transportation 13.0% Corporate Backed 10.6% Housing 10.6% Other Revenue 6.7% Higher Education 5.4% General Obligation 2.3% Subject to Government Appropriation 1.3% Tax Supported Debt 0.9% Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999, the end of the reporting period. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Virginia Tax-Free Income Fund 3/1/99 - 8/31/99
DIVIDEND PER SHARE ---------------------------- MONTH CLASS A CLASS C - ---------------------------------------------------------------------------------- March 4.85 cents 4.29 cents April 4.85 cents 4.29 cents May 4.85 cents 4.29 cents June 4.85 cents 4.32 cents July 4.85 cents 4.32 cents August 4.85 cents 4.32 cents - ---------------------------------------------------------------------------------- TOTAL 29.10 CENTS 25.83 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.63 $11.25 $11.88 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.291
CLASS C CHANGE 8/31/99 2/28/99 - --------------------------------------------------------------------------------- Net Asset Value -$0.62 $11.33 $11.95 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2583
PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ---------------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.85% -0.95% +31.17% +92.98% +132.74% Average Annual Total Return(2) -7.00% -5.16% +4.67% +6.34% +6.90% Distribution Rate(3) 4.95% Taxable Equivalent Distribution Rate(4) 8.70% 30-Day Standardized Yield(5) 4.55% Taxable Equivalent Yield(4) 7.99%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------------------------------------------------------------------------------------------- Cumulative Total Return(1) -3.02% -1.42% +14.07% +24.02% Average Annual Total Return(2) -4.93% -3.33% +4.13% +4.86% Distribution Rate(3) 4.54% Taxable Equivalent Distribution Rate(4) 7.98% 30-Day Standardized Yield(5) 4.15% Taxable Equivalent Yield(4) 7.29%
FRANKLIN VIRGINIA TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Virginia state personal income tax bracket of 43.1%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. MUNICIPAL BOND RATINGS MOODY'S Aaa: Best quality. They carry the smallest degree of investment risk and generally are referred to as "gilt-edged." Interest payments are protected by a large or exceptionally stable margin, and principal is secure. Although the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: High quality by all standards. Together with the Aaa group, they comprise what generally are known as high-grade bonds. Aa bonds are rated lower than Aaa because margins of protection may not be as large, fluctuation of protective elements may be of greater amplitude, or there may be other elements which make the long-term risks appear larger. A: Possess many favorable investment attributes and are considered upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Ba: Contain speculative elements. Often the protection of interest and principal payments may be very moderate and, thereby, not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Poor standing. Such issues may be in default, or elements of danger with respect to principal or interest may be present. Ca: Obligations that are highly speculative. Such issues are often in default or have other marked shortcomings. C: Lowest-rated class of bonds. Issues rated C can be regarded as having extremely poor prospects of ever attaining any real investment standing. S&P(R) AAA: The highest rating assigned by S&P to a debt obligation and indicates the ultimate degree of protection as to principal and interest. AA: Also qualify as high-grade obligations, and, in the majority of instances, differ from AAA issues only in a small degree. A: Generally regarded as upper medium-grade. They have considerable investment strength but are not entirely free from adverse effects of changes in economic and trade conditions. Interest and principal are regarded as safe. BBB: Regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such bonds likely will have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C: Reserved for income bonds on which no interest is being paid. D: Debt rated "D" is in default and payment of interest and/or repayment of principal is in arrears. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN ALABAMA TAX-FREE INCOME FUND
Six Months Ended Year Ended February 28, August 31, 1999 ------------------------------------------------------------- Class A (unaudited)*** 1999 1998 1997 1996(1) 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Per share operating performance (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.68 $ 11.98 $ 11.73 $ 11.73 $ 11.31 $ 11.80 ------------------------------------------------------------------------------ Income from investment operations: Net investment income ........................ .30 .62 .64 .65 .66 .66 Net realized and unrealized gains (losses) ... (.56) (.25) .36 .01 .42 (.50) ------------------------------------------------------------------------------ Total from investment operations .............. (.26) .37 1.00 .66 1.08 .16 ------------------------------------------------------------------------------ Less distributions from: Net investment income ........................ (.30)(3) (.62)(2) (.65) (.66) (.66) (.65) Net realized gains ........................... (.01) (.05) (.10) -- -- -- ------------------------------------------------------------------------------ Total distributions ........................... (.31) (.67) (.75) (.66) (.66) (.65) ------------------------------------------------------------------------------ Net asset value, end of period ................ $ 11.11 $ 11.68 $ 11.98 $ 11.73 $ 11.73 $ 11.31 ============================================================================== Total return* ................................. (2.24%) 3.21% 8.79% 5.84% 9.74% 1.54% Ratios/supplemental data Net assets, end of period (000's) ............. $ 225,818 $ 238,670 $ 216,982 $ 193,466 $ 185,981 $ 170,051 Ratios to average net assets: Expenses ..................................... .72%** .71% .72% .71% .72% .72% Net investment income ........................ 5.30%** 5.23% 5.39% 5.62% 5.69% 5.88% Portfolio turnover rate ....................... 12.37% 8.67% 10.44% 15.47% 12.39% 19.85% Class C - ------------------------------------------------------------------------------------------------------------------------------------ Per share operating performance (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.74 $ 12.04 $ 11.78 $ 11.77 $ 11.36 ------------------------------------------------------------------ Income from investment operations: Net investment income ........................ .27 .56 .58 .59 .49 Net realized and unrealized gains (losses) ... (.56) (.25) .36 .01 .41 ------------------------------------------------------------------ Total from investment operations .............. (.29) .31 .94 .60 .90 ------------------------------------------------------------------ Less distributions from: Net investment income ........................ (.27)(3) (.56)(2) (.58) (.59) (.49) Net realized gains ........................... (.01) (.05) (.10) -- -- ------------------------------------------------------------------ Total distributions ........................... (.28) (.61) (.68) (.59) (.49) ------------------------------------------------------------------ Net asset value, end of period ................ $ 11.17 $ 11.74 $ 12.04 $ 11.78 $ 11.77 ================================================================== Total return* ................................. (2.52%) 2.62% 8.23% 5.28% 8.01% Ratios/supplemental data Net assets, end of period (000's) ............. $ 16,250 $ 14,895 $ 9,469 $ 5,683 $ 1,662 Ratios to average net assets: Expenses ..................................... 1.26%** 1.27% 1.29% 1.28% 1.29%** Net investment income ........................ 4.74%** 4.67% 4.80% 5.05% 5.09%** Portfolio turnover rate ....................... 12.37% 8.67% 10.44% 15.47% 12.39%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.006 and $.004 for Class A and C, respectively. (3) Includes distributions in excess of net investment income in the amount of $.002. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN ALABAMA TAX-FREE INCOME FUND AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------- INVESTMENTS 98.6% BONDS 97.9% Alabama Building Renovation Financing Authority Revenue, 7.45%, 9/01/11 ...................... $ 1,500,000 $ 1,572,465 Alabama HFA, SFMR, GNMA Secured, Series A, 7.50%, 10/01/10 ................................................... 490,000 503,955 Series A-1, GNMA Secured, FNMA Insured, 6.50%, 4/01/17 .................................... 3,440,000 3,539,347 Series A-2, GNMA Secured, FNMA Insured, 6.80%, 4/01/25 .................................... 1,215,000 1,259,773 Series C, GNMA Secured, 7.45%, 10/01/21 ................................................... 285,000 290,900 Series C-2, GNMA Secured, 7.75%, 4/01/22 .................................................. 660,000 680,117 Series D-2, GNMA Secured, FNMA Insured, 5.75%, 10/01/23 ................................... 1,970,000 1,947,128 Alabama State Docks Department Docks Facilities Revenue, MBIA Insured, 6.30%, 10/01/21 ....... 4,500,000 4,728,060 Alabama State IDA, Solid Waste Disposal Revenue, Pine City Fiber Co., 6.45%, 12/01/23 ........ 2,000,000 2,006,720 Alabama Water Pollution Control Authority Revolving Fund Loan, Series B, Pre-Refunded, 7.75%, 8/15/12 ................................................................. 2,885,000 2,992,149 Alabaster Water and Gas Board Revenue, AMBAC Insured, 6.35%, 9/01/14 ......................... 2,215,000 2,372,199 Alexander City Utility Revenue, wts., Refunding, FSA Insured, 6.20%, 8/15/10 ................. 2,000,000 2,134,260 Athens Electric Revenue, wts., MBIA Insured, 6.00%, 6/01/25 .................................. 1,000,000 1,033,630 Athens Water and Sewer Revenue, wts., AMBAC Insured, 6.10%, 8/01/18........................... 1,500,000 1,565,520 Auburn Governmental Utility Services Corp. Wastewater Treatment Revenue, Merscot-Auburn LP Project, FGIC Insured, 7.30%, 1/01/12 ...................................... 1,390,000 1,426,349 Auburn University General Fee Revenue, Refunding, 7.00%, 6/01/11 ............................. 2,000,000 2,110,440 Baldwin County Eastern Shore Health Care Authority Hospital Revenue, 5.75%, 4/01/27 .......... 1,000,000 919,880 Bessemer Medical Clinic Board Revenue, Bessemer Carraway Center, Refunding, Series A, MBIA Insured, 7.25%, 4/01/15 ................................................................. 1,000,000 1,032,910 Birmingham Airport Authority Revenue, Series A, AMBAC Insured, 7.375%, 7/01/10 ............... 500,000 515,470 Birmingham Baptist Medical Center Special Care Facilities Financing Authority Revenue, Baptist Health System Inc., Refunding, MBIA Insured, 5.875%, 11/15/19 .......................................................................... 3,500,000 3,266,655 7.00%, 1/01/21 ............................................................................ 1,870,000 1,942,500 5.875%, 11/15/26 .......................................................................... 2,000,000 1,836,460 Birmingham GO, Refunding, Series B, 6.25%, 4/01/16 ........................................... 1,000,000 1,048,930 Birmingham Southern College Private Educational Building Authority Tuition, Refunding, 5.35%, 12/01/19 .......................................................... 1,000,000 932,060 Birmingham Special Care Facilities Financing Authority Revenue, Health Care, Medical Center East, MBIA Insured, 7.00%, 7/01/12 ............................ 1,200,000 1,268,652 Medical Center East, Refunding, MBIA Insured, 7.25%, 7/01/15 .............................. 2,000,000 2,016,420 Birmingham Water and Sewer Revenue, wts., Series A, 4.75%, 1/01/29 ........................... 1,860,000 1,549,696 Birmingham-Jefferson Civic Center Authority, Special Tax, Capital Outlay, 7.40%, 1/01/08 ............................................................................ 285,000 290,569 7.25%, 1/01/12 ............................................................................ 640,000 645,171 Camden IDB, PCR, Facilities Revenue, MacMillian Bloedel Project, Refunding, Series A, 7.75%, 5/01/09 ..................................................................... 3,250,000 3,398,980 Citronelle IDB, PCR, Stauffer Chemical Project, Series 1982, 8.00%, 12/01/12 ................. 500,000 519,135 Coffee County PBA, Building Revenue, wts., FSA Insured, 6.10%, 9/01/16 ....................... 1,000,000 1,047,180 Colbert County Health Care Authority, Helen Keller Hospital, Refunding, 8.75%, 6/01/09 ....... 1,750,000 1,841,368 Columbia IDB, PCR, Alabama Power Co. Project, Refunding, AMBAC Insured, 6.50%, 9/01/23 ....... 4,500,000 4,590,000 Courtland IDB, Environmental Improvement Revenue, Champion International Corp. Project, Refunding, 6.40%, 11/01/26 ................................................................ 2,000,000 2,033,020 Solid Waste Disposal Revenue, Champion International Corp. Project, 7.75%, 1/01/20 ........ 505,000 519,458 Solid Waste Disposal Revenue, Champion International Corp. Project, Series A, 6.50%, 9/01/25 5,000,000 5,106,050 Courtland IDBR, Champion International Corp., Refunding, Series A, 7.20%, 12/01/13 ........... 4,000,000 4,297,600 Demopolis HDC, MFHR, Refunding, Series A, FSA Insured, 7.625%, 8/01/19 ....................... 1,400,000 1,433,586 Fairfield GO, wts., AMBAC Insured, Pre-Refunded, 6.30%, 6/01/22 .............................. 3,000,000 3,166,020 Fairfield IDB, Environmental Improvement Revenue, USX Corp. Project, Refunding, 5.45%, 9/01/14 ............................................................................ 2,000,000 1,896,000 Series A, 6.70%, 12/01/24 ................................................................. 3,500,000 3,655,505 Florence Electric Revenue, wts., FSA Insured, 5.25%, 6/01/19 ................................. 2,915,000 2,777,062 Gadsden HDC, MFR, Refunding, Series A, 7.00%, 1/01/22 ........................................ 1,565,000 1,590,697 Guam Airport Authority Revenue, Series A, 6.50%, 10/01/23 .................................... 1,000,000 1,057,330 Guam Power Authority Revenue, Series A, 5.125%, 10/01/29 ..................................... 1,000,000 890,160 Gulf Shores GO, Refunding, wts., AMBAC Insured, 6.00%, 9/01/21 ............................... 1,935,000 1,993,340 Helena Utilities Board Water and Sewer Revenue, MBIA Insured, 5.75%, 9/01/25 ................. 6,000,000 6,058,680 Houston County Health Care Authority Revenue, Southeast Medical Center, MBIA Insured, 6.125%, 10/01/12 ............................................................... 2,070,000 2,163,047 Huntsville Solid Waste Disposal Authority and Resource Recovery Revenue, FGIC Insured, 7.00%, 10/01/14 ................................................................ 230,000 239,736 Jackson IDBR, Solid Waste, Boise Cascade, Refunding, 5.70%, 12/01/27 ......................... 4,150,000 3,787,290
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN ALABAMA TAX-FREE INCOME FUND AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) BONDS (CONT.) Jasper County Waterworks and Sewer Board Water and Sewer Revenue, AMBAC Insured, 6.15%, 6/01/14 ............................................... $ 1,000,000 $ 1,062,460 Jefferson County Sewer Revenue, Capital Improvement wts., Series A, FGIC Insured, 5.375%, 2/01/36 ......................... 5,000,000 4,736,850 wts., ETM, 7.50%, 9/01/13 ................................................................. 200,000 205,204 wts., Refunding, Series A, FGIC Insured, 5.375%, 2/01/27 .................................. 4,500,000 4,322,250 wts., Series D, FGIC Insured, 5.75%, 2/01/27 .............................................. 6,000,000 5,926,260 Lauderdale County and Florence Healthcare Authority Revenue GO, Coffee Health Group, Series A, MBIA Insured, 5.375%, 7/01/29 ...................................... 5,000,000 4,672,950 LCM Housing Assistance Corp. Project MFR, Section 8 Assisted Project, Refunding, Series A, 7.875%, 1/01/22 ....................................................... 1,255,000 1,276,762 Lee County GO, wts., AMBAC Insured, 5.50%, 2/01/21 ........................................... 2,250,000 2,208,263 Macon County Limited Obligation Revenue, School wts., AMBAC Insured, 5.10%, 2/01/24 .......... 1,200,000 1,096,812 Madison GO, wts., MBIA Insured, 6.00%, 4/01/23 .............................................................. 2,000,000 2,051,220 Series B, MBIA Insured, 6.25%, 2/01/15 .................................................... 1,560,000 1,662,632 Marshall County Health Care Authority Hospital Revenue, Boaz-Albertville Medical Center, Refunding, 6.50%, 1/01/18 ................................ 10,810,000 11,141,543 Guntersville-Arab Medical Center, Refunding, 7.60%, 10/01/07 .............................. 2,530,000 2,705,582 Mcintosh IDB, Environmental Improvement Revenue, CIBA Specialty, Refunding, Series C, 5.375%, 6/01/28 ....................................................... 3,000,000 2,790,750 Mobile Airport Authority Revenue, Mae Project, 7.375%, 11/01/12 .............................. 1,000,000 1,045,370 Mobile Commission of Water and Sewer Revenue, Refunding, 6.50%, 1/01/09 ...................... 1,500,000 1,579,890 Mobile Housing Assistance Corp. MFHR, Refunding, Series A, FSA Insured, 7.625%, 2/01/21 ...... 1,340,000 1,366,385 Mobile IDB, Solid Waste Disposal Revenue, Mobile Energy Service Co. Project, Refunding, 6.95%, 1/01/20 ......................................................... 8,000,000 4,240,000 Montgomery Medical Clinic Board Health Care Facilities Revenue, Jackson Hospital and Clinic, Refunding, AMBAC Insured, 6.00%, 3/01/26 .............................. 6,000,000 6,197,280 Morgan County Decatur Health Care Authority Hospital Revenue, Decatur General Hospital, Refunding, Connie Lee Insured, 6.375%, 3/01/24 ................................... 5,750,000 6,018,468 Moulton Waterworks Board Water Revenue, Series A, 6.30%, 1/01/18 ............................. 1,500,000 1,505,880 Muscle Shoals GO, Refunding, wts., MBIA Insured, 5.80%, 8/01/16 ............................................................................ 1,725,000 1,755,895 5.90%, 8/01/25 ............................................................................ 7,000,000 7,096,740 Oneonta Utilities Board Utility Revenue, FSA Insured, 6.90%, 11/01/24 .............................................................. 230,000 250,679 FSA Insured, Pre-Refunded, 6.90%, 11/01/24 ................................................ 4,000,000 4,504,960 MBIA Insured, 5.50%, 11/01/23 ............................................................. 3,820,000 3,724,997 Perdido Bay Water Sewer and Fire Protection District Water Revenue, Refunding, FSA Insured, 5.375%, 11/01/22 .............................................................. 1,085,000 1,049,347 Phenix County IDB, Environmental Improvement Revenue, Mead Coated Board Project, Refunding, Series A, 5.30%, 4/01/27 ............................................... 8,300,000 7,358,282 Piedmont IDBR, Springs Industrial Project, 8.25%, 9/01/10 .................................... 780,000 816,808 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series R, 7.15%, 7/01/00 ........................................................ 600,000 616,134 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.90%, 7/01/07 ................................................................... 5,000 5,056 Puerto Rico Commonwealth Urban Renewal and Housing Corp. Commonwealth Appropriation, Refunding, 7.875%, 10/01/04 ................................................. 300,000 306,714 Puerto Rico Electric Power Authority Revenue, Series DD, 5.00%, 7/01/28 ...................... 3,000,000 2,669,400 Puerto Rico Public Finance Corp. Commonwealth Appropriation, Series A, 5.00%, 6/01/26 ........ 4,000,000 3,572,480 Russellville GO, wts., Refunding, MBIA Insured, 5.75%, 12/01/26 .............................. 2,500,000 2,510,425 Tuscaloosa County Board Education Capital Outlay, wts., Series A, AMBAC Insured, 5.50%, 2/01/27 .................................................................... 2,375,000 2,309,379 Tuscaloosa, wts., AMBAC Insured, 6.75%, 7/01/20 .............................................. 4,925,000 5,118,848 University of North Alabama Revenue, General Fee, Series A, FSA Insured, 5.375%, 11/01/17 .... 4,995,000 4,878,617 Valley Special Care Facilities Financing Authority Revenue, Lanier Memorial Hospital, Series A, 5.65%, 11/01/22 ........................................................ 3,465,000 3,176,400 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/13 .................................................................................. 1,700,000 1,654,491 10/01/22 .................................................................................. 2,300,000 2,184,701 Warrior River Water Authority Water Revenue, FSA Insured, 5.40%, 8/01/29 ............................................................................ 4,250,000 4,056,029 5.50%, 8/01/34 ............................................................................ 4,735,000 4,543,563 Wilsonville IDB, PCR, Southern Electric Generating System, Refunding, Series C, MBIA Insured, 6.75%, 2/01/15 ................................................................. 3,500,000 3,653,894 ------------ TOTAL BONDS (COST $238,687,909) .............................................................. 237,116,279 ------------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN ALABAMA TAX-FREE INCOME FUND AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) ZERO COUPON BONDS .7% Alexander City Capital Appreciation, wts., Insured, 5/01/23 ................................................................................... $ 1,790,000 $ 436,903 5/01/24 ................................................................................... 1,790,000 416,569 5/01/25 ................................................................................... 1,790,000 394,623 5/01/26 ................................................................................... 1,790,000 364,426 ------------ TOTAL ZERO COUPON BONDS (COST $1,727,618) .................................................... 1,612,521 ------------ TOTAL INVESTMENTS (COST $240,415,527) 98.6% .................................................. 238,728,800 OTHER ASSETS, LESS LIABILITIES 1.4% .......................................................... 3,339,178 ------------ NET ASSETS 100.0% ............................................................................ $242,067,978 ============
See glossary of terms on page 96. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN FLORIDA TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $11.91 11.87 $11.59 $11.69 $11.35 $11.77 ------ ----- ------ ------ ------ ------ Income from investment operations: Net investment income ........................ .31 .62 .64 .67 .69 .69 Net realized and unrealized gains (losses) ... (.56) .05 .30 (.08) .34 (.44) ------ ----- ------ ------ ------ ------ Total from investment operations .............. (.25) .67 .94 .59 1.03 .25 ------ ----- ------ ------ ------ ------ Less distributions from: Net investment income ........................ (.31)(3) (.62)(2) (.65) (.69) (.69) (.67) Net realized gains ........................... -- (4) (.01) (.01) -- -- -- ------ ----- ------ ------ ------ ------ Total distributions ........................... (.31) (.63) (.66) (.69) (.69) (.67) ------ ----- ------ ------ ------ ------ Net asset value, end of period ................ $11.35 $11.91 $11.87 $11.59 $11.69 $11.35 ====== ====== ====== ====== ====== ====== Total return* ................................. (2.16%) 5.75% 8.37% 5.20% 9.28% 2.36%
RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) $1,663,397 $1,785,720 $1,650,068 $1,458,087 $1,353,541 $1,265,018 Ratios to average net assets: Expenses ....................... .62%** .61% .61% .60% .60% .59% Net investment income .......... 5.22%** 5.19% 5.45% 5.78% 5.93% 6.15% Portfolio turnover rate ......... 12.12% 7.66% 5.60% 12.00% 11.78% 14.34%
CLASS C - ----------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ...... $12.01 $11.96 $11.67 $11.76 $11.37 ------ ------ ------ ------ ------ Income from investment operations: Net investment income .................... .27 .55 .60 .60 .52 Net realized and unrealized gains (losses) (.57) .06 .29 (.07) .38 ------ ------ ------ ------ ------ Total from investment operations .......... (.30) .61 .89 .53 .90 ------ ------ ------ ------ ------ Less distributions from: Net investment income .................... (.27) (.55)(2) (.59) (.62) (.51) Net realized gains ....................... --(4) (.01) (.01) -- -- ------ ------ ------ ------ ------ Total distributions ....................... (.27) (.56) (.60) (.62) (.51) ------ ------ ------ ------ ------ Net asset value, end of period ............ $11.44 $12.01 $11.96 $11.67 $11.76 ====== ====== ====== ====== ====== Total return* ............................. (2.51%) 5.21% 7.80% 4.65% 8.05%
RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) $ 82,528 $ 82,596 $ 56,027 $ 23,556 $ 7,644 Ratios to average net assets: Expenses ....................... 1.18%** 1.17% 1.17% 1.17% 1.18%** Net investment income .......... 4.70%** 4.63% 4.88% 5.17% 5.33%** Portfolio turnover rate ......... 12.12% 7.66% 5.60% 12.00% 11.78%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.0005 and $.0004 for Class A and C, respectively. (3) Includes distributions in excess of net investment income in the amount of $.001. (4) Includes distributions of net realized gains in the amount of $.001. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 101.1% BONDS 96.5% Alachua County Health Facilities Authority Revenue, Santa Fe Health Care Facilities Project, Pre-Refunded, 7.60%, 11/15/13 ............. $ 6,705,000 $ 7,114,810 Shands Teaching Hospital, Series A, MBIA Insured, 5.80%, 12/01/26 .................. 12,000,000 12,127,080 Alachua County Public Improvement Revenue, Refunding, FSA Insured, 5.375%, 8/01/17 .. 5,755,000 5,654,115 Atlantic Beach Utilities Systems Revenue, MBIA Insured, 5.50%, 10/01/25 ............. 2,000,000 1,978,060 Bay County Hospital System Revenue, Bay Medical Center Project, Pre-Refunded, 8.00%, 10/01/12 ........................................................................... 11,205,000 13,101,110 Bay County Resource Recovery Revenue, Series A, MBIA Insured, Pre-Refunded, 6.60%, 7/01/11 ............................... 3,710,000 4,003,535 Series B, MBIA Insured, Pre-Refunded, 6.60%, 7/01/12 ............................... 18,150,000 19,586,028 Bay County Water System Revenue, Refunding, AMBAC Insured, 6.50%, 9/01/07 ..................................................................... 525,000 562,380 6.60%, 9/01/11 ..................................................................... 675,000 723,161 Bay Medical Center Hospital Revenue, Bay Medical Center Project, Refunding, AMBAC Insured, 5.60%, 10/01/19 ........................................................... 13,130,000 13,147,857 Boynton Beach Public Service Tax Revenue, MBIA Insured, Pre-Refunded, 7.50%, 11/01/10 4,000,000 4,178,320 Brevard County Health Facilities Authority Revenue, Wuesthoff Memorial Hospital, Series B, Pre-Refunded, 7.20%, 4/01/13 ............................................. 5,000,000 5,430,650 Brevard County HFA, SFMR, Refunding, Series B, FSA Insured, 7.00%, 3/01/13 .......... 835,000 868,350 Brevard County School Board COP, Refunding, Series A, AMBAC Insured, 5.40%, 7/01/11 . 4,415,000 4,499,768 Broward County Educational Facilities Authority Revenue, Nova Southeastern University Project, Refunding, Connie Lee Insured, 6.125%, 4/01/17 ............................ 2,250,000 2,365,853 Broward County HFA, MFHR, Bridgewater Place Apartments Project, Series A, 5.45%, 10/01/34 .............. 3,000,000 2,775,840 MFHR, Cross Keys Apartments Project, Series A, 5.80%, 10/01/33 ..................... 2,000,000 1,919,740 MFHR, Cross Keys Apartments Project, Series A, 5.85%, 4/01/39 ...................... 5,895,000 5,692,507 MFHR, Stirling Apartments Phase II, Series A, 5.35%, 10/01/29 ...................... 1,000,000 928,240 MFHR, Stirling Apartments Phase II, Series A, 5.40%, 4/01/39 ....................... 2,000,000 1,844,520 SFMR, Refunding, Series B, GNMA Secured, FNMA Insured, 5.40%, 4/01/29 .............. 4,000,000 3,753,320 Broward County HFAR, Nursing Home, Refunding, 7.40%, 8/15/10 ............................................ 2,080,000 2,174,910 Nursing Home, Refunding, 7.50%, 8/15/20 ............................................ 1,475,000 1,565,757 Series B, GNMA Secured, 7.55%, 3/01/15 ............................................. 2,710,000 2,782,520 Series C, GNMA Secured, Pre-Refunded, 8.00%, 3/01/21 ............................... 770,000 793,100 Series D, GNMA Secured, 6.90%, 6/01/09 ............................................. 250,000 260,668 Series D, GNMA Secured, 7.375%, 6/01/21 ............................................ 670,000 699,715 Broward County Professional Sports Facilities Tax Revenue, Civic Arena Project, Series A, MBIA Insured, 5.75%, 9/01/21 .................................................................... 5,000,000 5,038,200 5.625%, 9/01/28 ................................................................... 13,745,000 13,766,855 Broward County Resource Recovery Revenue, Broward Waste Energy Co., LP, North Project, Series 1984, 7.95%, 12/01/08 .......... 5,580,000 5,789,752 SES Waste Energy Co., LP, South Project, 7.95%, 12/01/08 ........................... 10,140,000 10,521,163 Broward County School Board COP, Series C, AMBAC Insured, 5.375%, 7/01/17 ........... 10,000,000 9,824,900 Cape Canaveral Hospital District Revenue COP, AMBAC Insured, 6.875%, 1/01/21 ..................................................... 1,500,000 1,582,170 Refunding, 5.25%, 1/01/28 .......................................................... 3,500,000 3,054,310 Celebration CDD, Special Assessment, MBIA Insured, 6.00%, 5/01/10 ....................................................... 3,875,000 4,078,011 MBIA Insured, 6.10%, 5/01/16 ....................................................... 2,815,000 2,941,844 Series A, MBIA Insured, 5.50%, 5/01/18 ............................................. 2,000,000 1,986,000 Charlotte County Utilities Revenue, Refunding, Series A, FGIC Insured, 5.625%, 10/01/21 ........................................................................... 3,000,000 2,997,960 Citrus County PCR, Florida Power Corp., Crystal River, Refunding, Series A, 6.625%, 1/01/27 .......................................................... 11,100,000 11,721,378 Series B, 6.35%, 2/01/22 ........................................................... 20,400,000 21,563,820 Cityplace CDD Revenue, Capital Improvement, MBIA Insured, 5.00%, 5/01/22 ............ 8,500,000 7,808,270 Clay County HFAR, SFM, Multi County, GNMA Secured, 5.30%, 10/01/29 ........................................ 4,710,000 4,414,542 Multi County, GNMA Secured, 5.45%, 4/01/31 ......................................... 1,775,000 1,690,333 Series A, GNMA Secured, 7.80%, 6/01/22 ............................................. 2,790,000 2,898,643 Series A, GNMA Secured, 7.45%, 9/01/23 ............................................. 1,310,000 1,353,702
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Clearwater MFR, Rental Housing, Drew Gardens Projects, Refunding, Series A, FHA Insured, 6.50%, 10/01/25 .................................................$ 2,810,000 $ 2,895,649 Clewiston Water and Sewer Revenue, AMBAC Insured, Pre-Refunded, 7.65%, 10/01/10 ......... 1,000,000 1,023,080 Collier County Water and Sewer District Revenue, Sewer Assessment, East and South Naples Project, MBIA Insured, 7.15%, 10/01/11 ................................................ 80,000 81,300 Coral Springs ID, Special Water and Sewer Project, 6.75%, 11/01/02 ..................... 2,195,000 2,220,374 Dade County Aviation Revenue, Miami International Airport, Series B, FSA Insured, 5.125%, 10/01/22 ...................................................................... 4,750,000 4,373,040 Dade County Health Facilities Authority Hospital Revenue, Catholic Health and Rehabilitation Inc. Project, Refunding, 7.625%, 8/15/20 ............................... 7,475,000 7,762,414 Dade County HFA, MFMR, Hialeah Center, Series 5, GNMA Secured, Pre-Refunded, 7.875%, 12/01/32 ........ 1,930,000 2,006,544 SFMR, Refunding, Series D, FSA Insured, 6.95%, 12/15/12 ............................. 400,000 417,992 SFMR, Refunding, Series E, FNMA Insured, GNMA Secured, 7.00%, 3/01/24 ............... 300,000 309,978 SFMR, Series A, GNMA Secured, 7.50%, 9/01/13 ........................................ 2,005,000 2,039,205 SFMR, Series A, GNMA Secured, 7.10%, 3/01/17 ........................................ 1,425,000 1,475,345 SFMR, Series B, GNMA Secured, 7.25%, 9/01/23 ........................................ 250,000 258,618 Dade County IDA, Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%, 2/01/23 ........................................................................ 5,695,000 5,989,716 Dade County School Board COP, Series B, AMBAC Insured, Pre-Refunded, 5.75%, 8/01/19 .... 10,000,000 10,685,600 Dade County Seaport Revenue, Refunding, Series 95, MBIA Insured, 5.75%, 10/01/15 ....... 4,100,000 4,192,742 Dade County Special Obligation, Courthouse Center Project, Pre-Refunded, 6.10%, 4/01/20 5,000,000 5,424,650 Dade County Water and Sewer System Revenue, FGIC Insured, 5.25%, 10/01/21 ..................................................................... 5,000,000 4,767,400 5.75%, 10/01/22 ..................................................................... 8,245,000 8,334,706 5.50%, 10/01/25 ..................................................................... 35,325,000 34,937,485 5.25%, 10/01/26 ..................................................................... 32,000,000 30,276,480 Dovera CDD, Special Assessment Revenue, 7.625%, 5/01/03 ....................................................................... 180,000 188,444 7.875%, 5/01/12 ..................................................................... 715,000 751,172 Duval County HFA, MFHR, Mortgage, Eagles Point North, Series A, MBIA Insured, 5.60%, 7/01/17 ......... 1,000,000 993,230 MFHR, Mortgage, Eagles Point North, Series A, MBIA Insured, 5.70%, 7/01/27 ......... 2,000,000 1,972,360 SFMR, FNMA and GNMA Secured, 5.20%, 10/01/19 ....................................... 3,000,000 2,804,850 SFMR, GNMA Secured, 5.30%, 4/01/31 ................................................... 1,800,000 1,685,034 SFMR, Series 1988, GNMA Secured, 8.625%, 12/01/19 .................................... 35,000 35,310 SFMR, Series A, GNMA Secured, 7.85%, 12/01/22 ........................................ 1,755,000 1,807,211 SFMR, Series B, GNMA Secured, 7.70%, 11/01/11 ........................................ 340,000 347,334 SFMR, Series C, FGIC Insured, GNMA Secured, 7.70%, 9/01/24 ........................... 750,000 781,785 Escambia County Health Facilities Authority Health Facility Revenue, Baptist Hospital and Baptist Manor, 5.125%, 10/01/19 ........................................................ 8,750,000 7,806,663 Pre-Refunded, 6.75%, 10/01/14 ........................................................ 3,415,000 3,748,577 Refunding, 6.75%, 10/01/14 ........................................................... 935,000 1,006,696 Escambia County HFA, SFMR, Multi-County Program, MBIA Insured, GNMA Secured, 5.20%, 4/01/32 ........................................... 7,500,000 6,916,050 Series C, FNMA and GNMA Secured, 5.80%, 10/01/19 ..................................... 1,415,000 1,414,929 Series C, FNMA and GNMA Secured, 7.40%, 10/01/23 ..................................... 3,955,000 4,073,057 Series C, FNMA and GNMA Secured, 5.875%, 10/01/28 .................................... 6,275,000 6,281,212 Escambia County Revenue, Series B, Sub Series 1, MBIA Insured, 7.20%, 1/01/15 ........... 2,210,000 2,265,162 Escambia County School Board COP, FSA Insured, 6.375%, 2/01/12 .......................... 1,210,000 1,253,959 Escambia County Utilities Authority Sanitary System Revenue, FSA Insured, Pre-Refunded, 6.00%, 1/01/23 ......................................................................... 2,500,000 2,667,250 First Florida Governmental Financing Commission Revenue, AMBAC Insured, 5.75%, 7/01/16 .. 3,700,000 3,762,567 Florida HFA, General Mortgage, Refunding, Series A, 6.40%, 6/01/24 .................................. 3,500,000 3,613,015 Homeowner Mortgage, Series 1, MBIA Insured, 5.625%, 7/01/17 .......................... 4,965,000 5,007,451 Homeownership Revenue, Series G-1, GNMA Secured, 7.80%, 9/01/10 ...................... 485,000 501,451 Homeownership Revenue, Series G-1, GNMA Secured, 7.90%, 3/01/22 ...................... 2,500,000 2,591,600 MF Housing, Citrus Meadows Apartments Project, Series Q, GNMA Secured, 7.65%, 6/20/31 4,000,000 4,069,280 MF Housing, Driftwood Terrace Project, Series I, 7.65%, 12/20/31 ..................... 3,445,000 3,519,584 MFHR, Refunding, Series A, 6.95%, 10/01/21 ........................................... 2,900,000 2,963,452 Reserve at Kanapaha, Series G, AMBAC Insured, 5.70%, 7/01/37 ......................... 5,000,000 4,841,500
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Florida HFA, (cont.) Reserve at Northshore, Series H, AMBAC Insured, 5.70%, 5/01/37 ........................... $ 2,000,000 $ 1,936,680 Riverfront Apartments, Series A, AMBAC Insured, 6.25%, 4/01/37 ........................... 1,300,000 1,337,739 SFMR, Series A, 8.60%, 7/01/16 ........................................................... 215,000 215,198 Florida HFC Revenue, Brenwood Trace Apartments, Series E-1, FSA Insured, 5.65%, 6/01/19 ....................... 1,500,000 1,487,520 Brenwood Trace Apartments, Series E-1, FSA Insured, 5.80%, 12/01/38 ...................... 5,000,000 4,961,200 Housing, Grand Savannah Club Apartments, Series A, FSA Insured, 5.45%, 3/01/30 ........... 3,400,000 3,254,072 Florida State Board of Education Capital Outlay, Public Education, Refunding, Series A, 7.25%, 6/01/23 ...................................................... 8,775,000 9,177,071 (b)Refunding, Series D, 5.75%, 6/01/22 ...................................................... 25,000,000 24,747,250 Series A, 5.25%, 6/01/22 ................................................................. 2,750,000 2,640,468 Series B, 5.875%, 6/01/24 ................................................................ 8,990,000 9,171,868 Series B, 5.875%, 6/01/25 ................................................................ 7,000,000 7,121,940 Series F, FGIC Insured, 5.50%, 6/01/26 ................................................... 10,000,000 9,916,000 Florida State Community Services Corp. Walton County Water and Sewer Revenue, South Walton County Regional Utilities, 7.00%, 3/01/18 .................................................. 2,550,000 2,716,566 Florida State Correctional Privatization Commission COP, Correctional Facility Bay Project, MBIA Insured, 6.00%, 8/01/15 ............................................................... 6,000,000 6,293,100 Florida State Department of Corrections COP, Okeechobee Correctional Facility, AMBAC Insured, 6.25%, 3/01/15 ............................................................................. 2,960,000 3,164,743 Florida State Department of General Services Division, Facilities Management Revenue, Facilities Pool, Refunding, Series B, AMBAC Insured, 5.70%, 9/01/20 ............................................................................ 7,000,000 7,031,990 (b) 5.50%, 9/01/28 .......................................................................... 10,000,000 9,832,000 Florida State Department of Transportation GO, Right of Way, Acquisition and Bridge, 5.375%, 7/01/26 .................................................. 5,000,000 4,871,400 Series B, 5.00%, 7/01/27 ................................................................. 5,000,000 4,507,650 Florida State Division Bond Finance Department General Services Revenues, Department of Natural Resources Preservation 2000, AMBAC Insured, Pre-Refunded, 6.75%, 7/01/13 ........... 3,000,000 3,193,020 Florida State Governmental Utility Authority Revenue, Poinciana Utility System, AMBAC Insured, 5.00%, 10/01/29 ............................................................................. 10,000,000 9,011,200 Florida State Mid-Bay Bridge Authority Revenue, Exchangeable, 6.05%, 10/01/22 ............................................................. 7,000,000 6,905,430 Exchangeable, Series A, 5.95%, 10/01/13 ................................................... 13,505,000 13,440,581 Exchangeable, Series D, 6.10%, 10/01/22 ................................................... 11,100,000 11,017,860 Series A, 8.00%, 10/01/06 ................................................................. 2,600,000 2,847,364 Series A, 7.50%, 10/01/17 ................................................................. 14,250,000 15,460,110 Series A, ETM, 6.875%, 10/01/22 ........................................................... 6,000,000 6,966,600 Florida State Turnpike Authority Revenue, Department of Transportation, Series A, AMBAC Insured, Pre-Refunded, 7.125%, 7/01/18 .............................................. 8,780,000 9,402,239 FGIC Insured, 5.50%, 7/01/21 .............................................................. 17,350,000 17,067,195 FGIC Insured, 5.625%, 7/01/25 ............................................................. 7,000,000 7,017,080 Gainesville Utilities Systems Revenue, Series A, 5.20%, 10/01/26 ................................................................. 7,590,000 7,088,984 Series B, 6.00%, 10/01/17 ................................................................. 3,500,000 3,571,540 Gateway Services District Revenue, Transportation Roadway Service Charges, 8.75%, 5/01/14 .... 8,675,000 9,572,949 Gulf Breeze Revenue, Local Government Loan Program, FGIC Insured, 7.75%, 12/01/15 ............ 2,000,000 2,056,820 Hialeah Housing Authority Revenue, Affordable Housing Program, Refunding, GNMA Secured, 5.30%, 12/20/18 ............................................................................. 1,240,000 1,196,340 Highlands County Health Facilities Authority Revenue, Adventist Health Systems, 5.25%, 11/15/20 ........................................................................... 11,000,000 9,894,940 Refunding, 5.25%, 11/15/28 ................................................................ 3,000,000 2,635,560 Hillsborough County Aviation Authority Revenue, Special Purpose, Delta Airlines Inc., Refunding, 7.75%, 1/01/24 ........................... 14,945,000 15,272,146 Tampa International Airport, Series A, FGIC Insured, 6.90%, 10/01/11 ...................... 4,490,000 4,591,025 Tampa International Airport, Series A, FGIC Insured, Pre-Refunded, 6.90%, 10/01/11 ........ 3,510,000 3,588,975 Tampa International Airport, Series B, FGIC Insured, 5.875%, 10/01/23 ..................... 5,730,000 5,848,840 Hillsborough County Capital Improvement Revenue, County Center Project, Second Series, Pre-Refunded, 6.625%, 7/01/12 ........................................................................... 8,300,000 8,950,637 6.75%, 7/01/22 ............................................................................ 1,250,000 1,352,100
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Hillsborough County Educational Facilities Authority Revenue, University of Tampa Project, Asset Guaranty Insured, 5.00%, 12/01/28 ...................................... $ 700,000 $ 611,779 Hillsborough County IDAR, Colonial Penn Insurance Project, 7.35%, 8/01/13 ................... 5,300,000 5,643,546 Hillsborough County Port District Revenue, Tampa Port Authority, Pre-Refunded, 8.25%, 6/01/09 3,000,000 3,213,150 Hillsborough County School Board COP, Master Lease Program, Series A, MBIA Insured, 5.25%, 7/01/22 ............................. 20,000,000 19,152,400 MBIA Insured, Pre-Refunded, 6.00%, 7/01/12 ............................................... 9,500,000 10,273,395 MBIA Insured, Pre-Refunded, 6.00%, 7/01/14 ............................................... 5,500,000 5,947,755 Hillsborough County Utilities Revenue, Refunding, Series A, 6.625%, 8/01/11 ................................................................ 10,400,000 10,879,440 Series A, 7.00%, 8/01/14 ................................................................. 5,515,000 5,796,100 Series A, 6.50%, 8/01/16 ................................................................. 3,000,000 3,116,490 Series B, 6.50%, 8/01/16 ................................................................. 1,000,000 1,038,830 Indian River County Hospital District Revenue, Refunding, FSA Insured, 5.70%, 10/01/15 ...... 1,000,000 1,021,260 Indian Trace CDD, Water Management Special Benefit Assessment, MBIA Insured, 5.00%, 5/01/27 . 10,000,000 9,017,800 Jacksonville Capital Improvement Revenue, Certificates, Gator Bowl Project, AMBAC Insured, 5.875%, 10/01/25 ............................................................................ 5,000,000 5,094,600 Jacksonville Electric Authority Revenue, Water and Sewer, Series B, FGIC Insured, 5.40%, 10/01/20 .................................................................................... 3,000,000 2,915,310 Jacksonville Health Facilities Authority Hospital Revenue, Charity Obligation Group, Series C, MBIA Insured, 5.375%, 8/15/29 ........................ 20,000,000 19,098,400 Riverside Hospital Project, Pre-Refunded, 7.625%, 10/01/13 ............................... 8,480,000 8,675,210 Jacksonville Hospital Revenue, University Medical Center Inc. Project, Connie Lee Insured, 6.60%, 2/01/21 .............................................................................. 1,750,000 1,843,415 Jupiter Sales Tax Revenue, Series 1990, Pre-Refunded, 7.40%, 9/01/20 ........................ 1,000,000 1,055,390 Kissimmee Water and Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/15 ................ 5,000,000 5,239,850 Lake County School Board COP, MBIA Insured, 5.00%, 7/01/23 .................................. 10,000,000 9,105,100 (b)Lakeland Hospital System Revenue, Lakeland Regional Health System, Series A, MBIA Insured, 5.50%, 11/15/26 ............................................................................. 10,000,000 9,791,900 Lakeland Utilities Tax Revenue, Refunding and Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 .................................................................................... 4,500,000 4,707,990 Lee County Capital Bonds, Series A, MBIA Insured, Pre-Refunded, 7.30%, 10/01/07 ............. 1,000,000 1,022,810 Lee County Hospital Board of Directors Hospital Revenue, Lee Memorial Health System, Series A, MBIA Insured, 5.875%, 4/01/24 .......................................................... 18,000,000 18,348,840 Lee County IDA, Health Care Facilities Revenue, Shell Point Village Project, Refunding, Series A, 5.50%, 11/15/29 ................................................... 4,000,000 3,497,040 Series A, 5.50%, 11/15/21 .............................................................. 7,500,000 6,745,875 Lee County IDAR, Bonita Springs Sewer Project, Asset Guaranty, Insured, 7.20%, 11/01/11 ........................................................................ 5,000,000 5,288,800 7.25%, 11/01/20 ........................................................................ 2,000,000 2,103,680 Lee County Local Option Gas Tax Revenue, FGIC Insured, 5.75%, 10/01/20 .................... 2,575,000 2,596,373 Lee County Solid Waste System Revenue, Series A, MBIA Insured, 7.00%, 10/01/04 ............................................................................... 1,945,000 2,075,004 10/01/05 ............................................................................... 1,175,000 1,251,833 10/01/06 ............................................................................... 1,305,000 1,390,073 10/01/11 ............................................................................... 4,600,000 4,890,398 Lee County Transportation Facilities Revenue, MBIA Insured, 5.75%, 10/01/22 ............................................................................... 4,500,000 4,548,960 10/01/27 ............................................................................... 5,900,000 5,956,581 Leesburg Hospital Revenue, Leesburg Regional Medical Center Project, Capital Improvement, Series A, Pre-Refunded, 7.375%, 7/01/11 ........................... 1,250,000 1,372,675 Capital Improvement, Series A, Pre-Refunded, 7.50%, 7/01/21 ............................ 2,115,000 2,329,524 Refunding, Series A, 6.125%, 7/01/18 ................................................... 7,000,000 7,222,040 Leesburg Utilities Revenue, FGIC Insured, Pre-Refunded, 7.60%, 10/01/09 ............................................ 500,000 506,535 Series B, AMBAC Insured, 5.375%, 10/01/28 .............................................. 6,515,000 6,233,487 Leon County Capital Improvement Revenue, AMBAC Insured, 5.25%, 10/01/17 ................... 3,000,000 2,904,630 Leon HFA, SFMR, Series A, GNMA Secured, 7.30%, 4/01/21 .................................... 695,000 716,455 Manatee County HFA, SFMR, Series A, GNMA Secured, 6.85%, 11/01/23 ......................... 3,970,000 4,084,852 Manatee County IDR, Manatee Hospital and Health System Inc., ETM, 8.25%, 3/01/01 .................................................................... 600,000 616,182 Pre-Refunded, 9.25%, 3/01/21 ........................................................... 6,700,000 7,309,030 Manatee County School Board COP, MBIA Insured, Pre-Refunded, 6.125%, 7/01/21 .............. 5,575,000 6,115,162
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Martin County Consolidated Utilities System Revenue, FGIC Insured, Pre-Refunded, 6.00%, 10/01/24 ......................................... $ 3,265,000 $ 3,540,174 Refunding, FGIC Insured, 6.00%, 10/01/24 ............................................ 735,000 762,364 Martin County PCR, Florida Power and Light Co. Project, Refunding, MBIA Insured, 7.30%, 7/01/20 ................................................................................ 14,500,000 15,123,935 Miami Beach Special Obligation, Subordinated, FGIC Insured, ETM, 7.375%, 12/01/08 ...... 2,000,000 2,052,960 Miami-Dade County HFA, MFMR, Villa Esperanza Apartments Project, 5.25%, 10/01/19 ..................................................................... 430,000 408,001 5.40%, 10/01/33 ..................................................................... 1,500,000 1,400,715 Miami-Dade County HFAR, Home Ownership Mortgage, Series A-1, GNMA Secured, FNMA Insured, 5.625%, 4/01/32 ........................................................................ 2,400,000 2,330,160 Miami-Dade County Water and Sewer Revenue, Series A, FGIC Insured, 5.00%, 10/01/29 ..... 25,000,000 22,528,000 Miramar Wastewater Improvement Assessment Revenue, FGIC Insured, Pre-Refunded, 6.75%, 10/01/25 ............................................................................... 6,500,000 7,215,130 Nassau County PCR, ITT Rayonier Inc. Project, Refunding, 6.25%, 6/01/10 ................ 5,000,000 5,162,650 North Broward Hospital District Revenue, Refunding and Improvement, MBIA Insured, 5.375%, 1/15/24 ..................................................................... 10,710,000 10,335,793 5.75%, 1/15/27 ...................................................................... 14,370,000 14,472,314 North Miami Health Facilities Authority Revenue, Catholic Health Services Obligation Group, 6.00%, 8/15/16 ............................................................................. 2,000,000 2,041,540 8/15/24 ............................................................................. 1,750,000 1,760,763 North Port Utilities Revenue, FGIC Insured, Pre-Refunded, 6.25%, 10/01/22 .............. 1,500,000 1,611,090 Northern Palm Beach County Water Control District Revenue, Unit Development No. 31, Project 2, 6.75%, 11/01/07 ..................................................................... 725,000 800,306 6.625%, 11/01/13 .................................................................... 1,470,000 1,615,780 Orange County Health Facilities Authority Revenue, Adventist/Sunbelt, Series A, AMBAC Insured, 6.875%, 11/15/15 ........................ 1,000,000 1,066,610 Adventist/Sunbelt, Series A, FSA Insured, 7.00%, 11/15/14 ........................... 3,000,000 3,076,140 Mayflower Retirement Project, Refunding, Asset Guaranteed, 5.25%, 6/01/29 ........... 4,200,000 3,936,030 Orlando Regional Healthcare, Refunding, Series A, MBIA Insured, 6.00%, 11/01/24 ..... 1,000,000 1,043,990 South Central Nursing, Series A, FSA Insured, 5.40%, 7/01/19 ........................ 1,750,000 1,712,358 South Central Nursing, Series A, FSA Insured, 5.50%, 7/01/32 ........................ 3,000,000 2,941,650 Orange County HFAR, Refunding, Series A, FGIC Insured,GNMA Secured, 7.60%, 1/01/24 ...................... 4,475,000 4,646,303 Series A, GNMA Secured, 7.375%, 9/01/24 ............................................. 410,000 427,507 Series D, GNMA Secured, 7.80%, 10/01/22 ............................................. 525,000 541,291 Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ............... 5,050,000 5,242,658 Orange County Tourist Development Tax Revenue, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/10 ........................................ 3,000,000 3,171,690 Refunding, MBIA Insured, 5.125%, 10/01/20 ........................................... 10,000,000 9,416,100 Series B, MBIA Insured, Pre-Refunded, 6.00%, 10/01/24 ............................... 24,675,000 26,754,609 Orlando and Orange County Expressway Authority Expressway Revenue, junior lien, FGIC Insured, 5.00%, 7/01/28 ........................................... 37,025,000 33,326,573 senior lien, AMBAC Insured, ETM, 7.625%, 7/01/18 .................................... 265,000 270,520 Orlando Community RDA, Tax Increment Revenue, Series A, 6.50%, 10/01/11 ..................................................................... 2,155,000 2,253,785 6.75%, 10/01/16 ..................................................................... 2,585,000 2,701,971 Orlando Wastewater Systems Revenue, Refunding, Series C, AMBAC Insured, 5.15%, 10/01/13 ..................................................................... 3,410,000 3,366,216 5.20%, 10/01/14 ..................................................................... 2,740,000 2,686,597 Osceola County Gas Tax Revenue, Refunding and Improvement, FGIC Insured, 6.00%, 4/01/13 ...................................................................... 3,500,000 3,700,235 Osceola County IDA, Community Provider Pooled Loan Program, Series A, FSA Insured, 7.75%, 7/01/10 ............................................... 4,634,000 4,864,588 Series C, FSA Insured, 7.60%, 7/01/10 ............................................... 795,000 833,597 Osceola County Sales Tax Revenue, FSA Insured, 5.00%, 4/01/24 .......................... 10,000,000 9,080,000 Pace Property Finance Authority Inc. Utility Systems Revenue, Refunding and Improvement, AMBAC Insured, 6.125%, 9/01/07 ...................................................... 270,000 280,946 AMBAC Insured, 6.25%, 9/01/13 ....................................................... 685,000 711,612 Pre-Refunded, 6.125%, 9/01/07 ....................................................... 730,000 761,427 Pre-Refunded, 6.25%, 9/01/13 ........................................................ 1,860,000 1,943,254 Pre-Refunded, 6.125%, 9/01/17 ....................................................... 840,000 876,162
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured, 6.00%, 6/01/15 .................................................................... $ 5,000,000 $ 5,244,900 Pre-Refunded, 7.25%, 6/01/11 ...................................................... 6,950,000 7,268,449 Palm Beach County Financing Authority MFR, Housing Windsor Park Apartment Project, Series A, 5.90%, 6/01/38 .......................................................... 1,000,000 996,870 Palm Beach County Health Facilities Authority Retirement Community Revenue, Acts Retirement-Life Communities, 5.125%, 11/15/29 ........................................ 3,650,000 3,161,302 Palm Beach County HFA, SFM Purchase Revenue, Series A, GNMA Secured, 7.70%, 3/01/22 ............................................ 5,565,000 5,756,436 Series B, GNMA Secured, 7.60%, 3/01/23 ............................................ 4,110,000 4,279,044 Palm Beach County IDR, Lourdes-Noreen Mckeen Residence, Geriatric Care Inc. Project, 6.55%, 12/01/16 ................................................................... 1,755,000 1,797,138 6.625%, 12/01/26 .................................................................. 4,000,000 4,096,560 (c) Palm Beach County Solid Waste IDR, Okeelanta Power and Light Co. Project, Series A, 6.50%, 2/15/09 .................................................................... 3,600,000 2,340,000 6.70%, 2/15/15 .................................................................... 11,700,000 7,605,000 Pensacola Airport Revenue, Series A, MBIA Insured, 5.75%, 10/01/27 ................... 5,615,000 5,678,899 Pensacola-Westwood Homes Development Corp. Revenue, Mortgage Loan, Refunding, FNMA/FHA Insured, 6.40%, 7/15/23 .............................................................. 965,000 981,743 Pinellas County HFA, SFHR, Multi-County Program, Series A-1, FNMA Insured, GNMA Secured, 5.30%, 9/01/30 1,500,000 1,390,635 SFHR, Multi-County Program, Series C-1, FNMA Insured, GNMA Secured, 5.45%, 9/01/29 1,765,000 1,670,467 SFMR, Multi-County Program, Series B, GNMA Secured, 6.875%, 8/01/10 ............... 1,060,000 1,095,150 SFMR, Multi-County Program, Series B, GNMA Secured, 7.375%, 2/01/24 ............... 4,415,000 4,572,616 SFMR, Series A, GNMA Secured, 7.30%, 8/01/22 ...................................... 1,385,000 1,422,118 SFMR, Series A, GNMA Secured, 7.75%, 8/01/23 ...................................... 1,300,000 1,344,863 Pinellas County PCR, Florida Power and Light Co., Refunding, 7.20%, 12/01/14 ......... 12,200,000 12,926,754 Plantation Health Facilities Authority Revenue, Covenant Retirement Community Inc., Pre-Refunded, 7.625%, 12/01/12 ....................................................... 1,500,000 1,674,555 7.75%, 12/01/22 ................................................................... 3,000,000 3,360,330 Polk County HFA, Refunding, Series A, GNMA Secured, 7.15%, 9/01/23 ................... 2,035,000 2,106,998 Polk County IDAR, Solid Waste Disposal Facility, Tampa Electric Co. Project, 5.85%, 12/01/30 ............................................................................. 20,500,000 20,716,480 Port Everglades Authority Port Improvement Revenue, Series A, Pre-Refunded, 7.50%, 9/01/12 ............................................ 18,050,000 18,411,000 Series 1986, ETM, 7.50%, 11/01/06 ................................................. 575,000 650,607 Port St. Lucie Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured, 5.125%, 9/01/27 ...................................................................... 24,640,000 22,831,670 Santa Rosa County Health Facilities Authority Revenue, Gulf Breeze Hospital Inc., Refunding, 8.60%, 10/01/02 ........................................................ 20,000 20,275 Series A, 6.20%, 10/01/14 ......................................................... 14,350,000 14,559,080 Santa Rosa County IDR, Refunding, Holley Navarre Water System Project, 6.75%, 5/01/24 .... 4,290,000 4,452,162 Sarasota County Solid Waste System Revenue, AMBAC Insured, 5.50%, 10/01/16 ............... 6,250,000 6,258,563 Sarasota County Utilities System Revenue, FGIC Insured, 5.75%, 10/01/27 ....................................................................... 18,000,000 18,204,840 Refunding, Series A, 5.25%, 10/01/25 .................................................. 9,000,000 8,523,180 Seminole County School Board COP, Series B, MBIA Insured, Pre-Refunded, 6.50%, 7/01/21 ... 5,000,000 5,474,100 South Broward Hospital District Revenue, Refunding, MBIA Insured, 5.25%, 5/01/21 ......... 5,000,000 4,751,500 South Florida Water Management District Special Obligation, Land Acquisition Bonds, AMBAC Insured, 6.00%, 10/01/15 ........................................................... 1,000,000 1,045,890 South Miami Health Facilities Authority Hospital Revenue, Baptist Health System Obligation Group, MBIA Insured, 5.00%, 11/15/28 ..................................................... 10,000,000 8,996,000 St. John's County IDA, IDR, Professional Golf Hall of Fame Project, MBIA Insured, 5.80%, 9/01/16 .................................................................................. 4,660,000 4,755,483 St. Lucie County Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%, 2/01/23 .................................................................................. 7,500,000 7,902,900 St. Lucie West Services District Capital Improvement Revenue, Lake Charles Project, 7.50%, 2/01/00 .................................................................................. 2,660,000 2,669,443 St. Petersburg Health Facilities Authority Revenue, Allegany Health System, Series A, MBIA Insured, Pre-Refunded, 7.00%, 12/01/15 ................................. 10,500,000 11,332,650 St. Mary, Series B, Pre-Refunded, 7.75%, 12/01/15 ..................................... 8,630,000 8,888,555 Sunrise Lakes Recreation District, Phase 4, Refunding, AMBAC Insured, 5.25%, 8/01/24 .............................................. 4,320,000 4,095,792 Series A, Pre-Refunded, 6.75%, 8/01/15 ................................................ 3,080,000 3,445,842 Series A, Pre-Refunded, 6.75%, 8/01/24 ................................................ 6,120,000 6,846,934
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Sunrise Special Tax District No. 1, Refunding, 6.375%, 11/01/08 ......................................................................... $ 3,485,000 $ 3,636,319 11/01/21 ......................................................................... 12,390,000 12,889,193 Sunrise Utilities System Revenue, Refunding, AMBAC Insured, 5.20%, 10/01/22 ........................................ 2,550,000 2,424,999 Series A, AMBAC Insured, Pre-Refunded, 5.90%, 10/01/18 ........................... 4,000,000 4,314,800 Tallahassee Consolidated Utility System Revenue, Series 1994, 6.20%, 10/01/19 ....... 3,400,000 3,530,254 Tampa Allegheny Health System Revenue, St. Joseph, MBIA Insured, Pre-Refunded, 6.75%, 12/01/17 .................................................................. 1,180,000 1,267,320 6.50%, 12/01/23 .................................................................. 7,000,000 7,764,750 Tampa Guaranteed Entitlement Revenue, Refunding, AMBAC Insured, 7.15%, 10/01/18 ..... 2,000,000 2,129,680 Tampa-Hillsborough County Expressway Authority Revenue, AMBAC Insured, 5.00%, 7/01/22 11,500,000 10,533,195 Tampa Occupational License Tax, Refunding, Series B, FGIC Insured, 5.50%, 10/01/27 .. 10,525,000 10,376,387 Tampa Sports Authority Revenue, Guaranteed Package, Tampa Bay Arena Project, MBIA Insured, 6.00%, 10/01/15 ....... 1,000,000 1,075,060 Guaranteed Package, Tampa Bay Arena Project, MBIA Insured, 6.05%, 10/01/20 ....... 1,715,000 1,807,507 Guaranteed Package, Tampa Bay Arena Project, MBIA Insured, 6.10%, 10/01/26 ....... 2,695,000 2,885,483 Interlock Agreement, Tampa Bay, MBIA Insured, Pre-Refunded, 6.05%, 10/01/15 ...... 4,250,000 4,589,703 Interlock Agreement, Tampa Bay, MBIA Insured, Pre-Refunded, 6.10%, 10/01/20 ...... 5,160,000 5,584,978 Interlock Agreement, Tampa Bay, MBIA Insured, Pre-Refunded, 6.125%, 10/01/26 ..... 6,800,000 7,368,276 Tampa Water and Sewer Revenue, sub. lien, Series A, AMBAC Insured, 7.25%, 10/01/16 .. 1,330,000 1,332,899 Titusville Water and Sewer Revenue, MBIA Insured, Pre-Refunded, 6.20%, 10/01/14 ..... 6,000,000 6,559,620 University Community Hospital Inc. Revenue, FSA Insured, Pre-Refunded, 7.375%, 9/01/07 .................................................................. 5,000,000 5,278,250 7.50%, 9/01/11 ................................................................... 5,000,000 5,284,300 Venice Health Care Revenue, Bon Secours Health System Project, MBIA Insured, 5.625%, 8/15/26 .......................................................................... 6,000,000 5,979,180 Viera East CDD, Special Assessment, 8.625%, 5/01/14 .................................................. 10,640,000 11,690,806 Special Assessment, ETM, 7.50%, 5/01/03 .............................................. 1,435,000 1,566,446 Special Assessment, Pre-Refunded, 8.50%, 5/01/04 ..................................... 2,810,000 3,076,051 Special Assessment, Pre-Refunded, 7.50%, 5/01/12 ..................................... 5,225,000 5,724,353 Special Assessment, Refunding, 6.30%, 5/01/26 ........................................ 7,355,000 7,773,867 Special Assessment, Refunding, Series A, 6.00%, 5/01/14 .............................. 11,295,000 11,554,559 Special Assessment, Series B, ETM, 6.75%, 5/01/14 .................................... 7,490,000 7,654,705 Special Assessment, Water Management, Refunding, Series A, 6.50%, 5/01/22 ............ 11,340,000 11,586,985 Special Assessment, Water Management, Series B, 6.50%, 5/01/05 ....................... 465,000 471,081 Special Assessment, Water Management, Series B, 6.50%, 5/01/22 ....................... 4,580,000 4,618,654 Water and Sewer Revenue, 7.875%, 5/01/03 ............................................. 2,585,000 2,683,513 Water and Sewer Revenue, 6.75%, 5/01/09 .............................................. 2,850,000 2,934,274 Village Center CDD, Recreational Revenue, Refunding, Series A, MBIA Insured, 5.00%, 11/01/21 ............................................................................. 5,000,000 4,568,149 Volusia County Educational Facility Authority Revenue, Embry Riddle Aeronautical University, Connie Lee Insured, Pre-Refunded, 6.625%, 10/15/22 ............................................................................. 500,000 542,759 Educational Facilities, Embry Riddle University, Refunding, Series B, AMBAC Insured, 5.25%, 10/15/22 ...................................................................... 3,490,000 3,341,220 Educational Facilities, Stetson University Inc. Project, AMBAC Insured, 5.25%, 6/01/29 5,000,000 4,685,749 Volusia County Health Facilities Authority Revenue, Hospital Facilities, Memorial Health Systems Project, AMBAC Insured, 5.50%, 11/15/26 ...................................... 9,770,000 9,633,512 Wellington Public Service Tax Revenue, AMBAC Insured, 5.25%, 9/01/19 .................... 1,000,000 969,899 West Lake CDD, Special Assessment Revenue, MBIA Insured, 5.75%, 5/01/17 ................. 1,970,000 2,006,720 (b) West Palm Beach Utility System Revenue, FGIC Insured, 5.50%, 10/01/29 ................ 6,805,000 6,715,990 Westgate/Belvedere Homes Community RDAR, Series 1992, Pre-Refunded, 6.50%, 11/01/09 ...................................................................... 410,000 429,704 6.60%, 11/01/17 ...................................................................... 1,410,000 1,479,343 Winter Haven Public Improvement Revenue, Refunding, FGIC Insured, 5.25%, 10/01/29 ....... 5,045,000 4,726,811 ------------- TOTAL BONDS (COST $1,677,485,897) ....................................................... 1,684,853,379 -------------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FLORIDA TAX-FREE INCOME FUND AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) ZERO COUPON BONDS 4.6% Broward County Water and Sewer Utility Revenue, Refunding, Series A, AMBAC Insured,10/01/08 ............................................................... $ 3,670,000 $ 2,346,121 Dade County Guaranteed Entitlement Revenue, Capital Appreciation, AMBAC Insured, Pre-Refunded,8/01/18 ........................................................... 17,020,000 5,031,282 Florida HFC Revenue, Deferred Interest, Homeowner Mortgage, Series 1, MBIA Insured,07/01/17 ............................................. 3,270,000 1,184,067 Series 2, MBIA Insured,01/01/29 ............................................. 50,025,000 8,885,441 Florida State Mid-Bay Bridge Authority Revenue, Series A, AMBAC Insured, 10/01/25 .................................................................... 9,845,000 2,166,589 10/01/26 .................................................................... 2,500,000 526,025 Lakeland Electric and Water Revenue, Capital Appreciation, ETM,10/01/14 ........ 5,770,000 2,490,736 Miami-Dade County Special Obligation, sub. lien, Refunding, Series A, MBIA Insured,10/01/25 ....................... 22,365,000 4,921,866 Sub Series B, MBIA Insured,10/01/36 ......................................... 5,635,000 645,489 Sub Series C, MBIA Insured,10/01/28 ......................................... 8,305,000 1,531,276 Port Everglades Authority Port Improvement Revenue, Capital Appreciation, 09/01/10 .............................................. 24,525,000 13,724,926 Capital Appreciation, ETM, 09/01/10 ......................................... 25,475,000 14,210,974 Refunding, Series A, 09/01/02 ............................................... 10,575,000 9,233,984 Refunding, Series A, 09/01/03 ............................................... 9,075,000 7,529,165 Refunding, Series A, 09/01/04 ............................................... 3,550,000 2,787,567 Sarasota Special Obligated Revenue, Refunding, AMBAC Insured, 11/01/09 .................................................................... 1,365,000 815,028 11/01/12 .................................................................... 1,780,000 889,608 11/01/15 .................................................................... 2,180,000 908,493 ------------- TOTAL ZERO COUPON BONDS (COST $51,731,504) ..................................... 79,828,637 ------------- TOTAL LONG TERM INVESTMENTS (COST $1,729,217,401) .............................. 1,764,682,016 ------------- (a)SHORT TERM INVESTMENTS .4% Jacksonville Educational Facilities Revenue, Jacksonville University Project, Weekly VRDN and Put, 3.20%, 10/01/22 ........................................... 200,000 200,000 Jacksonville Health Facilities Authority Hospital Revenue, Charity Obligation Group, Series C, MBIA Insured, Weekly VRDN and Put, 3.10%, 8/15/19 ............. 6,855,000 6,855,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $7,055,000) ................................. 7,055,000 ------------- TOTAL INVESTMENTS (COST $1,736,272,401) 101.5% ................................. 1,771,737,016 OTHER ASSETS, LESS LIABILITIES (1.5%) .......................................... (25,811,258) ------------- NET ASSETS 100.0% .............................................................. $ 1,745,925,758 ===============
See glossary of terms on page 96. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. (c) See Note 6 regarding defaulted securities. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN GEORGIA TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28 AUGUST 31, 1999 ---------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ...... $ 12.07 $ 12.12 $ 11.86 $ 11.88 $ 11.54 $ 12.00 ----------------------------------------------------------------------------- Income from investment operations: Net investment income .................... .30 .61 .63 .65 .66 .66 Net realized and unrealized gains (losses) (.58) .01 .27 (.02) .34 (.46) ----------------------------------------------------------------------------- Total from investment operations .......... (.28) .62 .90 .63 1.00 .20 ----------------------------------------------------------------------------- Less distributions from: Net investment income .................... (.30) (.61)(3) (.64)(2) (.65) (.66) (.66) In excess of net investment income ....... (.01) -- -- -- -- -- Net realized gains ....................... --(4) (.06) -- -- -- -- ----------------------------------------------------------------------------- Total distributions ....................... (.31) (.67) (.64) (.65) (.66) (.66) ----------------------------------------------------------------------------- Net asset value, end of period ............ $ 11.48 $ 12.07 $ 12.12 $ 11.86 $ 11.88 $ 11.54 ============================================================================= Total return* ............................. (2.39%) 5.22% 7.75% 5.47% 8.90% 1.87% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ......... $ 158,065 $ 164,669 $149,642 $ 139,903 $130,380 $116,771 Ratios to average net assets: Expenses ................................. .76%** .76% .76% .75% .77% .76% Net investment income .................... 4.98%** 5.00 5.28% 5.49% 5.58% 5.76% Portfolio turnover rate ................... 22.14% 12.84% 14.77% 17.47% 10.98% 36.17%
CLASS C - ------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ...... $ 12.15 $ 12.19 $ 11.92 $ 11.92 $ 11.57 ------------------------------------------------------------ Income from investment operations: Net investment income .................... .26 .543 .57 .58 .50 Net realized and unrealized gains (losses) (.59) .02 .27 (.01) .34 ------------------------------------------------------------ Total from investment operations .......... (.33) .56 .84 .57 .84 ------------------------------------------------------------ Less distributions from: Net investment income .................... (.26) (.54) (.57) (.57) (.49) In excess of net investment income ....... (.01) -- -- -- -- Net realized gains ....................... --(4) (.06) -- -- -- ------------------------------------------------------------ Total distributions ....................... (.27) (.60) (.57) (.57) (.49) ------------------------------------------------------------ Net asset value, end of period ............ $ 11.55 $ 12.15 $ 12.19 $ 11.92 $ 11.92 ============================================================ Total return* ............................. (2.73%) 4.70% 7.19% 4.97% 7.40% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ......... $18,235 $17,277 $9,107 $4,484 $1,335 Ratios to average net assets: Expenses ................................. 1.32%** 1.31% 1.32% 1.32% 1.34%** Net investment income .................... 4.44%** 4.45% 4.72% 4.87% 5.04%** Portfolio turnover rate ................... 22.14% 12.84% 14.77% 17.47% 10.98%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.001. (3) Includes distributions in excess of net investment income in the amount of $.004 and $.003 for Class A and C, respectively. (4) Includes distributions of net realized gains in the amount of $.002. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN GEORGIA TAX-FREE INCOME FUND AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 102.3% Albany-Daugherty County Hospital Authority Revenue, Anticipation Certificates, Series B, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/10 ....................... $ 500,000 $ 528,430 Atlanta Airport Facilities Revenue, Series B, AMBAC Insured, 6.00%, 1/01/21 .... 1,100,000 1,124,838 Atlanta and Fulton Counties Recreation Authority Revenue, Downtown Arena Public Improvement Project, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 .................................................................... 3,000,000 2,895,990 12/01/26 .................................................................... 1,500,000 1,434,825 Atlanta COP, Pretrial Detention Center, MBIA Insured, Pre-Refunded, 6.25%, 12/01/11 .................................................................... 1,000,000 1,076,760 Atlanta Downtown Development Authority Revenue, Underground Atlanta Project, Refunding, 6.25%, 10/01/16 .................................................. 2,000,000 2,090,740 Atlanta GO, Refunding, FGIC Insured, 5.00%, 12/01/20 .................................... 4,500,000 4,145,625 Series A, Pre-Refunded, 6.125%, 12/01/23 .................................... 5,000,000 5,435,000 Atlanta HDC, Mortgage Revenue, Oakland City/West, Refunding, Series A, FHA Insured, 6.375%, 3/01/23 .................................................... 1,480,000 1,520,315 Atlanta Special Purpose Facilities Revenue, Delta Air Lines Inc. Project, Series B, 7.90%, 12/01/18 ................................................... 3,500,000 3,591,035 Atlanta Urban Residential Finance Authority MFHR, Defoors Ferry Manor Project, 5.90%, 10/01/18 ................................ 1,700,000 1,731,093 Fulton Cotton Mill, GNMA Secured, 6.00%, 5/20/17 ............................ 1,040,000 1,059,812 Fulton Cotton Mill, GNMA Secured, 6.125%, 5/20/27 ........................... 1,560,000 1,584,352 Atlanta Water and Sewer Revenue, FGIC Insured, Pre-Refunded, 5.25%, 1/01/27 .... 1,900,000 1,965,588 Baldwin County Hospital Authority Revenue, Oconee Regional Medical Center, 5.25%, 12/01/22 ............................................................. 2,615,000 2,302,220 5.375%, 12/01/28 ............................................................ 2,000,000 1,749,220 Barnesville Water and Sewer Revenue, Pre-Refunded, 6.85%, 9/01/17 .............. 1,000,000 1,051,540 Brunswick and Glynn County Development Authority Revenue, Georgia Pacific Project, Refunding, 5.55%, 3/01/26 .......................................... 5,700,000 5,262,582 Burke County Development Authority PCR, Georgia Power Co. Plant Vogtle, 1st Series, 6.10%, 4/01/25 ...................................................... 1,000,000 1,025,460 Camden County Joint Development Authority PCR, Union Carbide Corp. Project, Refunding, 5.00%, 1/01/12 ................................................... 1,000,000 936,850 Chatham County Hospital Authority Revenue, Memorial Medical Center, Refunding and Improvement, Series A, AMBAC Insured, 5.70%, 1/01/19 .................... 1,000,000 1,007,100 Cherokee County Water and Sewage Authority Revenue, FGIC Insured, 5.00%, 8/01/27 ............................................... 2,000,000 1,779,960 Refunding, MBIA Insured, 6.90%, 8/01/18 .................................... 1,595,000 1,680,620 Clarke County Hospital Authority Revenue Certificates, Athens Regional Medical Center Project, Refunding, MBIA Insured, 5.25%, 1/01/29 ..................... 3,000,000 2,784,360 Clayton County Development Authority Special Facility Revenue, Delta Air Lines Inc. Project, Refunding, 7.625%, 1/01/20 .................................... 1,400,000 1,439,760 Clayton County Hospital Authority Revenue, Anticipation Certificates, Southern Regional Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 8/01/13 ......... 2,400,000 2,570,064 Clayton County MFHR, Pointe Clear Apartments Project, FSA Insured, 5.70%, 7/01/23 ..................................................................... 1,000,000 999,910 Cobb County Kennestone Hospital Authority Revenue, Series A, MBIA Insured, ETM, 7.75%, 2/01/07 .............................................................. 100,000 110,276 Columbia County GO, Courthouse/Detention Center Projects, 5.00%, 2/01/24 ....... 2,460,000 2,216,435 Commerce Combined Public Utility Revenue, Refunding and Improvement, AMBAC Insured, Pre-Refunded, 7.50%, 12/01/20 ...................................... 100,000 102,936 Conyers Water and Sewer Revenue, Series A, AMBAC Insured, ETM, 6.60%, 7/01/15 .. 1,000,000 1,066,650 Coweta County Association County Commissioners Leasing Program COP, MBIA Insured, Pre-Refunded, 7.00%, 12/01/10 ...................................... 750,000 768,398 DeKalb County Housing Authority SFMR, GNMA Secured, 7.70%, 2/01/24 ............. 245,000 255,474 Douglas County Housing Authority MFHR, Millwood Park Apartments, FNMA Insured, 5.45%, 1/01/18 .............................................................. 1,380,000 1,334,874 Downtown Smyrna Development Authority Revenue, Refunding and Improvement, 5.15%, 2/01/16 ..................................................................... 550,000 531,647 Fitzgerald Housing Authority Mortgage Revenue, Bridge Creek, Refunding, Series A, MBIA Insured, 6.50%, 7/01/24 ............................................. 935,000 958,758 Fulco Hospital Authority Revenue, Anticipation Certificates, Health System, Catholic Health East, Series A, MBIA Insured, 5.00%, 11/15/28 ............... 4,000,000 3,546,720 Fulton County Building Authority Revenue, Human Resources and Government Facilities Program, 7.10%, 1/01/15 ........... 750,000 783,968 Judicial Center Facilities Project, Refunding, 6.50%, 1/01/15 ............... 1,000,000 1,033,360 Fulton County Development Authority Special Facilities Revenue, Delta Airlines Inc. Project, 5.45%, 5/01/23 ................................................ 1,805,000 1,644,211 Fulton Dekalb Hospital Authority Revenue, Grady Memorial Hospital Project, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 1/01/20 ....................... 1,480,000 1,525,939 Gainesville and Hall County Hospital Authority Revenue, Anticipation Certificates, Northeast Georgia Health Care Project, Refunding, MBIA Insured, 5.75%, 10/01/17 ............................................... 210,000 213,650 MBIA Insured, 6.00%, 10/01/25 ............................................... 750,000 771,203 Series B, MBIA Insured, 7.20%, 10/01/20 ..................................... 455,000 460,806 Georgia Municipal Electric Authority Power Revenue, Series W, 6.60%, 1/01/18 ... 1,000,000 1,111,130
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN GEORGIA TAX-FREE INCOME FUND AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Georgia Municipal Gas Authority Gas Revenue, City of Toccoa Project, AMBAC Insured, 5.00%, 6/01/24 .......................................................... $ 3,000,000 $ 2,701,020 Georgia State HFAR, Homeownership Opportunity Program, Series A, 6.60%, 12/01/23 .................... 1,995,000 2,053,673 Homeownership Opportunity Program, Series A-1, 6.75%, 6/01/17 ................... 2,895,000 3,021,917 Homeownership Opportunity Program, Series C, 6.60%, 12/01/23 .................... 485,000 503,382 MF, Club Candlewood Project, FSA Insured, Pre-Refunded, 7.15%, 1/01/25 .......... 1,000,000 1,133,740 MF, Lake Vista Apartments Project, Series A, FSA Insured, 5.95%, 1/01/27 ........ 1,000,000 1,013,470 SFM, Series B, Sub Series B-2, 6.15%, 12/01/28 .................................. 1,000,000 1,019,510 SFM, Sub Series B-2, 5.85%, 12/01/28 ............................................ 2,990,000 2,994,096 Georgia State Residential Finance Authority Home Ownership Mortgage Revenue, Convertible Loans, Series B, Sub Series B, 7.50%, 6/01/17 ....................... 190,000 198,438 Series B, FHA Insured, 7.00%, 12/01/12 .......................................... 710,000 745,031 Series E, Sub Series E-1, FHA Insured, 7.50%, 6/01/17 ........................... 265,000 276,689 Hogansville Combined Public Utility System Revenue, Refunding, FSA Insured, 6.00%, 10/01/23 .................................................................. 3,300,000 3,473,184 La Grange Water and Sewer Revenue, Pre-Refunded, 7.375%, 1/01/12 ................... 1,000,000 1,031,270 Liberty County IDR, Leconte Property Inc. Project, Refunding, 7.875%, 12/01/14 ..... 850,000 894,362 Marietta Development Authority Revenue, First Mortgage, Life College Inc., Refunding, Series A, FSA Insured, 5.75%, 9/01/14 ................................ 1,800,000 1,843,974 Refunding, Series A, FSA Insured, 5.80%, 9/01/19 ................................ 1,100,000 1,118,975 Refunding, Series A, FSA Insured, 5.95%, 9/01/19 ................................ 1,000,000 1,026,840 Series B, FSA Insured, 5.75%, 9/01/14 ........................................... 800,000 819,544 Medical Center Hospital Authority, Revenue Anticipation Certificates, Columbus Regional Healthcare System, MBIA Insured, 5.50%, 8/01/25 ......................... 12,000,000 11,550,840 Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue, Second Indenture, Refunding, Series A, MBIA Insured, 5.625%, 7/01/20 ............ 2,670,000 2,681,748 Series A, MBIA Insured, Pre-Refunded, 6.90%, 7/01/20 ............................ 5,930,000 6,642,074 Monroe County Development Authority PCR, Georgia Power Co., AMBAC Insured, 6.25%, 7/01/19 ................................ 1,000,000 1,023,760 Georgia Power Co., Scherer Project, senior lien, First Series, 5.75%, 9/01/23 ... 1,000,000 985,920 Oglethorpe Power Co., Scherer Project, Refunding, Series A, 6.80%, 1/01/12 ...... 1,500,000 1,665,645 Municipal Electric Authority, Project One, Refunding, Sub Series A, AMBAC Insured, 5.125%, 1/01/16 .................................................. 2,000,000 1,907,280 MBIA Insured, 5.375%, 1/01/19 ................................................... 4,820,000 4,648,456 Paulding County Water and Sewer Revenue, AMBAC Insured, Pre-Refunded, 5.80%, 12/01/16 ........................................................................ 500,000 539,165 Peachtree City Water and Sewer Authority Sewer Systems Revenue, Series A, 5.60%, 3/01/27 .................................................................. 3,000,000 2,970,900 Pike County School District, Refunding, AMBAC Insured, 5.70%, 2/01/16 .............. 1,000,000 1,031,230 Polk County Water Authority Water and Sewerage Revenue, Refunding, MBIA Insured, 7.00%, 12/01/15 ........................................................ 100,000 102,480 Private Colleges and Universities Authority Revenue, Emory University Project, Series A, 5.00%, 11/01/24 ............................. 2,250,000 2,018,588 Mercer University Project, Refunding, Series A, 5.25%, 10/01/25 ................. 2,000,000 1,825,460 Mercer University Project, Series A, AMBAC Insured, 5.375%, 10/01/29 ............ 2,000,000 1,837,140 Puerto Rico Commonwealth GO, Public Improvement, Refunding, 5.375%, 7/01/25 ........ 8,025,000 7,673,906 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series R, 7.15%, 7/01/00 ........................................................ 230,000 236,185 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.90%, 7/01/07 .................................................................. 15,000 15,169 7.50%, 7/01/09 .................................................................. 5,000 5,064 Puerto Rico Electric Power Authority Revenue, Refunding, Series U, 6.00%, 7/01/14 ............................................. 1,000,000 1,053,620 Series T, 6.00%, 7/01/16 ........................................................ 1,000,000 1,032,640 Richmond County Development Authority, Solid Waste Disposal Revenue, International Paper Co. Project, 5.80%, 12/01/20 .............................................. 1,500,000 1,471,140 Rockdale County Water and Sewer Authority Revenue, Refunding, FSA Insured, 5.00%, 7/01/22 ......................................................................... 2,700,000 2,453,733 Rome Water and Sewer Revenue, Refunding and Improvement, AMBAC Insured, 5.25%, 1/01/15 ......................................................................... 2,750,000 2,684,770 Savannah EDA, IDR, Hershey Foods Corp. Project, Refunding, 6.60%, 6/01/12 .......... 1,000,000 1,058,980 Savannah Hospital Authority Revenue, St. Joseph's Hospital Project, Pre-Refunded, 6.20%, 7/01/23 .................................................................. 2,000,000 2,157,060 Savannah Port Authority PCR, Union Carbide Plastic Co. Inc., Refunding, 7.55%, 8/01/04 ......................................................................... 4,600,000 4,623,874 St. Mary's Housing Authority MFMR, Cumberland Oaks Apartments, Refunding, Series A, FHA Insured, 7.375%, 9/01/22 ... 500,000 515,050 Pine Apartments, Series C, FHA Insured, 7.375%, 4/01/22 ......................... 700,000 711,088
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN GEORGIA TAX-FREE INCOME FUND AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Tift County School District, MBIA Insured, 6.125%, 2/01/15 .................... $ 2,330,000 $ 2,392,164 Upper Oconee Basin Water Authority Revenue, FGIC Insured, 5.25%, 7/01/27 ..... 3,000,000 2,812,470 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 ........................................................... 850,000 831,266 5.50%, 10/01/22 ........................................................... 1,200,000 1,139,844 5.625%, 10/01/25 .......................................................... 1,530,000 1,468,372 Walker, Dade and Catoosa County Hospital Authority Revenue, Anticipation Certificates, Series A, FGIC Insured,Pre-Refunded, 7.00%, 10/01/10 ........ 1,500,000 1,612,680 Walton County Water and Sewer Authority Revenue, Refunding and Improvement, MBIA Insured, 6.00%, 2/01/21 .............................................. 2,000,000 2,070,580 White County IDAR, Clark Schwebel Fiber Glass, Refunding, 6.85%, 6/01/10 ..... 1,780,000 1,864,866 ------------- TOTAL LONG TERM INVESTMENTS (COST $179,739,982) .............................. 180,394,806 ------------- (a) SHORT TERM INVESTMENTS 1.0% Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ...................................... 100,000 100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ..................... 1,700,000 1,700,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $1,800,000) ............................... 1,800,000 ------------- TOTAL INVESTMENTS (COST $181,539,982) 103.3% ................................. 182,194,806 OTHER ASSETS, LESS LIABILITIES (3.3%) ........................................ (5,894,442) ------------- NET ASSETS 100.0% ............................................................ $ 176,300,364 =============
See glossary of terms on page 96. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN KENTUCKY TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ................ $ 11.47 $ 11.45 $ 11.05 $ 11.04 $ 10.54 $ 11.18 ------------------------------------------------------------------------- Income from investment operations: Net investment income .............................. .29 .59 .61 .61 .62 .61 Net realized and unrealized gains (losses) ......... (.59) .03 .40 .01 .50 (.62) -------------------------------------------------------------------------- Total from investment operations .................... (.30) .62 1.01 .62 1.12 (.01) -------------------------------------------------------------------------- Less distributions from net investment income ....... (.30)(2) (.60)(1) (.61) (.61) (.62) (.63) -------------------------------------------------------------------------- Net asset value, end of period ...................... $ 10.87 $ 11.47 $ 11.45 $ 11.05 $ 11.04 $ 10.54 ========================================================================== Total return* ....................................... (2.69%) 5.51% 9.38% 5.86% 10.73% .11% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................... $66,957 $ 64,516 $ 54,211 $44,289 $ 38,991 $ 32,831 Ratios to average net assets: Expenses ........................................... .46%** .42% .35% .34% .33% .29% Expenses excluding waiver and payments by affiliates .80%** .81% .81% .81% .82% .80% Net investment income .............................. 5.14%** 5.12% 5.40% 5.63% 5.65% 5.94% Portfolio turnover rate ............................. 4.83% 10.49% 26.61% 24.81% 31.89% 32.92%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) Includes distributions in excess of net investment income in the amount of $.004. (2) Includes distributions in excess of net investment income in the amount of $.008. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN KENTUCKY TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 99.4% Ashland PCR, Ashland Oil Inc. Project, Refunding, 6.65%, 8/01/09 .................. $ 700,000 $ 735,224 Ashland Solid Waste Revenue, Ashland Oil Inc. Project, 7.20%, 10/01/20 ............ 1,000,000 1,054,190 Boone County PCR, Collateralized, Dayton Power and Light Co., Refunding, Series A, 6.50%, 11/15/22 ................................................................ 710,000 760,176 Carroll County PCR, Collateralized, Kentucky Utilities Co. Project, Series B, 6.25%, 2/01/18 .................................................................... 325,000 341,543 Christian County Hospital Revenue, Jennie Stuart Medical Center, Series A, 6.00%, 7/01/17 .................................................................... 1,000,000 1,010,130 Danville Multi-City Lease Revenue, Campbellsville, Series B, MBIA Insured, 6.15%, 7/01/12 ......................... 1,500,000 1,610,085 Housing Authority, Jefferson County, 6.50%, 3/01/19 ............................ 125,000 130,820 Shelbyville, Series H, MBIA Insured, 6.70%, 7/01/11 ............................ 100,000 106,572 Daviess County Hospital Revenue, Odch Inc., Series A, MBIA Insured, 6.25%, 8/01/12 ........................................................................ 100,000 105,353 8/01/22 ........................................................................ 210,000 219,068 Daviess County Public Improvement Corp. Revenue, First Mortgage, Court Facilities Project, Refunding, Series A, 5.70%, 10/01/14 ..................................... 545,000 557,104 Eastern University Revenues, Consolidated Educational Building, Series Q, AMBAC Insured, 6.40%, 5/01/08 ........................................................... 100,000 105,108 Elizabethtown Public Properties Holding Inc. Revenue, First Mortgage, Administrative Office of the Courts, Judicial Facilities Project, MBIA Insured, 5.20%, 4/01/22 ...................................................... 2,000,000 1,890,760 Fulton County Industrial Building Revenue, H.I.S. Income Project, 7.50%, 2/01/10 .. 500,000 509,390 Greater Kentucky Housing Assistance Corp. Mortgage Revenue, Section 8 Assisted Projects, Refunding, Series A, MBIA Insured, 6.10%, 1/01/24 ....................... 2,000,000 2,027,440 Guam Airport Authority Revenue, Series A, 6.50%, 10/01/23 ......................... 400,000 422,932 Guam Power Authority Revenue, Series A, Pre-Refunded, 6.30%, 10/01/22 ............. 225,000 241,985 Hancock County Solid Waste Disposal Revenue, Willamette Industries Inc. Project, 6.60%, 5/01/26 .................................................................... 1,000,000 1,048,910 Hardin County Water District No. 2 Water System Revenue, Series A, AMBAC Insured, 5.00%, 1/01/31 .................................................................... 2,620,000 2,356,873 Henry County Water District No. 2 Water Revenue, Refunding, MBIA Insured, 4.75%, 1/01/28 ........................................................................... 2,035,000 1,734,369 Hopkins County Hospital Revenue, Trover Clinic Foundation Inc., MBIA Insured, 6.625%, 11/15/11 .................................................................. 125,000 131,815 Jefferson County Capital Projects Corp. Lease Revenue, MBIA Insured, 5.375%, 6/01/22 ........................................................................... 2,000,000 1,942,340 Jefferson County Health Facilities Revenue, Jewish Hospital Healthcare Services Inc., AMBAC Insured, 6.50%, 5/01/15 ........ 750,000 790,988 Jewish Hospital Healthcare Services Inc., AMBAC Insured, 6.55%, 5/01/22 ........ 720,000 758,203 Jewish Hospital Healthcare Services Inc., Refunding, AMBAC Insured, 5.75%, 1/01/26 ..................................................................... 2,000,000 2,011,280 University Medical Center Inc. Project, MBIA Insured, 5.50%, 7/01/17 ........... 1,500,000 1,494,810 Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11 1,930,000 1,991,702 Jefferson County PCR, DuPont, Series A, 6.30%, 7/01/12 ............................................... 450,000 484,403 Louisville Gas and Electric Co. Project, Refunding, Series A, 7.45%, 6/15/15 ... 100,000 104,421 Jefferson County School District Finance Corp. School Building Revenue, Refunding, Series A, FSA Insured, 5.25%, 1/01/19 ............................... 1,500,000 1,429,860 Series B, FSA Insured, 5.25%, 6/01/19 .......................................... 1,400,000 1,333,752 Kenton County Airport Board Revenue, Cincinnati/Northern Kentucky International Airport, Series B, MBIA Insured, 5.75%, 3/01/13 .............................................................. 1,230,000 1,270,012 Special Facilities, Delta Airlines Inc. Project, Series A, 7.50%, 2/01/20 ...... 445,000 472,928 Special Facilities, Delta Airlines Inc. Project, Series A, 7.125%, 2/01/21 ..... 325,000 342,531 Special Facilities, Delta Airlines Inc. Project, Series B, 7.25%, 2/01/22 ...... 445,000 471,282 Kenton County Water District No. 1 Waterworks Revenue, Refunding, FGIC Insured, 6.375%, 2/01/17 ....................................... 155,000 164,123 Series A, MBIA Insured, 5.80%, 2/01/15 ......................................... 500,000 518,310 Series B, FGIC Insured, 5.70%, 2/01/20 ......................................... 500,000 506,010 Kentucky Development Finance Authority Hospital Revenue, St. Elizabeth Medical Center, Refunding and Improvement, Series A, FGIC Insured, 6.00%, 11/01/10 ....... 750,000 765,278 Kentucky Development Finance Authority Revenue, Sisters of Charity of Nazareth Health Corp., Pre-Refunded, 6.75%, 11/01/12 ....................................... 100,000 107,101 Kentucky Economic Development Finance Authority Hospital Facilities Revenue, St Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%, 12/01/22 ..... 625,000 644,156 Kentucky Economic Development Finance Authority Hospital System Revenue, Appalachian Regional Health Center Facility, Refunding and Improvement, 5.875%, 10/01/22 ............................................................... 2,000,000 1,851,520 Kentucky Economic Development Finance Authority Medical Center Revenue, Ashland Hospital Corp., Refunding and Improvement, Series A, FSA Insured, 6.125%, 2/01/12 ................................................................ 500,000 527,800 Kentucky Economic Development Finance Authority Revenue, Refunding and Improvement, Catholic Health, Series A, 5.00%, 12/01/18 ........................................ 2,000,000 1,807,160
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN KENTUCKY TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Kentucky HFC Revenue, Refunding, Series A, 6.375%, 7/01/28 .............................................. $1,500,000 $ 1,538,985 Series B, 6.25%, 7/01/28 .......................................................... 1,280,000 1,306,048 Series C, FHA Insured, 6.40%, 1/01/17 ............................................. 1,200,000 1,242,732 SFMR, Series A, 6.60%, 7/01/11 .................................................... 40,000 41,446 SFMR, Series B, 6.60%, 7/01/11 .................................................... 150,000 155,421 SFMR, Series D, FHA Insured, 7.45%, 1/01/23 ....................................... 75,000 77,693 Kentucky Infrastructure Authority Revenue, Infrastructure Revolving Fund Program, Series J, Pre-Refunded, 6.375%, 6/01/14 .... 500,000 550,145 Wastewater Revolving Fund Program, Series D, 5.75%, 6/01/15 ....................... 300,000 304,083 Kentucky State Property and Buildings Commission Revenues, Project No. 56, Pre-Refunded, 6.00%, 9/01/14 ...................................... 700,000 758,366 (b) Project No. 64, MBIA Insured, 5.50%, 5/01/17 ................................... 1,535,000 1,521,185 Lexington-Fayette Urban County Government Revenue, University of Kentucky Library Project, MBIA Insured, Pre-Refunded, 6.625%, 11/01/13 .................................................................. 500,000 556,850 6.75%, 11/01/24 ................................................................... 750,000 839,550 Louisville and Jefferson County Metropolitan Sewer District Sewer and Drain System Revenue, Refunding, Series A, FGIC Insured, 5.00%, 5/15/22 ................................. 1,000,000 905,500 Refunding, Series B, MBIA Insured, 5.30%, 5/15/18 ................................. 1,000,000 962,050 Series A, AMBAC Insured, Pre-Refunded, 6.75%, 5/15/25 ............................. 300,000 336,018 Series A, FGIC Insured, 5.00%, 5/15/30 ............................................ 3,000,000 2,681,040 Series A, MBIA Insured, 5.50%, 5/15/21 ............................................ 500,000 489,420 Louisville and Jefferson County Regional Airport Authority Airport Systems Revenue, MBIA Insured, 5.00%, 7/01/25 ......................................................... 1,500,000 1,327,455 Madison County Utility District Revenue, Refunding, FSA Insured, 5.20%, 2/01/22 ...... 1,000,000 945,580 McCracken County Hospital Revenue, Mercy Health System, Refunding, Series A, MBIA Insured, 6.40%, 11/01/07 ............................................................. 500,000 541,585 Northern Kentucky Water Service District Revenue, MBIA Insured, 4.875%, 2/01/20 ...... 1,270,000 1,127,658 Oldham County School District Finance Corp. School Building Revenue, 5.00%, 7/01/19 .. 1,000,000 933,160 Pendleton County Multi-County Lease Revenue, Kentucky Association of Counties Leasing Trust, Series A, 6.50%, 3/01/19 .............................................. 1,050,000 1,099,718 Puerto Rico Commonwealth GO, Pre-Refunded, 6.45%, 7/01/17 ............................ 430,000 473,555 Puerto Rico Industrial Medical and Environmental Pollution Control Facilities Financing Authority Revenue, 6.45%, 12/01/25 ......................................... 1,480,000 1,535,840 Russell Health System Revenue, 8.10%, 7/01/15 .................................................................... 205,000 232,529 Our Lady of Bellefonte, Refunding, 5.50%, 7/01/15 ................................. 1,800,000 1,699,902 Pre-Refunded, 8.10%, 7/01/15 ...................................................... 145,000 174,661 Russellville Housing Authority MFR, The Field Manor Project, GNMA Secured, 5.65%, 4/20/34 .............................................................................. 1,455,000 1,405,617 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.625%, 10/01/25 ............................................................................. 2,000,000 1,919,440 ----------- TOTAL LONG TERM INVESTMENTS (COST $66,576,748) ....................................... 66,573,049 ----------- (a) SHORT TERM INVESTMENTS .3% Kentucky Development Finance Authority Revenue, Pooled Loan Program, Series A, FGIC Insured, Weekly VRDN and Put, 3.25%, 12/01/15 (COST $200,000) ................... 200,000 200,000 ----------- TOTAL INVESTMENTS (COST $66,776,748) 99.7% ........................................... 66,773,049 OTHER ASSETS, LESS LIABILITIES .3% ................................................... 184,020 ----------- NET ASSETS 100.0% .................................................................... $66,957,069 ===========
See glossary of terms on page 96. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principle balance plus accrued interest at specific dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN LOUISIANA TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.59 $ 11.61 $ 11.32 $ 11.32 $ 11.03 $ 11.56 -------------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .29 .60 .63 .65 .66 .66 Net realized and unrealized gains (losses) ... (.59) (.01) .30 -- .28 (.55) -------------------------------------------------------------------------------- Total from investment operations .............. (.30) .59 .93 .65 .94 .11 -------------------------------------------------------------------------------- Less distributions from net investment income . (.30)(3) (.61)(2) (.64) (.65) (.65) (.64) -------------------------------------------------------------------------------- Net asset value, end of period ................ $ 10.99 $ 11.59 $ 11.61 $ 11.32 $ 11.32 $ 11.03 ================================================================================ Total return* ................................. (2.64%) 5.23% 8.46% 5.94% 8.75% 1.14% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 155,071 $ 158,099 $ 134,922 $ 112,981 $107,461 $ 104,980 Ratios to average net assets: Expenses ..................................... .74%** .75% .76% .76% .78% .75% Net investment income ........................ 5.14%** 5.14% 5.50% 5.76% 5.89% 5.98% Portfolio turnover rate ....................... 13.54% 14.99% 15.26% 13.68% 5.23% 32.28% CLASS C - ---------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.66 $ 11.68 $ 11.37 $ 11.37 $ 11.01 -------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .26 .54 .57 .58 .49 Net realized and unrealized gains (losses) ... (.60) (.01) .32 -- .35 -------------------------------------------------------------------- Total from investment operations .............. (.34) .53 .89 .58 .84 -------------------------------------------------------------------- Less distributions from net investment income . (.26)(3) (.55)(2) (.58) (.58) (.48) -------------------------------------------------------------------- Net asset value, end of period ................ $ 11.06 $ 11.66 $ 11.68 $ 11.37 $ 11.37 ==================================================================== Total return* ................................. (2.91%) 4.61% 8.02% 5.27% 7.76% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 12,377 $ 9,982 $ 4,469 $ 3,004 $ 1,438 Ratios to average net assets: Expenses ..................................... 1.30%** 1.31% 1.32% 1.33% 1.35%** Net investment income ........................ 4.58%** 4.58% 4.95% 5.29% 5.27%** Portfolio turnover rate ....................... 13.54% 14.99% 15.26% 13.68% 5.23%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.0006 and $.0004 for Class A and C, respectively. (3) Includes distributions in excess of net investment income in the amount of $.008 and $.007 for Class A and C, respectively. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN LOUISIANA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 99.4% BONDS 98.0% Ascension Parish Sales and Use Tax, Gravity Drainage District No 1, Pre-Refunded, 7.25%, 12/01/06 ....................................................................... $ 300,000 $ 307,065 12/01/07 ....................................................................... 300,000 307,065 12/01/08 ....................................................................... 200,000 204,710 Bastrop PCR, International Paper Co. Project, Refunding, 6.90%, 3/01/07 ........... 500,000 528,565 Bossier City Public Improvement Sales and Use Tax Revenue, FGIC Insured, 5.00%, 12/01/19 .................................................. 1,145,000 1,039,133 Refunding, FGIC Insured, 5.00%, 12/01/21 ....................................... 1,875,000 1,688,700 Refunding, FGIC Insured, 5.00%, 12/01/22 ....................................... 1,515,000 1,361,228 Calcasieu Parish Public Trust Authority Mortgage Revenue, Refunding, Series A, 7.75%, 6/01/12 ....................................................... 480,000 502,306 Series B, 6.875%, 11/01/12 ..................................................... 720,000 747,626 Calcasieu Parish Public Trust Authority SFMR, Series A, GNMA Secured, FNMA Insured, 6.40%, 4/01/32 ................................................................. 285,000 290,908 De Soto Parish Environmental Improvement Revenue, International Paper Co. Project, 5.60%, 11/01/22 ................................................................ 2,250,000 2,108,588 Series A, 7.70%, 11/01/18 ...................................................... 1,500,000 1,676,220 Series A, 5.65%, 12/01/21 ...................................................... 1,000,000 950,170 (b) De Soto Parish PCR, Cleco Utility Group Inc. Project, Refunding, AMBAC Insured, 5.875%, 9/01/29 ................................................................ 5,000,000 5,023,500 Denham Spring Livingston Housing and Mortgage Finance Authority SFHR, Series A, ETM, 7.20%, 8/01/10 ............................................................ 1,380,000 1,551,148 East Baton Rouge Mortgage Finance Authority, SFM Purchase, Refunding, Series A, 6.10%, 10/01/29 ........................................... 990,000 1,008,582 Series A, GNMA Secured, 7.875%, 8/01/23 ........................................ 630,000 649,826 Series F, GNMA Secured, 7.875%, 12/01/21 ....................................... 705,000 736,612 East Baton Rouge Parish Sales and Use Tax, FGIC Insured, 5.90%, 2/01/18 ................................................... 750,000 773,288 (b) Public Improvement, Series ST-A, FGIC Insured, 5.625%, 2/01/23 ........................................................................ 3,625,000 3,486,453 Greater New Orleans Expressway Commission Revenue, FSA Insured, 5.25%, 11/01/16 ... 3,105,000 2,992,537 Hammond Tangipahoa Home Mortgage Authority Revenue, University Facilities Inc. Project, MBIA Insured, 5.375%, 7/15/15 ......................................... 1,090,000 1,061,006 Jefferson Parish School Board Sales and Use Tax Revenue, Series A, ETM, 7.35%, 2/01/03 ........................................................................ 500,000 506,785 Jefferson Sales Tax District Special Sales Tax Revenue, Refunding, FSA Insured, 5.00%, 12/01/22 ................................................................ 4,500,000 4,064,490 Lafayette Public Trust Financing Authority SFMR, Refunding, Series A, 8.50%, 11/15/12 ........................................... 205,397 209,478 Series A, ETM, 7.20%, 4/01/11 .................................................. 30,000 30,076 Lafourche Parish Home Mortgage Authority SFMR, ETM, 7.40%, 7/01/10 ................ 95,000 107,700 Lake Charles Harbor and Terminal District Port Facilities Revenue, Occidental Petroleum Corp., Refunding, 7.20%, 12/01/20 .................................... 3,000,000 3,205,170 Lake Charles Nonprofit HDC, Section 8 Assisted Mortgage Revenue, Chateau Project, Refunding, Series A, FSA Insured, 7.875%, 2/15/25 .............................. 750,000 752,828 Leesville IDBR, Wal-Mart Stores Inc. Project, Refunding, 7.10%, 3/01/11 ........... 1,750,000 1,808,135 Louisiana HFA, Mortgage Revenue, MF, Refunding, Series A, FHA Insured, 7.00%, 7/01/22 ........................... 2,795,000 2,818,478 MF Westview Project, FHA Insured, 7.80%, 4/01/30 ............................... 750,000 776,153 Louisiana Public Facilities Authority Hospital Revenue, Franciscan Missionaries, Series C, MBIA Insured, 5.00%, 7/01/19 ................ 3,750,000 3,386,663 Louisiana Health Systems Corp. Project, Refunding, FSA Insured, 5.00%, 10/01/22 1,000,000 898,890 Pendleton Memorial Methodist, Refunding, 5.25%, 6/01/28 ........................ 5,000,000 4,107,400 Touro Infirmary Project, Series A, 5.625%, 8/15/29 ............................. 6,000,000 5,427,480 Women's Hospital Foundation Project, Refunding, FSA Insured, 5.60%, 10/01/19 ... 1,500,000 1,480,350 Louisiana Public Facilities Authority Lease Revenue, Orleans Parish School Board Project, FSA Insured, 5.65%, 6/15/11 ........................................... 1,230,000 1,259,778 Louisiana Public Facilities Authority Revenue, Alton Ochsner Medical Foundation Project, Series C, MBIA Insured, 6.50%, 5/15/22 930,000 978,118 Centenary College Project, Pre-Refunded, 5.90%, 2/01/17 ........................ 1,000,000 1,064,190 Centenary College Project, Refunding, 5.75%, 2/01/29 ........................... 7,300,000 6,914,122 Dillard University Project, Refunding, AMBAC Insured, 5.00%, 2/01/18 ........... 2,000,000 1,818,200 HFA, Mortgage Purchase, FNMA Insured, 6.05%, 1/01/26 ........................... 1,200,000 1,218,012 Loyola University Project, Refunding, MBIA Insured, 5.625%, 10/01/16 ........... 1,000,000 1,007,210 MF Housing, One Lakeshore, Refunding, Series A, GNMA Secured, 6.40%, 7/20/20 ... 1,900,000 1,946,474 SFM Purchase, Series C, 8.45%, 12/01/12 ........................................ 995,065 1,045,535
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN LOUISIANA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Louisiana Public Facilities Authority Revenue, (cont.) Student Loan, Series A, Sub Series 3, 7.00%, 9/01/06 ........................... $ 955,000 $ 984,911 Tulane University, AMBAC Insured, 6.05%, 10/01/25 .............................. 5,500,000 5,753,605 Xavier University of Louisiana Project, Refunding, MBIA Insured, 5.25%, 9/01/17 1,000,000 959,540 Xavier University of Louisiana Project, Refunding, MBIA Insured, 5.25%, 9/01/27 6,015,000 5,583,183 Louisiana State Gas and Fuels Tax Revenue, Series A, Pre-Refunded, 7.25%, 11/15/04 500,000 513,475 Louisiana State Office Facilities Corp. Lease Revenue, Capitol Complex Program, Series A, MBIA Insured, 5.375%, 3/01/19 ........................................ 3,000,000 2,910,150 Louisiana State Offshore Terminal Authority Deepwater Port Revenue, Loop Inc., First Stage, Refunding, Series B, 7.20%, 9/01/08 .................... 1,000,000 1,058,610 Series E, 7.60%, 9/01/10 ....................................................... 480,000 501,816 Series E, Pre-Refunded, 7.60%, 9/01/10 ......................................... 520,000 549,541 Louisiana State University Agricultural and Mechanical College University Revenues, Auxiliary, MBIA Insured, 5.50%, 7/01/26 ........................................ 1,500,000 1,454,880 Louisiana State University at Eunice Project, MBIA Insured, 5.00%, 6/01/18 ..... 1,025,000 935,220 Mississippi River Bridge Authority Revenue, 6.75%, 11/01/12 ....................... 1,050,000 1,122,902 Natchitoches Parish GO, Consolidated School District No. 7, Series B, Pre-Refunded, 7.50%, 3/01/09 ........................................................................ 230,000 234,218 3/01/10 ........................................................................ 235,000 239,310 New Orleans GO, AMBAC Insured, Pre-Refunded, 6.00%, 9/01/21 .................................... 695,000 719,096 Drain Systems, AMBAC Insured, 5.00%, 12/01/18 .................................. 1,000,000 926,450 Public Improvement, Series A, AMBAC Insured, 5.125%, 12/01/27 .................. 1,000,000 915,730 Public Improvement, Series A, FGIC Insured, Pre-Refunded, 5.50%, 12/01/21 ...... 500,000 522,720 Refunding, AMBAC Insured, 6.00%, 9/01/21 ....................................... 1,305,000 1,319,368 New Roads Electric System Revenue, 7.00%, 7/01/17 ................................. 1,000,000 1,039,570 Office Facility Corp. Capital Facilities Bonds, 7.75%, 12/01/10 ................... 1,600,000 1,711,696 Orleans Levee District GO, Levee Improvement, FSA Insured, 5.95%, 11/01/14 ........ 910,000 956,774 Orleans Parish Parishwide School District GO, AMBAC Insured, 5.375%, 9/01/21 ................................................. 2,000,000 1,928,800 Refunding, Series B, FGIC Insured, 5.50%, 9/01/20 .............................. 1,000,000 981,690 Series A, FGIC Insured, 5.125%, 9/01/22 ........................................ 1,000,000 928,030 Orleans Parish School Board, Series 95, FGIC Insured, 5.375%, 9/01/18 ............. 1,950,000 1,896,863 Ouachita Parish Hospital Service District No. 1 Revenue, Glenwood Regional Medical Center, Refunding, FSA Insured, 5.75%, 5/15/21 ......................... 2,500,000 2,505,700 Puerto Rico Commonwealth GO, Series 1990, Pre-Refunded, 7.70%, 7/01/20 ............ 500,000 526,580 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.90%, 7/01/07 ................................................................. 120,000 121,350 7.75%, 7/01/08 ................................................................. 50,000 50,755 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ........................................ 55,000 56,946 Series C, GNMA Secured, 6.85%, 10/15/23 ........................................ 650,000 675,532 Rapides Parish Housing and Mortgage Finance Authority Revenue, SFM Purchase, FHA Insured, ETM, 7.25%, 8/01/10 ............................................... 1,370,000 1,519,604 Shreveport Airport System Revenue, Series A, FSA Insured, 5.375%, 1/01/28 ......... 1,000,000 938,510 Shreveport Certificates of Indebtedness, Refunding, Series A, AMBAC Insured, 5.00%, 10/01/16 ................................................................ 1,000,000 929,330 Shreveport GO, FGIC Insured, 5.00%, 3/01/18 ....................................... 1,000,000 930,340 Shreveport Water and Sewer Revenue, Series A, FGIC Insured, 5.95%, 12/01/14 ....... 3,500,000 3,631,285 St. Bernard Home Mortgage Authority Revenue, SF, Series A, FGIC Insured, ETM, 7.50%, 9/01/10 ................................................................. 435,000 495,256 St. Bernard Parish Exempt Facilities Revenue, Mobil Oil Corp. Project, 5.90%, 11/01/26 ....................................................................... 2,000,000 2,005,420 St. Bernard Parish Home Mortgage Authority SFMR, Refunding, Series A, 8.00%, 3/25/12 ........................................................................ 447,154 471,139 St. Charles Parish PCR, Louisiana Power and Light Co. Project, 7.50%, 6/01/21 .......................... 2,500,000 2,628,125 Union Carbide Corp. Project, Refunding, 5.10%, 1/01/12 ......................... 3,000,000 2,814,090 St. Charles Parish Solid Waste Disposal Revenue, Louisiana Power and Light Co. Project, 7.05%, 4/01/22 ................................................................. 1,500,000 1,560,270 Series A, 7.00%, 12/01/22 ...................................................... 750,000 793,898 St. John's Baptist Parish EDR, USX Corp. Project, Refunding, 5.35%, 12/01/13 ...... 2,500,000 2,345,600 St. John's Baptist Parish Sales Tax District, 7.30%, 12/01/08 ....................................................................... 430,000 445,037 12/01/09 ....................................................................... 275,000 284,463
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN LOUISIANA TAX-FREE INCOME FUND AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) St. Tammany's Public Trust Financing Authority SFMR, Series A, ETM, 7.20%, 7/01/10 ................................................................................ $ 165,000 $ 183,505 7/01/11 ................................................................................ 50,000 56,893 State Colleges and Universities Lease Revenue, University of Southwestern Louisiana, Cajundome, MBIA Insured, 5.65%, 9/01/26 ................................................. 4,080,000 4,068,780 Tangipahoa Parish Hospital Service Revenue, District No. 1, Refunding, AMBAC Insured, 6.25%, 2/01/24 .......................................................................... 5,500,000 5,716,975 University System Board of Supervisors Revenue, Northwestern State University Wellness, AMBAC Insured, 5.10%, 4/01/24 ........................................................... 1,000,000 914,969 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 ................................................................................ 3,000,000 2,873,459 West Feliciana Parish PCR, Gulf State Utility Co. Project, 7.70%, 12/01/14 ........................................................................ 6,500,000 6,987,109 Refunding, 8.00%, 12/01/24 ............................................................. 5,000,000 5,131,749 ------------ TOTAL BONDS (COST $164,197,594) ........................................................... 164,137,768 ------------ ZERO COUPON BONDS 1.4% Shreveport Water and Sewer Revenue, Refunding, Series B, FGIC Insured,12/01/11 (COST $ 2,127,882) ............................................................................ 5,000,000 2,316,450 ------------ TOTAL LONG TERM INVESTMENTS ($166,325,476) ................................................ 166,454,218 ------------ a SHORT TERM INVESTMENTS 4.3% East Baton Rouge Parish PCR, Exxon Project, Refunding, Daily VRDN and Put, 2.95%, 3/01/22 .......................................................................... 1,000,000 1,000,000 Lake Charles Harbor and Terminal District Revenue, Reynolds Metal Co. Project, Weekly VRDN and Put, 3.30%, 5/01/06 ................................................................. 500,000 500,000 Louisiana State Offshore Terminal Authority Deepwater Port Revenue, Loop Inc., First Stage, Refunding, ACES, Daily VRDN and Put, 2.70%, 9/01/06 ............................................... 4,900,000 4,900,000 Series A, Daily VRDN and Put, 2.70%, 9/01/08 ........................................... 100,000 100,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ........................................................... 200,000 200,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ........................................... 500,000 500,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $7,200,000) ............................................ 7,200,000 ------------- TOTAL INVESTMENTS (COST $173,525,476) 103.7% .............................................. 173,654,218 OTHER ASSETS, LESS LIABILITIES (3.7%) ..................................................... (6,206,714) ------------- NET ASSETS 100.0% ......................................................................... $ 167,447,504 =============
See glossary of terms on page 96. a Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. b Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN MARYLAND TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ---------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.66 $ 11.64 $ 11.33 $ 11.38 $ 10.92 $ 11.36 -------------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .28 .58 .59 .61 .62 .63 Net realized and unrealized gains (losses) ... (.58) .06 .32 (.03) .47 (.45) -------------------------------------------------------------------------------- Total from investment operations .............. (.30) .64 .91 .58 1.09 .18 Less distributions from: Net investment income ........................ (.28)(4) (.58)(3) (.60)(2) (.63) (.63) (.62) Net realized gains ........................... (.03) (.04) -- -- -- -- -------------------------------------------------------------------------------- Total distributions ........................... (.31) (.62) (.60) (.63) (.63) (.62) -------------------------------------------------------------------------------- Net asset value, end of period ................ $ 11.05 $ 11.66 $ 11.64 $ 11.33 $ 11.38 $ 10.92 ================================================================================ Total return* ................................. (2.61%) 5.64% 8.27% 5.24% 10.18% 1.78% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 248,211 $ 253,014 $ 213,005 $ 185,234 $175,078 $153,145 Ratios to average net assets: Expenses ..................................... .72%** .74% .74% .73% .74% .73% Net investment income ........................ 4.88%** 4.91% 5.20% 5.42% 5.56% 5.86% Portfolio turnover rate ....................... 1.01% 6.02% 3.19% 12.71% 8.11% 20.30% CLASS C - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.75 $ 11.72 $ 11.40 $ 11.44 $ 10.93 --------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .25 .51 .54 .55 .47 Net realized and unrealized gains (losses) ... (.58) .07 .31 (.03) .51 --------------------------------------------------------------------- Total from investment operations .............. (.33) .58 .85 .52 .98 Less distributions from: Net investment income ........................ (.25)(4) (.51)(3) (.53) (.56) (.47) Net realized gains ........................... (.03) (.04) -- -- -- --------------------------------------------------------------------- Total distributions ........................... (.28) (.55) (.53) (.56) (.47) --------------------------------------------------------------------- Net asset value, end of period ................ $ 11.14 $ 11.75 $ 11.72 $ 11.40 $ 11.44 ===================================================================== Total return* ................................. (2.86%) 5.11% 7.70% 4.68% 9.06% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 18,474 $ 16,826 $ 10,515 $ 5,084 $ 913 Ratios to average net assets: Expenses ..................................... 1.28%** 1.29% 1.30% 1.27% 1.31%** Net investment income ........................ 4.34%** 4.35% 4.63% 4.78% 4.95%** Portfolio turnover rate ....................... 1.01% 6.02% 3.19% 12.71% 8.11%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.005. (3) Includes distributions in excess of net investment income in the amount of $.004 and $.003 for Class A and C, respectively. (4) Includes distributions in excess of net investment income in the amount of $.002 and $.001 for Class A and C, respectively. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN MARYLAND TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.4% Anne Arundel County Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.00%, 1/01/26 ... $1,650,000 $1,682,357 Anne Arundel County PCR, Baltimore Gas and Electric Co. Project, Refunding, 6.00%, 4/01/24 ......................................................................... 9,500,000 9,753,459 Baltimore Convention Center Revenue, FGIC Insured, Pre-Refunded, 6.15%, 9/01/19 ........... 4,250,000 4,574,318 Baltimore COP, Emergency Telecommunication Phase II, Series A, MBIA Insured, 5.00%, 10/01/17 .......... 2,000,000 1,864,580 Refunding, Series C, MBIA Insured, 7.25%, 4/01/16 ...................................... 545,000 563,574 Baltimore County Authority Revenue, Series 1989, 7.20%, 7/01/19 ........................... 90,000 92,398 Baltimore County Mortgage Revenue, Old Orchard Apartments Project, Refunding, Series A, MBIA Insured, 7.00%, 7/01/16 ......................................................................... 1,000,000 1,061,490 7.125%, 1/01/27 ........................................................................ 3,000,000 3,194,820 Baltimore Economic Development Lease Revenue, Armistead Partnership, Refunding, Series A, 6.75%, 8/01/02 ......................................................................... 780,000 816,941 7.00%, 8/01/11 ......................................................................... 3,225,000 3,441,591 Baltimore GO, Series B, 7.15%, 10/15/08 ................................................... 1,000,000 1,162,970 Baltimore GO, Consolidated Public Improvement, Series A, FGIC Insured, 5.30%, 10/15/15 ................................................ 1,470,000 1,457,343 Series A, FGIC Insured, 5.30%, 10/15/17 ................................................ 1,500,000 1,462,410 Series A, FSA Insured, 5.25%, 10/15/17 ................................................. 3,300,000 3,198,558 Baltimore Port Facilities Revenue, Consolidated Coal Sales, Series A, 6.50%, 10/01/11 ..... 1,850,000 1,980,980 Baltimore Project Revenue, Wastewater Project, Refunding, Series B, FGIC Insured, 5.00%, 7/01/18 ................................................................................ 1,000,000 930,650 7/01/28 ................................................................................ 4,000,000 3,584,880 Baltimore Revenue, Wastewater Project, Refunding, Series A, FGIC Insured, 5.80%, 7/01/15 ......................................................................... 5,000,000 5,127,950 5.50%, 7/01/26 ......................................................................... 3,150,000 3,079,895 Frederick County College Revenue, Hood College Project, 7.20%, 7/01/09 .................... 350,000 361,722 Frederick County EDR, Manekin Frederick Project, Refunding, Series A, 7.50%, 12/01/14 ..... 500,000 513,905 Gaithersberg Hospital Facilities Revenue, Shady Grove Adventist Hospital, Refunding and Improvement, FSA Insured, 6.00%, 9/01/21 ............................................... 8,000,000 8,266,319 Harford County Mortgage Revenue, Greenbrier V Apartments Project, Refunding, FHA Insured, 6.50%, 11/01/26 ........................................................................ 3,000,000 3,143,610 Howard County Mortgage Revenue, Normandy Woods III Apartments Project, Refunding, Series A, 6.10%, 7/01/25 ......................................................................... 2,000,000 2,044,960 Maryland Environmental Services COP, Water and Waste Facilities, Series A, 6.70%, 6/01/11 ......................................................................... 1,900,000 1,986,678 Maryland Local Government Insurance Trust Capitalization Program, Series A, 7.125%, 8/01/09 ........................................................................ 650,000 677,034 Maryland State CDA, Department of Housing and Community Development, MFHR, Series A, 7.50%, 5/15/31 ......................................................... 30,000 30,359 MFHR Mortgage, Series A, 7.80%, 5/15/32 ................................................ 985,000 1,017,525 MFHR Mortgage, Series A, 6.85%, 5/15/33 ................................................ 1,800,000 1,878,354 MFHR Mortgage, Series D, 7.70%, 5/15/20 ................................................ 1,000,000 1,039,720 MFHR Mortgage, Series E, 7.10%, 5/15/28 ................................................ 675,000 700,468 Residential, Series D, 5.25%, 9/01/29 .................................................. 5,000,000 4,591,300 Series B, 5.35%, 9/01/30 ............................................................... 2,985,000 2,776,587 SF Program, 2nd Series, 7.60%, 4/01/23 ................................................. 360,000 372,823 SF Program, 3rd Series, 7.25%, 4/01/27 ................................................. 1,435,000 1,482,585 SF Program, 4th Series, 7.375%, 4/01/10 ................................................ 995,000 1,023,795 SF Program, 4th Series, 7.45%, 4/01/32 ................................................. 890,000 917,679 SF Program, 5th Series, 6.85%, 4/01/11 ................................................. 1,955,000 2,025,927 SFHR Program, First Series, 7.30%, 4/01/17 ............................................. 1,000,000 1,035,150 SF Program, Refunding, Second Series, 5.00%, 4/01/17 ................................... 3,000,000 2,819,340 Maryland State EDC, Lease Revenue, Hilton Street Facilities, Series A, 7.00%, 1/01/10 ..... 1,000,000 1,066,970 Maryland State Energy Financing Administration Solid Waste Disposal Revenue, Limited Obligation, Wheelabrator Water Projects, 6.45%, 12/01/16 .............................. 3,000,000 3,124,620 Maryland State Health and Higher Educational Facilities Authority Revenue, Anne Arundel Medical Center, FSA Insured, 5.10%, 7/01/18 ............................... 3,375,000 3,157,549 Anne Arundel Medical Center, FSA Insured, 5.125%, 7/01/28 .............................. 2,000,000 1,817,040 Anne Arundel Medical Center, FSA Insured, 5.125%, 7/01/33 .............................. 7,190,000 6,493,217 Charity Obligation Group, Series A, 5.00%, 11/01/19 .................................... 1,515,000 1,388,740 Charity Obligation Group, Series A, 5.00%, 11/01/29 .................................... 2,250,000 1,994,805 Doctors Community Hospital, Pre-Refunded, 8.75%, 7/01/12 ............................... 1,000,000 1,061,220 Doctors Community Hospital, Pre-Refunded, 8.75%, 7/01/22 ............................... 250,000 265,305
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MARYLAND TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Maryland State Health and Higher Educational Facilities Authority Revenue, (cont.) Doctors Community Hospital, Refunding, 5.75%, 7/01/13 ...................................... $ 3,000,000 $ 2,856,840 Francis Scott Key Facility, junior lien, Refunding, 5.625%, 7/01/25 ........................ 2,510,000 2,467,832 Helix Health Issue, Refunding, AMBAC Insured, ETM, 5.00%, 7/01/27 .......................... 11,000,000 10,234,839 Johns Hopkins Medical Institutions, Parking Facilities, AMBAC Insured, 5.50%, 7/01/26 ...... 9,750,000 9,641,287 Johns Hopkins Medicine, Howard County Hospital, General Hospital Acquisition Issue, MBIA Insured, 5.00%, 7/01/29 ............................................................ 2,000,000 1,816,080 Johns Hopkins Medicine, MBIA Insured, 5.00%, 7/01/19 ....................................... 3,000,000 2,802,870 Johns Hopkins University, Refunding, 5.625%, 7/01/17 ....................................... 1,150,000 1,172,069 Kernan Hospital, Connie Lee Insured, 6.10%, 7/01/24 ........................................ 1,700,000 1,761,166 Mercy Medical Center Project, Refunding, FSA Insured, 5.75%, 7/01/26 ....................... 1,500,000 1,501,920 Roland Park Place Project, Refunding, 5.625%, 7/01/18 ...................................... 2,500,000 2,289,475 Roland Park Place Project, Refunding, 5.625%, 7/01/24 ...................................... 5,000,000 4,492,200 Upper Chesapeake Hospitals, Series A, FSA Insured, 5.375%, 1/01/28 ......................... 9,440,000 9,036,062 Upper Chesapeake Hospitals, Refunding, Series A, FSA Insured, 5.125%, 1/01/33 .............. 7,400,000 6,686,344 Maryland State Industrial Development Financing Authority EDR, FSA Insured, Pre-Refunded, 7.10%, 7/01/18 ............................................................... 1,350,000 1,446,323 Maryland State Industrial Development Financing Authority Revenue, American Center Physics Headquarters, 6.625%, 1/01/17 ...................................................... 6,000,000 6,298,560 Maryland State Stadium Authority Lease Revenue, Convention Center Expansion, AMBAC Insured, 5.875%, 12/15/14 ............................................................ 4,655,000 4,791,904 Maryland State Stadium Authority Sports Facilities Lease Revenue, AMBAC Insured, 5.75%, 3/01/22 .............................................................. 5,000,000 5,033,200 AMBAC Insured, 5.80%, 3/01/26 .............................................................. 2,045,000 2,059,806 Series D, 7.60%, 12/15/19 .................................................................. 500,000 514,470 Maryland State Transportation Facilities Authority Revenue, Refunding, Series 1992, 5.75%, 7/01/13 ................................................................ 5,400,000 5,445,684 Maryland Water Quality Financing Administration Revenue, Revolving Loan Fund, Series A, 6.55%, 9/01/14 ................................................................... 1,000,000 1,047,830 Montgomery County Housing Opportunities Commission MFHR, Series B, 6.00%, 7/01/37 ............. 2,500,000 2,539,100 Montgomery County Housing Opportunities Commission MFMR, Series A, 7.25%, 7/01/11 ............................................................................. 375,000 391,661 7.00%, 7/01/23 ............................................................................. 2,410,000 2,515,895 Montgomery County Housing Opportunities Commission SFMR, Series A, 6.80%, 7/01/17 ............................................................................. 1,775,000 1,831,889 7.50%, 7/01/17 ............................................................................. 190,000 195,989 7.625%, 7/01/17 ............................................................................ 5,000 5,052 Montgomery County Revenue Authority Golf Course System Revenue, Series A, 6.125%, 10/01/22 ........................................................................... 1,000,000 1,014,880 Northeast Solid Waste Disposal Authority Revenue, Montgomery County Resources Recreation Project, Series A, 6.20%, 7/01/10 ............................................................................. 3,100,000 3,252,272 6.30%, 7/01/16 ............................................................................. 6,000,000 6,217,860 Ocean City GO, Refunding, MBIA Insured, 5.75%, 3/15/12 .................................................................................... 1,880,000 1,956,666 3/15/13 .................................................................................... 1,120,000 1,156,232 3/15/14 .................................................................................... 1,180,000 1,216,851 Prince George's County COP, Real Estate Acquisition Program II, MBIA Insured, 6.00%, 9/15/14 ............................................................... 2,050,000 2,129,643 Prince George's County GO, Consolidated Public Improvement, MBIA Insured, 5.00%, 4/15/18 ............................................................... 2,100,000 1,962,240 Prince George's County Hospital Revenue, Dimensions Health Corp., Pre-Refunded, 7.00%, 7/01/22 ............................................................... 1,000,000 1,091,070 Prince George's County Housing Authority MFHR, Emerson House Project, Series A, 7.00%, 4/15/19 ................................................................... 5,500,000 5,772,800 Prince George's County Housing Authority Mortgage Revenue, New Keystone Apartments Project, Refunding, Series A, MBIA Insured, 6.80%, 7/01/25 ................................ 2,900,000 2,991,408 Prince George's County IDA, Lease Revenue, Upper Marlboro Justice Center Project, MBIA Insured, 5.80%, 6/30/14 ...................................................... 2,750,000 2,806,870 Prince George's County Parking Authority Revenue, Justice Center Facilities Project, Refunding, 6.45%, 5/01/05 ......................................................... 500,000 529,245 Prince George's County PCR, Refunding, Potomac Electric Project, 6.00%, 9/01/22 ............................................................................. 1,200,000 1,231,680 6.375%, 1/15/23 ............................................................................ 2,975,000 3,137,197 Puerto Rico Commonwealth GO, 5.50%, 7/01/17 ............................................................................. 4,050,000 4,026,915 5.40%, 7/01/25 ............................................................................. 1,950,000 1,896,921 Public Improvement, Refunding, 5.75%, 7/01/17 ................................................. 3,000,000 3,056,100 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y, 5.50%, 7/01/26 ................................................................... 6,900,000 6,701,694 Puerto Rico Electric Power Authority Revenue, Series AA, MBIA Insured, 5.375%, 7/01/27 ........ 3,000,000 2,917,500 Rockville Mortgage Revenue, Summit Apartments Project, Refunding, Series A, MBIA Insured, 5.70%, 1/01/26 ..................................................... 1,145,000 1,155,179 University of Maryland Auxiliary Facilities System and Tuition Revenue, Series A, 5.60%, 4/01/16 ................................................................... 1,000,000 1,018,480
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MARYLAND TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 .................................... $ 1,700,000 $ 1,628,294 Refunding, Series A, 5.50%, 10/01/14 ..................................................... 3,300,000 3,210,900 Washington Suburban Sanitary District GO, General Construction, 5.25%, 6/01/19 ............. 1,330,000 1,279,300 ------------ TOTAL LONG TERM INVESTMENTS (COST $261,934,789) ............................................ 262,341,014 ------------ (a) SHORT TERM INVESTMENTS 0.4% Howard County MFR, Avalon Meadows Housing Project, Weekly VRDN and Put, 3.05%, 6/15/26 ..... 800,000 800,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ............................ 300,000 300,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $1,100,000) ............................................. 1,100,000 ------------ TOTAL INVESTMENTS (COST $263,034,788) 98.8% ................................................ 263,441,014 OTHER ASSETS, LESS LIABILITIES 1.2% ........................................................ 3,244,046 ------------ NET ASSETS 100.0% .......................................................................... $266,685,060 ============
See glossary of terms on page 96. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN MISSOURI TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 --------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - --------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.19 $ 12.23 $ 11.83 $ 11.94 $ 11.44 $ 11.94 -------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .30 .61 .64 .65 .65 .65 Net realized and unrealized gains (losses) ... (.66) -- .44 (.07) .49 (.50) -------------------------------------------------------------------------- Total from investment operations .............. (.35) .61 1.08 .58 1.14 .15 -------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.30)(2) (.62) (.64) (.65) (.64) (.65) Net realized gains ........................... (.01) (.03) (.04) (.04) -- -------------------------------------------------------------------------- Total distributions ........................... (.31) (.65) (.68) (.69) (.64) (.65) -------------------------------------------------------------------------- Net asset value, end of period ................ $ 11.52 $ 12.19 $ 12.23 $ 11.83 $ 11.94 $ 11.44 ========================================================================== Total return* ................................. (2.92%) 5.12% 9.43% 5.06% 10.23% 1.44% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $383,809 $386,948 $308,045 $269,564 $247,522 $227,442 Ratios to average net assets: Expenses ..................................... .68%** .70% .71% .70% .71% .70% Net investment income ........................ 4.98%** 4.99% 5.32% 5.56% 5.58% 5.75% Portfolio turnover rate ....................... 10.22% 15.21% 14.30% 21.81% 18.27% 19.84% CLASS C - -------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.24 $ 12.27 $ 11.85 $ 11.97 $ 11.47 ------------------------------------------------------------- Income from investment operations: Net investment income ........................ .27 .54 .58 .57 .48 Net realized and unrealized gains (losses) ... (.66) .01 .45 (.07) .50 ------------------------------------------------------------- Total from investment operations .............. (.39) .55 1.03 .50 .98 ------------------------------------------------------------- Less Distributions from: Net investment income ........................ (.27)(2) (.55) (.57) (.58) (.48) Net realized gains ........................... (.01) (.03) (.04) (.04) -- ------------------------------------------------------------- Total distributions ........................... (.28) (.58) (.61) (.62) (.48) ------------------------------------------------------------- Net asset value, end of period ................ $ 11.57 $ 12.24 $ 12.27 $ 11.85 $ 11.97 ============================================================= Total return* ................................. (3.18%) 4.58% 8.96% 4.32% 8.66% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $25,343 $20,396 $10,045 $ 4,295 $ 1,325 Ratios to average net assets: Expenses ..................................... 1.24%** 1.25% 1.27% 1.27% 1.27%** Net investment income ........................ 4.42%** 4.44% 4.75% 4.92% 4.94%** Portfolio turnover rate ....................... 10.22% 15.21% 14.30% 21.81% 18.27%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.0001 See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.0% Audrain County Hospital Revenue, Audrain Medical Center Project, Refunding, AMBAC Insured, 7.35%, 11/01/08 ................................................................ $ 500,000 $ 537,535 Bi State Development Agency Missouri Illinois Metropolitan District, St. Clair County Metrolink Extension, Series A, MBIA Insured, 5.00%, 7/01/28 ............... 6,500,000 5,808,725 Term Facilities Revenue, American Commercial Lines Inc., Pre-Refunded, 7.75%, 6/01/10 ...... 3,000,000 3,176,400 Cape Girardeau County IDA, Solid Waste Disposal Revenue, Procter and Gamble Paper Products, 5.30%, 5/15/28 ................................................................ 6,875,000 6,432,938 Fenton Public Facility Authority Leasehold Revenue, 5.25%, 1/01/18 ............................ 2,250,000 2,096,843 Guam Airport Authority Revenue, Series A, 6.50%, 10/01/23 .................................................................. 1,075,000 1,136,630 Series B, 6.60%, 10/01/10 .................................................................. 500,000 530,850 Series B, 6.70%, 10/01/23 .................................................................. 4,000,000 4,255,240 Guam Power Authority Revenue, Refunding, Series A, 5.125%, 10/01/29 ........................................................................... 2,000,000 1,780,320 5.25%, 10/01/34 ............................................................................ 2,000,000 1,792,000 Hannibal IDA, Health Facilities, FSA Insured, 5.75%, 3/01/22 .................................. 1,800,000 1,809,594 Hazelwood IDA, MFHR, Lakes Apartments Project, Refunding, Series A, GNMA Secured, 6.10%, 9/20/26 ........................................................ 1,745,000 1,761,822 Howard Bend Levee District Special Tax, 5.65%, 3/01/13 ............................................................................. 1,000,000 964,350 5.85%, 3/01/19 ............................................................................. 4,000,000 3,816,760 Jackson County IDAR, St. Joseph's Health Center Corp., MBIA Insured, 6.50%, 7/01/19 ........... 3,000,000 3,155,370 Jackson County Public Building Corp. Leasehold Revenue, Capital Improvement Projects, MBIA Insured, 5.70%, 12/01/17 ....................................................... 1,595,000 1,614,268 Jefferson County GO, Reorganized School District No. R-3, AMBAC Insured, 7.00%, 3/01/09 ....... 370,000 383,279 Kansas City Airport Revenue, General Improvement, Series B, FSA Insured, Pre-Refunded, 6.875%, 9/01/12 ......................................... 605,000 674,049 Kansas City IDA, MFHR, Hilltop Village Apartments Project, Refunding, Series A, 5.70%, 10/01/17 ...................... 1,030,000 1,012,851 Hilltop Village Apartments Project, Refunding, Series A, 5.80%, 10/01/27 ................... 1,555,000 1,521,194 Mews Apartments Project, Series A, FNMA Secured, 6.30%, 7/01/20 ............................ 3,345,000 3,436,218 Kansas City IDAR, Ewing Marion Kauffman, Series B, 5.70%, 4/01/27 ............................. 11,100,000 11,297,358 Kansas City Land Clearance RDA Lease Revenue, Municipal Auditorium and Muehlebach Hotel, Series A, FSA Insured, 5.90%, 12/01/18 .............................................................................. 5,000,000 5,166,450 Kansas City MAC Revenue, Leasehold Improvement, Citywide Infrastructure, Series B, FSA Insured, 6.50%, 3/01/14 ............................. 7,790,000 8,251,947 Truman Medical Center, Series A, Pre-Refunded, 7.00%, 11/01/11 ............................. 1,665,000 1,761,287 Kansas City Municipal Assistance, Leasehold Roe Bartle, Refunding, Series A, MBIA Insured, 5.00%, 4/15/20 ........................................................ 17,635,000 16,108,152 Kansas City Tax Increment Financing Commission Tax Increment Revenue, Briarcliff West Project, Series B, 7.00%, 11/01/14 ............................................ 3,525,000 3,732,587 Lake of the Ozarks Community Bridge Corp. Bridge System Revenue, Pre-Refunded, 6.25%, 12/01/16 .............................................................. 4,535,000 5,026,775 Pre-Refunded, 6.40%, 12/01/25 .............................................................. 7,000,000 7,799,960 Refunding, 5.25%, 12/01/14 ................................................................. 1,000,000 949,590 Refunding, 5.25%, 12/01/26 ................................................................. 1,000,000 912,330 Lee's Summit IDAR, John Knox Village Project, 6.55%, 8/15/10 ............................................................................. 1,000,000 1,040,740 6.625%, 8/15/13 ............................................................................ 2,000,000 2,112,940 Missouri School Board Association COP, Pooled Finance Program, Series A-3, BIG Insured, 7.875%, 3/01/06 ................................................... 5,000 5,057 Series A-5, BIG Insured, 7.375%, 3/01/06 ................................................... 35,000 35,516 Missouri School Board Association Lease COP, Fox C-6 School District, FSA Insured, 5.75%, 3/01/16 ....................................... 6,150,000 6,269,802 Republic R-3 School District Project, Refunding, FSA Insured, 6.00%, 3/01/16 ............... 2,220,000 2,288,465 Missouri State Development Finance Board Recreation Facilities Revenue, YMCA Greater Saint Louis Project, Series A, 5.40%, 9/01/18 ......................................... 7,420,000 7,239,323 Missouri State Development Finance Board Solid Waste Disposal Revenue, Procter and Gamble Paper Product, 5.20%, 3/15/29 .............................................. 3,000,000 2,758,800 Missouri State Environmental Improvement and Energy Resources Authority Environmental Improvement Revenue, Union Electric Co. Project, Series A, 7.40%, 5/01/20 .......................................... 2,390,000 2,483,569 Missouri State Environmental Improvement and Energy Resources Authority PCR, National Rural Association, Electric Project, Series G-6, AMBAC Insured, 5.85%, 2/01/13 ............................................................................ 2,100,000 2,177,595 Thomas Hill Electric Cooperative, 5.50%, 12/01/11 .......................................... 2,000,000 2,046,360 Missouri State Environmental Improvement and Energy Resources Authority Water PCR, Revolving Fund Program, PCR, Kansas City Project, Series A, 5.75%, 1/01/16 ......................................... 1,000,000 1,019,110 Series A, 7.00%, 10/01/10 .................................................................. 940,000 983,343
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Missouri State Environmental Improvement and Energy Resources Authority Water PCR, Revolving Fund Program, (cont.) Series A, 6.55%, 7/01/14 ..................................................................... $ 4,500,000 $ 4,794,120 Series A, FSA Insured, 6.05%, 7/01/16 ........................................................ 1,000,000 1,047,660 Series B, 7.125%, 12/01/10 ................................................................... 430,000 452,145 Series B, 5.80%, 1/01/15 ..................................................................... 1,000,000 1,023,860 Series B, 7.20%, 7/01/16 ..................................................................... 2,000,000 2,229,860 Missouri State HDC, MFHR, FHA Insured, 8.50%, 12/01/29 ........................................................... 135,000 135,772 Series B, GNMA Secured, 6.40%, 12/01/24 ...................................................... 2,105,000 2,152,594 SFMR, Homeowner Loan, Series B-1, 5.65%, 3/01/30 ............................................. 8,000,000 7,718,560 SFMR, Homeowner Loan, Series D, GNMA Secured, 6.125%, 3/01/28 ................................ 1,655,000 1,676,515 SFMR, Series A, GNMA Secured, 7.625%, 2/01/22 ................................................ 220,000 225,419 SFMR, Series B, GNMA Secured, 6.10%, 9/01/14 ................................................. 1,700,000 1,747,566 SFMR, Series B, GNMA Secured, 7.625%, 6/01/21 ................................................ 190,000 192,829 SFMR, Series B, GNMA Secured, 7.75%, 6/01/22 ................................................. 1,055,000 1,086,724 SFMR, Series B, GNMA Secured, 6.45%, 9/01/27 ................................................. 1,635,000 1,682,137 SFMR, Series B-2, GNMA/FNMA Insured, 5.50%, 3/01/25 .......................................... 1,995,000 1,913,265 SFMR, Series C, GNMA Secured, 6.90%, 7/01/18 ................................................. 1,215,000 1,260,490 SFMR, Series D-2, GNMA/FNMA Insured, 5.40%, 9/01/28 .......................................... 2,350,000 2,209,423 Missouri State Health and Educational Facilities Authority Educational Facilities Revenue, Washington University, 5.00%, 11/15/37 ................................................. 11,150,000 9,692,807 Missouri State Health and Educational Facilities Authority Health Facilities Revenue, BJC Health System, MBIA Insured, 5.00%, 5/15/38 .............................................. 5,000,000 4,392,300 Children's Mercy Hospital, 5.30%, 5/15/28 .................................................... 12,420,000 11,235,380 Freeman Health Systems Project, 5.25%, 2/15/28 ............................................... 2,750,000 2,409,303 Health Midwest, Series A, MBIA Insured, 6.40%, 2/15/15 ....................................... 5,000,000 5,236,150 Health Midwest, Series B, MBIA Insured, 6.10%, 6/01/11 ....................................... 700,000 739,459 Health Midwest, Series B, MBIA Insured, 6.25%, 6/01/14 ....................................... 1,990,000 2,113,917 Health Midwest, Series B, MBIA Insured, 6.25%, 2/15/22 ....................................... 1,100,000 1,145,760 Heartland Health, Refunding and Improvement, 8.125%, 10/01/10 ................................ 865,000 888,563 Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 .............................. 2,745,000 2,892,434 Jefferson Memorial Hospital Obligated Group, 6.75%, 5/15/15 .................................. 4,000,000 4,187,360 Jefferson Memorial Hospital Obligated Group, 6.80%, 5/15/25 .................................. 3,250,000 3,385,720 Lake of the Ozarks General Hospital, 6.25%, 2/15/11 .......................................... 410,000 421,070 Lake of the Ozarks General Hospital, FSA Insured, 5.125%, 2/15/24 ............................ 2,500,000 2,280,875 Lake of the Ozarks General Hospital, Pre-Refunded, 6.25%, 2/15/11 ............................ 840,000 921,682 Lake of the Ozarks General Hospital, Pre-Refunded, 6.50%, 2/15/21 ............................ 670,000 746,347 Lake of the Ozarks General Hospital, Refunding, 6.50%, 2/15/21 ............................... 330,000 342,349 Lutheran Senior Services, Refunding, 5.875%, 2/01/23 ......................................... 2,600,000 2,508,610 Lutheran Senior Services, Series A, 6.375%, 2/01/27 .......................................... 4,000,000 4,081,800 Park Lane Medical Center, Series A, MBIA Insured, 4.70%, 1/01/04 ............................. 1,900,000 1,907,258 Park Lane Medical Center, Series A, MBIA Insured, 5.60%, 1/01/15 ............................. 10,300,000 10,061,143 SSM Health Care, Refunding, Series AA, MBIA Insured, 6.25%, 6/01/16 .......................... 795,000 837,358 Missouri State Health and Educational Facilities Authority Revenue, SSM Health Care, Refunding, Series A, MBIA Insured, 5.00%, 6/01/18 .............................................. 7,310,000 6,732,583 Missouri State Western College Revenue, Student Housing, Pre-Refunded, 8.00%, 10/01/16 .......... 5,000,000 5,468,900 Moberly Water and Sewer Revenue, Refunding and Improvement, FGIC Insured, Pre-Refunded, 7.50%, 8/01/15 ................................................................... 1,000,000 1,053,780 North Kansas City Hospital Revenue, AMBAC Insured, 5.00%, 11/15/28 .............................. 4,300,000 3,834,783 Northeast State University Recreational Facility Revenue, Campus Recreational Center Project, AMBAC Insured, 5.80%, 6/01/15 .................................................. 1,000,000 1,020,420 Northwest Educational Facilities Authority Leasehold Revenue, Jefferson County, FSA Insured, 5.70%, 3/01/15 ............................................................................... 3,775,000 3,805,049 Pre-Refunded, 5.70%, 3/01/15 ................................................................. 1,425,000 1,498,929 O Fallon Public Facilities Authority Leasehold Revenue, Series A, AMBAC Insured, 5.40%, 2/01/17 .................................................................. 1,575,000 1,557,407 Phelps County Hospital Revenue, Regional Medical Center, Refunding, Connie Lee Insured, 6.00%, 5/15/13 ............................................................. 5,000,000 5,137,700 Poplar Bluff Public Building Corp. Leasehold Revenue, Series A, MBIA Insured, Pre-Refunded, 5.50%, 9/01/12 ................................................................... 2,820,000 2,941,880 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured, Pre-Refunded, 9.00%, 7/01/09 ............................................ 40,000 47,160 Puerto Rico Commonwealth GO, 5.00%, 7/01/27 ..................................................... 1,000,000 904,100
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.90%, 7/01/07 ............................................................................. $ 50,000 $ 50,563 7.75%, 7/01/08 ............................................................................. 475,000 482,173 Puerto Rico Electric Power Authority Revenue, Series DD, 5.00%, 7/01/28 .................................................................. 2,470,000 2,197,806 Series X, 6.00%, 7/01/15 ................................................................... 2,375,000 2,461,711 Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ........................... 320,000 328,960 Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ................................................................................... 1,265,000 1,314,689 Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Industrial Revenue, Guaynabo Municipal Government, 5.625%, 7/01/22 ................................................ 2,500,000 2,417,175 Puerto Rico Port Authority Revenue, Special Facilities, American Airlines, Series A, 6.25%, 6/01/26 ................................................................... 2,500,000 2,574,300 Puerto Rico Public Finance Corp. Commonwealth Appropriation, Series A, 5.00%, 6/01/26 ......... 1,865,000 1,665,669 Pulaski County IDA, MFHR, St. Robert Project, Series A, GNMA Collateral, 6.00%, 8/20/39 ....... 1,600,000 1,595,136 Raymore GO, FSA Insured, Pre-Refunded, 6.00%, 3/01/14 ......................................... 1,000,000 1,042,420 Springfield Missouri IDAR, Bethesda Living Centers, Refunding, Series A, 5.625%, 8/15/18 ............................................................................ 3,000,000 2,762,130 5.70%, 8/15/28 ............................................................................. 5,250,000 4,736,498 St. Charles County IDA, MFHR, Ashwood Apartments Project, Series A, FSA Insured, 5.60%, 4/01/30 ...................................................... 1,000,000 959,050 St. Charles County Public Water Supply District No. 2 COP, Refunding, Series A, MBIA Insured, 5.00%, 12/01/20 ....................................................... 3,240,000 2,954,945 St. Charles Public Facility Authority Leasehold Revenue, Refunding, AMBAC Insured, 5.80%, 2/01/10 .............................................................. 3,000,000 3,108,480 St. Louis Airport Revenue, Lambert-St. Louis International Airport, FGIC Insured, Pre-Refunded, 6.125%, 7/01/15 ................................................ 1,925,000 2,045,236 Refunding and Improvement, FGIC Insured, 6.125%, 7/01/15 ................................... 75,000 78,620 Series B, FGIC Insured, 5.25%, 7/01/27 ..................................................... 2,555,000 2,371,807 St. Louis County Housing Authority MFHR, Kensington Square Apartments Project, Refunding, 6.55%, 3/01/14 ............................................................................. 1,000,000 1,037,560 6.65%, 3/01/20 ............................................................................. 2,750,000 2,866,875 St. Louis County IDA, Bethesda Living Centers, Series B, 5.85%, 8/15/28 .......................................... 1,500,000 1,382,610 Elderly Housing Revenue, Centenary Towers Apartments Project, 6.40%, 4/01/14 ............... 1,000,000 1,032,510 Elderly Housing Revenue, Centenary Towers Apartments Project, 6.55%, 4/01/19 ............... 1,000,000 1,023,480 Health Facilities Revenue, Healthcare Nazareth Living, Refunding, 5.625%, 8/15/19 .......... 3,000,000 2,755,770 Health Facilities Revenue, Healthcare Nazareth Living, Refunding, 5.625%, 8/15/29 .......... 3,250,000 2,896,270 Health Facilities Revenue, Mother of Perpetual Help, GNMA Secured, 6.40%, 8/01/35 .......... 1,895,000 1,992,801 MFHR, Lucas Hunt Village Project, Refunding, Series A, GNMA Secured, 5.125%, 9/20/23 ....... 1,250,000 1,158,038 MFHR, Lucas Hunt Village Project, Refunding, Series A, GNMA Secured, 5.20%, 9/20/31 ........ 2,095,000 1,924,258 MFHR, South Summit Apartments, Refunding, Series A, GNMA Secured, 6.10%, 4/20/32 ........... 1,250,000 1,271,738 Sewer and Solid Waste Disposal Facilities Revenue, Anheuser-Busch Project, 5.875%, 11/01/26 .......................................................................... 1,000,000 1,000,870 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 9/01/19 .............................. 20,000 20,250 St. Louis County Regional Convention and Sports Complex Authority Revenue, Convention and Sports Project, Refunding, Series B, 5.75%, 8/15/21 ......................... 5,565,000 5,578,690 St. Louis GO, Public Safety, FGIC Insured, 5.125%, 2/15/18 .................................... 1,715,000 1,627,655 St. Louis Land Clearance RDA, Kiel Site Lease, Refunding, Series A, MBIA Insured, 5.125%, 7/01/21 ....................................................... 1,625,000 1,518,628 St. Louis Municipal Finance Corp. Leasehold Revenue, City Justice Center Improvement, Series A, AMBAC Insured, 6.00%, 2/15/19 ................... 5,370,000 5,575,027 Refunding, Series A, 6.00%, 7/15/13 ........................................................ 10,000,000 10,287,400 St. Louis Parking Facilities Revenue, Marquette Building Facilities, Series A, MBIA Insured, 5.25%, 12/15/23 ..................... 1,000,000 948,680 Pre-Refunded, 6.625%, 12/15/21 ............................................................. 470,000 510,961 St. Louis Regional Convention and Sports Complex Authority Revenue, Convention and Sports Facilities, Refunding, Series C, AMBAC Insured, 5.625%, 8/15/21 ...... 4,725,000 4,726,323 Series C, 7.75%, 8/15/01 ................................................................... 915,000 952,195 Series C, 7.90%, 8/15/21 ................................................................... 555,000 594,588 Series C, Pre-Refunded, 7.90%, 8/15/21 ..................................................... 4,000,000 4,505,520 Taney County IDA, Hospital Revenue, The Skaggs Community Hospital Association, 5.30%, 5/15/18 ............................................................................. 3,000,000 2,700,180 5.40%, 5/15/28 ............................................................................. 1,500,000 1,319,895 Taney County Reorganization School District No. R-V GO, Direct Deposit Program, 5.80%, 3/01/17 ................................................................................ 2,585,000 2,641,637
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN MISSOURI TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) University of Missouri Health Facilities Revenue, Health System, Refunding, Series A, AMBAC Insured, 5.60%, 11/01/26 ................... $ 5,000,000 $ 4,937,700 Series A, AMBAC Insured, 5.125%, 11/01/28 ............................................ 4,430,000 4,040,293 University of Missouri Revenues, System Facilities, 5.80%, 11/01/27 ..................... 4,000,000 4,050,640 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 ...................................................................... 2,500,000 2,444,900 5.50%, 10/01/22 ...................................................................... 2,500,000 2,374,675 Webb City School District No. R-VII Facilities Group Leasehold Revenue, Refunding and Improvement, FSA Insured, 5.625%, 8/01/16 ................................. 1,115,000 1,120,954 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Refunding, 5.50%, 11/15/12 ........................................................... 1,000,000 927,220 Refunding, 5.60%, 11/15/17 ........................................................... 1,700,000 1,517,947 Refunding, 5.65%, 11/15/22 ........................................................... 1,500,000 1,320,510 Series A, Pre-Refunded, 8.625%, 9/15/20 .............................................. 1,935,000 2,041,638 ------------ TOTAL LONG TERM INVESTMENTS (COST $400,998,805) ......................................... 400,917,821 ------------ (a)SHORT TERM INVESTMENTS 1.0% Kansas City IDA, Hospital Revenue, Research Health Services System, MBIA Insured, Daily VRDN and Put, 2.75%, 10/15/14 ...................................................................... 100,000 100,000 2.75%, 4/15/15 ....................................................................... 1,000,000 1,000,000 2.75%, 10/15/15 ...................................................................... 900,000 900,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ...................................... 1,000,000 1,000,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 .......................... 1,200,000 1,200,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $4,200,000) .......................................... 4,200,000 ------------ TOTAL INVESTMENTS (COST $405,198,805) 99.0% ............................................. 405,117,821 OTHER ASSETS, LESS LIABILITIES 1.0% ..................................................... 4,034,613 ------------ NET ASSETS 100.0% ....................................................................... $409,152,434 ============
See glossary of terms on page 96. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ----------------------------- CLASS A (UNAUDITED)*** 1999 1998 - --------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............ $ 12.16 $ 12.11 $ 11.73 -------- -------- -------- Income from investment operations: Net investment income .......................... .30 .60 .62 Net realized and unrealized gains (losses) ..... (.63) .06 .38 -------- -------- -------- Total from investment operations ................ (.33) .66 1.00 -------- -------- -------- Less distributions from net investment income .... (.30)(3) (.61) (.62) -------- -------- -------- Net asset value, end of period ................... $ 11.53 $ 12.16 $ 12.11 ======== ======== ======== Total return* .................................... (2.73%) 5.54% 8.78% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $346,559 $349,419 $297,406 Ratios to average net assets: Expenses ........................................ .68%** .70% .70% Net investment income ........................... 5.00%** 4.95 5.24% Portfolio turnover rate .......................... 4.56% 5.44% 9.95%
YEAR ENDED FEBRUARY 28, ------------------------------------------------ CLASS A 1997 1996(1) 1995 - --------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.75 $ 11.37 $ 11.92 -------- -------- -------- Income from investment operations: Net investment income ......................... .64 .64 .65 Net realized and unrealized gains (losses) .... (.03) .39 (.55) -------- -------- -------- Total from investment operations ............... .61 1.03 .10 -------- -------- -------- Less distributions from net investment income .. (.63) (.65)(2) (.65) -------- -------- -------- Net asset value, end of period ................. $ 11.73 $ 11.75 $ 11.37 ======== ======== ======== Total return* .................................. 5.38% 9.28% 1.06% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $260,979 $247,031 $216,263 Ratios to average net assets: Expenses ...................................... .70% .71% .70% Net investment income ......................... 5.47% 5.52% 5.75% Portfolio turnover rate ........................ 9.98% 25.19% 25.05%
CLASS C - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $ 12.24 $ 12.18 $ 11.79 $ 11.80 $ 11.41 ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income ........................... .27 .54 .56 .57 .49 Net realized and unrealized gains (losses) ...... (.64) .06 .39 (.02) .38 ---------- ---------- ---------- ---------- ---------- Total from investment operations ................. (.37) .60 .95 .55 .87 ---------- ---------- ---------- ---------- ---------- Less distributions from net investment income .... (.27)(3) (.54) (.56) (.56) (.48) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ................... $ 11.60 $ 12.24 $ 12.18 $ 11.79 $ 11.80 ========== ========== ========== ========== ========== Total return* .................................... (3.08%) 5.02% 8.22% 4.83% 7.77% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $ 42,286 $ 38,171 $ 20,043 $ 9,607 $ 2,430 Ratios to average net assets: Expenses ........................................ 1.24%** 1.25 1.26% 1.26% 1.28%** Net investment income ........................... 4.44%** 4.40 4.69% 4.85% 4.90%** Portfolio turnover rate .......................... 4.56% 5.44% 9.95% 9.98% 25.19%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.001. (3) Includes distributions in excess of net investment income in the amount of $.002. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 99.6% Appalachian State University Revenue, Utility Systems, MBIA Insured, Pre-Refunded, 6.10%, 5/15/13 .................................................. $1,075,000 $ 1,165,451 Refunding, MBIA Insured, 5.00%, 5/15/24 ..................................................... 4,410,000 3,970,852 Refunding, MBIA Insured, 5.00%, 5/15/18 ..................................................... 1,000,000 923,290 Asheville COP, Series A, MBIA Insured, 5.125%, 6/01/18 ......................................... 1,000,000 937,490 Asheville Water System Revenue, FGIC Insured, 5.70%, 8/01/25 ................................... 4,000,000 4,038,720 Buncombe County Metropolitan Sewage District System Revenue, FSA Insured, 5.00%, 7/01/29 ................................................................. 5,000,000 4,448,150 Series B, Pre-Refunded, 6.75%, 7/01/16 ...................................................... 10,000 10,580 Cabarrus County Development Corp. Installment Payment Revenue, AMBAC Insured, 5.30%, 6/01/19 ............................................................... 1,250,000 1,205,425 Centennial Authority Hotel Tax Revenue, Arena Project, FSA Insured, 5.125%, 9/01/19 ............ 5,115,000 4,778,280 Charlotte COP, Convention Facility Project, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/11 ....... 2,250,000 2,428,425 Charlotte GO, Public Improvements, Series A, 5.00%, 2/01/22 ............................................... 2,190,000 2,031,203 Water and Sewer, 5.00%, 2/01/21 ............................................................. 4,260,000 3,963,334 (b)Charlotte Water and Sewer Systems Revenue, 5.25%, 6/01/24 .................................... 4,000,000 3,792,880 Charlotte-Mecklenberg Hospital Authority Health Care System Revenue, 5.90%, 1/15/16 .............................................................................. 3,465,000 3,540,364 Carolinas Healthcare System, Series A, 5.125%, 1/15/22 ...................................... 8,000,000 7,225,600 Pre-Refunded, 5.90%, 1/15/16 ................................................................ 1,000,000 1,077,310 Refunding, Series 1992, 6.25%, 1/01/20 ...................................................... 2,620,000 2,723,097 Refunding, Series 1992, Pre-Refunded, 6.25%, 1/01/20 ........................................ 1,000,000 1,060,340 Coastal Solid Waste Disposal System Authority Revenue, Regional Solid Waste Management, Refunding, 6.50%, 6/01/08 ................................... 3,100,000 3,328,005 Columbus County Industrial Facilities and PCFA, Solid Water Disposal Revenue, International Paper Co. Project, Refunding, Series A, 5.80%, 12/01/16 ........................ 1,450,000 1,426,597 Concord COP, Series B, MBIA Insured, 5.75%, 6/01/16 .............................................................................. 1,475,000 1,502,229 6.125%, 6/01/21 ............................................................................. 2,180,000 2,261,096 Concord Utilities Systems Revenue, Series A, MBIA Insured, 5.00%, 12/01/22 ..................... 1,000,000 906,780 Cumberland County COP, Civic Center Project, Refunding, AMBAC Insured, 5.00%, 12/01/18 ................................................... 3,000,000 2,749,680 Refunding, AMBAC Insured, 5.00%, 12/01/24 ................................................... 2,760,000 2,482,427 Series A, AMBAC Insured, Pre-Refunded, 6.40%, 12/01/19 ...................................... 3,500,000 3,866,170 Series A, AMBAC Insured, Pre-Refunded, 6.40%, 12/01/24 ...................................... 3,765,000 4,158,894 Cumberland County Hospital Facilities Revenue, Cumberland County Hospital Systems Inc., MBIA Insured, Pre-Refunded, 6.00%, 10/01/21 ................................................. 2,500,000 2,592,575 Refunding, 5.25%, 10/01/29 .................................................................. 5,500,000 4,907,430 Davidson County COP, MBIA Insured, 5.00%, 6/01/18 .............................................. 600,000 550,662 Davie County GO, North Carolina Water, Unlimited Tax, Pre-Refunded, 7.10%, 4/01/10 ..................................................................................... 350,000 363,640 4/01/11 ..................................................................................... 250,000 259,743 Duplin County COP, Social Service Administrative Building, Solid Waste Project, FGIC Insured, 6.75%, 9/01/12 ............................................ 2,000,000 2,115,620 Durham COP, Series 1991, 6.875%, 4/01/09 ....................................................... 1,650,000 1,735,058 Durham County COP, Hospital and Office Facilities Project, Pre-Refunded, 6.00%, 5/01/14 ........................ 3,000,000 3,211,770 Hospital and Office Facilities Project, Pre-Refunded, 6.00%, 5/01/17 ........................ 3,200,000 3,425,888 Jail Facilities and Computer Equipment Project, Pre-Refunded, 6.625%, 5/01/14 ............... 3,000,000 3,175,320 East Carolina University Revenue, Student Fee, Student Health Center, MBIA Insured, 5.25%, 5/01/19 .......................................... 1,160,000 1,122,625 Fayetteville Public Works Commission Revenue, FSA Insured, 5.125%, 3/01/17 ................................................................ 2,500,000 2,365,950 FSA Insured, 5.125%, 3/01/24 ................................................................ 2,000,000 1,841,740 Series A, FSA Insured, 6.00%, 3/01/16 ....................................................... 2,000,000 2,077,160 Franklin County COP, AMBAC Insured, 5.00%, 6/01/25 ............................................. 1,500,000 1,345,980 Gaston COP, Police Station Project, FGIC Insured, 5.70%, 8/01/15 ............................... 1,500,000 1,535,370 Gaston County COP, Public Facilities Project, MBIA Insured, 5.25%, 12/01/16 .................... 1,000,000 977,730 Gaston County Industrial Facilities and PCFA Revenue, Duke Power Co. Project, 7.70%, 10/01/12 .. 750,000 774,413 Gastonia Combined Utilities System Revenue, MBIA Insured, Pre-Refunded, 6.10%, 5/01/19 ......... 2,200,000 2,384,052 Greensboro COP, Coliseum Arena Expansion Project, 6.75%, 12/01/09 .............................. 1,610,000 1,698,131
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Greensboro HDC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.70%, 1/01/24 ............. $ 1,320,000 $ 1,358,095 Guam Power Authority Revenue, Series A, Pre-Refunded, 6.375%, 10/01/08 .......................... 1,000,000 1,077,630 Halifax County Industrial Facilities and PCFA Revenue, Champion International Corporate Project, 5.45%, 11/01/33 .................................... 4,000,000 3,519,760 Halifax County Insured Facility PCR, Solid Waste Disposal, Champion International Corp., 8.15%, 11/01/19 ................................................ 400,000 410,056 Haywood County Industrial Facilities and PCFA, Environmental Improvement Revenue, Champion International Project, 6.25%, 9/01/25 ........... 2,000,000 2,017,500 Solid Waste Disposal Revenue, Champion International, 8.10%, 11/01/09 ....................... 195,000 199,895 Solid Waste Disposal Revenue, Champion International, Pre-Refunded, 8.10%, 11/01/09 ......... 5,000 5,134 Highpoint Special Obligation Sales Tax Revenue, Solid Waste Management Project, 7.15%, 7/01/01 .. 800,000 806,400 Johnston County Finance Corp. Installment Payment Revenue, School and Museum Project, FSA Insured, 5.25%, 8/01/21 ....................................... 1,000,000 953,660 Kinston Enterprise System Revenue, Combined Enterprise System, FSA Insured, 5.70%, 4/01/21 ...... 1,700,000 1,714,824 Kinston Housing Authority Mortgage Revenue, Kinston Towers Project, Refunding, 6.75%, 12/01/18 ........................................... 3,155,000 3,234,317 Martin County Industrial Facilities and PCFA Revenue, Pollution Control, Weyerhaeuser Co. Project, Refunding, 6.375%, 1/01/10 ..................... 3,000,000 3,122,340 Solid Waste, Weyerhaeuser Co. Project, 5.65%, 12/01/23 ...................................... 2,000,000 1,891,460 Solid Waste, Weyerhaeuser Co. Project, 6.00%, 11/01/25 ...................................... 4,000,000 4,020,080 Mooresville Grade School District COP, AMBAC Insured, 6.35%, 10/01/14 ........................... 1,000,000 1,055,790 New Hanover County Hospital Revenue, New Hanover Regional Medical Center Project, MBIA Insured, 5.00%, 10/01/28 ................... 4,000,000 3,562,960 New Hanover County Industrial Facilities and PCFA Revenue, Refunding, 6.70%, 7/01/19 ............ 1,000,000 1,047,820 North Carolina Eastern Municipal Power Agency Power System Revenue, Refunding, MBIA Insured, 5.375%, 1/01/24 .................................................... 9,300,000 8,963,247 Refunding, Series A, 6.50%, 1/01/17 ......................................................... 9,000,000 9,096,750 Refunding, Series A, 6.50%, 1/01/18 ......................................................... 3,000,000 3,080,820 Refunding, Series A, 5.75%, 1/01/26 ......................................................... 10,000,000 9,176,700 Refunding, Series B, 6.00%, 1/01/14 ......................................................... 3,000,000 2,954,430 Refunding, Series B, 5.75%, 1/01/24 ......................................................... 2,000,000 1,842,840 Series B, MBIA Insured, 5.875%, 1/01/21 ..................................................... 5,000,000 5,094,750 North Carolina Educational Facilities Finance Agency Revenue, High Point College Project, 7.10%, 12/01/07 .................................................................................... 190,000 194,820 12/01/08 .................................................................................... 205,000 210,174 12/01/09 .................................................................................... 220,000 225,502 North Carolina HFA, Home Ownership, Series 2-B, 5.10%, 7/01/17 .................................................. 1,450,000 1,381,357 MF, Mortgage Loan Resolution, Refunding, Series H, 6.05%, 7/01/28 ........................... 2,500,000 2,565,625 MF, Refunding, Series A, AMBAC Insured, 5.90%, 7/01/20 ...................................... 3,000,000 3,022,140 MF, Refunding, Series J, 5.45%, 7/01/17 ..................................................... 2,175,000 2,121,560 MFR, Refunding, Series B, 6.90%, 7/01/24 .................................................... 2,925,000 3,101,729 Refunding, Series F, 6.70%, 1/01/27 ......................................................... 4,855,000 5,160,574 SF, Refunding, Series DD, 6.20%, 9/01/27 .................................................... 2,920,000 2,965,377 SF, Series JJ, 6.45%, 9/01/27 ............................................................... 4,640,000 4,752,566 SFMR, Series J, 7.40%, 3/01/22 .............................................................. 135,000 138,349 SFMR, Series M, 7.85%, 9/01/28 .............................................................. 155,000 158,943 SFR, Refunding, Series S, 6.95%, 3/01/17 .................................................... 2,360,000 2,466,460 SFR, Series AA, 6.25%, 3/01/17 .............................................................. 915,000 943,100 SFR, Series RR, 5.85%, 9/01/28 .............................................................. 3,000,000 3,010,830 SFR, Series X, 6.65%, 9/01/19 ............................................................... 2,020,000 2,098,538 North Carolina Medical Care Commission Health Care Facilities Revenue, Duke University Health Systems Project,Series B, 5.00%, 6/01/28 ............................. 5,000,000 4,380,200 Novant Health Project, Refunding, Series A, MBIA Insured, 5.00%, 10/01/18 ................... 1,500,000 1,375,500 Novant Health Project, Refunding, Series A, MBIA Insured, 5.00%, 10/01/24 ................... 5,500,000 4,948,735 Scotland Memorial Hospital Project, Asset Guaranteed, 5.50%, 10/01/19 ....................... 630,000 607,723 Scotland Memorial Hospital Project, Asset Guaranteed, 5.50%, 10/01/29 ....................... 1,220,000 1,156,536 Stanley Memorial Hospital Project, Pre-Refunded, 7.80%, 10/01/19 ............................ 1,250,000 1,278,988 North Carolina Medical Care Commission Health System Revenue, Catholic Health East Project, Series C, AMBAC Insured, 5.00%, 11/15/18 .................................................................................... 2,500,000 2,291,675 11/15/28 .................................................................................... 4,850,000 4,319,071
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) North Carolina Medical Care Commission Hospital Revenue, Annie Pen Memorial Hospital Project, Pre-Refunded, 7.50%, 8/15/21 ............... $ 4,700,000 $ 5,122,671 Annie Penn Memorial Hospital Project, Refunding, 5.25%, 1/01/12 ................. 1,940,000 1,811,126 Annie Penn Memorial Hospital Project, Refunding, 5.375%, 1/01/22 ................ 1,920,000 1,733,990 Duke University Hospital Project, Series C, 5.25%, 6/01/26 ...................... 1,500,000 1,371,375 Halifax Memorial Hospital Project, Pre-Refunded, 6.75%, 8/15/24 ................. 3,500,000 3,794,805 Halifax Regional Medical Center Project, 5.00%, 8/15/18 ......................... 1,500,000 1,303,920 Halifax Regional Medical Center Project, 5.00%, 8/15/24 ......................... 2,800,000 2,357,404 High Point Regional Health System, AMBAC Insured, 5.00%, 10/01/29 ............... 5,000,000 4,446,600 Mission St. Joseph's Health System Project, MBIA Insured, 5.125%, 10/01/28 ...... 5,000,000 4,560,850 North Carolina Baptist Hospitals Project, Refunding, Series A, 6.00%, 6/01/22 ... 4,830,000 4,905,010 Rex Healthcare Project, AMBAC Insured, 5.00%, 6/01/17 ........................... 2,780,000 2,567,219 Roanoke-Chowan Hospital Project, Pre-Refunded, 7.75%, 10/01/19 .................. 3,000,000 3,069,210 Transylvania Community Hospital Inc. Project, Refunding, 5.75%, 10/01/19 ........ 1,090,000 1,040,056 Wake County Hospital System Project, MBIA Insured, 5.375%, 10/01/26 ............. 10,500,000 10,073,385 Wayne Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.00%, 10/01/21 ... 1,000,000 1,055,410 Wilson Memorial Hospital Project, Refunding, AMBAC Insured, 5.625%, 11/01/18 .... 5,000,000 5,017,400 Wyne Memorial Hospital Project, Refunding, AMBAC Insured, 5.00%, 10/01/21 ....... 2,205,000 2,004,676 North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue, Refunding, 6.25%, 1/01/17 ....................................................... 6,820,000 6,889,905 Series A, MBIA Insured, 5.125%, 1/01/17 ......................................... 1,000,000 941,330 Series A, MBIA Insured, 5.00%, 1/01/20 .......................................... 2,000,000 1,828,100 North Carolina State Education Assistance Authority Revenue, Guaranteed, Student Loan, sub. lien, Series A, 6.05%, 7/01/10 ........................................................ 3,310,000 3,363,225 Series A, 6.30%, 7/01/15 ........................................................ 1,500,000 1,523,880 Series C, 6.35%, 7/01/16 ........................................................ 4,500,000 4,550,985 Northampton County Insured Facility PCR, Solid Waste Disposal, Champion International Corp., 8.05%, 11/01/04 .............. 400,000 410,008 Onslow County Combined Enterprise System Revenue, MBIA Insured, 6.00%, 6/01/15 ..... 2,000,000 2,103,780 Pender County COP, Pre-Refunded, 7.70%, 6/01/11 .................................... 1,195,000 1,288,449 Person County COP, Law Enforcement Center Project, Series 1991, MBIA Insured, 7.125%, 6/01/11 ....................................... 2,165,000 2,290,916 Pitt County COP, FGIC Insured, 6.00%, 4/01/12 .................................................... 750,000 786,128 MBIA Insured, 5.85%, 4/01/17 .................................................... 5,055,000 5,173,793 Puerto Rico Commonwealth GO, Pre-Refunded, 6.45%, 7/01/17 .................................................... 8,050,000 8,865,385 Series 1990, Pre-Refunded, 7.25%, 7/01/10 ....................................... 500,000 524,555 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series R, 7.15%, 7/01/00 ............ 1,250,000 1,283,613 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.75%, 7/01/08 .................................................................. 100,000 101,510 7.50%, 7/01/09 .................................................................. 25,000 25,318 Puerto Rico Electric Power Authority Revenue, Series P, Pre-Refunded, 7.00%, 7/01/21 .......................................... 1,000,000 1,070,530 Series T, Pre-Refunded, 6.375%, 7/01/24 ......................................... 1,000,000 1,097,520 Series X, Pre-Refunded, 6.125%, 7/01/21 ......................................... 5,000,000 5,456,900 Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ................ 365,000 375,220 Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 .... 2,205,000 2,291,612 Puerto Rico Telephone Authority Revenue, Refunding, Series L, 6.00%, 1/01/12 .................................................................. 1,885,000 1,950,579 6.125%, 1/01/22 ................................................................. 1,490,000 1,565,722 Raeford HDC Revenue, First Lien, Yadkin Trail, Refunding, Series A, 6.00%, 7/15/22 . 1,415,000 1,433,324 Robeson County Industrial Facilities and PCFA Revenue, Campbell Soup Co. Project, Refunding, 6.40%, 12/01/06 ............................ 1,750,000 1,927,345 Rutherford County COP, Public Facilities Project, FGIC Insured, 6.25%, 6/01/23 ..... 1,850,000 1,963,590 Scotland County COP, Jail/Courthouse Project, FSA Insured, 6.75%, 3/01/11 .......... 1,000,000 1,047,610 Stokes County COP, MBIA Insured, 7.00%, 3/01/06 .................................... 1,000,000 1,051,770 University of North Carolina at Chapel Hill Revenue, Parking System, Series A, 5.70%, 5/15/27 ......................................... 3,000,000 2,991,420 University of North Carolina at Charlotte Revenue, Student Activity Center, MBIA Insured, 5.50%, 6/01/16 ......................................................................... 1,000,000 1,001,160 6/01/21 ......................................................................... 3,500,000 3,447,324
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) University of North Carolina at Greensboro Revenue, Student Facilities System, Series B, MBIA Insured, 5.45%, 4/01/23 ......................................... $ 1,000,000 $ 981,730 Series C, AMBAC Insured, 5.30%, 4/01/23 ........................................ 3,785,000 3,641,963 University of North Carolina at Wilmington Revenue, Student Union System, AMBAC Insured, Pre-Refunded, 6.90%, 1/01/07 ............... 250,000 257,477 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 ................................................................ 2,000,000 1,915,640 5.625%, 10/01/25 ............................................................... 1,575,000 1,511,558 Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co., 6.90%, 4/01/09 .................................... 10,000,000 10,329,200 Wilmington COP, AMBAC Insured, 5.20%, 11/01/17 ................................................. 1,500,000 1,435,334 Series A, MBIA Insured, 5.30%, 6/01/19 ......................................... 2,225,000 2,145,656 Winston-Salem SFMR, 8.00%, 9/01/07 ................................................. 250,000 258,392 Winston-Salem Water and Sewer System Revenue, Series B, 5.70%, 6/01/17 ............. 2,250,000 2,282,107 ------------ TOTAL LONG TERM INVESTMENTS (COST $387,415,036) .................................... 387,163,526 ------------ (a)SHORT TERM INVESTMENTS .1% Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ................... 100,000 100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 .................... 100,000 100,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $200,000) ....................................... 200,000 ------------ TOTAL INVESTMENTS (COST $387,615,036) 99.7% ........................................ 387,363,526 OTHER ASSETS, LESS LIABILITIES .3% ................................................. 1,481,220 ------------ NET ASSETS 100.0% .................................................................. $388,844,746 ============
See glossary of terms on page 96 (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights Franklin Texas Tax-Free Income Fund
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, CLASS A (UNAUDITED)*** 1999 1998 - --------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $ 11.42 $ 11.68 $ 11.37 -------- -------- -------- Income from investment operations: Net investment income ........................... .29 .60 .62 Net realized and unrealized gains (losses) ...... (.54) (.05) .36 -------- -------- -------- Total from investment operations ................. (.25) .55 .98 -------- -------- -------- Less distributions from: Net investment income ........................... (.30)(4) (.60)(3) (.63) In excess of net investment income -- -- (.01) Net realized gains .............................. (.04) (.21) (.03) -------- -------- -------- Total distributions .............................. (.34) (.81) (.67) -------- -------- -------- Net asset value, end of period ................... $ 10.83 $ 11.42 $ 11.68 -------- -------- -------- Total return* .................................... (2.28%) 4.86% 8.91% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $117,632 $127,739 $130,578 Ratios to average net assets: Expenses ........................................ .79%** .77% .76% Net investment income ........................... 5.17%** 5.17% 5.44% Portfolio turnover rate .......................... 13.64% 25.26% 34.52%
YEAR ENDED FEBRUARY 28, CLASS A 1997 1996(1) 1995 - ------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.58 $ 11.25 $ 11.72 -------- -------- -------- Income from investment operations: Net investment income ......................... .66 .67 .68 Net realized and unrealized gains (losses) .... -- .34 (.49) -------- -------- -------- Total from investment operations ............... .66 1.01 .19 -------- -------- -------- Less distributions from: Net investment income ......................... (.67) (.68) (.66) In excess of net investment income............. -- -- -- Net realized gains ............................ (.20) -- -- -------- -------- -------- Total distributions ............................ (.87) (.68) (.66) -------- -------- -------- Net asset value, end of period ................. $ 11.37 $ 11.58 $ 11.25 -------- -------- -------- Total return* .................................. 5.91% 9.15% 1.80% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $126,612 $129,702 $130,684 Ratios to average net assets: Expenses ...................................... .75% .76% .73% Net investment income ......................... 5.70% 5.86% 6.05% Portfolio turnover rate ........................ 35.57% 18.38% 6.36%
CLASS C - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ................ $ 11.57 $ 11.81 $ 11.49 $ 11.68 $ 11.27 --------- --------- --------- --------- --------- Income from investment operations: Net investment income .............................. .26 .53 .58 .60 .51 Net realized and unrealized gains (losses) ......... (.56) (.03) .35 .02 .40 --------- --------- --------- --------- --------- Total from investment operations .................... (.30) .50 .93 .62 .91 --------- --------- --------- --------- --------- Less distributions from: Net investment income .............................. (.26)(4) (.53)(3) (.58)(2) (.61) (.50) Net realized gains ................................. (.04) (.21) (.03) (.20) -- --------- --------- --------- --------- --------- Total distributions ................................. (.30) (.74) (.61) (.81) (.50) --------- --------- --------- --------- --------- Net asset value, end of period ...................... $ 10.97 $ 11.57 $ 11.81 $ 11.49 $ 11.68 --------- --------- --------- --------- --------- Total return* ....................................... (2.63%) 4.40% 8.31% 5.48% 8.23% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................... $ 4,911 $ 5,229 $ 2,076 $ 740 $ 79 Ratios to average net assets: Expenses ........................................... 1.35%** 1.33% 1.33% 1.32% 1.33%** Net investment income .............................. 4.61%** 4.61% 4.79% 5.03% 5.23%** Portfolio turnover rate ............................. 13.64% 25.26% 34.52% 35.57% 18.38%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.001. (3) Includes distributions in excess of net investment income in the amount of $.0005 and $.0003 for Class A and Class C, respectively. (4) Includes distributions in excess of net investment income in the amount of $.006 and $.005 for Class A and Class C, respectively. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN TEXAS TAX-FREE INCOME FUND AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 104.7% Aldine ISD, Series A, 5.00%, 2/15/22 ......................................................... $1,500,000 $1,350,375 Alliance Airport Authority Special Facilities Revenue, American Airlines Inc. Project, 7.00%, 12/01/11 ........................................... 2,250,000 2,492,438 (b)Austin Hotel Occupancy Tax Revenue, sub. lien, Refunding, AMBAC Insured, 5.80%, 11/15/29 .. 2,500,000 2,503,575 Austin Utility System Revenue, Refunding, MBIA Insured, 5.50%, 5/15/14 .................................................. 1,325,000 1,326,166 Series A, AMBAC Insured, 6.75%, 11/15/07 ................................................. 800,000 850,528 Series A, Pre-Refunded, 8.00%, 11/15/16 .................................................. 50,000 53,192 Bexar County Health Facilities Development Corp. Revenue, Incarnate Word Health Services, Refunding, FSA Insured, ETM, 6.00%, 11/15/15 ............. 3,000,000 3,257,460 Bexar County HFC Revenue, GNMA Secured, 8.10%, 3/01/24 ...................................... 95,000 98,919 Bexar Metropolitan Water District Waterworks Systems Revenue, Refunding, MBIA Insured, 6.35%, 5/01/25 ................................................... 1,890,000 2,004,912 Brazos Higher Education Authority Revenue, Student Loan Inc., Refunding, Series A-2, 6.80%, 12/01/04 .................................................... 825,000 859,106 Brazos River Authority PCR, Texas Utilities Electric Co. Project, Collateralized, Refunding, Series C, 5.55%, 6/01/30 ...................................................... 3,000,000 2,665,980 Series A, 7.875%, 3/01/21 ................................................................ 500,000 528,700 (b)Brownsville Combined Tax and Revenue, Certificates of Obligation, Series A, FGIC Insured, 5.60%, 2/15/19 .................................................... 1,000,000 992,940 Cameron County HFC, Collateralized Mortgage Obligation, Refunding, Series B, FGIC Insured, 7.85%, 3/01/24 ......................................... 70,000 72,873 Castleberry ISD, Refunding, 6.00%, 8/15/25 .................................................. 2,000,000 2,122,160 Cimarron MUD, Waterworks and Sewer System Combined Tax and Revenue, Asset Guaranteed, Pre-Refunded, 7.50%, 3/01/15 ............................................ 2,275,000 2,305,758 Comal County Health Facilities Development Corp. Revenue, McKenna Memorial Hospital, Refunding, FHA Insured, 7.375%, 1/15/21 ........................ 1,715,000 1,785,932 Corpus Christi HFC, SFMR, Refunding, Series A, MBIA Insured, 7.70%, 7/01/11 ................. 745,000 781,147 Dallas Civic Center Convention Complex Revenue, senior lien, AMBAC Insured, Pre-Refunded, 7.00%, 1/01/10 ............................................... 2,000,000 2,074,840 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 ............................................. 100,000 103,699 Dallas Housing Corp. Capital Projects Revenue, Section 8, Assisted Projects, Refunding, 7.70%, 8/01/05 ................................... 500,000 514,520 Dallas-Fort Worth International Airport Facilities Improvement Corp. Revenue, American Airlines Inc., 8.00%, 11/01/24 .................................................. 1,000,000 1,054,430 American Airlines Inc., Refunding, 6.00%, 11/01/14 ....................................... 2,000,000 2,035,920 Delta Airlines Inc., 7.625%, 11/01/21 .................................................... 2,000,000 2,125,900 Dallas-Fort Worth Regional Airport Revenue, Joint Dallas-Fort Worth International, Refunding, MBIA Insured, 5.75%, 11/01/24 ........... 1,000,000 1,011,120 Decatur Hospital Authority Hospital Revenue, Series A, 5.75%, 9/01/29 ....................... 4,245,000 3,786,328 Denison Hospital Authority Revenue, Texoma Medical Center Inc. Project, 7.00%, 8/15/14 ...... 1,250,000 1,325,875 Denton County GO, Permanent Improvement, Refunding, 5.125%, 7/15/26 ......................... 2,000,000 1,845,260 El Paso HFC, SFMR, Refunding, Series A, 8.75%, 10/01/11 ..................................... 360,000 381,362 Fort Worth HFC, HMR, Refunding, Series A, 8.50%, 10/01/11 ................................................ 665,000 702,805 SFMR, GNMA Secured, 8.25%, 12/01/11 ...................................................... 20,000 20,341 Gulf Coast Waste Disposal Authority Revenue, Champion International Corp., Series A, 6.875%, 12/01/28 ................................. 1,000,000 1,061,720 Valero Energy Corp. Project, 5.70%, 4/01/32 .............................................. 3,000,000 2,713,830 Harris County Health Facilities Development Corp. Revenue, Christus Health, Refunding, Series A, MBIA Insured, 5.375%, 7/01/29 ...................... 1,365,000 1,277,544 Hermann Hospital Project, FSA Insured, Pre-Refunded, 7.00%, 10/01/14 ..................... 750,000 806,340 Harrison County Health Facilities Development Corp. Hospital Revenue, Marshall Regional Medical Center Project, 5.50%, 1/01/18 ................ 1,750,000 1,692,985 Houston Higher Education Finance Corp. Higher Education Revenue, Rice University Project, Series A, 5.375%, 11/15/29 ............. 2,500,000 2,376,450 Leon County PCR, Nucor Corp. Project, Refunding, Series A, 7.375%, 8/01/09 .................. 2,000,000 2,118,440 Lower Colorado River Authority Revenue, Refunding, Series B, AMBAC Insured, 7.00%, 1/01/11 ....................................... 55,000 57,727 Series B, AMBAC Insured, Pre-Refunded, 7.00%, 1/01/11 .................................... 150,000 158,457 Lower Neches Valley Authority IDC Revenue, Mobil Oil Refunding Corp., Refunding, 5.55%, 3/01/33 ...................................... 1,500,000 1,409,175 Matagorda County Navigation District No. 1 PCR, Central Power and Light Co. Project, Collateralized, 7.50%, 12/15/14 .......................................................... 1,200,000 1,245,120 Refunding, Series E, MBIA Insured, 6.10%, 7/01/28 ........................................ 1,500,000 1,544,610 Mesquite Health Facilities Development Corp. Revenue, Retirement Facility, Christian Care Centers Inc., Refunding, Series A, 6.40%, 2/15/16 .................................................................................. 1,000,000 1,024,180 2/15/20 .................................................................................. 2,000,000 2,043,040 Montgomery County Texas GO, Library, FGIC Insured, Pre-Refunded, 6.75%, 9/01/10 ............................................... 280,000 299,326 FGIC Insured, Pre-Refunded, 6.75%, 9/01/11 ............................................... 295,000 315,361 Refunding, FGIC Insured, 6.75%, 9/01/10 .................................................. 495,000 523,888 Refunding, FGIC Insured, 6.75%, 9/01/11 .................................................. 530,000 560,019
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN TEXAS TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) North Central Health Facility Development Corp. Revenue, C.C. Young Memorial Home Project, Refunding, 6.30%, 2/15/15 ................................................................ $1,530,000 $1,555,964 Refunding, 6.375%, 2/15/20 ............................................................... 2,785,000 2,849,612 Series A, 5.375%, 2/15/14 ................................................................ 500,000 472,375 Series A, 5.375%, 2/15/25 ................................................................ 1,750,000 1,570,415 Nueces River Authority Environmental Improvement Revenue, Asarco Inc. Project, Refunding, 5.60%, 1/01/27 ............................................ 6,000,000 5,412,000 Port Corpus Christi Nueces County General Revenue, Union Pacific, Refunding, 5.65%, 12/01/22 ................................................. 2,000,000 1,905,440 Red River Authority PCR, West Texas Utilities Co. Project, Public Service Co. of Oklahoma, Central Power and Light Co., Refunding, MBIA Insured, 6.00%, 6/01/20 .............................................................. 7,000,000 7,229,880 Sabine River Authority PCR, Southwestern Electric Power Co., Refunding, MBIA Insured, 6.10%, 4/01/18 ................. 5,000,000 5,216,600 Texas Utilities Electric Co. Project, Collateralized, Refunding, FGIC Insured, 6.55%, 10/01/22 ................................................. 1,200,000 1,267,368 Tarrant County Health Facilities Development Corp. Health Systems Revenue, Harris Methodist Health, FGIC Insured, ETM, 6.00%, 9/01/24 ....... 4,000,000 4,134,440 Tarrant County Health Facilities Development Corp. Revenue, Bethesda Living Centers, Series C, 5.75%, 8/15/18 ......................................... 1,570,000 1,466,961 8/15/28 .................................................................................. 3,900,000 3,543,969 Texas City IDC, Marine Terminal Revenue, ARCO Pipe Line Co. Project, Refunding, 7.375%, 10/01/20 ................................... 500,000 604,750 Texas Housing Agency Residential Development Mortgage Revenue, Series A, 7.60%, 7/01/16 ................................................ 1,410,000 1,449,085 Texas State Department of Housing and Community Affairs HMR, Refunding, Series A, GNMA Secured, 6.95%, 7/01/23 .................................... 1,515,000 1,589,947 Texas State GO, Veterans Housing Assistance Fund I, Refunding, 6.15%, 12/01/25 .............. 1,000,000 1,016,680 Texas State Higher Education Coordinating Board College Student Loan Revenue, senior lien, 7.70%, 10/01/25 ........................................ 960,000 990,931 Texas State Turnpike Authority Revenue, Mountain Creek Lake Bridge, 7.00%, 1/01/07 .......... 25,000 25,343 Texas Water Development Board Revenue, State Revolving Fund, senior lien, Series A, 5.75%, 7/15/16 ............................... 3,275,000 3,321,047 Tomball Hospital Authority Revenue, Refunding, 6.125%, 7/01/23 .............................. 2,000,000 2,004,160 Tyler Health Facilities Development Corp. Hospital Revenue, East Texas Medical Center Project, Series D, FSA Insured, 5.375%, 11/01/27 ................................................... 5,000,000 4,673,650 University of Texas University Revenues, Financing System, Refunding, Series A, 7.00%, 8/15/07 ................................................................. 665,000 705,179 (b)Series A, 5.70%, 8/15/20 ................................................................. 2,500,000 2,503,675 Series B, 6.75%, 8/15/13 ................................................................. 1,300,000 1,369,069 (b)Series B, 5.70%, 8/15/20 ................................................................. 2,500,000 2,503,675 Van Alstyne ISD, GO, Refunding, 5.95%, 8/15/29 .............................................. 1,885,000 1,912,314 Waco Health Facilities Development Corp. Hospital Revenue, Hillcrest Baptist Medical Center Project, MBIA Insured, 7.125%, 9/01/14 ................... 500,000 521,990 West Side Calhoun County Navigation District Solid Waste Disposal Revenue, Union Carbide Chemical and Plastics Co. Project, 8.20%, 3/15/21 ........................... 1,000,000 1,058,770 Wylie ISD, GO, Pre-Refunded, 7.00%, 8/15/24 ............................................................. 660,000 766,009 Refunding, 7.00%, 8/15/24 ................................................................ 340,000 383,907 ------------ TOTAL LONG TERM INVESTMENTS (COST $127,194,863) ............................................. 128,287,978 ------------ (a)SHORT TERM INVESTMENTS 1.1% Brazos River Harbor Naval District, Brazoria County Revenue, Dow Chemical Company Project, Refunding, Series A, Daily VRDN and Put, 2.90%, 8/01/22 .................................. 200,000 200,000 Brazos River Harbor Navigation District Harbor Revenue, BASF Corp. Project, Daily VRDN and Put, 3.00%, 4/01/31 ................................... 500,000 500,000 Guadalupe Blanco River Authority PCR, Central Power and Light Co. Project, Refunding, Daily VRDN and Put, 2.75%, 11/01/15 ....... 200,000 200,000 Gulf Coast Waste Disposal Authority PCR, AMOCO Oil Co. Project, Refunding, Daily VRDN and Put, 2.70%, 10/01/17 ..................... 400,000 400,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ............................. 100,000 100,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $1,400,000) .............................................. 1,400,000 ------------ TOTAL INVESTMENTS (COST $128,594,863) 105.8% ................................................ 129,687,978 OTHER ASSETS, LESS LIABILITIES (5.8%) ....................................................... (7,145,895) ------------ NET ASSETS 100.0% ........................................................................... $122,542,083 ============
See glossary of terms on page 96. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN VIRGINIA TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, CLASS A (UNAUDITED)*** 1999 1998 - --------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.88 $ 11.88 $ 11.65 -------- -------- -------- Income from investment operations: Net investment income ......................... .29 .60 .62 Net realized and unrealized gains (losses) .... (.62) .03 .35 -------- -------- -------- Total from investment operations ............... (.33) .63 .97 -------- -------- -------- Less distributions from: Net investment income ......................... (.30)(3) (.60)(2) (.64) Net realized gains ............................ -- (.03) (.10) -------- -------- -------- Total distributions ............................ (.30) (.63) (.74) -------- -------- -------- Net asset value, end of period ................. $ 11.25 $ 11.88 $ 11.88 -------- -------- -------- Total return* .................................. (2.85%) 5.40% 8.53% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $363,263 $379,670 $332,199 Ratios to average net assets: Expenses ...................................... .68%** .68% .69% Net investment income ......................... 5.02%** 4.98% 5.29% Portfolio turnover rate ........................ 8.55% 8.90% 12.90%
YEAR ENDED FEBRUARY 28, CLASS A 1997 1996(1) 1995 - --------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.72 $ 11.33 $ 11.82 -------- -------- -------- Income from investment operations: Net investment income ......................... .65 .66 .66 Net realized and unrealized gains (losses) .... (.07) .38 (.50) -------- -------- -------- Total from investment operations ............... .58 1.04 .16 -------- -------- -------- Less distributions from: Net investment income ......................... (.64) (.65) (.65) Net realized gains ............................ (.01) -- -- -------- -------- -------- Total distributions ............................ (.65) (.65) (.65) -------- -------- -------- Net asset value, end of period ................. $ 11.65 $ 11.72 $ 11.33 -------- -------- -------- Total return* .................................. 5.15% 9.41% 1.56% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $287,172 $271,396 $255,965 Ratios to average net assets: Expenses ...................................... .69% .69% .69% Net investment income ......................... 5.56% 5.66% 5.86% Portfolio turnover rate ........................ 19.25% 12.72% 21.73%
Six Months Ended Year Ended February 28, August 31, 1999 ----------------------------------------------------------------- CLASS C (unaudited)*** 1999 1998 1997 1996(1) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.95 $ 11.95 $ 11.71 $ 11.77 $ 11.35 $ 11.82 ---------- ---------- ---------- ---------- ---------- --------- Income from investment operations: Net investment income ......................... .26 .53 .57 .58 .49 .66 Net realized and unrealized gains (losses) .... (.62) .03 .34 (.05) .41 (.50) ---------- ---------- ---------- ---------- ---------- --------- Total from investment operations ............... (.36) .56 .91 .53 .90 .16 ---------- ---------- ---------- ---------- ---------- --------- Less distributions from: Net investment income ......................... (.26)(3) (.53)(2) (.57) (.58) (.48) (.65) Net realized gains ............................ -- (.03) (.10) (.01) -- -- ---------- ---------- ---------- ---------- ---------- --------- Total distributions ............................ (.26) (.56) (.67) (.59) (.48) (.65) ---------- ---------- ---------- ---------- ---------- --------- Net asset value, end of period ................. $ 11.33 $ 11.95 $ 11.95 $ 11.71 $ 11.77 $ 11.33 ---------- ---------- ---------- ---------- ---------- --------- Total return* .................................. (3.02%) 4.78% 7.97% 4.61% 8.07% 1.56% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $ 23,673 $ 22,796 $ 13,186 $ 6,674 $ 2,050 $255,965 Ratios to average net assets: Expenses ...................................... 1.24%** 1.24% 1.25% 1.25% 1.26%** .69% Net investment income ......................... 4.46%** 4.42% 4.72% 4.94% 5.06%** 5.86% Portfolio turnover rate ........................ 8.55% 8.90% 12.90% 19.25% 12.72% 21.73%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.0005 and $.0004 for Class A and C, respectively. (3) Includes distributions in excess of net investment income in the amount of $.005 and $.004 for Class A and C, respectively. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 100.0% Abingdon IDA, Hospital Facilities Revenue, Johnston Memorial Hospital, Refunding, 5.375%, 7/01/28 .................................. $5,000,000 $4,618,400 Albermarle County IDAR, Martha Jefferson Hospital, Refunding, 5.875%, 10/01/13 ................................. 5,000,000 5,074,900 University of Virginia Health Services Foundation, Pre-Refunded, 6.50%, 10/01/22 ....... 1,125,000 1,212,953 Arlington County GO, Pre-Refunded, 6.00%, 8/01/13 ...................................... 2,085,000 2,256,783 Arlington County IDA, Hospital Facility Revenue, Arlington Hospital, Series A, Pre-Refunded, 7.125%, 9/01/21 ............................. 2,000,000 2,150,820 Augusta County IDAR, Augusta Hospital Corp. Project, AMBAC Insured, Pre-Refunded, 6.625%, 9/01/12 ........................................... 1,000,000 1,065,930 Pre-Refunded, 7.00%, 9/01/21 ........................................................... 2,000,000 2,144,080 Augusta County Virginia Service Authority Water and Sewer Revenue, MBIA Insured, 5.00%, 11/01/24 ........................................ 2,400,000 2,179,704 Bedford County GO, Series A, FGIC Insured, 5.35%, 12/15/17 ................................ 1,250,000 1,225,613 Bedford County IDA, IDR, Nekoosa Packaging Corp. Project, Refunding, 5.60%, 12/01/25 ..................................... 11,000,000 10,122,090 Blacksburg Polytechnic Institute Sanitation Authority Sewer System Revenue, Pre-Refunded, 6.25%, 11/01/12 ...................................... 1,230,000 1,320,848 Bristol GO, MBIA Insured, 5.25%, 4/01/16 .................................................. 1,025,000 991,903 Chesapeake Hospital Authority Facilities Revenue, Chesapeake General Hospital, 8.20%, 7/01/05 ............................................. 2,500,000 2,611,800 Chesapeake IDA, Nursing Home Revenue, Sentara Life Care Corp. Project, 8.00%, 11/01/17 ................. 225,000 229,770 Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%, 6/01/12 . 3,940,000 4,187,235 Chesapeake Toll Road Revenue, Expressway, Series A, 5.625%, 7/15/19 ................................................................................ 2,000,000 1,951,980 7/15/32 ................................................................................ 8,000,000 7,570,960 Covington-Alleghany County IDA, PCR, Westvaco Corp. Project, Refunding, 6.65%, 9/01/18 .... 5,000,000 5,358,400 Danville COP, Social Services, Pre-Refunded, 7.625%, 4/01/13 .............................. 2,000,000 2,141,840 Danville GO, Series 1991, Pre-Refunded, 6.75%, 2/01/10 ................................................................................ 655,000 690,717 2/01/11 ................................................................................ 705,000 743,444 Danville IDA, Hospital Revenue, Danville Regional Medical Center, FGIC Insured, Pre-Refunded, 6.50%, 10/01/24 ...................................... 5,000,000 5,493,900 Solid Waste Disposal Revenue, International Paper Co., 6.50%, 3/01/19 .................. 500,000 523,810 Fairfax County EDA, Parking Revenue, Huntington Metrorail, Pre-Refunded, 7.00%, 9/01/10 ... 1,000,000 1,051,510 Fairfax County EDA Revenue, National Wildlife Federation, MBIA Insured, 5.375%, 9/01/29 ... 8,800,000 8,379,096 Fairfax County IDAR, Health Care, Inova Health System Project, 6.00%, 8/15/26 ......................................................................... 5,000,000 5,167,550 Refunding, Series A, 5.00%, 8/15/25 .................................................... 5,000,000 4,429,950 Fairfax County Redevelopment and Housing Authority MFHR, Cedar Ridge Apartments, GNMA Secured, 6.30%, 12/20/27 .................................. 4,700,000 4,911,829 Paul Spring Center, Refunding, Series A, FHA Insured, 5.90%, 6/15/17 ................... 1,000,000 1,023,900 Paul Spring Center, Refunding, Series A, FHA Insured, 6.00%, 12/15/28 .................. 1,000,000 1,020,660 Fairfax County Sewer Revenue, MBIA Insured, 5.875%, 7/15/28 ............................... 6,500,000 6,673,355 Frederick County IDA, Lease Revenue, Government Complex Facilities Project, MBIA Insured, 6.50%, 12/01/09 .................... 2,040,000 2,220,805 Fredericksburg IDA, Hospital Facilities Revenue, Medicorp Health System Obligation, Refunding, AMBAC Insured, 5.25%, 6/15/16 ................................................................................ 1,860,000 1,809,296 6/15/23 ................................................................................ 10,000,000 9,429,400 Front Royal and Warren County IDAR, Mortgage, Heritage Hall No. 13, Refunding, FHA Insured, 8.25%, 7/15/05 ............................ 20,000 20,266 Goochland County IDA, IDR, Nekoosa Packaging Corp., Refunding, 5.65%, 12/01/25 ............ 5,500,000 5,096,355 Guam Airport Authority Revenue, Refunding, Series A, 6.375%, 10/01/10 .................................................. 830,000 874,040 Series A, 6.50%, 10/01/23 .............................................................. 1,000,000 1,057,330 Halifax County IDA, Exempt Facilities Revenue, Old Dominion Electric Cooperative Project, 6.50%, 12/01/12 .............................. 3,000,000 3,146,250 Hampton Redevelopment and Housing Authority Senior Living Association Revenue, Refunding, Series A, GNMA Secured, 6.00%, 1/20/26 ... 1,060,000 1,080,469 Hampton Roads Medical College General Revenue, Refunding, Series A, 6.875%, 11/15/16 ...... 1,500,000 1,572,480 Hampton Roads Regional Jail Authority Jail Facilities Revenue, Series A, MBIA Insured, 5.00%, 7/01/28 ......................... 10,000,000 9,001,100 Hanover County IDA, Hospital Revenue, Bon Secours Health Systems Projects, MBIA Insured, 5.50%, 8/15/25 ............................................................ 1,000,000 978,340 Hanover County Water and Sewer System Revenue, MBIA Insured, 5.25%, 2/01/26 ............... 4,175,000 3,963,495 Henrico County IDAR, Solid Waste, Browning-Ferris Industries, South Atlantic Inc., Series A, 5.875%, 3/01/17 .......................................... 1,000,000 949,240 Henry County IDA, Hospital Revenue, Memorial Hospital of Martinsville and Henry, Refunding, 6.00%, 1/01/27 .................. 1,250,000 1,248,213 Leesburg Utilities System Revenue, Refunding, MBIA Insured, 5.125%, 7/01/22 ............... 3,750,000 3,503,475
Franklin Tax-Free Trust STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Loudoun County IDA, Hospital Revenue, Loudoun Hospital Center, FSA Insured, 5.80%, 6/01/20 ................................................................................ $2,000,000 $2,038,500 6/01/26 ................................................................................ 3,000,000 3,057,750 Loudoun County Sanitation Authority Water and Sewer Revenue, Refunding, FGIC Insured, 5.125%, 1/01/26 ............................................... 3,795,000 3,508,743 Refunding, FGIC Insured, 5.125%, 1/01/30 ............................................... 5,250,000 4,830,420 Series 96, FGIC Insured, 5.25%, 1/01/26 ................................................ 6,500,000 6,170,970 Series 96, FGIC Insured, 5.25%, 1/01/30 ................................................ 1,000,000 946,340 Lynchburg IDA, Healthcare Facilities Revenue, Centra Health, Refunding, 5.20%, 1/01/28 .... 8,500,000 7,578,260 Lynchburg Redevelopment and Housing Authority Revenue, Waldon Pond III, Refunding, Series A, GNMA Secured, 6.20%, 7/20/27 ...................... 1,000,000 1,036,640 Mecklenburg County IDAR, Exempt Facility, Series A, 7.35%, 5/01/08 ........................ 4,500,000 4,691,025 Metropolitan Washington D.C. Airports Authority General Airport Revenue, Refunding, Series A, FGIC Insured, 5.00%, 10/01/27 ..................................... 7,500,000 6,644,550 Series A, 7.60%, 10/01/14 .............................................................. 1,000,000 1,052,250 Series A, 5.375%, 10/01/23 ............................................................. 3,985,000 3,751,758 Series B, 5.75%, 10/01/20 .............................................................. 6,000,000 5,906,100 Newport News IDA, Mortgage Revenue, Mennowood Communities Inc., Series A, GNMA Secured, 6.25%, 8/01/36 .................................................. 2,990,000 3,099,285 (b)Newport News Redevelopment and Housing Authority Revenue, Refunding, Series A, GNMA Secured, 5.85%, 12/20/30 ................................................. 2,000,000 2,004,400 Norfolk GO, MBIA Insured, Pre-Refunded, 5.75%, 6/01/14 .................................... 2,075,000 2,197,155 Norfolk IDAR, Children's Hospital of the Kings' Group Inc., AMBAC Insured, Pre-Refunded, 7.00%, 6/01/11 ............................................ 3,000,000 3,202,260 Health Care, Bon Secours Health, Series B, MBIA Insured, 5.25%, 8/15/26 ................ 4,000,000 3,769,240 Medical Center Hospital Project, Series A, 7.00%, 11/01/07 ............................. 20,000 20,043 Norfolk Parking System Revenue, MBIA Insured, 5.55%, 2/01/27 .............................. 4,475,000 4,400,491 Norfolk Water Revenue, AMBAC Insured, 5.375%, 11/01/23 ........................................................ 1,500,000 1,457,415 MBIA Insured, 5.875%, 11/01/20 ......................................................... 7,000,000 7,174,790 MBIA Insured, 5.90%, 11/01/25 .......................................................... 5,900,000 6,072,516 Northern Virginia Transportation District Commission Commuter Rail Revenue, Railway Express Project, FSA Insured, Pre-Refunded, 7.00%, 7/01/05 .............................................. 360,000 376,798 Peninsula Airport Commission Revenue, Airport Improvement, 7.25%, 7/15/11 ................. 1,000,000 1,060,360 Peninsula Ports Authority Coal Terminal Revenue, Coal Terminal Association Project, Refunding, 7.375%, 6/01/20 ............................. 5,480,000 5,823,541 Peninsula Ports Authority Health Care Facilities Revenue, Bon Secours Health System, Refunding, Series A, MBIA Insured, 5.25%, 8/15/23 .......... 1,500,000 1,423,605 Peninsula Ports Authority Health System Revenue, Riverside Health System Project, Series A, Pre-Refunded, 6.625%, 7/01/18 ................ 6,000,000 6,470,340 Peninsula Ports Authority Hospital Facility Revenue, Whittaker Memorial Hospital Project, Refunding, FHA Insured, 8.70%, 8/01/23 ............. 50,000 50,325 Portsmouth GO, FGIC Insured, 5.25%, 8/01/21 ............................................... 1,000,000 956,080 Portsmouth IDAR, Hotel Conference Center and Parking, FSA Insured, 5.00%, 4/01/29 ......... 3,000,000 2,689,530 (b)Prince William County Service Authority Water and Sewer Systems Revenue, FGIC Insured, 5.50%, 7/01/29 ........................... 5,000,000 4,849,950 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Q, Pre-Refunded, 8.00%, 7/01/18 ................................................. 1,000,000 1,055,590 Series Y, Pre-Refunded, 6.00%, 7/01/22 ................................................. 2,000,000 2,172,060 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.90%, 7/01/07 ......................................................................... 100,000 101,125 7.75%, 7/01/08 ......................................................................... 350,000 355,285 Puerto Rico Electric Power Authority Revenue, Refunding, Series Z, 5.25%, 7/01/21 .................................................... 1,500,000 1,414,395 Series P, Pre-Refunded, 7.00%, 7/01/21 ................................................. 1,500,000 1,605,795 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ........... 100,000 103,538 Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ............................................. 2,055,000 2,112,540 Sixth Portfolio, Section 8, Assisted Projects, FHA Insured, Pre-Refunded, 7.75%, 12/01/26 ............................................. 20,000 23,480 Puerto Rico Telephone Authority Revenue, Series L, Pre-Refunded, 6.125%, 1/01/22 ....... 5,000,000 5,254,100 Richmond GO, Refunding and Improvement, Series A, FSA Insured, 5.125%, 1/15/24 ............ 6,250,000 5,794,875 Richmond Metropolitan Authority Expressway Revenue, Refunding, Series B, FGIC Insured, 6.25%, 7/15/22 ...................................... 5,000,000 5,239,100 Series A, FGIC Insured, Pre-Refunded, 6.375%, 7/15/16 .................................. 2,500,000 2,684,725 South Boston IDAR, Halifax Community Hospital Inc. Project, 7.375%, 9/01/11 ............... 4,250,000 4,582,095
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Spotsylvania County Water and Sewer System Revenue, MBIA Insured, 5.25%, 6/01/22 ......................................................................... $5,500,000 $5,267,240 5.40%, 6/01/27 ......................................................................... 8,800,000 8,528,696 Staunton IDA, Facilities Revenue, Mary Baldwin College, Series B, Pre-Refunded, 8.00%, 11/01/17 .......................................................................... 895,000 961,114 Tazewell County IDA, Lease Revenue, Courthouse Project, MBIA Insured, 5.25%, 1/01/17 ......................................................................... 1,250,000 1,215,275 5.30%, 1/01/27 ......................................................................... 500,000 477,750 University of Virginia Revenue, Refunding, Series A, 5.00%, 6/01/24 ....................... 8,000,000 7,222,160 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50% 10/01/15 ............................................................................... 1,500,000 1,448,715 10/01/18 ............................................................................... 1,500,000 1,436,730 Virginia College Building Authority Educational Facilities Revenue, Marymount University Project, Pre-Refunded, 7.00%, 7/01/22 ............................. 1,750,000 1,902,005 Twenty-first Century College Program, 5.25%, 8/01/16 ................................... 1,000,000 970,510 Washington and Lee University, 5.75%, 1/01/19 .......................................... 50,000 50,977 Washington and Lee University Project, Pre-Refunded, 5.80%, 1/01/24 .................... 3,000,000 3,197,430 Virginia Commonwealth Transportation Board Transportation Program Revenue, Oak Grove Connector, Series A, 5.25%, 5/15/22 ............................................ 1,875,000 1,768,144 Virginia Port Authority Revenue, MBIA Insured, 5.50%, 7/01/24 ............................. 4,250,000 4,104,608 Virginia State HDA, Commonwealth Mortgage, Series A, 7.10%, 1/01/17 ........................................ 1,000,000 1,033,970 Commonwealth Mortgage, Series A, 7.15%, 1/01/33 ........................................ 4,440,000 4,605,923 Commonwealth Mortgage, Series A, Sub Series A-1, 8.10%, 1/01/17 ........................ 5,000 5,016 Commonwealth Mortgage, Series B, Sub Series B-3, 7.375%, 7/01/17 ....................... 45,000 46,016 Commonwealth Mortgage, Series B, Sub Series B-4, 6.55%, 1/01/27 ........................ 2,000,000 2,030,980 Commonwealth Mortgage, Series C, Sub Series C-3, 6.00%, 1/01/17 ........................ 2,000,000 2,039,600 Commonwealth Mortgage, Series D, Sub Series D-1, 6.40%, 7/01/17 ........................ 3,430,000 3,585,310 Commonwealth Mortgage, Series D, Sub Series D-2, 7.35%, 7/01/17 ........................ 155,000 155,631 Commonwealth Mortgage, Series H, Sub Series H-2, 6.55%, 1/01/17 ........................ 1,000,000 1,035,710 MF Housing, Series C, 5.30%, 11/01/16 .................................................. 2,830,000 2,749,062 MF Housing, Series F, 7.10%, 5/01/13 ................................................... 9,000,000 9,384,480 MF Housing, Series H, 5.55%, 5/01/15 ................................................... 2,000,000 1,964,960 Virginia State Resources Authority Sewer System Revenue, Harrisonburg Rockingham Region, Series A, Pre-Refunded, 6.00%, 5/01/22 ................................................... 1,000,000 1,054,180 Virginia State Resources Authority Water and Sewer System Revenue, Pooled Loan Program, Series A, ETM, 7.35%, 11/01/16 .................................... 45,000 45,461 Pooled Loan Program, Series A, ETM, 7.45%, 11/01/16 .................................... 10,000 10,104 Pooled Loan Program, Series A, Pre-Refunded, 7.35%, 11/01/16 ........................... 190,000 194,908 Rapidan Service Authority, Refunding, 5.30%, 10/01/18 .................................. 1,610,000 1,541,012 Virginia State Resources Authority Water System Revenue, Refunding, Series A, 6.125%, 4/01/19 .......................................................................... 1,000,000 1,034,170 Virginia State Transportation Board Transportation Contract Revenue, U.S. Route 28 Project, Refunding, 6.50%, 4/01/18 ........................................ 9,000,000 9,521,190 Washington County IDA, College Facilities Revenue, Emory and Henry College Project, 6.375%, 4/01/23 ........... 3,295,000 3,337,110 Hospital Facilities Revenue, First Mortgage, Johnston Memorial Hospital, Pre-Refunded, 7.00%, 7/01/22 ........................................................................ 3,000,000 3,264,780 West Point IDA, Solid Waste Disposal Revenue, Chesapeake Corp. Project, Refunding, Series B, 6.25%, 3/01/19 .............................................................. 5,450,000 5,551,643 Winchester IDA, Educational Facilities Revenue, First Mortgage, Shenandoah University Project, MBIA Insured, 5.25%, 10/01/28 ................................................... 7,000,000 6,630,750 Refunding, Asset Guaranteed, 6.80%, 10/01/24 ........................................... 2,000,000 2,136,734 ----------- TOTAL LONG TERM INVESTMENTS (COST $384,527,339) ........................................... 386,796,471 -----------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN VIRGINIA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------- (a)SHORT TERM INVESTMENTS .2% Petersburg Hospital Authority Revenue, Southside Regional Hospital Facility, Daily VRDN and Put, 2.95%, 7/01/27 ...................................................................... $ 100,000 $ 100,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ................................................................. 200,000 200,000 Roanoke IDA Hospital Revenue, Carilion Health System, Series B, Daily VRDN and Put, 2.95%, 7/01/27 ............................................ 100,000 100,000 Southampton County IDAR, Various Exempt Facilities, Hadson Power, 11-A, Daily VRDN and Put, 3.10%, 4/01/15 ...................................................................... 500,000 500,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $900,000) .............................................. 900,000 ------------ TOTAL INVESTMENTS (COST $385,427,339) 100.2% .............................................. 387,696,471 OTHER ASSETS, LESS LIABILITIES (.2%) ...................................................... (760,633) ------------ NET ASSETS 100.0% ......................................................................... $386,935,838 ============
See glossary of terms on page 96. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principle balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.) GLOSSARY OF TERMS - --------------------------------------------------------------------------------
ACES - Adjustable Convertible Exempt Securities AMBAC - American Municipal Bond Assurance Corp. BIG - Bond Investors Guaranty Insurance Co. (acquired by MBIA in 1989 and no longer does business under this name). CDA - Community Development Authority/Agency CDD - Community Development District COP - Certificate of Participation EDA - Economic Development Authority EDC - Economic Development Corp. EDR - Economic Development Revenue ETM - Escrow to Maturity FGIC - Financial Guaranty Insurance Co. FHA - Federal Housing Authority/Agency FNMA - Federal National Mortgage Association FSA - Financial Security Assistance (some of the securities shown as FSA Insured were originally issued by Capital Guaranty Insurance Co. (CGIC) which was acquired by FSA in 1995 and no longer does business under this name). GNMA - Government National Mortgage Association GO - General Obligation HDA - Housing Development Authority/Agency HDC - Housing Development Corp. HFA - Housing Finance Authority/Agency HFAR - Housing Finance Authority Revenue HFC - Housing Finance Corp. HMR - Home Mortgage Revenue ID - Improvement District IDA - Industrial Development Authority/Agency IDAR - Industrial Development Authority Revenue IDB - Industrial Development Board IDBR - Industrial Development Board Revenue IDC - Industrial Development Corp. IDR - Industrial Development Revenue ISD - Independent School District LP - Limited Partnership MAC - Municipal Assistance Corp. MBIA - Municipal Bond Investors Assurance Corp. MF - Multi-Family MFHR - Multi-Family Housing Revenue MFMR - Multi-Family Mortgage Revenue MFR - Multi-Family Revenue MUD - Municipal Utility District PBA - Public Building Authority PCFA - Pollution Control Financing Authority PCR - Pollution Control Revenue PFA - Public Financing Authority RDA - Redevelopment Agency RDAR - Redevelopment Authority/Agency Revenue SF - Single Family SFHR - Single Family Housing Revenue SFM - Single Family Mortgage SFMR - Single Family Mortgage Revenue
FRANKLIN TAX-FREE TRUST Financial Statements STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN ALABAMA TAX-FREE FLORIDA TAX-FREE GEORGIA TAX-FREE KENTUCKY TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND - ------------------------------------------------------------------------------------------------------------------------------------ Assets: Investments in securities: Cost ..................................... $ 240,415,527 $ 1,736,272,401 $ 181,539,982 $ 66,776,748 =============== =============== =============== =============== Value .................................... 238,728,800 1,771,737,016 182,194,806 66,773,049 Cash ...................................... 65,827 60,188 61,362 90,254 Receivables: Investment securities sold ............... -- -- 3,324,672 959,893 Capital shares sold ...................... 369,212 4,438,421 368,676 58,461 Interest ................................. 4,002,012 30,503,348 2,576,233 986,466 --------------- --------------- --------------- --------------- Total assets ........................... 243,165,851 1,806,738,973 188,525,749 68,868,123 --------------- --------------- --------------- --------------- Liabilities: Payables: Investment securities purchased .......... -- 50,608,696 11,571,993 1,509,335 Capital shares redeemed .................. 488,717 6,109,397 162,191 253,799 Affiliates ............................... 176,723 1,081,775 140,174 25,325 Shareholders ............................. 3,951 23,489 1,381 822 Distributions to shareholders ............. 406,273 2,871,250 325,111 110,773 Other liabilities ......................... 22,209 118,608 24,535 11,000 --------------- --------------- --------------- --------------- Total liabilities ...................... 1,097,873 60,813,215 12,225,385 1,911,054 --------------- --------------- --------------- --------------- Net assets, at value ................... $ 242,067,978 $ 1,745,925,758 $ 176,300,364 $ 66,957,069 =============== =============== =============== =============== Net assets consist of: Accumulated distributions in excess of net investment income .................. (168,636) (1,585,145) (207,686) (66,170) Net unrealized appreciation (depreciation) (1,686,727) 35,464,615 654,824 (3,699) Accumulated net realized gain (loss) ...... (986,784) 2,122,019 (328,573) (971,073) Capital shares ............................ 244,910,125 1,709,924,269 176,181,799 67,998,011 --------------- --------------- --------------- --------------- Net assets, at value ................... $ 242,067,978 $ 1,745,925,758 $ 176,300,364 $ 66,957,069 =============== =============== =============== =============== CLASS A: Net assets, at value ...................... $ 225,818,356 $ 1,663,397,373 $ 158,065,488 $ 66,957,069 =============== =============== =============== =============== Shares outstanding ........................ 20,325,508 146,610,543 13,773,146 6,159,783 =============== =============== =============== =============== Net asset value per share* ................ $ 11.11 $ 11.35 $ 11.48 $ 10.87 =============== =============== =============== =============== Maximum offering price per share (net asset value per share / 95.75%) ..... $ 11.60 $ 11.85 $ 11.99 $ 11.35 =============== =============== =============== =============== CLASS C: Net assets, at value ...................... $ 16,249,622 $ 82,528,385 $ 18,234,876 -- =============== =============== =============== =============== Shares outstanding ........................ 1,454,615 7,212,430 1,579,338 -- =============== =============== =============== =============== Net asset value per share* ................ $ 11.17 $ 11.44 $ 11.55 -- =============== =============== =============== =============== Maximum offering price per share (net asset value per share / 99.00%) ..... $ 11.28 $ 11.56 $ 11.67 -- =============== =============== =============== ===============
*Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF ASSETS AND LIABILITIES (CONT.) AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN NORTH LOUISIANA TAX-FREE MARYLAND TAX-FREE MISSOURI TAX-FREE CAROLINA TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND - ------------------------------------------------------------------------------------------------------------------------------------ Assets: Investments in securities: Cost .................................... $ 173,525,476 $ 263,034,788 $ 405,198,805 $ 387,615,036 ============= ============= ============= ============= Value ................................... 173,654,218 263,441,014 405,117,821 387,363,526 Cash ..................................... 64,852 102,452 13,000 79,457 Receivables: Capital shares sold ..................... 145,490 132,227 374,041 324,893 Interest ................................ 2,723,107 4,062,923 6,362,413 6,216,933 ------------- ------------- ------------- ------------- Total assets .......................... 176,587,667 267,738,616 411,867,275 393,984,809 ------------- ------------- ------------- ------------- Liabilities: Payables: Investment securities purchased ......... 8,537,802 -- 1,600,000 3,800,923 Capital shares redeemed ................. 176,984 415,906 120,517 400,517 Affiliates .............................. 124,183 193,088 283,070 285,859 Shareholders ............................ 1,607 4,312 4,198 2,558 Distributions to shareholders ............ 277,354 412,484 657,593 617,899 Other liabilities ........................ 22,233 27,766 49,463 32,307 ------------- ------------- ------------- ------------- Total liabilities ..................... 9,140,163 1,053,556 2,714,841 5,140,063 ------------- ------------- ------------- ------------- Net assets, at value .................. $ 167,447,504 $ 266,685,060 $ 409,152,434 $ 388,844,746 ============= ============= ============= ============= Net assets consist of: Accumulated distributions in excess of net investment income ............... $ (126,545) $ (171,621) $ (3,695) $ (69,732) Net unrealized appreciation (depreciation) 128,742 406,226 (80,984) (251,510) Accumulated net realized gain (loss) .... (1,296,999) 32,332 (784,750) (328,801) Capital shares .......................... 168,742,306 266,418,123 410,021,863 389,494,789 ------------- ------------- ------------- ------------- Net assets, at value .................. $ 167,447,504 $ 266,685,060 $ 409,152,434 $ 388,844,746 ============= ============= ============= ============= CLASS A: Net assets, at value ..................... $ 155,070,695 $ 248,211,360 $ 383,809,492 $ 346,558,986 ============= ============= ============= ============= Shares outstanding ....................... 14,110,549 22,457,237 33,314,986 30,065,449 ============= ============= ============= ============= Net asset value per share* ............... $ 10.99 $ 11.05 $ 11.52 $ 11.53 ============= ============= ============= ============= Maximum offering price per share (net asset value per share / 95.75%) ..... $ 11.48 $ 11.54 $ 12.03 $ 12.04 ============= ============= ============= ============= CLASS C: Net assets, at value ..................... $ 12,376,809 $ 18,473,700 $ 25,342,942 $ 42,285,760 ============= ============= ============= ============= Shares outstanding ....................... 1,118,901 1,657,724 2,191,076 3,644,300 ============= ============= ============= ============= Net asset value per share* ............... $ 11.06 $ 11.14 $ 11.57 $ 11.60 ============= ============= ============= ============= Maximum offering price per share (net asset value per share / 99.00%) ..... $ 11.17 $ 11.25 $ 11.69 $ 11.72 ============= ============= ============= =============
*Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF ASSETS AND LIABILITIES (CONT.) AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN TEXAS TAX-FREE VIRGINIA TAX-FREE INCOME FUND INCOME FUND ------------------------------------- Assets: Investments in securities: Cost ............................................................... $ 128,594,863 $ 385,427,339 ============= ============= Value .............................................................. 129,687,978 387,696,471 Cash ................................................................ 85,165 15,875 Receivables: Capital shares sold ................................................ 2,480 542,974 Interest ........................................................... 1,921,391 5,881,812 ------------- ------------- Total assets ..................................................... 131,697,014 394,137,132 ------------- ------------- Liabilities: Payables: Investment securities purchased .................................... 8,521,303 5,608,230 Capital shares redeemed ............................................ 313,808 665,410 Affiliates ......................................................... 91,968 269,817 Shareholders ....................................................... 1,757 4,353 Distributions to shareholders ....................................... 203,971 619,383 Other liabilities ................................................... 22,124 34,101 ------------- ------------- Total liabilities ................................................ 9,154,931 7,201,294 ------------- ------------- Net assets, at value ............................................. $ 122,542,083 $ 386,935,838 ============= ============= Net assets consist of: Accumulated distributions in excess of net investment income ........ $ (200,564) $ (187,847) Net unrealized appreciation ......................................... 1,093,115 2,269,132 Accumulated net realized loss ....................................... (24,671) (1,062,273) Capital shares ...................................................... 121,674,203 385,916,826 ------------- ------------- Net assets, at value ............................................. $ 122,542,083 $ 386,935,838 ============= ============= CLASS A: Net assets, at value ................................................ $ 117,631,574 $ 363,262,913 ============= ============= Shares outstanding .................................................. 10,866,250 32,284,587 ============= ============= Net asset value per share* .......................................... $ 10.83 $ 11.25 ============= ============= Maximum offering price per share (net asset value per share / 95.75%) $ 11.31 $ 11.75 ============= ============= CLASS C: Net assets, at value ................................................ $ 4,910,509 $ 23,672,925 ============= ============= Shares outstanding .................................................. 447,733 2,089,429 ============= ============= Net asset value per share* .......................................... $ 10.97 $ 11.33 ============= ============= Maximum offering price per share (net asset value per share / 99.00%) $ 11.08 $ 11.44 ============= =============
*Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN ALABAMA TAX-FREE FLORIDA TAX-FREE GEORGIA TAX-FREE KENTUCKY TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND --------------------------------------------------------------------------- Investment income: Interest .......................................... $ 7,570,015 $ 53,535,845 $ 5,241,207 $ 1,861,773 ------------ ------------ ------------ ------------ Expenses: Management fees (Note 3) .......................... 690,856 4,233,793 518,403 208,881 Distribution fees (Note 3) Class A .......................................... 115,356 837,074 81,873 33,743 Class C .......................................... 52,207 275,861 60,462 -- Transfer agent fees (Note 3) ...................... 49,395 303,615 44,874 12,260 Custodian fees .................................... 1,282 9,108 918 317 Reports to shareholders ........................... 15,505 111,227 16,892 4,100 Registration and filing fees ...................... 5,212 35,003 3,466 1,518 Professional fees ................................. 4,259 19,282 2,676 1,198 Trustees' fees and expenses ....................... 1,220 7,585 840 324 Other ............................................. 8,579 36,456 8,911 5,317 ------------ ------------ ------------ ------------ Total expenses ............................... 943,871 5,869,004 739,315 267,658 Expenses waived/paid by affiliate (Note 3) ... -- -- -- (116,590) ------------ ------------ ------------ ------------ Net expenses ............................... 943,871 5,869,004 739,315 151,068 ------------ ------------ ------------ ------------ Net investment income .................... 6,626,144 47,666,841 4,501,892 1,710,705 ------------ ------------ ------------ ------------ Realized and unrealized gains (losses): Net realized gain (loss) from investments ......... (985,183) 2,132,953 (328,085) (128,486) Net unrealized depreciation on investments ........ (11,433,599) (90,228,794) (8,722,650) (3,452,632) ------------ ------------ ------------ ------------ Net realized and unrealized loss ................... (12,418,782) (88,095,841) (9,050,735) (3,581,118) ------------ ------------ ------------ ------------ Net decrease in net assets resulting from operations $ (5,792,638) $(40,429,000) $ (4,548,843) $ (1,870,413) ============ ============ ============ ============
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF OPERATIONS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN NORTH LOUISIANA TAX-FREE MARYLAND TAX-FREE MISSOURI TAX-FREE CAROLINA TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ----------------------------------------------------------------------------- Investment income: Interest .......................................... $ 4,947,892 $ 7,647,156 $ 11,638,303 $ 11,205,509 -------------------------------------------------------------------- Expenses: Management fees (Note 3) .......................... 484,046 738,540 1,051,559 1,014,601 Distribution fees (Note 3) Class A .......................................... 77,172 125,343 189,682 174,089 Class C .......................................... 37,722 60,332 75,712 134,908 Transfer agent fees (Note 3) ...................... 30,282 65,758 93,938 82,893 Custodian fees .................................... 864 1,360 1,961 1,940 Reports to shareholders ........................... 9,059 20,522 33,099 21,779 Registration and filing fees ...................... 3,655 4,723 14,302 6,946 Professional fees ................................. 2,423 3,274 4,736 4,728 Trustees' fees and expenses ....................... 799 1,404 1,903 1,742 Other ............................................. 9,419 9,527 11,532 13,316 -------------------------------------------------------------------- Total expenses ............................... 655,441 1,030,783 1,478,424 1,456,942 -------------------------------------------------------------------- Net investment income ...................... 4,292,451 6,616,373 10,159,879 9,748,567 -------------------------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments ......... (331,464) 32,896 (783,702) 218,246 Net unrealized depreciation on investments ........ (8,454,167) (13,742,756) (21,677,959) (21,202,218) -------------------------------------------------------------------- Net realized and unrealized loss ................... (8,785,631) (13,709,860) (22,461,661) (20,983,972) -------------------------------------------------------------------- Net decrease in net assets resulting from operations $ (4,493,180) $ (7,093,487) $(12,301,782) $(11,235,405) ====================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF OPERATIONS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) FRANKLIN FRANKLIN
TEXAS TAX-FREE VIRGINIA TAX-FREE INCOME FUND INCOME FUND ----------------------------------- Investment income: Interest ...................................................................... $3,849,794 $11,398,723 ----------- ------------ Expenses: Management fees (Note 3) ...................................................... 384,211 1,023,422 Distribution fees (Note 3) Class A ...................................................................... 55,558 183,488 Class C ...................................................................... 16,643 78,694 Transfer agent fees (Note 3) .................................................. 31,769 87,736 Custodian fees ................................................................ 686 2,030 Reports to shareholders ....................................................... 10,217 25,321 Registration and filing fees .................................................. 12,065 8,212 Professional fees ............................................................. 1,887 4,296 Trustees' fees and expenses ................................................... 690 2,017 Other ......................................................................... 7,758 11,687 ----------- ------------ Total expenses ........................................................... 521,484 1,426,903 ----------- ------------ Net investment income .................................................. 3,328,310 9,971,820 ----------- ------------ Realized and unrealized losses: Net realized loss from investments ............................................ (23,713) (1,050,662) Net unrealized depreciation on investments .................................... (6,336,938) (20,303,584) ----------- ------------ Net realized and unrealized loss ............................................... (6,360,651) (21,354,246) ----------- ------------ Net decrease in net assets resulting from operations ........................... $(3,032,341) $(11,382,426) =========== ============
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS for the six months ended August 31, 1999 (unaudited) and the year ended February 28, 1999
FRANKLIN ALABAMA FRANKLIN FLORIDA TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------ ---------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ------------------------------------------------------------------------ Increase (decrease) in net assets: Operations: Net investment income ............................... $ 6,626,144 $ 12,470,697 $ 47,666,841 $ 91,429,588 Net realized gain (loss) from investments ........... (985,183) 818,129 2,132,953 2,085,930 Net unrealized appreciation (depreciation) on investments ....................................... (11,433,599) (5,618,719) (90,228,794) 5,208,364 ------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations ....................................... (5,792,638) 7,670,107 (40,429,000) 98,723,882 Distributions to shareholders from: Net investment income: Class A ............................................ (6,252,085) (11,939,099) (45,728,049) (88,302,683) Class C ............................................ (374,059) (559,627) (1,938,792) (3,126,905) In excess of net investment income: Class A ............................................ (47,460) (113,035) (132,587) (71,693) Class C ............................................ (2,839) (5,302) (5,625) (2,539) Net realized gains: Class A ............................................. (148,972) (917,072) (135,130) (1,175,768) Class C ............................................. (10,091) (51,296) (6,476) (52,335) ------------------------------------------------------------------------ Total distributions to shareholders .................. (6,835,506) (13,585,431) (47,946,659) (92,731,923) Capital share transactions: (Note 2) Class A ............................................. (1,042,281) 27,324,497 (37,991,376) 129,875,026 Class C ............................................. 2,172,932 5,704,773 3,977,142 26,353,188 ------------------------------------------------------------------------ Total capital share transactions ..................... 1,130,651 33,029,270 (34,014,234) 156,228,214 Net increase (decrease) in net assets .............. (11,497,493) 27,113,946 (122,389,893) 162,220,173 Net assets: Beginning of period .................................. 253,565,471 226,451,525 1,868,315,651 1,706,095,478 ------------------------------------------------------------------------ End of period ........................................ $ 242,067,978 $ 253,565,471 $ 1,745,925,758 $ 1,868,315,651 ======================================================================== Accumulated distributions in excess of net investment income included in net assets: End of period ....................................... $ (168,636) $ (118,337) $ (1,585,145) $ (1,446,933) ========================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) for the six months ended August 31, 1999 (unaudited) and the year ended February 28, 1999
FRANKLIN GEORGIA FRANKLIN KENTUCKY TAX-FREE INCOME FUND TAX-FREE INCOME FUND ---------------------------------- -------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .................................... $ 4,501,892 $ 8,518,942 $ 1,710,705 $ 3,066,223 Net realized gain (loss) from investments ................ (328,085) 628,282 (128,486) 77,954 Net unrealized appreciation (depreciation) on investments (8,722,650) (506,735) (3,452,632) 73,621 ------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .............................................. (4,548,843) 8,640,489 (1,870,413) 3,217,798 Distributions to shareholders from: Net investment income: Class A ................................................. (4,092,225) (7,931,954) (1,710,705) (3,089,344) Class C ................................................. (409,667) (586,988) -- -- In excess of net investment income: Class A ................................................. (125,580) (51,167) (46,380) (19,790) Class C ................................................. (12,572) (3,786) -- -- Net realized gains: Class A ................................................. (23,621) (739,309) -- -- Class C ................................................. (2,724) (67,075) -- -- ------------------------------------------------------------------- Total distributions to shareholders ....................... (4,666,389) (9,380,279) (1,757,085) (3,109,134) Capital share transactions: (Note 2) Class A ................................................. 1,665,193 15,711,376 6,068,963 10,196,210 Class C ................................................. 1,903,937 8,225,919 -- -- ------------------------------------------------------------------- Total capital share transactions .......................... 3,569,130 23,937,295 6,068,963 10,196,210 Net increase (decrease) in net assets .................... (5,646,102) 23,197,505 2,441,465 10,304,874 Net assets: Beginning of period ....................................... 181,946,466 158,748,961 64,515,604 54,210,730 ------------------------------------------------------------------- End of period ............................................. $ 176,300,364 $ 181,946,466 $ 66,957,069 $ 64,515,604 =================================================================== Accumulated distributions in excess of net investment income included in net assets: End of period ............................................ $ (207,686) $ (69,534) $ (66,170) $ (19,790) ===================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) for the six months ended August 31, 1999 (unaudited) and the year ended February 28, 1999
FRANKLIN LOUISIANA FRANKLIN MARYLAND TAX-FREE INCOME FUND TAX-FREE INCOME FUND ----------------------------------- ------------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .......................... $ 4,292,451 $ 7,936,886 $ 6,616,373 $ 12,055,275 Net realized gain (loss) from investments ...... (331,464) 488,946 32,896 1,358,390 Net unrealized depreciation on investments ..... (8,454,167) (690,249) (13,742,756) (76,966) ------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ............................. (4,493,180) 7,735,583 (7,093,487) 13,336,699 Distributions to shareholders from: Net investment income: Class A ....................................... (4,032,708) (7,761,641) (6,222,722) (11,448,258) Class C ....................................... (259,743) (350,878) (393,651) (607,017) In excess of net investment income: Class A ....................................... (111,295) (7,732) (37,043) (84,177) Class C ....................................... (7,168) (350) (2,343) (4,463) Net realized gains: Class A ....................................... -- -- (671,718) (871,879) Class C ....................................... -- -- (49,584) (56,008) ------------------------------------------------------------------------- Total distributions to shareholders ............. (4,410,914) (8,120,601) (7,377,061) (13,071,802) Capital share transactions: (Note 2) Class A ....................................... 5,248,048 23,548,340 8,677,060 39,756,722 Class C ....................................... 3,022,007 5,527,638 2,639,071 6,298,607 ------------------------------------------------------------------------- Total capital share transactions ................ 8,270,055 29,075,978 11,316,131 46,055,329 Net increase (decrease) in net assets .......... (634,039) 28,690,960 (3,154,417) 46,320,226 Net assets: Beginning of period ............................. 168,081,543 139,390,583 269,839,477 223,519,251 ------------------------------------------------------------------------- End of period ................................... $ 167,447,504 $ 168,081,543 $ 266,685,060 $ 269,839,477 ========================================================================= Accumulated distributions in excess of net investment income included in net assets: End of period .................................. $ (126,545) $ (8,082) $ (171,621) $ (132,235) =========================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) for the six months ended August 31, 1999 (unaudited) and the year ended February 28, 1999
FRANKLIN MISSOURI FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .......................... $ 10,159,879 $ 17,579,385 $ 9,748,567 $ 17,127,841 Net realized gain (loss) from investments ...... (783,702) 490,267 218,246 832,636 Net unrealized appreciation (depreciation) on investments .................................. (21,677,959) (605,052) (21,202,218) 413,367 ------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ............................. (12,301,782) 17,464,600 (11,235,405) 18,373,844 Distributions to shareholders from: Net investment income: Class A ........................................ (9,928,475) (17,097,301) (8,921,635) (15,908,188) Class C ........................................ (523,302) (677,489) (911,121) (1,292,262) In excess of net investment income: Class A ........................................ (3,510) -- (63,271) -- Class C ........................................ (185) -- (6,462) -- Net realized gains: Class A ........................................ (440,962) (848,423) -- -- Class C ........................................ (27,139) (35,015) -- -- ------------------------------------------------------------------------- Total distributions to shareholders ............. (10,923,573) (18,658,228) (9,902,489) (17,200,450) Capital share transactions: (Note 2) Class A ........................................ 18,746,288 80,047,632 16,060,662 50,945,959 Class C ........................................ 6,287,682 10,400,259 6,332,137 18,021,556 ------------------------------------------------------------------------- Total capital share transactions ................ 25,033,970 90,447,891 22,392,799 68,967,515 Net increase in net assets ..................... 1,808,615 89,254,263 1,254,905 70,140,909 Net assets: Beginning of period ............................. 407,343,819 318,089,556 387,589,841 317,448,932 ------------------------------------------------------------------------- End of period ................................... $ 409,152,434 $ 407,343,819 $ 388,844,746 $ 387,589,841 ========================================================================= Undistributed net investment income (accumulated distributions in excess of net investment income) included in net assets: End of period ................................. $ (3,695) $ 291,898 $ (69,732) $ 84,190 =========================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) for the six months ended August 31, 1999 (unaudited) and the year ended February 28, 1999
FRANKLIN TEXAS FRANKLIN VIRGINIA TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------ -------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ---------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ............................. $ 3,328,310 $ 6,806,106 $ 9,971,820 $ 18,677,118 Net realized gain (loss) from investments ......... (23,713) 1,167,854 (1,050,662) 267,647 Net unrealized appreciation (depreciation) on investments ..................................... (6,336,938) (1,644,556) (20,303,584) 703,456 ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ................................. (3,032,341) 6,329,404 (11,382,426) 19,648,221 Distributions to shareholders from: Net investment income: Class A ........................................... (3,213,079) (6,648,209) (9,441,875) (18,091,651) Class C ........................................... (115,231) (157,897) (529,945) (779,882) In excess of net investment income: Class A ........................................... (68,485) (6,115) (160,830) (17,247) Class C ........................................... (2,456) (145) (9,027) (743) Net realized gains: Class A ........................................... (440,542) (2,340,989) -- (789,058) Class C ........................................... (17,396) (58,681) -- (38,432) ---------------------------------------------------------------------------- Total distributions to shareholders ................ (3,857,189) (9,212,036) (10,141,677) (19,717,013) Capital share transactions: (Note 2) Class A ........................................... (3,482,792) (25,786) 3,815,207 47,531,270 Class C ........................................... (53,589) 3,223,143 2,179,396 9,617,382 ---------------------------------------------------------------------------- Total capital share transactions ................... (3,536,381) 3,197,357 5,994,603 57,148,652 Net increase (decrease) in net assets ............. (10,425,911) 314,725 (15,529,500) 57,079,860 Net assets: Beginning of period ................................ 132,967,994 132,653,269 402,465,338 345,385,478 ---------------------------------------------------------------------------- End of period ...................................... $ 122,542,083 $ 132,967,994 $ 386,935,838 $ 402,465,338 ============================================================================ Accumulated distributions in excess of net investment income included in net assets: End of period ..................................... $ (200,564) $ (129,623) $ (187,847) $ (17,990) ============================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Notes to Financial Statements 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Franklin Tax Free Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-six separate series (the Funds). All Funds included in this report are diversified except the Franklin Maryland Tax-Free Income Fund. The Funds' investment objectives are to provide tax-free income. The following summarizes the Funds' significant accounting policies. a. SECURITY VALUATION Tax-free bonds generally trade in the over-the-counter market and are valued within the range of the latest quoted bid and asked prices. In the absence of a sale or reported bid and asked prices, information with respect to bond and note transactions, quotations from bond dealers, market transactions in comparable securities, and various relationships between securities are used to determine the value of the security. The Trust may utilize a pricing service, bank or broker/dealer experienced in such matters to perform any of the pricing functions under procedures approved by the Board of Trustees. Securities for which market quotations are not readily available are valued at fair value as determined by management in accordance with procedures established by the Board of Trustees. b. INCOME TAXES No provision has been made for income taxes because each Fund's policy is to qualify as a regulated investment company under the Internal Revenue Code and distribute substantially all of its taxable income. c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Bond discount and premium are amortized on an income tax basis. Distributions to shareholders are recorded on the ex-dividend date. Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets. Other expenses are charged to each Fund on a specific identification basis. d. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense during the reporting period. Actual results could differ from those estimates. 2. SHARES OF BENEFICIAL INTEREST The Funds, except for the Franklin Kentucky Tax-Free Income Fund, offer two classes of shares: Class A and Class C. Effective January 1, 1999, Class I and II were renamed Class A and Class C, respectively. Each class of shares differs by their initial sales load, distribution fees, voting rights on matters affecting a single class and the exchange privilege of each class. FRANKLIN TAX-FREE TRUST Notes to Financial Statements (continued) 2. SHARES OF BENEFICIAL INTEREST (cont.) At August 31, 1999, there were an unlimited number of shares authorized (no par value). Transactions in the Funds' shares were as follows:
FRANKLIN ALABAMA FRANKLIN FLORIDA TAX-FREE INCOME FUND TAX-FREE INCOME FUND ---------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold .................................. 1,269,263 $ 14,643,598 9,485,014 $ 111,131,259 Shares issued in reinvestment of distributions 241,989 2,774,817 1,189,354 13,871,903 Shares redeemed .............................. (1,614,576) (18,460,696) (14,021,681) (162,994,538) ---------------------------------------------------------------------- Net decrease ................................. (103,324) $ (1,042,281) (3,347,313) $ (37,991,376) ====================================================================== Year ended February 28, 1999 Shares sold .................................. 3,928,750 $ 46,288,384 27,102,249 $ 322,736,020 Shares issued in reinvestment of distributions 497,017 5,847,857 2,172,745 25,852,864 Shares redeemed .............................. (2,107,060) (24,811,744) (18,386,112) (218,713,858) -------------------------------------------------------------------- Net increase ................................. 2,318,707 $ 27,324,497 10,888,882 $ 129,875,026 ====================================================================== CLASS C SHARES: Six months ended August 31, 1999 Shares sold .................................. 302,858 $ 3,512,479 1,117,041 $ 13,207,023 Shares issued in reinvestment of distributions 16,780 193,257 81,550 959,517 Shares redeemed .............................. (133,265) (1,532,804) (865,745) (10,189,398) -------------------------------------------------------------------- Net increase ................................. 186,373 $ 2,172,932 332,846 $ 3,977,142 ==================================================================== Year ended February 28, 1999 Shares sold .................................. 572,980 $ 6,785,441 3,192,922 $ 38,333,343 Shares issued in reinvestment of distributions 27,698 327,338 142,767 1,712,748 Shares redeemed .............................. (119,184) (1,408,006) (1,141,979) (13,692,903) -------------------------------------------------------------------- Net increase ................................. 481,494 $ 5,704,773 2,193,710 $ 26,353,188 ====================================================================
FRANKLIN GEORGIA FRANKLIN KENTUCKY TAX-FREE INCOME FUND TAX-FREE INCOME FUND --------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT --------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold .................................. 1,042,043 $ 12,383,079 804,277 $ 9,051,483 Shares issued in reinvestment of distributions 172,344 2,040,288 67,424 756,907 Shares redeemed .............................. (1,082,128) (12,758,174) (334,600) (3,739,427) --------------------------------------------------------------------- Net increase ................................. 132,259 $ 1,665,193 537,101 $ 6,068,963 ==================================================================== Year ended February 28, 1999 Shares sold .................................. 2,585,504 $ 31,326,826 1,245,441 $ 14,308,425 Shares issued in reinvestment of distributions 368,092 4,460,541 117,256 1,347,644 Shares redeemed .............................. (1,656,003) (20,075,991) (474,917) (5,459,859) --------------------------------------------------------------------- Net increase ................................. 1,297,593 $ 15,711,376 887,780 $ 10,196,210 ==================================================================== CLASS C SHARES: Six months ended August 31, 1999 Shares sold .................................. 311,009 $ 3,729,863 Shares issued in reinvestment of distributions 21,885 260,567 Shares redeemed .............................. (176,150) (2,086,493) ------------------------------- Net increase ................................. 156,744 $ 1,903,937 ============================== Year ended February 28, 1999 Shares sold .................................. 929,760 $ 11,327,791 Shares issued in reinvestment of distributions 35,188 428,887 Shares redeemed .............................. (289,533) (3,530,759) ------------------------------- Net increase ................................. 675,415 $ 8,225,919 ===============================
FRANKLIN TAX-FREE TRUST Notes to Financial Statements (continued) 2. SHARES OF BENEFICIAL INTEREST (cont.)
FRANKLIN LOUISIANA FRANKLIN MARYLAND TAX-FREE INCOME FUND TAX-FREE INCOME FUND -------------------------------- ---------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold .................................. 1,337,416 $ 15,222,939 2,036,271 $ 23,364,373 Shares issued in reinvestment of distributions 156,214 1,774,397 330,036 3,766,767 Shares redeemed .............................. (1,029,413) (11,749,288) (1,616,545) (18,454,080) -------------------------------------------------------------------- Net increase ................................. 464,217 $ 5,248,048 749,762 $ 8,677,060 ==================================================================== Year ended February 28, 1999 Shares sold .................................. 3,221,007 $ 37,387,696 4,888,050 $ 57,057,592 Shares issued in reinvestment of distributions 306,021 3,551,482 564,968 6,597,373 Shares redeemed .............................. (1,499,172) (17,390,838) (2,046,845) (23,898,243) -------------------------------------------------------------------- Net increase ................................. 2,027,856 $ 23,548,340 3,406,173 $ 39,756,722 ==================================================================== CLASS C SHARES: Six months ended August 31, 1999 Shares sold .................................. 295,695 $ 3,401,797 442,010 $ 5,121,459 Shares issued in reinvestment of distributions 11,590 132,203 27,368 314,538 Shares redeemed .............................. (44,802) (511,993) (243,851) (2,796,926) -------------------------------------------------------------------- Net increase ................................. 262,483 $ 3,022,007 225,527 $ 2,639,071 ==================================================================== Year ended February 28, 1999 Shares sold .................................. 536,583 $ 6,261,123 747,540 $ 8,797,704 Shares issued in reinvestment of distributions 16,406 191,580 38,241 450,176 Shares redeemed .............................. (79,281) (925,065) (250,371) (2,949,273) -------------------------------------------------------------------- Net increase ................................. 473,708 $ 5,527,638 535,410 $ 6,298,607 ====================================================================
FRANKLIN MISSOURI FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND TAX-FREE INCOME FUND ---------------------------------- ----------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold .................................. 4,714,640 $ 56,436,247 2,942,047 $ 35,225,226 Shares issued in reinvestment of distributions 408,327 4,864,608 382,579 4,550,415 Shares redeemed .............................. (3,552,166) (42,554,567) (1,995,955) (23,714,979) ----------------------------------------------------------------------- Net increase ................................. 1,570,801 $ 18,746,288 1,328,671 $ 16,060,662 ======================================================================= Year ended February 28, 1999 Shares sold .................................. 8,870,628 $ 108,367,210 6,146,411 $ 74,796,684 Shares issued in reinvestment of distributions 712,755 8,699,355 654,741 7,962,453 Shares redeemed .............................. (3,032,017) (37,018,933) (2,617,169) (31,813,178) ----------------------------------------------------------------------- Net increase ................................. 6,551,366 $ 80,047,632 4,183,983 $ 50,945,959 ======================================================================= CLASS C SHARES: Six months ended August 31, 1999 Shares sold .................................. 589,758 $ 7,073,224 727,985 $ 8,742,763 Shares issued in reinvestment of distributions 32,604 389,350 49,114 587,581 Shares redeemed .............................. (98,199) (1,174,892) (252,497) (2,998,207) ----------------------------------------------------------------------- Net increase ................................. 524,163 $ 6,287,682 524,602 $ 6,332,137 ======================================================================= Year ended February 28, 1999 Shares sold .................................. 904,387 $ 11,088,809 1,597,185 $ 19,527,930 Shares issued in reinvestment of distributions 41,559 509,208 68,045 832,816 Shares redeemed .............................. (97,734) (1,197,758) (190,827) (2,339,190) ----------------------------------------------------------------------- Net increase ................................. 848,212 $ 10,400,259 1,474,403 $ 18,021,556 =======================================================================
FRANKLIN TAX-FREE TRUST Notes to Financial Statements (continued) 2. SHARES OF BENEFICIAL INTEREST (cont.)
FRANKLIN TEXAS FRANKLIN VIRGINIA TAX-FREE INCOME FUND TAX-FREE INCOME FUND ----------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------- Six months ended August 31, 1999 Shares sold ...................................... 363,569 $ 4,098,094 2,296,566 $ 26,786,142 Shares issued in reinvestment of distributions ... 148,411 1,658,564 404,562 4,702,439 Shares redeemed .................................. (829,039) (9,239,450) (2,387,380) (27,673,374) ----------------------------------------------------------------- Net increase (decrease) .......................... (317,059) $ (3,482,792) 313,748 $ 3,815,207 ================================================================= Year ended February 28, 1999 Shares sold ...................................... 1,063,854 $ 12,279,433 6,206,679 $ 73,827,181 Shares issued in reinvestment of distributions ... 369,534 4,258,680 791,873 9,417,456 Shares redeemed .................................. (1,433,300) (16,563,899) (3,001,436) (35,713,367) ----------------------------------------------------------------- Net increase ..................................... 88 $ (25,786) 3,997,116 $ 47,531,270 ================================================================= CLASS C SHARES: Six months ended August 31, 1999 Shares sold ...................................... 55,674 $ 634,160 342,838 $ 4,041,739 Shares issued in reinvestment of distributions ... 7,514 85,033 27,874 326,027 Shares redeemed .................................. (67,553) (772,782) (188,135) (2,188,370) ----------------------------------------------------------------- Net increase (decrease) .......................... (4,365) $ (53,589) 182,577 $ 2,179,396 ================================================================= Year ended February 28, 1999 Shares sold ...................................... 324,935 $ 3,790,151 916,509 $ 10,970,899 Shares issued in reinvestment of distributions ... 12,858 149,890 41,576 497,850 Shares redeemed .................................. (61,489) (716,898) (154,863) (1,851,367) ----------------------------------------------------------------- Net increase ..................................... 276,304 $ 3,223,143 803,222 $ 9,617,382 =================================================================
3. TRANSACTIONS WITH AFFILIATES Certain officers and trustees of the Funds are also officers or directors of Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc. (Distributors), Franklin/Templeton Investor Services, Inc. (Investor Services), and Franklin Templeton Services, Inc. (FT Services), the Funds' investment manager, principal underwriter, transfer agent, and administrative manager, respectively. The Funds pay an investment management fee to Advisers based on the average net assets of the Funds as follows: ANNUALIZED FEE RATE MONTH-END NET ASSETS ------------------------------------------------------------------------- .625% First $100 million .500% Over $100 million, up to and including $250 million .450% In excess of $250 million Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Funds. Advisers agreed in advance to waive a portion of the management fees for the Franklin Kentucky Tax-Free Income Fund as noted in the Statement of Operations. The Funds reimburse Distributors up to .10% and .65% per year of their average daily net asset of Class A and Class C, respectively, for costs incurred in marketing the Funds' shares. FRANKLIN TAX-FREE TRUST Notes to Financial Statements (continued) 3. TRANSACTIONS WITH AFFILIATES (CONT.) Distributors received (paid) net commissions from (on) sales of the Funds shares, and received contingent deferred sales charges for the period as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN ALABAMA FLORIDA GEORGIA KENTUCKY LOUISIANA TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ---------------------------------------------------------------------- Net commissions received (paid) ....... $ (25,097) $(231,895) $ (34,234) $ 14,763 $ (42,927) Contingent deferred sales charges ..... $ 7,054 $ 9,085 $ 9,169 $ -- $ 12,923
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN MARYLAND MISSOURI NORTH CAROLINA TEXAS VIRGINIA TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ---------------------------------------------------------------------- Net commissions paid .................. $ (59,570) $ (59,621) $(116,861) $ (1,330) $ (3,739) Contingent deferred sales charges ..... $ 11,555 $ 18,783 $ 18,456 $ 4,569 $ 22,306
The Funds paid transfer agent fees of $802,520 of which $664,626 was paid to Investor Services. 4. INCOME TAXES At February 28, 1999, the Funds had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows:
FRANKLIN FRANKLIN FRANKLIN KENTUCKY LOUISIANA NORTH CAROLINA TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND ----------------------------------------------- Capital loss carryovers expiring in: 2003 .................................. $450,595 $965,535 $357,415 2004 .................................. 65,389 -- -- 2005 .................................. 294,278 -- 187,812 ----------------------------------------------- $810,262 $965,535 $545,227 ===============================================
At February 28, 1999, Franklin Kentucky Tax-Free Income Fund and Franklin Virginia Tax-Free Income Fund have deferred capital losses occurring subsequent to October 31, 1998 of $32,325 and $11,635, respectively. For tax purposes, such losses will be reflected in the year ending February 29, 2000. Distributions of income to shareholders may not equal net investment income due to differing treatments of dividend distributions for book and tax purposes. FRANKLIN TAX-FREE TRUST Notes to Financial Statements (continued) 4. INCOME TAXES (CONT.) At August 31, 1999, the net unrealized appreciation (depreciation) based on the cost of investments for income tax purposes was as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN ALABAMA FLORIDA GEORGIA KENTUCKY LOUISIANA TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------------------------------- Investments at cost ........... $ 240,415,527 $ 1,736,272,401 $ 181,539,982 $ 66,776,748 $ 173,525,476 =========================================================================================== Unrealized appreciation ....... $ 6,280,905 $ 68,547,289 $ 4,427,081 $ 1,731,481 $ 4,287,984 Unrealized depreciation ....... (7,967,632) (33,082,674) (3,772,257) (1,735,180) (4,159,242) ------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) .............. $ (1,686,727) $ 35,464,615 $ 654,824 $ (3,699) $ 128,742 ===========================================================================================
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN MARYLAND MISSOURI NORTH CAROLINA TEXAS VIRGINIA TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------------------------------- Investments at cost ........... $ 263,034,788 $ 405,198,805 $ 387,615,036 $128,594,863 $ 385,427,339 =========================================================================================== Unrealized appreciation ....... $ 6,392,025 $ 10,571,574 $ 10,329,589 $ 3,890,919 $ 10,810,021 Unrealized depreciation ....... (5,985,799) (10,652,558) (10,581,099) (2,797,804) (8,540,889) ------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) .............. $ 406,226 $ (80,984) $ (251,510) $ 1,093,115 $ 2,269,132 ===========================================================================================
5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the period ended August 31, 1999 were as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN ALABAMA FLORIDA GEORGIA KENTUCKY LOUISIANA TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------------------------------- Purchases ..................... $ 33,235,796 $ 236,715,727 $ 51,313,900 $ 9,825,423 $ 33,660,968 Sales ......................... $ 30,690,682 $ 230,946,478 $ 39,731,380 $ 3,168,190 $ 22,588,724
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN MARYLAND MISSOURI NORTH CAROLINA TEXAS VIRGINIA TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------------------------------- Purchases ..................... $ 22,912,123 $ 67,915,014 $ 44,936,484 $ 18,760,191 $ 45,681,919 Sales ......................... $ 2,660,625 $ 41,240,936 $ 17,785,318 $ 17,584,016 $ 33,911,101
6. CREDIT RISK AND DEFAULTED SECURITIES At August 31, 1999, the Franklin Florida Tax-Free Income Fund held defaulted securities with a value aggregating $9,945,000 representing .57% of the Fund's net assets. For information as to specific securities, see the accompanying Statement of Investments. For financial reporting purposes, the Fund discontinues accruing income on defaulted bonds and provides an estimate for losses on interest receivable. The Funds have investments in excess of 10% of their total net assets in their respective states and/or U.S. territories and possessions. Such concentration may subject the Funds more significantly to economic changes occurring within those states and/or U.S. territories and possessions. SHAREHOLDER LETTER Dear Shareholder: This semiannual report for Franklin Tax-Free Trust covers the period ended August 31, 1999. During the six months under review, U.S. bond markets continued to experience challenging times. The yield on the benchmark 30-year Treasury bond steadily increased, from 5.57% on February 28, 1999, to 6.07% on August 31, 1999 -- reaching a high of 6.25% on August 10, 1999. Although many of the uncertainties associated with hedge funds and 1998's financial stresses on Asia, Latin America and Eastern Europe either dissipated or stabilized, the Federal Reserve Board's (the Fed's) position toward domestic inflationary tendencies renewed investor concern. At its June 30 meeting, the Federal Open Market Committee (FOMC) raised the federal funds target rate to 5.00%, while announcing a neutral bias toward further increases, which most investors initially viewed as positive. However, most bond investors became cautious as they perceived Alan Greenspan's testimony before the U.S. House of Representatives on July 22, 1999, as a change by the Fed from a neutral bias to one of possibly raising rates. Indeed, the FOMC raised its target for the federal funds rate another quarter-percentage point to 5.25% and again adopted a neutral bias at its August 24, 1999, meeting, which appeared to stabilize the bond markets for the short term. The economy's future direction and its effect on inflationary pressures will ultimately determine the level of volatility that impacts the bond markets in the near future. During the period under review, many investors uncharacteristically reacted very swiftly to new releases of economic data or Fed announcements, and in many instances the market overcorrected. Investors with short-term investment horizons may view such instability as unfavorable. However, we prefer to take a long-term approach toward investing and find that recent market conditions afforded us opportunities not only to increase the funds' income-earning potential, but also to enhance the portfolios' overall structure. Our conservative, long-term, buy-and-hold philosophy enables us to CONTENTS Shareholder Letter ....................................................... 1 Special Feature: Uncovering Tax-Free Opportunities ....................... 5 Fund Reports Franklin Arizona Tax-Free Income Fund .................................... 8 Franklin Colorado Tax-Free Income Fund ................................... 12 Franklin Connecticut Tax-Free Income Fund ................................ 15 Franklin Federal Intermediate-Term Tax-Free Income Fund .................. 19 Franklin High Yield Tax-Free Income Fund ................................. 23 Franklin New Jersey Tax-Free Income Fund ................................. 28 Franklin Oregon Tax-Free Income Fund ..................................... 32 Franklin Pennsylvania Tax-Free Income Fund ............................... 36 Franklin Puerto Rico Tax-Free Income Fund ................................ 40 Municipal Bond Ratings ................................................... 44 Financial Highlights & Statement of Investments .......................... 46 Financial Statements ..................................................... 111 Notes to Financial Statements ............................................ 122
[PYRAMID GRAPH] WHAT DOES "TAXABLE EQUIVALENT" MEAN FOR YOU? For yield and distribution rate, the taxable equivalent is the amount a taxable investment would have to earn to match a tax-free investment such as municipal bonds.(1) You can find your fund's taxable equivalent distribution rate and yield in the Performance Summary that follows your fund's report. produce comparatively high credit-quality portfolios that distribute favorable tax-free income.(1) We do not purchase exotic derivative products or use leverage as part of our investment strategy to increase yield because we also strive to maintain low share-price volatility. We encourage you to examine the credit quality of your tax-free fund, as well as its yield when evaluating your investment needs. With municipal bond insurance prevalent over the past few years, the difference in yields between high- and lower-rated bonds has narrowed compared to historical levels. As a result, many of our funds in recent years chose to invest in high-rated bonds because of the risk versus return characteristics in the marketplace. At the end of this reporting period, many of our tax-free funds held a large percentage of AAA-rated bonds, reflecting the portfolios' high quality. Our disciplined, long-term, income-oriented investment approach, along with our ability to recognize value, enables us to offer funds providing attractive tax-free yields while enjoying excellent credit quality characteristics compared to their peers. Historically more than 85% of total return for municipal bonds is derived from the income component. In light of this, we choose to concentrate on income and risk-adjusted total return in managing our funds, and on this basis, most of our tax-free funds compare very favorably to their peers. As the interest-rate outlook stabilizes and inflationary concerns diminish, we expect the bond markets to become more stable. Overall, we expect municipal bonds to perform well, as at the end of the reporting period the ratio of yields for the Bond Buyer 40 Municipal Index versus the 30-year Treasury bond approached 95%, considerably higher than the historical average of 89%, which means municipal bonds are relatively inexpensive. Furthermore, municipal bond supply for 1999 is expected to be approximately 18% less than in 1998, with about $230 billion coming to market. The reduced supply should enhance municipal bonds' performance going forward. Please keep in mind that interest rates and thus, bond prices, rise and fall depending on the economy. Such fluctuations are a normal part of investing, and one should expect this when investing in any security, including municipal bonds. Municipal bond funds can help lower such volatility, as they offer a level of diversification that is difficult for individual investors to achieve on their own. They continue to be an attractive investment for those investors seeking tax-free income as well as providing an opportunity to reduce risk in their portfolios. Depending on your federal and state tax a taxable investment would need to offer a higher yield than the taxable yield of a tax-free investment. We encourage you to discuss your financial goals an investment representative. As always, we appreciate your support, welcome questions and look forward to serving your investment needs in the years ahead. 1. For investors subject to the federal or state alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. Sincerely, /s/ Charles B. Johnson Charles B. Johnson Chairman Franklin Tax-Free Trust /s/ Thomas J. Kenny Thomas J. Kenny Director Franklin Municipal Bond Department FRANKLIN MUNICIPAL BOND FUNDS ARE STAR QUALITY OVERALL MORNINGSTAR RATINGS(TM) These funds in Franklin Tax-Free Trust were rated against a universe of 1,591; 1,210 and 372 municipal bond funds for the 3-, 5- and 10-year periods, respectively, ended August 31, 1999. You may be pleased to know how well your Franklin Tax-Free Income Fund compares with the competition. Morningstar, a leading mutual fund rating company, awarded 33 Franklin municipal bond funds their highest ratings, four or five stars. With one of the largest municipal bond departments in the industry, Franklin Templeton has the resources needed to identify attractive municipal bond opportunities and the know-how to purchase them at favorable prices. We offer investors more high-quality choices than any other fund group followed by Morningstar. ***** FIVE-STAR FRANKLIN TAX-FREE INCOME FUNDS(1,2) Franklin Federal Intermediate-Term Tax-Free Income Fund - Class A Franklin High Yield Tax-Free Income Fund - Class A Franklin Pennsylvania Tax-Free Income Fund - Class A **** FOUR-STAR FRANKLIN TAX-FREE INCOME FUNDS(1,2) Franklin Arizona Tax-Free Income Fund - Class A Franklin Colorado Tax-Free Income Fund - Class A Franklin Connecticut Tax-Free Income Fund - Class A Franklin New Jersey Tax-Free Income Fund - Class A Franklin Oregon Tax-Free Income Fund - Class A Franklin Puerto Rico Tax-Free Income Fund - Class A 1. For investors subject to federal or state alternative minimum tax, all or a portion of the dividends may be subject to such tax, depending on the fund. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. For the 3-, 5- and 10-year periods ended August 31, 1999, the respective Morningstar ratings were as follows: Arizona Tax-Free Income 4, 4, 4; Colorado Tax-Free Income 3, 4, 4; Connecticut Tax-Free Income 4, 4, 3; Federal Intermediate-Term Tax-Free Income 4, 5, N/A; High Yield Tax-Free Income 5, 5, 5; New Jersey Tax-Free Income 4, 4, 4; Oregon Tax-Free Income 4, 4, 3; Pennsylvania Tax-Free Income 4, 5, 5; Puerto Rico Tax-Free Income 4, 5, 4. Morningstar proprietary ratings reflect historical risk-adjusted performance and can change monthly. They are calculated from the fund's 3-, 5- and 10-year average annual returns in excess of 90-day Treasury bill returns with appropriate sales charge adjustments, and a risk factor reflecting performance below 90-day T-bill returns. The top 10% of funds in a broad asset class receive five stars, the next 22.5% four stars, the next 35% three stars, the next 22.5% two stars, and the bottom 10% one star. Ratings are for Class A shares only; other classes may vary. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. You have previously received a prospectus for Franklin Tax-Free Trust in which you are a shareholder. Franklin Templeton Distributors, Inc. is the principal underwriter of the Trust. This page is not part of the shareholder report. [SPECIAL UPDATE GRAPHIC] UNCOVERING TAX-FREE OPPORTUNITIES [PHOTO OF RAFAEL COSTAS] Rafael Costas, Senior Vice President and Director of Franklin's Municipal Research Department, discusses how research is an integral part of Franklin's tax-free income funds' success. Q: Could you provide an overview of Franklin's research department? RAFAEL COSTAS: We have one of the industry's largest municipal research staffs, allowing us to routinely analyze more than 2,000 debt issuers a year. The research department analysts work closely with our portfolio managers, who rely on these analysts when making buy and sell decisions. With a focus on in-depth research and the discipline to buy when others are selling, we often are able to find exciting opportunities at temporarily depressed prices. Generally, we concentrate on investment grade issues. Of course, for our high yield funds, we also look for below investment-grade bonds that we feel offer appropriate rewards for the increased risk. Q: What are some advantages of Franklin's size and reputation? RAFAEL: Today, Franklin is one of the nation's leading tax-free fund managers. Our size, with approximately $50 billion of tax-free investments, often enables us to purchase investments at advantageous prices, which in turn, can help keep investment costs low. We pass on these savings to shareholders in the form of higher tax-free yields.(1) In addition, our size often makes us a favorite of new issuers, as many prefer to work with a minimum number of investors. Q: What type of tax-free bonds do you favor? RAFAEL: We typically look for investment-grade bonds, as we try to provide our shareholders high, current income with a relatively low level of risk. Most of our investment grade tax-free bond funds are composed of a high percentage of securities rated AAA or AA, the highest ratings bonds can receive from national credit rating agencies.(2) In addition, many of our purchases are insured because of the prevalence of insurance in the municipal bond marketplace in the past few years. Insured securities normally are rated AAA, further improving the quality of our funds. For our high yield funds, we look for bonds which may be out of favor but, in our view, still have solid fundamentals and the potential to be upgraded. In fact, we devote much of our research efforts to finding such bonds in the low investment-grade, high yield sectors. 1. For investors subject to the federal or state alternative minimum tax, a portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Ratings can change. Q: How do you research a bond? RAFAEL: We emphasize detailed, high-quality research, which often enables us to uncover attractive investments that others may have overlooked. When presented with an opportunity, our analysts carefully consider such factors as the bond's purpose, who will repay the bond, if the projections are reasonable, the payment schedule and the issuer's credit history. We incorporate all of the numerical findings in our internal, proprietary databases and spreadsheets created by our analysts. With the processed information and analysis, we meet with our portfolio managers to discuss the merits of each individual issue. The portfolio manager's decision to buy a security will depend largely on our analysis of the bond's credit quality and price. We continue to monitor our investments closely after the purchase, looking for signs of potential problems as well as additional opportunities. Q: Do you feel it is important to personally meet management and municipal officials? RAFAEL: Very much so. Each year Franklin's analysts and portfolio managers visit hundreds of sites to garner an understanding that can be obtained only through personal inspection. They meet face-to-face with the project's management and municipal officials to discuss firsthand any potential problems. Our analysts also can use these meetings to discover new opportunities, often before they are widely known. Q: Do issuers and investment bankers ever come to Franklin? RAFAEL: Our sizable presence in the municipal bond market frequently means that issuers and their bankers come to us with new issues. In a typical day, we may receive between 50 and 100 calls from brokers offering new and secondary issues. Approximately three times a week, investment bankers visit our offices, usually as part of an issue's road show. We view these as excellent opportunities not only to buy issues at favorable prices, but also to propose changes to the issue, enhancing its quality and appeal to our distinct standards. [PHOTO] Municipal research analyst Molly Butler discusses a bond issue with portfolio manager Stella Wong. Q: How can Franklin's research influence the portfolio managers investment decisions? RAFAEL: Our extensive research allows us to use a contrarian approach to investing, because we firmly believe that near-term volatility can create opportunities for greater long-term yields. For example, when Moody's, Standard & Poor's or Fitch, three national credit rating agencies, downgrade a bond, many investors sell the issue, sometimes reducing prices to what we believe are attractive levels. As we evaluate our investments based on our internal assessments, we can use these valuable opportunities to purchase what we believe are high-quality issues at temporarily depressed prices. External events can also lead to situations where bonds become undervalued. Over the past few years, for example, Medicare reform negatively affected the hospital bond sector, even for those hospitals in strong financial shape. As many hospitals' credit profiles weakened, we were able to find value selectively through our analysts' expertise. Seeking to take advantage of this, we recommended such bonds to our portfolio managers who purchased them at a time when the market seemed to be shunning these issues. Q: Could you provide an example of a successful outcome of your research? RAFAEL: Sure. A perfect example is Tucson Electric Power (TEP). It issued $579 million in tax-exempt debt in 1997-98. However, the utility had a long, troubled history and its debt was rated below investment grade. So, Molly Butler, our electric utility analyst, and I flew to Tucson and spent an entire day with TEP's top executives and division heads. We discussed their history, current position and future plans as well as challenged and questioned many of their projections and assumptions. At the end of the day, we were satisfied that their management team had a clear vision and a realistic plan for the future. Q: How is TEP doing today? RAFAEL: Since then, the rating agencies have raised TEP's credit rating and the bonds have seen a significant increase in value. Of course, the ratings can change again in the future. However, the bonds are still offering above-market yields for our shareholders, because we were able to purchase the securities when they were unpopular. We have an excellent relationship with management and they often call Ms. Butler to discuss the latest releases of information. THANK YOU, RAFAEL. WHAT IS A ROAD SHOW? Before a new issue is brought to the public, the issuer and its investment bankers travel around the country making presentations to potential investors concerning the issuer's financial information and outlook. FRANKLIN ARIZONA TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Arizona Tax-Free Income Fund Based on Long-Term Investments 8/31/99 [PIE CHART] AAA - 50.5% AA - 15.1% A - 17.8% BBB - 16.6% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin Arizona Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Arizona state personal income taxes through a portfolio consisting primarily of Arizona municipal bonds.(1) STATE UPDATE [GRAPHIC OF ARIZONA] Arizona's economy continues to surpass optimistic forecasts, driven by employment growth, population increases, a favorable business environment, new home construction and six consecutive years of tax reductions. The job base began dramatically diversifying several years ago, within the expanding high-tech manufacturing and international trade sectors, along with the more traditional mining, agriculture, tourism and retirement industries. The state saw increased but more limited job growth during the reporting period. The state boasts an unemployment rate below the national average, at 4.2% in July 1999, which is even more impressive given the massive influx of new residents. (2) Such growth is extremely important to the state's economic health. The number of companies interested in relocating to Arizona is soaring, while many existing companies have announced major expansions. In the Phoenix area alone, almost 2,000 new jobs were created in June 1999.(3) Furthermore, these new residents need somewhere to live, fueling the important construction industry. Home building permits in 1999 may break 1998's record of 36,001.(4) The state has seen its personal income figures increase more than 65% since 1990.(5) Arizona, not immune to world economic problems, struggled as three of Arizona's largest copper producers laid off 2,850 workers during the reporting period, as the price of copper remains depressed due to oversupply caused by the Asian crisis.(6) However, these job losses should be easily offset by continued new job growth. One concern for Arizona's economy is that rising interest rates could cause a slowdown in construction spending. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Bureau of Labor Statistics, 8/99. 3. Source: Arizona Dept. of Commerce, The Gold Sheet, 8/99. 4. Source: The Arizona Republic, Arizona Boom Still Booming, 8/99. 5. Source: Arizona Dept. of Commerce, The Gold Sheet, 7/27/99. 6. Source: Tucson Citizen, Copper Down, But Hopes Rise, 7/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 47 of this report. Arizona's future looks very bright. Presently, Arizona has the second fastest-growing population of any state. The favorable climate should continue to draw retiring baby-boomers, and the broad-based economy's ample supply of new jobs should add to the state's younger population. PORTFOLIO NOTES Franklin Arizona Tax-Free Income Fund participated in the largest Arizona deal of 1999, the $366 million Mesa, Arizona Industrial and Development Agency (IDA) Health Facilities Revenue bonds for Discovery Health Systems, during the reporting period. We made this issue one of the portfolio's core positions. The bonds were insured and offered at extremely attractive yields for Arizona. Considered a "specialty state," Arizona bonds typically trade at yield levels below the national average for municipal bonds due to supply and demand characteristics. Such purchases gave us the opportunity to restructure the portfolio and we sold other bonds to book tax losses that can be carried forward and used to help offset future capital gains and reduce our shareholders' tax liabilities. Other notable purchases during the reporting period included Maricopa County Hospital Revenue -- Sun Health Corp. and Phoenix Civic Improvement Corp. Excise Tax Revenue bonds. The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(7) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.18%. AAA-rated securities made up 50.5% of Franklin Arizona Tax-Free Income Fund's total long-term investments on August 31, 1999, reflecting the fund's high quality. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. PORTFOLIO BREAKDOWN Franklin Arizona Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS Utilities 25.4% Hospital & Health Care 22.7% Prerefunded 13.1% General Obligation 9.3% Tax Supported Debt 6.0% Corporate Backed 5.2% Housing 5.0% Transportation 4.6% Subject to Government Appropriation 3.9% Higher Education 2.5% Other Revenue 2.3% 7. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. Arizona's new bond issuance for the first half of 1999 was $1.34 billion, down 43.6% from the same period last year. This reduced new-issue supply combined with strong retail demand for Arizona municipal bonds should help support the value of the portfolio's holdings. Looking forward, we remain positive on the outlook for Arizona, its municipal bonds and Franklin Arizona Tax-Free Income Fund. The reduced new-issue supply combined with strong demand for Arizona municipal bonds continue to make Arizona municipal bonds attractive investments. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS(*) Franklin Arizona Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ------------------------- MONTH CLASS A CLASS C - ------------------------------------------------------------------------ March 4.75 cents 4.24 cents April 4.75 cents 4.24 cents May 4.75 cents 4.24 cents June 4.75 cents 4.27 cents July 4.75 cents 4.27 cents August 4.75 cents 4.27 cents - ------------------------------------------------------------------------ TOTAL 28.5 CENTS 25.53 CENTS (*)Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. FRANKLIN ARIZONA TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - ------------------------------------------------------------------------------ Net Asset Value -$0.59 $10.79 $11.38 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2850 Long-Term Capital Gain $0.0346 TOTAL $0.3196 CLASS C CHANGE 8/31/99 2/28/99 - ------------------------------------------------------------------------------ Net Asset Value -$0.59 $10.86 $11.45 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2553 Long-Term Capital Gain $0.0346 TOTAL $0.2899 CLASS A (formerly Class I): Subject to the current,maximum 4.25% initial sales charge. Prior to July 1,1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1,1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ------------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.36% -0.21% +30.82% +91.60% +127.93% Average Annual Total Return(2) -6.55% -4.47% +4.60% +6.25% + 6.72% Distribution Rate(3) 5.06% Taxable Equivalent Distribution Rate(4) 8.82% 30-Day Standardized Yield(5) 4.48% Taxable Equivalent Yield(4) 7.81%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - --------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.61% -0.77% +14.31% +23.71% Average Annual Total Return(2) -4.56% -2.73% +4.22% +4.79% Distribution Rate(3) 4.63% Taxable Equivalent Distribution Rate(4) 8.07% 30-Day Standardized Yield(5) 4.06% Taxable Equivalent Yield(4) 7.08%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Arizona state personal income tax bracket of 42.6%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN COLORADO TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Colorado Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 64.2% AA - 8.8% A - 13.3% BBB - 13.7% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin Colorado Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Colorado state personal income taxes through a portfolio consisting primarily of Colorado municipal bonds.(1) STATE UPDATE [GRAPHIC OF COLORADO] The Colorado economy is on a roll; however, questions remain as to how fast and how far it can go. After posting sluggish growth for the first half of 1999 due to reductions in the construction and services sectors, the economy heated up a little in July, with gains in several high-paying industries, including manufacturing, transportation and construction. Unemployment, at 3.1% in June 1999, remains well below the national average, but a steady stream of new residents so far has eased any labor shortages.(2) Debt per capita remains relatively low and prudent financial management practices have placed the state in a favorable fiscal position. The city and county of Denver remains Colorado's economic center. The area continues to show robust economic activity, illustrated by the 7.8% average annual increases in the city's tax base over each of the past five years.(3) Like the state, Denver has a relatively low debt per capita and conservative financial management. While labor shortages could hinder future growth, Colorado and Denver are in strong fiscal shape, which gives them a promising outlook. PORTFOLIO NOTES For the first eight months of 1999, the Colorado municipal bond supply was $2.6 billion, an increase of 21.1% compared with the same period in 1998. In addition, the number of insured issues shot up 70.1% in the first six months of 1999, compared with the same year-ago period. Reflecting this trend, AAA-rated securities made up 64.2% of Franklin Colorado Tax-Free Income Fund's total long-term investments on August 31, 1999. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Bureau of Labor Statistics, 8/99. 3. Source: Fitch IBCA, 5/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 53 of this report. The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.39%. Notable purchases during the reporting period included revenue bonds from Colorado Springs Utilities, University of Colorado Hospital Authority and University of Colorado - Enterprise System. Hospital and health care remained the fund's largest weighting, at 27.5% of total long-term investments, followed by transportation, at 13.5% on August 31, 1999. Going forward, Colorado's municipal bond supply for the remainder of the year is expected to remain stable, which should continue to make them attractive investments for investors seeking tax-free income. The fund will maintain its fiscally responsible strategy of seeking to provide a high level of current income with a relatively stable share price. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS(*) Franklin Colorado Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ------------------------- MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 4.95 cents 4.38 cents April 4.95 cents 4.38 cents May 4.95 cents 4.38 cents June 4.95 cents 4.42 cents July 4.95 cents 4.42 cents August 4.95 cents 4.42 cents - -------------------------------------------------------------------------------- TOTAL 29.70 CENTS 26.40 CENTS PORTFOLIO BREAKDOWN Franklin Colorado Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------------------------------------- Hospital & Health Care 27.5% Transportation 13.5% Utilities 12.7% Housing 10.9% Tax Supported Debt 8.1% General Obligation 7.6% Subject to Government Appropriation 6.4% Higher Education 5.3% Prerefunded 5.1% Corporate Backed 2.9% (*)Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. FRANKLIN COLORADO TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - ------------------------------------------------------------------------------- Net Asset Value -$0.65 $11.40 $12.05 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2970 Long-Term Capital Gain $0.0118 TOTAL $0.3088 CLASS C CHANGE 8/31/99 2/28/99 - ------------------------------------------------------------------------------- Net Asset Value -$0.65 $11.46 $12.11 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2640 Long-Term Capital Gain $0.0118 TOTAL $0.2758 CLASS A (formerly Class I): Subject to the current,maximum 4.25% initial sales charge. Prior to July 1,1994,fund shares were offered at a lower initial sales charge;thus actual total returns may differ. May 1,1994,the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan,which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - ----------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.82% -0.94% +32.91% +95.32% +134.39% Average Annual Total Return(2) -6.91% -5.16% +4.93% +6.46% +6.97% Distribution Rate(3) 4.99% Taxable Equivalent Distribution Rate(4) 8.70% 30-Day Standardized Yield(5) 4.62% Taxable Equivalent Yield(4) 8.05%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------------------------------------------------------------------------------------------- Cumulative Total Return(1) -3.08% -1.49% +14.65% +25.21% Average Annual Total Return(2) -4.97% -3.38% +4.30% +5.07% Distribution Rate(3) 4.58% Taxable Equivalent Distribution Rate(4) 7.98% 30-Day Standardized Yield(5) 4.22% Taxable Equivalent Yield(4) 7.35%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Colorado state personal income tax bracket of 42.6%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN CONNECTICUT TAX-FREE INCOME FUND Your Fund's Goal:Franklin Connecticut Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Connecticut state personal income taxes through a portfolio consisting primarily of Connecticut municipal bonds.(1) STATE UPDATE [GRAPHIC OF CONNECTICUT] Connecticut is the nation's wealthiest state, with per-capita income approximately 142% of the national average, as of June 1999.(2) Its economy remains strong, and in May 1999 the unemployment rate was only 3.4%.(3) The powerful economy has resulted in budget surpluses over the past three years, improving the state's financial position. However, several notable issues temper this scenario. The state's debt per capita is among the highest in the nation; at $3,043 it is more than six times the national median. Plans for future borrowing promise to maintain this high level. Connecticut also has large, unfunded pension liabilities, including $6.9 billion in teachers' retirement funds.(2) Flat or declining population figures, coupled with low unemployment, mean that labor shortages will likely constrain growth going forward. As of mid-June 1999, 80% of Connecticut's mission-critical computer systems were Year-2000 compliant. The state expects the remainder to be compliant by November 1.(2) The outlook for Connecticut is generally positive. Although the state has high fixed costs from servicing its large debt, which may hinder growth, its diversified and expanding economy, high wealth and a strengthening financial position bode well for the future. Reflecting this upbeat projection, Standard and Poor's(R), a national credit rating agency, assigned the state an AA rating.(4) CREDIT QUALITY BREAKDOWN* Franklin Connecticut Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [Pie Chart] AAA - 42.6% AA - 21.0% A - 8.5% BBB - 27.9% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. A non-diversified fund may be subject to greater risk of adverse economic or regulatory developments in that state than a fund with broader geographical diversification. 2. Source: Moody's Investors Service,State of Connecticut, 6/99. 3. Source: Bureau of Labor Statistics, 8/99. 4. This does not indicate Standard and Poor's rating of the fund. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 57 of this report. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell pre-refunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. PORTFOLIO NOTES Connecticut's municipal bond issuance continued at a snail's pace during the period under review, while the demand from individual and institutional buyers remained robust. Many issuers enhanced their debt's credit quality by purchasing insurance for their upcoming issues, improving their bonds marketability and giving them greater access to new money or better opportunities to refinance existing debt. However, as interest rates rose, prerefunding activity decreased because there was less advantage to issuers. The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.50%. The fund purchased primarily AA, AAA and insured bonds during the period, resulting in a marked increase in the portfolio's quality. The percentage of AAA-rated securities increased significantly, from 29.0% of total long-term investments on February 28, 1999, to 42.6% at the end of the reporting period. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Purchases during the period included Connecticut State Health and Educational Facilities Authority Revenue Bonds for Fairfield University, University of Connecticut Foundation and Horace Bushnell Memorial Hall. Several times during the six-month period under review, the fund sought to book tax losses, which can be carried forward in the portfolio to help offset any future taxable capital gains and potentially lower shareholders' tax liabilities. The fund was able to sell territorial debt, such as Puerto Rico bonds, to purchase Connecticut state issues. This strategy allowed the fund to remain well-diversified as well as provided opportunities in the future to buy territorial debt, which is highly liquid and well received, when state issues are scarce. Looking forward, the fund will continue to buy current coupon bonds at a slight discount in its effort to provide shareholders with high, current tax-free income and preservation of capital. In addition, we intend to maintain our strategy of selling pre-refunded bonds to decrease the fund's call exposure. 5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Connecticut Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE -------------------------- MONTH CLASS A CLASS C - --------------------------------------------------------------------- March 4.65 cents 4.12 cents April 4.65 cents 4.12 cents May 4.65 cents 4.12 cents June 4.65 cents 4.14 cents July 4.65 cents 4.14 cents August 4.65 cents 4.14 cents - --------------------------------------------------------------------- TOTAL 27.90 cents 24.78 cents *Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PORTFOLIO BREAKDOWN Franklin Connecticut Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - -------------------------------------- Hospital & Health Care 27.7% Prerefunded 22.2% Utilities 13.3% Housing 12.5% Higher Education 12.3% General Obligation 5.0% Tax Supported Debt 1.8% Subject to Government Appropriation 1.7% Transportation 1.4% Other Revenue 1.3% Corporate Backed 0.8% PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.62 $10.65 $11.27 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.279 CLASS C CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.62 $10.68 $11.30 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2478 PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (10/3/88) - --------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -3.02% -0.82% +30.34% +84.19% +98.72% Average Annual Total Return(2) -7.14% -5.02% +4.53% +5.84% +6.07% Distribution Rate(3) 5.00% Taxable Equivalent Distribution Rate(4) 8.67% 30-Day Standardized Yield(5) 4.47% Taxable Equivalent Yield(4) 7.75%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ----------------------------------------------------------------------------------------- Cumulative Total Return(1) -3.29% -1.38% +13.91% +23.91% Average Annual Total Return(2) -5.16% -3.26% +4.09% +4.82% Distribution Rate(3) 4.60% Taxable Equivalent Distribution Rate(4) 7.97% 30-Day Standardized Yield(5) 4.07% Taxable Equivalent Yield(4) 7.06%
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current,maximum 4.25% initial sales charge. Prior to July 1,1994,fund shares were offered at a lower initial sales charge;thus actual total returns may differ. May 1,1994,the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan,which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Connecticut state personal income tax bracket of 42.3%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND Your Fund's Goal: Franklin Federal Intermediate-Term Tax-Free Income Fund seeks to provide high, current income exempt from regular federal income tax through a portfolio of municipal bonds with an average weighted maturity (the time in which a debt must be repaid) between 3 and 10 years.(1) PORTFOLIO NOTES During the six-month reporting period, the 30-year Treasury bond yield rose from 5.57% on February 28, 1999, to 6.07% on August 31, 1999. As the municipal bond market typically trends with the Treasury market, the yield on the Bond Buyer 40 Municipal Index, an indicator of the municipal bond market, rose during the same period, from 5.23% to 5.78%. At the end of the reporting period, municipal bond yields approached 95% of the yield on Treasury bonds, a ratio historically in the 89% range. Thus, in our opinion municipal bonds were trading relatively cheaply, providing the fund with several excellent buying opportunities. The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40 was off 8.25%.(2) By comparison, your fund's Class A share price, as measured by net asset value, declined only 3.81%. CREDIT QUALITY BREAKDOWN* Franklin Federal Intermediate-Term Tax-Free Income Fund Based on Long-Term Investments 8/31/99 [PIE CHART] AAA - 18.3% AA - 10.2% A - 21.0% BBB - 48.8% Below Investment Grade - 1.7% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. 1. This dividend income is generally subject to state and local income taxes, if any. For investors subject to the federal or state alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. A non-diversified fund may be subject to greater risk of adverse economic or regulatory developments than a fund with broader diversification. 2. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 61 of this report. PORTFOLIO BREAKDOWN Franklin Federal Intermediate-Term Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ----------------------------------------- Utilities 19.6% Hospital & Health Care 19.1% Corporate Backed 12.0% Tax Supported Debt 10.8% Housing 7.9% General Obligation 7.3% Subject to Government Appropriation 7.2% Transportation 5.7% Higher Education 4.0% Prerefunded 3.3% Other Revenue 3.1% Our strategy remained unchanged, as we sought to produce high, current, tax-free income, while maintaining share price stability. The fund generally employed a buy-and-hold strategy, keeping portfolio turnover very low over the past six months. We found value in the 10-15 year maturity range, and many of the funds purchased during the reporting period were insured, improving the fund's overall credit quality. During the period, AAA-rated bonds increased from 14.6% to 18.3% of the fund's total long-term investments. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Additionally, the fund was able to take advantage of opportunities in the market to buy "specialty state" issues at national yield levels. These states generally trade at lower yields than other states due to supply and demand characteristics. The fund purchased bonds over the six-month period in many different sectors, helping to maintain its diversification. Some of the purchases included University of Akron, Ohio General Receipts; Florida State Board of Education Capital Outlay and New Jersey State Housing and Mortgage Finance Agency Revenue. Going forward, our outlook for the fixed-income markets, including municipal bonds, remains positive. Although we expect the supply of municipals to be relatively strong, we anticipate that the yield ratio of municipal bonds to Treasuries should fall more into its historical trading range, a positive sign for municipal bonds. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS(*) Franklin Federal Intermediate-Term Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND MONTH PER SHARE - ------------------------------- March 4.15 cents April 4.15 cents May 4.15 cents June 4.15 cents July 4.15 cents August 4.15 cents - ------------------------------- TOTAL 24.90 CENTS (*)Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.43 $10.87 $11.30 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.249 CLASS A (formerly Class I): Subject to the maximum 2.25% initial sales charge. The fund's manager agreed in advance to waive a portion of its management fees,which reduces operating expenses and increases yield,distribution rate and total return to shareholders. Without these reductions,the fund's distribution rate and total return would have been lower,and yield for the period would have been 4.07%.The fee waiver may be discontinued at any time upon notification to the fund's Board of Trustees. PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR (9/21/92) - ------------------------------------------------------------------------------------------ Cumulative Total Return(1) -1.57% +0.58% +31.95% +51.42% Average Annual Total Return(2) -3.78% -1.68% +5.23% +5.81% Distribution Rate(3) 4.59% Taxable Equivalent Distribution Rate(4) 7.60% 30-Day Standardized Yield(5) 4.10% Taxable Equivalent Yield(4) 6.79%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include the sales charge. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the applicable, maximum sales charge. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the current 4.25 cent per share monthly dividend and the maximum offering price of $11.12 on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN HIGH YIELD TAX-FREE INCOME FUND Your Fund's Goal: Franklin High Yield Tax-Free Income Fund seeks to provide high, current income exempt from regular federal income tax through a portfolio consisting primarily of higher-yielding, medium- to lower-rated and non-rated municipal securities.(1) As discussed in the fund's prospectus, these securities entail greater risk than higher-rated municipal securities. PORTFOLIO NOTES The six-month period ended August 31, 1999, provided challenges and opportunities in the municipal bond market. The 30-year Treasury bond yield rose from 5.57% on February 28, 1999, to 6.07% on August 31, 1999, extending a trend of higher rates that started after the 30-year Treasury bond yield reached a low of 4.70% on October 5, 1998. The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, an indicator of the municipal bond market, was off 8.25%.(2) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.26%. Given the substantial rate increase, it is interesting to note how the relationship between Treasuries and municipal bonds has changed. In the fall of 1998, when the global financial crisis caused the flight to quality into Treasuries, municipal bonds were actually yielding more than Treasuries for a short while. The ratio of the yield on a generic insured municipal bond to the 30-year Treasury bond yield topped out at 101%, a very rare situation that put municipal bonds in a position to outperform Treasuries. In fact, that has occurred as the principal value of the 30-year Treasury bond has fallen about 17% since October 1998, while a generic insured municipal bond is down about 6%. CREDIT QUALITY BREAKDOWN* Franklin High Yield Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 26.2% AA - 2.7% A - 9.7% BBB - 27.6% Below Investment Grade - 33.8% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. 1. This dividend income is generally subject to state and local income taxes, if any. For investors subject to the federal or state alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 69 of this report. PORTFOLIO BREAKDOWN Franklin High Yield Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - -------------------------------------- Utilities 31.2% Hospital & Health Care 14.7% Prerefunded 13.6% Tax Supported Debt 10.2% General Obligation 7.5% Transportation 7.2% Corporate Backed 6.5% Housing 3.4% Subject to Government Appropriation 3.1% Other Revenue 2.3% Higher Education 0.3% The supply of bonds in the municipal market also has been more favorable this calendar year. In 1998, the supply was unusually large, with more than $280 billion coming to market. For 1999, we expect about $230 billion of supply, approximately 18% less than 1998, which should help municipal bonds' performance. We continue to invest with our proven strategy that has guided our performance through the years -- seeking to maximize income by finding the best value and investing at a slight discount. Such a strategy has worked through many different interest rate cycles, generally allowing us to provide high, current income. The strategy also sets up the portfolio defensively, so that in the recent rising interest-rate environment, our tax-free funds performed favorably versus our competition. Also, we attempted to take advantage of recent market conditions by selling bonds to book tax losses, which can be carried forward in the portfolio to help offset any taxable capital gains in the future and potentially lower shareholders' tax liabilities, and reinvesting the proceeds at higher rates. While interest rates rose in general, the high yield sector of the municipal bond market held its value very well. The yield difference, or spread, between a lower-rated bond, such as those in which the fund invests, and an insured bond widened significantly between the spring and fall of 1998. During that period, we invested aggressively, taking advantage of investor concerns as spreads widened and high yield bond prices fell. But with the increase in interest rates during the six months under review, the spread narrowed, allowing the value of high yield bonds to improve relative to higher quality bonds. We continued to seek out plenty of favorable opportunities in certain sectors of the high yield market. Decreasing revenues from Medicare due to the Balanced Budget Act caused uncertainty in the health care market, as some investors became extremely nervous about these companies' ability to pay their debt. This resulted in many opportunities to buy bonds at distressed levels that we believe provide substantial value. Adhering to our research-based, value approach, we sought to take advantage of some excellent opportunities, and during the period, we purchased Mesa, Arizona Industrial and Development Authority (IDA) Health Facilities Revenue bonds for Discovery Health Systems and Harris County Health Facilities Development Corp. Revenue bonds for Christus Health. We see more opportunities in the future as we continue to search all sectors in the municipal bond marketplace. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS(*) Franklin High Yield Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ------------------------------------------ MONTH CLASS A CLASS B(**) CLASS C - -------------------------------------------------------------------------------- March 5.4 cents 4.84 cents 4.79 cents April 5.4 cents 4.84 cents 4.79 cents May 5.4 cents 4.84 cents 4.79 cents June 5.4 cents 4.84 cents 4.90 cents July 5.4 cents 4.84 cents 4.90 cents August 5.4 cents 4.84 cents 4.90 cents - -------------------------------------------------------------------------------- TOTAL 32.4 CENTS 29.04 CENTS 29.07 CENTS (*)Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. (**)January 1, 1999, the fund began offering Class B shares to investors. See the prospectus for details. FRANKLIN HIGH YIELD TAX-FREE INCOME FUND PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - ----------------------------------------------------------------------------- Net Asset Value -$0.49 $11.00 $11.49 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.3240 Long-Term Capital Gain $0.0028 TOTAL $0.3268 CLASS B CHANGE 8/31/99 2/28/99 - ----------------------------------------------------------------------------- Net Asset Value -$0.48 $11.04 $11.52 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2904 Long-Term Capital Gain $0.0028 TOTAL $0.2932 CLASS C CHANGE 8/31/99 2/28/99 - ----------------------------------------------------------------------------- Net Asset Value -$0.50 $11.07 $11.57 DISTRIBUTIONS (3/1/99 - 8/31/99) -------------------------------- Dividend Income $0.2907 Long-Term Capital Gain $0.0028 TOTAL $0.2935 CLASS A (formerly Class I): Subject to the current,maximum 4.25% initial sales charge. Prior to July 1,1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994,the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan,which affects subsequent performance. CLASS B: Subject to no initial sales charge, but subject to a contingent deferred sales charge (CDSC) declining from 4% to 0% over six years. These shares have higher annual fees and expenses than Class A shares. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% CDSC for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. Past performance is not predictive of future results. PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (3/18/86) - ------------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -1.40% -0.32% +39.31% +107.49% +180.79% Average Annual Total Return(2) -5.59% -4.56% +5.93% +7.11% +7.63% Distribution Rate(3) 5.64% Taxable Equivalent Distribution Rate(4) 9.34% 30-Day Standardized Yield(5) 5.28% Taxable Equivalent Yield(4) 8.74%
INCEPTION CLASS B 6-MONTH (1/1/99) - --------------------------------------------------------------------- Cumulative Total Return(1) -1.60% -0.66% Aggregate Total Return(2) -5.43% -4.50% Distribution Rate(3) 5.28% Taxable Equivalent Distribution Rate(4) 8.74% 30-Day Standardized Yield(5) 4.95% Taxable Equivalent Yield(4) 8.20%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ----------------------------------------------------------------------------------------------------- Cumulative Total Return(1) -1.76% -0.88% +18.00% +30.40% Average Annual Total Return(2) -3.72% -2.81% +5.32% +6.06% Distribution Rate(3) 5.28% Taxable Equivalent Distribution Rate(4) 8.74% 30-Day Standardized Yield(5) 4.90% Taxable Equivalent Yield(4) 8.11%
1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. Since Class B shares have existed for less than one year, the figures for that class represent aggregate total return from inception; therefore, average annual total returns are not provided. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. FRANKLIN NEW JERSEY TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin New Jersey Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 73.5% AA - 6.0% A - 5.8% BBB - 13.2% Below Investment Grade - 1.5% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin New Jersey Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and New Jersey state personal income taxes through a portfolio consisting primarily of New Jersey municipal bonds.(1) STATE UPDATE [GRAPHIC OF NEW JERSEY] New Jersey's economy has found its stride. After the recession of the early '90s, New Jersey was one of the last states to benefit from the national eco- nomic rebound. However, in the past two years, the state has outperformed expectations. In the first five months of 1999, monthly job growth increased between 1.4% and 2.0%, compared with the same period a year ago.(2) Although job growth remains below the national average, this situation is a dramatic improvement from earlier in the decade. The state's increasing job growth is largely a result of the economic shift from manufacturing to services. Once principally reliant on manufacturing, the state economy now is made up of a broad spectrum of industries, many of which are service-based. Services are now the state's largest employment sector, comprising 32% of jobs.(2) New Jersey's financial condition remains sound. On June 30, 1999, the state completed its 1999 fiscal year with a surplus of more than $1 billion. The state has a moderate debt burden and due to its strong economy, has been able to cut property and personal income taxes during the past few years. However, its debt is rapidly rising, and at $14 billion as of July 1999, is the fourth-highest among all states.(2) Although the escalating debt burden may be worrisome, the increase partially reflects New Jersey's investments in its transportation infrastructure, which should help fuel further growth. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Moody's Investors Service, State of New Jersey, 8/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 93 of this report. New Jersey seems to have a solid future. With a large and diverse economy, financial controls in place and per capita wealth second only to Connecticut's, New Jersey has the sound foundation for additional growth. Based on these factors, Standard and Poor's, a national credit rating agency, assigns New Jersey an AA+ rating.(3) PORTFOLIO NOTES New Jersey's new municipal bond issuance increased 9.3% in the first half of 1999. Many issuers enhanced their debt's credit quality by purchasing insurance for their upcoming issues, improving their bonds marketability and giving them greater access to new money or better opportunities to refinance existing debt. However, as interest rates rose, prerefunding activity decreased because there was less opportunity for issuers to find interest rate savings. The rise in interest rates during the period also resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.60%. During the reporting period, the fund primarily purchased insured bonds, which helped maintain the portfolio's high quality, as many insured bonds are rated AAA. At the end of the period, 73.5% of the fund's total long-term investments were rated AAA, compared with 73.0% on February 28, 1999. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Important purchases during the period included Mount Laurel Township Board of Education general obligation (GO), South Jersey Transportation Authority Transportation Systems Revenue and New Jersey Health Care Facilities Financing Authority Revenue Bonds for Burdette Tomlin Memorial Hospital and Meridian Health Systems Obligation Group. As opportunities allowed during the six-month period under review, the fund sought to book tax losses, which can be carried forward in the portfolio to help offset any taxable capital gains in the future and potentially lower shareholders' tax liabilities. PORTFOLIO BREAKDOWN Franklin New Jersey Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ---------------------------------------- Prerefunded 19.7% Hospital & Health Care 19.0% Utilities 15.7% Transportation 13.3% Housing 10.6% Higher Education 6.0% General Obligation 6.0% Subject to Government Appropriation 3.7% Other Revenue 2.7% Corporate Backed 2.1% Tax Supported Debt 1.2% 3. This does not indicate Standard and Poor's rating of the fund. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell pre-refunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. Looking forward, the fund will continue to buy current coupon bonds at a slight discount in its effort to provide shareholders with high, current tax-free income and preservation of capital. In addition, we intend to maintain our strategy of selling pre-refunded bonds to decrease the fund's call exposure. Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS(*) Franklin New Jersey Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ------------------------- MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 5 cents 4.43 cents April 5 cents 4.43 cents May 5 cents 4.43 cents June 5 cents 4.46 cents July 5 cents 4.46 cents August 5 cents 4.46 cents - -------------------------------------------------------------------------------- TOTAL 30 CENTS 26.67 CENTS (*)Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.55 $11.41 $11.96 DISTRIBUTIONS (3/1/99 - 8/31/99) ----------------------------------- Dividend Income $0.3000 Long-Term Capital Gain $0.0032 TOTAL $0.3032 CLASS C CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.56 $11.47 $12.03 DISTRIBUTIONS (3/1/99 - 8/31/99) ----------------------------------- Dividend Income $0.2667 Long-Term Capital Gain $0.0032 TOTAL $0.2699 PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (5/12/88) - -------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.05% +0.10% +32.15% +92.82% +121.94% Average Annual Total Return(2) -6.21% -4.13% +4.82% +6.32% +6.90% Distribution Rate(3) 5.03% Taxable Equivalent Distribution Rate(4) 8.89% 30-Day Standardized Yield(5) 4.46% Taxable Equivalent Yield(4) 7.89%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - --------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.40% -0.47% +15.35% +24.93% Average Annual Total Return(2) -4.31% -2.39% +4.51% +5.03% Distribution Rate(3) 4.63% Taxable Equivalent Distribution Rate(4) 8.19% 30-Day Standardized Yield(5) 4.06% Taxable Equivalent Yield(4) 7.18%
Past performance is not predictive of future results. FRANKLIN NEW JERSEY TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge;thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and New Jersey state personal income tax bracket of 43.4%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. FRANKLIN OREGON TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Oregon Tax-Free Income Fund Based on Total Long-term Investments 8/31/99 [PIE CHART] AAA - 41.4% AA - 28.0% A - 15.4% BBB - 13.8% Below Investment Grade - 1.4% *Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin Oregon Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Oregon state personal income taxes through a portfolio consisting primarily of Oregon municipal bonds.(1) STATE UPDATE [GRAPHIC OF OREGON] Recently, Oregon's economy has become the envy of much of the nation. For the past few years, aggressive expansion of the high-tech industry and a boom in housing construction, resulting from strong immigration, have fueled an impressive economic performance. Through 1997, Oregon's economy outperformed the nation's for 12 consecutive years, but Asia's economic recession caused the state to fall below the national average, as exports to the region count for 11% of gross state product. In 1998, growth slowed to 2.0%, compared with 2.6% for the nation.(2) However, things are looking up again for Oregon. Since the fourth quarter of 1998, Oregon's exports to Asia have picked up significantly. Many analysts now feel that the Asian economic crisis has begun to wane, and indeed, the East Asian economies seem to be expanding again. In addition, Oregon's important semiconductor industry also is turning around, as much of their business is in Asia. As a result, Oregon's employment growth is expected to outpace the nation's through 2000. Oregon's outlook is positive, as the state maintains a tight grip on its expenses and maintains a low debt burden. Revenues have exceeded projections for the last few years and at $281 per person, Oregon's debt per capita is well under the national average of $505.(2) As a result, Standard and Poor's, a national credit rating agency, assigns the state an AA rating.(3) 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: Moody's Investors Service, State of Oregon, 5/99. 3. This does not indicate Standard and Poor's rating of the fund. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 98 of this report. PORTFOLIO NOTES The bond market experienced a significant rise in interest rates during the six months under review, which led to a significant drop in bond prices. As of August 31, 1999, the price of the 30-year Treasury bond was down 8.38% for the six-month period under review, while the Bond Buyer 40 Municipal Index, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, Franklin Oregon Tax-Free Income Fund's Class A share price, as measured by net asset value, declined only 5.07%. Our conservative, long-term, buy-and-hold philosophy enabled us to take advantage of the market volatility during the six months under review. We sought to construct a debt portfolio designed to lock in long-term high income while reducing the potential for principal erosion and large price swings. With low turnover rates and without using leverage, the fund was able to pay out relatively high dividends with low volatility. The fund held a large percentage of high coupon bonds during the period, which maintained stability in the rising interest-rate environment. Furthermore, the fund maintained a shorter duration (8.46 years) than the Bond Buyer 40 Index (14.0 years), where duration is a measure of interest-rate risk.(5) On August 31, 1999, the fund's total net assets were more than $500 million, giving the fund a stable and diversified asset base. The fund often was able to use its size as well as Franklin's presence in the municipal bond market to structure issues to fit its needs. Furthermore, the fund maintained high credit quality, with 41.4% of the fund's total long-term investments rated AAA at the end of the reporting period. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Important purchases during the period included Port of Portland International Airport Revenue and Salem-Keizer general obligation bonds for School District No. 24J. Going forward, we remain positive on the outlook for Oregon, its municipal bonds and Franklin Oregon Tax-Free Income Fund. Our shareholders will continue to benefit from our practice of holding onto premium bonds, not only for the income and lower volatility, but also for tax efficiency and after-tax yield. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. 5. Source: The Bond Buyer, 9/2/99. PORTFOLIO BREAKDOWN Franklin Oregon Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------------------------------------ Hospital & Health Care 16.6% Housing 15.7% Transportation 15.0% Prerefunded 13.6% Utilities 11.1% General Obligation 10.9% Subject to Government Appropriation 7.7% Corporate Backed 4.5% Higher Education 2.9% Tax Supported Debt 2.0% Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Oregon Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ---------------------------------- MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 4.85 cents 4.28 cents April 4.85 cents 4.28 cents May 4.85 cents 4.28 cents June 4.80 cents 4.26 cents July 4.80 cents 4.26 cents August 4.80 cents 4.26 cents - -------------------------------------------------------------------------------- TOTAL 28.95 CENTS 25.62 CENTS * Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.60 $11.23 $11.83 DISTRIBUTIONS (3/1/99 - 8/31/99) ----------------------------------- Dividend Income $0.2895 CLASS C CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.60 $11.31 $11.91 DISTRIBUTIONS (3/1/99 - 8/31/99) ----------------------------------- Dividend Income $0.2562 PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (9/1/87) - -------------------------------------------------------------------------------------- Cumulative Total Return(1) -2.62% -0.65% +30.55% +87.06% +119.75% Average Annual Total Return(2) -6.79% -4.89% +4.56% +6.00% +6.40% Distribution Rate(3) 4.91% Taxable Equivalent Distribution Rate(4) 8.93% 30-Day Standardized Yield(5) 4.49% Taxable Equivalent Yield(4) 8.17%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - ------------------------------------------------------------------------------------ Cumulative Total Return(1) -2.88% -1.12% +13.69% +23.41% Average Annual Total Return(2) -4.79% -3.04% +4.01% +4.73% Distribution Rate(3) 4.50% Taxable Equivalent Distribution Rate(4) 8.19% 30-Day Standardized Yield(5) 4.10% Taxable Equivalent Yield(4) 7.46%
Past performance is not predictive of future results. FRANKLIN OREGON TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge;thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Oregon state personal income tax bracket of 45.0%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Pennsylvania Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [PIE CHART] AAA - 67.5% AA - 7.8% A - 10.9% BBB - 13.9% * Quality breakdown may include internal ratings for bonds not rated by a national rating agency. Your Fund's Goal: Franklin Pennsylvania Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and Pennsylvania state personal income taxes through a portfolio consisting primarily of Pennsylvania municipal bonds.(1) COMMONWEALTH UPDATE [GRAPHIC OF PENNSYLVANIA] Pennsylvania's efforts to diversify its economy are beginning to pay off. A variety of service industries including software, tourism, biotechnology and business services recently have created new jobs. Meanwhile, employment in the once all-important manufacturing sector has consistently fallen to a level more in line with the national average, reducing the commonwealth's vulnerability to sectoral and regional recessions. However, restricted by a tight labor force, Pennsylvania has lagged the nation in new job growth as well as personal income gains. The commonwealth's debt position has improved consistently over the past few years. Fiscal 1999, which ended June 30, was the third consecutive year that Pennsylvania posted a large revenue surplus. The surplus reflects larger than projected gains in tax revenues, despite the personal income and business tax cuts enacted in each of the past three years. The state plans a conservative budget for fiscal year 2000, which should produce another budget surplus. Pennsylvania took the lead in preparing for the Year 2000 computer problem. In December 1998, the commonwealth reported that 99% of its mission-critical computer systems were Year-2000 compliant, the highest rate of any state at the time.(2) Looking forward, the outlook remains bright for Pennsylvania, as its diversifying economy and strong fiscal health position it for continued solid economic growth. 1. For investors subject to the federal alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. The fund's shares are free from Pennsylvania personal property tax and income is free from Philadelphia School Investment Net Income Tax. 2. Source: Moody's Investors Service, State of Pennsylvania, 6/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 103 of this report. Showing its confidence in Pennsylvania, Moody's, a national credit rating agency, assigns the commonwealth an Aa3 rating.(3) PORTFOLIO NOTES Pennsylvania's new municipal bond issuance decreased significantly in the first eight months of 1999, down 23.2% compared with the previous year. Many issuers enhanced their debt's credit quality by purchasing insurance for their upcoming issues, improving their bonds' marketability and giving them greater access to new money or better opportunities to refinance existing debt. However, as interest rates rose, prerefunding activity decreased because there was less opportunity for issuers to find interest rate savings. The rise in interest rates during the period also resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(4) By comparison, your fund's Class A share price, as measured by net asset value, declined only 5.13%. During the period, the fund purchased primarily insured bonds, which led to a solid improvement in the portfolio's quality as many insured bonds are rated AAA. As a result, 67.5% of the fund's total long-term investments were rated AAA at the end of the reporting period, compared with 60.3% on February 28, 1999. Higher-rated bonds generally exhibit greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. Important purchases during the period included Philadelphia Parking Authority Parking Revenue, Pennsylvania Housing Finance Authority and Pennsylvania Economic Development Financing Authority - USG Corp. Project. Several times during the six-month period under review, the fund sought to book tax losses, which can be carried forward in the portfolio to help offset any future taxable capital gains and potentially lower shareholders' tax liabilities. Looking forward, the fund will continue to buy current coupon bonds at a slight discount in our attempt to provide shareholders with high, current tax-free income and preservation of capital. In addition, we intend to maintain our strategy of selling prerefunded bonds to decrease the call exposure. 3. This does not indicate Moody's rating of the fund. 4. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. PORTFOLIO BREAKDOWN Franklin Pennsylvania Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------------------------------------------------- Hospital & Health Care 20.0% Utilities 17.2% Prerefunded 15.0% Higher Education 9.5% Housing 9.1% General Obligation 8.5% Corporate Backed 8.2% Other Revenue 4.1% Tax Supported Debt 3.9% Transportation 3.5% Subject to Government Appropriation 1.0% Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Pennsylvania Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE --------------------------------- MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 4.4 cents 3.89 cents April 4.4 cents 3.89 cents May 4.4 cents 3.89 cents June 4.4 cents 3.93 cents July 4.4 cents 3.93 cents August 4.4 cents 3.93 cents - -------------------------------------------------------------------------------- TOTAL 26.4 CENTS 23.46 CENTS * Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.54 $9.98 $10.52 DISTRIBUTIONS (3/1/99 - 8/31/99) ------------------------------------ Dividend Income $0.2640 Long-Term Capital Gain $0.0002 TOTAL $0.2642 CLASS C CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.54 $10.03 $10.57 DISTRIBUTIONS (3/1/99 - 8/31/99) ----------------------------------- Dividend Income $0.2346 Long-Term Capital Gain $0.0002 TOTAL $0.2348 PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (12/1/86) - --------------------------------------------------------------------------------- Cumulative Total Return(1) -2.61% -0.53% +31.88% +93.46% +126.76% Average Annual Total Return(2) -6.77% -4.76% +4.78% +6.36% +6.27% Distribution Rate(3) 5.07% Taxable Equivalent Distribution Rate(4) 8.64% 30-Day Standardized Yield(5) 4.68% Taxable Equivalent Yield(4) 7.97%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - --------------------------------------------------------------------------------- Cumulative Total Return(1) -2.87% -1.09% +14.70% +24.35% Average Annual Total Return(2) -4.81% -3.04% +4.34% +4.92% Distribution Rate(3) 4.67% Taxable Equivalent Distribution Rate(4) 7.95% 30-Day Standardized Yield(5) 4.27% Taxable Equivalent Yield(4) 7.27%
Past performance is not predictive of future results. FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum combined federal and Pennsylvania state personal income tax bracket of 41.3%, based on the federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. FRANKLIN PUERTO RICO TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin Puerto Rico Tax-Free Income Fund Based on Total Long-Term Investments 8/31/99 [Pie Chart] AAA -- 53.3% AA -- 0.9% A -- 1.4% BBB -- 44.4% * Quality breakdown may include internal ratings for bonds nor rated by a national rating agency. Your Fund's Goal: Franklin Puerto Rico Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and many states' personal income taxes through a portfolio consisting primarily of Puerto Rico municipal bonds.(1) COMMONWEALTH UPDATE [GRAPHIC OF PUERTO RICO] Brushing aside the short-term negative impact of Hurricane Georges in September 1998, Puerto Rico posted another year of steady economic growth in fiscal 1998. Building on an economic expansion that began in 1992, gross domestic product increased 3.1% in fiscal 1998. During the same one-year period, exports jumped 26%, to $30 billion, while imports increased by 2%. In a sign that the manufacturing sector may soon be improving, companies such as Amgen, Searle and Sara Lee have committed to creating more than 3,200 jobs in Puerto Rico over the next few years. However for 1998, the manufacturing sector as a whole continued its steady decline, showing job losses of approximately 3%.(2) The Puerto Rican government continues to push through the privatization of many of its most important assets, which should lead to improved services and lower consumer prices. On March 2, 1999, the government transferred control of the Puerto Rico Telephone Company (PRTC) to a group headed by U.S. telephone company GTE and Puerto Rican bank Banco Popular. In addition, the government gave French company PSG operational control over water and sewage company PRASA in February 1999. With steady growth in a number of sectors and solid showings in the important construction and tourism industries, Puerto Rico is on track for another year of economic expansion in the 2.5%-3.0% range.(3) Reflecting this positive outlook, Moody's, a national credit rating agency, assigned Puerto Rico a Baa1 rating in November 1998.(4) 1. For investors subject to the federal and state alternative minimum tax, a small portion of this income may be subject to such tax. Distributions of capital gains and of ordinary income from accrued market discount, if any, are generally taxable. 2. Source: PR Newswire Association, 3/22/99. You will find a complete listing of the fund's portfolio holdings, including dollar value and number of shares or principal amount, beginning on page 108 of this report. PORTFOLIO NOTES The rise in interest rates during the period resulted in decreasing bond prices. For the six months ended August 31, 1999, the 30-year Treasury bond price fell 8.38%, and the Bond Buyer 40, a reasonable proxy for the type of securities in the fund's portfolio, was off 8.25%.(5) By comparison, your fund's Class A share price, as measured by net asset value, declined only 4.29%. During the six months under review, Franklin Puerto Rico Tax-Free Income Fund continued its strategy of investing for current income in U.S. Territories' municipal bonds. Through August 1999, the Puerto Rico bond supply was significantly lighter than in the same period of 1998, when a large number of bonds were prerefunded. The fund maintained its focus on purchasing high-quality and insured issues during the period, and on August 31, 1999, 53.3% of the fund's total long-term investments were AAA-rated bonds, reflecting the fund's high quality. Higher-rated bonds generally exhibited greater price stability than their lower-rated counterparts, better ensuring the safety of your principal and income stream. The fund's sector weightings changed only slightly during the reporting period. On August 31, 1999, prerefunded securities was the fund's largest sector holding, making up 25.3% of total long-term investments, followed by transportation, at 12.1%. Despite the limited number of bonds available, there were some new issues during the period that we found to be attractive, including Guam Power Authority, Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities for Ana G. Mendez University Systems Project and Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Hospital Revenue - San Lucas and Cristo Project. Looking forward, the fund will continue to buy current coupon bonds at a slight discount in its effort to provide shareholders with high, current tax-free income and preservation of capital. In addition, we intend to maintain our strategy of selling pre- refunded bonds to decrease the call exposure. 3. Source: Economist Intelligence Unit, 8/12/99. 4. This does not indicate Moody's rating of the fund. 5. Sources: Lehman Brothers; The Bond Buyer 40 Municipal Bond Index. Index is unmanaged and includes reinvested dividends. One cannot invest directly in an index. WHAT IS A PREREFUNDED BOND? When a bond is prerefunded, a new issue is brought to market with a lower interest rate to pay off the older issue at its first call date. In most cases, the proceeds from the sale of the new bonds are invested in U.S. Treasury securities that mature on the first call date of the original bonds. Because of the U.S. Treasury backing, prerefunded bonds usually offer a substantial price increase -- depending on their call date. Generally, we look to sell prerefunded bonds as they approach five years to their call date. At this point, the premium on prerefunded bonds often begins to decline rapidly to the stated call price. Our strategy aims to capture the bond's premium, increase the fund's call protection and protect its share value. PORTFOLIO BREAKDOWN Franklin Puerto Rico Tax-Free Income Fund 8/31/99 % OF TOTAL LONG-TERM SECTOR INVESTMENTS - ------------------------------------------------- Prerefunded 25.3% Transportation 12.1% Hospital & Health Care 11.9% Higher Education 9.6% Utilities 7.8% Housing 7.5% Tax Supported Debt 7.4% Subject to Government Appropriation 6.1% General Obligation 5.1% Other Revenue 4.5% Corporate Backed 2.7% Please remember, this discussion reflects our views, opinions and portfolio holdings as of August 31, 1999. However, market and economic conditions are changing constantly, which can be expected to affect our strategies and the fund's portfolio composition. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. DIVIDEND DISTRIBUTIONS* Franklin Puerto Rico Tax-Free Income Fund 3/1/99 - 8/31/99 DIVIDEND PER SHARE ----------------------------------- MONTH CLASS A CLASS C - -------------------------------------------------------------------------------- March 4.75 cents 4.18 cents April 4.75 cents 4.18 cents May 4.75 cents 4.18 cents June 4.75 cents 4.22 cents July 4.75 cents 4.22 cents August 4.75 cents 4.22 cents - -------------------------------------------------------------------------------- TOTAL 28.50 CENTS 25.20 CENTS * Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the fund during the reporting period. PERFORMANCE SUMMARY AS OF 8/31/99 Distributions will vary based on earnings of the fund's portfolio and any profits realized from the sale of the portfolio's securities. Past distributions are not indicative of future trends. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION CLASS A CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.51 $11.37 $11.88 DISTRIBUTIONS (3/1/99 - 8/31/99) ----------------------------------- Dividend Income $0.2850 Long-Term Capital Gain $0.0156 TOTAL $0.3006 CLASS C CHANGE 8/31/99 2/28/99 - -------------------------------------------------------------------------------- Net Asset Value -$0.50 $11.39 $11.89 DISTRIBUTIONS (3/1/99 - 8/31/99) ----------------------------------- Dividend Income $0.2520 Long-Term Capital Gain $0.0156 TOTAL $0.2676 PERFORMANCE
INCEPTION CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (4/3/85) - --------------------------------------------------------------------------------- Cumulative Total Return(1) -1.74% +0.52% +33.53% +92.51% +181.69% Average Annual Total Return(2) -5.94% -3.76% +5.04% +6.31% +7.13% Distribution Rate(3) 4.80% Taxable Equivalent Distribution Rate(4) 7.95% 30-Day Standardized Yield(5) 4.41% Taxable Equivalent Yield(4) 7.30%
INCEPTION CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95) - -------------------------------------------------------------------------------- Cumulative Total Return(1) -1.94% -0.04% +15.93% +25.77% Average Annual Total Return(2) -3.86% -1.98% +4.69% +5.19% Distribution Rate(3) 4.39% Taxable Equivalent Distribution Rate(4) 7.27% 30-Day Standardized Yield(5) 4.00% Taxable Equivalent Yield(4) 6.62%
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND CLASS A (formerly Class I): Subject to the current, maximum 4.25% initial sales charge. Prior to July 1, 1994, fund shares were offered at a lower initial sales charge; thus actual total returns may differ. May 1, 1994, the fund eliminated the sales charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS C (formerly Class II): Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the current, applicable, maximum sales charge(s) for that class. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on August 31, 1999. 4. Taxable equivalent distribution rate and yield assume the 1999 maximum federal income tax rate of 39.6%. 5. Yield, calculated as required by the SEC, is based on the earnings of the fund's portfolio for the 30 days ended August 31, 1999. Bond prices, and thus the fund's share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares. Past performance is not predictive of future results. MUNICIPAL BOND RATINGS MOODY'S Aaa: Best quality. They carry the smallest degree of investment risk and generally are referred to as "gilt-edged." Interest payments are protected by a large or exceptionally stable margin, and principal is secure. Although the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: High quality by all standards. Together with the Aaa group, they comprise what generally are known as high-grade bonds. Aa bonds are rated lower than Aaa because margins of protection may not be as large, fluctuation of protective elements may be of greater amplitude, or there may be other elements which make the long-term risks appear larger. A: Possess many favorable investment attributes and are considered upper medium- grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Ba: Contain speculative elements. Often the protection of interest and principal payments may be very moderate and, thereby, not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Poor standing. Such issues may be in default, or elements of danger with respect to principal or interest may be present. Ca: Obligations that are highly speculative. Such issues are often in default or have other marked shortcomings. C: Lowest-rated class of bonds. Issues rated C can be regarded as having extremely poor prospects of ever attaining any real investment standing. S&P(R) AAA: The highest rating assigned by S&P to a debt obligation and indicates the ultimate degree of protection as to principal and interest. AA: Also qualify as high-grade obligations, and, in the majority of instances, differ from AAA issues only in a small degree. A: Generally regarded as upper medium-grade. They have considerable investment strength but are not entirely free from adverse effects of changes in economic and trade conditions. Interest and principal are regarded as safe. BBB: Regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such bonds likely will have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C: Reserved for income bonds on which no interest is being paid. D: Debt rated "D" is in default and payment of interest and/or repayment of principal is in arrears. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN ARIZONA TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31,1999 ------------------------------------------------------------ CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $11.38 $11.44 $11.24 $11.34 $11.11 $11.58 ------------------------------------------------------------------------------ Income from investment operations: Net investment income ....................... .29 .59 .61 .62 .64 .65 Net realized and unrealized gains (losses) .. (.55) (.01) .29 (.04) .36 (.48) ------------------------------------------------------------------------------ Total from investment operations .............. (.26) .58 .90 .58 1.00 .17 ------------------------------------------------------------------------------ Less distributions from: Net investment income ....................... (.29)(4) (.59)(2) (.61) (.63) (.65) (.64) In excess of net investment income .......... -- -- (.01) -- -- -- Net realized gains .......................... (.04) (.05) (.08) (.05) (.12) -- ------------------------------------------------------------------------------ Total distributions ........................... (.33) (.64) (.70) (.68) (.77) (.64) ------------------------------------------------------------------------------ Net asset value, end of period ................ $10.79 $11.38 $11.44 $11.24 $11.34 $11.11 ============================================================================== Total return* ............................... (2.36%) 5.17% 8.23% 5.33% 9.24% 1.63% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $832,231 $861,020 $810,250 $752,335 $750,797 $720,801 Ratios to average net assets: Expenses .................................... .64%** .63% .63% .62% .62% .60% Net investment income ....................... 5.12%** 5.11% 5.40% 5.59% 5.67% 5.86% Portfolio turnover rate ....................... 13.62% 14.11% 20.02% 16.57% 25.12% 18.65% CLASS C - ------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $11.45 $11.51 $11.30 $11.38 $11.15 ---------------------------------------------------------------- Income from investment operations: Net investment income ....................... .26 .52 .56 .57 .49 Net realized and unrealized gains (losses) .. (.55) (.01) .29 (.03) .34 ---------------------------------------------------------------- Total from investment operations .............. (.29) .51 .85 .54 .83 ---------------------------------------------------------------- Less distributions from: Net investment income ....................... (.26)(5) (.52)(3) (.56) (.57) (.48) Net realized gains .......................... (.04) (.05) (.08) (.05) (.12) ---------------------------------------------------------------- Total distributions ........................... (.30) (.57) (.64) (.62) (.60) ---------------------------------------------------------------- Net asset value, end of period ................ $10.86 $11.45 $11.51 $11.30 $11.38 ================================================================ Total return* ................................. (2.61%) 4.54% 7.67% 4.89% 7.60% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $24,808 $23,871 $14,537 $5,486 $1,892 Ratios to average net assets: Expenses .................................... 1.20%** 1.19% 1.19% 1.19% 1.20%** Net investment income ....................... 4.56%** 4.55% 4.82% 5.01% 5.05%** Portfolio turnover rate ....................... 13.62% 14.11% 20.02% 16.57% 25.12%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.002. (3) Includes distributions in excess of net investment income in the amount of $.001. (4) Includes distributions in excess of net investment income in the amount of $.006. (5) Includes distributions in excess of net investment income in the amount of $.005. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE - ---------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.9% Apache Junction Water Utilities Community, FSA Insured, 5.80%, 7/01/17 ........................ $ 1,200,000 $ 1,219,488 Arizona Educational Loan Marketing Corp. Revenue, Senior Series, 6.375%, 9/01/05 ..................... 10,000,000 10,390,800 Series B, MBIA Insured, 7.00%, 3/01/03 ............. 1,000,000 1,052,080 Series B, MBIA Insured, 7.35%, 9/01/04 ............. 1,000,000 1,022,500 Series B, MBIA Insured, 7.00%, 3/01/05 ............. 1,000,000 1,052,080 Series B, MBIA Insured, 7.375%, 9/01/05 ............ 775,000 792,438 Sub Series, 6.625%, 9/01/05 ........................ 1,000,000 1,046,770 Arizona Health Facilities Authority Hospital System Revenue, Phoenix Baptist Hospital, MBIA Insured, ETM, 6.25%, 9/01/11 ....................... 2,000,000 2,114,680 Arizona Health Facilities Authority Revenue, Arizona Voluntary Hospital, Hospital Federal Pooled Loan Revenue, Series B, FGIC Insured, Pre-Refunded,7.75%,10/01/07 ........ 770,000 772,064 Series B, FGIC Insured, 7.25%, 10/01/13 ............ 5,000,000 5,059,950 Arizona State COP, FSA Insured, 6.625%, 9/01/08 ....................... 5,000,000 5,310,800 Refunding, Series B, AMBAC Insured, 6.25%, 9/01/10 . 5,000,000 5,340,250 Arizona State Municipal Financing Program COP, Dysart School, Series 22, BIG Insured, ETM, 7.875%, 8/01/05 .................................. 1,350,000 1,574,964 Peoria School, Series 19, BIG Insured, ETM, 7.75%, 8/01/04 ................................... 500,000 571,335 Series 20, BIG Insured, ETM, 7.625%, 8/01/06 ....... 3,250,000 3,628,560 Series 25, BIG Insured, 7.875%, 8/01/14 ............ 500,000 635,730 Arizona State Wastewater Management Authority Wastewater Financial Assistance Revenue, 6.80%, 7/01/11 ..................................... 4,000,000 4,282,120 Series A, AMBAC Insured, 5.625%, 7/01/15 ........... 1,000,000 1,016,250 Casa Grande Excise Tax Revenue, FGIC Insured, 6.20%, 4/01/15 ..................................... 930,000 972,650 Casa Grande, IDA, PCR, Frito Lay/PepsiCo, 6.60%, 12/01/10 ....... 1,800,000 1,929,402 IDR, Frito Lay/PepsiCo, 6.65%, 12/01/14 ............ 500,000 536,530 Chandler GO,FGIC Insured, Pre-Refunded, 6.80%, 7/01/13 ....................... 1,750,000 1,938,493 Pre-Refunded, 6.85%, 7/01/14 ....................... 1,625,000 1,803,523 Refunding, 7.00%, 7/01/12 .......................... 1,000,000 1,047,860 Chandler IDA, MFHR, Hacienda Apartments Project, Refunding, Series A, GNMA Secured, 6.05%, 7/20/30 ... 4,055,000 4,118,704 Chandler Street and Highway Revenue, MBIA Insured, Pre-Refunded, 6.85%, 7/01/13 ........................ 1,250,000 1,387,325 Chandler Water and Sewer Revenue, Refunding, FGIC Insured, 7.00%, 7/01/12 ..................................... 6,715,000 7,036,380 6.25%, 7/01/13 ..................................... 2,165,000 2,277,125 5.25%, 7/01/15 ..................................... 2,270,000 2,236,268 Coconino County Flagstaff USD, No.1, AMBAC Insured, 6.20%, 7/01/06 ..................................... 1,095,000 1,121,061 Coconino County PCR, Arizona Public Service Co., Refunding, Series A, MBIA Insured, 5.875%, 8/15/28 ..................... 5,275,000 5,339,408 Nevada Power Co., 6.375%, 10/01/36 ................. 3,500,000 3,607,905 Nevada Power Co., Refunding, Series E, 5.35%, 10/01/22 .......................................... 7,265,000 6,628,077 Nevada Power Co., Series B, 5.80%, 11/01/32 ........ 6,500,000 6,232,200 Eloy Municipal Property Corp. Facilities Revenue, 7.80%, 7/01/09 ..................................... 1,475,000 1,528,439 Gila County IDAR, Asarco Inc., Refunding, 5.55%, 1/01/27 ............................................ 45,900,000 41,434,389 Gilbert ID No.11, FGIC Insured, 7.60%, 1/01/05 ....... 1,500,000 1,539,375 Gilbert Water and Sewer Revenue, Refunding, FGIC Insured, 6.50%, 7/01/12 ............................................ 1,500,000 1,626,600 7/01/22 ............................................ 3,250,000 3,469,180 Glendale IDA, Educational Facilities Revenue, American Graduate School International, Connie Lee Insured, Pre-Refunded, 7.00%, 7/01/14 ...................... 1,000,000 1,127,960 Educational Facilities Revenue, American Graduate School International, Connie Lee Insured, Pre-Refunded, 7.125%, 7/01/20 ..................... 1,250,000 1,417,850 Educational Facilities Revenue, American Graduate School International, Refunding, Connie Lee Insured, 5.875%, 7/01/15 .......................... 2,200,000 2,260,148 Midwestern University, Series A, 5.375%, 5/15/28 ... 15,000,000 13,459,050 Midwestern University, Series A, Connie Lee Insured, 6.00%, 5/15/16 .................................... 455,000 470,839 Midwestern University, Series A, Connie Lee Insured, 6.00%, 5/15/26 .................................... 340,000 353,263 Midwestern University, Series A, MBIA Insured, 5.375%, 5/15/28 ................................... 2,000,000 1,927,640 Midwestern University, Series A, Pre-Refunded, 6.00%, 5/15/16 .................................... 1,485,000 1,616,497 Midwestern University, Series A, Pre-Refunded, 6.00%, 5/15/26 .................................... 1,660,000 1,806,993
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Glendale Municipal Property Corp., Refunding, MBIA Insured, 7.00%, 7/01/09 ............................... $ 2,400,000 $ 2,447,328 Guam Power Authority Revenue, Series A, Pre-Refunded, 6.30%, 10/01/12 ............................................. 3,630,000 3,904,029 10/01/22 ............................................. 4,000,000 4,301,960 Lake Havasu City Wastewater COP, FGIC Insured, 7.00%, 6/01/05 ........................................ 2,700,000 2,854,980 Marana Municipal Property Corp. Municipal Facilities Revenue, Refunding, MBIA Insured, 5.25%, 7/01/22 ...... 1,170,000 1,121,866 Maricopa County COP, 6.00%, 6/01/04 .................... 8,000,000 8,261,520 Maricopa County GO, School District No. 4, Mesa Unified, FGIC Insured, Pre-Refunded, 5.65%, 7/01/11 ........................ 500,000 533,680 School District No. 4, Mesa Unified, FGIC Insured, Pre-Refunded, 5.70%, 7/01/12 ........................ 1,000,000 1,069,880 School District No. 8, Osborn, Refunding, Series A, FGIC Insured, 5.875%, 7/01/14 ....................... 3,500,000 3,646,405 School District No. 11, Peoria Unified, Refunding, AMBAC Insured, 6.10%, 7/01/10 ....................... 6,300,000 6,640,326 School District No. 11, Peoria Unified, Refunding, MBIA Insured, 7.00%, 7/01/10 ........................ 2,800,000 2,940,532 School District No. 28, Kyrene Elementary, Series B, FGIC Insured, 6.00%, 7/01/14 ........................ 2,000,000 2,066,500 School District No. 98, Fountain Hills Unified, FGIC Insured, 6.625%, 7/01/10 ....................... 475,000 495,753 School District No. 98, Fountain Hills Unified, FGIC Insured, Pre-Refunded, 6.625%, 7/01/10 ......... 825,000 868,626 UHSD No. 210, Series A, Pre-Refunded, 5.70%, 7/01/15 . 500,000 531,110 UHSD No. 210, Series B, Pre-Refunded, 5.50%, 7/01/17 . 8,050,000 8,480,514 USD No. 41, Gilbert, 6.25%, 7/01/15 .................. 2,000,000 2,064,080 USD No. 65, Littleton School Improvement, Series B, FGIC Insured, 6.40%, 7/01/14 ........................ 1,175,000 1,240,565 USD No. 66, Roosevelt Elementary Project, Series B, FGIC Insured, 5.25%, 7/01/17 ........................ 2,500,000 2,432,125 USD No. 69, Paradise Valley, Series A, Pre-Refunded, 7.10%, 7/01/05 ...................................... 1,000,000 1,118,340 USD No. 80, Chandler, FGIC Insured, Pre-Refunded, 6.00%, 7/01/13 ...................................... 1,600,000 1,723,824 USD No. 89, Dysart, Refunding and Improvement, FGIC Insured, 6.70%, 7/01/05 ........................ 240,000 247,073 USD No. 89, Dysart, Refunding and Improvement, FGIC Insured, 6.75%, 7/01/06 ........................ 1,760,000 1,809,650 Maricopa County Hospital Revenue, Sun Health Corp., 5.30%, 4/01/29 ....................................... 15,595,000 13,953,314 Refunding, 5.80%, 4/01/08 ............................ 3,870,000 3,974,954 Refunding, 5.90%, 4/01/09 ............................ 2,120,000 2,182,370 Refunding, 6.125%, 4/01/18 ........................... 15,650,000 16,065,195 Maricopa County, IDA, Health Facilities Revenue, Catholic Healthcare West Project, Refunding, Series A, 5.00%, 7/01/16 ... 13,100,000 11,141,812 IDA, Health Facilities Revenue, Catholic Healthcare West Project, Refunding, Series A, 5.00%, 7/01/21 ... 17,600,000 14,418,448 IDA, Hospital Facility Revenue, FSA Insured, 7.50%, 12/01/13 ............................................ 1,445,000 1,522,640 IDA, Hospital Facility Revenue, FSA Insured, Pre-Refunded, 7.50%, 12/01/13 ....................... 1,305,000 1,386,784 IDA, Hospital Facility Revenue, Mayo Clinic Hospital, 5.25%, 11/15/37 ..................................... 20,725,000 18,832,393 IDA, Hospital Facility Revenue, Samaritan Health Service Hospital, Refunding, Series A, MBIA Insured, 7.00%, 12/01/16 ..................................... 1,890,000 2,221,657 IDA, Hospital Facility Revenue, Samaritan Hospital Health Services, Refunding, Series A, MBIA Insured, 7.00%,12/01/13 ...................................... 17,800,000 18,650,128 IDA, MFHR, Arborwood Apartments Project, Series A, MBIA Insured, 5.05%, 10/01/29 ....................... 1,750,000 1,594,163 IDA, MFHR, Madera Pointe Apartments Project, Refunding, FSA Insured, 5.90%, 6/01/26 .............. 2,105,000 2,143,606 IDA, MFHR, Stanford Court Apartments Project, Series A, MBIA Insured, 5.30%, 7/01/28 .............. 1,235,000 1,175,424 IDA, Water System Revenue, Improvement, Chaparral Water Co., Series A, AMBAC Insured, 5.40%, 12/01/22 . 1,000,000 956,570 IDR, Citizens Utilities Co. Project, 6.20%, 5/01/30 .. 5,000,000 5,066,000 Maricopa County IDAR, SFMR, GNMA Secured, 8.00%, 9/01/09 510,000 520,797 Maricopa County Stadium District Revenue, MBIA Insured, 5.75%, 7/01/16 ........................................ 3,000,000 3,043,650 Mesa IDAR, Discovery Health Systems, Series A, MBIA Insured, (b)5.75%, 1/01/25 .................................... 45,000,000 45,107,100 5.625%, 1/01/29 ................................... 4,000,000 3,940,320 Mesa Utility System Revenue, FGIC Insured, 5.375%, 7/01/17 ............................................... 15,500,000 15,297,725 Mohave County Hospital District No. 1, Kingman Regional Medical Center Project, FGIC Insured, 6.50%, 6/01/15 ......................... 1,500,000 1,574,310 Pre-Refunded, 8.375%, 6/01/15 ........................ 6,350,000 6,683,185 Mohave County IDA, Health Care Revenue, Refunding, GNMA Secured, 6.375%, 11/01/31 .................................... 1,585,000 1,649,541 Hospital Systems Revenue, Baptist Hospital, MBIA Insured, 5.50%, 9/01/21 ............................. 1,500,000 1,475,565 Hospital Systems Revenue, Baptist Hospital, MBIA Insured, 5.75%, 9/01/26 ............................. 4,675,000 4,701,040 IDR, Citizens Utilities Co. Project, 6.60%, 5/01/29 .. 4,100,000 4,408,689 IDR, Citizens Utilities Co. Project, Series A, 7.15%, 2/01/26 ...................................... 10,000,000 10,217,300 IDR, Citizens Utilities Co. Project, Series B, 7.15%, 2/01/26 ...................................... 5,000,000 5,108,650
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) Navajo County PCR, Arizona Public Service Co., Series A, MBIA Insured, 5.875%, 8/15/28 ........................ $ 3,000,000 $ 3,036,630 Refunding, 5.875%, 8/15/28 ........................... 54,500,000 54,511,445 Nogales Municipal Development Authority Inc. Municipal Facilities Revenue, Refunding, MBIA Insured, 7.20%, 6/01/08 ............................... 6,350,000 6,713,601 Northern Arizona University System Revenue, Refunding,FGIC Insured, 6.40%, 6/01/07 ................ 2,750,000 2,903,203 Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.85%, 3/15/28 ............................................... 8,785,000 9,008,051 Oro Valley Municipal Property Corp. Revenue, Municipal Water System, MBIA Insured, 5.55%, 7/01/17 ....................................... 1,150,000 1,155,474 5.75%, 7/01/17 ....................................... 1,000,000 1,013,100 5.375%, 7/01/26 ...................................... 1,000,000 964,840 Peoria Municipal Development Authority Water and Sewer Revenue, Refunding, FGIC Insured, 6.625%, 7/01/06 ............................................... 1,000,000 1,029,860 Phoenix Airport Revenue, Refunding, Series B, MBIA Insured, 6.20%, 7/01/10 .... 700,000 753,494 Refunding, Series C, MBIA Insured, 6.30%, 7/01/10 .... 1,680,000 1,806,487 Refunding, Series C, MBIA Insured, 6.40%, 7/01/11 .... 1,785,000 1,924,587 Refunding, Series C, MBIA Insured, 6.40%, 7/01/12 .... 570,000 613,041 Series D, MBIA Insured, 6.30%, 7/01/10 ............... 1,800,000 1,935,522 Series D, MBIA Insured, 6.40%, 7/01/11 ............... 3,825,000 4,124,115 Series D, MBIA Insured, 6.40%, 7/01/12 ............... 820,000 881,918 Phoenix Civic Improvement Corp. Excise Tax Revenue, Adams Street Garage Project, senior lien, Series B, 5.30%, 7/01/20 ...................................... 690,000 667,147 Adams Street Garage Project, senior lien, Series B, 5.35%, 7/01/24 ...................................... 2,985,000 2,889,211 Adams Street Garage Project, senior lien, Series B, 5.375%, 7/01/29 ..................................... 4,730,000 4,549,645 Municipal Courthouse Project, senior lien, Series A, 5.25%, 7/01/18 ...................................... 2,535,000 2,455,274 Municipal Courthouse Project, senior lien, Series A, 5.25%, 7/01/20 ...................................... 4,075,000 3,900,590 Municipal Courthouse Project, senior lien, Series A, 5.25%, 7/01/24 ...................................... 3,860,000 3,654,918 Municipal Courthouse Project, senior lien, Series A, 5.375%, 7/01/29 ..................................... 18,310,000 17,535,487 Phoenix Civic Improvement Corp. Municipal Facilities Excise Tax Revenue, MBIA Insured, Pre-Refunded, 6.90%, 7/01/21 ........................................ 1,000,000 1,120,080 Phoenix Civic Improvement Corp. Water System Revenue, junior lien, MBIA Insured, 5.375%, 7/01/22 ........... 8,130,000 7,905,449 Pre-Refunded, 5.95%, 7/01/15 ......................... 1,090,000 1,168,709 Pre-Refunded, 5.95%, 7/01/16 ......................... 3,665,000 3,929,650 Pre-Refunded, 6.00%, 7/01/19 ......................... 3,000,000 3,225,300 Phoenix Civic Plaza Building Corp., 6.00%, 7/01/14 ..... 4,300,000 4,480,170 Phoenix GO, 5.25%, 7/01/20 ....................................... 2,000,000 1,914,400 Refunding, 6.375%, 7/01/13 ........................... 5,000,000 5,284,750 Refunding, Series A, 5.00%, 7/01/19 .................. 3,500,000 3,266,060 Series A, Pre-Refunded, 5.50%, 7/01/15 ............... 5,000,000 5,247,450 Series B, 5.25%, 7/01/15 ............................. 2,775,000 2,727,964 Phoenix HFC, Mortgage Revenue, Project A, Refunding, MBIA Insured, 6.50%, 7/01/24 ... 2,750,000 2,821,858 Section 8 Project, Refunding, Series A, MBIA Insured, 6.90%, 1/01/23 ...................................... 1,750,000 1,801,153 Section 8 Project, Refunding, Series A, MBIA Insured, 7.25%, 1/01/23 ...................................... 2,260,000 2,295,731 Phoenix IDA, Hospital Revenue, Refunding, Series B, Connie Lee Insured, 5.75%, 12/01/16 ............................ 3,500,000 3,529,295 SFMR, FNMA Insured, 6.30%, 12/01/12 .................. 695,000 718,547 SFMR, Statewide, Series C, GNMA Secured, 5.30%, 4/01/20 ............................................. 2,000,000 1,894,440 Phoenix Municipal Housing Revenue, Fillmore Gardens Project, Refunding, 6.30%, 6/01/09 .................... 1,500,000 1,562,310 Phoenix Street and Highway Revenue, ETM, 6.80%, 7/01/03 .................................. 1,000,000 1,084,350 Refunding, 6.60%, 7/01/07 ............................ 5,000,000 5,321,000 Pima County IDA, Health Care Corp. Revenue, Carondelet St. Joseph's and St. Mary's Hospital, BIG Insured, 8.00%, 7/01/13 65,000 66,047 Health Care Corp. Revenue, Carondelet St. Joseph's and St. Mary's Hospital, MBIA Insured, 6.75%, 7/01/10 2,250,000 2,386,125 MFR, Series A, FNMA Insured, 6.00%, 12/01/21 ......... 2,720,000 2,764,037 SFMR, GNMA Secured, 6.40%, 11/01/09 .................. 795,000 820,527 SFMR, GNMA Secured, 8.125%, 9/01/20 .................. 920,000 931,509 SFMR, GNMA Secured, 6.75%, 11/01/27 .................. 3,555,000 3,683,478
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE - ---------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Pima County IDA,(cont.) SFMR, Refunding, Series A, 7.625%, 2/01/12 ......... $ 2,600,000 $ 2,681,588 SFMR, Refunding, Series A, 6.50%, 2/01/17 .......... 675,000 693,826 Pima County IDAR, MFHR, Housing Ria Nova and Villa Projects, GNMA Secured, 5.20%, 12/20/31 .......................... 2,370,000 2,179,428 Refunding, Series A, MBIA Insured, 5.625%, 4/01/14 . 2,250,000 2,290,725 Pima County Sewer Revenue, Refunding, FGIC Insured, 6.75%, 7/01/15 ...................................... 1,410,000 1,475,678 Pima County USD, Tucson Project No.1, FGIC Insured, 5.875%, 7/01/14 ..................................... 21,000,000 21,706,020 Pinal County USD, No. 43, Apache Junction Improvement, FGIC Insured, 7.15%, 7/01/05 ....................... 355,000 362,054 Refunding, Series A, FGIC Insured, 5.85%, 7/01/15 .. 2,500,000 2,576,175 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured, Pre-Refunded, 9.00%, 7/01/09 ............................................. 75,000 88,425 Puerto Rico Commonwealth GO, Pre-Refunded, 6.50%, 7/01/23 ............................................. 4,850,000 5,351,733 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, 5.00%, 7/01/38 ........................... 2,000,000 1,751,180 Series Y, 5.00%, 7/01/36 ........................... 9,000,000 7,983,360 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.75%, 7/01/08 ..................................... 1,550,000 1,573,405 7.50%, 7/01/09 ..................................... 335,000 339,258 Puerto Rico Electric Power Authority Revenue, Series X, Pre-Refunded, 6.125%, 7/01/21 ............. 25,720,000 28,070,294 Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ......... 1,215,000 1,249,020 Sixth Portfolio, Section 8 Assisted, FHA Mortgage Insured, Pre-Refunded, 7.75%, 12/01/26 ............ 40,000 46,959 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ....................... 370,000 383,091 Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Hospital Revenue, Dr. Pila Hospital, Refunding, 5.875%, 8/01/12 ...... 5,225,000 5,355,782 Hospital Auxilio Mutuo Obligation, Series A, MBIA Insured, 6.25%, 7/01/24 ........................... 1,950,000 2,075,600 Salt River Project Agricultural Improvement and Power District Electric System Revenue, Refunding, Series A, 5.75%, 1/01/13 ................ 2,435,000 2,493,026 Refunding, Series A, 5.00%, 1/01/20 ................ 7,500,000 6,931,650 Series A, 6.00%, 1/01/31 ........................... 4,600,000 4,662,146 Series A, MBIA Insured, 6.00%, 1/01/31 ............. 1,845,000 1,867,564 Series C, 6.20%, 1/01/12 ........................... 5,925,000 6,246,254 Series C, 6.25%, 1/01/19 ........................... 9,975,000 10,438,538 Series D, 6.25%, 1/01/27 ........................... 4,890,000 5,111,713 Santa Cruz County IDAR, Citizens Utilities Co. ....... Project, 6.60%, 5/01/29 ............................. 8,000,000 8,602,320 Scottsdale IDA Hospital Revenue, Scottsdale Memorial Hospital, Refunding, Series A, AMBAC Insured, 5.70%, 9/01/15 ............................................ 1,250,000 1,261,525 9/01/18 ............................................ 4,045,000 4,069,310 Sedona Sewer Sales Tax Revenue, Refunding, 6.75%, 7/01/07 ..................................... 3,800,000 4,111,714 7.00%, 7/01/12 ..................................... 5,000,000 5,289,050 Tucson Airport Authority Revenue, Series A, MBIA Insured, 6.875%, 6/01/20 ............ 1,090,000 1,125,894 Series B, MBIA Insured, 7.125%, 6/01/15 ............ 1,175,000 1,219,157 Series B, MBIA Insured, 7.25%, 6/01/20 ............. 1,125,000 1,168,043 Tucson GO, Series A, 5.375%, 7/01/20 ................. 1,800,000 1,756,908 Tucson IDA, MFR, La Entrada, Refunding, 7.40%, 7/01/26 .............. 1,820,000 1,885,484 Los Portales Apartments, Refunding, GNMA Secured, 5.90%, 12/20/31 ................................... 2,000,000 2,021,180 Tucson Water Revenue, Refunding, FGIC Insured, 5.125%, 7/01/20 ...................... 4,000,000 3,758,440 MBIA Insured, 7.00%, 7/01/10 ....................... 2,250,000 2,271,263 University of Arizona System Revenue, Pre-Refunded, 6.25%, 6/01/11 ..................................... 1,000,000 1,088,780 6.35%, 6/01/14 ..................................... 1,300,000 1,420,900
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN ARIZONA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/13 ................................................................................... $ 2,500,000 $ 2,433,075 10/01/22 ................................................................................... 3,750,000 3,562,013 Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.30%, 7/01/18 ... 2,475,000 2,312,640 Virgin Islands Water and Power Authority Water System Revenue, Refunding, 5.50%, 7/01/17 ...... 1,500,000 1,357,530 Yavapai County GO, USD No. 22 Humboldt, Project of 1995, Series B, MBIA Insured, 5.60%, 7/01/14 1,825,000 1,859,182 Yavapai County IDA, Hospital Facility Revenue, Yavapai Regional Medical Center, Series A, FSA Insured, 5.125%, 12/01/13 .......................................................................... 2,000,000 1,953,420 IDR, Citizens Utilities Co. Project, 5.45%, 6/01/33 ........................................ 6,000,000 5,732,580 Yuma County GO, Elementary School District No. 1, MBIA Insured, 5.50%, 7/01/14 ............................................................... 2,000,000 2,021,020 Series A, MBIA Insured, 5.75%, 7/01/14 ..................................................... 1,500,000 1,545,915 Yuma IDA, Hospital Revenue, Regency Apartments, Refunding, Series A, GNMA Secured, 5.50%, 12/20/32 ... 2,000,000 1,920,300 Hospital Revenue, Yuma Regional Medical Center, Refunding, MBIA Insured, 5.50%, 8/01/17 .... 4,000,000 3,981,760 MFHR, Alexandrite Sands Apartments Project, FHA Insured, Pre-Refunded, 7.60%, 12/01/15 ..... 1,000,000 1,023,990 MFHR, Alexandrite Sands Apartments Project, FHA Insured, Pre-Refunded, 7.70%, 12/01/29 ..... 2,000,000 2,055,530 ------------- TOTAL LONG TERM INVESTMENTS (COST $837,345,085) ............................................... 847,719,433 ============= (a) SHORT TERM INVESTMENTS 1.6% Maricopa County IDA, Hospital Facility Revenue, Samaritan Health Service Hospital, Series B, 2, MBIA Insured, Daily VRDN and Put, 2.75%, 12/01/08................... 900,000 900,000 Maricopa County PCC, PCR, Arizona Public Service Co., Refunding, Series D, Daily VRDN and Put, 2.75%, 5/01/29 ............................................................................ 2,100,000 2,100,000 Maricopa County PCR, El Paso Electric Co. Project, Series A, Weekly VRDN and Put, 3.30%, 7/01/14 ............................................................................ 450,000 450,000 Pinal County IDA, PCR, Magma-Copper Co., Newmont Mining Corp., Daily VRDN and Put, 3.05%, 12/01/09 .................................. 8,800,000 8,800,000 Newmont Mining Corp., DATES, Daily VRDN and Put, 3.05%, 12/01/09 ........................... 200,000 200,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ...................................................... 1,100,000 1,100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ....................................... 300,000 300,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $13,850,000) ............................................... 13,850,000 ------------- TOTAL INVESTMENTS (COST $851,195,085) 100.5% .................................................. 861,569,433 OTHER ASSETS, LESS LIABILITIES (.5%) .......................................................... (4,530,226) ------------- NET ASSETS 100.0% ............................................................................. $ 857,039,207 =============
See glossary of terms on page 110. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN COLORADO TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.05 $ 12.11 $ 11.80 $ 11.84 $ 11.38 $ 11.94 --------------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .29 .60 .63 .66 .67 .67 Net realized and unrealized gains (losses) ... (.63) .02 .39 (.04) .45 (.57) --------------------------------------------------------------------------------- Total from investment operations .............. (.34) .62 1.02 .62 1.12 .10 --------------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.30)(2) (.60) (.64) (.66) (.66) (.66) Net realized gains ........................... (.01) (.08) (.07) -- -- -- --------------------------------------------------------------------------------- Total distributions ........................... (.31) (.68) (.71) (.66) (.66) (.66) --------------------------------------------------------------------------------- Net asset value, end of period ................ $ 11.40 $ 12.05 $ 12.11 $ 11.80 $ 11.84 $ 11.38 --------------------------------------------------------------------------------- Total return* ................................. (2.82%) 5.24% 8.86% 5.44% 10.12% 1.05% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 288,952 $ 301,381 $ 266,599 $ 236,609 $ 215,609 $194,564 Ratios to average net assets: Expenses ..................................... .69%** .70% .71% .71% .71% .70% Net investment income ........................ 4.96%** 4.93% 5.28% 5.59% 5.73% 5.94% Portfolio turnover rate ....................... 14.07% 12.60% 22.97% 14.13% 17.58% 28.83% CLASS C - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.11 $ 12.17 $ 11.84 $ 11.87 $ 11.40 --------------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .26 .54 .57 .59 .50 Net realized and unrealized gains (losses) ... (.63) .02 .40 (.02) .46 --------------------------------------------------------------------------------- Total from investment operations .............. (.37) .56 .97 .57 .96 --------------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.27)(3) (.54) (.57) (.60) (.49) Net realized gains ........................... (.01) (.08) (.07) -- -- --------------------------------------------------------------------------------- Total distributions ........................... (.28) (.62) (.64) (.60) (.49) --------------------------------------------------------------------------------- Net asset value, end of period ................ $ 11.46 $ 12.11 $ 12.17 $ 11.84 $ 11.87 Total return* ................................. (3.08%) 4.63% 8.39% 4.93% 8.57% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 22,497 $ 21,899 $ 10,855 $ 5,654 $ 1,656 Ratios to average net assets: Expenses ..................................... 1.24%** 1.26% 1.27% 1.28% 1.29%** Net investment income ........................ 4.41%** 4.38% 4.72% 4.99% 5.12%** Portfolio turnover rate........................ 14.07% 12.60% 22.97% 14.13% 17.58%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.009 (3) Includes distributions in excess of net investment income in the amount of $.008 See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN COLORADO TAX-FREE INCOME FUND AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.2% Adams County School No.12 GO, FGIC Insured, 5.40%, 12/15/14 ...................... $ 1,000,000 $ 1,002,810 Arapahoe County Capital Improvements Transportation Fund Highway Revenue, Vehicle Registration, Series A, MBIA Insured, 6.15%, 8/31/26 .................. 8,000,000 8,405,600 Arapahoe County COP, Refunding, FSA Insured, 6.625%, 12/01/16 .................... 805,000 854,733 Arapahoe County School District No. 2, Refunding, MBIA Insured, 5.70%, 6/01/19 ... 2,200,000 2,211,814 Arvada IDR, Wanco Inc. Project, 5.25%, 12/01/07 ............................................................... 100,000 97,963 5.80%, 12/01/17 ............................................................... 480,000 464,741 Arvada MFHR, Springwood Community Project, Refunding, 6.35%, 8/20/16 ............. 1,000,000 1,022,370 Aurora COP, Refunding, 6.25%, 12/01/09 ........................................... 2,850,000 3,004,641 Bayfield School District No. 10, MBIA Insured, Pre-Refunded, 6.65%, 6/01/15 ...... 1,000,000 1,101,310 Boulder County Hospital Revenue, Longmont United Hospital Project, 5.50%, 12/01/12 ............................................................... 1,000,000 963,490 5.80%, 12/01/13 ............................................................... 2,000,000 2,003,380 5.60%, 12/01/17 ............................................................... 3,385,000 3,203,462 5.875%, 12/01/20 .............................................................. 1,285,000 1,247,709 Pre-Refunded, 8.20%, 12/01/20 ................................................. 3,000,000 3,182,760 Boulder, Larimer and Weld Counties GO, Vrain Valley School District RE1J, Series A, FGIC Insured, 5.00%, 12/15/22 ...................................... 7,000,000 6,405,700 Castle Pines Metropolitan District GO, Refunding and Improvement, FSA Insured, 5.25%, 12/01/15 ................................................. 1,900,000 1,853,222 Colorado Health Facilities Authority Revenue, Birchwood Manor Project, Series A, GNMA Secured, 7.625%, 4/01/26 .............. 1,615,000 1,648,479 Boulder Community Hospital, Refunding, Series B, MBIA Insured, 5.875%, 10/01/23 1,500,000 1,522,005 Catholic Health Initiatives, Series A, 5.00%, 12/01/28 ........................ 1,800,000 1,533,402 Children's Hospital Association Project, MBIA Insured, 5.25%, 10/01/26 ........ 1,000,000 929,140 Community Provider Pooled Loan Program, FSA Insured, 6.75%, 7/15/17 ........... 954,000 998,456 Community Provider Pooled Loan Program, Series A, FSA Insured, 7.25%, 7/15/17 . 6,570,000 6,924,254 Covenant Retirement Communities, 6.75%, 12/01/15 .............................. 1,750,000 1,873,673 Covenant Retirement Communities, 6.75%, 12/01/25 .............................. 4,950,000 5,277,492 Kaiser Permanente, Series A, 5.35%, 11/01/16 .................................. 8,000,000 7,561,440 Mercy Medical Center Durango, 6.20%, 11/15/15 ................................. 1,250,000 1,305,038 National Benevolent Association, Refunding, Series A, 5.20%, 1/01/18 .......... 700,000 626,024 National Benevolent Association, Refunding, Series A, 5.25%, 1/01/27 .......... 1,180,000 1,023,449 National Benevolent Association, Series B, 5.25%, 2/01/18 ..................... 750,000 674,655 National Benevolent Association, Series B, 5.25%, 2/01/28 ..................... 2,500,000 2,163,550 Oakbrook Manor, Series A, GNMA Secured, 7.25%, 4/01/11 ........................ 365,000 372,931 Oakbrook Manor, Series A, GNMA Secured, 7.625%, 4/01/26 ....................... 885,000 903,346 Parkview Medical Center Inc. Project, 5.25%, 9/01/18 .......................... 1,660,000 1,492,224 Parkview Medical Center Inc. Project, 5.30%, 9/01/25 .......................... 1,615,000 1,417,211 PSL Health System Project, Series B, Pre-Refunded, 8.50%, 2/15/21 ............. 1,000,000 1,080,590 Sisters of Charity Leavenworth, 5.125%, 12/01/18 .............................. 1,000,000 934,340 Colorado HFA, GO, Series A, 7.50%, 5/01/29 .................................................. 1,000,000 1,033,960 MF, Series A, 6.80%, 8/01/14 .................................................. 3,030,000 3,140,686 MF, Series A, 6.85%, 8/01/24 .................................................. 5,790,000 5,991,318 MF, Series A, 6.875%, 8/01/30 ................................................. 2,300,000 2,379,419 MF, Series A-2, 6.00%, 10/01/28 ............................................... 1,000,000 1,010,820 MF, Series A-2, FHA Insured, 5.45%, 10/01/29 .................................. 1,000,000 942,300 SF Program, Refunding, Series A-2, MBIA Insured, 5.625%, 11/01/23 ............. 4,000,000 3,960,560 SF Program, Series A-1, 8.00%, 8/01/17 ........................................ 125,000 127,180 SF Program, Series A-2, 7.70%, 2/01/23 ........................................ 300,000 309,537 SF Program, Series A-3, 7.90%, 8/01/21 ........................................ 100,000 102,452 SF Program, Series C-2, 7.375%, 8/01/10 ....................................... 585,000 602,018 SF Program, Series C-2, 7.85%, 2/01/21 ........................................ 90,000 91,981 Colorado Public Highway Authority Revenue, Highway E-470, Refunding, Senior Series A, MBIA Insured, 5.25%, 9/01/18 ................................. 3,795,000 3,632,308 Senior Series A, MBIA Insured, 5.00%, 9/01/21 ................................. 2,000,000 1,814,100 Series A, MBIA Insured, 5.00%, 9/01/26 ........................................ 3,120,000 2,781,574 Colorado Springs Airport Revenue, Series A, MBIA Insured, 5.25%, 1/01/22 ......... 2,500,000 2,364,725
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN COLORADO TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Colorado Springs Hospital Revenue, Refunding, MBIA Insured, 6.00%, 12/15/15 ............................................................................ $ 5,575,000 $ 5,860,050 12/15/24 ............................................................................ 10,955,000 11,277,734 Colorado Springs Utilities Revenue, Refunding and Improvement, Series A, 5.25%, 11/15/22 ................................ 1,000,000 941,170 Refunding and Improvement, Series A, 5.375%, 11/15/26 ............................... 16,920,000 16,051,158 Series A, 5.75%, 11/15/23 ........................................................... 1,450,000 1,451,552 Colorado State Board of Agriculture, State University Revenue, Refunding, AMBAC Insured, 5.125%, 3/01/17 ..................................................... 1,000,000 946,380 Colorado State Board of Agriculture COP, MBIA Insured, 5.35%, 5/01/18 .................. 1,000,000 968,950 Colorado State Board of Community Colleges and Occupational Education Revenue, Red Rocks Community College Project, AMBAC Insured, Pre-Refunded, 6.00%, 11/01/19 ....................................... 1,090,000 1,169,777 Colorado Water Resource and Power Authority Drinking Water Revenue, Series A, 5.30%, 9/01/18 .................................. 875,000 853,528 Colorado Water Resource and Power Development Authority, Stagecoach Project, Pre-Refunded, 8.00%, 11/01/17 .................................. 65,000 65,453 Colorado Water Resource and Power Development Authority Clean Water Revenue, Series A, 6.15%, 9/01/11 ................................................... 1,765,000 1,873,565 6.30%, 9/01/14 ...................................................................... 1,000,000 1,057,580 5.80%, 9/01/17 ...................................................................... 2,000,000 2,051,840 Colorado Water Resource and Power Development Authority Small Water Resource Revenue, Series A, FGIC Insured, 6.70%, 11/01/12 .............. 750,000 801,705 Denver City and County Airport Revenue, Series A, 7.50%, 11/15/23 ........................................................... 3,315,000 3,656,180 Series A, 8.50%, 11/15/23 ........................................................... 3,645,000 3,876,421 Series A, MBIA Insured, 5.60%, 11/15/20 ............................................. 3,200,000 3,176,160 Series A, Pre-Refunded, 7.50%, 11/15/12 ............................................. 3,000,000 3,339,120 Series A, Pre-Refunded, 7.50%, 11/15/23 ............................................. 685,000 785,668 Series A, Pre-Refunded, 8.50%, 11/15/23 ............................................. 355,000 380,184 Series D, 7.75%, 11/15/13 ........................................................... 1,000,000 1,182,500 Series E, MBIA Insured, 5.50%, 11/15/25 ............................................. 3,750,000 3,643,275 Denver City and County IDR, University of Denver Project, 7.50%, 3/01/11 ............... 1,880,000 1,963,773 Denver City and County MFHR, The Boston Lofts Project, Series A, FHA Insured, 5.75%, 10/01/27 .................................................................... 1,500,000 1,463,205 Denver City and County Revenue, Children's Hospital Association Project, FGIC Insured, 6.00%, 10/01/15 ...................................................... 3,150,000 3,249,950 Denver City and County School District No.1 GO, FGIC Insured, 5.00%, 12/01/23 .......... 5,475,000 5,001,084 Denver City and County Special Facilities Airport Revenue, United Airlines Inc Project, Series A, 6.875%, 10/01/32 ............................................... 2,000,000 2,099,580 Donala Water and Sanitary District GO, Improvement, Series B, 6.50%, 12/01/14 .......... 995,000 1,034,392 Douglas County MFR, Housing Mortgage, Parker Hilltop Project, FHA Insured, 5.45%, 8/01/28 ..................................................................... 2,000,000 1,905,000 Douglas County School District No. 1 GO, Douglas and Elbert Counties, Improvement, Series A, MBIA Insured, 6.50%, 12/15/16 ............................... 230,000 247,374 Pre-Refunded, 6.50%, 12/15/16 ....................................................... 2,000,000 2,203,860 Fort Collins Lease COP, Civic Center Facilities Project, MBIA Insured, 5.125%, 12/01/18 ................................................................... 1,000,000 936,560 Fort Collins PCR, Anheuser-Busch Co. Project, Refunding, 6.00%, 9/01/31 ................ 5,000,000 5,041,000 Fort Collins Stormwater Utility Enterprise Storm Drain Revenue, FSA Insured, 5.25%, 12/01/19 ....................................................... 2,965,000 2,822,769 Fremont County COP, Lease Purchase, MBIA Insured, 5.30%, 12/15/17 ...................... 1,570,000 1,519,886 Frisco Fire Protection District, Refunding and Improvement, 7.20%, 12/01/05 ............ 250,000 252,140 Greeley MFR, Housing Mortgage, Creek Stone Project, FHA Insured, 5.95%, 7/01/28 ........ 1,000,000 993,080 Guam Airport Authority Revenue, Refunding, Series A, 6.375%, 10/01/10 ............................................... 400,000 421,224 Series A, 6.50%, 10/01/23 ........................................................... 800,000 845,864 Guam Power Authority Revenue, Series A, Pre-Refunded, 6.375%, 10/01/08 ................. 1,000,000 1,077,630 Jefferson County District Wide Sales Tax Revenue, Local ID, MBIA Insured, 6.30%, 6/01/22 7,450,000 7,693,317 Jefferson County Open Space Sales Tax Revenue, FGIC Insured, 5.00%, 11/01/18 ........... 3,000,000 2,766,720 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ............. 225,000 235,098 La Junta Hospital Revenue, Ark Valley Regional Medical Center Project, 5.75%, 4/01/14 ...................................................................... 2,090,000 2,037,604 6.00%, 4/01/19 ...................................................................... 1,000,000 970,830 6.10%, 4/01/24 ...................................................................... 1,000,000 966,630 Lakewood MFHR Mortgage, FHA Insured Mortgage, 6.65%, 10/01/25 ..................................................................... 1,235,000 1,289,007 6.70%, 10/01/36 ..................................................................... 3,025,000 3,147,240 Larimer County COP, School District No. R1, Poudre, MBIA Insured, 5.65%, 12/01/16 ...... 2,300,000 2,330,130
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN COLORADO TAX-FREE INCOME FUND AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Las Animas County School District No. 1, Refunding, 6.15%, 12/01/08 ....................................................................... $ 1,000,000 $ 1,050,490 6.20%, 12/01/10 ....................................................................... 935,000 982,694 Left Hand Water District Revenue, MBIA Insured, 5.70%, 11/15/15 .......................... 1,400,000 1,430,520 Logan County SFMR, Refunding, Series A, 8.50%, 11/01/11 .................................. 185,000 190,147 Metex Metropolitan District GO, Refunding, Series A, MBIA Insured, 5.80%, 12/01/16 .......................................................................... 500,000 513,550 Montrose County COP, 6.35%, 6/15/06 ...................................................... 1,850,000 1,954,174 Mountain College Residence Hall Revenue Authority, MBIA Insured, 5.75%, 6/01/23 ........................................................................... 3,000,000 3,020,190 Municipal Subdistrict of Northern Colorado Water Conservancy District Revenue, Series G, AMBAC Insured, 5.25%, 12/01/15 ............. 2,000,000 1,961,300 Platte River Power Authority Revenue, Refunding, Series D-2, MBIA Insured, 5.375%, 6/01/17 5,490,000 5,394,090 Postsecondary Educational Facilities Authority Revenue, Auraria Foundation Project, FSA Insured, 6.00%, 9/01/15 ............................... 1,000,000 1,043,360 University of Denver Project, Refunding and Improvement, MBIA Insured, 5.375%, 3/01/18 2,500,000 2,430,100 Pueblo County, MBIA Insured, 6.00%, 6/01/16 .............................................. 4,395,000 4,579,766 Pueblo County COP, Public Parking, 6.90%, 7/01/15 ........................................ 500,000 511,980 Pueblo County School District No. 70 GO, Pueblo Rural, AMBAC Insured, Pre-Refunded, 6.40%, 2/01/14 ......................................................... 1,000,000 1,088,770 Pueblo Urban Renewal Authority Tax Increment Revenue, Refunding, AMBAC Insured, 6.10%, 12/01/15 ...................................................................... 1,000,000 1,048,840 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured, Pre-Refunded, 9.00%, 7/01/09 ............................................ 55,000 64,845 Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Industrial Revenue, Guaynabo Municipal Government, 5.625%, 7/01/22 ....................................... 1,335,000 1,290,771 Regional Transportation District Sales Tax Revenue, FGIC Insured, 6.25%, 11/01/12 ...................................................................... 160,000 169,640 Southwestern SFMR, Refunding, Series A, 7.375%, 9/01/11 .................................. 360,000 369,695 Stonegate Village Metropolitan District, Refunding and Improvement, Series A, FSA Insured, 5.60%, 12/01/25 ............................................................. 4,500,000 4,444,695 Summit County SFMR, Series A, 7.50%, 12/01/11 ............................................ 95,000 97,568 Summit County Sports Facilities Revenue, Keystone Resorts Project, Ralston Purina Co., Refunding, 7.875%, 9/01/08 ....................................... 2,750,000 3,225,613 University of Colorado Hospital Authority Revenue, Refunding, Series A, AMBAC Insured, 5.20%, 11/15/17 ................................... 1,000,000 951,340 Refunding, Series A, AMBAC Insured, 5.25%, 11/15/22 ................................... 5,000,000 4,693,650 Series A, AMBAC Insured, 5.50%, 11/15/24 .............................................. 3,000,000 2,900,550 Series A, AMBAC Insured, 5.00%, 11/15/29 .............................................. 11,865,000 10,472,642 University of Colorado Revenues, Enterprise System, Series A, Refunding, MBIA Insured, 5.00%, 6/01/24 ......................................................... 5,375,000 4,839,328 University of Northern Colorado Authority Facilities System Revenue, MBIA Insured, 5.60%, 6/01/24 ....................................................................... 2,000,000 1,999,800 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 ....................................................................... 2,500,000 2,444,900 5.50%, 10/01/22 ....................................................................... 2,500,000 2,374,675 Westminster City Sales and Use Tax Revenue, Refunding and Improvement, FGIC Insured, 7.00%, 12/01/08 .............................. 2,000,000 2,078,580 Storm Project, Refunding and Improvement, Series A, 5.60%, 12/01/16 ................... 1,500,000 1,520,880 Westminster COP, Ice Centre Project, AMBAC Insured, 5.40%, 1/15/23 ..................................... 4,400,000 4,208,512 (b)MBIA Insured, 5.625%, 9/01/19 ...................................................... 1,000,000 991,090 Widefield Water and Sanitary District Water and Sewage Revenue, Refunding and Improvement, Series A, MBIA Insured, 5.70%, 12/01/16 ................... 2,000,000 2,041,816 ------------ TOTAL LONG TERM INVESTMENTS (COST $304,414,568) .......................................... 305,877,800 ------------ (a) SHORT TERM INVESTMENTS .4% Colorado Health Facilities Authority Revenue, Boulder County Hospital, Project C, Weekly VRDN and Put, 3.25%, 10/01/14 .............. 200,000 200,000 Catholic Health Initiatives, Series B, Weekly VRDN and Put, 3.30%, 12/01/25 ........... 250,000 250,000 The Visiting Nurse Corp., Daily VRDN and Put, 3.00%, 7/01/22 .......................... 550,000 550,000 Christian Living Project, Weekly VRDN and Put, 3.30%, 1/01/24 ......................... 100,000 100,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $1,100,000) ........................................... 1,100,000 ------------ TOTAL INVESTMENTS (COST $305,514,568) 98.6% .............................................. 306,977,800 ------------ OTHER ASSETS, LESS LIABILITIES 1.4% ...................................................... 4,471,326 ------------ NET ASSETS 100.0% ........................................................................ $311,449,126 ============
See glossary of terms on page 110. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 1999 YEAR ENDED FEBRUARY 28, CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.27 $ 11.23 $ 10.92 $ 10.96 $ 10.64 $ 11.23 Income from investment operations: Net investment income ........................ .28 .58 .60 .61 .62 .62 Net realized and unrealized gains (losses) ... (.63) .04 .32 (.02) .32 (.60) ------------------------------------------------------------------------------- Total from investment operations .............. (.35) .62 .92 .59 .94 .02 ------------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.28) (.58)2 (.60) (.63) (.62) (.61) In excess of net investment income ........... -- -- (.01) -- -- -- ------------------------------------------------------------------------------- Total distributions ........................... (.28) (.58) (.61) (.63) (.62) (.61) ------------------------------------------------------------------------------- Net asset value, end of period ................ $ 10.64 $ 11.27 $ 11.23 $ 10.92 $ 10.96 $ 10.64 =============================================================================== Total return* ................................. (3.02%) 5.62% 8.62% 5.52% 9.04% 0.37% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 239,180 $245,016 $ 203,643 183,649 $167,045 $ 155,623 Ratios to average net assets: Expenses ..................................... .70%** .72% .73% .72% .73% .71% Net investment income ........................ 5.03%** 5.08% 5.41% 5.62% 5.70% 5.83% Portfolio turnover rate ....................... 15.38% 5.87% 18.54% 14.53% 3.88% 75.72%
CLASS C - ------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.30 $ 11.26 $ 10.94 $ 10.97 $ 10.65 --------------------------------------------------------------- Income from investment operations: Net investment income ........................ .25 .52 .55 .60 .47 Net realized and unrealized gains (losses) ... (.62) .03 .31 (.07) .31 --------------------------------------------------------------- Total from investment operations .............. (.37) .55 .86 .53 .78 --------------------------------------------------------------- Less distributions from net investment income . (.25) (.51)(2) (.54) (.56) (.46) --------------------------------------------------------------- Net asset value, end of period ................ $ 10.68 $ 11.30 $ 11.26 $ 10.94 $ 10.97 =============================================================== Total return* ................................. (3.26%) 5.02% 8.08% 5.03% 7.45% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 26,841 $ 23,443 $ 8,636 $ 4,149 $ 1,656 Ratios to average net assets: Expenses ..................................... 1.25%** 1.28% 1.29% 1.29% 1.30%** Net investment income ........................ 4.48%** 4.53% 4.85% 5.01% 5.12%** Portfolio turnover rate ....................... 15.38% 5.87% 18.54% 14.53% 3.88%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.002. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN CONNECTICUT TAX-FREE INCOME FUND AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.4% Bridgeport GO, Series A, 7.25%, 6/01/00 ......................................................... $ 300,000 $ 306,810 Series B, 7.55%, 11/15/00 ........................................................ 1,375,000 1,408,605 Series B, Pre-Refunded, 7.75%, 11/15/10 .......................................... 3,750,000 3,990,300 Connecticut State Development Authority First Mortgage Revenue, Health Care Project, Church Homes Inc., Refunding, 5.80%, 4/01/21 ..................................... 4,000,000 3,810,800 Elim Park Baptist Home, Refunding, Series A, 5.375%, 12/01/18 .................... 1,100,000 1,007,952 Connecticut State Development Authority PCR, New England Power Co., Pre-Refunded, 7.25%, 10/15/15 ................................................................. 750,000 768,120 Connecticut State Development Authority Revenue, Life Care Facilities, Seabury Project, Refunding, 5.00%, 9/01/21 ................. 3,840,000 3,469,786 Refunding, 5.375%, 8/01/24 ....................................................... 2,000,000 1,883,600 Connecticut State Development Authority Solid Waste Disposal Facilities Revenue, Pfizer Inc. Project, 7.00%, 7/01/25 .................................... 2,000,000 2,213,800 Connecticut State Development Authority Water Facility Revenue, Bridgeport Hydraulic Co. Project, 6.15%, 4/01/35 ................................................................... 1,000,000 1,025,760 6.00%, 9/01/36 ................................................................... 10,000,000 10,110,700 Refunding, 7.25%, 6/01/20 ........................................................ 1,000,000 1,036,310 Connecticut State GO, 5.00%, 6/15/18 ................................................ 5,000,000 4,681,300 Connecticut State Health and Educational Facilities Authority Revenue, Abbot Terrace Health Center Project, Series A, 6.00%, 11/01/14 ................... 2,000,000 2,082,720 Brunswick School, Series A, MBIA Insured, 5.00%, 7/01/29 ......................... 5,000,000 4,540,200 Capital Assets, Series B, ETM, 7.00%, 1/01/00 .................................... 635,000 641,655 Capital Assets, Series C, MBIA Insured, 7.00%, 1/01/20 ........................... 1,265,000 1,327,048 Capital Assets, Series C, MBIA Insured, Pre-Refunded, 7.00%, 1/01/20 ............. 200,000 211,410 (b) Child Care Facilities Program, Series C, AMBAC Insured, 5.625%, 7/01/29 .......... 1,250,000 1,241,838 Choate Rosemary Hall, Series A, MBIA Insured, Pre-Refunded, 7.00%, 7/01/25 ....... 1,500,000 1,677,930 (b) Fairfield University, Series I, MBIA Insured, 5.25%, 7/01/25 ..................... 2,500,000 2,377,800 (b) Fairfield University, Series I, MBIA Insured, 5.50%, 7/01/29 ..................... 8,000,000 7,861,200 Greenwich Hospital, Series A, MBIA Insured, 5.75%, 7/01/16 ....................... 1,000,000 1,015,120 Greenwich Hospital, Series A, MBIA Insured, 5.80%, 7/01/26 ....................... 2,500,000 2,511,750 Hartford University, Series C, Pre-Refunded, 8.00%, 7/01/18 ...................... 1,275,000 1,408,046 Hartford University, Series D, 6.80%, 7/01/22 .................................... 5,000,000 5,114,600 Hebrew Home and Hospital, Series B, FHA Insured, 5.15%, 8/01/28 .................. 3,800,000 3,445,650 (b) Horace Bushnell Memorial Hall, Series A, MBIA Insured, 5.625%, 7/01/29 ........... 1,000,000 992,050 Hospital for Special Care, Refunding, Series B, 5.375%, 7/01/17 .................. 7,205,000 6,648,702 Hospital for Special Care, Refunding, Series B, 5.50%, 7/01/27 ................... 17,000,000 15,409,140 Lutheran General Health Care System, ETM, 7.375%, 7/01/19 ........................ 500,000 592,410 New Britain Memorial Hospital, Series A, Pre-Refunded, 7.75%, 7/01/22 ............ 1,000,000 1,110,845 New Horizons Village Project, 7.30%, 11/01/16 .................................... 2,905,000 3,254,646 Quinnipiac College, Series C, Pre-Refunded, 7.75%, 7/01/20 ....................... 960,000 1,010,208 Sacred Heart University, Refunding, Series E, 5.00%, 7/01/28 ..................... 7,000,000 6,273,540 Sacred Heart University, Series C, 6.50%, 7/01/16 ................................ 235,000 248,043 Sacred Heart University, Series C, Pre-Refunded, 6.50%, 7/01/16 .................. 765,000 853,327 Sacred Heart University Authority Revenue, Series C, 6.625%, 7/01/26 ............. 785,000 828,615 Sacred Heart University Authority Revenue, Series C, Pre-Refunded, 6.625%, 7/01/26 6,215,000 6,977,456 Sacred Heart University, Series D, Pre-Refunded, 6.20%, 7/01/27 .................. 1,700,000 1,871,241 St. Mary's Hospital, Refunding, Series E, 5.50%, 7/01/20 ......................... 4,615,000 4,368,467 St. Mary's Hospital, Refunding, Series E, 5.875%, 7/01/22 ........................ 3,510,000 3,468,371 Taft School, Series A, Pre-Refunded, 7.375%, 7/01/20 ............................. 1,000,000 1,049,270 Taft School, Series C, Pre-Refunded, 6.00%, 7/01/16 .............................. 1,500,000 1,576,905 Trinity College, Series E, MBIA Insured, 5.875%, 7/01/26 ......................... 2,200,000 2,229,260 University Connecticut Foundation, Series A, 5.25%, 7/01/19 ...................... 500,000 480,900 University Connecticut Foundation, Series A, 5.375%, 7/01/29 ..................... 1,250,000 1,197,125 Veterans Memorial Medical Center, Series A, MBIA Insured, 5.50%, 7/01/26 ......... 4,210,000 4,077,764 Windham Community Memorial Hospital, Series C, 6.00%, 7/01/20 .................... 8,000,000 7,822,560 Yale New Haven Hospital, Refunding, Series H, MBIA Insured, 5.70%, 7/01/25 ....... 4,500,000 4,508,865 Yale New Haven Hospital, Series F, MBIA Insured, Pre-Refunded, 7.10%, 7/01/25 .... 7,000,000 7,335,230
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN CONNECTICUT TAX-FREE INCOME FUND AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Connecticut State HFA, Housing Mortgage Finance Program, Series B, 6.75%, 11/15/23 ........................................................ $ 14,705,000 $ 15,612,593 Series C-1, 6.60%, 11/15/23 ...................................................... 460,000 483,041 Series C-2, 6.25%, 11/15/18 ...................................................... 1,500,000 1,563,120 Series C-2, 6.70%, 11/15/22 ...................................................... 3,765,000 3,923,394 Series E, 6.30%, 5/15/17 ......................................................... 3,105,000 3,228,300 Sub Series B-1, 6.30%, 5/15/25 ................................................... 700,000 722,729 Sub Series B-1, 5.30%, 11/15/28 .................................................. 1,700,000 1,605,973 Sub Series C-2, 5.85%, 11/15/28 .................................................. 1,480,000 1,475,738 Sub Series D-1, 5.55%, 11/15/28 .................................................. 1,000,000 971,770 Sub Series E-2, 5.20%, 11/15/21 .................................................. 1,840,000 1,722,590 Sub Series G-1, 6.20%, 11/15/16 .................................................. 1,255,000 1,280,502 Connecticut State Higher Education Supplemental Loan Authority, Series A, 7.00%, 11/15/05 .................................................................. 720,000 747,648 7.20%, 11/15/10 .................................................................. 220,000 228,162 7.50%, 11/15/10 .................................................................. 345,000 350,537 Connecticut State Resource Recovery Authority Revenue, Bridgeport Resco Ltd. Partnership Project, Series A, 7.625%, 1/01/09 ................................... 835,000 854,831 East Haven Bank Qualified GO, Pre-Refunded, 7.00%, 9/15/07 .......................... 200,000 204,200 Eastern Connecticut Resource Recovery Authority Solid Waste Revenue, Wheelabrator Lisbon Project, Series A, 5.50%, 1/01/15 ........................... 8,000,000 7,495,360 Griswold GO, AMBAC Insured, 7.50%, 4/01/06 .......................................... 200,000 230,994 Guam Airport Authority Revenue, Series B, 6.60%, 10/01/10 .................................................................. 250,000 265,425 6.70%, 10/01/23 .................................................................. 1,300,000 1,382,953 Guam Power Authority Revenue, Series A, Pre-Refunded, 6.75%, 10/01/24 .................................................... 5,500,000 6,149,000 Refunding, 5.25%, 10/01/34 ....................................................... 4,000,000 3,584,000 New Haven GO, Series A, Pre-Refunded, 7.40%, 3/01/12 ................................ 4,545,000 4,965,731 Plainfield GO, Series 1988, 7.30%, 9/01/10 ...................................................... 150,000 160,880 Series 1991, 7.25%, 9/01/05 ...................................................... 335,000 359,582 Series 1991, 7.30%, 9/01/07 ...................................................... 335,000 359,566 Series 1991, 7.30%, 9/01/09 ...................................................... 335,000 359,432 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, 5.00%, 7/01/38 ........................................................ 2,500,000 2,188,975 Puerto Rico Electric Power Authority Revenue, Series P, Pre-Refunded, 7.00%, 7/01/21 ........................................... 2,450,000 2,622,799 Series T, Pre-Refunded, 6.375%, 7/01/24 .......................................... 5,000,000 5,487,600 Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ..... 775,000 805,442 Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Industrial Revenue, Guaynabo Warehouse, Series A, 5.15%, 7/01/19 ..................................... 4,845,000 4,428,427 Puerto Rico Municipal Finance Agency GO, Series A, 6.50%, 7/01/19 ................... 5,000,000 5,374,600 South Central Regional Water Authority Water System Revenue, Refunding, Series A, FGIC Insured, 5.125%, 8/01/29 .................................................... 9,840,000 9,005,371 Stratford GO, Unlimited Tax, Pre-Refunded, 7.30%, 3/01/12 ........................... 1,130,000 1,203,676 Virgin Islands PFA Revenue, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/13 ......................................................................... 2,500,000 2,433,075 10/01/22 ......................................................................... 2,500,000 2,374,675 Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.30%, 7/01/18 ........................................................ 1,500,000 1,401,600 Refunding, 5.30%, 7/01/21 ........................................................ 1,000,000 924,490 Series A, Pre-Refunded, 7.40%, 7/01/11 ........................................... 5,780,000 6,139,285 Waterbury GO, Pre-Refunded, 7.25%, 3/01/04 ................................................................... 785,000 834,439 7.50%, 3/01/07 ................................................................... 780,000 831,917 ------------ TOTAL LONG TERM INVESTMENTS (COST $259,969,138) ..................................... 261,700,172 ------------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN CONNECTICUT TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------ (a) SHORT TERM INVESTMENTS .2% Connecticut State Health and Educational Facilities Authority Revenue, Yale University, Series T-1, Weekly VRDN and Put, 3.40%, 7/01/29 ................. $ 100,000 $ 100,000 Connecticut State Special Tax Obligation Revenue, Weekly VRDN and Put, 3.00%, 12/01/10 200,000 200,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.70%, 12/01/15 ............................................. 300,000 300,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $600,000) ......................................... 600,000 ------------ TOTAL INVESTMENTS (COST $260,569,138) 98.6% .......................................... 262,300,172 OTHER ASSETS, LESS LIABILITIES 1.4% .................................................. 3,721,225 ------------ NET ASSETS 100.0% .................................................................... $266,021,397 ============
See glossary of terms on page 110. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 -------------------------------------------------------- (UNAUDITED)*** 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............... $ 11.30 $ 11.25 $ 10.94 $ 10.95 $ 10.48 $ 10.80 --------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income ............................. .26 .51 .53 .55 .55 .54 Net realized and unrealized gains (losses) ........ (.43) .06 .33 (.01) .47 (.33) --------------------------------------------------------------------------- Total from investment operations ................... (.17) .57 .86 .54 1.02 .21 --------------------------------------------------------------------------- Less distributions from net investment income ...... (.26) (.52) (.55) (.55) (.55) (.53) ---------------------------------------------------------------------------- Net asset value, end of period ..................... $ 10.87 $ 11.30 $ 11.25 $ 10.94 $ 10.95 $ 0.48 =========================================================================== Total return* ...................................... (1.57%) 5.17% 8.02% 5.12% 9.93% (.20%) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .................. $ 182,057 $195,598 $ 139 $ 104,715 $ 85,967 $ 73,977 Ratios to average net assets: Expenses .......................................... .75%** .75% .75% .68% .65% .56% Expenses excluding waiver and payments by affiliate .76%** .78% .82% .84% .85% .84% Net investment income ............................. 4.56%** 4.53% 4.83% 5.16% 5.12% 5.25% Portfolio turnover rate ............................ 12.08% 16.57% 23.32% 22.54% 3.35% 38.46%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 103.0% BONDS 100.9% ALABAMA .6% Morgan County Decatur Health Care Authority Hospital Revenue, Refunding, Connie Lee Insured, 5.80%, 3/01/04 ............................................... $1,000,000 $1,044,920 ---------- ALASKA .3% Alaska State HFC, Collateral, Veteran's Mortgage Program, First Series, 5.80%, 6/01/04 430,000 443,416 Anchorage Parking Authority Revenue, 5th Avenue Garage Lease Project, Refunding, 6.50%, 12/01/02 ....................................................... 170,000 177,431 ---------- 620,847 ---------- ARIZONA 3.7% Maricopa County COP, 5.625%, 6/01/00 ................................................. 330,000 332,396 Maricopa County GO, School District No. 40, Glendale Improvement, 6.10%, 7/01/08 ..... 1,000,000 1,066,090 Mesa IDAR, Discovery Health System, Series A, MBIA Insured, 5.50%, 1/01/13 .................................................................... 2,000,000 2,004,840 5.625%, 1/01/15 ................................................................... 3,000,000 3,018,480 Mohave County IDA, Hospital Systems Revenue, Medical Environments Inc., Phoenix Hospital and Medical Center, Refunding, ETM, 6.00%, 7/01/00 ..................... 200,000 203,836 Phoenix HFC, Mortgage Revenue, Project A, Refunding, MBIA Insured, 6.00%, 7/01/02 .... 35,000 35,956 ---------- 6,661,598 ---------- ARKANSAS .9% Arkansas State Development Finance Authority Revenue, White River Medical Center Project, 5.30%, 6/01/14 ........................................... 1,000,000 931,110 Camden PCR, International Paper Co. Project, Refunding, 5.70%, 9/01/12 ............... 750,000 754,793 ---------- 1,685,903 ---------- CALIFORNIA 7.7% ABAG Finance Corp. COP, ABAG XXVI, Series B, 6.30%, 10/01/02 ......................... 100,000 105,145 (b) Bakersfield PFA Revenue, Refunding, Series A, 5.80%, 9/15/05 ...................... 3,000,000 3,129,720 California Educational Facilities Authority Revenue, Pooled College and University Financing, Refunding, Series B, 5.90%, 6/01/03 ........................ 1,500,000 1,566,780 (b) California Statewide CDA Revenue, COP, Health Facilities, Barton Memorial Hospital, Refunding, Series B, 6.40%, 12/01/05 ................... 300,000 315,027 California Statewide Communities Development Corp. COP, Pacific Homes, Series A, Pre-Refunded, 5.90%, 4/01/09 ........................................... 1,000,000 1,041,810 Coastside County Water District 1915 Act GO, Crystal Springs Project, Refunding, 5.10%, 9/02/03 .................................................................... 490,000 493,342 5.30%, 9/02/05 .................................................................... 620,000 614,984 Fresno Joint Powers Financing Authority Local Agency Revenue, Refunding, Series A, 6.00%, 9/02/01 .............................................. 1,000,000 1,020,110 Los Angeles County Transport Commission COP, Series B, 5.90%, 7/01/00 ................ 100,000 101,812 San Diego Port Facilities Revenue, National Steel and Shipbuilding Co., Refunding, 6.60%, 12/01/02 ....................................................... 100,000 104,423 (b) San Francisco City and County RDA, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.125%, 7/01/02 ............................... 50,000 50,036 San Francisco Downtown Parking Corp. Parking Revenue, 6.25%, 4/01/04 ................. 200,000 215,010 San Joaquin County COP, General Hospital Project, ETM, 5.90%, 9/01/03 ................ 200,000 211,780 San Ramon Valley USD, COP, Measure A, Capital Project, Series A, 5.95%, 10/01/01 ..... 1,535,000 1,594,051 Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.00%, 9/02/06 .................................................................... 465,000 455,867 5.25%, 9/02/11 .................................................................... 1,000,000 965,490 Snowline Joint USD, COP, ETM, 5.60%, 7/01/01 .................................................................... 260,000 266,924 5.70%, 7/01/02 .................................................................... 275,000 285,725 5.80%, 7/01/03 .................................................................... 290,000 304,868 Solano County COP, Justice Facility and Public Building Project, Refunding, 5.875%, 10/01/05 ...................................................... 400,000 412,416 Southern California Rapid Transit District Revenue, Special Benefit AD A2, 6.00%, 9/01/02 ................................................................... 100,000 104,187 Susanville PFA Revenue, Series A, AMBAC Insured, 5.90%, 9/01/02 .................................................................... 25,000 25,942 6.00%, 9/01/03 .................................................................... 100,000 103,913 Tahoe City PUD, COP, Capital Facilities Project, Series B, 6.05%, 6/01/01 ............ 500,000 513,245 ---------- 14,002,607 ---------- COLORADO 2.8% Denver City and County Airport Revenue, Series A, 7.00%, 11/15/99 ......................................................... 3,000,000 3,016,980 (b) Series C, 6.25%, 335,000 342,022
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) COLORADO (CONT.) Montrose County COP, 6.20%, 6/15/03 ..................................................... $1,500,000 $ 1,567,515 Summit County Recreational Facilities Revenue, Copper Mountain, Refunding, 5.90%, 4/01/17 255,000 255,329 ---------- 5,181,846 ---------- CONNECTICUT 4.1% Connecticut State Health and Educational Facilities Authority Revenue, Sacred Heart University, Refunding, Series C, 6.00%, 7/01/05 ........................ 135,000 140,015 Series C, ETM, 6.00%, 7/01/05 ........................................................ 425,000 454,635 Connecticut State HFA, Housing Mortgage Finance Program, Series C-2, 6.00%, 11/15/10 .... 2,000,000 2,078,020 Stamford Housing Authority MFR, Fairfield Apartments Project, 4.75%, 12/01/28 ........... 5,000,000 4,751,550 ---------- 7,424,220 ---------- FLORIDA 5.8% Alachua County Health Facilities Authority Revenue, Santa Fe Health Systems Project, Pre-Refunded, 6.875%, 11/15/02 ..................................... 100,000 104,439 Florida State Board of Education Capital Outlay, Public Education, Refunding, Series D, 5.50%, 6/01/08 .............................................................................. 850,000 865,266 6/01/10 .............................................................................. 945,000 949,479 6/01/11 .............................................................................. 200,000 199,810 6/01/12 .............................................................................. 200,000 198,536 6/01/13 .............................................................................. 200,000 196,766 6/01/14 .............................................................................. 200,000 196,418 Gateway Services District Revenue, Transportation Roadway Service Charges, 8.50%, 5/01/04 ...................................................................... 585,000 637,188 Meadow Pointe II CDD, Capital Improvement Revenue, 6.00%, 7/01/01 ....................................................................... 510,000 512,836 Series A, 5.25%, 8/01/03 ............................................................. 2,330,000 2,283,214 Nassau County PCR, ITT Rayonier Inc. Project, Refunding, 6.25%, 6/01/10 ................. 1,000,000 1,032,530 Northern Palm Beach County Water Control District Revenue, Unit Development No. 31, Program 1, Refunding, 6.60%, 11/01/03 ................................................ 320,000 331,942 Program 2, Refunding, 6.60%, 11/01/03 ................................................ 405,000 420,115 Palm Beach County IDR, Lourdes-Noreen Mckeen Residence, Geriatric Care Inc. Project, 6.20%, 12/01/08 ...................................................................... 275,000 281,177 (c) 6.30%, 12/01/09 .................................................................... 580,000 594,001 Palm Beach County Solid Waste IDR, Okeelanta Power and Light Co. Project, Series A, 6.375%, 2/15/07 ........................................................... 1,400,000 910,000 Pembroke Pines Special Assessment, No. 9, 5.75%, 11/01/05 ............................... 785,000 807,451 ---------- 10,521,168 ---------- GEORGIA 3.0% Baldwin County Hospital Authority Revenue, Oconee Regional Medical Center, 5.30%, 12/01/13 ............................................................. 1,020,000 958,678 (b) Fulton County Development Authority Special Facilities Revenue, Delta Airlines Inc. Project, Refunding, 6.85%, 11/01/07 ............................. 100,000 105,275 Macon-Bibb County Urban Development Authority Revenue, MF Housing, Refunding, Series A, MBIA Insured, 5.00%, 1/01/07 ................................... 1,290,000 1,280,544 (b) Wayne County Development Authority PCR, ITT Rayonier Inc. Project, Refunding, 6.10%, 11/01/07 .......................................................... 3,105,000 3,195,821 ---------- 5,540,318 ---------- HAWAII 1.8% Hawaii State Department of Budget and Finance Special Purpose Revenue, Kaiser Permanente, Series A, 5.10%, 3/01/14 .......................................... 3,000,000 2,796,000 Kapiolani Health Obligation, 5.60%, 7/01/06 .......................................... 500,000 507,600 ---------- 3,303,600 ---------- ILLINOIS 3.1% Chicago O'Hare International Airport Special Facilities Revenue, United Air Lines Project, Refunding, Series A, 5.35%, 9/01/16 ....................... 2,000,000 1,854,620 Illinois Educational Facilities Authority Revenue, Columbia College, 5.875%, 12/01/03 ... 850,000 877,727 Illinois HDA Revenue, Homeowner Mortgage, Sub Series A-1, 6.10%, 2/01/05 ................ 360,000 373,306 Illinois Health Facilities Authority Revenue, St. Elizabeth's Hospital, 6.00%, 7/01/05 ............................................. 425,000 437,355 Victory Health Services, Series A, 5.25%, 8/15/09 .................................... 1,170,000 1,130,396 Metropolitan Pier and Exposition Authority Hospitality Facilities Revenue, McCormick Place Convention Center, 5.75%, 7/01/06 ................................... 1,000,000 1,027,780 ---------- 5,701,184 ----------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) INDIANA 3.2% Franklin EDR, Hoover Universal Inc. Project, Johnson Controls, Refunding, 6.10%, 12/01/04 .......... $2,000,000 $ 2,102,100 Indianapolis Local Public Improvement Bond, Refunding, Series D, 6.10%, 2/01/02 .................... 100,000 104,076 (b) Sullivan PCR, Indiana-Michigan Power Co. Project, Refunding, Series C, 5.95%, 5/01/09 ............ 3,500,000 3,575,425 ----------- 5,781,601 ----------- IOWA .1% Iowa State Financial Authority Hospital Facilities Revenue, Trinity Regional Hospital Project, Refunding, ETM, 6.50%, 7/01/00 ............................................................ 100,000 101,168 ----------- KENTUCKY 1.4% Kenton County Airport Board Revenue, Special Facilities, Delta Airlines Inc. Project, Series A, 6.75%, 2/01/02 ........................................................................... 100,000 103,647 Kentucky Economic Development Finance Authority Hospital System Revenue, Appalachian Regional Health Center Facility, Refunding and Improvement, 5.70%, 10/01/10 .................................................................................. 1,000,000 991,050 5.75%, 10/01/11 .................................................................................. 1,500,000 1,479,405 ----------- 2,574,102 ----------- LOUISIANA 3.2% Calcasieu Parish Public Trust Authority Mortgage Revenue, Refunding, Series B, 6.375%, 11/01/02 .... 10,000 10,326 Louisiana Public Facilities Authority Revenue, Student Loan, Refunding, Series A-1, 6.20%, 3/01/01 ............................................................................................ 80,000 81,874 (b) Louisiana State Offshore Terminal Authority Deepwater Port Revenue, First Stage, Loop Inc., Refunding, Series B, 6.20%, 9/01/03 ................................................................ 100,000 104,370 St. John's Baptist Parish EDR, USX Corp. Project, Refunding, 5.35%, 12/01/13 ....................... 6,000,000 5,629,440 ----------- 5,826,010 ----------- MARYLAND .1% (b) Baltimore Economic Development Lease Revenue, Armistead Partnership, Refunding, Series A, 6.75%, 8/01/02 ..................................................................................... 125,000 130,920 ----------- MASSACHUSETTS 6.4% Massachusetts State Development Finance Agency Revenue, Loomis Community Project, First Mortgage, Refunding, Series A, 5.50%, 7/01/08 ..................................................................................... 3,225,000 3,189,267 Massachusetts State Industrial Finance Agency Resource Recovery Revenue, Ogden Haverhill Project, Refunding, Series A, 4.95%, 12/01/06 .................................................................................. 2,500,000 2,458,025 5.15%, 12/01/07 .................................................................................. 2,000,000 1,964,300 5.20%, 12/01/08 .................................................................................. 2,000,000 1,953,960 Massachusetts State Industrial Finance Agency Revenue, Youville Senior Care, Series D, 5.50%, 10/01/12 .................................................................................... 1,745,000 1,740,079 New England Educational Loan Marketing Corp. Student Loan Revenue, Refunding, Series B, 5.60%, 6/01/02 ..................................................................................... 415,000 423,943 ----------- 11,729,574 ----------- MICHIGAN 1.2% Chippewa County Hospital Financing Authority Revenue, Chippewa County War Memorial Hospital, Refunding, Series B, 5.30%, 11/01/07 .................................................................................. 815,000 792,343 5.625%, 11/01/14 ................................................................................. 350,000 335,342 Detroit GO, Refunding, Series B, 6.375%, 4/01/06 ................................................... 1,000,000 1,069,730 ----------- 2,197,415 ----------- MINNESOTA .1% (b) Minneapolis CDA, Supported Development Revenue, Common Bond Fund, Series 91-5A, 7.20%, 12/01/04 ........................................................................................... 200,000 211,606 ----------- MISSISSIPPI 1.7% Mississippi Development Bank Special Obligation, Oktibbeha County Hospital Revenue Project, Refunding, 5.65%, 7/01/06 .......................................................................... 725,000 735,585 Perry County PCR, Leaf River Forest Project, Refunding, 5.20%, 10/01/12 ............................ 2,500,000 2,361,500 ----------- 3,097,085 ----------- MISSOURI 3.3% Lake of the Ozarks Community Bridge Corp. Bridge System Revenue, Refunding, 5.00%, 12/01/08 ........ 3,000,000 2,883,780 Missouri State Health and Educational Facilities Authority Health Facilities Revenue, Park Lane Medical Center, Series A, MBIA Insured, 4.70%, 1/01/04 ........................................ 1,200,000 1,204,584 Taney County IDA, Hospital Revenue, The Skaggs Community Hospital Association, 5.10%, 5/15/10 ...... 1,420,000 1,344,697 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Refunding, 5.00%, 11/15/04 ....... 560,000 544,482 ----------- 5,977,543 -----------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEBRASKA .8% Omaha Stadium Facilities Corp. Lease Revenue, Rosenblatt Stadium Project, Series A, 4.90%, 11/01/13 ......................................................................................... $ 1,100,000 $ 1,036,607 Wayne State College Revenue, Student Fees and Facilities, Refunding, MBIA Insured, 5.05%, 7/01/10 .......................................................................................... 365,000 365,201 ----------- 1,401,808 ----------- NEVADA 1.9% Clark County Nevada PCR, Nevada Power Co. Project, Refunding, Series D, 5.30%, 10/01/11 .......... 1,500,000 1,446,780 Sparks RDA, Tax Allocation Revenue, Refunding, Asset Guaranty, 5.15%, 1/15/08 .................... 2,110,000 2,099,956 ----------- 3,546,736 ----------- NEW HAMPSHIRE .6% New Hampshire Higher Education and Health Facilities Authority Revenue, New Hampshire Catholic Charities, Refunding, Series A, 5.10%, 8/01/04 ........................................ 1,160,000 1,152,008 ----------- NEW JERSEY 1.7% Hudson County Improvement Authority Solid Waste Systems Revenue, Refunding, Series 1, 5.90%, 1/01/15 ....................................................................... 1,000,000 994,920 New Jersey EDA Revenue, Economic Growth, 2nd Series F-1, 6.00%, 12/01/02 ......................... 70,000 71,772 New Jersey Health Care Facilities Financing Authority Revenue, Monmouth Medical Center, Refunding, Series C, FSA Insured, ETM, 5.80%, 7/01/04 ..................................................... 1,000,000 1,056,670 New Jersey State Housing and Mortgage Finance Agency Revenue, SFMR, Home Buyer, Series Z, MBIA Insured, 5.35%, 4/01/11 ........................................................................ 1,000,000 1,001,440 ----------- 3,124,802 ----------- NEW YORK 10.4% Metropolitan Transportation Authority Commuter Facilities Revenue, Services Contract, Refunding, Series R, 5.50%, 7/01/01 ............................................................ 2,215,000 2,236,419 New York City GO, Pre-Refunded, 6.50%, 8/01/04 .................................................................. 105,000 112,734 Refunding, Series H, 5.90%, 8/01/09 ........................................................... 500,000 527,435 (b) Refunding, Series J, 6.00%, 8/01/08 ......................................................... 3,000,000 3,200,100 Series B, 6.25%, 10/01/01 ................................................................... 75,000 77,905 Series B, ETM, 6.25%, 10/01/01 .............................................................. 25,000 26,049 Series C, 6.50%, 8/01/04 .................................................................... 410,000 436,367 Series C, 6.50%, 8/01/07 .................................................................... 1,490,000 1,578,700 Series C, Pre-Refunded, 6.50%, 8/01/07 ...................................................... 360,000 386,518 (b) Series H, 7.00%, 2/01/05 .................................................................... 30,000 32,013 Series H, Pre-Refunded, 7.00%, 2/01/05 ...................................................... 220,000 236,854 Series J, 6.00%, 2/15/04 .................................................................... 1,000,000 1,051,630 (b) New York City Health and Hospital Corp. Revenue, Refunding, Series A, 6.00%, 2/15/06 ........... 2,500,000 2,560,450 New York City IDA, Civic Facility Revenue, New York Blood Center Inc. Project, ETM, 6.80%, 5/01/02 ........................................................................................ 90,000 93,099 New York State Dormitory Authority Revenue, Mental Health Services Facilities Improvement, Refunding, Series D, 5.60%, 2/15/07 ............................................................ 140,000 145,432 New York State HFAR, Health Facilities, New York City, Refunding, Series A, 5.90%, 5/01/05 ....... 1,000,000 1,035,350 New York State Tollway Authority Service Contract Revenue, Local Highway and Bridge, 5.75%, 4/01/08 ................................................................................. 500,000 520,215 5.75%, 4/01/09 ................................................................................. 1,150,000 1,188,445 Pre-Refunded, 5.90%, 4/01/08 ................................................................... 1,000,000 1,075,210 Oneida-Herkimer Solid Waste Management Authority Solid Waste Systems Revenue, Refunding, 6.20%, 4/01/00 ................................................................................. 100,000 101,430 Port Authority of New York and New Jersey Special Obligation Revenue, 3rd Installment, 7.00%, 10/01/07 ....................................................................................... 1,000,000 1,091,270 Ulster County Resource Recovery Agency Solid Waste System Revenue, 5.90%, 3/01/07 ................ 1,100,000 1,132,681 ----------- 18,846,306 ----------- OHIO 2.1% Franklin County Health Care Facilities Revenue, Presbyterian Retirement Services, Refunding, 5.25%, 7/01/08 ................................................................................. 575,000 549,516 5.40%, 7/01/10 ................................................................................. 775,000 735,336 5.50%, 7/01/11 ................................................................................. 500,000 474,935 University of Akron General Receipts, Series R, FGIC Insured, 5.75%, 1/01/14 ..................... 2,000,000 2,056,860 ----------- 3,816,647 ----------- OKLAHOMA 1.4% Jackson County Memorial Hospital Authority Revenue, Jackson County Memorial Hospital Project, Refunding, 6.75%, 8/01/04 ...................................................................... 1,525,000 1,577,506 Valley View Hospital Authority Revenue, Valley View Regional Medical Center, Refunding, 5.75%, 8/15/06 ........................................................................................ 895,000 883,902 ----------- 2,461,408 -----------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) OREGON .8% Clackamas County Hospital Facilities Authority Revenue, Willamette View Inc. Project, Refunding, 6.00%, 11/01/06 ................................................................... $ 500,000 $ 511,325 Hillsborough Hospital Facilities Authority Revenue, Refunding, 5.75%, 10/01/12 ................. 1,000,000 1,002,830 ----------- 1,514,155 ----------- PENNSYLVANIA 4.1% (b) Cambria County Hospital Development Authority Revenue, Conemaugh Valley Memorial Hospital, Refunding and Improvement, Series B, Connie Lee Insured, Pre-Refunded, 5.90%, 7/01/03 ...... 100,000 105,791 Chartiers Valley Industrial and Commercial Development Authority Revenue, First Mortgage, Asbury Place Project, 6.25%, 2/01/06 ....................................................... 240,000 244,414 Clarion County Hospital Authority Revenue, Clarion Hospital Project, Refunding, 5.40%, 7/01/07 ...................................................................................... 1,135,000 1,111,540 Northeastern Hospital and Educational Authority College Revenue, Kings College Project, Refunding, Series B, 5.60%, 7/15/03 .......................................................... 410,000 417,659 Pennsylvania State Higher Educational Facilities Authority Health Services Revenue, University of Pennsylvania Health Services, Refunding, Series A, 5.75%, 1/01/12 ............................................................................... 1,000,000 986,040 5.875%, 1/01/15 .............................................................................. 800,000 784,496 Philadelphia Gas Works Revenue, Refunding, Series A, 5.70%, 7/01/00 .......................................................... 300,000 303,825 Refunding, Series A, 5.80%, 7/01/01 .......................................................... 300,000 306,219 Sub. lien, Series C, FSA Insured, 5.00%, 7/01/13 ............................................. 1,680,000 1,607,105 Schuylkill County IDA, Resource Recovery Revenue, Schuylkill Energy Resources Inc., 6.50%, 1/01/10 ...................................................................................... 1,685,000 1,688,252 ----------- 7,555,341 ----------- SOUTH CAROLINA .5% Charleston County Resource Recovery Revenue, Foster Wheeler Charleston, Refunding, AMBAC Insured, 5.25%, 1/01/10 ...................................................................... 1,000,000 999,920 ----------- SOUTH DAKOTA .6% South Dakota HDA Revenue, Homeownership Mortgage, Series D, 6.05%, 5/01/04 ..................... 990,000 1,033,501 ----------- TENNESSEE 1.0% Memphis-Shelby County Airport Authority Special Facilities and Project Revenue, Federal Express Corp., Refunding, 5.35%, 9/01/12 ..................................................... 1,000,000 982,560 Metropolitan Government of Nashville and Davidson County IDBR, Osco Treatment Inc., Refunding and Improvement, 6.00%, 5/01/03 .................................................... 750,000 763,463 ----------- 1,746,023 ----------- TEXAS 3.5% Abilene Higher Educational Facilities Corp., ETM, 5.90%, 10/01/05 ......................................................................... 65,000 69,009 Higher Education Revenue, Abilene Christian, Refunding and Improvement, 5.90%, 10/01/05 ...... 720,000 748,598 Houston ISD, Refunding, 5.50%, 8/15/09 ......................................................... 1,000,000 1,018,410 North Central Health Facility Development Corp. Revenue, C.C. Young Memorial Home Project, Refunding, Series C, 6.10%, 2/15/06 .......................................................... 400,000 410,036 Port Corpus Christi Nueces County General Revenue, Union Pacific, Refunding, 5.35%, 11/01/10 ... 2,500,000 2,438,325 Trinity River Authority Revenue, Tarrant County Water Project Improvement, Refunding, FSA Insured, 5.25%, 2/01/13 .................................................................. 1,795,000 1,764,413 ----------- 6,448,791 ----------- US TERRITORIES 7.6% District of Columbia GO, Refunding, Series A, 5.875%, 6/01/05 ......................................................... 670,000 700,257 Series A, ETM, 5.875%, 6/01/05 ............................................................... 30,000 31,646 Puerto Rico Electric Power Authority Revenue, (b) Refunding, Series Q, 5.90%, 7/01/01 ........................................................ 100,000 102,777 Series T, 6.00%, 7/01/04 ................................................................. 1,345,000 1,425,592 Virgin Islands PFA Revenue, Senior lien, Refunding, Series A, 5.30%, 10/01/11 ............................................ 5,000,000 4,843,800 Subordinate lien, Fund Loan Notes, Series D, Refunding, 5.50%, 10/01/00 ...................... 2,000,000 2,019,680 Virgin Islands Water and Power Authority Water System Revenue, Refunding, 5.00%, 7/01/03 ............................................................................... 500,000 495,170 4.875%, 7/01/06 .............................................................................. 2,000,000 1,907,600 5.00%, 7/01/09 ............................................................................... 2,400,000 2,243,832 ----------- 13,770,354 -----------
FRANKLIN TAX-FREE TRUST Statement of Investments, August 31, 1999 (unaudited) (cont.)
PRINCIPAL FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) UTAH .4% Salt Lake County College Revenue, Westminster College Project, 5.50%, 10/01/12 .............. $ 340,000 $ 327,107 Utah State HFA, SFM, Refunding, 5.85%, 7/01/08 .............................................. 465,000 479,499 ----------- 806,606 ----------- VIRGINIA 4.0% Covington-Alleghany County IDA, PCR, Westvaco Corp. Project, Refunding, 5.85%, 9/01/04 ...... 2,800,000 2,925,384 Virginia State GO, 5.00%, 6/01/09 ........................................................... 1,000,000 1,006,300 Virginia State HDA, Commonwealth Mortgage, Sub Series C-7, 5.60%, 1/01/03 ............................................................................ 1,695,000 1,740,850 5.70%, 1/01/04 ............................................................................ 1,475,000 1,527,377 ----------- 7,199,911 ----------- WASHINGTON 3.6% Grant County PUD No. 2, Priest Rapids Hydroelectric Revenue, Second Series, Series A, MBIA Insured, 5.00%, 1/01/14 .............................................................. 1,095,000 1,013,466 Marysville Water and Sewer Revenue, Refunding, MBIA Insured, 5.75%, 12/01/05 ................ 600,000 626,988 Spokane Downtown Foundation Parking Revenue, River Park Square Project, Asset Guaranty Insured, 5.00%, 8/01/08 ................................................................... 3,000,000 2,942,850 Washington State Public Power Supply System Revenue, Nuclear Project No. 1, Refunding, Series A, AMBAC Insured, 5.70%, 7/01/09 ................. 1,000,000 1,046,480 Nuclear Project No. 2, Refunding, Series A, 5.375%, 7/01/10 ............................... 1,000,000 997,080 ----------- 6,626,864 ----------- WEST VIRGINIA .8% West Virginia Public Energy Authority Energy Revenue, Morgantown Association Project, Series A, 5.05%, 7/01/08 .................................................................. 1,390,000 1,401,259 ----------- WISCONSIN .6% Wisconsin State GO, Refunding, Series 1, 5.50%, 5/01/10 ..................................... 1,000,000 1,028,860 ----------- TOTAL BONDS ................................................................................. 183,796,535 ----------- (d) ZERO COUPON BONDS 2.1% Champaign County USD No. 116, Urbana, Series C, FGIC Insured, 1/01/10 ..................... 3,305,000 1,877,703 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien, Refunding, Series A, 1/15/17 ....................................................................... 3,000,000 1,972,555 ----------- TOTAL ZERO COUPON BONDS ..................................................................... 3,850,258 ----------- TOTAL LONG TERM INVESTMENTS (COST $187,766,527) ............................................. 187,646,793 ----------- (a) SHORT-TERM INVESTMENTS 2.9% Allegheny County Hospital Development Authority Revenue, Presbyterian, Health Center, Series B, MBIA Insured,Weekly VRDN and Put, 3.35%, 3/01/20 ...................... 600,000 600,000 Fort Wayne Hospital Authority Hospital Revenue, Parkview Memorial Hospital, Series D, Weekly VRDN and Put, 3.25%, 1/01/16 ................................. 600,000 600,000 New Jersey State Turnpike Authority Revenue, Series D, FGIC Insured, Weekly VRDN and Put, 2.60%, 1/01/18 ..................................................................... 400,000 400,000 Northeastern Hospital and Educational Authority Health Care Revenue, Wyoming Valley Health Care, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 3.25%, 1/01/24 ........... 1,500,000 1,500,000 Port Authority of New York and New Jersey Special Obligation Revenue, Versatile Structure, Series 2, Daily VRDN and Put, 2.60%, 5/01/19 ............................................ 1,100,000 1,100,000 Southampton County IDAR, Various Exempt Facilities, Hadson Power, Series 11-A, Daily VRDN and Put, 3.10%, 4/01/15 ................................................................. 100,000 100,000 Stevenson IDB Environmental Improvement Revenue, The Mead Corp. Project, Refunding, Series D, Daily VRDN and Put, 2.80%, 11/01/11 ........................................... 900,000 900,000 ----------- TOTAL SHORT TERM INVESTMENTS (COST $5,200,000) .............................................. 5,200,000 ----------- TOTAL INVESTMENTS (COST $192,966,527) 105.9% ................................................ 192,846,793 OTHER ASSETS, LESS LIABILITIES (5.9%) ....................................................... (10,789,797) ----------- NET ASSETS 100.0% ........................................................................... $ 182,056,996 ===========
See glossary of terms on page 110. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. (c) See Note 6 regarding defaulted securities. (d) Zero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 -------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999(2) 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.49 $ 11.68 $ 11.21 $ 11.19 $ 10.74 $ 11.25 ---------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income ........................ .32 .66 .69 .71 .74 .74 Net realized and unrealized gains (losses) ... (.48) (.18) .47 .04 .45 (.51) ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations .............. (.16) .48 1.16 .75 1.19 .23 ---------- ---------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ........................ (.33)(3) (.65) (.68) (.73)(1) (.74) (.74) In excess of net investment income ........... -- -- (.01) -- -- -- Net realized gains ........................... -- (4) (.02) -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Total distributions ........................... (.33) (.67) (.69) (.73) (.74) (.74) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ................ $ 11.00 $ 11.49 $ 11.68 $ 11.21 $ 11.19 $ 10.74 ========== ========== ========== ========== ========== ========== Total return* ................................. (1.40%) 4.21% 10.64% 7.01% 11.35% 2.28% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $5,719,163 $5,988,204 $5,742,939 $4,505,258 $3,787,147 $3,287,270 Ratios to average net assets: Expenses ..................................... .61%** .62% .61% .62% .61% .60% Net investment income ........................ 5.70%** 5.64% 5.98% 6.41% 6.68% 6.92% Portfolio turnover rate ....................... 11.92% 18.55% 15.84% 6.98% 9.23% 15.89%
CLASS B - ------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ...................................... $ 11.52 $ 11.51 ---------- ---------- Income from investment operations: Net investment income .................................................... .29 .11 Net realized and unrealized losses ....................................... (.47) -- ---------- ---------- Total from investment operations .......................................... (.18) .11 ---------- ---------- Less distributions from: Net investment income .................................................... (.30)(3) (.10) Net realized gains ....................................................... -- (4) -- ---------- ---------- Net asset value, end of period ............................................ $ 11.04 $ 11.52 ========== ========== Total return* ............................................................. (1.60%) .96% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ......................................... $ 72,071 $ 15,487 Ratios to average net assets: Expenses ................................................................. 1.17%** 1.18%** Net investment income .................................................... 5.18%** 5.06%** Portfolio turnover rate ................................................... 11.92% 18.55%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) Includes distributions in excess of net investment income in the amount of $.008. (2) For the period January 1, 1999 (effective date) to February 28, 1999 for Class B. (3) Includes distributions in excess of net investment income in the amount of $.005. (4) Includes distributions of net realized capital gains in the amount of $.003. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights (continued) FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (CONT.)
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ----------------------------------------------- CLASS C (UNAUDITED)*** 1999 1998 1997 1996(1) - --------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.56 $ 11.75 $ 11.26 $ 11.24 $ 10.81 --------- --------- --------- -------- -------- Income from investment operations: Net investment income ........................ .29 .60 .63 .66 .56 Net realized and unrealized gains (losses) ... (.48) (.18) .48 .03 .42 --------- --------- --------- -------- -------- Total from investment operations .............. (.19) .42 1.11 .69 .98 --------- --------- --------- -------- -------- Less distributions from: Net investment income ........................ (.30)(3) (.59) (.62) (.67)(2) (.55) Net realized gains ........................... -- (4) (.02) -- -- -- --------- --------- --------- -------- -------- Total distributions ........................... (.30) (.61) (.62) (.67) (.55) --------- --------- --------- -------- -------- Net asset value, end of period ................ $ 11.07 $ 11.56 $ 11.75 $ 11.26 $ 11.24 ========= ========= ========= ======== ======== Total return* ................................. (1.76%) 3.69% 10.15% 6.36% 9.27% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 631,669 $ 631,974 $ 423,264 $194,400 $ 48,163 Ratios to average net assets: Expenses ..................................... 1.17%** 1.18% 1.18% 1.18% 1.18%** Net investment income ........................ 5.14%** 5.07% 5.38% 5.78% 6.07%** Portfolio turnover rate ....................... 11.92% 18.55% 15.84% 6.98% 9.23%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.003. (3) Includes distributions in excess of net investment income in the amount of $.005. (4) Includes distributions of net realized capital gains in the amount of $.003. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 99.5% BONDS 95.7% ALABAMA 1.0% Alabama State IDA, Solid Waste Disposal Revenue, Pine City Fiber Co., Boise Cascade Corp., 6.45%, 12/01/23 ............................. $ 10,400,000 $ 10,434,944 Jefferson County Sewer Revenue, wts., Series D, FGIC Insured, 5.75%, 2/01/22 .............................................................................. 7,500,000 7,443,525 2/01/27 .............................................................................. 18,535,000 18,307,205 Marshall County Health Care Authority Hospital Revenue, Boaz-Albertville Medical Center, Refunding, 6.20%, 1/01/08 ............................ 3,300,000 3,313,002 Mcintosh IDB, Environmental Improvement Revenue, CIBA Specialty, Refunding, Series C, 5.375%, 6/01/28 .................................. 3,000,000 2,790,750 Mobile IDB, Solid Waste Disposal Revenue, Mobile Energy Service Co. Project, Refunding, 6.95%, 1/01/20 .......................... 46,500,000 24,645,000 ---------- 66,934,426 ---------- ALASKA .9% Alaska Industrial Development and Export Authority Power Revenue, Upper Lynn Canal Regional Power, 5.70%, 1/01/12 ....................................................................... 2,000,000 1,914,500 5.80%, 1/01/18 ....................................................................... 1,245,000 1,152,310 5.875%, 1/01/32 ...................................................................... 5,100,000 4,601,628 Alaska Industrial Development and Export Authority Revenue, American President Lines Project, Refunding, 8.00%, 11/01/09 .......................... 4,000,000 4,095,640 Alaska Industrial Development and Export Authority, Revolving Fund, Series A, 6.20%, 4/01/10 .............................................. 775,000 807,504 Alaska State HFC, Refunding, Series A, MBIA Insured, 6.00%, 12/01/15 ................................... 3,410,000 3,505,310 Refunding, Series A, MBIA Insured, 5.875%, 12/01/24 .................................. 5,000,000 5,046,600 Refunding, Series A, MBIA Insured, 5.875%, 12/01/30 .................................. 12,475,000 12,558,707 Refunding, Series A, MBIA Insured, 6.10%, 12/01/37 ................................... 22,000,000 22,368,940 Series A, MBIA Insured, 5.85%, 12/01/15 .............................................. 4,670,000 4,727,348 ---------- 60,778,487 ---------- ARIZONA 5.7% Apache County IDA, IDR, Tucson Electric Power Co. Project, Series C, 5.85%, 3/01/26 ..................... 16,500,000 15,230,985 PCR, Tucson Electric Power Co. Project, Series A, 5.85%, 3/01/28 ..................... 53,150,000 49,015,462 PCR, Tucson Electric Power Co. Project, Series B, 5.875%, 3/01/33 .................... 38,950,000 35,891,646 Arizona Health Facilities Authority Revenue, Bethesda Foundation Project, Series A, 6.375%, 8/15/15 ...................................................................... 400,000 403,644 6.40%, 8/15/27 ....................................................................... 4,000,000 3,974,080 Coconino County PCR, Tucson Electric Power Navajo, Refunding, Series A, 7.125%, 10/01/32 ........................................................... 21,125,000 22,832,956 Series B, 7.00%, 10/01/32 ............................................................ 7,500,000 8,095,875 Gila County IDAR, Asarco Inc., Refunding, 5.55%, 1/01/27 ................................ 4,000,000 3,610,840 Gilbert Water Resources Municipal Property Corp. Water and Wastewater System Revenue, sub. lien, 6.875%, 4/01/14 .............................................................................. 1,000,000 1,012,160 4/01/16 .............................................................................. 1,000,000 1,020,110 Maricopa County IDA, Health Facilities Revenue, Catholic Healthcare West Project, Refunding, Series A, 5.00%, 7/01/16 ................. 6,500,000 5,528,380 Maricopa County PCC, PCR, Public Service Co. of Colorado, Palo Verde, Refunding, Series A, 6.375%, 8/15/23 ..................................... 8,500,000 8,712,585 Refunding, Series A, 5.75%, 11/01/22 ................................................. 20,150,000 19,207,585 Maricopa County Rural Road ID, Pre-Refunded, 8.625%, 7/01/07 ............................ 3,890,000 4,158,643 (b)Mesa IDA Authority Health Facilities Revenue, Discovery Health System, Series A, MBIA Insured, 5.75%, 1/01/25 ....................... 25,000,000 25,059,500 Pima County IDAR, Tucson Electric Power Co. Project, Series A, 6.10%, 9/01/25 ............................................................. 3,990,000 3,786,231 Series B, 6.00%, 9/01/29 ............................................................. 94,690,000 89,545,459 Series C, 6.00%, 9/01/29 ............................................................. 53,500,000 50,593,345 Red Hawk Canyon Community Facility Revenue, 7.625%, 6/01/05 ............................. 13,995,000 14,387,420 Salt River Project Agricultural Improvement and Power District Electric System Revenue, Series A, 6.00%, 1/01/31 .................. 5,000,000 5,067,550 ---------- 367,134,456 ---------- ARKANSAS .3% Baxter County IDR, Aeroquip/Trinova Corp. Project, Refunding, 5.80%, 10/01/13 ........... 2,400,000 2,425,200 Conway Hospital Revenue, Refunding, 8.375%, 7/01/11 ..................................... 1,000,000 1,044,030 Independence County PCR, Arkansas Power and Light Co. Project, Refunding, 6.25%, 1/01/21 ................................................................................ 5,000,000 5,149,200
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) ARKANSAS (CONT.) Jefferson County PCR, Entergy Arkansas Inc. Project, Refunding, 5.60%, 10/01/17 .......................... $ 9,400,000 $ 8,988,092 North Little Rock Health Facilities Board Health Care Revenue, Baptist Health Facility, Series A, MBIA Insured, 5.50%, 12/01/21 ............................................ 700,000 697,263 ---------- 18,303,785 ---------- CALIFORNIA 7.0% Adelanto Water Authority Revenue, Water Systems Acquisition Project, sub. lien, Series A, 7.50%, 9/01/28 ............. 21,330,000 22,693,840 Alameda County MFHR, Claremont House Project, Refunding, Series A, 8.00%, 12/01/23 ...................... 12,950,000 14,391,335 Antioch PFA, Reassessment Revenue, sub. lien, Series B, 5.85%, 9/02/15 ............... 7,000,000 6,857,760 Arroyo Grande Hospital System COP, Vista Hospital Systems, Refunding, Series A, 9.50%, 7/01/20 ............................................... 22,515,000 22,515,000 Series A, 8.375%, 7/01/06 ......................................................... 2,500,000 2,500,000 Avenal PFA Revenue, Refunding, 7.00%, 9/02/10 .................................................................... 1,660,000 1,701,932 7.25%, 9/02/27 .................................................................... 3,665,000 3,756,552 Azusa RDA, Tax Allocation, Merged Area Project, Refunding, Series A, 6.75%, 8/01/23 ........................... 2,850,000 2,983,808 Beaumont PFA Revenue, Sewer Enterprise Project, Series A, Pre-Refunded, 6.90%, 9/01/23 .................. 4,575,000 5,218,931 Benicia 1915 Act, Fleetside Industrial Park Assessment, Refunding, 5.25%, 9/02/99 ................................................................... 180,000 180,000 5.50%, 9/02/00 ................................................................... 195,000 195,862 5.65%, 9/02/01 ................................................................... 205,000 206,845 5.80%, 9/02/02 ................................................................... 215,000 217,825 5.90%, 9/02/03 ................................................................... 225,000 228,834 6.00%, 9/02/04 ................................................................... 240,000 244,447 6.10%, 9/02/05 ................................................................... 255,000 259,215 6.20%, 9/02/06 ................................................................... 270,000 275,052 6.30%, 9/02/07 ................................................................... 290,000 296,386 6.40%, 9/02/08 ................................................................... 305,000 310,841 6.50%, 9/02/09 ................................................................... 325,000 331,942 6.60%, 9/02/10 ................................................................... 340,000 346,922 6.70%, 9/02/11 ................................................................... 365,000 374,687 6.80%, 9/02/12 ................................................................... 245,000 252,558 California Educational Facilities Authority Revenue, Pooled College and University Financing, Series B, 6.125%, 6/01/09 ................ 3,000,000 3,123,900 California HFAR, MFHR, Series A, AMBAC Insured, 6.05%, 8/01/27 ...................... 2,000,000 2,052,620 California Special Districts Association Finance Corp., COP, Series V, 7.50%, 5/01/13 ...................................... 790,000 836,784 California State GO, 5.75%, 3/01/19 ................................................. 310,000 314,139 California Statewide CDA, California State University Northridge, Refunding, AMBAC Insured, 6.00%, 4/01/26 ......................................... 2,500,000 2,577,550 Capistrano USD, CFD, Special Tax No. 9, Pre-Refunded, 6.60%, 9/01/05 .................................. 285,000 313,853 Special Tax No. 9, Pre-Refunded, 6.70%, 9/01/06 .................................. 280,000 309,366 Special Tax No. 9, Pre-Refunded, 6.80%, 9/01/07 .................................. 325,000 360,266 Special Tax No. 9, Pre-Refunded, 6.90%, 9/01/08 .................................. 260,000 288,652 Special Tax No. 92-1, Pre-Refunded, 7.00%, 9/01/18 ............................... 1,000,000 1,115,790 Contra Costa County PFA Revenue, Refunding, 6.625%, 9/02/10 .................................................................. 2,295,000 2,368,440 6.875%, 9/02/16 .................................................................. 2,610,000 2,694,825 Corona COP, Corona Community Hospital Project, ETM, 9.425%, 9/01/06 .......................... 7,955,000 9,280,223 Corona Community Hospital Project, Pre-Refunded, 9.425%, 9/01/20 ................. 8,820,000 11,579,778 Vista Hospital System, Refunding, Series B, 8.375%, 7/01/06 ...................... 11,100,000 11,100,000 Vista Hospital System, Refunding, Series B, 9.50%, 7/01/20 ....................... 10,885,000 10,885,000 Eden Township Hospital District Health Facilities Revenue COP, Eden Hospital Health Services Corp., Refunding, 5.85%, 7/01/18 .................... 4,845,000 4,901,687 Emeryville RDA, MFHR, Emery Bay Apartments II, Refunding, Series A, 5.85%, 10/01/28 ............................................. 15,035,000 14,685,286 Sub. lien, Refunding, Series B, 6.35%, 10/01/28 .................................. 3,535,000 3,456,877 Sub. lien, Refunding, Series C, 7.875%, 10/01/28 ................................. 2,085,000 2,050,931 Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, MBIA Insured, 5.75%, 1/15/40 .................... 10,000,000 9,548,000 Senior lien, Series A, Pre-Refunded, 6.50%, 1/01/32 .............................. 37,675,000 41,711,876
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) CALIFORNIA (CONT.) Gateway Improvement Authority Revenue, Marin City CFD, Series A, Pre-Refunded, 7.75%, 9/01/25 ............................ $ 4,500,000 $ 5,280,795 Hawthorne CRDA, Hawthorne Plaza Project, Refunding, 8.50%, 7/01/20 .................. 4,175,000 4,319,372 Hesperia PFA Revenue, Series B, 7.375%, 10/01/23 .................................... 6,365,000 6,560,596 Lake Elsinore 1915 Act, AD No. 93-1, Series A, 7.90%, 9/02/24 ....................... 6,000,000 6,253,740 Long Beach Special Tax, CFD No. 2, 7.50%, 9/01/11 ................................... 3,065,000 3,075,605 Los Angeles County CFD No. 4 Special Tax, Improvement Area B, Series A, 9.25%, 9/01/22 ...................................... 29,500,000 30,135,430 Los Angeles MFR, Refunding, Series J-1A, 7.125%, 1/01/24 ..................................................... 155,000 155,135 Series J-1B, 7.125%, 1/01/24 ..................................................... 675,000 675,587 Series J-1C, 7.125%, 1/01/24 ..................................................... 1,435,000 1,436,248 Series J-2A, 8.50%, 1/01/24 ...................................................... 860,000 860,378 Series J-2B, 8.50%, 1/01/24 ...................................................... 3,325,000 3,326,463 Series J-2C, 8.50%, 1/01/24 ...................................................... 7,090,000 7,093,120 Los Angeles Regional Airports Improvement Corp. Lease Revenue, Facilities Sub-Lease, International Airport, Refunding, 6.35%, 11/01/25 .......... 25,000,000 25,871,750 United Airlines, International Airport, Refunding, 6.875%, 11/15/12 .............. 9,500,000 10,097,740 Los Angeles USD, Series A, FGIC Insured, 5.40%, 7/01/22 ............................. 9,000,000 8,712,630 Oakland Revenue, YMCA East Bay Project, Refunding, 7.10%, 6/01/10 ................... 2,335,000 2,504,101 Orinda 1915 Act, AD No. 94-1, Oak Springs, 8.25%, 9/02/19 ........................... 2,834,000 2,890,595 (e) Palmdale Special Tax CFD, No. 93-1 Ritter Ranch Project, Series A, 8.50%, 9/01/24 ........................ 23,500,000 18,800,000 Perris PFA, Local Agency Revenue, Series B, 7.125%, 8/15/15 .................................................................. 2,035,000 2,093,689 7.25%, 8/15/23 ................................................................... 4,095,000 4,227,473 Riverside County COP, Airforce Village Project West Inc., Series A, Pre-Refunded, 8.125%, 6/15/07 .......................................................................... 7,160,000 8,013,758 6/15/12 .......................................................................... 5,290,000 5,920,780 Roseville Special Tax, North Central CFD No. 1, 5.75%, 9/01/23 ................................................................... 3,000,000 2,836,140 Pre-Refunded, 8.60%, 11/01/17 .................................................... 12,000,000 13,345,920 San Bernardino County Finance Authority Revenue, Public Improvement, AD, Refunding, Series A, 6.00%, 9/02/01 ................................................................... 1,450,000 1,467,908 6.50%, 9/02/04 ................................................................... 1,285,000 1,314,696 7.00%, 9/02/17 ................................................................... 2,710,000 2,770,379 San Francisco Downtown Parking Corp. Parking Revenue, 6.55%, 4/01/12 ................................................................... 1,800,000 1,919,844 6.65%, 4/01/18 ................................................................... 2,150,000 2,289,170 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien, 5.00%, 1/01/33 .................................... 5,930,000 5,147,477 San Jose MFHR, Timberwood Apartments, Series B, 9.25%, 2/01/10 ...................... 1,500,000 1,532,655 San Luis Obispo COP, Vista Hospital System Inc., 8.375%, 7/01/29 .................... 22,000,000 22,000,000 San Ramon 1915 Act, Fostoria Parkway Reassessment District No. 9, 6.30%, 9/02/03 ................................................................... 185,000 192,478 6.80%, 9/02/15 ................................................................... 680,000 708,594 Santa Margarita/Dana Point Authority Revenue, ID 3, 3A, 4, and 4A, Refunding, Series B, MBIA Insured, 5.75%, 8/01/20 ............ 3,000,000 3,030,450 South San Francisco RDA Tax Allocation, Gateway Redevelopment Project, Pre-Refunded, 7.60%, 9/01/18 ....................... 2,000,000 2,226,580 Vallejo Special Tax, CFD No. 198, Pre-Refunded, 8.90%, 8/01/21 ...................... 7,500,000 8,000,025 ----------- 448,983,718 ----------- COLORADO 2.3% Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 6/01/11 .............. 2,485,000 2,624,756 Arvada MFHR, Springwood Community Project, 6.45%, 2/20/26 ........................... 3,000,000 3,068,400 Auraria Higher Education Center, Parking Facilities Revenue, Pre-Refunded, 7.75%, 4/01/09 ................................................................... 3,450,000 3,529,592 7.875%, 4/01/12 .................................................................. 1,600,000 1,638,048 Colorado Health Facilities Authority Revenue, Beneficial Living System Inc., Series A, 10.125%, 10/01/20 ....................... 12,300,000 12,974,286 Rocky Mountain Adventist Health Center, Refunding, 6.25%, 2/01/04 ................ 2,200,000 2,164,206 Volunteers of America Care Facilities, Refunding and Improvement, Series A, 5.45%, 7/01/08 ............................ 1,135,000 1,101,665
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) COLORADO (CONT.) Colorado Health Facilities Authority Revenue, (cont.) Volunteers of America Care Facilities, Refunding and Improvement, Series A, 5.75%, 7/01/20 ............................ $ 3,000,000 $ 2,796,600 Volunteers of America Care Facilities, Refunding and Improvement, Series A, 5.875%, 7/01/28 .............................. 5,290,000 4,926,101 Colorado HFA, SF Program, Series A-2, 9.25%, 8/01/01 ........................................... 55,000 56,326 SF Program, Series A-2, 9.375%, 8/01/02 .......................................... 180,000 185,729 SF Program, Series B-1, 8.70%, 8/01/01 ........................................... 110,000 112,160 SFMR, Series B-3, 9.75%, 8/01/02 ................................................. 170,000 171,928 SFMR, Series C, 9.20%, 8/01/02 ................................................... 285,000 293,422 SFMR, Series C, 9.075%, 8/01/03 .................................................. 530,000 548,566 Denver City and County Airport Revenue, Series A, 8.25%, 11/15/12 ........................................................ 5,350,000 5,675,548 Series A, 8.50%, 11/15/23 ........................................................ 29,060,000 30,905,019 Series A, 8.00%, 11/15/25 ........................................................ 135,000 142,792 Series A, MBIA Insured, 5.50%, 11/15/25 .......................................... 8,830,000 8,578,698 Series A, Pre-Refunded, 8.25%, 11/15/12 .......................................... 490,000 523,340 Series A, Pre-Refunded, 8.50%, 11/15/23 .......................................... 2,740,000 2,934,376 Series A, Pre-Refunded, 8.00%, 11/15/25 .......................................... 10,000 10,652 Series D, 7.75%, 11/15/13 ........................................................ 500,000 591,250 Series D, 7.75%, 11/15/21 ........................................................ 3,425,000 3,668,860 Series D, Pre-Refunded, 7.75%, 11/15/21 .......................................... 765,000 834,210 Eagle County Airport Terminal Project Revenue, 7.50%, 5/01/21 ....................... 2,305,000 2,419,420 Eagle County Sports and Housing Facilities Revenue, Vail Associate Project, Refunding, 6.95%, 8/01/19 ................................. 41,200,000 43,661,700 Littleton MFHR, Riverpoint, Refunding, Series C, 8.00%, 12/01/29 .................... 3,015,000 3,243,205 Stonegate Village Metropolitan District, Refunding and Improvement, Series A, FSA Insured, 5.60%, 12/01/25 ............................................ 4,640,000 4,582,974 (e) Villages Castle Rock Metropolitan District No. 4, Refunding, 8.50%, 6/01/31 ...... 3,000,000 1,754,850 ----------- 145,718,679 ----------- CONNECTICUT 2.2% Connecticut State Development Authority First Mortgage Revenue, East Hill Gladeview Health Project 86, Pre-Refunded, 9.75%, 12/15/16 ........................................ 2,600,000 2,767,024 Connecticut State Development Authority PCR, Connecticut Light and Power, Refunding, Series B, 5.95%, 9/01/28 ................. 21,750,000 20,741,670 Connecticut Light and Water, Refunding, Series A, 5.85%, 9/01/28 ................. 74,975,000 71,463,171 Western Massachusetts Electric Co., Refunding, Series A, 5.85%, 9/01/28 .......... 12,500,000 11,914,500 Connecticut State Development Authority Water Facility Revenue, Bridgeport Hydraulic Co. Project, 6.15%, 4/01/35 ................ 3,000,000 3,077,280 Connecticut State Health and Educational Facilities Authority Revenue, Sacred Heart University, Series C, 6.50%, 7/01/16 ................................ 420,000 443,310 Sacred Heart University, Series C, Pre-Refunded, 6.50%, 7/01/16 .................. 1,580,000 1,762,427 Windham Community Memorial Hospital, Series C, 6.00%, 7/01/11 .................... 2,300,000 2,280,588 Connecticut State HFA, Housing Mortgage Finance Program, Series C-1, 6.30%, 11/15/17 ...................................................... 19,995,000 20,904,573 Sub Series F-1, 6.00%, 5/15/17 ................................................... 3,500,000 3,597,650 ----------- 138,952,193 ----------- FLORIDA 8.2% Alachua County Health Facilities Authority Revenue, Shands Teaching Hospital, Series A, MBIA Insured, 5.80%, 12/01/26 ................. 2,990,000 3,021,664 Beacon Tradeport CDD, Special Assessment, Commercial Project, Series A, 5.80%, 5/01/04 ..................................... 4,350,000 4,312,938 Commercial Project, Series A, 6.00%, 5/01/16 ..................................... 27,760,000 27,017,142 Commercial Project, Series A, 6.20%, 5/01/22 ..................................... 23,590,000 22,999,542 Industrial Project, Series B, 6.125%, 5/01/17 .................................... 15,305,000 14,966,453 Industrial Project, Series B, 6.375%, 5/01/22 .................................... 8,835,000 8,731,542 Brooks of Bonita Springs CDD, Capital Improvement Revenue, Series A, 6.20%, 5/01/19 ............................ 11,200,000 10,816,848 District Florida Capital Improvement Revenue, Series B, 5.65%, 5/01/06 ........... 2,850,000 2,781,914 Broward County Resource Recovery Revenue, Broward Waste Energy Co., LP, North Project, Series 1984, 7.95%, 12/01/08 ......... 18,160,000 18,842,634
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) FLORIDA (CONT.) Capron Trails CDD, 9.375%, 12/01/01 ..................................................................... $ 1,100,000 $ 1,149,654 9.50%, 12/01/10 ...................................................................... 5,795,000 6,054,500 Championsgate CDD, Capital Improvement Revenue, Series A, 6.25%, 5/01/20 ............................................................. 2,835,000 2,754,741 Series B, 5.70%, 5/01/05 ............................................................. 1,520,000 1,501,821 East County Water Control District, Lee County Drain, Series 1991, Pre-Refunded, 8.75%, 9/01/01 ....................................................................... 1,800,000 1,912,212 8.625%, 9/01/11 ...................................................................... 10,565,000 11,275,391 Falcon Trace CDD, Special Assessment, 5.75%, 5/01/09 ....................................................................... 1,700,000 1,638,885 6.00%, 5/01/20 ....................................................................... 3,695,000 3,466,280 Florida State Board of Education Capital Outlay, (b) Public Education, Refunding, Series D, 5.75%, 6/01/22 ............................. 5,000,000 4,949,450 (b) Public Education, Refunding, Series D, 6.00%, 6/01/23 ............................. 5,000,000 5,193,350 Public Education, Series B, 5.875%, 6/01/24 ....................................... 7,000,000 7,141,610 Public Education, Series B, 5.875%, 6/01/25 ....................................... 2,000,000 2,034,840 Gateway Services District Water Management Benefit Tax Revenue, Second Assessment Area, Phase One, 8.00%, 5/01/20 ................ 3,995,000 4,284,957 Heritage Harbor CDD, Special Assessment Revenue, Series A, 6.70%, 5/01/19 ............................................................. 1,895,000 1,882,493 Series B, 6.00%, 5/01/03 ............................................................. 2,635,000 2,633,893 Heritage Isles CDD, Special Assessment Revenue, Series A, 5.75%, 5/01/05 ................ 2,000,000 1,987,460 Heritage Palms CDD, Capital Improvement Revenue, 5.40%, 11/01/03 ........................ 4,650,000 4,588,434 Highlands County Health Facilities Authority Revenue, Adventist Health Systems, Refunding, 5.25%, 11/15/28 .................................. 9,000,000 7,906,680 Indian Trace CDD, Water and Sewer Revenue, Expansion, 6.875%, 4/01/10 .................................. 9,800,000 10,054,702 Water Management Special Benefit, Refunding, Sub Series B, 8.25%, 5/01/05 ............ 7,510,000 8,212,185 Water Management Special Benefit, Refunding, Sub Series B, 8.25%, 5/01/11 ............ 12,760,000 14,004,483 Lakeland Retirement Community Revenue, First Mortgage, Carpenters Home, Refunding, Series A, 6.75%, 1/01/19 .................................. 15,345,000 15,573,641 Lakewood Ranch CDD 2, Benefit Special Assessment, 6.25%, 5/01/18 ....................................................................... 11,670,000 11,197,832 Series A, 8.125%, 5/01/17 ............................................................ 10,000,000 10,809,900 Series B, 8.125%, 5/01/17 ............................................................ 2,680,000 2,897,053 Lakewood Ranch CDD 3, Special Assessment Revenue, 7.625%, 5/01/18 ....................... 6,180,000 6,525,338 Manatee County IDR, Manatee Hospital and Health System Inc., Pre-Refunded, 9.25%, 3/01/21 ......................... 6,500,000 7,090,850 Meadow Pointe II CDD, Capital Improvement Revenue, Series A, 5.25%, 8/01/03 ............................................................. 965,000 945,623 Series B, 5.50%, 8/01/05 ............................................................. 3,675,000 3,582,684 Mount Dora County Club CDD, Special Assessment Revenue, 6.75%, 5/01/03 ....................................................................... 65,000 65,703 7.125%, 5/01/05 ...................................................................... 3,195,000 3,286,409 7.75%, 5/01/13 ....................................................................... 1,865,000 1,959,183 Naples Heritage CDD, Capital Improvement Revenue, 6.15%, 11/01/01 ....................... 3,810,000 3,829,469 North Broward Hospital District Revenue, Refunding and Improvement, MBIA Insured, 5.75%, 1/15/27 ............................... 20,000,000 20,142,400 North Springs ID, Special Assessment Revenue, Parkland Isles Project, Series A, 7.00%, 5/01/19 ......... 1,300,000 1,344,109 Special Assessment Revenue, Parkland Isles Project, Series B, 6.25%, 5/01/05 ......... 3,650,000 3,696,392 Water Management, Series A, Pre-Refunded, 8.20%, 5/01/24 ............................. 1,920,000 2,208,288 Water Management, Series B, 8.30%, 5/01/24 ........................................... 1,685,000 1,793,666 Northwood CDD, Special Assessment Revenue, 6.40%, 5/01/02 ....................................................................... 2,610,000 2,628,688 Series A, 7.125%, 5/01/00 ............................................................ 220,000 220,623 Series B, 7.60%, 5/01/17 ............................................................. 1,530,000 1,567,791 Orlando Special Assessment Revenue, Conroy Road Interchange Project, Series A, 5.80%, 5/01/26 ............................. 3,250,000 3,138,655 Palm Beach County Health Facilities Authority Revenue, Abbey del Ray South Project, Refunding, 8.25%, 10/01/15 ............................... 6,000,000 6,426,600 (c) Palm Beach County Solid Waste IDR, Okeelanta Power and Light Co. Project, Series A, 6.85%, 2/15/21 ..................... 27,000,000 17,550,000
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) FLORIDA (CONT.) Pelican Marsh CDD, Special Assessment Revenue, Refunding, Series A, 5.00%, 5/01/11 .......................................... $ 6,770,000 $ 6,841,965 Refunding, Series A, 5.50%, 5/01/16 .......................................... 4,370,000 4,415,317 Refunding, Series B, 5.25%, 5/01/09 .......................................... 300,000 303,150 Series A, ETM, 8.25%, 5/01/00 ................................................ 230,000 236,877 Series A, ETM, 8.25%, 5/01/01 ................................................ 250,000 266,600 Series A, ETM, 8.25%, 5/01/02 ................................................ 270,000 296,738 Series A, ETM, 8.25%, 5/01/03 ................................................ 295,000 333,205 Series A, ETM, 8.25%, 5/01/04 ................................................ 315,000 364,427 Series A, Pre-Refunded, 8.25%, 5/01/16 ....................................... 6,590,000 7,564,200 Series C, 7.00%, 5/01/19 ..................................................... 13,460,000 13,857,878 Series D, 6.95%, 5/01/19 ..................................................... 8,185,000 8,397,974 Piney-Z CDD, Capital Improvement Revenue, Series A, 7.25%, 5/01/19 ..................................................... 995,000 993,826 Series B, 6.50%, 5/01/02 ..................................................... 6,265,000 6,247,709 Port Orange Lease Finance Corp. Recreation Facilities Lease Revenue, Pre-Refunded, 8.75%, 10/01/12 ....................... 2,230,000 2,283,252 Reserve CDD, Capital Improvement Revenue, Stormwater Management, 8.25%, 5/01/14 ........... 4,215,000 4,445,898 Utility Revenue, Stormwater Management, Refunding, Series A, 6.625%, 12/01/22 4,400,000 4,355,692 River Ridge CDD, Capital Improvement Revenue, 5.75%, 5/01/08 .................... 3,600,000 3,497,040 Riverwood Community Development Revenue, Special AD, Series A, 6.75%, 5/01/04 ............................................................... 3,320,000 3,410,105 7.75%, 5/01/14 ............................................................... 1,220,000 1,269,935 Saint Lucie West Services District Special Assessment Revenue, Port Saint Lucie, Water Management Benefit, Refunding, Series B, 6.00%, 5/01/09 ............................................................... 1,430,000 1,427,784 6.25%, 5/01/25 ............................................................... 5,080,000 5,066,589 Santa Rosa County Health Facilities Authority Revenue, Gulf Breeze Hospital Inc., Refunding, 8.60%, 10/01/02 ......................... 195,000 197,681 St. Lucie West Services District Capital Improvement Revenue, Cascades Project, 6.10%, 5/01/18 ............................................. 2,560,000 2,476,774 Lake Charles Project, 6.375%, 8/01/02 ........................................ 2,230,000 2,206,317 Road Project, 5.875%, 5/01/09 ................................................ 6,910,000 6,787,209 St. Lucie West Services District Revenue, Port St. Lucie, Pre-Refunded, 7.875%, 5/01/20 ................................................ 19,420,000 22,121,905 Refunding, 8.25%, 12/01/23 ................................................... 22,715,000 24,276,883 St. Lucie West Services District Water Management Benefit Tax, Pre-Refunded, 7.70%, 5/01/25 ..................................... 4,885,000 5,596,842 Stoneybrook CDD, Capital Improvement Revenue, Series A, 6.10%, 5/01/19 ..................................................... 830,000 813,176 Series B, 5.70%, 5/01/08 ..................................................... 2,610,000 2,578,236 Sumter County IDAR, Little Sumter Utility Co. Project, 6.75%, 10/01/27 .............................................................. 2,950,000 2,794,093 7.25%, 10/01/27 .............................................................. 4,200,000 4,227,888 Tampa Revenue, Aquarium Inc. Project, Pre-Refunded, 7.55%, 5/01/12 .............. 8,900,000 9,761,609 Village CDD No. 1, Capital Improvement Revenue, 8.40%, 5/01/12 ............................................................... 615,000 654,821 8.00%, 5/01/15 ............................................................... 2,775,000 2,920,965 Village Center CDD, Recreational Revenue, Sub Series B, 6.25%, 1/01/13 ................................................. 7,665,000 7,616,327 Sub Series B, 8.25%, 1/01/17 ................................................. 2,700,000 2,884,086 Sub Series C, 7.375%, 1/01/19 ................................................ 2,640,000 2,667,139 Westchase East CDD, Capital Improvement Revenue, 6.10%, 5/01/20 ................. 6,200,000 6,015,426 ----------- 529,073,133 ----------- GEORGIA .6% Baldwin County Hospital Authority Revenue, Oconee Regional Medical Center, 5.375%, 12/01/28 .................................... 1,470,000 1,285,677 Chatham County Hospital Authority Revenue, Memorial Medical Center, Refunding and Improvement, Series A, AMBAC Insured, 5.70%, 1/01/19 ............................................ 10,000,000 10,071,000
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) GEORGIA (CONT.) Forsyth County Hospital Authority Revenue, Anticipation Certificate, Georgia Baptist Health Care System Project, 6.25%, 10/01/18 .................................................................... $ 6,000,000 $ 5,761,080 6.375%, 10/01/28 ................................................................... 9,000,000 8,604,900 Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue, Second Indenture, Refunding, Series A, MBIA Insured, 5.625%, 7/01/20 ............... 15,000,000 15,066,000 Tift County IDAR, Beverly Enterprises, 10.125%, 9/01/10 ............................... 1,270,000 1,352,448 ---------- 42,141,105 ---------- HAWAII .2% Hawaii State Department of Transportation Special Facilities Revenue, Continental Airlines Inc., 9.70%, 6/01/20 ............... 6,500,000 6,798,285 Hawaii State Special AD No. 17, AMBAC Insured, 9.50%, 8/01/11 ......................... 4,445,000 4,658,671 Hawaiian Home Lands Department Revenue, Pre-Refunded, 7.60%, 7/01/08 .................. 1,315,000 1,416,650 ---------- 12,873,606 ---------- IDAHO .3% Nez Perce County PCR, Potlatch Corp. Project, Refunding, 6.00%, 10/01/24 .............. 22,360,000 22,329,814 ---------- ILLINOIS 5.4% Alton Hospital Facilities Revenue, St. Anthony's Health Center Project, Pre-Refunded, 8.375%, 9/01/14 .................. 8,655,000 8,828,100 Aurora MFR, Fox Valley Two-Oxford Limited Development, Refunding, Series A, GNMA Secured, 6.125%, 2/20/32 ............. 5,635,000 5,689,209 Bryant PCR, Central Illinois Light Co. Project, Refunding, MBIA Insured, 5.90%, 8/01/23 ............................................. 11,000,000 11,141,460 Chicago Board of Education GO, Chicago School Reform, Series A, AMBAC Insured, 5.25%, 12/01/30 ..................... 10,830,000 9,829,741 Chicago O'Hare International Airport Special Facilities Revenue, American Airlines Inc. Project, 8.20%, 12/01/24 .................................... 7,830,000 8,917,900 United Airlines Inc. Project, Series A, 8.85%, 5/01/18 ............................. 14,495,000 15,549,946 United Airlines Inc. Project, Series B, 8.85%, 5/01/18 ............................. 3,460,000 3,711,819 Chicago Wastewater Transmission Revenue, MBIA Insured, Pre-Refunded, 6.375%, 1/01/24 ......................................... 4,780,000 5,246,767 Cook County GO, Refunding, Series A, MBIA Insured, 5.625%, 11/15/22 ................... 10,500,000 10,188,150 Illinois Development Finance Authority Hospital Revenue, Adventist Health System, Sunbelt Obligation, 5.65%, 11/15/24 .................................................................... 23,750,000 21,810,338 5.50%, 11/15/29 .................................................................... 15,450,000 13,787,889 Illinois Development Finance Authority PCR, Commonwealth Edison Co. Project, Refunding, Series 1991, 7.25%, 6/01/11 ............. 7,000,000 7,363,580 Illinois Development Finance Authority Revenue, Provena Health, Series A, MBIA Insured, 5.50%, 5/15/21 .............................. 10,500,000 10,138,065 Illinois Educational Facilities Authority Revenue, Osteopathic Health Systems, ETM, 7.125%, 5/15/11 ............................................................... 2,330,000 2,495,989 Pre-Refunded, 7.25%, 5/15/22 ....................................................... 7,000,000 8,332,310 Illinois Health Facilities Authority Revenue, Northwestern Medical Center, MBIA Insured, Pre-Refunded, 6.625%, 11/15/25 .......... 6,500,000 7,243,080 Rush Presbyterian Hospital, Refunding, Series A, MBIA Insured, 6.25%, 11/15/20 ..... 9,000,000 9,468,090 Sarah Bush Lincoln Health Center, Pre-Refunded, 7.25%, 5/15/12 ..................... 2,000,000 2,185,980 Sarah Bush Lincoln Health Center, Refunding, Series B, 6.00%, 2/15/11 .............. 3,370,000 3,430,626 St. Elizabeth's Hospital, 6.25%, 7/01/16 ........................................... 1,215,000 1,245,497 St. Elizabeth's Hospital, 6.375%, 7/01/26 .......................................... 6,695,000 6,873,623 Thorek Hospital and Medical Center, Refunding, 5.25%, 8/15/18 ...................... 5,125,000 4,529,168 Thorek Hospital and Medical Center, Refunding, 5.375%, 8/15/28 ..................... 8,595,000 7,460,546 (b) Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue, McCormick Place Expansion Project, Refunding, Series A, FGIC Insured, 5.25%, 12/15/28 ............................ 15,000,000 13,783,650 Metropolitan Pier and Exposition Authority Hospitality Facilities Revenue, McCormick Place Convention Center, 5.75%, 7/01/06 ..................................................................... 1,650,000 1,695,837 6.25%, 7/01/17 ..................................................................... 11,000,000 11,329,450 7.00%, 7/01/26 ..................................................................... 7,500,000 8,443,500 Robbins Resource Recovery Revenue, Series A, 8.375%, 10/15/10 ......................................................... 10,000,000 6,000,000 Series A, 8.375%, 10/15/16 ......................................................... 145,175,000 87,105,000 Series B, 8.375%, 10/15/16 ......................................................... 47,200,000 28,320,000 Southwestern Development Authority Revenue, Anderson Hospital, 5.625%, 8/15/29 ........ 2,425,000 2,193,607 ---------- 344,338,917 ----------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) INDIANA .3% Crawfordsville Industrial EDR, Kroger Co., Refunding, 7.70%, 11/01/12 .................... $ 5,000,000 $ 5,490,700 Goshen Industrial Revenue, Greencroft Hospital Association Inc., Refunding, 5.75%, 8/15/19 ............................................................................... 3,000,000 2,781,900 8/15/28 ............................................................................... 5,000,000 4,543,550 Indiana Health Facility Financing Authority Hospital Revenue, Hancock Memorial Hospital Project, Series 1990, Pre-Refunded, 8.30%, 8/15/20 ............................................. 2,935,000 3,114,475 Jackson County Scheck Memorial Hospital, Refunding, 5.125%, 2/15/17 ................... 1,500,000 1,338,300 White River Elementary Building Corp. .................................................... First Mortgage, AMBAC Insured, 5.00%, 7/15/16 ......................................... 1,000,000 936,030 ----------- 18,204,955 ----------- KANSAS .1% Manhattan Health Care Facility Revenue, Meadowlark Hills Retirement, Series A, 6.375%, 5/15/20 ....................................................................... 1,150,000 1,123,412 6.50%, 5/15/28 ........................................................................ 1,750,000 1,716,348 Prairie Village Revenue, Claridge Court Project, Series A, 8.75%, 8/15/23 ................ 5,730,000 6,393,076 ----------- 9,232,836 ----------- KENTUCKY .8% Adair County Public Hospital Corp. Revenue, Refunding and Improvement, 5.40%, 1/01/12 ........................................................................ 460,000 445,883 5.70%, 1/01/19 ........................................................................ 1,100,000 1,050,346 Kenton County Airport Board Revenue, Special Facilities, Delta Airlines Inc. Project, 8.10%, 12/01/15 ....................................................................... 11,000,000 11,290,840 Series A, 7.50%, 2/01/20 .............................................................. 11,230,000 11,934,795 Series B, 7.25%, 2/01/22 .............................................................. 3,595,000 3,807,321 Kentucky Economic Development Finance Authority Hospital System Revenue, Appalachian Regional Health Center Facility, Refunding and Improvement, 5.875%, 10/01/22 ...................................... 7,835,000 7,253,330 Powderly IDR, First Mortgage Revenue, Kroger Co., Refunding, 7.375%, 9/01/06 ........................................................... 830,000 900,932 Russell Health System Revenue, 8.10%, 7/01/15 ........................................................................ 3,230,000 3,663,757 Franciscan Health Center, Series B, 8.10%, 7/01/01 .................................... 800,000 827,592 Our Lady of Bellefonte, Refunding, 5.50%, 7/01/15 ..................................... 1,000,000 944,390 Pre-Refunded, 8.10%, 7/01/15 .......................................................... 4,270,000 5,143,471 Stanford Health Facilities Revenue, Beverly Project, Refunding, 10.375%, 11/01/09 ........ 900,000 965,844 ----------- 48,228,501 ----------- LOUISIANA 2.1% Calcasieu Parish Public Trust Authority Mortgage Revenue, Refunding, Series A, 7.75%, 6/01/12 ................................................... 1,320,000 1,381,340 Iberville Parish PCR, Entergy Gulf States Inc. ........................................... Project, Refunding, 5.70%, 1/01/14 .................................................... 15,500,000 14,868,995 Lake Charles Harbor and Terminal District Port Facilities Revenue, Trunkline Co. Project, Refunding, 7.75%, 8/15/22 .................. 35,000,000 38,628,100 Louisiana Public Facilities Authority Revenue, Xavier University of Louisiana Project, Refunding, MBIA Insured, 5.25%, 9/01/17 ............................................... 5,000,000 4,797,700 Pointe Coupee Parish PCR, Gulf States Utilities Co. Project, Refunding, 6.70%, 3/01/13 .......................... 4,850,000 5,040,363 St. Charles Parish PCR, Louisiana Power and Light Co. Project, 8.00%, 12/01/14 ........... 13,525,000 14,013,929 St. Tammany Public Trust Financing Authority Revenue, Christwood Project, Refunding, 5.70%, 11/15/28 ......................................... 4,000,000 3,607,320 West Feliciana Parish PCR, Gulf State Utility Co. Project, Refunding, 8.00%, 12/01/24 ............................ 17,200,000 17,653,220 Gulf State Utility Co. Project, Series D, 5.80%, 12/01/15 ............................. 4,000,000 3,841,160 Gulf State Utility Co. Project, Series D, 5.80%, 4/01/16 .............................. 19,600,000 18,813,452 Series A, 7.50%, 5/01/15 .............................................................. 8,740,000 9,384,225 ----------- 132,029,804 ----------- MAINE .6% Maine State Finance Authority Solid Waste Disposal Revenue, Boise Cascade Corp. Project, 7.90%, 6/01/15 ............................................ 5,000,000 5,193,350 Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 7/01/20 ..................... 4,800,000 4,990,752 Skowhegan PCR, S.D. Warren Co., Series A, 6.65%, 10/15/15 ............................................................. 24,570,000 25,277,862 Series B, 6.65%, 10/15/15 ............................................................. 4,940,000 5,082,321 ----------- 40,544,285 -----------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) MARYLAND .7% Gaithersberg Hospital Facilities Revenue, Shady Grove Adventist Hospital, Refunding and Improvement, Series B, 8.50%, 9/01/03 ........................................................... $ 4,510,000 $ 4,955,453 Series B, 8.50%, 9/01/07 ........................................................... 5,340,000 6,289,345 Series B, Pre-Refunded, 8.50%, 9/01/22 ............................................. 3,550,000 4,035,853 Series C, FSA Insured, 6.00%, 9/01/21 .............................................. 5,000,000 5,166,450 Maryland State CDA, Department of Housing and Community Development, Series A, 5.875%, 7/01/16 .................................... 3,975,000 4,047,464 Maryland State Health and Higher Educational Facilities Authority Revenue, Roland Park Place Project, Refunding, 5.625%, 7/01/24 ..................................................................... 5,000,000 4,492,200 Takoma Park Hospital Facilities Revenue, Washington Adventist Hospital Project, Series B, 8.50%, 9/01/03 ............................................................................ 4,700,000 5,146,688 9/01/07 ............................................................................ 6,975,000 8,166,191 ----------- 42,299,644 ----------- MASSACHUSETTS 1.9% Massachusetts Bay Transportation Authority Revenue, General Transportation System, Series A, 7.00%, 3/01/21 ............................. 2,000,000 2,307,760 Massachusetts Municipal Wholesale Electric Co. ........................................ Power Supply System Revenue, Series A, 6.75%, 7/01/11 ........................................................... 4,435,000 4,644,465 Series B, 6.75%, 7/01/17 ........................................................... 3,170,000 3,331,638 Massachusetts State Development Finance Agency Revenue, Berkshire Retirement Project, First Mortgage, 5.60%, 7/01/19 ....................... 1,030,000 959,929 Berkshire Retirement Project, First Mortgage, 5.625%, 7/01/29 ...................... 1,620,000 1,473,552 Loomis Community Project, First Mortgage, Refunding, Series A, 5.75%, 7/01/23 ...... 3,500,000 3,292,485 Loomis Community Project, First Mortgage, Series A, 5.625%, 7/01/15 ................ 1,850,000 1,745,309 Massachusetts State Health and Educational Facilities Authority Revenue, Bay State Medical Center, Series E, FSA Insured, 6.00%, 7/01/26 .................... 5,000,000 5,078,200 Framingham Union Hospital, Pre-Refunded, 8.50%, 7/01/10 ............................ 1,810,000 1,916,374 Partners Healthcare System, Series A, MBIA Insured, 5.375%, 7/01/24 ................ 9,000,000 8,499,240 Saint Memorial Medical Center, Refunding, Series A, 5.75%, 10/01/06 ................ 3,250,000 3,127,508 Saint Memorial Medical Center, Refunding, Series A, 6.00%, 10/01/23 ................ 6,235,000 5,807,715 Massachusetts State Industrial Finance Agency Resource Recovery Revenue, Semass Project, Series A, 9.00%, 7/01/15 ........................................................... 15,490,000 16,927,782 Series B, 9.25%, 7/01/15 ........................................................... 20,370,000 22,310,650 Massachusetts State Industrial Finance Agency Revenue, Cape Cod Health Systems, Pre-Refunded, 8.50%, 11/15/20 .............................. 4,500,000 4,830,300 Massachusetts State Industrial Finance Agency Solid Waste Disposal Revenue, Massachusetts Paper Co. Project, senior lien, 8.50%, 11/01/12 .............................................. 42,402,544 28,091,685 Massachusetts State Turnpike Authority Metropolitan Highway System Revenue, Series A, MBIA Insured, 5.00%, 1/01/37 ......... 7,500,000 6,536,250 ----------- 120,880,842 ----------- MICHIGAN 2.4% Cadillac Local Development Finance Authority Tax Increment Revenue, Refunding, 8.50%, 3/01/10 .......................... 5,425,000 5,802,200 Detroit GO, City School District, Series A, AMBAC Insured, Pre-Refunded, 5.85%, 5/01/16 .................................. 5,175,000 5,587,551 Refunding, Series B, 6.375%, 4/01/07 ............................................... 7,535,000 8,049,038 Refunding, Series B, 6.25%, 4/01/08 ................................................ 3,000,000 3,182,160 Series A, Pre-Refunded, 6.80%, 4/01/15 ............................................. 5,160,000 5,747,311 Dickinson County, Memorial Hospital System Revenue, Pre-Refunded, 8.125%, 11/01/24 ...................................................... 4,250,000 4,991,710 Garden City Hospital Financing Authority Hospital Revenue, Refunding, 5.625%, 9/01/10 .................................................................... 2,000,000 1,875,960 5.75%, 9/01/17 ..................................................................... 1,000,000 919,120 Kent Hospital Finance Authority Health Care Revenue, Butterworth Health System, Series A, MBIA Insured, Pre-Refunded, 6.125%, 1/15/21 ........................................ 11,770,000 12,858,019 Michigan State Hospital Finance Authority Revenue, Detroit Medical Center Obligation Group, Refunding, Series A, 6.25%, 8/15/13 ....... 7,500,000 7,349,550 Detroit Medical Center Obligation Group, Refunding, Series A, 6.50%, 8/15/18 ....... 30,205,000 30,247,891 Detroit Medical Center Obligation Group, Refunding, Series B, 5.50%, 8/15/23 ....... 500,000 441,330 Detroit Medical Center Obligation Group, Series A, 5.25%, 8/15/23 .................. 500,000 426,215 Detroit Medical Center Obligation Group, Series A, 5.25%, 8/15/28 .................. 7,000,000 5,888,750 Genesys Regional Medical Center, Refunding, Series A, 5.50%, 10/01/27 .............. 16,500,000 14,613,390 Memorial Healthcare Center, Refunding, 5.75%, 11/15/15 ............................. 1,000,000 972,210
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) MICHIGAN (CONT.) Michigan State Hospital Finance Authority Revenue, (cont.) Memorial Healthcare Center, Refunding, 5.875%, 11/15/21 .......................... $ 1,000,000 $ 956,350 Mercy Health Services, Series Q, AMBAC Insured, 5.75%, 8/15/16 ................... 9,310,000 9,452,722 Sinai Hospital, Refunding, 6.625%, 1/01/16 ....................................... 2,990,000 3,038,348 Sinai Hospital, Refunding, 6.70%, 1/01/26 ........................................ 7,250,000 7,401,960 Michigan State Strategic Fund Limited Obligation Revenue, Detroit Edison Co., Pollution Project, Refunding, Series BB, MBIA Insured, 6.20%, 8/15/25 ...................................... 7,825,000 8,214,685 Muskegon Hospital Finance Authority Hospital Revenue, Muskegon General Hospital, Refunding, Series A, 8.25%, 2/15/11 ................... 3,500,000 3,638,775 Tawas City Hospital Finance Authority, Tawas St. Joseph's Hospital Project, Refunding, Series A, 5.60%, 2/15/13 .............................................. 2,395,000 2,292,446 Series A, 5.75%, 2/15/23 ......................................................... 4,125,000 3,911,573 Wayne County Downriver Systems Sewer Disposal Revenue, Series A, Pre-Refunded, 7.00%, 11/01/13 ......................................... 1,900,000 2,062,469 Wayne County GO, IDA, Building Authority, Pre-Refunded, 8.00%, 3/01/17 ............................ 4,500,000 4,968,540 South Huron Valley Wastewater Control, Refunding, 7.875%, 5/01/02 ................ 1,550,000 1,582,054 ----------- 156,472,327 ----------- MINNESOTA 2.4% Burnsville Solid Waste Revenue, Freeway Transfer Inc. Project, 9.00%, 10/01/00 ......................................................................... 185,000 191,240 4/01/10 .......................................................................... 1,500,000 1,573,020 Duluth Commercial Development Revenue, Duluth Radisson Hotel Project, Refunding, 8.00%, 12/01/15 ......................... 5,000,000 4,104,050 International Falls PCR, Boise Cascade Corp. ........................................ Project, Refunding, 5.65%, 12/01/22 ............................................... 10,500,000 9,647,820 Maplewood Health Care Facility Revenue, Health East Project, 5.95%, 11/15/06 .............................................. 2,200,000 2,165,702 Minneapolis CDA, Supported Development Revenue, Limited Tax, Series 2, 8.40%, 12/01/12 ........................................................ 2,785,000 2,836,328 Series 3-A, 8.375%, 12/01/19 ..................................................... 600,000 636,168 Minneapolis Revenue, Walker Methodist Senior Services, Series A, 5.875%, 11/15/18 ................................................................. 2,500,000 2,355,825 6.00%, 11/15/28 .................................................................. 4,750,000 4,440,490 Minnesota Agriculture and Economic Development Board Revenue, Health Care System, Fairview Hospital, Refunding, Series A, MBIA Insured, 5.75%, 11/15/26 ............................... 23,380,000 23,413,433 Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured, 5.95%, 2/01/18 ................................. 3,295,000 3,352,201 Northfield First Mortgage Nursing Home Revenue, Minnesota Odd Fellows Home Project, Pre-Refunded, 8.75%, 10/01/03 ................. 880,000 890,683 Northwest Multi-County RDAR, Government Housing, Pooled Housing Project, 7.40%, 7/01/26 ............................................ 5,165,000 4,390,250 Robbinsdale MFHR, Copperfield Phase II Apartments, Refunding, 9.00%, 3/01/25 ......................................................... 4,110,000 4,152,251 Rochester Health Care Facilities Revenue, Mayo Foundation, Series A, 5.50%, 11/15/27 ........................................ 15,000,000 14,539,350 Roseville MFHR, Rosepointe I Project, Refunding, Series C, 8.00%, 12/01/29 .............................................. 3,430,000 3,563,461 (e)South Central Multi-County Housing and RDAR, Pooled Housing, 8.00%, 2/01/25 .................................................... 10,000,000 6,000,000 St. Cloud IDR, Nahan Printing, 9.75%, 6/01/20 ....................................... 5,700,000 6,134,055 St. Paul Housing and RDA, Housing Tax, 8.625%, 9/01/07 .............................. 1,345,000 1,441,168 St. Paul Port Authority Commercial Development, Theole Printing Project, 9.00%, 10/01/21 .......................................... 570,000 586,262 St. Paul Port Authority IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/09 ............................ 40,000 39,360 SDA Enterprises, Series K, 10.25%, 10/01/10 ...................................... 1,095,000 1,053,040 Series A-I, 8.50%, 12/01/01 ...................................................... 665,000 655,983 Series A-I, 9.00%, 12/01/02 ...................................................... 260,000 259,147 Series A-I, 9.00%, 12/01/12 ...................................................... 4,300,000 3,934,156 Series A-II, 8.50%, 12/01/01 ..................................................... 650,000 641,186 Series A-II, 9.00%, 12/01/02 ..................................................... 255,000 254,164 Series A-II, 9.00%, 12/01/12 ..................................................... 4,235,000 3,874,686 Series A-III, 8.50%, 12/01/01 .................................................... 680,000 670,779 Series A-III, 9.00%, 12/01/02 .................................................... 265,000 264,131 Series A-III, 9.00%, 12/01/12 .................................................... 4,430,000 4,053,096 Series A-IV, 8.50%, 12/01/01 ..................................................... 525,000 517,881 Series A-IV, 9.00%, 12/01/02 ..................................................... 205,000 204,328 Series A-IV, 9.00%, 12/01/12 ..................................................... 3,375,000 3,087,855 Series C, 10.00%, 12/01/01 ....................................................... 860,000 871,601
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) MINNESOTA (CONT.) St. Paul Port Authority IDR, (cont.) Series C, 10.00%, 12/01/02 ...................................................... $ 715,000 $ 724,645 Series C, 10.00%, 12/01/06 ...................................................... 2,930,000 2,838,818 Series C, 9.875%, 12/01/08 ...................................................... 3,100,000 3,003,838 Series F, 10.25%, 10/01/99 ...................................................... 65,000 64,973 Series F, 8.00%, 9/01/00 ........................................................ 25,000 24,853 Series F, 10.25%, 10/01/00 ...................................................... 70,000 70,156 Series F, 8.00%, 9/01/01 ........................................................ 25,000 24,797 Series F, 10.25%, 10/01/01 ...................................................... 80,000 80,210 Series F, 8.00%, 9/01/02 ........................................................ 25,000 24,792 Series F, 10.25%, 10/01/02 ...................................................... 90,000 90,057 Series F, 8.00%, 9/01/19 ........................................................ 1,025,000 835,631 Series I, 10.75%, 12/01/00 ...................................................... 15,000 15,084 Series I, 10.75%, 12/01/01 ...................................................... 15,000 15,148 Series I, 10.75%, 12/01/02 ...................................................... 15,000 15,116 Series J, 9.50%, 12/01/01 ....................................................... 80,000 80,423 Series J, 9.50%, 12/01/02 ....................................................... 95,000 95,235 Series J, 9.50%, 12/01/11 ....................................................... 1,325,000 1,262,341 Series L, 9.50%, 12/01/01 ....................................................... 40,000 40,212 Series L, 9.75%, 12/01/01 ....................................................... 25,000 25,132 Series L, 9.50%, 12/01/02 ....................................................... 45,000 45,111 Series L, 9.75%, 12/01/02 ....................................................... 30,000 30,065 Series L, 9.50%, 12/01/14 ....................................................... 1,025,000 971,300 Series L, 9.75%, 12/01/14 ....................................................... 1,530,000 1,455,397 Series N, 10.00%, 12/01/01 ...................................................... 65,000 65,314 Series N, 10.75%, 10/01/02 ...................................................... 1,300,000 1,310,140 Series N, 10.00%, 12/01/02 ...................................................... 65,000 65,139 Series N, 10.00%, 12/01/14 ...................................................... 1,405,000 1,343,517 Series S, 9.625%, 12/01/01 ...................................................... 55,000 55,009 Series S, 9.625%, 12/01/02 ...................................................... 60,000 59,980 Series S, 9.625%, 12/01/14 ...................................................... 1,280,000 1,225,190 Series T, 9.625%, 12/01/01 ...................................................... 30,000 30,161 Series T, 9.625%, 12/01/02 ...................................................... 35,000 35,081 Series T, 9.625%, 12/01/14 ...................................................... 910,000 871,034 St. Paul Port Authority Lease Revenue, Mears Park Center Project, 6.50%, 6/01/16 ......................................................................... 4,930,000 4,953,467 6/01/26 ......................................................................... 10,660,000 10,710,742 Victoria Private School Facility Revenue, Holy Family Catholic High School, Series A, 5.875%, 9/01/29 ...................... 4,000,000 3,827,040 ----------- 153,180,298 ----------- MISSISSIPPI 1.1% Claiborne County PCR, Systems Energy Resources Inc., Refunding, 6.20%, 2/01/26 ........................................................ 33,295,000 33,505,757 Corinth and Alcorn County Hospital Revenue, Magnolia Regional Health Center Project, Refunding, Series A, 5.50%, 10/01/21 ............................................ 4,000,000 3,612,160 Series B, 5.50%, 10/01/21 ....................................................... 1,000,000 903,040 Lowndes County Hospital Revenue, Golden Triangle Medical Center, 8.50%, 2/01/10 ................................... 4,035,000 4,164,443 Mississippi Business Finance Corp. PCR, System Energy Resource Inc. Project, 5.875%, 4/01/22 ................................................................. 24,900,000 23,292,207 Refunding, 5.90%, 5/01/22 ....................................................... 6,730,000 6,314,423 ----------- 71,792,030 ----------- MISSOURI 1.4% Lake of the Ozarks Community Bridge Corp. Bridge System Revenue, Pre-Refunded, 6.25%, 12/01/16 ................................................... 1,000,000 1,108,440 Pre-Refunded, 6.40%, 12/01/25 ................................................... 3,000,000 3,342,840 Refunding, 5.25%, 12/01/20 ...................................................... 12,280,000 11,389,332 Refunding, 5.25%, 12/01/26 ...................................................... 8,875,000 8,096,929 Marshall IDA, Hospital Revenue, John Fitzgibbon Memorial Hospital, Pre-Refunded, 10.00%, 5/01/20 ................. 8,500,000 9,010,510
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) MISSOURI (CONT.) Missouri State Health and Educational Facilities Authority Health Facilities Revenue, Heartland Health, Refunding and Improvement, 8.125%, 10/01/10 ................................... $ 7,300,000 $ 7,498,852 Newton County IDA, Health Facilities Revenue, Beverly Enterprises, 10.375%, 11/01/08 ......................................... 1,320,000 1,367,652 Perry County GO, Perry Memorial Hospital, Pre-Refunded, 9.125%, 6/01/11 .................................................. 1,500,000 1,587,450 St. Louis County IDA, Kiel Center, Refunding, 7.625%, 12/01/09 .............................................................. 8,000,000 8,550,640 7.75%, 12/01/13 ............................................................... 5,175,000 5,534,197 7.875%, 12/01/24 .............................................................. 6,000,000 6,419,940 St. Louis Municipal Finance Corp. Leasehold Revenue, City Justice Center, Refunding, Series A, AMBAC Insured, 5.95%, 2/15/16 ....... 8,640,000 8,970,566 Refunding, Series A, 6.00%, 7/15/13 ........................................... 14,250,000 14,659,545 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Refunding, 5.50%, 11/15/12 ...................... 500,000 463,610 ----------- 88,000,503 ----------- MONTANA .3% Montana State Board of Housing SFM, Senior Bonds, Series B-2, 8.90%, 10/01/00 ..................................... 65,000 65,645 Series A, FHA Insured, 8.275%, 10/01/03 ....................................... 330,000 341,573 Montana State Board of Investments Resource Recovery Revenue, Yellowstone Energy Project, 7.00%, 12/31/19 .................. 20,770,000 20,669,266 ----------- 21,076,484 ----------- NEBRASKA .3% Kearney IDR, Great Platte River Road, 6.75%, 1/01/23 ....................................................................... 9,000,000 7,634,880 1/01/28 ....................................................................... 6,500,000 5,455,255 Lancaster County Hospital Authority Revenue, Bryan Memorial Hospital Project No. 1, Series A, MBIA Insured, 5.375%, 6/01/19 ........................................ 5,465,000 5,261,866 Scotts Bluff County Hospital Authority No. 1 Hospital Revenue, Regional West, 6.375%, 12/15/08 ............................................... 1,145,000 1,201,529 Regional West Medical Center, Pre-Refunded, 6.375%, 12/15/08 .................. 955,000 1,030,999 ----------- 20,584,529 ----------- NEVADA 3.0% Clark County IDR, Nevada Power Co. Project, Refunding, Series C, 5.50%, 10/01/30 ................ 41,400,000 37,371,780 Southwest Gas Corp., Series A, 6.50%, 12/01/33 ................................ 13,775,000 14,309,057 Clark County PCR, Nevada Power Co. Project, Refunding, Series D, 5.45%, 10/01/23 .................................. 4,000,000 3,645,720 Clark County Special ID No. 108, Summerlin, 6.625%, 2/01/17 ...................... 7,550,000 7,775,670 Henderson Local ID, No. 2, 9.50%, 8/01/11 ......................................................... 5,485,000 5,706,265 No. T-1, Series A, 8.50%, 8/01/13 ............................................. 21,990,000 24,133,145 No. T-4, Series A, Pre-Refunded, 8.50%, 11/01/12 .............................. 8,680,000 9,006,368 No. T-4C, Green Valley, Refunding, Series A, 5.90%, 11/01/18 .................. 3,200,000 3,110,368 No. T-10, 7.50%, 8/01/15 ...................................................... 7,260,000 7,484,770 No. T-12, Series A, 7.375%, 8/01/18 ........................................... 49,590,000 52,178,102 Las Vegas Downtown RDA, Tax Increment Revenue, Fremont Street Project, Series A, 6.10%, 6/15/14 ........ 3,500,000 3,557,820 Las Vegas Local Improvement Bond Special Assessment, ID No. 404, FSA Insured, 5.85%, 11/01/09 ...................................... 3,370,000 3,443,870 ID No. 707, 6.60%, 6/01/05 .................................................... 1,000,000 1,034,770 ID No. 707, 6.70%, 6/01/06 .................................................... 1,235,000 1,278,237 ID No. 707, 6.80%, 6/01/07 .................................................... 1,805,000 1,868,626 ID No. 707, 7.10%, 6/01/16 .................................................... 8,000,000 8,287,760 Las Vegas Special Assessment ID No. 505, Elkhorn Springs, 8.00%, 9/15/13 .................................... 7,615,000 7,848,857 Nevada Housing Division, SF Program, Subordinated, FI/GML, Series A, 9.30%, 10/01/00 ............................................. 50,000 50,673 FI/GML, Series A-1, 8.75%, 10/01/04 ........................................... 200,000 207,652 FI/GML, Series A-2, 9.375%, 10/01/00 .......................................... 55,000 55,782 FI/GML, Series A-2, 8.65%, 10/01/01 ........................................... 185,000 187,355 FI/GML, Series A-3, 9.20%, 10/01/00 ........................................... 80,000 80,988
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEVADA (CONT.) Nevada Housing Division, SF Program, Subordinated, (cont.) FI/GML, Series B, 9.50%, 10/01/01 .............................................. $ 130,000 $ 132,977 FI/GML, Series B-1, 7.90%, 10/01/05 ............................................ 540,000 554,828 FI/GML, Series C-1, 7.55%, 10/01/05 ............................................ 675,000 695,081 Series B-2, 9.65%, 10/01/02 .................................................... 105,000 106,813 Series C-1, 9.60%, 10/01/02 .................................................... 175,000 175,340 ------------ 194,288,674 ------------ NEW HAMPSHIRE 2.5% New Hampshire Higher Education and Health Facilities Authority Revenue, Hillcrest Terrace, 7.50%, 7/01/24 .............................................. 18,450,000 19,271,763 Hospital Littleton Hospital Association, Series B., 5.90%, 5/01/28 ............. 2,000,000 1,844,700 Kendal at Hanover Project, Pre-Refunded, 8.00%, 10/01/19 ....................... 9,290,000 9,506,457 New Hampshire Catholic Charities, Refunding, Series A, 5.75%, 8/01/11 .......... 1,300,000 1,286,688 New Hampshire State Business Finance Authority PCR, Connecticut Light and Power Co., Refunding, Series A, 5.85%, 12/01/22 .......... 21,000,000 19,562,340 Public Service Co. of New Hampshire, Refunding, Series D, 6.00%, 5/01/21 ....... 28,000,000 26,883,920 Public Service Co. of New Hampshire, Refunding, Series E, 6.00%, 5/01/21 ....... 21,800,000 20,931,052 United Illuminating Co., Refunding, Series A, 5.875%, 10/01/33 ................. 3,000,000 2,878,590 New Hampshire State IDAR, Pollution Control, Connecticut Light and Power Co., 5.90%, 11/01/16 ............................... 5,400,000 5,163,966 Connecticut Light and Power Co., 5.90%, 8/01/18 ................................ 8,000,000 7,589,520 Public Service Co. of New Hampshire Project, Series A, 7.65%, 5/01/21 .......... 10,970,000 11,421,306 Public Service Co. of New Hampshire Project, Series C, 7.65%, 5/01/21 .......... 34,635,000 36,059,884 ------------ 162,400,186 ------------ NEW JERSEY .4% Hudson County Improvement Authority Solid Waste Systems Revenue, Refunding, Series 1, 6.00%, 1/01/19 ....................................................... 2,180,000 2,179,782 Series 1, 6.00%, 1/01/29 ....................................................... 5,000,000 4,965,350 Series 2, 6.125%, 1/01/19 ...................................................... 2,125,000 2,128,804 Series 2, 6.125%, 1/01/29 ...................................................... 5,105,000 5,114,138 New Jersey EDA Revenue, First Mortgage, Keswick Pines, Refunding, 5.75%, 1/01/24 ........................................ 1,500,000 1,406,700 New Jersey Health Care Facilities Financing Authority Revenue, Lutheran Home, Series A, 8.40%, 7/01/19 ............ 2,100,000 2,151,471 New Jersey State Housing and Mortgage Finance Agency MFHR, Refunding, Series A, AMBAC Insured, 6.00%, 11/01/14 ................................................................ 3,000,000 3,092,670 6.05%, 11/01/20 ................................................................ 5,500,000 5,655,760 ------------ 26,694,675 ------------ NEW MEXICO 4.1% Farmington PCR, Public Service Co. of New Mexico, San Juan Project, Refunding, Series A, 6.30%, 12/01/16 .................. 29,045,000 29,304,662 Public Service Co. of New Mexico, San Juan Project, Refunding, Series A, 5.80%, 4/01/22 .................. 22,500,000 21,230,550 Public Service Co. of New Mexico, San Juan Project, Refunding, Series A, 6.40%, 8/15/23 .................. 58,250,000 58,906,478 Public Service Co. of New Mexico, San Juan Project, Refunding, Series B, 6.30%, 12/01/16 ................. 14,500,000 14,629,630 Public Service Co. of New Mexico, San Juan Project, Refunding, Series B, 5.80%, 4/01/22 .................. 19,500,000 18,399,810 Public Service Co. of New Mexico, San Juan Project, Refunding, Series C, 5.80%, 4/01/22 .................. 13,900,000 13,115,762 Public Service Co. of New Mexico, San Juan Project, Refunding, Series D, 6.375%, 4/01/22 ................. 64,125,000 65,061,225 Tucson Electric Power Co., Series A, 6.95%, 10/01/20 ........................... 37,000,000 39,511,560 New Mexico Mortgage Finance Authority SFM Program, Refunding, Series A-1, 7.90%, 7/01/04 .......................................... 465,000 476,676 Series A, 9.50%, 9/01/00 ....................................................... 110,000 110,604 Series A, 9.10%, 9/01/03 ....................................................... 590,000 612,385 Series A, FHA Insured, 8.80%, 9/01/01 .......................................... 160,000 163,603 Series B, 9.30%, 9/01/00 ....................................................... 35,000 35,189 Sub Series A, 9.55%, 9/01/02 ................................................... 505,000 513,196 Rio Rancho Water and Wastewater Revenue, Series A, FSA Insured, Pre-Refunded, 5.90%, 5/15/15 ............................. 3,620,000 3,866,920 ------------ 265,938,250 ------------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK 11.1% MTA Commuter Facilities Revenue, Series 8, 5.50%, 7/01/21 ........................................................ $16,775,000 $16,134,866 Series A, MBIA Insured, 5.625%, 7/01/27 ......................................... 12,880,000 12,816,115 Series R, 5.50%, 7/01/17 ........................................................ 2,000,000 1,951,040 Service Contract, Refunding, Series 1, FSA Insured, 5.70%, 7/01/24 .............. 10,000,000 10,066,500 MTA Service Contract Revenue, Commuter Facilities, Refunding, Series 5, 6.50%, 7/01/16 ........................ 3,860,000 4,028,759 Commuter Facilities, Refunding, Series N, 6.80%, 7/01/04 ........................ 3,330,000 3,586,010 Commuter Facilities, Refunding, Series N, 6.90%, 7/01/05 ........................ 3,050,000 3,284,881 Transit Facilities, Refunding, Series N, 6.80%, 7/01/04 ......................... 2,330,000 2,509,130 Transit Facilities, Refunding, Series N, 6.90%, 7/01/05 ......................... 2,470,000 2,660,215 Transit Facilities, Refunding, Series N, 7.125%, 7/01/09 ........................ 7,830,000 8,446,613 Transit Facilities, Refunding, Series P, 5.75%, 7/01/15 ......................... 6,065,000 6,106,181 MTA Transit Facilities Revenue, Series A, MBIA Insured, 5.875%, 7/01/27 ......................................... 22,700,000 23,251,156 Service Contract, Refunding, Series R, 5.50%, 7/01/17 ........................... 5,000,000 4,877,600 New York City GO, Refunding, Series F, 6.00%, 8/01/11 ............................................. 10,000,000 10,469,800 Refunding, Series F, 5.25%, 8/01/15 ............................................. 20,580,000 19,847,764 Refunding, Series H, 6.25%, 8/01/15 ............................................. 25,000,000 26,449,750 Refunding, Series H, 6.125%, 8/01/25 ............................................ 5,600,000 5,726,896 Refunding, Series J, 6.00%, 8/01/21 ............................................. 10,000,000 10,163,600 Series A, 6.125%, 8/01/06 ....................................................... 9,955,000 10,612,329 Series A, 6.25%, 8/01/08 ........................................................ 10,000,000 10,673,600 Series A, 7.25%, 3/15/20 ........................................................ 100,000 102,756 Series A, 6.25%, 8/01/21 ........................................................ 845,000 868,981 Series A, Pre-Refunded, 6.125%, 8/01/06 ......................................... 235,000 254,698 Series A, Pre-Refunded, 7.25%, 3/15/20 .......................................... 230,000 237,813 Series B, 7.00%, 2/01/18 ........................................................ 3,255,000 3,442,781 Series B, 7.00%, 2/01/19 ........................................................ 3,375,000 3,567,341 Series B, 7.00%, 2/01/20 ........................................................ 3,305,000 3,492,559 Series B, 6.00%, 8/15/26 ........................................................ 4,355,000 4,405,910 Series B, Pre-Refunded, 6.75%, 10/01/15 ......................................... 100,000 108,395 Series B, Pre-Refunded, 7.00%, 2/01/18 .......................................... 835,000 897,976 Series B, Pre-Refunded, 7.00%, 2/01/19 .......................................... 1,625,000 1,747,558 Series B, Pre-Refunded, 7.00%, 2/01/20 .......................................... 2,440,000 2,624,025 Series B, Pre-Refunded, 6.00%, 8/15/26 .......................................... 645,000 701,212 Series B, Sub Series B-1, Pre-Refunded, 7.00%, 8/15/16 .......................... 17,070,000 19,137,689 Series B, Sub Series B-1, Pre-Refunded, 7.25%, 8/15/19 .......................... 5,000,000 5,660,650 Series C, 5.375%, 11/15/27 ...................................................... 7,450,000 6,982,885 Series C, 5.50%, 11/15/37 ....................................................... 2,000,000 1,899,200 Series C, Pre-Refunded, 7.25%, 8/15/24 .......................................... 7,905,000 8,371,474 Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/16 .......................... 55,000 59,875 Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/17 .......................... 370,000 402,797 Series C, Sub Series C-1, Pre-Refunded, 7.50%, 8/01/21 .......................... 435,000 479,457 Series D, 6.00%, 2/15/10 ........................................................ 8,155,000 8,510,721 Series D, 7.625%, 2/01/14 ....................................................... 40,000 42,934 Series D, 7.50%, 2/01/18 ........................................................ 5,000 5,345 Series D, Pre-Refunded, 7.70%, 2/01/11 .......................................... 150,000 163,874 Series D, Pre-Refunded, 7.625%, 2/01/13 ......................................... 400,000 436,316 Series D, Pre-Refunded, 7.625%, 2/01/14 ......................................... 810,000 883,540 Series D, Pre-Refunded, 7.50%, 2/01/18 .......................................... 380,000 413,425 Series D, Pre-Refunded, 7.50%, 2/01/19 .......................................... 330,000 359,027 Series E, 6.25%, 2/15/07 ........................................................ 3,270,000 3,500,699 Series E, 7.50%, 2/01/18 ........................................................ 45,000 48,101 Series E, Pre-Refunded, 6.25%, 2/15/07 .......................................... 6,730,000 7,322,442 Series E, Pre-Refunded, 7.50%, 2/01/18 .......................................... 480,000 522,221
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) New York City GO, (cont.) Series F, 7.625%, 2/01/13 ........................................................ $ 45,000 $ 48,355 Series F, 7.625%, 2/01/15 ........................................................ 15,000 16,104 Series F, 7.50%, 2/01/21 ......................................................... 110,000 117,424 Series F, Pre-Refunded, 7.625%, 2/01/13 .......................................... 310,000 338,145 Series F, Pre-Refunded, 7.625%, 2/01/14 .......................................... 275,000 299,967 Series F, Pre-Refunded, 7.50%, 2/01/21 ........................................... 575,000 625,577 Series F, Pre-Refunded, 6.625%, 2/15/25 .......................................... 8,625,000 9,516,825 Series G, 5.75%, 8/01/10 ......................................................... 505,000 521,519 Series G, 6.125%, 10/15/11 ....................................................... 20,480,000 21,743,206 Series G, 6.20%, 10/15/14 ........................................................ 10,000,000 10,584,300 Series G, 7.50%, 2/01/22 ......................................................... 10,000 10,673 Series G, Pre-Refunded, 7.50%, 2/01/22 ........................................... 50,000 54,338 Series H, 7.20%, 2/01/15 ......................................................... 875,000 931,044 Series H, 7.00%, 2/01/22 ......................................................... 10,000 10,561 Series H, 5.00%, 3/15/29 ......................................................... 34,625,000 30,334,270 Series H, Pre-Refunded, 7.20%, 2/01/14 ........................................... 625,000 674,969 Series H, Pre-Refunded, 7.20%, 2/01/15 ........................................... 500,000 539,975 Series H, Pre-Refunded, 7.00%, 2/01/19 ........................................... 2,245,000 2,416,989 Series H, Pre-Refunded, 7.00%, 2/01/20 ........................................... 280,000 301,118 Series H, Pre-Refunded, 7.00%, 2/01/22 ........................................... 25,000 26,886 Series I, 6.25%, 4/15/17 ......................................................... 23,865,000 24,910,764 Series I, 6.25%, 4/15/27 ......................................................... 7,705,000 7,940,080 Series I, Pre-Refunded, 6.25%, 4/15/17 ........................................... 1,505,000 1,653,243 Series I, Pre-Refunded, 6.25%, 4/15/27 ........................................... 15,215,000 16,713,678 New York City IDA, Civic Facility Revenue, Amboy Properties Corp. Project, 9.625%, 6/01/15 ............................................................ 6,205,000 6,652,008 Civic Facility Revenue, Amboy Properties Corp. Project, Refunding, 6.75%, 6/01/20 ............................................................. 7,160,000 7,015,511 IDR, La Guardia Association LP Project, Refunding, 6.00%, 11/01/28 ............... 7,500,000 7,124,100 New York State Dormitory Authority Revenue, City University System, Third General, Series 2, 6.00%, 7/01/26 .................. 6,100,000 6,161,793 City University System, Third General, Series 2, Pre-Refunded, 6.00%, 7/01/26 .... 15,750,000 17,162,303 Mental Health Services Facilities, Refunding, Series B, 5.625%, 2/15/21 .......... 8,360,000 8,191,462 Mental Health Services Facilities, Series A, 6.00%, 8/15/17 ...................... 11,240,000 11,483,346 Mental Health Services Facilities, Series A, 5.75%, 2/15/27 ...................... 5,000,000 4,945,350 State University Educational Facilities, Pre-Refunded, 6.00%, 5/15/18 ............ 5,000,000 5,442,750 State University Educational Facilities, Refunding, 5.125%, 5/15/27 .............. 3,755,000 3,359,936 New York State Environmental Facilities Corp. Special Obligation PCR, State Water Revenue, New York Municipal Water, Refunding, Series A, 5.875%, 6/15/14 .................................................................. 5,000,000 5,158,700 New York State HFA, Service Contract Obligation Revenue, Series A, 6.00%, 3/15/26 ................................................................... 4,975,000 5,009,328 Pre-Refunded, 7.80%, 9/15/10 ..................................................... 6,850,000 7,273,330 Pre-Refunded, 7.80%, 9/15/20 ..................................................... 9,715,000 10,315,387 Pre-Refunded, 6.50%, 3/15/25 ..................................................... 10,000,000 11,159,800 New York State HFAR, Refunding, Series A, 5.90%, 11/01/05 ........................... 12,515,000 12,990,820 New York State Medical Care Facilities Finance Agency Revenue, Hospital and Nursing, Series B, FHA Insured, 6.95%, 2/15/32 ...................... 3,305,000 3,509,546 Hospital and Nursing, Series B, Pre-Refunded, 6.95%, 2/15/32 ..................... 695,000 751,253 Montefiore Medical Center, Insured Mortgage, Series A, AMBAC/FHA Insured, 5.75%, 2/15/25 ................................................................... 6,175,000 6,253,052 New York State Mortgage Agency Revenue, Homeowners Mortgage, Series 59, 6.10%, 10/01/15 ....................................................... 2,000,000 2,060,260 Series 59, 6.15%, 10/01/17 ....................................................... 2,750,000 2,832,665 Series 61, 5.80%, 10/01/16 ....................................................... 7,100,000 7,216,937 (b) New York State Thruway Authority Service Contract Revenue, Local Highway and Bridge, 5.75%, 4/01/19 ........................................................... 10,000,000 9,941,400 New York State Urban Development Corp. Revenue, Correctional Capital Facilities, Series 6, 5.375%, 1/01/25 ........................................................ 5,750,000 5,391,028 Series 7, 5.70%, 1/01/27 ......................................................... 22,750,000 22,285,218
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) New York State Urban Development Corp., Corporate Purpose, sub. lien, Refunding, 5.50%, 7/01/22 .................................. $ 7,975,000 $ 7,673,625 New York, New York City, Series F, Pre-Refunded, 7.625%, 2/01/15 ........................... 15,000 16,362 Oneida County IDAR, Civic Facility, St. Elizabeth Medical, Series A, 5.75%, 12/01/19 ............................................................... 1,575,000 1,471,381 Series A, 5.875%, 12/01/29 .............................................................. 2,750,000 2,550,763 Series B, 6.00%, 12/01/19 ............................................................... 2,520,000 2,425,525 Series B, 6.00%, 12/01/29 ............................................................... 7,560,000 7,156,901 Onondaga County IDA Solid Waste Disposal Facility Revenue, Solvay Paperboard LLC Project, Refunding, 6.80%, 11/01/14 ......................................................................... 5,000,000 5,018,750 7.00%, 11/01/30 ......................................................................... 7,000,000 7,025,970 Port Authority of New York and New Jersey Revenue, Special Obligation Revenue, Consolidated, 102nd Series, MBIA Insured, 5.75%, 10/15/23 .............................. 5,000,000 5,117,350 Port Authority of New York and New Jersey Special Obligation Revenue, 2nd Installment, 6.50%, 10/01/01 ........................................................ 1,000,000 1,035,190 3rd Installment, 7.00%, 10/01/07 ........................................................ 8,000,000 8,730,160 4th Installment, Special Project, 6.75%, 10/01/11 ....................................... 925,000 984,940 5th Installment, 6.75%, 10/01/19 ........................................................ 17,500,000 18,470,025 Continental Airlines Inc., Eastern Project, La Guardia, 9.00%, 12/01/10 ................. 10,000,000 10,637,200 Continental Airport Project, Eastern Project, La Guardia, 9.125%, 12/01/15 .............. 27,650,000 29,452,780 Ulster County IDA, Civic Facility Revenue, Benedictine Hospital Project, Series A, 6.40%, 6/01/14 .......................................................................... 725,000 712,711 6.45%, 6/01/24 .......................................................................... 1,950,000 1,902,713 Warren and Washington Counties IDAR, Adirondack Resource Recovery Project, Refunding, Series A, 7.90%, 12/15/07 ............... 1,150,000 1,171,517 ------------ 712,888,638 ------------ NORTH CAROLINA 1.7% Asheville Water System Revenue, FGIC Insured, 5.70%, 8/01/25 ............................... 2,500,000 2,524,200 North Carolina Eastern Municipal Power Agency Power System Revenue, Refunding, Series A, 5.75%, 1/01/26 ..................................................... 37,500,000 34,412,625 Refunding, Series B, 6.00%, 1/01/14 ..................................................... 16,000,000 15,756,960 Refunding, Series B, 5.75%, 1/01/24 ..................................................... 35,750,000 32,940,765 Series B, MBIA Insured, 5.875%, 1/01/21 ................................................. 20,000,000 20,379,000 North Carolina HFA, SF, Series II, GNMA Secured, 6.20%, 3/01/16 ................................................................................. 2,775,000 2,850,480 9/01/17 ................................................................................. 1,845,000 1,896,439 ------------ 110,760,469 ------------ NORTH DAKOTA .4% Mercer County PCR, Basin Electric Power Corp., Refunding, Second Series, AMBAC Insured, 6.05%, 1/01/19 .................................. 24,655,000 25,297,263 ------------ OHIO 5.3% Cleveland Airport Special Revenue, Continental Airlines Inc. Project, 9.00%, 12/01/19 .......................................................................... 21,235,000 21,918,767 (b) Refunding, 5.70%, 12/01/19 ............................................................ 11,520,000 10,709,222 Cuyahoga County Hospital Revenue, University Hospitals Health System, Refunding, Series B, MBIA Insured, 5.50%, 1/15/16 ................................................... 10,065,000 10,064,295 Dayton Special Facilities Revenue, Emery Air Freight Corp., Emery Worldwide Air Inc., Refunding, Series A, 5.625%, 2/01/18 ............................................................... 5,000,000 4,749,750 Series C, 6.05%, 10/01/09 ............................................................... 7,500,000 7,797,825 Series E, 6.05%, 10/01/09 ............................................................... 4,000,000 4,158,840 Elyria GO, FGIC Insured, 5.40%, 12/01/22 ................................................... 2,785,000 2,674,380 Franklin County Health Care Facilities Revenue, Presbyterian Retirement Services, Refunding, 5.50%, 7/01/17 ............................................................... 3,100,000 2,883,341 Refunding, 5.50%, 7/01/21 ............................................................... 4,700,000 4,308,866 Series A, 6.625%, 7/01/13 ............................................................... 1,000,000 1,065,670 Lorain County Hospital Revenue, Catholic Healthcare Partners, Refunding, Series B, MBIA Insured, 5.50%, 9/01/27 ........................................ 17,885,000 17,436,265 Lucas County Health Facilities Revenue, Presbyterian Retirement Services, Refunding, Series A, 6.625%, 7/01/14 ......................................................................... 1,000,000 1,038,270 6.75%, 7/01/20 .......................................................................... 2,000,000 2,079,820
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) OHIO (CONT.) Montgomery County Health Systems Revenue, Franciscan at Saint Leonard, Refunding, 5.50%, 7/01/18 ............................ $ 3,630,000 $ 3,323,265 Franciscan Medical Center-Dayton, Refunding, 5.50%, 7/01/18 ....................... 1,900,000 1,739,450 Refunding, Series B, 8.10%, 7/01/01 ............................................... 600,000 620,694 Refunding, Series B-1, 8.10%, 7/01/01 ............................................. 500,000 517,245 Refunding, Series B-1, 8.10%, 7/01/18 ............................................. 1,955,000 2,217,537 Series B-1, Pre-Refunded, 8.10%, 7/01/18 .......................................... 4,345,000 5,233,813 Series B-2, 8.10%, 7/01/18 ........................................................ 1,995,000 2,262,909 Series B-2, Pre-Refunded, 8.10%, 7/01/18 .......................................... 4,505,000 5,441,229 St. Leonard, Series B, 8.10%, 7/01/18 ............................................. 3,100,000 3,514,408 St. Leonard, Series B, Pre-Refunded, 8.10%, 7/01/18 ............................... 6,500,000 7,850,830 Muskingum County Hospital Facilities Revenue, Franciscan Sisters, Refunding, Connie Lee Insured, 5.375%, 2/15/12 ................. 1,200,000 1,202,520 Oak Hills Local School District GO, MBIA Insured, 5.45%, 12/01/21 .................... 4,925,000 4,770,404 Ohio State Air Quality Development Authority Revenue, Dayton Power and Light Co. Project, Refunding, 6.10%, 9/01/30 ..................... 17,900,000 18,216,651 PCR, Toledo Edison, Series B, Refunding, 8.00%, 5/15/19 ........................... 5,265,000 5,455,224 Pollution Control, Cleveland Electric, Refunding, Series A, 6.10%, 8/01/20 ........ 10,400,000 10,159,344 Pollution Control, Cleveland Electric, Refunding, Series B, 6.00%, 8/01/20 ........ 39,760,000 38,832,399 Pollution Control, Toledo Edison, Refunding, Series A, 6.10%, 8/01/27 ............. 5,000,000 4,869,050 Ohio State Solid Waste Revenue, Republic Engineered Steels Inc., 9.00%, 6/01/21 ...... 16,650,000 17,968,847 Ohio State Water Development Authority PCR, Facilities Revenue, Cleveland Electric, Refunding, Series A, 6.10%, 8/01/20 ........................... 18,000,000 17,583,480 Cleveland Electric, Refunding, Series A, 8.00%, 10/01/23 .......................... 27,700,000 30,837,579 Toledo Edison, Series A, 8.00%, 5/15/19 ........................................... 6,200,000 6,424,006 Ohio State Water Development Authority Revenue, Fresh Water Service, AMBAC Insured, 5.90%, 12/01/21 .......................................................... 9,250,000 9,521,025 Toledo-Lucas County Port Authority Airport Revenue, Burlington Air Express, Project 1, 7.00%, 4/01/04 ......................................................... 4,370,000 4,595,798 Project 1, 7.25%, 4/01/09 ......................................................... 5,385,000 5,748,380 Project 1, 7.375%, 4/01/14 ........................................................ 8,200,000 8,759,896 Project 1, 7.50%, 4/01/19 ......................................................... 14,365,000 15,357,191 Series 1, Pre-Refunded, 9.125%, 9/15/01 ........................................... 735,000 787,479 Series 1, Pre-Refunded, 9.125%, 9/15/13 ........................................... 5,875,000 6,294,475 Toledo-Lucas County Port Authority Development Revenue, Nortwest Ohio Bond Fund, Series A, Pre-Refunded, 8.625%, 5/15/10 ........................................... 1,095,000 1,158,992 Series B, 9.00%, 11/15/08 ......................................................... 980,000 997,121 Series D, Pre-Refunded, 8.25%, 5/15/20 ............................................ 2,870,000 3,013,242 Willoughby IDR, Presbyterian Retirement Services, Refunding, Series A, 6.875%, 7/01/16 ......................................................... 1,500,000 1,527,120 ------------ 337,686,914 ------------ OKLAHOMA .3% Tulsa County Municipal Airport Revenue, American Airlines Inc., 7.375%, 12/01/20 ........................................... 12,845,000 13,463,230 Valley View Hospital Authority Revenue, Valley View Regional Medical Center, Refunding, 6.00%, 8/15/14 ..................... 4,000,000 3,988,120 ------------ 17,451,350 ------------ OREGON 1.4% Klamath Falls Electric Revenue, Klamath Cogen, senior lien, Refunding, 5.75%, 1/01/13 .................................................................... 8,000,000 7,710,960 5.875%, 1/01/16 ................................................................... 19,400,000 18,698,496 6.00%, 1/01/25 .................................................................... 56,060,000 53,395,468 Northern Wasco County Peoples Utilities District Electric Revenue, FGIC Insured, 5.625%, 12/01/22 .................................................... 2,500,000 2,521,200 Oregon State Department of Administrative Services COP, Series A, MBIA Insured, 5.50%, 11/01/20 ........................................... 5,585,000 5,577,628 Series C, MBIA Insured, 5.75%, 5/01/17 ............................................ 4,665,000 4,771,829 ------------ 92,675,581 ------------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) PENNSYLVANIA 5.0% Allegheny County Hospital Development Authority Revenue, Allegheny Valley Health Facilities Management Co., 7.50%, 8/01/13 ................ $ 9,100,000 $ 9,088,170 Allegheny Valley Hospital, 7.75%, 8/01/20 ........................................ 2,100,000 2,091,600 Allegheny County IDAR, Environmental Improvement, USX Corp., Refunding, 6.10%, 7/15/20 .......................................................................... 6,460,000 6,399,276 Bucks County IDA, Environmental Improvement Revenue, USX Corp. Project, Refunding, 5.60%, 3/01/33 ........................................................ 4,125,000 3,745,253 Chartiers Valley Industrial and Commercial Development Authority Revenue, Asbury Health Center Project, Refunding, 7.40%, 12/01/15 .................................................................. 5,250,000 6,015,608 (b)Chartiers Valley Industrial and Commercial Development Authority First Mortgage Revenue, Asbury Health Center, Refunding, 6.375%, 12/01/19 ......................................................................... 1,000,000 980,400 12/01/24 ......................................................................... 1,750,000 1,679,738 Delaware County IDAR, Resource Recovery Facility, Refunding, Series A, 6.10%, 1/01/04 ................................................................... 1,310,000 1,326,716 6.10%, 1/01/06 ................................................................... 2,140,000 2,155,387 6.50%, 1/01/08 ................................................................... 425,000 426,305 6.10%, 7/01/13 ................................................................... 16,500,000 16,107,465 6.20%, 7/01/19 ................................................................... 6,500,000 6,311,825 Delaware River Port Authority Pennsylvania and New Jersey Revenue, Series 1995, FGIC Insured, 5.50%, 1/01/26 ........................................ 20,750,000 20,492,493 Franklin County IDA, Health Facilities Revenue, Encore Nursing Center, 10.375%, 7/01/11 ................................................................. 650,000 700,557 Refunding, 10.375%, 7/01/11 ...................................................... 2,800,000 3,017,784 Gettysburg IDA Health Facilities Revenue, Encore Nursing Center, Refunding, 10.375%, 7/01/11 ................................................................. 3,000,000 3,233,340 Lehigh County IDA, PCR, Pennsylvania Power and Light Co. Project, Refunding, Series A, MBIA Insured, 6.15%, 8/01/29 ........................................... 4,000,000 4,172,560 Monroeville Hospital Authority Hospital Revenue, Forbes Health Systems, Refunding, 5.75%, 10/01/05 .................................................................. 1,000,000 978,180 7.00%, 10/01/13 .................................................................. 8,825,000 8,795,436 6.25%, 10/01/15 .................................................................. 4,545,000 4,481,779 Montgomery County Higher Education and Health Authority Revenue, First Mortgage, Holy Redeemer Long-Term Care, Series A, Pre-Refunded, 8.20%, 6/01/06 ................................................................... 1,465,000 1,589,320 First Mortgage, Holy Redeemer Long-Term Care, Series A, Pre-Refunded, 8.00%, 6/01/22 ................................................................... 3,500,000 3,838,135 St. Joseph's University, Pre-Refunded, 8.30%, 6/01/10 ............................ 5,000,000 5,265,350 United Hospital, Series A, Pre-Refunded, 8.375%, 11/01/11 ........................ 200,000 205,508 United Hospital, Series A, Pre-Refunded, 7.50%, 11/01/12 ......................... 3,560,000 3,582,321 United Hospital, Series A, Pre-Refunded, 7.50%, 11/01/13 ......................... 750,000 754,703 United Hospital, Series A, Pre-Refunded, 7.50%, 11/01/14 ......................... 600,000 603,762 United Hospital, Series B, Pre-Refunded, 7.50%, 11/01/14 ......................... 3,940,000 3,964,704 United Hospital, Series B, Pre-Refunded, 7.50%, 11/01/15 ......................... 1,600,000 1,610,032 Montgomery County IDA, Retirement Community Revenue, Act Retirement-Life Communities, 5.25%, 11/15/28 ..................................................... 2,500,000 2,184,125 Montgomery County IDAR, Resource Recovery, 7.50%, 1/01/12 ........................... 10,000,000 10,335,800 Pennsylvania Convention Center Authority Revenue, Refunding, Series A, 5.75%, 9/01/99 ................................................................... 1,750,000 1,750,000 6.25%, 9/01/04 ................................................................... 5,000,000 5,210,500 6.60%, 9/01/09 ................................................................... 16,000,000 17,126,880 6.70%, 9/01/14 ................................................................... 20,760,000 22,312,018 6.75%, 9/01/19 ................................................................... 15,800,000 16,979,470 Pennsylvania EDA, Financing Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 ....................................................... 10,000,000 10,890,500 Pennsylvania State Higher Educational Facilities Authority Health Services Revenue, Allegheny Delaware Valley Obligation Group, Series A, MBIA Insured, 5.875%, 11/15/16 ................................................................. 15,000,000 14,729,550 University of Pennsylvania Health Services, Refunding, Series A, 5.75%, 1/01/12 ................................................................... 5,000,000 4,930,200 University of Pennsylvania Health Services, Refunding, Series A, 5.875%, 1/01/15 .................................................................. 1,000,000 980,620 Philadelphia Gas Works Revenue, 14th Series A, Pre-Refunded, 6.375%, 7/01/26 ..................................... 885,000 959,898 Refunding, 14th Series, 6.375%, 7/01/26 .......................................... 1,965,000 2,056,530 Philadelphia GO, Refunding, Series B, 6.00%, 5/15/05 ................................ 3,080,000 3,240,222 Philadelphia IDA, Health Care Facility Revenue, Pauls Run, Series A, 5.85%, 5/15/13 ................................................................... 2,200,000 2,100,098 5.75%, 5/15/18 ................................................................... 1,500,000 1,386,720 5.875%, 5/15/28 .................................................................. 2,500,000 2,282,600
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) PENNSYLVANIA (CONT.) Philadelphia Municipal Authority Revenue, Lease, Refunding, Series D, 6.30%, 7/15/17 .................................................. $ 3,500,000 $ 3,613,715 Sub Series C, 8.625%, 11/15/16 ....................................................... 2,210,000 2,365,916 Sub Series D, 6.25%, 7/15/13 ......................................................... 3,000,000 3,128,070 Philadelphia Water and Sewer Revenue, Series 10, ETM, 7.35%, 9/01/04 .................... 14,235,000 15,565,973 Schuylkill County IDA, Resource Recovery Revenue, Schuylkill Energy Resources Inc., 6.50%, 1/01/10 ....................................................................... 28,870,000 28,925,719 South Fork Municipal Authority Hospital Revenue, Conemaugh Valley Memorial Hospital Project, Series A, MBIA Insured, 5.75%, 7/01/16 ....................................................................... 8,130,000 8,241,544 South Wayne County Water and Sewer Authority Revenue, Refunding, 8.20%, 4/15/13 ......... 8,055,000 8,235,996 Washington County IDA, PCR, West Pennsylvania Power Co., Series G, AMBAC Insured, 6.05%, 4/01/14 ....................................................................... 5,025,000 5,283,034 ------------ 318,429,405 ------------ RHODE ISLAND .3% Rhode Island Housing and Mortgage Finance Corp. Revenue, Homeownership Opportunity, Series 17-A, 6.25%, 4/01/17 .......................................................... 5,000,000 5,111,500 Rhode Island State Health and Educational Building Corp. Revenue, Hospital Financing Lifespan Obligation Group, MBIA Insured, 5.75%, 5/15/23 ........... 5,000,000 4,999,500 Landmark Medical Center, 5.875%, 10/01/19 ............................................ 6,000,000 6,059,100 West Warwick GO, Series A, 7.00%, 8/15/02 ....................................................................... 120,000 124,925 7.30%, 7/15/08 ....................................................................... 845,000 915,203 ------------ 17,210,228 ------------ SOUTH CAROLINA .8% Charleston County Hospital Facilities First Mortgage Revenue, Sandpiper Village Inc., 8.00%, 11/01/13 ...................................................................... 3,535,000 3,510,502 Piedmont Municipal Power Agency Electric Revenue, Refunding, 6.60%, 1/01/21 ....................................................................... 3,660,000 3,672,700 Series A, AMBAC Insured, 6.55%, 1/01/16 .............................................. 4,110,000 4,123,727 South Carolina Jobs EDA, Health Facilities Revenue, 1st Mortgage Lutheran Homes, Refunding, 5.65%, 5/01/18 ....................................................................... 3,200,000 2,973,280 5.70%, 5/01/26 ....................................................................... 4,235,000 3,857,746 South Carolina Public Service Authority Revenue, Refunding, Series A, MBIA Insured, 5.75%, 1/01/22 ....................................................................... 32,500,000 32,861,075 ------------ 50,999,030 ------------ SOUTH DAKOTA .2% South Dakota HDA Revenue, Homeownership Mortgage, Series A, 6.125%, 5/01/17 ............. 5,000,000 5,112,350 South Dakota Health and Educational Facilities Authority Revenue, AMBAC Insured, 5.50%, 8/01/22 ........................................................ 7,100,000 6,928,109 Prairie Lakes Health Care, Pre-Refunded, 7.25%, 4/01/22 .............................. 2,480,000 2,751,337 Prairie Lakes Health Care, Refunding, 7.25%, 4/01/22 ................................. 1,020,000 1,081,690 ------------ 15,873,486 ------------ TENNESSEE .3% Johnson City Health and Educational Facilities Board Revenue, Pine Oaks Assisted Project, Series A, GNMA Secured, 5.90%, 6/20/37 ................................................ 2,620,000 2,573,050 Knox County Health, Educational and Housing Facilities Board MFHR, East Towne Village Project, GNMA Secured, 8.20%, 7/01/28 ................................................. 3,035,000 3,119,373 Memphis-Shelby County Airport Authority Special Facilities and Project Revenue, Federal Express Corp., 7.875%, 9/01/09 ................................................ 6,000,000 6,460,440 Metropolitan Government of Nashville and Davidson County GO, Public Improvements, 5.875%, 5/15/26 ....................................................................... 5,000,000 5,082,850 Shelby County Health and Education Housing Facility Revenue, Beverly Enterprise, 10.125%, 12/01/11 ..................................................................... 2,800,000 2,957,220 Tennessee HDA, Mortgage Finance, Series A, 6.90%, 7/01/25 ............................... 200,000 211,338 ------------ 20,404,271 ------------ TEXAS 3.7% Alliance Airport Authority Special Facilities Revenue, 7.50%, 12/01/29 .................. 10,000,000 10,502,400 Bexar County Health Facilities Development Corp. Revenue, Incarnate Word Health Services, Refunding, FSA Insured, ETM, 6.00%, 11/15/15 ........................... 8,750,000 9,500,925 (b)Comal ISD, GO, Refunding, 5.75%, 8/01/28 .............................................. 10,000,000 9,957,500 Coppell Special Assessment, Gateway Project, 8.70%, 3/01/12 ............................. 4,190,000 4,335,519 Copperas Cove Health Facilities Development Corp. Hospital Revenue, First Mortgage, Metroplex Health, Series B, Pre-Refunded, 9.125%, 12/01/19 ....................... 5,328,000 5,503,344 Decatur Hospital Authority Hospital Revenue, Series A, 5.75%, 9/01/29 ................... 5,000,000 4,459,750 El Paso HFC, SFMR, Refunding, Series A, 8.75%, 10/01/11 ................................. 3,650,000 3,866,591
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) TEXAS (CONT.) Georgetown Health Facilities Development Corp. Revenue, Georgetown Healthcare System, Refunding, 6.25%, 8/15/29 ....................... $ 10,975,000 $ 10,517,123 Harris County Health Facilities Development Corp. ...................................... Hospital Revenue, Memorial Hospital System Project, Refunding, Series A, MBIA Insured, 5.75%, 6/01/19 ...................................................................... 15,065,000 15,108,086 5.50%, 6/01/24 ...................................................................... 12,000,000 11,667,120 Harris County Health Facilities Development Corp. Revenue, Christus Health, Refunding, Series A, MBIA Insured, 5.375%, 7/01/29 .................. 15,000,000 14,038,950 Harris County Health Facilities Development Corp Special Facilities Revenue, Medical Center Project, MBIA Insured, 6.00%, 5/15/20 ..... 7,000,000 7,228,970 Nueces River Authority Environmental Improvement Revenue, Asarco Inc. Project, Refunding, 5.60%, 1/01/27 ...................................................................... 8,640,000 7,793,280 Series A, 5.60%, 4/01/18 ............................................................ 4,500,000 4,153,050 Nueces River Authority Water Supply Revenue, Facilities, Corpus Christi Lake Project, FSA Insured, 5.50%, 3/01/27 ................. 7,500,000 7,262,625 Port Corpus Christi IDC Revenue, Valero, Refunding, Series C, 5.40%, 4/01/18 .......................................... 15,800,000 14,416,236 Port Corpus Christi Nueces County General Revenue, Union Pacific, Refunding, 5.65%, 12/01/22 ............................................ 5,000,000 4,763,600 Red River Authority PCR, West Texas Utilities Co. Project, Public Service Co. of Oklahoma, Central Power and Light Co., Refunding, MBIA Insured, 6.00%, 6/01/20 ......................................................... 8,000,000 8,262,720 Sabine River Authority PCR, Southwestern Electric Power Co., Refunding, MBIA Insured, 6.10%, 4/01/18 ............. 7,000,000 7,303,240 Sam Rayburn Municipal Power Agency Supply System Revenue, Refunding, Series A, 6.50%, 10/01/08 ........................................................... 755,000 764,037 Series A, 6.75%, 10/01/14 ........................................................... 12,990,000 13,228,496 Series A, 6.25%, 10/01/17 ........................................................... 4,795,000 4,733,432 Series B, 5.75%, 10/01/08 ........................................................... 1,315,000 1,268,133 Series B, 6.125%, 10/01/13 .......................................................... 5,340,000 5,243,506 Series B, 5.50%, 10/01/20 ........................................................... 11,255,000 10,127,136 San Antonio Electric and Gas Revenue, Series 95, MBIA Insured, 5.375%, 2/01/18 ......... 6,000,000 5,799,000 Texas State GO, Veterans Housing Assistance Fund I, Refunding, 6.15%, 12/01/25 ......... 7,430,000 7,553,932 Texas Water Development Board Revenue, State Revolving Fund, 6.00%, 7/15/13 ............ 4,000,000 4,167,120 Tomball Hospital Authority Revenue, Refunding, 6.125%, 7/01/23 ......................... 8,750,000 8,768,200 Travis County Health Facilities Development Corp. Hospital Revenue, Charity Obligation Group, Series A, 5.375%, 11/01/28 .......... 11,685,000 10,804,535 Tyler Health Facilities Development Corp. .............................................. Hospital Revenue, East Texas Medical Center Project, Series B, FSA Insured, 5.60%, 11/01/27 .......................................................... 3,450,000 3,387,383 ------------ 236,485,939 ------------ US TERRITORIES 4.6% American Samoa EDA, Executive Office Building Revenue, 10.125%, 9/01/08 ................ 2,175,000 2,241,707 District of Columbia GO, Refunding, Series A, 5.875%, 6/01/05 ................................................ 7,205,000 7,530,378 Refunding, Series A, 6.00%, 6/01/07 ................................................. 10,905,000 11,518,297 Refunding, Series B, 5.25%, 6/01/26 ................................................. 59,315,000 53,712,105 Series A, 5.25%, 6/01/27 ............................................................ 25,225,000 22,649,780 Series A, ETM, 5.875%, 6/01/05 ...................................................... 595,000 627,648 Series A, ETM, 6.00%, 6/01/07 ....................................................... 870,000 928,099 Series A, Pre-Refunded, 6.375%, 6/01/11 ............................................. 22,770,000 25,074,779 Series A, Pre-Refunded, 6.375%, 6/01/16 ............................................. 27,230,000 29,986,221 Series E, FSA Insured, 6.00%, 6/01/11 ............................................... 5,000,000 5,203,500 District of Columbia Hospital Revenue, Medlantic Healthcare Group, Refunding, Series A, MBIA Insured, ETM, 5.70%, 8/15/08 ........................................ 6,500,000 6,791,525 Medlantic Healthcare Group, Refunding, Series A, MBIA Insured, ETM, 5.875%, 8/15/19 ....................................... 8,850,000 9,324,626 Washington Hospital Center Corp., Series A, Pre-Refunded, 7.00%, 8/15/05 ............................................. 2,000,000 2,151,440 Washington Hospital Center Corp., Series A, Pre-Refunded, 9.00%, 1/01/08 ............................................. 12,430,000 13,431,734 Washington Hospital Center Corp., Series A, Pre-Refunded, 8.75%, 1/01/15 ............................................. 3,750,000 4,042,800 Washington Hospital Center Corp., Series A, Pre-Refunded, 7.125%, 8/15/19 ............................................ 4,500,000 4,918,725 District of Columbia Redevelopment Land Agency Washington D.C Sports Arena Special Tax Revenue, 5.625%, 11/01/10 ................................... 1,005,000 999,945 District of Columbia Revenue, Carnegie Endowment Revenue, 5.75%, 11/15/26 .......................................... 5,410,000 5,402,101 Methodist Home Issue, 6.00%, 1/01/29 ................................................. 4,750,000 4,469,608 Northern Mariana Islands Commonwealth Ports Authority Airport Revenue, senior lien, Series A, 6.25%, 3/15/28 ............................... 14,830,000 14,976,520 Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.85%, 3/15/28 ............................................ 8,980,000 9,208,002 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.75%, 7/01/08 ........................................ 700,000 710,570
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) US TERRITORIES (CONT.) Virgin Islands PFA Revenue, Matching Fund Loan Notes, Series A, Pre-Refunded, 7.25%, 10/01/18 ...................................... $ 14,000,000 $ 15,479,380 sub. lien, Fund Loan Notes, Refunding, Series E, 5.75%, 10/01/13 .................... 15,000,000 14,701,800 sub. lien, Fund Loan Notes, Refunding, Series E, 5.875%, 10/01/18 ................... 9,000,000 8,822,610 sub. lien, Fund Loan Notes, Refunding, Series E, 6.00%, 10/01/22 .................... 15,000,000 14,925,000 Virgin Islands Water and Power Authority Electric System Revenue, Series A, Pre-Refunded, 7.40%, 7/01/11 ...................... 360,000 382,378 Virgin Islands Water and Power Authority Water System Revenue, Series B, Pre-Refunded, 7.60%, 1/01/12 ......................... 4,000,000 4,427,600 ------------- 294,638,878 ------------- UTAH .4% Box Elder County PCR, Nucor Corp. Project, 6.90%, 5/15/17 .............................. 2,000,000 2,141,240 Carbon County Solid Waste Disposal Revenue, Laidlaw Environmental Services, Refunding, Series A, 7.45%, 7/01/17 .................. 2,500,000 2,692,775 Tooele County PCR, Laidlaw Environmental, Refunding, Series A, 7.55%, 7/01/27 .................................................. 3,500,000 3,775,870 Utah Assessed Municipal Power Systems Revenue, San Juan Project, MBIA Insured, Pre-Refunded, 6.375%, 6/01/22 ........................ 11,000,000 12,059,410 Utah State HFA, SFM, Series A-2, 9.625%, 7/01/02 ......................................................... 15,000 15,248 Series A-2, 9.45%, 7/01/03 .......................................................... 25,000 25,541 Series B, 9.50%, 7/01/00 ............................................................ 5,000 5,054 Series B, 9.25%, 7/01/01 ............................................................ 5,000 5,060 Series B-2, 9.50%, 7/01/02 .......................................................... 5,000 5,087 Series B-2, 9.45%, 7/01/03 .......................................................... 35,000 35,854 Series C-1, 9.375%, 7/01/00 ......................................................... 10,000 10,081 Series C-2, 9.05%, 7/01/03 .......................................................... 75,000 77,638 Series D-2, 9.00%, 7/01/03 .......................................................... 170,000 175,962 Series E, 9.50%, 7/01/00 ............................................................ 10,000 10,090 Series E-1, 8.70%, 7/01/03 .......................................................... 215,000 222,187 Sub Series B-2, 8.70%, 7/01/04 ...................................................... 395,000 409,643 Sub Series D, 8.45%, 7/01/04 ........................................................ 180,000 183,949 Weber County Municipal Building Authority Lease Revenue, Refunding, MBIA Insured, 5.75%, 12/15/19 ............................................. 5,000,000 5,031,650 ------------- 26,882,339 ------------- VIRGINIA .2% Virginia State HDA, Commonwealth Mortgage, Series D, Sub Series D-3, 6.125%, 1/01/19 ... 9,715,000 9,912,312 ------------- WASHINGTON .1% Washington State Public Power Supply System Revenue, Nuclear Project No. 1, Series C, Pre-Refunded, 8.00%, 7/01/17 ........................ 5,000,000 5,271,550 ------------- WEST VIRGINIA .3% West Virginia State Hospital Finance Authority Hospital Revenue, Logan General Hospital Project, Refunding and Improvement, 7.25%, 7/01/20 ........... 15,000,000 14,625,000 West Virginia State Water Development Authority Revenue, Solid Waste Management, Series C, 8.125%, 8/01/15 .................................... 2,290,000 2,382,585 ------------- 17,007,585 ------------- WISCONSIN .9% Wisconsin Housing and EDA, Homeownership Revenue, Series C, 6.15%, 9/01/17 ............................................................. 2,275,000 2,324,208 Wisconsin State Health and Educational Facilities Authority Revenue, Clement Manor, Refunding, 5.75%, 8/15/24 ............................................ 4,000,000 3,706,040 Felician Health Care, Series A, AMBAC Insured, Pre-Refunded, 7.00%, 1/01/15 ................................................... 5,000,000 5,151,200 Franciscan Health System Inc. Project, Pre-Refunded, 8.375%, 3/01/05 ................ 6,000,000 6,254,880 Franciscan Health System Inc. Project, Pre-Refunded, 8.50%, 3/01/20 ................. 6,000,000 6,258,540 Franciscan Skemp Medical Center Inc. Project, 6.25%, 11/15/20 ....................... 9,510,000 9,841,519 Sisters Sorrowful Mother, Series A, MBIA Insured, 5.90%, 8/15/24 .................... 22,055,000 22,469,855 ------------- 56,006,242 ------------- WYOMING .2% Sweetwater County PCR, Idaho Power Co. Project, Refunding, Series A, 6.05%, 7/15/26 .................................................. 10,500,000 10,599,435 Teton County Hospital District Hospital Revenue, Refunding and Improvement, 5.80%, 12/01/17 ........................................... 1,965,000 1,853,034 Wyoming CDA, Housing Revenue, Series 1, 6.15%, 6/01/17 ................................. 1,000,000 1,037,250 ------------- 13,489,719 ------------- TOTAL BONDS ............................................................................ 6,148,782,341
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ (d) ZERO COUPON BONDS 3.8% CALIFORNIA 3.5% Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, MBIA Insured, 1/15/22 ....................... $ 49,115,000 $ 12,399,573 Convertible Capital Appreciation, Refunding, 1/15/23 ......................... 35,000,000 18,905,250 San Francisco City and County RDA, Lease Revenue, George R. Moscone Center, 7/01/09 ..................................................................... 3,750,000 2,246,963 7/01/10 ..................................................................... 4,500,000 2,521,935 7/01/12 ..................................................................... 4,500,000 2,213,010 7/01/13 ..................................................................... 4,250,000 1,956,403 7/01/14 ..................................................................... 2,250,000 967,995 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Junior lien, ETM, 1/01/04 ................................................... 7,400,000 6,083,022 Junior lien, ETM, 1/01/05 ................................................... 8,000,000 6,239,440 Junior lien, ETM, 1/01/06 ................................................... 9,000,000 6,666,390 Junior lien, ETM, 1/01/07 ................................................... 9,400,000 6,592,784 Junior lien, ETM, 1/01/08 ................................................... 10,400,000 6,893,224 Junior lien, ETM, 1/01/09 ................................................... 21,900,000 13,691,004 Junior lien, ETM, 1/01/10 ................................................... 15,000,000 8,845,200 Junior lien, ETM, 1/01/12 ................................................... 30,100,000 15,718,822 Junior lien, ETM, 1/01/24 ................................................... 52,700,000 13,052,209 Junior lien, ETM, 1/01/25 ................................................... 45,200,000 10,544,256 Junior lien, ETM, 1/01/26 ................................................... 131,900,000 28,977,111 Junior lien, ETM, 1/01/27 ................................................... 139,100,000 28,849,340 Senior lien, Refunding, Series A, 1/15/23 ................................... 20,000,000 12,921,000 Senior lien, Refunding, Series A, 1/15/24 ................................... 20,000,000 12,915,600 ------------- 219,200,531 ------------- FLORIDA .1% Miami-Dade County Special Obligation, Capital Appreciation, Series B, MBIA Insured,10/01/28 ....................... 11,860,000 2,186,747 Capital Appreciation, Series B, MBIA Insured,10/01/29 ....................... 20,000,000 3,479,200 Capital Appreciation, Series B, MBIA Insured,10/01/32 ....................... 7,780,000 1,125,844 Capital Appreciation, Series B, MBIA Insured,10/01/33 ....................... 2,000,000 273,000 Capital Appreciation, Series B, MBIA Insured,10/01/35 ....................... 6,765,000 821,542 Sub. lien, Series B, MBIA Insured,10/01/34 .................................. 3,895,000 501,481 ------------- 8,387,814 ------------- NEBRASKA .1% Kearney IDR, Great Platte River Road, Capital Appreciation, zero cpn. to 1/01/06, 7.00% thereafter, 1/01/11 ..................................................................... 4,255,000 2,639,717 1/01/17 ..................................................................... 8,895,000 5,441,872 ------------- 8,081,589 ------------- NEW YORK MAC for City of Troy, Capital Appreciation, Series C, MBIA Insured, 7/15/21 ..................................................................... 428,010 124,174 1/15/22 ..................................................................... 649,658 182,820 ------------- 306,994 ------------- OHIO .1% Akron COP, Akron Municipal Baseball Stadium Project, Capital Appreciation, zero cpn. to 12/01/01, 6.30% thereafter, 12/01/05 .................................................. 1,700,000 1,564,646 6.40% thereafter, 12/01/06 .................................................. 1,685,000 1,558,810 6.50% thereafter, 12/01/07 .................................................. 1,750,000 1,626,468 6.90% thereafter, 12/01/16 .................................................. 2,500,000 2,385,575 ------------- 7,135,499 ------------- TOTAL ZERO COUPON BONDS ........................................................ 243,112,427 ------------- TOTAL LONG TERM INVESTMENTS (COST $6,342,124,371) .............................. 6,391,894,768 -------------
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN HIGH YIELD TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ (a)SHORT TERM INVESTMENTS .2% Delta County EDC, Environmental Improvement Revenue, Mead Escanaba Paper Project, Refunding, Series C, Daily VRDN and Put, 2.80%, 12/01/23 ......................................... $ 2,200,000 $ 2,200,000 Jacksonville Health Facilities Authority Hospital Revenue, Charity Obligation Group, Series C, MBIA Insured, Weekly VRDN and Put, 3.20%, 8/15/19 ........................................ 2,100,000 2,100,000 New Jersey EDA, EDR, Dow Chemical, El Dorado Term 1984B, Refunding, Daily VRDN and Put, 2.60%, 5/01/03 ............ 700,000 700,000 Port Authority of New York and New Jersey Special Obligation Revenue, Versatile Structure, Series 2, Daily VRDN and Put, 2.60%, 5/01/19 .......... 2,100,000 2,100,000 Uinta County PCR, Chevron USA Inc. Project, Refunding, Daily VRDN and Put, 2.70%, 8/15/20 .................................. 7,000,000 7,000,000 -------------- TOTAL SHORT TERM INVESTMENTS (COST $14,100,000) .................................. 14,100,000 -------------- TOTAL INVESTMENTS (COST $6,356,224,371) 99.7% .................................... 6,405,994,768 OTHER ASSETS, LESS LIABILITIES .3% ............................................... 16,908,338 -------------- NET ASSETS 100.0% ................................................................ $6,422,903,106 ==============
See glossary of terms on page 110. (a)Variable rate demand notes (VRDN) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b)Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. (c)See Note 6 regarding defaulted securities. (d)Zero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant. (e)The bond pays interest based upon the issuer's ability to pay, which may be less than the stated interest rate. See notes to financial statements FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 -------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ------- --------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ...... $ 11.96 $ 11.92 $ 11.61 $ 11.68 $ 11.28 $ 11.82 --------- --------- --------- --------- --------- --------- Income from investment operations: Net investment income .................... .30 .61 .63 .64 .65 .66 Net realized and unrealized gains (losses) (.54) .05 .32 (.06) .39 (.55) --------- --------- --------- --------- --------- --------- Total from investment operations .......... (.24) .66 .95 .58 1.04 .11 --------- --------- --------- --------- --------- --------- Less distributions from: Net investment income .................... (.31)(2) (.62) (.64) (.65) (.64) (.65) Net realized gains ....................... -- -- -- -- -- -- --------- --------- --------- --------- --------- --------- Net asset value, end of period ............ $ 11.41 (4) $ 11.96 $ 11.92 $ 11.61 $ 11.68 $ 11.28 ========= ========= ========= ========= ========= ========= Total return* ............................. (2.05%) 5.63% 8.37% 5.13% 9.43% 1.12% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ......... $ 677,939 $ 681,818 $ 636,929 $ 574,691 $ 564,864 $ 533,937 Ratios to average net assets: Expenses ................................. .66%** .65% .66% .64% .65% .63% Net investment income .................... 5.06%** 5.06% 5.34% 5.58% 5.65% 5.86% Portfolio turnover rate ................... 5.59% 5.43% 12.77% 8.87% 12.04% 31.05% CLASS C - ------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ...... $ 12.03 $ 11.98 $ 11.66 $ 11.72 $ 11.30 --------- --------- --------- --------- --------- Income from investment operations: Net investment income .................... .26 .54 .56 .57 .49 Net realized and unrealized gains (losses) (.55) .06 .33 (.05) .40 --------- --------- --------- --------- --------- Total from investment operations .......... (.29) .60 .89 .52 .89 --------- --------- --------- --------- --------- Less distributions from: Net investment income .................... (.27)(3) (.55) (.57) (.58) (.47) Net realized gains ....................... -- (4) -- -- -- -- --------- --------- --------- --------- --------- Net asset value, end of period ............ $ 11.47 $ 12.03 $ 11.98 $ 11.66 $ 11.72 ========= ========= ========= ========= ========= Total return* ............................. (2.40%) 5.09% 7.84% 4.57% 8.02% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ......... $ 51,770 $ 48,715 $ 28,139 $ 13,095 $ 4,542 Ratios to average net assets: Expenses ................................. 1.22%** 1.21% 1.21% 1.21% 1.23%** Net investment income .................... 4.50%** 4.50% 4.77% 5.01% 5.15%** Portfolio turnover rate ................... 5.59% 5.43% 12.77% 8.87% 12.04%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2)Includes distributions in excess of net investment income in the amount of $.007. (3)Includes distributions in excess of net investment income in the amount of $.006. (4)Includes distribution of net realized gains in the amount of $.003. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 98.9% BONDS 98.9% Aberdeen Township, Refunding, FGIC Insured, 5.70%, 2/01/22 ............................... $ 4,100,000 $ 4,135,424 Allamuchy Town Board of Education COP, MBIA Insured, 6.00%, 11/01/14 .......................................................... 1,000,000 1,042,390 Atlantic City Municipal Utilities Authority Revenue, Water System, Pre-Refunded, 7.75%, 5/01/17 ............................................. 2,000,000 2,091,720 Atlantic County Improvement Authority Luxury Tax Revenue, Convention Center Project, MBIA Insured, ETM, 7.40%, 7/01/16 ........................... 9,500,000 11,487,305 Atlantic County Utilities Authority, Solid Waste Revenue, 7.00%, 3/01/08 ........................................................................ 2,000,000 1,991,160 7.125%, 3/01/16 ....................................................................... 6,600,000 6,596,766 Bedminister Township Board of Education COP, Pre-Refunded, 7.125%, 9/01/10 .......................................................... 2,000,000 2,123,880 Bergen County Utility Authority Solid Waste System Revenue, Series A, FGIC Insured, 6.25%, 6/15/11 ................................................. 1,325,000 1,395,835 Camden County Improvement Authority Health System Revenue, Catholic Health East, Series B, AMBAC Insured, 5.00%, 11/15/28 ......................... 11,600,000 10,315,184 Camden County Municipal Utilities Authority Sewer Revenue, Refunding, FGIC Insured, 5.20%, 7/15/15 ........................................................................ 5,000,000 4,842,250 5.25%, 7/15/16 ........................................................................ 2,005,000 1,941,662 5.125%, 7/15/17 ....................................................................... 4,560,000 4,322,014 5.25%, 7/15/17 ........................................................................ 2,425,000 2,332,414 Cape May County IPC, Financing Authority Revenue, Refunding, Atlantic City Electric Co., Series A, MBIA Insured, 6.80%, 3/01/21 .......... 5,400,000 6,271,182 Carteret Board of Education COP, MBIA Insured, Pre-Refunded, 6.25%, 4/15/19 .............. 2,750,000 3,014,055 Church Street Corp. Keansburg Elderly Housing Mortgage Revenue, Refunding, 5.625%, 3/01/11 ............................................................. 1,890,000 1,902,758 Delaware River and Bay Authority Revenue, FGIC Insured, 5.25%, 1/01/26 ........................................................... 10,200,000 9,764,664 Delaware River Port Authority Pennsylvania and New Jersey Revenue, Series 1995, FGIC Insured, 5.50%, 1/01/26 .............................................. 24,000,000 23,702,160 Essex County Improvement Authority Revenue, MBIA Insured, Pre-Refunded, 6.00%, 12/01/17 ........................................... 2,510,000 2,683,843 Utilities System, Orange Franchise, Series A, MBIA Insured, 5.375%, 7/01/18 .................................................... 1,400,000 1,369,886 Evesham Municipal Utilities Authority Revenue, Series B, MBIA Insured, 7.00%, 7/01/10 ................................................. 3,000,000 3,062,460 Freehold Township Board of Education, FSA Insured, 5.40%, 7/15/28 ........................ 1,080,000 1,049,177 Gloucester County Improvement Authority Revenue, Justice Complex Lease Project, Pre-Refunded, 7.50%, 12/15/10 ........................... 1,000,000 1,020,820 Gloucester County Improvement Authority Solid Waste Resource Recovery Revenue, SES Gloucester Co. LP Project, Series B, 8.375%, 7/01/10 ............ 275,000 275,963 Guam Power Authority Revenue, Refunding, Series A, 5.25%, 10/01/34 ....................... 4,000,000 3,584,000 Hamilton Township Board of Education COP, Series B, FSA Insured, 7.00%, 12/15/15 ................................................. 4,670,000 4,937,217 Highland Park School District GO, Refunding, MBIA Insured, 5.125%, 2/15/25 ............... 7,120,000 6,663,964 Howell Township GO, Refunding, FGIC Insured, 6.80%, 1/01/14 .............................. 1,750,000 1,860,198 Hudson County Improvement Authorities Facilities Lease Revenue, Hudson County Lease Project, FGIC Insured, Pre-Refunded, 6.00%, 12/01/25 .............. 2,000,000 2,138,520 Hudson County Improvement Authority Solid Waste Systems Revenue, Koppers Site Project, Series A, 6.125%, 1/01/29 ........................................ 6,510,000 6,443,728 Mercer County Improvement Authority Revenue, Library Systems, Series A, Pre-Refunded, 6.00%, 12/01/14 ................................................ 2,500,000 2,691,675 Middlesex County COP, MBIA Insured, 5.30%, 6/15/29 ........................................................................ 5,000,000 4,694,050 Pre-Refunded, 6.00%, 8/15/14 .......................................................... 1,500,000 1,600,215 Pre-Refunded, 6.125%, 2/15/19 ......................................................... 2,300,000 2,465,117 Middlesex County Improvement Authority Revenue, Guaranteed Educational Services, Commission Project, Pre-Refunded, 6.00%, 9/15/14 .......................................................... 2,000,000 2,167,600 Middlesex County Utilities Authority Sewer Revenue, Refunding, Series A, FGIC Insured, 5.375%, 9/15/15 ....................................................................... 2,100,000 2,087,694 5.125%, 12/01/16 ...................................................................... 9,000,000 8,616,690 Middletown Township GO, Board of Education, MBIA Insured, 5.85%, 8/01/24 ............................................................................... 4,295,000 4,368,101 8/01/25 ............................................................................... 4,300,000 4,378,690 Moorestown Township School District GO, FGIC Insured, 5.00%, 1/01/26 ..................... 1,000,000 921,680 Mount Laurel Township Board of Education GO, FGIC Insured, 5.40%, 8/01/16 ............................................................................... 2,155,000 2,147,802 8/01/17 ............................................................................... 2,405,000 2,385,808 New Jersey EDA, Auto Parking Revenue, Blair Development Co., FGIC Insured, 5.60%, 10/15/26 ............ 2,000,000 1,977,860 EDR, School Revenue, Blair Academy, 1995 Project, Series N, 6.90%, 12/01/11 ........... 3,545,000 3,729,269 EDR, School Revenue, Blair Academy, 1995 Project, Series P, 6.90%, 12/01/11 ........... 395,000 415,532 Heating and Cooling Revenue, Trigen-Trenton Project, Series A, 6.20%, 12/01/10 ........ 6,370,000 6,514,599 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.10%, 12/01/04 ........ 3,245,000 3,317,526 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.20%, 12/01/07 ........ 2,720,000 2,790,312
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) New Jersey EDA, (cont.) Market Transition Facilities Revenue, Senior Lien, Series A, MBIA Insured, 5.875%, 7/01/11 .......................... $ 3,000,000 $ 3,158,880 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series A, AMBAC Insured, 6.25%, 8/01/24 ....................................... 8,200,000 8,572,444 PCR, Jersey Central Power and Light, 7.10%, 7/01/15 ................................. 550,000 583,561 School Revenue, Blair Academy, 1995 Project, Series A, 5.85%, 9/01/16 ............... 1,640,000 1,644,100 State Lease Revenue, Liberty State Park Lease Rental, Refunding, AMBAC Insured, 5.75%, 3/15/20 ...................................... 4,605,000 4,648,149 State Lease Revenue, Liberty State Park Lease Rental, Refunding, AMBAC Insured, 5.75%, 3/15/22 ...................................... 3,315,000 3,339,332 Terminal Revenue, GATX Terminals Corp. Project, 6.65%, 9/01/22 ...................... 7,440,000 7,787,150 Water Facilities Revenue, Hackensack Water Co. Project, Refunding, Series A, MBIA Insured, 5.80%, 3/01/24 ............................. 1,000,000 1,007,520 Water Facilities Revenue, Middlesex Water Co. Project, 7.25%, 7/01/21 ............... 6,000,000 6,319,380 New Jersey EDA Revenue, Educational Testing Service, Refunding, Series A, MBIA Insured, 4.75%, 5/15/25 ................................................... 3,000,000 2,553,240 Hillcrest Health Services System Project, Refunding, AMBAC Insured, 5.375%, 1/01/16 ...................................... 2,500,000 2,458,475 St. Barnabas Project, Series A, MBIA Insured, 5.375%, 7/01/27 ....................... 4,375,000 4,159,838 Transportation Project Sub-Lease, Series A, FSA Insured, 5.00%, 5/01/18 ............. 2,000,000 1,868,600 New Jersey Health Care Facilities Financing Authority Revenue, Atlantic City Medical Center, Series C, 6.80%, 7/01/11 .............................. 2,500,000 2,646,925 Atlantic Health Systems, Series A, AMBAC Insured, 5.00%, 7/01/27 .................... 7,500,000 6,732,675 Berkeley Heights Convalescent Hospital, AMBAC Insured, 5.00%, 7/01/26 ............... 6,000,000 5,365,380 Beth Israel Hospital Association Passaic, 7.80%, 7/01/04 ............................ 2,345,000 2,398,935 Beth Israel Hospital Association Passaic, Refunding, 7.875%, 7/01/07 ................ 1,000,000 1,023,050 Burdette Tomlin Memorial Hospital, 5.50%, 7/01/29 ................................... 5,725,000 5,397,244 Cathedral Health Service, Pre-Refunded, 7.25%, 2/15/21 .............................. 2,020,000 2,146,129 Cathedral Health Services, Refunding, MBIA Insured, 5.25%, 8/01/21 .................. 5,000,000 4,732,150 Cathedral Health, Series A, FHA Insured, Pre-Refunded, 7.25%, 2/15/10 ............... 9,275,000 9,854,131 Christian Health Care Center, Refunding, Series A, 5.50%, 7/01/18 ................... 1,200,000 1,104,816 East Orange General Hospital, Series B, 7.75%, 7/01/20 .............................. 5,445,000 5,635,031 Elizabeth General Medical Center, Series C, 7.375%, 7/01/15 ......................... 4,890,000 5,045,698 Franciscan St. Mary's Hospital, 5.875%, 7/01/12 ..................................... 5,150,000 5,138,052 Hackensack Medical Center, FGIC Insured, Pre-Refunded, 6.25%, 7/01/21 ............... 2,400,000 2,488,944 Hackensack University Medical Center, Refunding, Series B, MBIA Insured, 5.20%, 1/01/28 .............................. 5,000,000 4,630,450 Holy Name Hospital, 6.00%, 7/01/25 .................................................. 3,000,000 2,968,620 Holy Name Hospital, AMBAC Insured, 5.25%, 7/01/20 ................................... 4,380,000 4,187,368 Holy Name Hospital, Series B, AMBAC Insured, Pre-Refunded, 7.00%, 7/01/08 .................................................. 2,000,000 2,093,320 Jersey Shore Medical Center, Refunding, AMBAC Insured, 5.875%, 7/01/24 .............. 1,525,000 1,616,332 Jersey Shore Medical Center, Refunding, AMBAC Insured, 5.875%, 7/01/24 .............. 975,000 981,611 John F. Kennedy Health Systems, Obligation Group Revenue, FGIC Insured, 5.70%, 7/01/25 .................................................. 5,000,000 5,008,950 John F. Kennedy Medical Center/Hartwyck, Refunding, MBIA Insured, 5.00%, 7/01/25 ....................................... 7,855,000 7,037,687 Medical Center at Princeton Obligation Group, AMBAC Insured, 5.00%, 7/01/28 ......... 7,000,000 6,228,600 Meridian Health Systems Obligation Group, FSA Insured, 5.375%, 7/01/24 .............. 6,500,000 6,228,950 Meridian Health Systems Obligation Group, FSA Insured, 5.25%, 7/01/29 ............... 9,050,000 8,456,139 Monmouth Medical Center, Series C, FSA Insured, Pre-Refunded, 6.25%, 7/01/16 ........ 4,900,000 5,351,535 Monmouth Medical Center, Series C, FSA Insured, Pre-Refunded, 6.25%, 7/01/24 .................................................. 8,250,000 9,010,238 New Jersey Geriatric Center of Workmen's Circle Inc., Series A, FHA Insured, 8.00%, 2/01/28 ......................................... 125,000 127,853 Newcomb Medical Center, Series A, 7.875%, 7/01/03 ................................... 2,075,000 2,109,943 Pascack Valley Hospital Association, 5.125%, 7/01/28 ................................ 6,000,000 5,109,720 Pascack Valley Hospital, Pre-Refunded, 6.90%, 7/01/21 ............................... 3,565,000 3,797,153 Riverview Medical Center, AMBAC Insured, Pre-Refunded, 5.875%, 7/01/16 .............. 10,000,000 10,760,400 Shoreline Behavioral Health, MBIA Insured, 5.50%, 7/01/27 ........................... 1,500,000 1,462,335 Southern Ocean County Hospital, FSA Insured, 5.00%, 7/01/27 ......................... 2,000,000 1,785,220 St. Barnabas Health, Refunding, Series B, MBIA Insured, 5.00%, 7/01/24 .............. 13,000,000 11,734,190 St. Joseph's Hospital and Medical Center, Refunding, Connie Lee Insured, 5.75%, 7/01/16 ................................ 2,050,000 2,088,151 St. Joseph's Hospital and Medical Center, Refunding, Connie Lee Insured, 6.00%, 7/01/26 ................................ 1,000,000 1,021,880 Wayne General Hospital, Series B, Pre-Refunded, 5.75%, 8/01/11 ...................... 1,680,000 1,800,086 Wayne General Hospital, Series B, Pre-Refunded, 5.875%, 8/01/18 ..................... 1,000,000 1,076,930 New Jersey State Building Authority Revenue, Refunding, 5.00%, 6/15/15 ................. 5,000,000 4,783,850 New Jersey State Educational Facilities Authority Revenue, Jersey State College, Series D, MBIA Insured, Pre-Refunded, 6.125%, 7/01/22 ......... 2,000,000 2,133,200 New Jersey Institute of Technology Revenue, Refunding, Series A, MBIA Insured, 6.00%, 7/01/24 ............................. 1,455,000 1,499,159
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) New Jersey State Educational Facilities Authority Revenue, (cont.) New Jersey Institute of Technology, Series 95-E, MBIA Insured, 5.375%, 7/01/25 ........ $ 2,500,000 $ 2,400,400 New Jersey Institute of Technology, Series A, MBIA Insured, 6.00%, 7/01/15 ............ 4,000,000 4,144,400 Princeton University, Refunding, Series A, 5.00%, 7/01/29 ............................. 5,000,000 4,553,600 Princeton University, Series C, 5.25%, 7/01/25 ........................................ 2,760,000 2,650,511 Rider College, Series D, AMBAC Insured, 6.20%, 7/01/17 ................................ 3,000,000 3,143,340 Rowan College, Series E, AMBAC Insured, 6.00%, 7/01/26 ................................ 9,810,000 10,024,643 Seton Hall University Project, Refunding, Series E, MBIA Insured, 5.60%, 7/01/16 ...... 1,765,000 1,779,526 Seton Hall University Project, Series D, 7.00%, 7/01/21 ............................... 2,665,000 2,805,446 Seton Hall University Project, Series D, Pre-Refunded, 7.00%, 7/01/21 ................. 1,735,000 1,852,598 St. Peters College, Series B, 5.50%, 7/01/27 .......................................... 2,000,000 1,840,040 Stevens Institute of Technology, Series I, 5.00%, 7/01/18 ............................. 1,100,000 1,003,420 Stevens Institute of Technology, Series I, 5.00%, 7/01/28 ............................. 1,575,000 1,397,419 Trenton State College, Series B, AMBAC Insured, Pre-Refunded, 6.125%, 7/01/19 ......... 4,780,000 5,156,234 Trenton State College, Series B, AMBAC Insured, Pre-Refunded, 6.125%, 7/01/24 ......... 7,845,000 8,462,480 University of Medical Dentistry, Series C, AMBAC Insured, 5.20%, 12/01/19 ............. 1,000,000 952,990 University of Medical Dentistry, Series C, AMBAC Insured, 5.125%, 12/01/29 ............ 2,700,000 2,466,315 New Jersey State Highway Authority Garden State Parkway, Senior Parkway Revenue, 6.20%, 1/01/10 ........................................................................ 5,000,000 5,409,850 6.25%, 1/01/14 ........................................................................ 2,500,000 2,628,600 6.00%, 1/01/16 ........................................................................ 2,900,000 2,962,756 New Jersey State Housing and Mortgage Finance Agency MFHR, Montclarion Project, Series J, FHA Insured, 7.70%, 11/01/29 ........................... 2,155,000 2,223,141 Refunding, Series A, AMBAC Insured, 6.00%, 11/01/14 ................................... 5,000,000 5,154,450 Refunding, Series A, AMBAC Insured, 6.05%, 11/01/20 ................................... 12,500,000 12,854,000 Regency Park Project, Series H, 7.70%, 11/01/30 ....................................... 450,000 460,292 Series A, AMBAC Insured, 5.55%, 5/01/27 ............................................... 2,000,000 1,920,720 New Jersey State Housing and Mortgage Finance Agency Revenue, Home Buyer, Series B, MBIA Insured, 7.90%, 10/01/22 ................................... 425,000 433,343 Home Buyer, Series D, MBIA Insured, 7.70%, 10/01/29 ................................... 2,180,000 2,225,453 Home Buyer, Series J, MBIA Insured, 6.20%, 10/01/25 ................................... 4,980,000 5,098,574 Home Buyer, Series N, MBIA Insured, 6.35%, 10/01/27 ................................... 4,000,000 4,132,240 Home Buyer, Series U, MBIA Insured, 5.85%, 4/01/29 .................................... 12,000,000 12,062,880 Section 8, Refunding, Series 1, 6.70%, 11/01/28 ....................................... 2,885,000 3,033,722 Section 8, Refunding, Series A, 6.95%, 11/01/13 ....................................... 12,400,000 13,067,120 (b)SFMR, Home Bury, Series Z, MBIA Insured, 5.70%, 10/01/17 ............................ 6,325,000 6,343,153 New Jersey State Sports and Exposition Authority Convention Center Luxury Tax, Series A, MBIA Insured, Pre-Refunded, 6.60%, 7/01/15 ........................................................................ 8,000,000 8,632,960 6.25%, 7/01/20 ........................................................................ 6,800,000 7,275,252 Newark Board of Education, MBIA Insured, 5.875%, 12/15/14 ................................ 3,250,000 3,379,318 North Brunswick Township Board of Education GO, Refunding, FGIC Insured, 5.00%, 2/01/15 ............................................... 2,000,000 1,923,000 Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.85%, 3/15/28 ............................................. 1,985,000 2,035,399 Ocean Township Municipal Utilities Authority Revenue, Refunding, AMBAC Insured, 5.80%, 12/01/18 ............................................. 7,400,000 7,479,106 Orange Township GO, Municipal Utility and Lease, Refunding, Series C, MBIA Insured, 5.10%, 12/01/17 .................................... 3,035,000 2,899,396 Plainfield Board Education, FSA Insured, 5.00%, 8/01/26 .................................. 6,050,000 5,555,957 Port Authority of New York and New Jersey Revenue, Consolidated 67th Series, 6.875%, 1/01/25 ............................................. 2,500,000 2,546,975 Consolidated 67th Series, AMBAC Insured, 6.875%, 1/01/25 .............................. 750,000 763,943 Consolidated 71st Series, 6.50%, 1/15/26 .............................................. 2,500,000 2,577,825 Consolidated 72nd Series, 7.35%, 10/01/27 ............................................. 7,000,000 7,598,710 Consolidated 74th Series, 6.75%, 8/01/26 .............................................. 1,000,000 1,043,720 Consolidated 84th Series, 6.00%, 1/15/28 .............................................. 1,125,000 1,154,846 Consolidated 94th Series, 6.00%, 12/01/16 ............................................. 2,000,000 2,083,980 Consolidated 94th Series, 6.00%, 6/01/17 .............................................. 5,000,000 5,209,950 Consolidated, 109th Series, FGIC Insured, 5.375%, 7/15/22 ............................. 4,645,000 4,528,364 Delta Air Lines Special Project, Series 1, 6.95%, 6/01/08 ............................. 5,000,000 5,320,650 Special Obligation Revenue, 4th Installment, Special Project, 6.75%, 10/01/11 ......... 2,500,000 2,662,000 Special Obligation Revenue, Consolidated, 102nd Series, MBIA Insured, 5.75%, 10/15/23 ..................................... 5,000,000 5,117,350 Special Obligation Revenue, John F. Kennedy International Air Terminal, MBIA Insured, 5.75%, 12/01/22 ....................... 8,000,000 8,011,440
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN NEW JERSEY TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Puerto Rico Commonwealth GO, Pre-Refunded, 6.45%, 7/01/17 .............................. $ 3,000,000 $ 3,303,870 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Q, Pre-Refunded, 8.00%, 7/01/18 ............ 8,000,000 8,444,720 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.90%, 7/01/07 ..................................................................... 120,000 121,350 7.75%, 7/01/08 ..................................................................... 1,350,000 1,370,385 7.50%, 7/01/09 ..................................................................... 100,000 101,271 Puerto Rico Commonwealth Urban Renewal and Housing Corp. Commonwealth Appropriation, Refunding, 7.875%, 10/01/04 ............... 1,000,000 1,022,380 Puerto Rico Electric Power Authority Revenue, Series T, 6.00%, 7/01/16 ........................................................... 11,535,000 11,911,502 Series X, 6.00%, 7/01/15 ........................................................... 2,000,000 2,073,020 Series X, Pre-Refunded, 6.125%, 7/01/21 ............................................ 5,000,000 5,456,900 Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ......................................... 4,185,000 4,302,180 Sixth Portfolio, Section 8 Assisted, FHA Mortgage Insured, Pre-Refunded, 7.75%, 12/01/26 ................................................ 125,000 146,748 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ............................................. 470,000 486,629 Rutgers State University, Series A, 6.50%, 5/01/18 .................................... 4,250,000 4,501,940 Salem County IPC, Financing Authority Revenue, Public Services, Electric and Gas Co., Refunding, Series D, MBIA Insured, 6.55%, 10/01/29 ................................... 5,000,000 5,421,350 South Brunswick Township Board of Education GO, Refunding, Series AA, FGIC Insured, 5.50%, 8/01/24 ................................. 1,720,000 1,701,510 South Jersey Transportation Authority Transportation Systems Revenue, AMBAC Insured, 5.00%, 11/01/29 ..................................................... 16,525,000 14,779,795 Stony Brook Regional Sewerage Authority Revenue, Series A, Pre-Refunded, 7.40%, 12/01/09 ............................................ 1,000,000 1,029,000 Union County Improvement Authority Revenue, Plainfield Board of Education, FGIC Insured, Pre-Refunded, 5.85%, 8/01/26 ........... 5,000,000 5,376,300 Union County Utilities Authority Solid Waste Revenue, sub. leased, Ogden Martin, Series A, AMBAC Insured, 5.35%, 6/01/23 .................. 2,900,000 2,732,612 University of Medicine and Dentistry COP, Series A, MBIA Insured, 5.00%, 9/01/22 .............................................. 1,700,000 1,548,547 University of Medicine and Dentistry Revenue, Series C, Pre-Refunded, 7.20%, 12/01/09 ........................................................................... 750,000 771,390 12/01/19 ........................................................................... 725,000 745,668 Virgin Islands PFA Revenue, Fund Loan Notes, Senior Lien, Refunding, Series A, 5.50%, 10/01/18 .................................................................... 3,045,000 2,916,562 5.50%, 10/01/15 .................................................................... 2,500,000 2,414,525 5.50%, 10/01/22 .................................................................... 2,000,000 1,899,740 ------------ TOTAL BONDS ............................................................................ 721,556,209 ------------ ZERO COUPON BONDS (d)Middlesex County COP, MBIA Insured, 6/15/24 ......................................... 1,000,000 241,280 ------------ TOTAL LONG TERM INVESTMENTS (COST $709,221,163) ....................................... 721,797,489 ------------ (a)SHORT TERM INVESTMENTS .1% New Jersey State Turnpike Authority Revenue, Series D, FGIC Insured, Weekly VRDN and Put, 2.50%, 1/01/18 (COST $400,000) ......... 400,000 400,000 ------------ TOTAL INVESTMENTS (COST $709,621,163) 99.0% ........................................... 722,197,489 OTHER ASSETS, LESS LIABILITIES 1.0% ................................................... 7,512,061 ------------ NET ASSETS 100.0% ..................................................................... $729,709,550 ============
See glossary of terms on page 110. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. (d) Zero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN OREGON TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 ----------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ------- --------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.83 $ 11.86 $ 11.55 $ 11.60 $ 11.22 $ 11.70 -------- -------- -------- -------- -------- -------- Income from investment operations: Net investment income ........................ .29 .59 .62 .63 .63 .63 Net realized and unrealized gains (losses) ... (.59) (.01) .31 (.05) .38 (.49) -------- -------- -------- -------- -------- -------- Total from investment operations .............. (.30) .58 .93 .58 1.01 .14 -------- -------- -------- -------- -------- -------- Less distributions from net investment income . (.30) (.61) (.62) (.63) (.63) (.62) -------- -------- -------- -------- -------- -------- Net asset value, end of period ................ $ 11.23 $ 11.83 $ 11.86 $ 11.55 $ 11.60 $ 11.22 ======== ======== ======== ======== ======== ======== Total return* ................................. (2.62%) 5.12% 8.21% 5.13% 9.19% 1.36% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $471,951 $483,664 $427,022 $384,003 $375,415 $349,458 Ratios to average net assets: Expenses ..................................... .66%** .67% .67% .66% .66% .65% Net investment income ........................ 4.98%** 5.00% 5.33% 5.52% 5.51% 5.71% Portfolio turnover rate ....................... 15.60% 10.65% 12.18% 4.47% 6.52% 26.44% CLASS C PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.90 $ 11.92 $ 11.61 $ 11.65 $ 11.23 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ........................ .26 .53 .56 .56 .47 Net realized and unrealized gains (losses) ... (.59) -- .31 (.04) .41 -------- -------- -------- -------- -------- Total from investment operations .............. (.33) .53 .87 .52 .88 -------- -------- -------- -------- -------- Less distributions from net investment income . (.26) (.55) (.56) (.56) (.46) -------- -------- -------- -------- -------- Net asset value, end of period ................ $ 11.31 $ 11.90 $ 11.92 $ 11.61 $ 11.65 ======== ======== ======== ======== ======== Total return* ................................. (2.88%) 4.59% 7.66% 4.59% 7.99% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 36,911 $ 32,962 $ 15,946 $ 7,100 $ 2,044 Ratios to average net assets: Expenses ..................................... 1.22%** 1.23% 1.22% 1.23% 1.24%** Net investment income ........................ 4.44%** 4.44% 4.74% 4.93% 4.87%** Portfolio turnover rate ....................... 15.60% 10.65% 12.18% 4.47% 6.52%
*Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. **Annualized ***Based on average shares outstanding. (1)For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 99.4% BONDS 99.3% Bay Area Health District Hospital Facility Authority, Health Facilities Revenue, Evergreen Court Project, 7.25%, 10/01/14 .............. $ 2,000,000 $ 2,087,040 Benton County Hospital Facilities Authority Revenue, Samaritan Health Services Project, Refunding, 5.20%, 10/01/17 ................................................................. 4,000,000 3,728,960 5.125%, 10/01/28 ................................................................ 4,500,000 4,011,975 Benton County Hospital Facilities Authority, Good Samaritan Hospital, Corvallis, Pre-Refunded, 6.25%, 10/01/09 ................ 1,125,000 1,195,088 Chemeketa Community College District, FGIC Insured, Pre-Refunded, 5.80%, 6/01/12 ....................................... 1,000,000 1,062,870 Clackamas Community College District, MBIA Insured, Pre-Refunded, 5.80%, 6/01/26 ....................................... 1,000,000 1,062,870 Clackamas County Health Facilities Authority Hospital Revenue, Adventist Health, Refunding, Series A, MBIA Insured, 6.35%, 3/01/09 .............. 4,945,000 5,214,601 Clackamas County Hospital Facilities Authority Revenue, Gross Willamette Falls, Refunding, 5.75%, 4/01/15 ............................... 2,250,000 2,224,823 Jennings Lodge Project, GNMA Secured, 7.50%, 10/20/31 ........................... 2,990,000 3,094,680 Kaiser Permanente, Series A, 6.50%, 4/01/11 ..................................... 1,635,000 1,700,923 Kaiser Permanente, Series A, 5.375%, 4/01/14 .................................... 2,500,000 2,420,150 Kaiser Permanente, Series A, 6.25%, 4/01/21 ..................................... 4,950,000 5,094,689 Sisters of Providence Project, 8.125%, 10/01/07 ................................. 110,000 110,628 (b)Willamette Falls Hospital Project, 6.00%, 4/01/19 ............................. 1,000,000 985,240 Willamette View Inc. Project, Refunding, 6.10%, 11/01/12 ........................ 500,000 501,825 Willamette View Inc. Project, Refunding, 6.30%, 11/01/21 ........................ 1,500,000 1,499,835 Clackamas County USD No. 115, AMBAC Insured, Pre-Refunded, 6.15%, 6/01/14 ...................................... 4,000,000 4,347,160 Clairmont Water District Revenue, 6.50%, 2/01/12 ................................... 1,125,000 1,140,761 Deschutes County Hospital Facilities Authority Hospital Revenue, St. Charles Medical Center, 6.00%, 1/01/13 ..................... 3,000,000 3,115,980 Douglas County Hospital Facilities Authority Revenue, Catholic Health Facilities, Series B, MBIA Insured, 6.00%, 11/15/15 .............. 1,950,000 2,044,907 Emerald People's Utility District Electric System Revenue, Series B, AMBAC Insured, Pre-Refunded, 7.30%, 11/01/11 ........................... 500,000 502,975 Eugene Electric Utility System Revenue, Pre-Refunded, 6.65%, 8/01/10 .................................................................. 655,000 684,514 6.70%, 8/01/11 .................................................................. 700,000 732,172 Eugene Public Safety Facilities, FGIC Insured, 5.70%, 6/01/16 ...................... 500,000 510,320 Eugene Trojan Nuclear Project Revenue, Refunding, 5.90%, 9/01/09 ................... 840,000 845,166 Guam Airport Authority Revenue, Series B, 6.60%, 10/01/10 ................................................................. 750,000 796,275 6.70%, 10/01/23 ................................................................. 1,900,000 2,021,239 Guam Power Authority Revenue, Refunding, Series A, 5.25%, 10/01/34 ............................................ 10,000,000 8,960,000 Refunding, Series A, 5.125%, 10/01/29 ........................................... 2,000,000 1,780,320 Series A, Pre-Refunded, 6.30%, 10/01/12 ......................................... 825,000 887,279 Hermiston GO, AMBAC Insured, 6.00%, 8/01/15 ........................................ 1,000,000 1,040,810 Hillsborough Hospital Facilities Authority Revenue, Refunding, 5.75%, 10/01/12 ..... 205,000 205,580 Klamath Falls Intercommunity Hospital Revenue, Merle West Medical Center Project, 7.00%, 6/01/02 .................................................................. 1,175,000 1,233,832 7.25%, 6/01/06 .................................................................. 2,310,000 2,429,496 Lane County PCR, Weyerhaeuser Co. Project, Refunding, 6.50%, 7/01/09 ............... 11,575,000 12,277,834 Lebanon Wastewater Revenue, Refunding, 5.875%, 6/01/20 ............................. 2,425,000 2,386,224 Marion County COP, Courthouse Square Project, Series A, MBIA Insured, 5.00%, 6/01/23 ........................................... 1,000,000 910,650 Marion County Housing Authority Revenue, Elliott Residence Project, GNMA Secured, 7.50%, 10/20/25 ......................... 1,240,000 1,353,733 Medford Hospital Facilities Authority Revenue, Asante Health System, Series A, MBIA Insured, 5.00%, 8/15/18 .................... 9,500,000 8,797,380 Asante Health System, Series A, MBIA Insured, 5.00%, 8/15/24 .................... 6,300,000 5,732,055 Asante Health Systems, Series B, MBIA Insured, 5.125%, 8/15/28 .................. 6,000,000 5,561,400 Gross Rogue Valley Health Services, MBIA Insured, Pre-Refunded, 6.75%, 12/01/20 .............................................. 4,475,000 4,712,265 Metropolitan Service District Convention Center GO, Series A, 6.25%, 1/01/13 ....... 4,865,000 4,988,620 Multnomah County COP, Series A, 4.75%, 8/01/16 ..................................... 1,825,000 1,627,389 Multnomah Educational Service District, FSA Insured, 5.40%, 6/01/17 ................ 1,000,000 993,150 Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.85%, 3/15/28 ........................................ 3,440,000 3,527,342 Oak Lodge Water District GO, AMBAC Insured, 7.40%, 12/01/08 ................................................................. 215,000 238,629 7.50%, 12/01/09 ................................................................. 215,000 238,667 Ontario Catholic Health Revenue, Dominican Sisters Holy Rosary, 6.10%, 11/15/17 ................................... 1,500,000 1,559,985 Oregon City Sewer Revenue, Pre-Refunded, 6.875%, 10/01/19 .......................... 4,000,000 4,480,800
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)(CONT.)
PRINCIPAL FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Oregon Health Sciences University Revenue, Series A, MBIA Insured, 5.25%, 7/01/25 ............................................................................... $ 100,000 $ 95,901 7/01/28 ............................................................................... 1,750,000 1,677,200 Oregon State Department of Administrative Services COP, Series A, AMBAC Insured, 5.00%, 5/01/24 ............................................... 35,000,000 31,731,000 Series A, AMBAC Insured, Pre-Refunded, 5.80%, 5/01/24 ................................. 5,000,000 5,351,750 Series C, MBIA Insured, 5.75%, 5/01/17 ................................................ 2,000,000 2,045,800 Oregon State Department of General Services COP, Real Property Financing Program, Series A, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/15 .......................... 750,000 792,645 Real Property Financing Program, Series A, MBIA Insured, Pre-Refunded, 7.20%, 1/15/15 ........................... 10,000 10,326 Refunding, Series D, MBIA Insured, 5.80%, 3/01/15 ..................................... 1,000,000 1,023,430 Series B, MBIA Insured, Pre-Refunded, 7.20%, 1/15/15 .................................. 150,000 154,886 Series F, AMBAC Insured, Pre-Refunded, 7.50%, 9/01/15 ................................. 950,000 1,004,017 Series G, AMBAC Insured, 6.25%, 9/01/15 ............................................... 750,000 781,395 Oregon State Department of Transportation Revenue GO, Regional Light Rail Federal Westside Project, MBIA Insured, 6.10%, 6/01/07 ........................................................................ 2,000,000 2,134,760 6.20%, 6/01/08 ........................................................................ 2,500,000 2,674,525 6.25%, 6/01/09 ........................................................................ 1,750,000 1,882,773 Oregon State EDR, Georgia Pacific Corp. Project, Refunding, Series 183, 5.70%, 12/01/25 ................................................ 1,500,000 1,397,730 Series CLVII, 6.35%, 8/01/25 .......................................................... 18,500,000 18,790,080 Oregon State Elderly Housing GO, Series A, 7.125%, 8/01/30 ............................... 475,000 485,545 Oregon State GO Alternative Energy Project, Refunding, Series D, 5.00%, 1/01/28 ....................... 4,265,000 3,847,457 Board of Higher Education, 6.50%, 10/01/17 ............................................ 750,000 773,993 Board of Higher Education, Baccalaureate, Series A, 5.00%, 8/01/22 .................... 5,000,000 4,585,000 Board of Higher Education, Baccalaureate, Series A, 5.00%, 8/01/27 .................... 6,000,000 5,431,860 Board of Higher Education, Series A, 5.65%, 8/01/27 ................................... 4,440,000 4,453,098 Board of Higher Education, Series C, 5.65%, 8/01/27 ................................... 1,460,000 1,464,307 Elderly and Disabled Housing Authority, Series A, 6.00%, 8/01/15 ...................... 910,000 940,640 Elderly and Disabled Housing Authority, Series A, 6.00%, 8/01/21 ...................... 455,000 467,676 Elderly and Disabled Housing Authority, Series A, 5.375%, 8/01/28 ..................... 1,950,000 1,839,572 Elderly and Disabled Housing Authority, Series B, 6.10%, 8/01/17 ...................... 1,410,000 1,458,095 Elderly and Disabled Housing Authority, Series B, 6.25%, 8/01/23 ...................... 2,015,000 2,112,586 Elderly and Disabled Housing Authority, Series B, 6.375%, 8/01/24 ..................... 2,155,000 2,258,397 Elderly and Disabled Housing Authority, Series C, 6.50%, 8/01/22 ...................... 6,000,000 6,332,880 Veteran's Welfare, Series 75, 5.85%, 10/01/15 ......................................... 800,000 830,168 Veteran's Welfare, Series 75, 5.875%, 10/01/18 ........................................ 460,000 475,649 Veteran's Welfare, Series 75, 6.00%, 4/01/27 .......................................... 2,655,000 2,740,518 Veteran's Welfare, Series 76-A, 6.05%, 10/01/28 ....................................... 3,000,000 3,121,410 Veteran's Welfare, Series 77, 5.30%, 10/01/29 ......................................... 5,000,000 4,782,750 Oregon State Health, Housing, Educational and Cultural Facilities Authority Revenue, Lewis and Clark College Project, Series A, MBIA Insured, 6.125%, 10/01/24 ........ 10,500,000 10,998,855 Oregon State Housing and Community Services Department Finance Housing Revenue SFM, Series A, 5.75%, 7/01/12 .............................................................. 850,000 857,446 Series A, 6.35%, 7/01/14 .............................................................. 2,860,000 2,957,126 Series A, 6.40%, 7/01/18 .............................................................. 1,315,000 1,355,094 Series A, 6.45%, 7/01/26 .............................................................. 2,830,000 2,908,334 Series B, 6.875%, 7/01/28 ............................................................. 12,000,000 12,576,600 Series C, 6.20%, 7/01/15 .............................................................. 2,115,000 2,160,747 Series C, 6.40%, 7/01/26 .............................................................. 1,015,000 1,041,867 Series D, 6.80%, 7/01/27 .............................................................. 1,750,000 1,812,755 Series E, 5.80%, 7/01/16 .............................................................. 790,000 782,400 Series F, 5.65%, 7/01/28 .............................................................. 1,000,000 973,560 Series H, 5.65%, 7/01/28 .............................................................. 2,000,000 1,936,300 Oregon State Housing and Community Services Department Finance Housing Revenue, Multi-Unit, Series A, 6.80%, 7/01/13 .............................................................. 6,710,000 6,976,521 Series A, 6.15%, 7/01/21 .............................................................. 910,000 934,206 Series C, 6.85%, 7/01/22 .............................................................. 180,000 186,858
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (unaudited) (cont.)
PRINCIPAL FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Oregon State Housing and Community Services Department Mortgage Revenue, SFM Program, Series A, 5.15%, 7/01/27 ........................ $ 2,000,000 $ 1,881,720 Port Astoria GO, MBIA Insured, Pre-Refunded, 6.60%, 9/01/11 ................................. 450,000 471,159 Port Morrow PCR, Idaho Power Co., Boardman Project, 7.25%, 8/01/08 .......................... 2,200,000 2,227,236 Port of Portland International Airport Revenue, Portland International Airport, Series 7A, MBIA Insured, Pre-Refunded, 6.75%, 7/01/09 .................................... 1,500,000 1,582,590 Series 7B, MBIA Insured, Pre-Refunded, 7.10%, 7/01/21 .................................... 2,800,000 3,251,668 Series 7B, MBIA Insured, Pre-Refunded, 7.10%, 7/01/21 .................................... 200,000 211,686 Series 10, FGIC Insured, 5.75%, 7/01/25 .................................................. 300,000 297,579 Series 12C, FGIC Insured, 5.00%, 7/01/28 ................................................. 2,500,000 2,218,125 Series 12C, FGIC Insured., 5.00%, 7/01/18 ................................................ 1,500,000 1,371,525 Port of Portland International Airport Special Obligation Revenue, Delta Airlines Inc. Project, 6.20%, 9/01/22 ........................... 4,000,000 4,042,640 Port St. Helens PCR, Boise Cascade Corp. Project, Refunding, 5.65%, 12/01/27 .................................. 7,750,000 7,164,875 Portland General Electric Co. Project, Series A, 5.25%, 8/01/14 .......................... 3,600,000 3,428,100 Port Umpqua PCR, International Paper Co. .................................................... Project, Refunding, Series B, 5.20%, 6/01/11 .............................................. 2,200,000 2,137,696 (b)Portland Airport Revenue, Portland International Airport, Series A, AMBAC Insured, 5.50%, 7/01/24 .......................................... 22,000,000 21,388,840 Portland Airport Way-Urban Renewal and Redevelopment Tax Increment, Sub-Series B-3, FGIC Insured, Pre-Refunded, 7.60%, 6/01/10 .... 2,825,000 2,903,450 Portland GO, Central City Streetcar Project, Series A, 4.75%, 4/01/21 ........................................................................... 3,600,000 3,153,960 5.00%, 4/01/24 ........................................................................... 2,000,000 1,830,800 Portland Hospital Facilities Authority Hospital Revenue, Legacy Health System, Refunding, Series A, AMBAC Insured, 6.70%, 5/01/21 .................................................. 5,500,000 5,735,565 Series B, AMBAC Insured, 6.70%, 5/01/21 .................................................. 8,475,000 8,849,002 Portland Housing Authority MFR, Berry Ridge Project, 6.30%, 5/01/29 ......................... 1,500,000 1,506,075 Portland Housing Authority Revenue, 7.10%, 7/01/15 .......................................... 1,000,000 1,036,540 Portland Hydroelectric Power Revenue, Bull Run Project, Series C, 7.00%, 10/01/16 ............................................... 635,000 635,210 Portland MFHR, Civic Stadium Housing Project, Series A, 6.00%, 3/01/17 ...................... 1,000,000 1,005,140 Portland Oregon GO, Revenue, Limited Tax, Series A, 5.00%, 4/01/18 .......................... 3,380,000 3,162,328 Portland Sewer System Revenue, Refunding, Series A, FGIC Insured, 5.00%, 6/01/15 ........................................ 500,000 474,355 Series A, Pre-Refunded, 6.25%, 6/01/15 ................................................... 9,100,000 9,834,279 Portland Urban Renewal and Redevelopment, Downtown Waterfront, Refunding, Series A, 6.40%, 6/01/08 .................................. 5,555,000 5,802,253 Portland Water System Revenue, Series A, 5.00%, 8/01/16 ..................................... 1,000,000 951,700 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured, Pre-Refunded, 9.00%, 7/01/09 .............................................................. 75,000 88,425 Puerto Rico Commonwealth GO, Pre-Refunded, 6.45%, 7/01/17 ............................................................. 1,000,000 1,101,290 Public Improvement, Refunding, 5.375%, 7/01/25 ........................................... 1,000,000 956,250 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Q, Pre-Refunded, 8.00%, 7/01/18 ................................................... 4,000,000 4,222,360 Series Y, 5.50%, 7/01/36 ................................................................. 13,000,000 12,619,750 Series Y, 5.50%, 7/01/26 ................................................................. 7,275,000 7,065,917 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.75%, 7/01/08 ................................... 280,000 284,228 Puerto Rico Electric Power Authority Revenue, Series DD, 5.00%, 7/01/28 ................................................................ 6,000,000 5,338,800 Series R, Pre-Refunded, 6.25%, 7/01/17 ................................................... 2,070,000 2,205,502 Series X, 5.50%, 7/01/25 ................................................................. 2,600,000 2,547,116 Series X, 6.00%, 7/01/15 ................................................................. 2,500,000 2,591,275 Puerto Rico HFC Revenue, Sixth Portfolio, Section 8 Assisted, FHA Mortgage Insured, Pre-Refunded, 7.75%, 12/01/26 ............................................................. 395,000 463,722 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ................................................... 180,000 186,368 Puerto Rico Housing Bank and Financing Authority SFMR, Homeownership Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ......................... 500,000 514,080 Puerto Rico PBA Revenue, Government Facilities, Series B, 5.25%, 7/01/21 .................... 3,700,000 3,488,841 Puerto Rico PBA, Public Education and Health Facilities, Refunding, Series M, 5.75%, 7/01/15 ....................................................... 2,500,000 2,540,550 Puerto Rico Telephone Authority Revenue, Series L, Pre-Refunded, 6.125%, 1/01/22 ................................................... 1,100,000 1,155,902 Salem Educational Facilities Revenue, Willamette University, Refunding, 6.10%, 4/01/14 .......................................... 1,000,000 1,024,380 Salem-Keizer GO, School District No. 24J, 5.00%, 6/01/19 .................................... 15,000,000 13,982,550 Taft-Nelscott-Delake Rural Fire Protection District, 6.00%, 6/01/16 ......................... 1,110,000 1,141,435 Tri-County Metropolitan Transportation District Revenue, Limited Obligation, Airport Light Rail, Series 1, 5.65%, 6/01/29 .......................... 14,080,000 13,722,509 Unified Sewer Agency Sewer Revenue, Pre-Refunded, 7.00%, 11/01/09 ............................ 2,700,000 2,714,553
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN OREGON TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Virgin Islands PFA Revenue, Fund Loan Notes, Senior Lien, Refunding, Series A, 5.50% 10/01/15 .............................................................................. $ 1,635,000 $ 1,579,099 10/01/18 .............................................................................. 2,400,000 2,298,768 Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.30%, 7/01/18 ............................................................................... 2,500,000 2,336,000 7/01/21 ............................................................................... 1,400,000 1,294,286 Wasco County Hospital Facility Authority Hospital Revenue, 7.375%, 7/01/00 ............. 1,035,000 1,054,924 Washington County Housing Authority MFHR, Bethany Meadows II Project, 5.85%, 9/01/27 ............................................ 1,435,000 1,436,062 Terrace View Project, FNMA Insured, 5.50%, 12/01/17 ................................... 1,725,000 1,711,114 Terrace View Project, FNMA Insured, 5.60%, 12/01/22 ................................... 1,360,000 1,340,740 Washington County School District No. 088 GO, J Sherwood, FSA Insured, 6.10%, 6/01/12 ........................................................................ 190,000 200,404 Pre-Refunded, 6.10%, 6/01/12 .......................................................... 810,000 869,810 Washington County Unified Sewer Agency Revenue, Senior Lien, Series A, AMBAC Insured, 6.20%, 10/01/10 ........................................................ 470,000 496,503 AMBAC Insured, Pre-Refunded, 6.125%, 10/01/12 ......................................... 1,000,000 1,073,930 Pre-Refunded, 6.20%, 10/01/10 ......................................................... 3,530,000 3,802,869 Western Lane Hospital District Hospital Facilities Authority Revenue, Sisters of St. Joseph of Peace Health and Hospital Services, Refunding, MBIA Insured, 5.875%, 8/01/12 ....................................................... 4,400,000 4,598,880 Yamhill County GO, USD No. 029J Newberg, FSA Insured, Pre-Refunded, 6.10%, 6/01/11 ..... 5,000,000 5,371,800 ------------- TOTAL BONDS ............................................................................ 505,046,682 ------------- ZERO COUPON BONDS .1% (d)Oregon Health Sciences University Revenue, Capital Appreciation, Refunding, Series A, MBIA Insured, 7/01/21 ........................................................ 2,200,000 642,378 ------------- TOTAL LONG TERM INVESTMENTS (COST $505,153,136) ........................................ 505,689,060 ------------- (a)SHORT TERM INVESTMENTS 3.2% Oregon State GO, Series 73E, Weekly VRDN and Put, 3.00%, 12/01/16 ...................................... 2,300,000 2,300,000 Series 73F, Weekly VRDN and Put, 3.00%, 12/01/17 ...................................... 9,300,000 9,300,000 Port of Portland International Airport Special Obligation Revenue, Horizon Airlines Inc. Project, Daily VRDN and Put, 3.20%, 6/15/27 ............................ 100,000 100,000 Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ........................................ 4,700,000 4,700,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $16,400,000) ........................................ 16,400,000 TOTAL INVESTMENTS (COST $521,553,136) 102.6% ........................................... 522,089,060 OTHER ASSETS, LESS LIABILITIES (2.6%) .................................................. (13,226,847) ------------- NET ASSETS 100.0% ...................................................................... $ 508,862,213 =============
See glossary of terms on page 110 (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. (d) Zero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 -------------------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 10.52 $ 10.56 $ 10.39 $ 10.44 $ 10.16 $ 10.56 ------------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .27 .55 .58 .60 .62 .62 Net realized and unrealized gains (losses) ... (.53) (.02) .32 (.04) .29 (.41) ------------------------------------------------------------------------------- Total from investment operations .............. (.26) .53 .90 .56 .91 .21 ------------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.28)(3) (.55) (.58) (.61) (.63) (.61) In excess of net investment income ........... -- (.01) (.01) -- -- -- Net realized gains ........................... -- (.01) (.14) -- -- -- ------------------------------------------------------------------------------- Total distributions ........................... (.28) (.57) (.73) (.61) (.63) (.61) ------------------------------------------------------------------------------- Net asset value, end of period ................ $ 9.98 $ 10.52 $ 10.56 $ 10.39 $ 10.44 $ 10.16 =============================================================================== Total return* ................................. (2.61%) 5.11% 8.90% 5.53% 9.15% 2.22% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $707,102 $758,942 $713,141 $658,339 $639,847 $587,366 Ratios to average net assets: Expenses ..................................... .66%** .65% .65% .64% .64% .63% Net investment income ........................ 5.16%** 5.17% 5.49% 5.84% 5.96% 6.15% Portfolio turnover rate ....................... 12.92% 11.11% 12.74% 22.24% 9.71% 12.91% CLASS C - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 10.57 $ 10.61 $ 10.43 $ 10.47 $ 10.17 ------------------------------------------------------------------------------- Income from investment operations: Net investment income ........................ .24 .49 .52 .55 .47 Net realized and unrealized gains (losses) ... (.54) (.03) .33 (.05) .30 ------------------------------------------------------------------------------- Total from investment operations .............. (.30) .46 .85 .50 .77 ------------------------------------------------------------------------------- Less distributions from: Net investment income ........................ (.24)(2) (.49)(2) (.53) (.54) (.47) Net realized gains ........................... -- (.01) (.14) -- -- ------------------------------------------------------------------------------- Total distributions ........................... (.24) (.50) (.67) (.54) (.47) ------------------------------------------------------------------------------- Net asset value, end of period ................ $ 10.03 $ 10.57 $ 10.61 $ 10.43 $ 10.47 =============================================================================== Total return* ................................. (2.87%) 4.50% 8.35% 4.98% 7.71% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $44,774 $41,917 $25,899 $11,935 $ 3,110 Ratios to average net assets: Expenses ..................................... 1.22%** 1.21% 1.21% 1.21% 1.22%** Net investment income ........................ 4.60%** 4.61% 4.89% 5.22% 5.36%** Portfolio turnover rate ....................... 12.92% 11.11% 12.74% 22.24% 9.71%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.004. (3) Includes distributions in excess of net investment income in the amount of $.005. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 99.5% BONDS 98.8% Abington School, FGIC Insured, Pre-Refunded, 6.00%, 5/15/26 ................................... $ 2,000,000 $ 2,147,800 Allegheny County Airport Revenue, Pittsburgh International Airport, Refunding, Series B, MBIA Insured, 5.00%, 1/01/19 ....................................................... 6,000,000 5,498,220 Allegheny County COP, AMBAC Insured, 5.00%, 12/01/28 .......................................... 4,000,000 3,546,440 Allegheny County Higher Education Building Authority, Duquesne University Project, AMBAC Insured, 5.00%, 3/01/21 ................................................................ 1,000,000 913,880 Allegheny County Hospital Development Authority Revenue, Allegheny General Hospital Project, Series A, MBIA Insured, 6.25%, 9/01/20 ................... 10,000,000 9,926,100 Allegheny Hospital, South Hills Health System, Series A, MBIA Insured, 5.875%, 5/01/26 ....... 1,700,000 1,713,039 Health Center, Canterbury Place, AMBAC Insured, 5.375%, 12/01/21 ............................. 5,000,000 4,712,050 Health Center, University of Pittsburgh Medical Center, Series B, MBIA Insured, 5.00%, 7/01/16 ............................................................................... 4,000,000 3,707,400 University of Pittsburgh Health Center, Refunding, Series A, MBIA Insured, 5.625%, 4/01/27 .............................................................................. 10,450,000 10,199,305 Allegheny County IDAR, Environmental Improvement, Refunding, 6.10%, 1/15/18 ......................................... 2,000,000 2,001,240 Environmental Improvement, USX Corp., Refunding, 5.50%, 12/01/29 ............................. 10,000,000 8,973,100 Environmental Improvement, USX Corp., Refunding, 5.60%, 9/01/30 .............................. 7,530,000 6,853,580 Kaufmann Medical Project, Refunding, Series A, MBIA Insured, 6.80%, 3/01/15 .................. 1,000,000 1,065,720 Allegheny County RDAR, Home Improvement Loan, Refunding, Series A, 5.90%, 2/01/11 ............. 1,555,000 1,563,133 Allegheny County Residential Finance Authority Mortgage Revenue SFM, Series DD-1, GNMA Secured, 5.35%, 11/01/19 ................................................... 885,000 841,980 Series DD-2, GNMA Secured, 5.40%, 11/01/29 ................................................... 2,000,000 1,873,020 Allegheny County Residential Finance Authority Mortgage Revenue, Ladies Grand Army Republic Health Facilities Project, Series G, FHA Insured, 6.35%, 10/01/36 .............................................................................. 1,950,000 1,993,154 Lexington Home, Series E, 7.125%, 2/01/27 .................................................... 3,680,000 3,768,283 MFMR, Series D, FHA Insured, 7.50%, 6/01/33 .................................................. 1,400,000 1,440,754 Series J, GNMA Secured, 7.50%, 6/01/17 ....................................................... 1,795,000 1,821,817 Series K, GNMA Secured, 7.75%, 12/01/22 ...................................................... 1,705,000 1,731,223 SFMR, Series M, GNMA Secured, 7.90%, 6/01/11 ................................................. 885,000 914,285 SFMR, Series T, GNMA Secured, 6.95%, 5/01/17 ................................................. 810,000 835,596 Ambridge Area School District, Refunding, Series A, FGIC Insured, 5.25%, 11/01/16 ............. 2,730,000 2,634,041 Beaver County Hospital Authority Revenue, Beaver County Medical Center Inc., AMBAC Insured, Pre-Refunded, 6.625%, 7/01/10 ................................................. 5,000,000 5,398,900 Beaver County IDA, PCR, Beaver Valley Project, Pennsylvania Power and Light, Refunding, Series A, 7.15%, 9/01/21 ..... 4,400,000 4,599,892 Ohio Edison Project, Series A, Pre-Refunded, 7.75%, 9/01/24 .................................. 6,475,000 6,604,500 Bensalem Township, Refunding, FGIC Insured, 5.75%, 12/01/16 ................................... 3,000,000 3,123,720 Berks County Municipal Authority Revenue, FGIC Insured, Pre-Refunded, 7.00%, 5/15/18 .......... 4,000,000 4,422,600 Bethlehem Area School District, MBIA Insured, Pre-Refunded, 6.00%, 3/01/16 .................... 4,000,000 4,288,120 Bradford County IDA, Solid Waste Disposal Revenue, International Paper Co. Projects, Series A, 6.60%, 3/01/19 ..................................................................... 2,500,000 2,618,625 Butler Area School District, Refunding, Series B, FGIC Insured, 5.00%, 10/01/26 ............... 5,000,000 4,513,400 Butler County IDA, PCR, Witco Corp. Project, Refunding, 5.85%, 12/01/23 ....................... 2,000,000 1,934,460 Cambria County HDA, Hospital Revenue, Conemaugh Valley Memorial Hospital, Refunding, Series B, Connie Lee Insured, Pre-Refunded, 6.375%, 7/01/18 ................................. 3,500,000 3,746,435 Cambria County IDA, PCR, Pennsylvania Electric Co. Project, Refunding, Series A, MBIA Insured, 5.80%, 11/01/20 ...................................................... 5,000,000 5,070,900 Chartiers Valley Industrial and Commercial Development Authority Revenue, First Mortgage, Asbury Place Project, Refunding, 6.50%, 2/01/36 ............................. 4,250,000 4,431,178 Clarion County Hospital Authority Revenue, Clarion Hospital Project, Refunding, 5.40%, 7/01/07 ............................................................................... 1,000,000 979,330 5.55%, 7/01/09 ............................................................................... 2,365,000 2,308,879 5.60%, 7/01/10 ............................................................................... 600,000 582,426 5.75%, 7/01/12 ............................................................................... 1,795,000 1,728,675 5.75%, 7/01/17 ............................................................................... 700,000 657,615 5.625%, 7/01/21 .............................................................................. 1,500,000 1,360,860 Cranberry Township Municipal Authority Water and Sewer Revenue, MBIA Insured, 5.125%, 12/01/26 ............................................................................. 1,450,000 1,337,118 Dauphin County General Authority Health System Revenue, Pinnacle Health System Project, Refunding, MBIA Insured, 5.50%, 5/15/17 ............................................. 4,280,000 4,222,477 Dauphin County General Authority Hospital Revenue, Hapsco-Western Hospital Project, Refunding, Series A, MBIA Insured, 6.50%, 7/01/12 ............................................ 4,500,000 4,746,465 Series B, MBIA Insured, 6.25%, 7/01/16 ....................................................... 5,000,000 5,199,550 Dauphin County General Authority, Sub Series 0003, AMBAC Insured, 4.75%, 6/01/26 .............. 1,000,000 1,004,220 Deer Lakes School District, Series A, FSA Insured, 5.00%, 1/15/23 ............................. 1,000,000 912,560 Delaware County Authority College Revenue, Eastern College, Series C, 5.625%, 10/01/28 ........ 2,210,000 2,039,631
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Delaware County Authority Health Facility Revenue, Mercy Health Corp. Project, ETM, 6.00%, 12/15/26 ............................................................................ $10,800,000 $11,383,740 Delaware County Authority Healthcare Revenue, Mercy Health Corp. Southeastern, Series B, Pre-Refunded, 6.00%, 11/15/07 .................................................... 9,000,000 9,458,730 Delaware County Authority Revenue, Elwyn Inc. Project, Pre-Refunded, 8.35%, 6/01/15 ......... 2,000,000 2,106,100 Delaware County IDAR, Philadelphia Electric, Refunding, Series 1991, 7.375%, 4/01/21 ........ 5,000,000 5,284,350 Delaware River Port Authority Pennsylvania and New Jersey Revenue, Series 1995, FGIC Insured, 5.50%, 1/01/26 ............................................................... 7,350,000 7,258,787 Delaware Valley Regional Finance Authority Local Government Revenue, Series B, AMBAC Insured, 5.60%, 7/01/17 .............................................................. 5,000,000 5,044,600 Erie County Hospital Authority Revenue, Nursing Home, Sarah A. Reed Retirement Center, Refunding, 5.625%, 7/01/14 .................. 3,660,000 3,481,282 St. Vincent Health Center Project, Series A, MBIA Insured, 6.375%, 7/01/22 ................. 7,000,000 7,317,170 Erie-Western Pennsylvania Port Authority General Revenue, 6.875%, 6/15/16 ............................................................................ 920,000 972,937 Pre-Refunded, 8.625%, 6/15/10 .............................................................. 1,850,000 1,955,191 Exeter Township, Refunding, Series B, FGIC Insured, 5.30%, 7/15/21 .......................... 6,100,000 5,818,729 Harrisburg Authority Revenue, Series I, MBIA Insured, 5.625%, 4/01/19 ....................... 6,000,000 5,961,000 Hazleton Area School District, Series B, FGIC Insured, 5.00%, 3/01/23 ....................... 4,455,000 4,064,697 Hazleton Health Services Authority Hospital Revenue, Hazleton General Hospital, 5.50%, 7/01/27 ............................................................................. 2,475,000 2,225,347 Interboro School District GO, Delaware County, MBIA Insured, 5.375%, 8/15/22 ................ 2,335,000 2,244,215 Jeannette County Municipal Authority Sewer Revenue, Pre-Refunded, 7.00%, 7/01/17 ............ 1,250,000 1,336,463 Jeannette Health Service Authority Hospital Revenue, Jeannette District Memorial Hospital, Refunding, Series A, 6.00%, 11/01/18 ............................................. 785,000 782,268 Lancaster County Hospital Authority Revenue, Health Center, Masonic Homes Project, Refunding, AMBAC Insured, 5.00%, 11/15/20 .................................................. 1,600,000 1,453,920 Lawrence County IDA, PCR, Pennsylvania Power Co., New Castle Project, Refunding, 7.15%, 3/01/17 ............................................................................. 5,595,000 5,851,307 Lebanon County Good Samaritan Hospital Authority Revenue, Good Samaritan Hospital Project, Refunding, 6.00%, 11/15/18 ........................................................ 2,500,000 2,491,275 Lehigh County General Purpose Authority Revenue, Good Shepard Rehabilitation Hospital, Refunding, AMBAC Insured, 5.25%, 11/15/27 ............ 5,500,000 5,096,300 Hospital Lehigh Valley, Health Network, Series A, MBIA Insured, 5.00%, 7/01/28 ............. 4,000,000 3,528,760 Lehigh Valley Hospital Inc., Refunding, Series A, MBIA Insured, 5.875%, 7/01/15 ............ 1,000,000 1,027,340 Muhlenburg Hospital Center, Series A, Pre-Refunded, 6.60%, 7/15/22 ......................... 5,800,000 6,318,694 Lehigh County IDA, PCR, Pennsylvania Power and Light Co. Project, Refunding, Series A, MBIA Insured, 6.40%, 11/01/21 .................................................... 5,000,000 5,276,900 Series A, MBIA Insured, 6.15%, 8/01/29 ..................................................... 5,550,000 5,789,427 Series B, MBIA Insured, 6.40%, 9/01/29 ..................................................... 10,000,000 10,713,200 Lower Providence Township Sewer Authority Revenue, Refunding, MBIA Insured, 5.25%, 5/01/14 ............................................................................. 2,000,000 1,946,040 Luzerne County IDA, Exempt Facility Revenue, Gas and Water Co. Project, Refunding, Series A, AMBAC Insured, 7.00%, 12/01/17 ............................................................................ 5,000,000 5,520,800 6.05%, 1/01/19 ............................................................................. 4,750,000 4,801,680 Meadville GO, Series A, AMBAC Insured, 5.25%, 10/01/25 ...................................... 2,285,000 2,143,216 Montgomery County GO, Refunding, Series B, 5.375%, 10/15/21 ................................. 3,400,000 3,282,530 Montgomery County Higher Education and Health Authority Revenue, Holy Redeemer Hospital, Series A, AMBAC Insured, Pre-Refunded, 7.625%, 2/01/20 ............. 2,375,000 2,413,285 Jeanes Health System Project, Pre-Refunded, 8.75%, 7/01/20 ................................. 5,000,000 5,301,850 Pottstown Memorial Medical Center Project, Pre-Refunded, 7.35%, 11/15/05 ................... 1,315,000 1,427,393 St. Joseph's University, Refunding, Connie Lee Insured, 6.50%, 12/15/22 .................... 1,750,000 1,868,615 Montgomery County IDA, Retirement Community Revenue, Act Retirement-Life Communities, 5.25%, 11/15/28 ........................................... 5,000,000 4,368,250 Adult Community Total Services, Refunding, Series A, 5.875%, 11/15/22 ...................... 4,850,000 4,720,845 Adult Community Total Services, Series B, 5.75%, 11/15/17 .................................. 3,000,000 2,927,040 Montgomery County IDAR, Hill School Project, MBIA Insured, 5.35%, 8/15/27 .......................................... 9,000,000 8,490,060 PCR, Philadelphia Electric Co., Refunding, Series A, 7.60%, 4/01/21 ........................ 2,530,000 2,682,433 PCR, Philadelphia Electric Co., Series B, MBIA Insured, 6.70%, 12/01/21 .................... 5,000,000 5,302,500 Resource Recovery, 7.50%, 1/01/12 .......................................................... 10,000,000 10,335,800 Mount Pleasant Business District Authority Hospital Revenue, Frick Hospital, Refunding, 5.70%, 12/01/13 ............................................................................ 1,205,000 1,149,510 5.75%, 12/01/17 ............................................................................ 500,000 469,855 5.75%, 12/01/27 ............................................................................ 1,600,000 1,466,688 Neshaminy School District GO, FGIC Insured, Pre-Refunded, 7.00%, 2/15/14 .................... 1,000,000 1,110,740 New Wilmington Municipal Authority College Revenue, Westminster College, 5.35%, 3/01/28 ..... 2,250,000 2,014,943 North Hampton County IDAR, PCR, Metropolitan Edison Co., Refunding, Series A, MBIA Insured, 6.10%, 7/15/21 ..................................................... 6,100,000 6,275,802
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Northeastern Pennsylvania Hospital and Educational Authority Revenue, Kings College Project, Refunding, Series B, 6.00%, 7/15/11 ................................. $ 1,000,000 $ 1,003,830 Kings College Project, Refunding, Series B, 6.00%, 7/15/18 ................................. 1,000,000 1,000,400 Wilkes University, Refunding, 6.125%, 10/01/11 ............................................. 5,000,000 4,999,900 Pennsylvania Convention Center Authority Revenue, Refunding, Series A, 6.60%, 9/01/09 ....... 5,000,000 5,352,150 Pennsylvania Economic Development Financing Authority, Solid Waste Disposal Revenue, USG Corp. Project, 6.00%, 6/01/31 ................................................. 10,650,000 10,283,108 Pennsylvania EDA, Financing Authority Revenue, Macmillan, LP Project, Pre-Refunded, 7.60%, 12/01/20 .......... 3,000,000 3,480,540 Financing Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 ........... 5,000,000 5,445,250 Pennsylvania HFA, Rental Housing, Refunding, FNMA Insured, 5.75%, 7/01/14 .................................... 10,000,000 10,077,800 SFM, Refunding, Series Y, 7.45%, 4/01/16 ................................................... 2,115,000 2,159,182 SFM, Series 29, 7.375%, 10/01/16 ........................................................... 2,530,000 2,612,023 SFM, Series 30, 7.30%, 10/01/17 ............................................................ 1,505,000 1,561,994 SFM, Series 34-A, 6.85%, 4/01/16 ........................................................... 3,000,000 3,117,570 SFM, Series 34-B, 7.00%, 4/01/24 ........................................................... 6,000,000 6,207,660 SFM, Series 38, 6.125%, 10/01/24 ........................................................... 4,535,000 4,611,914 SFM, Series 1991, 7.15%, 4/01/15 ........................................................... 4,370,000 4,529,243 (b)SFM, Series 67A, 5.85%, 10/01/18 ........................................................... 5,000,000 5,007,000 SFM, Series W, Pre-Refunded, 7.80%, 10/01/20 ............................................... 1,965,000 2,010,333 SFMR, Refunding, Series 54-A, 6.15%, 10/01/22 .............................................. 1,500,000 1,523,880 Pennsylvania Infrastructure Investment Authority Revenue, Pennvest Loan Pool Program, MBIA Insured, 5.625%, 9/01/13 .................................................................................... 6,010,000 6,126,774 9/01/14 .................................................................................... 2,870,000 2,911,443 Pennsylvania Intergovernmental Cooperative Authority Special Tax Revenue, Philadelphia Funding Program, FGIC Insured, Pre-Refunded, 7.00%, 6/15/14 ................... 6,000,000 6,716,940 Refunding, FGIC Insured, 5.00%, 6/15/21 .................................................... 10,000,000 9,132,100 Pennsylvania State Financial Authority Revenue, Municipal Capital Improvements Program, Refunding, 6.60%, 11/01/09 ................................................................. 12,565,000 13,569,572 Pennsylvania State Higher Educational Facilities Authority Health Services Revenue, Allegheny Delaware Valley Obligation Group, Refunding, Series A, MBIA Insured, 5.875%, 11/15/21 ........................................................................... 17,000,000 16,528,250 University of Pennsylvania Health Services, Refunding, Series A, 5.75%, 1/01/22 ............ 10,000,000 9,470,400 Pennsylvania State Higher Educational Facilities Authority Revenue, Allegheny College Project, Refunding, Series B, 6.125%, 11/01/13 ........................... 1,000,000 1,021,730 Allegheny College Project, Series B, Pre-Refunded, 6.00%, 11/01/22 ......................... 3,140,000 3,371,355 Allegheny College, Refunding, Series A, MBIA Insured, 5.00%, 11/01/22 ...................... 3,300,000 2,981,187 Drexel University, Refunding, 6.375%, 5/01/17 .............................................. 5,220,000 5,485,698 Drexel University, Refunding, MBIA Insured, 5.75%, 5/01/22 ................................. 4,385,000 4,397,497 Geneva College, 5.45%, 4/01/18 ............................................................. 2,360,000 2,171,082 La Salle University, MBIA Insured, 5.25%, 5/01/23 .......................................... 1,500,000 1,407,240 La Salle University, Refunding, MBIA Insured, 5.625%, 5/01/17 .............................. 4,000,000 4,006,440 Philadelphia College of Textiles and Science, 6.75%, 4/01/20 ............................... 3,040,000 3,148,893 State System of Higher Education, Series N, MBIA Insured, 5.80%, 6/15/24 ................... 3,000,000 3,023,100 State System of Higher Education, Series R, FSA Insured, 5.00%, 6/15/24 .................... 3,140,000 2,834,478 State Systems of Higher Education, Series O, AMBAC Insured, 5.125%, 6/15/24 ................ 1,990,000 1,833,984 Temple University, 7.40%, 10/01/10 ......................................................... 30,000 30,309 Thomas Jefferson University, AMBAC Insured, 5.00%, 7/01/19 ................................. 3,000,000 2,758,920 University of Pennsylvania, 5.50%, 7/15/38 ................................................. 10,000,000 9,627,500 Pennsylvania State IDAR, Economic Revenue, AMBAC Insured, 6.00%, 1/01/12 .................... 4,250,000 4,480,138 Pennsylvania State University, Series A, 5.00%, 8/15/22 ..................................... 1,000,000 896,840 Philadelphia Airport Revenue, Philadelphia Airport System, Series A, AMBAC Insured, 6.10%, 6/15/25 ............................................................................. 5,000,000 5,181,000 Philadelphia Gas Works Revenue, 1st Series A, FSA Insured, 5.00%, 7/01/26 .................................................. 6,000,000 5,357,880 2nd Series, FSA Insured, 5.00%, 7/01/29 .................................................... 10,000,000 8,896,300 12th Series B, MBIA Insured, ETM, 7.00%, 5/15/20 ........................................... 1,000,000 1,143,420 14th Series A, Pre-Refunded, 6.375%, 7/01/26 ............................................... 3,360,000 3,644,357 Refunding, 14th Series, 6.375%, 7/01/26 .................................................... 6,740,000 7,053,949 Philadelphia GO, FSA Insured, 5.00%, 3/15/28 ................................................ 10,000,000 8,992,800 Philadelphia Hospitals and Higher Education Facilities Authority Revenue, Albert Einstein Medical Center, Pre-Refunded, 7.30%, 10/01/08 .............................. 5,225,000 5,642,948 Temple University Hospital, 5.875%, 11/15/23 ............................................... 5,000,000 4,626,650
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Philadelphia Hospitals and Higher Educational Facilities Authority Revenue, Children's Hospital, Refunding, Series A, 5.00%, 2/15/21 ..................................... $ 2,465,000 $ 2,188,698 Children's Seashore House, Series A, 7.00%, 8/15/17 .......................................... 1,000,000 1,064,940 Children's Seashore House, Series B, 7.00%, 8/15/22 .......................................... 2,600,000 2,768,116 Frankford Hospital, Series A, ETM, 6.00%, 6/01/14 ............................................ 2,500,000 2,651,325 Philadelphia Municipal Authority Revenue, Lease, Refunding, Series D, 6.30%, 7/15/17 .......... 2,000,000 2,064,980 Philadelphia Parking Authority Parking Revenue, Airport, FSA Insured, 5.25%, 9/01/29 ......................................................... 12,000,000 11,050,920 Airport, Refunding, AMBAC Insured, 5.50%, 9/01/18 ............................................ 1,000,000 987,240 Series A, AMBAC Insured, 5.25%, 2/15/29 ...................................................... 6,000,000 5,528,580 Philadelphia RDA, Home Improvement Loan Revenue, Series A, FHA Insured, 7.375%, 6/01/03 ....................................................... 40,000 40,400 Series B, FHA Insured, 6.10%, 6/01/17 ........................................................ 600,000 608,850 Philadelphia School District GO, Series B, AMBAC Insured, 5.50%, 9/01/15 ............................................................................... 3,785,000 3,809,300 5.375%, 4/01/22 .............................................................................. 2,995,000 2,879,452 Philadelphia Water and Sewer Revenue, Series 10, ETM, 7.35%, 9/01/04 .......................... 6,840,000 7,479,540 Philadelphia Water and Wastewater Revenue, Refunding, 5.75%, 6/15/13 .......................... 10,000,000 9,980,200 Pittsburgh and Allegheny County Public Auditorium Revenue, Regional Asset District Sales Tax, AMBAC Insured, 5.25%, 2/01/31 .................................................... 11,610,000 10,597,723 Pittsburgh Urban RDA, Mortgage Revenue, Series A, 7.15%, 10/01/27 .................................................. 840,000 874,751 Mortgage Revenue, Series A, FNMA Insured, 5.25%, 10/01/29 .................................... 3,345,000 3,071,144 (b)Mortgage Revenue, Series C, FNMA Insured, GNMA Secured, 5.70%, 4/01/30 ....................... 1,525,000 1,473,591 Mortgage Revenue, Series D, 6.25%, 10/01/17 .................................................. 1,695,000 1,763,291 Oliver Garage Project, FGIC Insured, 5.45%, 6/01/28 .......................................... 3,500,000 3,391,080 SFMR, Series B, GNMA Secured, 7.375%, 12/01/16 ............................................... 1,770,000 1,796,372 Pittsburgh Water and Sewer System Authority Revenue, Refunding, FGIC Insured, ETM, 7.25%, 9/01/14 ..................................................................................... 1,250,000 1,446,312 Schuylkill County IDA, Resource Recovery Revenue, Schuylkill Energy Resources Inc., 6.50%, 1/01/10 ..................................................................................... 16,350,000 16,381,555 Schuylkill County RDA, Lease Revenue, Series A, FGIC Insured, 7.125%, 6/01/13 ................. 1,500,000 1,586,460 South Fork Municipal Authority Hospital Revenue, Conemaugh Valley Memorial Hospital Project, Series A, MBIA Insured, 5.75%, 7/01/26 ...................................................... 10,000,000 9,985,500 Southeastern Pennsylvania Transportation Authority Special Revenue, FGIC Insured, 5.375%, 3/01/22 ..................................................................................... 7,000,000 6,696,480 State Public School Building Authority Revenue, Cornell School District Project, Refunding, Series B, MBIA Insured, 5.375%, 9/01/12 ........... 2,165,000 2,159,976 Shenandoah Valley School District Project, Refunding, AMBAC Insured, 7.375%, 9/15/10 ........ 1,000,000 1,020,920 University of Pittsburgh Revenue, Higher Education, Refunding, Series B, MBIA Insured, 5.00%, 6/01/21 ..................................................................................... 10,000,000 9,132,900 Upper St. Clair Township School District GO, Refunding, 5.20%, 7/15/27 ........................ 5,000,000 4,652,650 Westtown Township Sewer Revenue, FSA Insured, 5.25%, 12/15/27 ................................. 3,270,000 3,059,870 Wilkes Barre Area School District GO, FGIC Insured, Pre-Refunded, 6.375%, 4/01/15 .................................................. 3,000,000 3,255,510 Refunding, FGIC Insured, 5.25%, 4/01/16 ...................................................... 1,385,000 1,337,370 ------------ TOTAL BONDS ................................................................................... 743,011,247 ------------ (d)ZERO COUPON BONDS .7% Pennsylvania HFA, SFM, Series 63A, 4/01/30 ..................................................................... 11,000,000 1,783,100 SFMR, Series 64, 4/01/30 ..................................................................... 6,000,000 3,219,840 ------------ TOTAL ZERO COUPON BONDS ....................................................................... 5,002,940 ------------ TOTAL INVESTMENTS (COST $742,244,661) 99.5% ................................................... 748,014,187 OTHER ASSETS, LESS LIABILITIES .5% ............................................................ 3,861,530 ------------ NET ASSETS 100.0% ............................................................................. $751,875,717 ============
See glossary of terms on page 110. (b) Sufficient collateral has been segregated for securities traded on a when-issued or delayed delivery basis. (d) Zero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Highlights FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 1999 -------------------------------------------------- CLASS A (UNAUDITED)*** 1999 1998 1997 1996(1) 1995 - --------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.88 $ 11.86 $ 11.51 $ 11.59 $ 11.31 S 11.83 ------------------------------------------------------------------ Income from investment operations: Net investment income ........................ .29 .60 .62 .65 .66 .67 Net realized and unrealized gains (losses) ... (.49) .06 .36 .02 .30 (.50) ------------------------------------------------------------------ Total from investment operations .............. (.20) .66 .98 .67 .96 .17 ------------------------------------------------------------------ Less distributions from: Net investment income ........................ (.29)(2) (.60)(3) (.62) (.65)(3) (.67)(2) (.69) Net realized gains ........................... (.02) (.04) (.01) (.10) (.01) -- ------------------------------------------------------------------ Total distributions ........................... (.31) (.64) (.63) (.75) (.68) (.69) ------------------------------------------------------------------ Net asset value, end of period ................ $ 11.37 $ 11.88 $ 11.86 $ 11.51 $ 11.59 $ 11.31 ================================================================== Total return* ................................. (1.74%) 5.68% 8.78% 6.03% 8.68% 1.60% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $211,036 $218,753 $210,325 $192,525 $190,577 $176,888 Ratios to average net assets: Expenses ..................................... .76%** .74% .75% .73% .74% .73% Net investment income ........................ 4.98%** 4.98% 5.35% 5.62% 5.71% 5.95% Portfolio turnover rate ....................... 6.14% 20.19% 7.94% 21.09% 27.99% 18.30% CLASS C - ------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.89 $ 11.87 $ 11.53 $ 11.62 $ 11.32 --------------------------------------------------------- Income from investment operations: Net investment income ........................ .26 .53 .56 .58 .50 Net realized and unrealized gains (losses) ... (.48) .06 .34 .02 .30 --------------------------------------------------------- Total from investment operations .............. (.22) .59 .90 .60 .80 --------------------------------------------------------- Less distributions from: Net investment income ........................ (.26)(2) (.53)(4) (.55) (.59) (.49) Net realized gains ........................... (.02) (.04) (.01) (.10) (.01) --------------------------------------------------------- Total distributions ........................... (.28) (.57) (.56) (.69) (.50) --------------------------------------------------------- Net asset value, end of period ................ $ 11.39 $ 11.89 $ 11.87 $ 11.53 $ 11.62 ========================================================= Total return* ................................. (1.94%) 5.09% 8.07% 5.33% 7.21% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 8,002 $ 7,050 $ 3,615 $ 1,679 $ 533 Ratios to average net assets: Expenses ..................................... 1.32%** 1.30% 1.31% 1.30% 1.32%** Net investment income ........................ 4.42%** 4.43% 4.78% 5.04% 5.16%** Portfolio turnover rate ....................... 6.14% 20.19% 7.94% 21.09% 27.99%
* Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. Prior to May 1, 1994, dividends from net investment income were reinvested at the offering price. ** Annualized *** Based on average shares outstanding. (1) For the period May 1, 1995 (effective date) to February 29, 1996 for Class C. (2) Includes distributions in excess of net investment income in the amount of $.001. (3) Includes distributions in excess of net investment income in the amount of $.006. (4) Includes distributions in excess of net investment income in the amount of $.004. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
PRINCIPAL FRANKLIN PUERTO RICO TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.0% Guam Airport Authority Revenue, Series B, 6.60%, 10/01/10 .............................................................................. $1,675,000 $1,778,348 6.70%, 10/01/23 .............................................................................. 5,800,000 6,170,098 Guam Government GO, Series A, 5.90%, 9/01/05 ............................................................................... 4,575,000 4,603,045 6.00%, 9/01/06 ............................................................................... 1,085,000 1,091,543 Guam Government Limited Obligation Highway Revenue, Refunding, Series A, FSA Insured, 6.30%, 5/01/12 ...................................................................... 5,590,000 5,899,574 Guam Housing Corp. SFR, MBS, Mortgage Guaranteed, Series A, 5.35%, 9/01/18 .................... 5,000,000 4,787,350 Guam Power Authority Revenue, Refunding, Series A, 5.25%, 10/01/34 ......................................................... 6,065,000 5,434,240 Series A, Pre-Refunded, 6.30%, 10/01/22 ...................................................... 6,190,000 6,657,283 Series A, Pre-Refunded, 6.75%, 10/01/24 ...................................................... 2,680,000 2,996,240 Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.85%, 3/15/28 ..................................................................... 6,905,000 7,080,318 Puerto Rico Commonwealth GO, Pre-Refunded, 6.40%, 7/01/11 ................................................................. 2,000,000 2,198,280 Refunding, MBIA Insured, 5.75%, 7/01/24 ...................................................... 2,000,000 2,036,380 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Q, Pre-Refunded, 7.75%, 7/01/10 ....................................................... 350,000 368,750 Series Y, Pre-Refunded, 6.00%, 7/01/22 ....................................................... 8,000,000 8,688,240 Puerto Rico Commonwealth IDC, General Purpose Revenue, Series B, 5.375%, 7/01/16 .............. 5,000,000 4,867,400 Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A, 7.90%, 7/01/07 ............................................................................... 580,000 586,525 7.75%, 7/01/08 ............................................................................... 300,000 304,530 7.50%, 7/01/09 ............................................................................... 660,000 668,389 Puerto Rico Commonwealth Urban Renewal and Housing Corp. Commonwealth Appropriation, Refunding, 7.875%, 10/01/04 .................................................................. 3,350,000 3,424,973 Puerto Rico Electric Power Authority Revenue, Refunding, Series U, 6.00%, 7/01/14 .......................................................... 700,000 737,534 Series DD, 5.00%, 7/01/28 .................................................................... 930,000 827,514 Series P, Pre-Refunded, 7.00%, 7/01/11 ....................................................... 615,000 658,376 Series P, Pre-Refunded, 7.00%, 7/01/21 ....................................................... 1,000,000 1,070,530 Series T, Pre-Refunded, 6.375%, 7/01/24 ...................................................... 5,000,000 5,487,600 Series X, Pre-Refunded, 6.125%, 7/01/21 ...................................................... 7,225,000 7,885,221 Puerto Rico HFC Revenue, MF Mortgage, Portfolio A-I, 7.50%, 4/01/22 ................................................... 1,470,000 1,511,160 MF, Portfolio A, Series I, 7.50%, 10/01/15 ................................................... 420,000 431,760 Sixth Portfolio, Section 8 Assisted, FHA Mortgage Insured, Pre-Refunded, 7.75%, 12/01/26 ..... 2,060,000 2,418,399 Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ............... 2,320,000 2,411,130 Puerto Rico Housing Bank and Financing Authority SFMR, Affordable Housing Mortgage, First Portfolio, 6.25%, 4/01/29 ................................. 2,075,000 2,143,164 Homeownership Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ................................. 955,000 981,893 Puerto Rico Industrial Medical and Environmental PCFA Revenue, 6.45%, 12/01/25 .............................................................................. 2,000,000 2,075,460 PepsiCo Inc. Project, 6.25%, 11/15/13 ........................................................ 900,000 959,184 Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities, Ana G. Mendez University Systems Project, Refunding, 5.375%, 2/01/19 ......................... 2,000,000 1,883,880 Ana G. Mendez University Systems Project, Refunding, 5.375%, 2/01/29 ......................... 4,000,000 3,692,520 Inter American University, Series A, MBIA Insured, 5.00%, 10/01/22 ........................... 5,500,000 5,061,870 Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Hospital Revenue, Dr. Pila Hospital Project, Refunding, FHA Insured, 6.25%, 8/01/32 ............................ 500,000 516,320 Dr. Pila Hospital Project, Refunding, FHA Insured, 6.125%, 8/01/25 ........................... 2,500,000 2,531,850 Hospital Auxilio Mutuo Obligation, MBIA Insured, 5.50%, 7/01/17 .............................. 2,750,000 2,768,453 Hospital Auxilio Mutuo Obligation, Series A, MBIA Insured, 6.25%, 7/01/24 .................... 8,445,000 8,988,942 Mennonite General Hospital Project, 5.625%, 7/01/17 .......................................... 915,000 869,982 Mennonite General Hospital Project, 6.50%, 7/01/26 ........................................... 5,000,000 5,200,150 Mennonite General Hospital Project, 5.625%, 7/01/27 .......................................... 2,000,000 1,848,240 Refunding, San Lucas and Cristo Project, Series A, 5.75%, 6/01/19 ............................ 3,000,000 2,853,690
FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED) (CONT.)
PRINCIPAL FRANKLIN PUERTO RICO TAX-FREE INCOME FUND AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Industrial Revenue, Fuaynabo Warehouse, Series A., 5.20%, 7/01/24 .............................................. $ 4,120,000 $ 3,726,375 Guaynabo Municipal Government, 5.625%, 7/01/15 ............................................. 6,550,000 6,405,245 Guaynabo Municipal Government, 5.625%, 7/01/22 ............................................. 3,160,000 3,055,309 Teacher's Retirement System Revenue, 5.50%, 7/01/16 ........................................ 3,175,000 3,147,251 Teacher's Retirement System Revenue, Series B, 5.50%, 7/01/21 .............................. 6,585,000 6,429,133 Puerto Rico Municipal Finance Agency GO, Series A, 6.50%, 7/01/19 ........................... 2,000,000 2,149,840 Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured, 5.75%, 7/01/22 ..... 1,000,000 1,022,660 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 6.00%, 7/01/21 ..................................................... 1,250,000 1,262,125 Special Facilities, American Airlines, Series A, 6.30%, 6/01/23 ............................ 5,500,000 5,656,420 Special Facilities, American Airlines, Series A, 6.25%, 6/01/26 ............................ 1,900,000 1,956,468 Puerto Rico Telephone Authority Revenue, Series L, Pre-Refunded, 6.125%, 1/01/22 .................................................... 6,450,000 6,777,789 Series N, Pre-Refunded, 5.50%, 1/01/13 ..................................................... 300,000 314,652 Series N, Pre-Refunded, 5.50%, 1/01/22 ..................................................... 2,375,000 2,490,995 University of Puerto Rico Revenues, Series M, MBIA Insured, 5.50%, 6/01/15 ............................................................................. 4,000,000 4,055,000 5.25%, 6/01/25 ............................................................................. 6,145,000 5,885,312 Virgin Islands HFA, SFR, Refunding, Series A, GNMA Secured, 6.45%, 3/01/16 ............................................................................. 365,000 376,348 6.50%, 3/01/25 ............................................................................. 865,000 891,850 Virgin Islands PFA Revenue, Senior Lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 ......................... 3,000,000 2,873,460 Senior Lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/22 ......................... 3,000,000 2,849,610 Senior Lien, Fund Loan Notes, Refunding, Series A, 5.625%, 10/01/25 ........................ 3,000,000 2,879,160 Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.30%, 7/01/18 .................................................................. 1,700,000 1,588,480 Refunding, 5.30%, 7/01/21 .................................................................. 1,000,000 924,490 Series A, Pre-Refunded, 7.40%, 7/01/11 ..................................................... 4,905,000 5,209,895 Virgin Islands Water and Power Authority Water System Revenue, Refunding, 5.25%, 7/01/12 ............................................................................. 4,000,000 3,686,760 5.50%, 7/01/17 ............................................................................. 4,000,000 3,620,076 ------------ TOTAL LONG TERM INVESTMENTS (COST $209,404,604) ............................................. 214,691,031 ------------ (a)SHORT TERM INVESTMENTS .6% Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put, 2.85%, 12/01/15 ....................................................... 1,200,000 1,200,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series A, AMBAC Insured, Weekly VRDN and Put, 2.90%, 7/01/28 ............................... 200,000 200,000 ------------ TOTAL SHORT TERM INVESTMENTS (COST $1,400,000) .............................................. 1,400,000 TOTAL INVESTMENTS (COST $210,804,604) 98.6% ................................................. 216,091,031 OTHER ASSETS, LESS LIABILITIES 1.4% ......................................................... 2,947,450 ------------ NET ASSETS 100.0% ........................................................................... $219,038,481 ============
See glossary of terms on page 110. (a) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. See notes to financial statements. FRANKLIN TAX-FREE TRUST STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (UNAUDITED)
GLOSSARY OF TERMS - ----------------------------------------------------------------------------------------------------------------------------------- 1915 Act - Improvement Bond Act of 1915 ABAG - The Association of Bay Area Governments AD - Assessment District AMBAC - American Municipal Bond Assurance Corp. BIG - Bond Investors Guaranty Insurance Co. (acquired by MBIA in 1989 and no longer does business under this name). CDA - Community Development Authority/Agency CDD - Community Development District CFD - Community Facilities District COP - Certificate of Participation CRDA - Community Redevelopment Authority/Agency DATES - Demand Adjustable Tax-Exempt Securities EDA - Economic Development Authority EDC - Economic Development Corp. EDR - Economic Development Revenue ETM - Escrow to Maturity FGIC - Financial Guaranty Insurance Co. FHA - Federal Housing Authority/Agency FI/GML - Federally Insured or Guaranteed Mortgage Loans FNMA - Federal National Mortgage Association FSA - Financial Security Assistance (some of the securities shown as FSA Insured were originally issued by Capital Guaranty Insurance Co. (CGIC) which was acquired by FSA in 1995 and no longer does business under this name). GNMA - Government National Mortgage Association GO - General Obligation HDA - Housing Development Authority/Agency HFA - Housing Finance Authority/Agency HFAR - Housing Finance Authority/Agency Revenue HFC - Housing Finance Corp. ID - Improvement District IDA - Industrial Development Authority/Agency IDAR - Industrial Development Authority/Agency Revenue IDB - Industrial Development Board IDBR - Industrial Development Board Revenue IDC - Industrial Development Corp. IDR - Industrial Development Revenue IPC - Industrial Pollution Control ISD - Independent School District LLC - Limited Liability Corporation LP - Limited Partnership MAC - Municipal Assistance Corporation MBIA - Municipal Bond Investors Assurance Corp. MBS - Mortgage Backed Securities MF - Multi-Family MFHR - Multi-Family Housing Revenue MFMR - Multi-Family Mortgage Revenue MFR - Multi-Family Revenue PBA - Public Building Authority PCC - Pollution Control Corporation PCFA - Pollution Control Financing Authority PCR - Pollution Control Revenue PFA - Public Financing Authority PUD - Public Utility District RDA - Redevelopment Authority/Agency RDAR - Redevelopment Authority/Agency Revenue SF - Single Family SFM - Single Family Mortgage SFMR - Single Family Mortgage Revenue SFR - Single Family Revenue UHSD - Unified High School District USD - Unified School District
FRANKLIN TAX-FREE TRUST FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FEDERAL ARIZONA COLORADO CONNECTICUT INTERMEDIATE- TAX-FREE TAX-FREE TAX-FREE TERM TAX FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------ Assets: Investments in securities: Cost ...................................................... $851,195,085 $305,514,568 $260,569,138 $192,966,527 ================================================================= Value ..................................................... 861,569,433 306,977,800 262,300,172 192,846,793 Cash ....................................................... 36,662,937 74,929 94,822 40,563 Receivables: Investment securities sold ................................ -- -- 13,276,238 -- Capital shares sold ....................................... 636,725 1,462,199 159,476 777,475 Interest .................................................. 10,609,960 5,020,259 3,704,099 2,567,838 ---------------------------------------------------------------- Total assets ............................................ 909,479,055 313,535,187 279,534,807 196,232,669 ---------------------------------------------------------------- Liabilities: Payables: Investment securities purchased ........................... 48,821,700 995,778 12,502,330 12,474,834 Capital shares redeemed ................................... 1,386,642 261,900 370,835 1,219,555 Affiliates ................................................ 520,432 214,592 198,152 110,596 Shareholders .............................................. 7,365 2,387 4,518 830 Distributions to shareholders .............................. 1,628,748 577,431 429,742 308,728 Other liabilities .......................................... 74,961 33,973 7,833 61,130 ---------------------------------------------------------------- Total liabilities ....................................... 52,439,848 2,086,061 13,513,410 14,175,673 ---------------------------------------------------------------- Net assets, at value .................................. $857,039,207 $311,449,126 $266,021,397 $182,056,996 ================================================================= Net assets consist of: Undistributed net investment income ........................ $ -- $ -- $ -- $ 48,336 Accumulated distributions in excess of net investment income ....................................... (1,175,788) (242,731) (259,060) -- Net unrealized appreciation (depreciation) ................. 10,374,348 1,463,232 1,731,034 (119,734) Accumulated net realized loss .............................. (4,205,319) (237,137) (5,434,133) (1,180,744) Capital shares ............................................. 852,045,966 310,465,762 269,983,556 183,309,138 ---------------------------------------------------------------- Net assets, at value .................................. $857,039,207 $311,449,126 $266,021,397 $182,056,996 ================================================================ CLASS A: Net assets, at value ....................................... $832,231,128 $288,951,992 $239,180,146 $182,056,996 ================================================================ Shares outstanding ......................................... 77,147,383 25,345,237 22,471,651 16,747,073 ================================================================ Net asset value per share* ................................. $ 10.79 $ 11.40 $ 10.64 $ 10.87 ================================================================ Maximum offering price per share (net asset value per share divided by 95.75%) ............................. $ 11.27 $ 11.91 $ 11.11 $ 11.12** ================================================================ CLASS C: Net assets, at value ....................................... $ 24,808,079 $ 22,497,134 $ 26,841,251 -- ================================================================ Shares outstanding ......................................... 2,284,706 1,963,038 2,513,847 -- ================================================================ Net asset value per share* ................................. $ 10.86 $ 11.46 $ 10.68 -- ================================================================ Maximum offering price per share (net asset value per share divided by 99%) ................................ $ 10.97 $ 11.58 $ 10.79 -- ================================================================
* Redemption price is equal to net asset value less any applicable contingent deferred sales charge. ** The maximum offering price for Franklin Federal Intermediate-Term Tax-Free Income Fund is calculated at $10.87 divided by 97.75%. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF ASSETS AND LIABILITIES (CONT.) AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN HIGH-YIELD NEW JERSEY OREGON PENNSYLVANIA TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------------ Assets: Investments in securities: Cost .............................................. $ 6,356,224,371 $ 709,621,163 $ 521,553,136 $ 742,244,661 ======================================================================== Value ............................................. 6,405,994,768 722,197,489 522,089,060 748,014,187 Cash ................................................ 1,392,961 1,920,018 -- 341,094 Receivables: Investment securities sold ......................... -- 4,864,906 3,788,579 -- Capital shares sold ................................ 10,780,484 1,607,898 292,311 898,041 Interest ........................................... 116,321,034 9,811,557 7,138,935 12,639,999 ------------------------------------------------------------------------ Total assets ..................................... 6,534,489,247 740,401,868 533,308,885 761,893,321 ------------------------------------------------------------------------ Liabilities: Payables: Investment securities purchased ................... 83,014,924 8,210,391 22,408,648 6,572,099 Capital shares redeemed ........................... 12,422,193 696,369 832,328 1,422,014 Affiliates ........................................ 4,006,002 501,857 338,769 506,669 Shareholders ...................................... 89,577 8,498 5,623 12,013 Distributions to shareholders ....................... 11,674,134 1,189,538 809,937 1,425,815 Other liabilities ................................... 379,311 85,665 51,367 78,994 ------------------------------------------------------------------------ Total liabilities ................................ 111,586,141 10,692,318 24,446,672 10,017,604 ------------------------------------------------------------------------ Net assets, at value ........................... $ 6,422,903,106 $ 729,709,550 $ 508,862,213 $ 751,875,717 ======================================================================== Net assets consist of: Undistributed net investment income ................. $ -- $ -- $ 447,937 $ -- Accumulated distributions in excess of net investment income ................................. (6,603,653) (439,145) -- (1,179,813) Net unrealized appreciation ......................... 49,770,397 12,576,326 535,925 5,769,526 Accumulated net realized loss ....................... (1,599,033) (681,296) (87,629) (302,857) Capital shares ...................................... 6,381,335,395 718,253,665 507,965,980 747,588,861 ---------------------------------------------------------------------- Net assets, at value ........................... $ 6,422,903,106 $ 729,709,550 $ 508,862,213 $ 751,875,717 ======================================================================== CLASS A: Net assets, at value ................................ $ 5,719,162,790 $ 677,939,267 $ 471,951,440 $707,101,932 ======================================================================== Shares outstanding .................................. 519,949,609 59,429,031 42,020,964 70,885,795 ======================================================================== Net asset value per share* .......................... $ 11.00 $ 11.41 $ 11.23 $ 9.98 ======================================================================== Maximum offering price per share (net asset value per share / 95.75%) ............................... $ 11.49 $ 11.92 $ 11.73 $ 10.42 ======================================================================== CLASS B: Net assets, at value ................................ $ 72,071,370 -- -- -- ======================================================================== Shares outstanding .................................. 6,529,532 -- -- -- ======================================================================== Net asset value and maximum offering price per share* .......................................... $ 11.04 -- -- -- ======================================================================== CLASS C: Net assets, at value ................................ $ 631,668,946 $ 51,770,283 $ 36,910,773 $ 44,773,785 ======================================================================== Shares outstanding .................................. 57,035,604 4,514,135 3,264,632 4,465,635 ======================================================================== Net asset value per share* .......................... $ 11.07 $ 11.47 $ 11.31 $ 10.03 ======================================================================== Maximum offering price per share (net asset value per share / 99.00%) ............................... $ 11.18 $ 11.59 $ 11.42 $ 10.13 ========================================================================
* Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF ASSETS AND LIABILITIES (CONT.) AUGUST 31, 1999 (UNAUDITED)
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND Assets: Investments in securities: Cost ............................................................................................... $ 210,804,604 ============= Value .............................................................................................. 216,091,031 Cash ................................................................................................. 8,219 Receivables: Capital shares sold ................................................................................ 283,514 Interest ........................................................................................... 3,351,834 ------------- Total assets ..................................................................................... 219,734,598 ------------- Liabilities: Payables: Capital shares redeemed ............................................................................ 122,948 Affiliates ......................................................................................... 161,120 Shareholders ....................................................................................... 3,187 Distributions to shareholders ........................................................................ 392,874 Other liabilities .................................................................................... 15,988 ------------- Total liabilities ................................................................................ 696,117 ------------- Net assets, at value ........................................................................... $ 219,038,481 ============= Net assets consist of: Accumulated distributions in excess of net investment income ......................................... (176,294) Net unrealized appreciation .......................................................................... 5,286,427 Accumulated net realized gain ........................................................................ 517,294 Capital shares ....................................................................................... 213,411,054 ------------- Net assets, at value ........................................................................... $ 219,038,481 ============= CLASS A: Net assets, at value ................................................................................. $ 211,036,024 ============= Shares outstanding ................................................................................... 18,554,661 ============= Net asset value per share* ........................................................................... $ 11.37 ============= Maximum offering price per share (net asset value per share / 95.75%) ................................ $ 11.87 ============= CLASS C: Net assets, at value ................................................................................. $ 8,002,457 ============= Shares outstanding ................................................................................... 702,550 ============= Net asset value per share* ........................................................................... $ 11.39 ============= Maximum offering price per share (net asset value per share / 99.00%) ................................ $ 11.51 =============
* Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FEDERAL ARIZONA COLORADO CONNECTICUT INTERMEDIATE- TAX-FREE TAX-FREE TAX-FREE TERM TAX FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------ Investment income: Interest .................................................. $ 25,412,459 $ 9,106,626 $ 7,847,623 $ 5,082,637 ------------------------------------------------------------------ Expenses: Management fees (Note 3) .................................. 2,107,342 843,719 735,683 535,483 Distribution fees (Note 3) Class A ................................................. 406,453 146,321 118,489 96,383 Class C ................................................. 82,852 73,010 85,105 -- Transfer agent fees (Note 3) .............................. 149,238 61,611 53,374 33,857 Custodian fees ............................................ 4,536 1,555 1,277 886 Reports to shareholders ................................... 44,712 17,173 20,013 12,843 Registration and filing fees .............................. 13,637 5,740 4,510 28,197 Professional fees ......................................... 11,778 2,946 1,989 3,152 Trustees' fees and expenses ............................... 3,699 1,928 1,196 883 Other ..................................................... 30,946 14,565 7,292 18,916 ------------------------------------------------------------------ Total expenses ......................................... 2,855,193 1,168,568 1,028,928 730,600 Expenses waived/paid by affiliate (Note 3) ............. -- -- -- (7,550) ------------------------------------------------------------------ Net expenses ......................................... 2,855,193 1,168,568 1,028,928 723,050 ------------------------------------------------------------------ Net investment income ............................... 22,557,266 7,938,058 6,818,695 4,359,587 ------------------------------------------------------------------ Realized and unrealized gains (losses): Net realized loss from investments ........................ (4,197,864) (234,341) (1,876,462) (65,336) Net unrealized depreciation on investments ................ (39,437,050) (16,810,677) (13,489,393) (7,290,958) ------------------------------------------------------------------ Net realized and unrealized loss ........................... (43,634,914) (17,045,018) (15,365,855) (7,356,294) ------------------------------------------------------------------ Net decrease in net assets resulting from operations ....... $(21,077,648) $ (9,106,960) $ (8,547,160) $ (2,996,707) ==================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF OPERATIONS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
FRANKLIN FRANKLIN FRANKLIN FRANKLIN HIGH-YIELD NEW JERSEY OREGON PENNSYLVANIA TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ----------------------------------------------------------------------- Investment income: Interest .............................................. $ 210,277,270 $ 21,164,886 $ 14,732,327 $ 22,850,950 ----------------------------------------------------------------------- Expenses: Management fees (Note 3) .............................. 14,956,384 1,792,457 1,299,328 1,886,693 Distribution fees (Note 3) Class A ................................................ 2,670,095 329,127 233,449 358,746 Class B ................................................ 150,841 -- -- -- Class C ................................................ 2,106,042 170,024 116,186 145,356 Transfer agent fees (Note 3) .......................... 1,304,887 186,971 95,531 211,117 Custodian fees ........................................ 31,833 3,472 2,521 4,289 Reports to shareholders ............................... 425,663 60,877 37,478 62,634 Registration and filing fees .......................... 426,800 10,020 4,719 9,236 Professional fees ..................................... 163,489 8,768 3,511 10,817 Trustees' fees and expenses ........................... 29,909 3,615 2,692 3,589 Other ................................................. 129,274 20,478 16,030 20,839 ----------------------------------------------------------------------- Total expenses ......................................... 22,395,217 2,585,809 1,811,445 2,713,316 ----------------------------------------------------------------------- Net investment income ................................. 187,882,053 18,579,077 12,920,882 20,137,634 ----------------------------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments ............. (1,560,744) (680,193) 16,268 (304,544) Net unrealized depreciation on investments ............ (280,426,945) (33,853,248) (26,849,750) (41,112,717) ----------------------------------------------------------------------- Net realized and unrealized loss ....................... (281,987,689) (34,533,441) (26,833,482) (41,417,261) ----------------------------------------------------------------------- Net decrease in net assets resulting from operations ... $ (94,105,636) $ (15,954,364) $ (13,912,600) $ (21,279,627) =======================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF OPERATIONS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND ----------- Investment income: Interest ........................................................................................... $ 6,426,507 ----------- Expenses: Management fees (Note 3) ........................................................................... 622,641 Distribution fees (Note 3) Class A ............................................................................................. 103,232 Class C ............................................................................................. 25,290 Transfer agent fees (Note 3) ....................................................................... 69,474 Custodian fees ..................................................................................... 1,169 Reports to shareholders ............................................................................ 21,008 Registration and filing fees ....................................................................... 14,904 Professional fees .................................................................................. 4,354 Trustees' fees and expenses ........................................................................ 1,158 Other .............................................................................................. 5,416 ----------- Total expenses ...................................................................................... 868,646 ----------- Net investment income .............................................................................. 5,557,861 ----------- Realized and unrealized gains (losses): Net realized gain from investments ................................................................. 518,377 Net unrealized depreciation on investments ......................................................... (9,927,417) ----------- Net realized and unrealized loss .................................................................... (9,409,040) ----------- Net decrease in net assets resulting from operations ................................................ $(3,851,179) ===========
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN ARIZONA FRANKLIN COLORADO TAX-FREE INCOME FUND TAX-FREE INCOME FUND ----------------------------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ----------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .................... $ 22,557,266 $ 43,743,520 $ 7,938,058 $ 14,775,876 Net realized gain (loss) from investments (4,197,864) 3,918,445 (234,341) 1,022,077 Net unrealized depreciation on investments (39,437,050) (4,679,698) (16,810,677) (713,406) ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ........... (21,077,648) 42,982,267 (9,106,960) 15,084,547 Distributions to shareholders from: Net investment income: Class A ................................. (21,981,770) (42,890,425) (7,445,049) (14,188,201) Class C ................................. (575,496) (853,095) (439,009) (709,062) In excess of net investment income: Class A ................................. (449,770) (112,500) (221,295) (6,459) Class C ................................. (11,769) (2,296) (14,654) (323) Net realized gains: Class A ................................. (2,664,218) (3,662,232) (297,996) (1,791,554) Class C ................................. (79,831) (79,205) (21,969) (102,076) ----------------------------------------------------------------------- Total distributions to shareholders ........ (25,762,854) (47,599,753) (8,493,972) (16,797,675) Capital share transactions: (Note 2) Class A ................................. 16,695,904 55,297,029 3,946,648 36,395,512 Class C ................................. 2,292,919 9,424,466 1,823,345 11,143,387 ----------------------------------------------------------------------- Total capital share transactions ........... 18,988,823 64,721,495 5,769,993 47,538,899 Net increase (decrease) in net assets . (27,851,679) 60,104,009 (11,830,939) 45,825,771 Net assets: Beginning of period ..................... 884,890,886 824,786,877 323,280,065 277,454,294 ----------------------------------------------------------------------- End of period ........................... $ 857,039,207 $ 884,890,886 $ 311,449,126 $ 323,280,065 ======================================================================= Accumulated distributions in excess of net investment income included in net assets: End of period ............................ $ (1,175,788) $ (714,249) $ (242,731) $ (6,782) =======================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN CONNECTICUT FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX FREE INCOME FUND ----------------------------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ----------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .................... $ 6,818,695 $ 11,874,815 $ 4,359,587 $ 7,442,059 Net realized gain (loss) from investments (1,876,462) 631,807 (65,336) 146,469 Net unrealized appreciation (depreciation) on investments ......................... (13,489,393) 175,555 (7,290,958) 632,241 ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .......... (8,547,160) 12,682,177 (2,996,707) 8,220,769 ----------------------------------------------------------------------- Distributions to shareholders from: Net investment income: Class A ................................ (6,238,710) (11,204,717) (4,378,086) (7,539,385) Class C ................................ (579,985) (670,098) -- -- In excess of net investment income: Class A ................................ (99,254) (53,408) -- -- Class C ................................ (9,220) (3,194) -- -- ----------------------------------------------------------------------- Total distributions to shareholders ........ (6,927,169) (11,931,417) (4,378,086) (7,539,385) Capital share transactions: (Note 2) Class A ................................. 8,145,949 40,666,725 (6,166,579) 55,372,039 Class C ................................. 4,890,732 14,762,426 -- -- ----------------------------------------------------------------------- Total capital share transactions ........... 13,036,681 55,429,151 (6,166,579) 55,372,039 Net increase (decrease) in net assets (2,437,648) 56,179,911 (13,541,372) 56,053,423 Net assets: Beginning of period ..................... 268,459,045 212,279,134 195,598,368 139,544,945 ----------------------------------------------------------------------- End of period ........................... $ 266,021,397 $ 268,459,045 $ 182,056,996 $ 195,598,368 ======================================================================= Undistributed net investment income (accumulated distributions in excess of net investment income) included in net assets: End of period ........................... $ (259,060) $ (150,586) $ 48,336 $ 66,835 =======================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN HIGH-YIELD FRANKLIN NEW JERSEY TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ------------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .................... $ 187,882,053 $ 360,598,786 $ 18,579,077 $ 35,124,421 Net realized gain (loss) from investments (1,560,744) 21,319,398 (680,193) 596,765 Net unrealized appreciation (depreciation) on investments ......................... (280,426,945) (120,400,244) (33,853,248) 2,362,264 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ........... (94,105,636) 261,517,940 (15,954,364) 38,083,450 Distributions to shareholders from: Net investment income: Class A ................................. (170,252,508) (332,249,669) (17,489,429) (33,973,510) Class B ................................. (1,141,317) (46,213) -- -- Class C ................................. (16,488,228) (27,314,370) (1,164,596) (1,728,570) In excess of net investment income: Class A ................................. (2,803,993) -- (411,729) -- Class B ................................. (18,797) -- -- -- Class C ................................. (271,555) -- (27,416) -- Net realized gains: Class A ................................. (1,469,024) (7,966,666) (187,763) -- Class B ................................. (13,236) -- -- -- Class C ................................. (159,598) (819,741) (14,225) -- ------------------------------------------------------------------------------- Total distributions to shareholders ........ (192,618,256) (368,396,659) (19,295,158) (35,702,080) Capital share transactions: (Note 2) Class A .................................. (12,492,037) 342,918,876 28,886,265 42,629,937 Class B .................................. 58,872,870 15,504,687 -- -- Class C .................................. 27,580,492 217,918,008 5,539,618 20,454,134 ------------------------------------------------------------------------------- Total capital share transactions ........... 73,961,325 576,341,571 34,425,883 63,084,071 Net increase (decrease) in net assets .. (212,762,567) 469,462,852 (823,639) 65,465,441 Net assets: Beginning of period ....................... 6,635,665,673 6,166,202,821 730,533,189 665,067,748 ------------------------------------------------------------------------------- End of period ............................. $ 6,422,903,106 $ 6,635,665,673 $ 729,709,550 $ 730,533,189 =============================================================================== Undistributed net investment income (accumulated distributions in excess of net investment income) included in net assets: End of period ............................ $ (6,603,653) $ (3,528,808) $ (439,145) $ 74,948 ===============================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN OREGON FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND TAX-FREE INCOME FUND ----------------------------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 AUGUST 31, 1999 FEBRUARY 28, 1999 ----------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ........................... $ 12,920,882 $ 23,901,350 $ 20,137,634 $ 39,708,987 Net realized gain (loss) from investments ....... 16,268 1,677,443 (304,544) 1,071,826 Net unrealized depreciation on investments ...... (26,849,750) (1,943,787) (41,112,717) (2,242,080) ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ............................. (13,912,600) 23,635,006 (21,279,627) 38,538,733 Distributions to shareholders from: Net investment income: Class A ....................................... (12,374,602) 23,518,284 (19,127,655) (38,182,843) Class C ....................................... (790,873) 1,142,332 (1,009,979) (1,526,144) In excess of net investment income: Class A ....................................... -- -- (330,491) (418,611) Class C ....................................... -- -- (17,430) (16,732) Net realized gains: Class A ....................................... -- -- (14,418) (985,591) Class C ....................................... -- -- (865) (51,198) ----------------------------------------------------------------------- Total distributions to shareholders ............... (13,165,475) (24,660,616) (20,500,838) (41,181,119) Capital share transactions: (Note 2) Class A .......................................... 13,498,480 57,633,801 (12,438,722) 48,325,952 Class C .......................................... 5,815,128 17,049,844 5,235,356 16,135,478 ----------------------------------------------------------------------- Total capital share transactions .................. 19,313,608 74,683,645 (7,203,366) 64,461,430 Net increase (decrease) in net assets ......... (7,764,467) 73,658,035 (48,983,831) 61,819,044 Net assets: Beginning of period .............................. 516,626,680 442,968,645 800,859,548 739,040,504 ----------------------------------------------------------------------- End of period .................................... $ 508,862,213 $ 516,626,680 $ 751,875,717 $ 800,859,548 ======================================================================= Undistributed net investment income (accumulated distributions in excess of net investment income) included in net assets: End of period .................................... $ 447,937 $ 692,530 $ (1,179,813) $ (831,892) =======================================================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 1999
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND -------------------------------- SIX MONTHS YEAR ENDED ENDED AUGUST 31, 1999 FEBRUARY 28, 1999 -------------------------------- Increase (decrease) in net assets: Operations: Net investment income ........................................... $ 5,557,861 $ 10,900,493 Net realized gain from investments .............................. 518,377 836,253 Net unrealized appreciation (depreciation) on investments ....... (9,927,417) 296,087 -------------------------------- Net increase (decrease) in net assets resulting from operations (3,851,179) 12,032,833 Distributions to shareholders from: Net investment income: Class A ........................................................ (5,388,805) (10,664,385) Class C ........................................................ (169,056) (236,108) In excess of net investment income: Class A ........................................................ (13,609) (112,508) Class C ........................................................ (427) (2,491) Net realized gains: Class A ........................................................ (289,652) (682,528) Class C ........................................................ (10,841) (19,507) -------------------------------- Total distributions to shareholders ............................... (5,872,390) (11,717,527) Capital share transactions: (Note 2) Class A .......................................................... 1,664,672 8,116,885 Class C .......................................................... 1,294,168 3,431,283 -------------------------------- Total capital share transactions .................................. 2,958,840 11,548,168 Net increase (decrease) in net assets ......................... (6,764,729) 11,863,474 Net assets: Beginning of period .............................................. 225,803,210 213,939,736 -------------------------------- End of period ..................................................... $ 219,038,481 $ 225,803,210 ================================ Accumulated distributions in excess of net investment income included in net assets: End of period .................................................... $ (176,294) $ (162,258) ================================
See notes to financial statements. FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Franklin Tax Free Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of twenty-six separate series (the Funds). All Funds included in this report are diversified except the Franklin Connecticut Tax-Free Income Fund and the Franklin Federal Intermediate-Term Tax-Free Income Fund. The Funds' investment objective is to provide tax-free income. The following summarizes the Funds' significant accounting policies. a. SECURITY VALUATION Tax-free bonds generally trade in the over-the-counter market and are valued within the range of the latest quoted bid and asked prices. In the absence of a sale or reported bid and asked prices, information with respect to bond and note transactions, quotations from bond dealers, market transactions in comparable securities, and various relationships between securities are used to determine the value of the security. The Trust may utilize a pricing service, bank or broker/dealer experienced in such matters to perform any of the pricing functions under procedures approved by the Board of Trustees. Securities for which market quotations are not readily available are valued at fair value as determined by management in accordance with procedures established by the Board of Trustees. b. INCOME TAXES No provision has been made for income taxes because each Fund's policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income. c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Bond discount and premium are amortized on an income tax basis. Distributions to shareholders are recorded on the ex-dividend date. Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets. Other expenses are charged to each Fund on a specific identification basis. d. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense during the reporting period. Actual results could differ from those estimates. 2. SHARES OF BENEFICIAL INTEREST The classes of shares offered within each of the funds are indicated below. Effective January 1, 1999, Class I and Class II were renamed Class A and Class C, respectively, and the Franklin High Yield Tax-Free Income Fund began offering a new class of shares, Class B. The shares differ by their initial sales load, distribution fees, voting rights on matters affecting a single class and the exchange privilege of each class.
CLASS A CLASS A & CLASS C CLASS A, CLASS B, & CLASS C - ------------------------------------------------------------------------------------------------------------------------- Federal Intermediate-Term Tax-Free Income Fund Arizona Tax-Free Income Fund High Yield Tax-Free Income Fund Colorado Tax-Free Income Fund Connecticut Tax-Free Income Fund New Jersey Tax-Free Income Fund Oregon Tax-Free Income Fund Pennsylvania Tax-Free Income Fund Puerto Rico Tax-Free Income Fund
FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) (continued) 2. SHARES OF BENEFICIAL INTEREST (CONT.) At August 31, 1999, there were an unlimited number of shares authorized (no par value). Transactions in the funds' shares were as follows:
FRANKLIN ARIZONA FRANKLIN COLORADO FRANKLIN CONNECTICUT TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND --------------------------------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT --------------------------------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold .................... 6,282,923 $ 70,329,414 1,787,591 $ 21,099,468 2,080,096 $ 22,978,618 Shares issued in reinvestment of distributions ............. 933,549 10,394,618 331,498 3,907,276 278,425 3,067,722 Shares redeemed ................ (5,745,254) (64,028,128) (1,784,615) (21,060,096) (1,628,844) (17,900,391) -------------------------------------------------------------------------------------------- Net increase ................... 1,471,218 $ 16,695,904 334,474 $ 3,946,648 729,677 $ 8,145,949 ============================================================================================ Year ended February 28, 1999 Shares sold .................... 11,526,533 $131,398,899 4,827,831 $ 58,439,307 5,343,819 $ 60,218,484 Shares issued in reinvestment of distributions ............. 1,678,671 19,132,729 655,996 7,932,374 494,190 5,562,097 Shares redeemed ................ (8,347,885) (95,234,599) (2,479,532) (29,976,169) (2,231,916) (25,113,856) -------------------------------------------------------------------------------------------- Net increase ................... 4,857,319 $ 55,297,029 3,004,295 $ 36,395,512 3,606,093 $ 40,666,725 ============================================================================================ CLASS C SHARES: Six months ended August 31, 1999 Shares sold .................... 486,096 $ 5,479,148 407,690 $ 4,834,841 593,582 $ 6,596,395 Shares issued in reinvestment of distributions ............. 35,642 399,197 31,467 372,946 35,209 388,564 Shares redeemed ................ (321,677) (3,585,426) (284,368) (3,384,442) (189,101) (2,094,227) -------------------------------------------------------------------------------------------- Net increase ................... 200,061 $ 2,292,919 154,789 $ 1,823,345 439,690 $ 4,890,732 ============================================================================================ Year ended February 28, 1999 Shares sold .................... 1,020,350 $ 11,705,629 1,064,599 $ 12,955,209 1,442,047 $ 16,291,315 Shares issued in reinvestment of distributions ............. 48,448 555,594 47,188 573,490 36,934 417,159 Shares redeemed ................ (247,506) (2,836,757) (195,768) (2,385,312) (172,113) (1,946,048) -------------------------------------------------------------------------------------------- Net increase ................... 821,292 $ 9,424,466 916,019 $ 11,143,387 1,306,868 $ 14,762,426 ==========================================================================================
FRANKLIN FEDERAL INTERMEDIATE-TERM FRANKLIN HIGH YIELD FRANKLIN NEW JERSEY TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold ................... 6,986,185 $ 77,622,449 44,692,642 $ 505,535,053 5,771,005 $ 67,905,725 Shares issued in reinvestment of distributions ............ 249,580 2,773,371 6,659,720 75,233,051 804,420 9,449,372 Shares redeemed ............... (7,797,952) (86,562,399) (52,578,848) (593,260,141) (4,133,020) (48,468,832) ------------------------------------------------------------------------------------------- Net increase (decrease) ....... (562,187) $ (6,166,579) (1,226,486) $ (12,492,037) 2,442,405 $ 28,886,265 =========================================================================================== Year ended February 28, 1999 Shares sold ................... 11,604,328 $130,996,084 109,439,514 $ 1,270,904,703 9,025,737 $107,896,711 Shares issued in reinvestment of distributions ............ 424,605 4,788,679 12,599,576 146,168,778 1,485,157 17,759,368 Shares redeemed ............... (7,120,171) (80,412,724) (92,381,330) (1,074,154,605) (6,947,075) (83,026,142) ------------------------------------------------------------------------------------------- Net increase .................. 4,908,762 $ 55,372,039 29,657,760 $ 342,918,876 3,563,819 $ 42,629,937 ===========================================================================================
FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) (continued) 2. SHARES OF BENEFICIAL INTEREST (CONT.)
FRANKLIN HIGH YIELD FRANKLIN NEW JERSEY TAX-FREE INCOME FUND TAX-FREE INCOME FUND -------------------------------------------------------------- CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------- Six months ended August 31, 1999 Shares sold .................... 5,243,800 $ 59,546,003 Shares issued in reinvestment of distributions ............. 58,905 663,195 Shares redeemed ................ (117,829) (1,336,328) ----------------------------- Net increase ................... 5,184,876 $ 58,872,870 ============================= Period ended February 28, 1999(1) Shares sold .................... 1,351,940 $ 15,588,944 Shares issued in reinvestment of distributions ............. 1,920 22,138 Shares redeemed ................ (9,204) (106,395) ----------------------------- Net increase ................... 1,344,656 $ 15,504,687 ============================= CLASS C SHARES: Six months ended August 31, 1999 Shares sold .................... 7,164,225 $ 81,745,693 790,642 $ 9,411,756 Shares issued in reinvestment of distributions ............. 868,047 9,867,827 64,374 760,015 Shares redeemed ................ (5,643,231) (64,033,028) (391,738) (4,632,153) -------------------------------------------------------------- Net increase ................... 2,389,041 $ 27,580,492 463,278 $ 5,539,618 ============================================================== Year ended February 28, 1999 Shares sold .................... 23,491,348 $274,591,698 2,039,721 $24,514,544 Shares issued in reinvestment of distributions ............. 1,434,609 16,744,689 92,442 1,111,258 Shares redeemed ................ (6,290,089) (73,418,379) (430,504) (5,171,668) -------------------------------------------------------------- Net increase ................... 18,635,868 $217,918,008 1,701,659 $20,454,134 ==============================================================
(1) For the period January 1, 1999 (effective date) to February 28, 1999.
FRANKLIN OREGON FRANKLIN PENNSYLVANIA FRANKLIN PUERTO RICO TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold ................... 3,780,700 $ 44,079,472 3,620,175 $ 37,454,979 1,096,548 $ 12,845,076 Shares issued in reinvestment of distributions ............ 586,066 6,790,452 850,041 8,764,397 236,974 2,771,555 Shares redeemed ............... (3,231,276) (37,371,444) (5,701,793) (58,658,098) (1,193,771) (13,951,959) ------------------------------------------------------------------------------------- Net increase (decrease) ....... 1,135,490 $ 13,498,480 (1,231,577) $(12,438,722) 139,751 $ 1,664,672 ===================================================================================== Year ended February 28, 1999 Shares sold ................... 7,610,561 $ 90,155,831 10,273,081 $108,316,940 2,024,140 $ 24,064,112 Shares issued in reinvestment of distributions ............ 1,100,982 13,038,139 1,721,278 18,145,017 469,863 5,585,862 Shares redeemed ............... (3,846,398) (45,560,169) (7,413,012) (78,136,005) (1,811,759) (21,533,089) ------------------------------------------------------------------------------------- Net increase .................. 4,865,145 $ 57,633,801 4,581,347 $ 48,325,952 682,244 $ 8,116,885 =====================================================================================
FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) (continued) 2. SHARES OF BENEFICIAL INTEREST (CONT.)
FRANKLIN OREGON FRANKLIN PENNSYLVANIA FRANKLIN PUERTO RICO TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND ----------------------------------------------------------------------------------------- CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------------------------------- Six months ended August 31, 1999 Shares sold ................... 809,245 $ 9,460,098 715,896 $ 7,467,294 181,905 $ 2,137,193 Shares issued in reinvestment of distributions ............ 46,539 542,550 61,976 641,762 8,475 99,259 Shares redeemed (359,990) (4,187,520) (276,140) (2,873,700) (80,553) (942,284) ----------------------------------------------------------------------------------------- Net increase .................. 495,794 $ 5,815,128 501,732 $ 5,235,356 109,827 $ 1,294,168 ========================================================================================= Year ended February 28, 1999 Shares sold ................... 1,560,923 $ 18,592,323 1,872,749 $ 19,847,633 361,675 $ 4,306,325 Shares issued in reinvestment of distributions ............ 70,444 839,644 96,080 1,017,661 13,159 156,658 Shares redeemed ............... (199,919) (2,382,123) (447,006) (4,729,816) (86,636) (1,031,700) ----------------------------------------------------------------------------------------- Net increase .................. 1,431,448 $ 17,049,844 1,521,823 $ 16,135,478 288,198 $ 3,431,283 =========================================================================================
3. TRANSACTIONS WITH AFFILIATES Certain officers and trustees of the Trust are also officers and/or directors of Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc. (Distributors), Franklin/Templeton Investor Services, Inc. (Investor Services), and Franklin Templeton Services, Inc. (FT Services), the Funds' investment manager, principal underwriter, transfer agent, and administrative manager, respectively. The Funds pay an investment management fee to Advisers, based on the average net assets of the Funds as follows: ANNUALIZED FEE RATE MONTH-END NET ASSETS - ---------------------------------------------------------------------------- .625% First $100 million .500% Over $100 million, up to and including $250 million .450% In excess of $250 million Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Funds. Advisers agreed in advance to waive management fees for the Franklin Federal Intermediate-Term Tax-Free Income Fund, as noted in the Statements of Operations. The Funds reimburse Distributors up to .10%, .65%, and .65% per year of their average daily net assets of Class A, Class B, and Class C, respectively, for costs incurred in marketing the Funds' shares. FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) (continued) 3. TRANSACTIONS WITH AFFILIATES (CONT.) Distributors received (paid) net commissions on sales of the Funds' shares, and received contingent deferred sales charges for the period as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN ARIZONA COLORADO CONNECTICUT INTERMEDIATE- HIGH YIELD TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ----------------------------------------------------------------------------- Net commissions paid ................... $(164,008) $(23,412) $(34,802) $(176,686) $(2,684,590) Contingent deferred sales charges ...... $ 25,563 $ 11,257 $ 13,316 $ 32,198 $ 287,989
FRANKLIN FRANKLIN FRANKLIN FRANKLIN NEW JERSEY OREGON PENNSYLVANIA PUERTO RICO TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND -------------------------------------------------------------- Net commissions (paid) ............................... $(130,797) $(124,116) $(28,028) $(7,972) Contingent deferred sales charges .................... $ 18,701 $ 46,440 $ 13,622 $ 5,706
The Funds paid transfer agent fees of $2,166,060, of which $1,814,406 was paid to Investor Services. 4. INCOME TAXES At February 28, 1999, the Funds had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows:
FRANKLIN FRANKLIN FEDERAL FRANKLIN CONNECTICUT INTERMEDIATE- OREGON TAX-FREE TERM TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND -------------------------------------------------------- Capital loss carryovers expiring in: 2003 ................... $3,162,502 $ -- $ 36,444 2004 ................... 46,957 920,152 -- 2005 ................... 322,502 99,478 67,453 2006 ................... -- 95,778 -- ------------------------------------------------------- $3,531,961 $1,115,408 $103,897 =======================================================
Distributions of income to shareholders may not equal net investment income due to differing treatments of dividend distributions for book and tax purposes. Net realized capital gains (losses) differ for financial statement and tax purposes primarily due to differing treatment of wash sales. FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) (continued) 4. INCOME TAXES (CONT.) At August 31, 1999, the net unrealized appreciation (depreciation) based on the cost of investments for income tax purposes was as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FEDERAL ARIZONA COLORADO CONNECTICUT INTERMEDIATE- TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ------------------------------------------------------------------------- Investments at cost ......................... $851,198,867 $305,514,568 $260,592,791 $192,966,527 ========================================================================= Unrealized appreciation ..................... $ 28,739,329 $ 7,920,569 $ 8,458,007 $ 3,148,185 Unrealized depreciation ..................... (18,368,763) (6,457,337) (6,750,626) (3,267,919) ------------------------------------------------------------------------- Net unrealized appreciation (depreciation) .. $ 10,370,566 $ 1,463,232 $ 1,707,381 $ (119,734) =========================================================================
FRANKLIN FRANKLIN FRANKLIN FRANKLIN HIGH YIELD NEW JERSEY OREGON PENNSYLVANIA TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ---------------------------------------------------------------------------------- Investments at cost ................ $6,356,590,151 $709,621,163 $521,553,136 $742,244,661 ================================================================================= Unrealized appreciation ............ $ 261,347,974 $ 24,722,680 $ 13,467,666 $ 20,928,319 Unrealized depreciation ............ (211,943,357) (12,146,354) (12,931,741) (15,158,793) ---------------------------------------------------------------------------------- Net unrealized appreciation ........ $ 49,404,617 $ 12,576,326 $ 535,925 $ 5,769,526 =================================================================================
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND ----------- Investments at cost .................................................................................. $210,804,604 ============ Unrealized appreciation .............................................................................. $ 8,722,705 Unrealized depreciation .............................................................................. (3,436,278) ------------ Net unrealized appreciation .......................................................................... $ 5,286,427 ============
5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the period ended August 31, 1999, were as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN ARIZONA COLORADO CONNECTICUT INTERMEDIATE- HIGH YIELD TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND ---------------------------------------------------------------------------------------------- Purchases ............. $134,424,983 $51,533,776 $55,967,064 $ 25,677,519 $933,218,561 Sales ................. $118,507,262 $44,564,080 $41,148,016 $ 22,679,888 $778,046,402
FRANKLIN FRANKLIN FRANKLIN FRANKLIN NEW JERSEY OREGON PENNSYLVANIA PUERTO RICO TAX-FREE TAX-FREE TAX-FREE TAX-FREE INCOME FUND INCOME FUND INCOME FUND INCOME FUND ----------------------------------------------------------------------- Purchases ................................. $72,465,241 $84,524,581 $101,305,625 $14,784,595 Sales ..................................... $40,797,815 $80,404,134 $100,570,677 $13,548,878
FRANKLIN TAX-FREE TRUST Notes to Financial Statements (unaudited) (continued) 6. CREDIT RISK AND DEFAULTED SECURITIES The Franklin High Yield Tax-Free Income Fund has 33.8% of its portfolio invested in lower rated and comparable quality unrated high yield securities, which tend to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities because such securities are generally unsecured and are often subordinated to other creditors of the issuer. At August 31, 1999, the Franklin Federal Intermediate-Term Tax-Free Income Fund and the Franklin High Yield Tax-Free Income Fund held defaulted securities with a value aggregating $910,000 and $17,550,000 representing .50% and .27%, respectively, of the Funds' net assets. For information as to specific securities, see the accompanying Statements of Investments. For financial reporting purposes, the Funds discontinue accruing income on defaulted bonds and provide an estimate for losses on interest receivable. The Funds have investments in excess of 10% of their total net assets in their respective states and/or U.S. territories and possessions except the Franklin Intermediate-Term Tax-Free Income Fund and the Franklin High Yield Tax-Free Income Fund which have investments in excess of 10% of their total net assets in the states of California and/or New York. Such concentration may subject the Funds more significantly to economic changes occurring within those states and/or U.S. territories and possessions. -----END PRIVACY-ENHANCED MESSAGE-----