UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-03395
Franklin Federal Tax-Free Income Fund
(Exact name of registrant as specified in charter)
_One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
_Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
Date of fiscal year end: _4/30
Date of reporting period: _4/30/16
Item 1. Reports to Stockholders.
Annual Report and Shareholder Letter
April 30, 2016
Franklin Federal Tax-Free Income Fund
Contents | |
Annual Report | |
Franklin Federal Tax-Free Income Fund | 3 |
Performance Summary | 7 |
Your Fund’s Expenses | 11 |
Financial Highlights and Statement of Investments | 12 |
Financial Statements | 41 |
Notes to Financial Statements | 44 |
Report of Independent Registered | |
Public Accounting Firm | 51 |
Tax Information | 52 |
Board Members and Officers | 53 |
Shareholder Information | 58 |
Visit franklintempleton.com for fund updates, | |
to access your account, or to find helpful | |
financial planning tools. |
Annual Report
Franklin Federal Tax-Free Income Fund
We are pleased to bring you Franklin Federal Tax-Free Income Fund’s annual report for the fiscal year ended April 30, 2016.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in investment-grade municipal securities that pay interest free from such taxes.1
Credit Quality Breakdown*
4/30/16
% of Total | ||
Ratings | Investments | |
AAA | 11.31 | % |
AA | 49.88 | % |
A | 20.43 | % |
BBB | 6.05 | % |
Below Investment Grade | 1.98 | % |
Refunded | 9.79 | % |
Not Rated | 0.56 | % |
*Securities, except for those labeled Not Rated, are assigned ratings by one or more Nationally Recognized Statistical Credit Rating Organizations (NRSROs), such as Standard & Poor’s, Moody’s and Fitch, that can be considered by the investment manager as part of its independent securities analysis. When ratings from multiple agencies are available, the highest is used, consistent with the portfolio investment process. Ratings reflect an NRSRO’s opinion of an issuer’s creditworthiness and typically range from AAA (highest) to D (lowest). The Below Investment Grade category consists of bonds rated below BBB-. The Refunded category generally consists of refunded bonds secured by U.S. government or other high-quality securities and not rerated by an NRSRO. The Not Rated category consists of ratable securities that have not been rated by an NRSRO. Cash and equivalents are excluded from this breakdown.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, increased from $12.45 on April 30, 2015, to $12.48 on April 30, 2016. The Fund’s Class A shares paid dividends totaling 47.35 cents per share for the reporting period.2 The
Performance Summary beginning on page 7 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.64% based on an annualization of April’s 3.95 cent per share dividend and the maximum offering price of $13.03 on April 30, 2016. An investor in the 2016 maximum federal personal income tax bracket of 39.60% (plus 3.8% Medicare tax) would need to earn a distribution rate of 6.43% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For the Fund’s Class C and Advisor shares’ performance, please see the Performance Summary.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Municipal Bond Market Overview
The municipal bond market outperformed the U.S. Treasury and the U.S. stock markets during the 12-month period ended April 30, 2016. Investment-grade municipal bonds, as measured by the Barclays Municipal Bond Index, generated a +5.29% total return for the period, while U.S. Treasuries, as measured by the Barclays U.S. Treasury Index, posted a +2.83% total return.3 U.S. equities, as represented by the Standard & Poor’s® 500 Index, underperformed with a +1.21% total return for the reporting period.3 The underperformance in U.S. equities was partly fueled by concerns about global economic growth, particularly a continuing slowdown in China and sluggish economic activity in Europe and Japan. Sustained price declines in the commodities markets also put downward pressure on U.S. equities. These factors led to a perceived flight to quality, which seemed to benefit municipal bondholders. In addition, in our opinion, municipal bonds continued to offer significant value relative to Treasuries because of their tax-exempt status and relatively low risk.
1. Dividends are generally subject to state and local taxes, if any. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable.
Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be
properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.
2. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income. All Fund
distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
3. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 15.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Dividend Distributions2 | |||
5/1/15–4/30/16 | |||
Dividend per Share (cents) | |||
Month | Class A | Class C | Advisor Class |
May | 3.85 | 3.26 | 3.96 |
June | 3.90 | 3.35 | 4.00 |
July | 3.90 | 3.35 | 4.00 |
August | 3.90 | 3.35 | 4.00 |
September | 3.95 | 3.39 | 4.05 |
October | 3.95 | 3.39 | 4.05 |
November | 4.00 | 3.44 | 4.10 |
December | 4.00 | 3.43 | 4.11 |
January | 4.00 | 3.43 | 4.11 |
February | 4.00 | 3.43 | 4.11 |
March | 3.95 | 3.37 | 4.05 |
April | 3.95 | 3.37 | 4.05 |
Total | 47.35 | 40.56 | 48.59 |
The Federal Reserve (Fed) raised its target interest-rate range to 0.25%–0.50% in December, citing labor market improvement and continued U.S. economic growth. This action ended a seven-year period of near-zero short-term interest rates. At the time, the Fed indicated the move would be followed by a “gradual” tightening of monetary policy. Benchmark 10-year and 30-year tax-exempt interest rates ended the period lower than where they began.
Municipal bond funds finished the period with eight consecutive months of inflows, reflecting solid demand for tax-exempt debt. Bonds with longer maturities generally performed better than bonds with shorter maturities. In addition, investment-grade municipal bonds fared better than high yield municipal bonds. High yield tax-exempt bonds, as measured by the Barclays High Yield Municipal Bond Index, generated a +4.51% total return for the period.1 Approximately $334 billion in bonds were issued over the past 12 months; this was offset, however, by the nearly $341 billion in bonds that either matured or were called out of the market, making net supply flat for the period.4
Several developments affected Puerto Rico bonds over the reporting period. Puerto Rico and its municipal issuers continued to experience significant financial difficulties, which created additional strain on a commonwealth already facing economic stagnation and fiscal imbalances. These challenges also led to liquidity issues including reduced access to the
Portfolio Breakdown | ||
4/30/16 | ||
% of Total | ||
Investments* | ||
Refunded** | 19.1 | % |
Utilities | 16.7 | % |
Transportation | 13.7 | % |
General Obligation | 13.1 | % |
Subject to Government Appropriations | 9.9 | % |
Hospital & Health Care | 9.7 | % |
Higher Education | 5.9 | % |
Tax-Supported | 4.9 | % |
Other Revenue | 4.9 | % |
Corporate-Backed | 1.3 | % |
Housing | 0.8 | % |
*Does not include cash and cash equivalents. | ||
**Includes all refunded bonds; the percentage may differ from that in the Credit | ||
Quality Breakdown. |
financial markets. On February 6, 2015, a federal judge ruled that Puerto Rico’s Public Corporation Debt Enforcement and Recovery Act (the Act), signed into law on June 28, 2014, was unconstitutional. Following the ruling, which was affirmed by the U.S. Court of Appeals on July 6, 2015, independent credit rating agencies Moody’s Investors Service and Standard & Poor’s repeatedly downgraded Puerto Rico’s general obligation debt, as well as the ratings of certain related Puerto Rico issuers. On August 21, 2015, Puerto Rico petitioned the U.S. Supreme Court to review the ruling invalidating the Act. In early December, the U.S. Supreme Court granted Puerto Rico’s request, and began hearing oral arguments on March 22, 2016. In addition, the commonwealth continued to seek the expansion of Chapter 9 bankruptcy eligibility through the U.S. Congress.
Near the end of June 2015, in conjunction with announcing that Puerto Rico’s debt was “not payable,” Governor Alejandro Garcia Padilla publicly called for a restructuring of Puerto Rico debt obligations, while certain other Puerto Rico issuers continued to negotiate with creditors for a financial restructuring. During the reporting period, Puerto Rico’s financial issues led to partial defaults by Puerto Rico’s Public Finance Corporation on its debt service payments beginning on August 3, 2015. In September, Governor Garcia Padilla’s working group issued a preliminary report regarding the island’s financial situation and potential restructuring recommendations. In recent months, the government has released two different restructuring proposals to creditors. Both
4. Source: Goldman Sachs Securities Division, Bloomberg.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
plans seek to reduce the amount of debt outstanding and lessen annual debt service payments. The government proposed doing this through an exchange into two bonds, at levels below current principal values.
Franklin Templeton has been a member of a creditors’ committee (Ad Hoc Group) made up of bondholders of the Puerto Rico Electric Power Authority (PREPA) with the goal of achieving a negotiated, market-based, long-term solution to PREPA’s liquidity and structural issues. On December 23, 2015, a Restructuring Support Agreement was signed. The agreement, which has attained legislative approval, provides for the Ad Hoc Group to exchange its bonds at 85 cents on the dollar into a new “securitization” bond. There are still many details that need to be resolved, and the formulation of the exchange offer and necessary legislation may take several months. However, we are satisfied that implementation of this agreement would allow PREPA to provide reliable and lower cost service, fund its capital needs for the medium term, ensure environmental compliance, diversify generation resources to include more natural gas and provide jobs.
We believe the PREPA agreement demonstrates how the combination of pursuing our legal rights and engaging in negotiations can achieve positive results, avoiding costly lawsuits or bankruptcy proceedings.
In April 2016, the U.S. House Committee on Natural Resources introduced H.R. 4900, “The Puerto Rico Oversight, Management and Economic Stability Act (PROMESA).” This legislation would create a federal oversight board as well as a restructuring process for Puerto Rico. During April, Governor Padilla also enacted a debt moratorium on most debt issued by Puerto Rico and its agencies. The legislation further stays all related litigation until January 2017.
At period-end, we maintained our positive view of the municipal bond market. We believe municipal bonds continue to be an attractive asset class among fixed income securities, and we intend to follow our solid discipline of investing to maximize income while seeking value in the municipal bond market.
Investment Strategy
We use a consistent, disciplined strategy in an effort to maximize tax-exempt income for our shareholders by seeking to maintain exposure to higher coupon securities while balancing risk and return within the Fund’s range of allowable investments. We generally employ a buy-and-hold approach and invest in securities we believe should provide the most relative value in the market. We do not use leverage or derivatives, nor do we use hedging techniques that could add volatility and contribute to underperformance in adverse markets.
Manager’s Discussion
Our value-oriented philosophy of investing primarily for income and stability of principal, when combined with a positive-sloping municipal yield curve, in which yields for longer term bonds are higher than those for shorter term bonds, led us to favor longer term bonds during the period under review. Consistent with our strategy, we sought to remain invested in bonds ranging from 15 to 30 years in maturity with good call features. Our relative-value, income-oriented philosophy also led the Fund to maintain its positions in higher coupon bonds, which provided income performance during the reporting period. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
The Fund holds a small portion of its assets in Puerto Rico bonds, which experienced price declines over the period. Puerto Rico and its municipal issues continued to experience significant financial difficulties, which we discussed in the Municipal Bond Market Overview. The Fund is not required to sell securities that have been downgraded to below investment grade, but it is prohibited from making further purchases of such securities as long as the securities are not rated investment grade by at least one U.S. nationally recognized rating service. Rating actions combined with news related to the commonwealth’s financial position and future financing endeavors caused the Puerto Rico bond market to experience volatility during the reporting period. We continue to closely monitor developments in Puerto Rico; however, the municipal bond market’s overall fundamentals, such as general creditworthiness and low default rates, remain stable.
Thank you for your continued participation in Franklin Federal Tax-Free Income Fund. We look forward to serving your future investment needs.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2016, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Performance Summary as of April 30, 2016
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | |||||
Share Class (Symbol) | 4/30/16 | 4/30/15 | Change | ||
A (FKTIX) | $ | 12.48 | $ | 12.45 | +$0.03 |
C (FRFTX) | $ | 12.47 | $ | 12.44 | +$0.03 |
Advisor (FAFTX) | $ | 12.49 | $ | 12.46 | +$0.03 |
Distributions1 (5/1/15–4/30/16) | |||||
Dividend | |||||
Share Class | Income | ||||
A | $ | 0.4735 | |||
C | $ | 0.4056 | |||
Advisor | $ | 0.4859 |
See page 10 for Performance Summary footnotes.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Performance as of 4/30/16
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Class A: 4.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only; Advisor Class: no sales charges.
Cumulative | Average Annual | Average Annual | Total Annual | |||||
Share Class | Total Return2 | Total Return3 | Total Return (3/31/16)4 | Operating Expenses5 | ||||
A | 0.62 | % | ||||||
1-Year | +4.16 | % | -0.25 | % | -1.57 | % | ||
5-Year | +32.62 | % | +4.89 | % | +5.18 | % | ||
10-Year | +59.13 | % | +4.30 | % | +4.24 | % | ||
C | 1.17 | % | ||||||
1-Year | +3.59 | % | +2.59 | % | +1.27 | % | ||
5-Year | +29.05 | % | +5.23 | % | +5.51 | % | ||
10-Year | +50.50 | % | +4.17 | % | +4.12 | % | ||
Advisor | 0.52 | % | ||||||
1-Year | +4.26 | % | +4.26 | % | +2.92 | % | ||
5-Year | +33.26 | % | +5.91 | % | +6.21 | % | ||
10-Year | +60.62 | % | +4.85 | % | +4.79 | % | ||
Distribution | Taxable Equivalent | 30 | -Day | Taxable Equivalent 30-Day | ||||
Share Class | Rate6 | Distribution Rate7 | Standardized Yield8 | Standardized Yield7 | ||||
A | 3.64 | % | 6.43 | % | 1.44 | % | 2.54 | % |
C | 3.24 | % | 5.72 | % | 0.97 | % | 1.71 | % |
Advisor | 3.89 | % | 6.87 | % | 1.61 | % | 2.84 | % |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 10 for Performance Summary footnotes.
8 Annual Report
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
See page 10 for Performance Summary footnotes.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share
price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a
rise in interest rates, the Fund’s share price may decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer,
insurer or guarantor, may affect the bond’s value. The Fund holds a small portion of its assets in Puerto Rico municipal bonds that have been impacted by recent
adverse economic and market changes, which may cause the Fund’s share price to decline. The Fund may invest a significant part of its assets in municipal
securities that finance similar types of projects, such as utilities, hospitals, higher education and transportation. A change that affects one project would likely
affect all similar projects, thereby increasing market risk. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will
produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Class C: These shares have higher annual fees and expenses than Class A shares.
Advisor Class: Shares are available to certain eligible investors as described in the prospectus.
1. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Financial Highlights in this report. In periods of market volatility,
assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
6. Distribution rate is based on an annualization of the respective class’s April dividend and the maximum offering price (NAV for Classes C and Advisor) per share on 4/30/16.
7. Taxable equivalent distribution rate and yield assume the 2016 maximum federal income tax rate of 39.60% plus 3.8% Medicare tax.
8. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
9. Source: Morningstar. The Barclays Municipal Bond Index is a market value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index,
bonds must be fixed rate, have at least one year to final maturity and be rated investment grade (Baa3/BB- or higher) by at least two of the following agencies: Moody’s,
Standard & Poor’s and Ftich.
10. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
Beginning Account | Ending Account | Expenses Paid During | ||||
Share Class | Value 11/1/15 | Value 4/30/16 | Period* 11/1/15–4/30/16 | |||
A | ||||||
Actual | $ | 1,000 | $ | 1,029.40 | $ | 3.13 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.78 | $ | 3.12 |
C | ||||||
Actual | $ | 1,000 | $ | 1,026.50 | $ | 5.90 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.05 | $ | 5.87 |
Advisor | ||||||
Actual | $ | 1,000 | $ | 1,029.90 | $ | 2.62 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.28 | $ | 2.61 |
*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.62%; C: 1.17%; and Advisor: 0.52%),
multiplied by the average account value over the period, multiplied by 182/366 to reflect the one-half year period.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Highlights | |||||||||||||||
Year Ended April 30, | |||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.45 | $ | 12.22 | $ | 12.79 | $ | 12.48 | $ | 11.47 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb | 0.48 | 0.47 | 0.49 | 0.48 | 0.51 | ||||||||||
Net realized and unrealized gains (losses) | 0.02 | 0.23 | (0.57 | ) | 0.31 | 1.02 | |||||||||
Total from investment operations | 0.50 | 0.70 | (0.08 | ) | 0.79 | 1.53 | |||||||||
Less distributions from net investment income | (0.47 | ) | (0.47 | ) | (0.49 | ) | (0.48 | ) | (0.52 | ) | |||||
Net asset value, end of year. | $ | 12.48 | $ | 12.45 | $ | 12.22 | $ | 12.79 | $ | 12.48 | |||||
Total returnc | 4.16 | % | 5.82 | % | (0.49 | )% | 6.44 | % | 13.61 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses | 0.61 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.62 | % | |||||
Net investment income | 3.87 | % | 3.80 | % | 4.11 | % | 3.76 | % | 4.25 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 8,384,079 | $ | 8,505,853 | $ | 8,243,367 | $ | 9,414,734 | $ | 8,758,460 | |||||
Portfolio turnover rate | 6.07 | % | 5.49 | % | 8.51 | % | 6.31 | % | 8.55 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
12 Annual Report | The accompanying notes are an integral part of these financial statements.
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FINANCIAL HIGHLIGHTS
Year Ended April 30, | |||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.44 | $ | 12.21 | $ | 12.78 | $ | 12.47 | $ | 11.46 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb | 0.41 | 0.40 | 0.43 | 0.41 | 0.45 | ||||||||||
Net realized and unrealized gains (losses) | 0.03 | 0.23 | (0.58 | ) | 0.31 | 1.01 | |||||||||
Total from investment operations | 0.44 | 0.63 | (0.15 | ) | 0.72 | 1.46 | |||||||||
Less distributions from net investment income | (0.41 | ) | (0.40 | ) | (0.42 | ) | (0.41 | ) | (0.45 | ) | |||||
Net asset value, end of year. | $ | 12.47 | $ | 12.44 | $ | 12.21 | $ | 12.78 | $ | 12.47 | |||||
Total returnc | 3.59 | % | 5.24 | % | (1.05 | )% | 5.87 | % | 13.00 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses | 1.16 | % | 1.17 | % | 1.17 | % | 1.16 | % | 1.17 | % | |||||
Net investment income | 3.32 | % | 3.25 | % | 3.56 | % | 3.21 | % | 3.70 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,215,034 | $ | 1,166,771 | $ | 1,120,471 | $ | 1,525,083 | $ | 1,319,527 | |||||
Portfolio turnover rate | 6.07 | % | 5.49 | % | 8.51 | % | 6.31 | % | 8.55 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report 13
FRANKLIN FEDERAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Year Ended April 30, | |||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.46 | $ | 12.23 | $ | 12.80 | $ | 12.49 | $ | 11.48 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb | 0.49 | 0.49 | 0.50 | 0.49 | 0.52 | ||||||||||
Net realized and unrealized gains (losses) | 0.03 | 0.22 | (0.57 | ) | 0.31 | 1.02 | |||||||||
Total from investment operations | 0.52 | 0.71 | (0.07 | ) | 0.80 | 1.54 | |||||||||
Less distributions from net investment income | (0.49 | ) | (0.48 | ) | (0.50 | ) | (0.49 | ) | (0.53 | ) | |||||
Net asset value, end of year. | $ | 12.49 | $ | 12.46 | $ | 12.23 | $ | 12.80 | $ | 12.49 | |||||
Total return | 4.26 | % | 5.92 | % | (0.39 | )% | 6.54 | % | 13.71 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses | 0.51 | % | 0.52 | % | 0.52 | % | 0.51 | % | 0.52 | % | |||||
Net investment income | 3.97 | % | 3.90 | % | 4.21 | % | 3.86 | % | 4.35 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,443,272 | $ | 1,689,267 | $ | 1,314,233 | $ | 1,755,892 | $ | 1,389,908 | |||||
Portfolio turnover rate | 6.07 | % | 5.49 | % | 8.51 | % | 6.31 | % | 8.55 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
14 Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Statement of Investments, April 30, 2016 | ||||
Principal | ||||
Amount | Value | |||
Municipal Bonds 96.7% | ||||
Alabama 1.2% | ||||
Alabama State Incentives Financing Authority Special Obligation Revenue, Series A, 5.00%, 9/01/42 | $ | 14,300,000 | $ | 16,032,159 |
Alabama State Port Authority Docks Facilities Revenue, Refunding, 6.00%, 10/01/40. | 6,000,000 | 7,088,400 | ||
Alabama State Public Health Care Authority Lease Revenue, Department of Public Health Facilities, | ||||
Refunding, 5.00%, 9/01/44 | 17,085,000 | 19,236,514 | ||
Birmingham Waterworks Board Water Revenue, | ||||
Series A, Assured Guaranty, 5.125%, 1/01/34 | 3,500,000 | 3,837,050 | ||
Series A, Assured Guaranty, Pre-Refunded, 5.125%, 1/01/34. | 2,100,000 | 2,336,628 | ||
Series B, 5.00%, 1/01/38 | 3,500,000 | 3,985,170 | ||
Series B, 5.00%, 1/01/43 | 8,000,000 | 9,036,160 | ||
Chilton County Health Care Authority Limited Obligation Sales Tax Revenue, Chilton County Hospital | ||||
Project, Series A, 5.00%, 11/01/40 | 8,425,000 | 9,654,208 | ||
East Alabama Health Care Authority Health Care Facilities Revenue, Mandatory Put 9/01/18, Series B, | ||||
5.50%, 9/01/33. | 18,500,000 | 20,282,475 | ||
Mobile Water and Sewer Commissioners Water and Sewer Revenue, Refunding, 5.00%, 1/01/36 | 11,300,000 | 12,962,795 | ||
Tuscaloosa Public Educational Building Authority Student Housing Revenue, Ridgecrest Student | ||||
Housing LLC, University of Alabama Ridgecrest Residential Project, Assured Guaranty, 6.75%, | ||||
7/01/38 | 10,000,000 | 11,137,800 | ||
University of Alabama General Revenue, | ||||
Series A, XLCA Insured, Pre-Refunded, 5.00%, 7/01/28 | 5,000,000 | 5,035,750 | ||
Series A, XLCA Insured, Pre-Refunded, 5.00%, 7/01/32 | 5,500,000 | 5,539,325 | ||
University of South Alabama University Tuition Revenue, Capital Improvement, Refunding, AMBAC | ||||
Insured, 5.00%, 12/01/36 | 11,570,000 | 11,812,970 | ||
137,977,404 | ||||
Alaska 0.8% | ||||
Alaska Municipal Bond Bank Authority Revenue, | ||||
Refunding, Series 3, 5.25%, 10/01/36 | 16,045,000 | 19,152,916 | ||
Refunding, Series 3, 5.00%, 10/01/39 | 12,950,000 | 15,071,210 | ||
Alaska State Industrial Development and Export Authority Revenue, Providence Health and Services, | ||||
Series A, 5.00%, 10/01/40 | 10,000,000 | 10,939,100 | ||
Alaska State International Airports Revenue, Series C, 5.00%, 10/01/33 | 12,565,000 | 14,335,911 | ||
Anchorage Electric Revenue, senior lien, Refunding, Series A, 5.00%, 12/01/41 | 8,875,000 | 10,229,858 | ||
Matanuska-Susitna Borough Lease Revenue, Goose Creek Correctional Center Project, Assured | ||||
Guaranty, Pre-Refunded, 6.00%, 9/01/32 | 20,000,000 | 23,326,400 | ||
93,055,395 | ||||
Arizona 2.6% | ||||
Arizona State Board of Regents University of Arizona System Revenue, Stimulus Plan for Economic | ||||
and Educational Development, 5.00%, 8/01/44 | 10,000,000 | 11,592,800 | ||
Arizona State COP, Department of Administration, Series A, AGMC Insured, 5.00%, 10/01/27 | 14,440,000 | 16,118,072 | ||
Arizona State Lottery Revenue, Series A, AGMC Insured, 5.00%, 7/01/27 | 15,000,000 | 16,924,650 | ||
Glendale Municipal Property Corp. Excise Tax Revenue, Subordinate, Refunding, Series C, 5.00%, | ||||
7/01/38 | 15,500,000 | 17,507,560 | ||
Lake Havasu Wastewater System Revenue, senior lien, Refunding, Series B, AGMC Insured, 5.00%, | ||||
7/01/40 | 15,000,000 | 17,649,000 | ||
Maricopa County PCC, PCR, El Paso Electric Co. Palo Verde Project, Series A, 7.25%, 2/01/40 | 10,000,000 | 11,523,900 | ||
Mesa Utility Systems Revenue, 4.00%, 7/01/36 | 19,000,000 | 20,214,480 | ||
Navajo County PCC Revenue, Arizona Public Service Co. Cholla Project, Mandatory Put 6/01/16, | ||||
Series E, 5.75%, 6/01/34. | 7,200,000 | 7,227,360 | ||
Phoenix Civic Improvement Corp. Airport Revenue, | ||||
junior lien, Series A, 5.00%, 7/01/40 | 24,000,000 | 26,950,320 | ||
senior lien, Series A, 5.00%, 7/01/33. | 28,000,000 | 30,241,120 |
franklintempleton.com
Annual Report
15
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Arizona (continued) | ||||
Phoenix Civic Improvement Corp. Distribution Revenue, | ||||
Capital Appreciation, Civic Plaza Expansion Project, Series B, NATL Insured, 5.50%, 7/01/32 | $ | 6,000,000 | $ | 8,019,360 |
Capital Appreciation, Civic Plaza Expansion Project, Series B, NATL Insured, 5.50%, 7/01/34 | 5,000,000 | 6,740,050 | ||
Capital Appreciation, Civic Plaza Expansion Project, Series B, NATL Insured, 5.50%, 7/01/35 | 9,860,000 | 13,327,663 | ||
Phoenix Civic Improvement Corp. Water System Revenue, | ||||
junior lien, Refunding, Series A, 5.00%, 7/01/32 | 21,095,000 | 23,641,589 | ||
junior lien, Refunding, Series A, 5.00%, 7/01/34 | 10,000,000 | 11,197,200 | ||
Pima County IDA Lease Revenue, Clark County Detention Facility Project, 5.00%, 9/01/39. | 20,000,000 | 21,236,400 | ||
Pinal County Electrical District No. 3 Revenue, Electric System, Refunding, 5.25%, 7/01/36 | 10,000,000 | 11,606,400 | ||
Salt River Project Agricultural Improvement and Power District Electric System Revenue, Salt River | ||||
Project, Series A, 5.00%, 1/01/38 | 10,000,000 | 10,628,800 | ||
282,346,724 | ||||
Arkansas 0.1% | ||||
University of Arkansas Revenue, | ||||
Various Facilities, Fayetteville Campus, Series B, 5.00%, 11/01/37 | 3,100,000 | 3,634,130 | ||
Various Facilities, Fayetteville Campus, Series B, 5.00%, 11/01/42 | 9,360,000 | 10,744,344 | ||
14,378,474 | ||||
California 13.1% | ||||
Bay Area Toll Authority Toll Bridge Revenue, | ||||
San Francisco Bay Area, Series F-1, Pre-Refunded, 5.00%, 4/01/28 | 24,000,000 | 26,884,560 | ||
San Francisco Bay Area, Series F-1, Pre-Refunded, 5.00%, 4/01/34 | 20,250,000 | 21,905,640 | ||
San Francisco Bay Area, Series F-1, Pre-Refunded, 5.00%, 4/01/34 | 9,530,000 | 10,675,411 | ||
San Francisco Bay Area, Series F-1, Pre-Refunded, 5.00%, 4/01/39 | 14,000,000 | 15,144,640 | ||
San Francisco Bay Area, Series F-1, Pre-Refunded, 5.50%, 4/01/43 | 30,000,000 | 32,736,900 | ||
California Infrastructure and Economic Development Bank Revenue, Bay Area Toll Bridges Seismic | ||||
Retrofit, first lien, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/33 | 24,500,000 | 32,378,220 | ||
California State Economic Recovery GO, Series A, Pre-Refunded, 5.25%, 7/01/21 | 28,580,000 | 32,557,478 | ||
California State Educational Facilities Authority Revenue, Carnegie Institution of Washington, | ||||
Refunding, Series A, 5.00%, 7/01/40 | 24,525,000 | 27,855,495 | ||
California State GO, | ||||
Various Purpose, 6.00%, 5/01/18 | 535,000 | 550,108 | ||
Various Purpose, 5.90%, 4/01/23 | 1,200,000 | 1,226,448 | ||
Various Purpose, 5.00%, 10/01/29 | 15,000,000 | 16,989,300 | ||
Various Purpose, 6.00%, 4/01/38 | 100,000,000 | 114,079,000 | ||
Various Purpose, 6.00%, 11/01/39 | 25,000,000 | 29,185,000 | ||
Various Purpose, 5.25%, 11/01/40 | 50,000,000 | 57,950,000 | ||
Various Purpose, FGIC Insured, 6.00%, 5/01/20. | 850,000 | 873,825 | ||
Various Purpose, Refunding, 5.25%, 3/01/30 | 30,000,000 | 34,601,400 | ||
Various Purpose, Refunding, 6.00%, 3/01/33 | 12,000,000 | 14,231,040 | ||
Various Purpose, Refunding, 5.25%, 3/01/38 | 20,000,000 | 21,484,000 | ||
Various Purpose, Refunding, 5.50%, 3/01/40 | 25,000,000 | 28,976,250 | ||
California State Health Facilities Financing Authority Revenue, | ||||
Children’s Hospital of Orange County, Series A, 6.50%, 11/01/24 | 5,000,000 | 5,973,700 | ||
Children’s Hospital of Orange County, Series A, 6.50%, 11/01/38 | 8,000,000 | 9,403,520 | ||
California State Public Works Board Lease Revenue, | ||||
Department of Education, Riverside Campus Project, Series B, 6.125%, 4/01/28 | 2,740,000 | 3,142,342 | ||
Department of General Services, Office Buildings 8 and 9 Renovation, Series A, 6.00%, 4/01/27 . | 3,980,000 | 4,552,682 | ||
Department of General Services, Office Buildings 8 and 9 Renovation, Series A, 6.125%, 4/01/29. | 5,000,000 | 5,731,100 | ||
Various Capital Projects, Series A, 5.00%, 4/01/30 | 18,000,000 | 21,303,180 | ||
Various Capital Projects, Series A, 5.00%, 4/01/33 | 12,475,000 | 14,649,268 | ||
Various Capital Projects, Series I, 6.125%, 11/01/29 | 29,300,000 | 34,373,881 |
16 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
California (continued) | ||||
California Statewide CDA, PCR, Refunding, 4.50%, 9/01/29 | $ | 14,830,000 | $ | 16,508,163 |
California Statewide CDA Revenue, | ||||
Adventist Health System/West, Series B, Assured Guaranty, 5.00%, 3/01/37 | 9,860,000 | 10,458,009 | ||
St. Joseph Health System, Series B, FGIC Insured, 5.75%, 7/01/47 | 5,000,000 | 5,488,850 | ||
St. Joseph Health System, Series E, AGMC Insured, 5.25%, 7/01/47 | 10,000,000 | 10,766,700 | ||
Colton Joint USD, GO, San Bernardino and Riverside Counties, Election of 2008, Series A, Assured | ||||
Guaranty, 5.375%, 8/01/34 | 15,000,000 | 16,842,150 | ||
Corona-Norco USD, | ||||
GO, Riverside County, Capital Appreciation, Election of 2006, Series C, AGMC Insured, zero cpn., | ||||
8/01/39 | 7,500,000 | 3,079,500 | ||
GO, Riverside County, Capital Appreciation, Election of 2006, Series C, AGMC Insured, zero cpn. | ||||
to 8/01/17, 6.20% thereafter, 8/01/29 | 3,250,000 | 4,285,190 | ||
GO, Riverside County, Capital Appreciation, Election of 2006, Series C, AGMC Insured, zero cpn. | ||||
to 8/01/17, 6.80% thereafter, 8/01/39 | 8,500,000 | 11,208,525 | ||
Foothill/Eastern Transportation Corridor Agency Toll Road Revenue, | ||||
Capital Appreciation, Refunding, Series A, AGMC Insured, zero cpn. to 1/15/24, 5.40% thereafter, | ||||
1/15/30 | 15,475,000 | 13,444,835 | ||
Capital Appreciation, Refunding, Series A, zero cpn. to 1/14/24, 6.85% thereafter, 1/15/42 | 20,000,000 | 16,949,000 | ||
Refunding, Series A, 5.75%, 1/15/46 | 25,000,000 | 29,485,750 | ||
Refunding, Series A, 6.00%, 1/15/49 | 20,000,000 | 23,822,800 | ||
Hartnell Community College District GO, Monterey and San Benito Counties, Capital Appreciation, | ||||
Election of 2002, Series D, Pre-Refunded, zero cpn., 8/01/39 | 45,000,000 | 10,085,400 | ||
Jefferson UHSD San Mateo County GO, | ||||
Capital Appreciation, Election of 2006, Series D, Pre-Refunded, zero cpn., 8/01/35 | 10,500,000 | 3,135,405 | ||
Capital Appreciation, Election of 2006, Series D, Pre-Refunded, zero cpn., 8/01/40 | 10,000,000 | 1,972,100 | ||
Capital Appreciation, Election of 2006, Series D, Pre-Refunded, zero cpn., 8/01/41 | 13,590,000 | 2,464,546 | ||
Los Angeles Community College District GO, Election of 2008, Series C, 5.25%, 8/01/39. | 30,000,000 | 34,699,500 | ||
Los Angeles Department of Airports Revenue, | ||||
Los Angeles International Airport, Senior, Refunding, Series A, 5.00%, 5/15/40 | 25,485,000 | 29,175,993 | ||
Los Angeles International Airport, Senior, Series D, 5.00%, 5/15/40 | 50,000,000 | 57,241,500 | ||
Los Angeles Department of Water and Power Revenue, Power System, Series B, 5.00%, 7/01/31 | 20,000,000 | 24,385,000 | ||
Los Angeles USD, | ||||
GO, Election of 2002, Series B, AMBAC Insured, 4.50%, 7/01/31 | 28,745,000 | 29,886,751 | ||
GO, Election of 2004, Series F, AGMC Insured, Pre-Refunded, 5.00%, 7/01/30 | 52,475,000 | 52,852,820 | ||
GO, Election of 2004, Series G, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/26 | 10,250,000 | 10,323,800 | ||
GO, Election of 2004, Series G, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/31 | 10,000,000 | 10,072,000 | ||
GO, Series KRY, 5.25%, 7/01/34 | 36,625,000 | 42,461,926 | ||
M-S-R Energy Authority Gas Revenue, Series B, 6.50%, 11/01/39 | 12,500,000 | 18,087,375 | ||
New Haven USD, | ||||
GO, Alameda County, Capital Appreciation, Assured Guaranty, zero cpn., 8/01/31 | 2,055,000 | 1,266,681 | ||
GO, Alameda County, Capital Appreciation, Assured Guaranty, zero cpn., 8/01/32 | 7,830,000 | 4,623,537 | ||
GO, Alameda County, Capital Appreciation, Assured Guaranty, zero cpn., 8/01/33 | 7,660,000 | 4,312,427 | ||
Placentia-Yorba Linda USD, GO, Orange County, Election of 2008, Series A, Pre-Refunded, 5.25%, | ||||
8/01/32 | 24,490,000 | 26,952,225 | ||
Pomona USD, GO, Los Angeles County, Election of 2008, Series A, Assured Guaranty, 5.00%, 8/01/29. | 5,585,000 | 6,208,621 | ||
Rialto USD, GO, San Bernardino County, Captial Appreciation, Series A, AGMC Insured, zero cpn., | ||||
8/01/36 | 20,000,000 | 9,398,800 | ||
Sacramento County Airport System Revenue, Senior, Series B, AGMC Insured, 5.25%, 7/01/33 | 16,355,000 | 17,761,857 | ||
San Diego Public Facilities Financing Authority Water Revenue, Series B, 5.375%, 8/01/34 | 15,000,000 | 16,964,550 | ||
San Francisco City and County COP, Multiple Capital Improvement Projects, Series A, 5.25%, 4/01/31 . | 10,000,000 | 11,132,700 |
franklintempleton.com
Annual Report
17
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
California (continued) | ||||
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, | ||||
Capital Appreciation, senior lien, ETM, zero cpn., 1/01/23 | $ | 7,000,000 | $ | 6,404,440 |
senior lien, Refunding, Series A, 5.00%, 1/15/34 | 50,000,000 | 56,177,500 | ||
San Mateo UHSD, | ||||
GO, Capital Appreciation, Election of 2010, Refunding, Series A, zero cpn. to 9/01/28, 6.70% | ||||
thereafter, 9/01/41 | 20,000,000 | 16,998,400 | ||
GO, Capital Appreciation, Election of 2010, Series A, zero cpn. to 9/01/28, 6.45% thereafter, | ||||
9/01/33 | 6,065,000 | 5,067,004 | ||
San Mateo-Foster City School District GO, Capital Appreciation, Election of 2008, Series A, zero cpn. | ||||
to 8/01/26, 6.625% thereafter, 8/01/42. | 50,000,000 | 43,267,000 | ||
Santa Ana USD, | ||||
GO, Orange County, Capital Appreciation, Election of 2008, Series B, Assured Guaranty, zero | ||||
cpn., 8/01/35 | 10,000,000 | 5,187,700 | ||
GO, Orange County, Capital Appreciation, Election of 2008, Series B, Assured Guaranty, zero | ||||
cpn., 8/01/36 | 18,865,000 | 9,327,611 | ||
GO, Orange County, Capital Appreciation, Election of 2008, Series B, Assured Guaranty, zero | ||||
cpn., 8/01/37 | 10,000,000 | 4,715,900 | ||
Santa Clara County GO, Election of 2008, Series A, 5.00%, 8/01/34 | 25,000,000 | 27,985,750 | ||
Upland USD, GO, San Bernardino County, Election of 2008, Series B, zero cpn., 8/01/39 | 50,075,000 | 13,036,025 | ||
Washington Township Health Care District Revenue, Series A, 6.25%, 7/01/39 | 3,000,000 | 3,341,430 | ||
West Contra Costa USD, | ||||
GO, Election of 2005, Series C-1, Assured Guaranty, zero cpn., 8/01/29 | 10,000,000 | 6,741,500 | ||
GO, Election of 2005, Series C-1, Assured Guaranty, zero cpn., 8/01/30 | 20,845,000 | 13,507,143 | ||
GO, Election of 2005, Series C-1, Assured Guaranty, zero cpn., 8/01/31 | 20,000,000 | 12,402,000 | ||
GO, Election of 2005, Series C-1, Assured Guaranty, zero cpn., 8/01/32 | 10,730,000 | 6,417,506 | ||
Whittier UHSD, GO, Los Angeles County, Capital Appreciation, Election of 2008, Refunding, Series A, | ||||
zero cpn., 8/01/34 | 20,000,000 | 7,256,600 | ||
1,445,052,883 | ||||
Colorado 2.0% | ||||
Aurora Water Improvement Revenue, | ||||
first lien, Series A, AMBAC Insured, 5.00%, 8/01/32 | 10,000,000 | 10,516,500 | ||
first lien, Series A, AMBAC Insured, 5.00%, 8/01/36 | 41,235,000 | 43,301,286 | ||
first lien, Series A, AMBAC Insured, 5.00%, 8/01/39 | 26,930,000 | 28,248,762 | ||
Colorado State Board of Governors University Enterprise System Revenue, | ||||
Series A, AGMC Insured, 5.00%, 3/01/37 | 10,000,000 | 10,299,900 | ||
Series A, NATL Insured, 5.00%, 3/01/37 | 1,700,000 | 1,750,983 | ||
Series A, NATL Insured, Pre-Refunded, 5.00%, 3/01/37 | 8,300,000 | 8,597,223 | ||
Colorado State Health Facilities Authority Revenue, | ||||
The Evangelical Lutheran Good Samaritan Society Project, Refunding, Series A, 5.00%, 6/01/45 . | 10,000,000 | 11,050,900 | ||
Health Facility Authority, Hospital, Refunding, Series B, AGMC Insured, 5.25%, 3/01/36 | 10,000,000 | 11,002,800 | ||
Valley View Hospital Assn. Project, Refunding, 5.50%, 5/15/28 | 5,000,000 | 5,432,100 | ||
Valley View Hospital Assn. Project, Refunding, 5.75%, 5/15/36 | 7,000,000 | 7,592,760 | ||
Colorado State Higher Education Capital Construction Lease Purchase Financing Program COP, | ||||
Pre-Refunded, 5.50%, 11/01/27 | 10,000,000 | 11,146,700 | ||
Denver City and County Airport System Revenue, Subordinate, Series B, 5.25%, 11/15/33. | 16,405,000 | 19,721,107 | ||
Park Creek Metropolitan District Revenue, Senior Limited Property Tax Supported, Improvement, | ||||
Assured Guaranty, Pre-Refunded, 6.25%, 12/01/30 | 6,000,000 | 7,117,440 | ||
Public Authority for Colorado Energy Natural Gas Purchase Revenue, 6.50%, 11/15/38 | 20,000,000 | 28,508,800 | ||
Regional Transportation District Sales Tax Revenue, FasTracks Project, Series A, 5.00%, 11/01/32 | 10,000,000 | 12,006,500 | ||
University of Colorado Enterprise System Revenue, University of Colorado Regents, Series A, | ||||
Pre-Refunded, 5.375%, 6/01/32 | 3,500,000 | 3,977,365 | ||
220,271,126 |
18 Annual Report
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Connecticut 0.1% | ||||
Connecticut State GO, Series B, 5.00%, 6/15/35 | $ | 7,000,000 | $ | 8,237,180 |
District of Columbia 2.8% | ||||
District of Columbia Ballpark Revenue, | ||||
Series B-1, BHAC Insured, 5.00%, 2/01/24 | 12,120,000 | 12,162,420 | ||
Series B-1, BHAC Insured, 5.00%, 2/01/25 | 7,000,000 | 7,024,430 | ||
Series B-1, BHAC Insured, 5.00%, 2/01/26 | 9,950,000 | 9,984,725 | ||
District of Columbia Hospital Revenue, | ||||
Children’s Hospital Obligated Group Issue, Refunding, 5.00%, 7/15/40 | 6,830,000 | 7,959,204 | ||
Children’s Hospital Obligated Group Issue, Sub Series 1, AGMC Insured, Pre-Refunded, 5.45%, | ||||
7/15/35 | 23,350,000 | 25,652,777 | ||
District of Columbia Income Tax Secured Revenue, | ||||
Refunding, Series A, 5.00%, 12/01/31 | 10,000,000 | 11,438,100 | ||
Series A, 5.25%, 12/01/34 | 11,000,000 | 12,512,830 | ||
District of Columbia Revenue, | ||||
Assn. of American Medical Colleges Issue, Series B, 5.25%, 10/01/41 | 15,000,000 | 16,507,800 | ||
Deed Tax, Housing Production Trust Fund, New Communities Project, Series A, NATL Insured, | ||||
5.00%, 6/01/32 | 5,000,000 | 5,203,400 | ||
Georgetown University Issue, Growth and Income Securities, AMBAC Insured, zero cpn. to | ||||
4/01/18, 5.00% thereafter, 4/01/32. | 15,370,000 | 15,290,998 | ||
Medlantic/Helix Issue, Series B, AGMC Insured, Pre-Refunded, 5.00%, 8/15/38 | 20,000,000 | 21,073,000 | ||
National Academy of Sciences Project, Series A, 5.00%, 4/01/35. | 10,905,000 | 12,366,161 | ||
National Academy of Sciences Project, Series A, 5.00%, 4/01/40. | 16,960,000 | 19,129,184 | ||
National Public Radio Inc. Issue, 5.00%, 4/01/35 | 7,750,000 | 8,697,360 | ||
District of Columbia Tobacco Settlement FICO Revenue, Asset-Backed, Refunding, 6.50%, 5/15/33 | 35,000,000 | 42,933,450 | ||
District of Columbia University Revenue, Georgetown University Issue, Refunding, Series D, 5.50%, | ||||
4/01/36 | 5,000,000 | 5,487,500 | ||
District of Columbia Water and Sewer Authority Public Utility Revenue, senior lien, Series A, Pre- | ||||
Refunded, 6.00%, 10/01/35 | 8,000,000 | 9,004,560 | ||
Metropolitan Washington D.C. Airports Authority Airport System Revenue, | ||||
Refunding, Series A, 5.375%, 10/01/29 | 5,000,000 | 5,472,750 | ||
Refunding, Series A, 5.00%, 10/01/35 | 5,000,000 | 5,741,450 | ||
Refunding, Series C, 5.25%, 10/01/27 | 10,745,000 | 11,864,092 | ||
Series A, 5.00%, 10/01/39 | 5,000,000 | 5,725,350 | ||
Series C, 5.00%, 10/01/26 | 10,235,000 | 11,242,738 | ||
Metropolitan Washington D.C. Airports Authority Dulles Toll Road Revenue, Capital Appreciation, | ||||
second lien, Series C, Assured Guaranty, zero cpn. to 10/01/16, 6.50% thereafter, 10/01/41 | 25,000,000 | 32,566,250 | ||
315,040,529 | ||||
Florida 7.0% | ||||
Alachua County Health Facilities Authority Health Facilities Revenue, Shands Teaching Hospital and | ||||
Clinics Inc. at the University of Florida Project, Series A, 5.00%, 12/01/44. | 10,350,000 | 11,648,718 | ||
Brevard County Health Facilities Authority Health Facilities Revenue, Health First Inc. Project, Series B, | ||||
Pre-Refunded, 7.00%, 4/01/39 | 6,500,000 | 7,643,805 | ||
Brevard County Local Option Fuel Tax Revenue, NATL Insured, 5.00%, 8/01/37 | 12,245,000 | 12,780,841 | ||
Broward County Water and Sewer Utility Revenue, Series A, Pre-Refunded, 5.25%, 10/01/34. | 8,800,000 | 9,736,584 | ||
Cape Coral Water and Sewer Revenue, | ||||
AMBAC Insured, Pre-Refunded, 5.00%, 10/01/36 | 5,000,000 | 5,088,100 | ||
Refunding, Series A, AGMC Insured, 5.00%, 10/01/42 | 21,510,000 | 24,505,913 | ||
Citizens Property Insurance Corp. Revenue, | ||||
Costal Account, senior secured, Series A-1, 5.00%, 6/01/20 | 20,000,000 | 23,082,600 | ||
High-Risk Account, senior secured, Series A-1, 5.25%, 6/01/17 | 24,250,000 | 25,407,937 | ||
High-Risk Account, senior secured, Series A-1, 5.50%, 6/01/17 | 10,000,000 | 10,504,200 | ||
High-Risk Account, senior secured, Series A-1, 6.00%, 6/01/17 | 25,000,000 | 26,394,000 |
franklintempleton.com
Annual Report
19
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Florida (continued) | ||||
Clearwater City Water and Sewer Revenue, Series A, 5.25%, 12/01/39 | $ | 7,000,000 | $ | 7,933,870 |
Florida State Board of Education Public Education GO, Capital Outlay, Refunding, Series D, 6.00%, | ||||
6/01/23 | 17,500,000 | 22,890,525 | ||
Florida State Mid-Bay Bridge Authority Revenue, | ||||
Capital Appreciation, Series A, AMBAC Insured, Pre-Refunded, zero cpn., 10/01/23. | 5,000,000 | 3,647,751 | ||
Capital Appreciation, Series A, AMBAC Insured, Pre-Refunded, zero cpn., 10/01/24. | 3,000,000 | 2,067,030 | ||
Florida State Municipal Loan Council Revenue, Series D, AGMC Insured, 5.50%, 10/01/41. | 4,750,000 | 5,608,800 | ||
Hernando County School Board COP, NATL Insured, 5.00%, 7/01/30. | 10,000,000 | 10,026,100 | ||
Hillsborough County Aviation Authority Revenue, | ||||
Tampa International Airport, Series A, Assured Guaranty, 5.50%, 10/01/38 | 5,000,000 | 5,485,000 | ||
Tampa International Airport, Subordinated, Refunding, Series B, 5.00%, 10/01/44 | 10,000,000 | 11,719,500 | ||
Hillsborough County IDA, PCR, Tampa Electric Co. Project, Series A, 5.65%, 5/15/18 | 6,500,000 | 7,115,290 | ||
Hillsborough County School Board COP, Master Lease Program, Refunding, Series A, 5.00%, 7/01/28 . | 17,650,000 | 20,770,343 | ||
Indian River County School Board COP, NATL Insured, Pre-Refunded, 5.00%, 7/01/27 | 16,485,000 | 17,307,107 | ||
Jacksonville Economic Development Commission Health Care Facilities Revenue, Mayo Clinic, 5.00%, | ||||
11/15/36 | 17,950,000 | 18,009,055 | ||
Martin County Health Facilities Authority Hospital Revenue, Martin Memorial Medical Center, 5.50%, | ||||
11/15/42 | 3,800,000 | 4,259,382 | ||
Miami Beach RDA Tax Increment Revenue, City Center, Refunding, Series A, AGMC Insured, 5.00%, | ||||
2/01/44 | 12,000,000 | 13,816,560 | ||
Miami Beach Resort Tax Revenue, 5.00%, 9/01/40 | 11,000,000 | 12,904,540 | ||
Miami-Dade County Aviation Revenue, | ||||
Miami International Airport, Hub of the Americas, Refunding, Series A, 5.50%, 10/01/36 | 20,000,000 | 22,669,600 | ||
Miami International Airport, Hub of the Americas, Refunding, Series A, Assured Guaranty, 5.25%, | ||||
10/01/33 | 11,000,000 | 11,863,280 | ||
Miami International Airport, Hub of the Americas, Refunding, Series A, Assured Guaranty, 5.25%, | ||||
10/01/38 | 13,000,000 | 13,959,660 | ||
Miami-Dade County Expressway Authority Toll System Revenue, | ||||
Refunding, Series A, 5.00%, 7/01/29 | 10,000,000 | 11,717,200 | ||
Refunding, Series A, 5.00%, 7/01/32 | 6,375,000 | 7,429,552 | ||
Series A, 5.00%, 7/01/40 | 30,265,000 | 34,088,983 | ||
Miami-Dade County GO, Building Better Communities Program, Series B-1, 5.75%, 7/01/33 | 20,000,000 | 22,127,600 | ||
Miami-Dade County School Board COP, | ||||
Refunding, Series A, 5.00%, 5/01/31 | 10,000,000 | 11,608,500 | ||
Series A, Assured Guaranty, Pre-Refunded, 5.25%, 2/01/27 | 10,000,000 | 11,163,700 | ||
Miami-Dade County Special Obligation Revenue, | ||||
sub. bond, Refunding, Series B, 5.00%, 10/01/31 | 5,000,000 | 5,934,300 | ||
sub. bond, Refunding, Series B, 5.00%, 10/01/32 | 4,500,000 | 5,331,915 | ||
sub. bond, Refunding, Series B, 5.00%, 10/01/35 | 3,250,000 | 3,795,318 | ||
Miami-Dade County Transit System Sales Surtax Revenue, | ||||
Refunding, 5.00%, 7/01/35. | 7,000,000 | 8,242,430 | ||
Refunding, AGMC Insured, 5.00%, 7/01/38 | 18,845,000 | 20,244,430 | ||
Miami-Dade County Water and Sewer System Revenue, Refunding, Series A, 5.00%, 10/01/42 | 20,000,000 | 23,187,200 | ||
Orange County Health Facilities Authority Hospital Revenue, Orlando Regional Healthcare System, | ||||
Refunding, Series B, AGMC Insured, 5.00%, 12/01/32 | 20,000,000 | 21,737,000 | ||
Orange County Health Facilities Authority Reveune, Orlando Health Inc., Refunding, Series A, 5.00%, | ||||
10/01/39 | 6,000,000 | 7,071,720 | ||
Orange County School Board COP, Series A, Assured Guaranty, Pre-Refunded, 5.50%, 8/01/34 | 15,000,000 | 17,204,550 | ||
Orlando Tourist Development Tax Revenue, 6th Cent Contract Payments, second lien sub. bonds, | ||||
Series B, Assured Guaranty, 5.50%, 11/01/38 | 18,490,000 | 19,464,423 |
20 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Florida (continued) | ||||
Orlando-Orange County Expressway Authority Revenue, | ||||
Series A, 5.00%, 7/01/40 | $ | 5,000,000 | $ | 5,610,400 |
Series A, AGMC Insured, Pre-Refunded, 5.00%, 7/01/32. | 12,000,000 | 12,598,440 | ||
Series C, 5.00%, 7/01/40 | 15,000,000 | 16,831,200 | ||
Palm Beach County Solid Waste Authority Revenue, Improvement, Series B, Pre-Refunded, 5.50%, | ||||
10/01/28 | 10,000,000 | 11,123,900 | ||
Pensacola Airport Revenue, Refunding, 6.25%, 10/01/38 | 16,500,000 | 17,920,815 | ||
Port St. Lucie Utility System Revenue, Refunding, Assured Guaranty, 5.25%, 9/01/35 | 3,000,000 | 3,268,290 | ||
South Broward Hospital District Revenue, | ||||
South Broward Hospital District Obligated Group, Refunding, 4.75%, 5/01/28 | 10,000,000 | 10,378,200 | ||
South Broward Hospital District Obligated Group, Refunding, 5.00%, 5/01/36 | 12,500,000 | 13,304,375 | ||
South Lake County Hospital District Revenue, South Lake Hospital Inc., Series A, 6.25%, 4/01/39. | 5,735,000 | 6,411,902 | ||
South Miami Health Facilities Authority Hospital Revenue, Baptist Health South Florida Obligated | ||||
Group, 5.00%, 8/15/32 | 31,070,000 | 32,622,568 | ||
St. Lucie County Transportation Revenue, AMBAC Insured, Pre-Refunded, 5.00%, 8/01/27 | 5,785,000 | 6,093,398 | ||
Tallahassee Energy System Revenue, Refunding, NATL Insured, 5.00%, 10/01/37 | 20,000,000 | 21,055,000 | ||
Tohopekaliga Water Authority Utility System Revenue, Refunding, 5.00%, 10/01/46 | 5,000,000 | 6,113,550 | ||
Town of Davie Water and Sewer Revenue, AGMC Insured, 5.00%, 10/01/32. | 8,575,000 | 9,934,995 | ||
772,461,945 | ||||
Georgia 3.7% | ||||
Athens-Clarke County Unified Government Water and Sewerage Revenue, Pre-Refunded, 5.50%, | ||||
1/01/38 | 14,500,000 | 16,276,540 | ||
Atlanta Airport General Revenue, Refunding, Series C, 6.00%, 1/01/30 | 15,000,000 | 18,176,400 | ||
The Atlanta Development Authority Revenue, | ||||
New Downtown Atlanta Stadium Project, senior lien, Series A-1, 5.25%, 7/01/44 | 3,000,000 | 3,568,680 | ||
Tuff Yamacraw LLC Project, Refunding, Series A, AMBAC Insured, 5.00%, 1/01/24 | 6,385,000 | 7,309,101 | ||
Tuff Yamacraw LLC Project, Refunding, Series A, AMBAC Insured, 5.00%, 1/01/25 | 6,955,000 | 8,019,950 | ||
Tuff Yamacraw LLC Project, Refunding, Series A, AMBAC Insured, 5.00%, 1/01/26 | 5,000,000 | 5,782,950 | ||
Tuff Yamacraw LLC Project, Refunding, Series A, AMBAC Insured, 5.00%, 1/01/27 | 5,000,000 | 5,605,450 | ||
Atlanta Water and Wastewater Revenue, | ||||
Refunding, 5.00%, 11/01/40 | 30,000,000 | 35,397,300 | ||
Refunding, Series B, AGMC Insured, 5.25%, 11/01/34 | 30,000,000 | 33,999,300 | ||
Series A, Pre-Refunded, 6.25%, 11/01/34 | 20,000,000 | 23,647,200 | ||
Bleckley-Dodge County Joint Development Authority Student Housing Facilities Revenue, | ||||
MGC Real Estate Foundation II LLC Project, 5.00%, 7/01/33 | 5,000,000 | 5,387,950 | ||
MGC Real Estate Foundation II LLC Project, 5.25%, 7/01/38 | 10,000,000 | 10,808,800 | ||
Bulloch County Development Authority Student Housing Revenue, Georgia Southern University | ||||
Housing Foundation Four LLC Project, Assured Guaranty, 5.375%, 7/01/39. | 23,075,000 | 24,986,994 | ||
Burke County Development Authority PCR, | ||||
Oglethorpe Power Corp. Vogtle Project, Series B, 5.50%, 1/01/33. | 15,000,000 | 15,960,900 | ||
Oglethorpe Power Corp. Vogtle Project, Series E, 7.00%, 1/01/23 | 25,000,000 | 27,460,500 | ||
Clark County Hospital Authority Revenue, Athens Regional Medical Center Project, NATL Insured, | ||||
5.00%, 1/01/27. | 5,000,000 | 5,142,950 | ||
Clayton County Development Authority Student Housing and Activity Center Revenue, CSU Foundation | ||||
Real Estate I LLC Project, XLCA Insured, 5.00%, 7/01/33 | 11,125,000 | 11,608,381 | ||
DeKalb Newton and Gwinnett Counties Joint Development Authority Revenue, Georgia Gwinnett | ||||
College Foundation LLC Project, 6.00%, 7/01/34 | 10,000,000 | 11,456,200 | ||
Fayette County Hospital Authority Revenue, Anticipation Certificates, Piedmont Fayette Hospital | ||||
Project, Refunding, Series A, 5.00%, 7/01/39. | 11,420,000 | 12,911,566 |
franklintempleton.com
Annual Report
21
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Georgia (continued) | ||||
Georgia State Higher Education Facilities Authority Revenue, | ||||
USG Real Estate Foundation I LLC Project, Assured Guaranty, Pre-Refunded, 5.625%, 6/15/38 | $ | 5,000,000 | $ | 5,504,650 |
USG Real Estate Foundation I LLC Project, Pre-Refunded, 6.25%, 6/15/40 | 13,970,000 | 15,562,580 | ||
USG Real Estate Foundation II LLC Project, Series A, 5.50%, 6/15/34 | 10,000,000 | 11,254,600 | ||
USG Real Estate Foundation III LLC Project, Series A, 5.00%, 6/15/40 | 3,700,000 | 4,042,731 | ||
USG Real Estate Foundation III LLC Project, Series A, Pre-Refunded, 5.00%, 6/15/40 | 1,300,000 | 1,507,350 | ||
Houston County Hospital Authority Revenue, Anticipation Certificates, Houston Healthcare Project, | ||||
5.25%, 10/01/35. | 10,485,000 | 11,051,924 | ||
Jefferson PBA Revenue, Jackson County Facilities, Series A, XLCA Insured, Pre-Refunded, 5.00%, | ||||
3/01/32 | 6,075,000 | 6,292,546 | ||
Main Street Natural Gas Inc. Revenue, Gas Project, Series A, 5.50%, 9/15/28 | 5,000,000 | 6,390,400 | ||
Medical Center Hospital Authority Revenue, Anticipation Certificates, Columbus Regional Healthcare | ||||
System Inc. Project, Refunding, Assured Guaranty, 6.50%, 8/01/38 | 10,000,000 | 11,137,800 | ||
Municipal Electric Authority of Georgia Revenue, Project One Sub., Refunding, Series A, 5.00%, | ||||
1/01/35 | 3,250,000 | 3,831,815 | ||
Private Colleges and Universities Authority Revenue, | ||||
Emory University, Refunding, Series A, 5.00%, 9/01/41 | 10,000,000 | 11,617,700 | ||
Emory University, Refunding, Series A, 5.00%, 10/01/43 | 10,000,000 | 11,636,800 | ||
Emory University, Refunding, Series C, 5.25%, 9/01/39 | 21,000,000 | 23,668,470 | ||
407,006,478 | ||||
Hawaii 0.4% | ||||
Hawaii State Department of Budget and Finance Special Purpose Revenue, Hawaiian Electric Co. Inc. | ||||
and Subsidiary Projects, 6.50%, 7/01/39 | 7,500,000 | 8,557,425 | ||
Honolulu City and County Board of Water Supply Water System Revenue, Series A, NATL Insured, | ||||
Pre-Refunded, 5.00%, 7/01/36 | 20,000,000 | 20,143,000 | ||
Honolulu City and County MFHR, Waipahu Towers Project, Series A, GNMA Secured, 6.90%, 6/20/35 . | 1,045,000 | 1,048,459 | ||
Honolulu City and County Wastewater System Revenue, First Bond Resolution, Senior Series A, | ||||
5.00%, 7/01/38. | 10,000,000 | 11,606,800 | ||
41,355,684 | ||||
Idaho 0.1% | ||||
Idaho State Health Facilities Authority Revenue, St. Luke’s Health System Project, Series A, 6.75%, | ||||
11/01/37 | 12,500,000 | 14,082,625 | ||
Illinois 5.1% | ||||
Bolingbrook GO, Will and DuPage Counties, Capital Appreciation, Refunding, Series A, zero cpn., | ||||
1/01/36 | 19,000,000 | 7,291,630 | ||
Bourbonnais Industrial Project Revenue, | ||||
Olivet Nazarene University Project, 5.00%, 11/01/44 | 2,000,000 | 2,059,420 | ||
Olivet Nazarene University Project, Assured Guaranty, 5.125%, 11/01/37 | 5,000,000 | 5,229,250 | ||
Chicago GO, Lakefront Millennium Project, Parking Facilities, NATL Insured, ETM, 5.75%, 1/01/23 | 8,955,000 | 11,191,063 | ||
Chicago Midway Airport Revenue, Refunding, Series C, Assured Guaranty, 5.50%, 1/01/24 | 18,460,000 | 22,589,687 | ||
Chicago O’Hare International Airport Revenue, | ||||
General Airport, third lien, Series A, 5.75%, 1/01/39 | 5,000,000 | 5,854,150 | ||
General Airport, third lien, Series C, Assured Guaranty, 5.25%, 1/01/35 | 12,850,000 | 14,456,250 | ||
Chicago Transit Authority Sales Tax Receipts Revenue, 5.25%, 12/01/40 | 10,000,000 | 10,826,400 | ||
Chicago Wastewater Transmission Revenue, | ||||
Project, second lien, 5.00%, 1/01/42 | 10,525,000 | 11,134,608 | ||
second lien, Series A, BHAC Insured, 5.50%, 1/01/38 | 18,000,000 | 18,982,620 | ||
Illinois Health Facilities Authority Revenue, | ||||
Loyola University Health System, Series A, NATL Insured, ETM, 5.625%, 7/01/18 | 2,105,000 | 2,316,616 | ||
South Suburban Hospital, ETM, 7.00%, 2/15/18 | 1,125,000 | 1,207,035 |
22 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Illinois (continued) | ||||
Illinois State Finance Authority Revenue, | ||||
Alexian Brothers Health System, Series A, AGMC Insured, Pre-Refunded, 5.50%, 1/01/28 | $ | 45,000,000 | $ | 48,771,000 |
Art Institute of Chicago, Refunding, Series A, 5.25%, 3/01/40 | 16,000,000 | 17,607,200 | ||
Columbia College, NATL Insured, Pre-Refunded, 5.00%, 12/01/32 | 15,440,000 | 16,462,900 | ||
Resurrection Health Care, Series B, AGMC Insured, 5.25%, 5/15/29. | 26,695,000 | 28,834,871 | ||
Riverside Health System, 6.25%, 11/15/35 | 5,000,000 | 5,813,700 | ||
Roosevelt University Project, Refunding, 6.50%, 4/01/39 | 15,000,000 | 16,672,950 | ||
Rush University Medical Center Obligated Group, Series B, NATL Insured, Pre-Refunded, 5.75%, | ||||
11/01/28 | 2,500,000 | 2,808,650 | ||
Rush University Medical Center Obligated Group, Series B, NATL Insured, Pre-Refunded, 5.25%, | ||||
11/01/35 | 3,000,000 | 3,333,420 | ||
Rush University Medical Center Obligated Group, Series B, Pre-Refunded, 7.25%, 11/01/38 | 10,000,000 | 11,604,300 | ||
Sherman Health Systems, Series A, Pre-Refunded, 5.50%, 8/01/37 | 5,000,000 | 5,294,200 | ||
Illinois State Finance Authority Student Housing Revenue, | ||||
CHF-DeKalb II LLC, Northern Illinois University Project, 6.875%, 10/01/43 | 15,000,000 | 17,782,650 | ||
CHF-Normal LLC, Illinois State University Project, 7.00%, 4/01/43 | 7,500,000 | 8,814,600 | ||
Illinois State GO, | ||||
5.25%, 7/01/30 | 16,915,000 | 18,605,654 | ||
5.50%, 7/01/33 | 5,000,000 | 5,528,100 | ||
5.50%, 7/01/38 | 20,000,000 | 21,798,400 | ||
AGMC Insured, 5.00%, 9/01/29 | 12,000,000 | 12,023,040 | ||
Assured Guaranty, 5.25%, 4/01/34 | 10,000,000 | 10,370,600 | ||
Refunding, 5.00%, 1/01/24. | 12,820,000 | 13,770,603 | ||
Illinois State Municipal Electric Agency Power Supply System Revenue, Series A, NATL Insured, | ||||
Pre-Refunded, 5.00%, 2/01/35 | 20,000,000 | 20,647,000 | ||
Illinois State Revenue, Build Illinois, Sales Tax Bonds, Series B, 5.25%, 6/15/34 | 15,000,000 | 16,550,400 | ||
Illinois State Toll Highway Authority Toll Highway Revenue, Senior, Refunding, Series A-1, 5.00%, | ||||
1/01/31 | 10,245,000 | 11,297,059 | ||
Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue, | ||||
Capital Appreciation, McCormick Place Expansion Project, Refunding, Series B, NATL Insured, | ||||
5.50%, 6/15/20 | 6,680,000 | 7,074,254 | ||
Capital Appreciation, McCormick Place Expansion Project, Refunding, Series B, NATL Insured, | ||||
5.55%, 6/15/21 | 4,215,000 | 4,464,654 | ||
Capital Appreciation, McCormick Place Expansion Project, Refunding, Series B, NATL Insured, | ||||
zero cpn. to 6/14/17, 5.65% thereafter, 6/15/22 | 27,355,000 | 30,373,898 | ||
Capital Appreciation, McCormick Place Expansion Project, Series B, NATL Insured, ETM, zero | ||||
cpn. to 6/14/17, 5.65% thereafter, 6/15/22 | 2,645,000 | 3,140,382 | ||
Capital Appreciation, McCormick Place Expansion Project, Series B, NATL Insured, Pre- | ||||
Refunded, 5.50%, 6/15/20 | 1,560,000 | 1,659,138 | ||
Capital Appreciation, McCormick Place Expansion Project, Series B, NATL Insured, Pre- | ||||
Refunded, 5.55%, 6/15/21 | 1,785,000 | 1,899,419 | ||
McCormick Place Expansion Project, Series A, 5.50%, 6/15/50 | 15,000,000 | 16,020,900 | ||
Metropolitan Pier and Exposition Authority Hospitality Facilities Revenue, McCormick Place Convention | ||||
Center, ETM, 7.00%, 7/01/26 | 12,000,000 | 15,976,920 | ||
Metropolitan Pier and Exposition Authority Revenue, McCormick Place Expansion Project, Series A, | ||||
5.00%, 6/15/42. | 5,000,000 | 5,318,800 | ||
Railsplitter Tobacco Settlement Authority Revenue, Refunding, 6.00%, 6/01/28 | 14,530,000 | 17,352,307 | ||
Regional Transportation Authority Revenue, Series A, AMBAC Insured, 7.20%, 11/01/20 | 530,000 | 611,943 | ||
Southwestern Illinois Development Authority Revenue, | ||||
Capital Appreciation, Local Government Program, AGMC Insured, zero cpn., 12/01/24. | 3,850,000 | 2,967,349 | ||
Capital Appreciation, Local Government Program, AGMC Insured, zero cpn., 12/01/26. | 7,700,000 | 5,402,012 |
franklintempleton.com
Annual Report
23
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Illinois (continued) | ||||
University of Illinois University Revenue, | ||||
Auxiliary Facilities System, Refunding, Series A, 5.125%, 4/01/36 | $ | 2,950,000 | $ | 3,266,712 |
Auxiliary Facilities System, Refunding, Series A, 5.25%, 4/01/41 | 5,000,000 | 5,541,050 | ||
Auxiliary Facilities System, Series A, Pre-Refunded, 5.75%, 4/01/38. | 7,000,000 | 7,970,200 | ||
Upper River Valley Development Authority Environmental Facilities Revenue, General Electric Co. | ||||
Project, 5.45%, 2/01/23 | 3,600,000 | 3,611,988 | ||
560,181,952 | ||||
Indiana 1.7% | ||||
Indiana Bond Bank Revenue, Special Program, Hendricks Regional Health Project, Series A, 5.50%, | ||||
2/01/29 | 9,000,000 | 9,994,050 | ||
Indiana State Finance Authority Environmental Revenue, Duke Energy Indiana Inc. Project, Refunding, | ||||
Series B, 6.00%, 8/01/39 | 10,000,000 | 11,082,900 | ||
Indiana State Finance Authority Hospital Revenue, Deaconess Hospital Obligated Group, Series A, | ||||
Pre-Refunded, 6.75%, 3/01/39 | 9,750,000 | 11,322,383 | ||
Indiana State Finance Authority Revenue, | ||||
Deaconess Health System Obligated Group, Refunding, Series A, 5.00%, 3/01/39 | 5,000,000 | 5,650,050 | ||
Educational Facilities, Marian University Project, 6.375%, 9/15/41 | 12,500,000 | 14,249,500 | ||
Stadium Project, Refunding, Series A, 5.25%, 2/01/37 | 10,000,000 | 12,136,700 | ||
Indiana State Finance Authority Wastewater Utility Revenue, | ||||
CWA Authority Project, first lien, Refunding, Series A, 5.00%, 10/01/39. | 30,000,000 | 35,257,200 | ||
CWA Authority Project, first lien, Series A, 5.00%, 10/01/37 | 5,000,000 | 5,806,500 | ||
CWA Authority Project, first lien, Series A, 5.25%, 10/01/38 | 12,000,000 | 13,976,160 | ||
CWA Authority Project, first lien, Series A, 4.00%, 10/01/42 | 22,615,000 | 23,897,044 | ||
Indiana State Health and Educational Facility Financing Authority Hospital Revenue, | ||||
Community Foundation of Northwest Indiana Obligated Group, Pre-Refunded, 5.50%, 3/01/27 | 2,860,000 | 2,971,740 | ||
Community Foundation of Northwest Indiana Obligated Group, Refunding, 5.50%, 3/01/27 | 3,640,000 | 3,782,506 | ||
Indiana State Municipal Power Agency Power Supply System Revenue, Series B, Pre-Refunded, | ||||
6.00%, 1/01/39. | 4,000,000 | 4,542,560 | ||
Indiana University Revenue, Refunding, Series A, 5.00%, 6/01/41 | 6,000,000 | 7,245,360 | ||
Indianapolis Local Public Improvement Bond Bank Revenue, Pilot Infrastructure Project, Series F, | ||||
AGMC Insured, 5.00%, 1/01/35 | 10,000,000 | 11,135,300 | ||
Jasper County PCR, Northern Indiana Public Service Co. Project, Refunding, Series C, NATL Insured, | ||||
5.60%, 11/01/16. | 5,000,000 | 5,113,750 | ||
Northern Indiana Commuter Transportation District Industrial Revenue, Limited Obligation, 5.00%, | ||||
7/01/41 | 6,000,000 | 7,049,580 | ||
University of Southern Indiana Revenue, Student Fee, Series J, Assured Guaranty, 5.75%, 10/01/28 | 2,000,000 | 2,298,640 | ||
187,511,923 | ||||
Kansas 0.2% | ||||
Kansas State Development Finance Authority Hospital Revenue, Adventist Health System/Sunbelt | ||||
Obligated Group, Refunding, Series C, 5.75%, 11/15/38 | 6,250,000 | 7,132,250 | ||
Wyandotte County Kansas City Unified Government Utility System Revenue, | ||||
Improvement, Refunding, Series A, 5.00%, 9/01/44 | 3,000,000 | 3,448,530 | ||
Improvement, Series A, 5.00%, 9/01/45 | 10,000,000 | 11,510,500 | ||
Series A, BHAC Insured, 5.25%, 9/01/34 | 5,000,000 | 5,534,200 | ||
27,625,480 | ||||
Kentucky 0.9% | ||||
Carroll County Environmental Facilities Revenue, Kentucky Utilities Co. Project, Series A, AMBAC | ||||
Insured, 5.75%, 2/01/26 | 12,500,000 | 13,541,000 | ||
Jefferson County Capital Projects Corp. Lease Revenue, | ||||
Refunding, Series A, zero cpn., 8/15/16 | 7,005,000 | 6,985,386 | ||
Refunding, Series A, zero cpn., 8/15/17 | 7,115,000 | 6,988,993 |
24 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Kentucky (continued) | ||||
Kentucky Economic Development Finance Authority Health System Revenue, Norton Healthcare Inc., | ||||
Captial Appreciation, Refunding, Series B, NATL Insured, zero cpn., 10/01/18 | $ | 8,585,000 | $ | 8,175,410 |
Kentucky Economic Development Finance Authority Louisville Arena Project Revenue, Louisville Arena | ||||
Authority Inc., Series A, Sub Series A-1, Assured Guaranty, 6.00%, 12/01/38 | 4,000,000 | 4,285,480 | ||
Kentucky State Municipal Power Agency Power System Revenue, | ||||
Prairie State Project, Refunding, Series A, NATL Insured, 5.00%, 9/01/42 | 10,000,000 | 11,449,600 | ||
Prairie State Project, Series A, NATL Insured, Pre-Refunded, 5.00%, 9/01/32 | 10,000,000 | 10,546,900 | ||
Kentucky State Property and Buildings Commission Revenues, | ||||
Project No. 90, Pre-Refunded, 5.50%, 11/01/28 | 13,230,000 | 14,747,084 | ||
Project No. 90, Refunding, 5.50%, 11/01/28 | 1,770,000 | 1,961,355 | ||
Louisville/Jefferson County Metro Government College Revenue, Bellarmine University Project, | ||||
Refunding and Improvement, Series A, 6.00%, 5/01/33. | 3,000,000 | 3,203,970 | ||
Louisville/Jefferson County Metro Government Health Facilities Revenue, Jewish Hospital and St. | ||||
Mary’s HealthCare Inc. Project, Pre-Refunded, 6.125%, 2/01/37 | 11,500,000 | 12,573,755 | ||
Paducah Electric Plant Board Revenue, Series A, Assured Guaranty, 5.25%, 10/01/35. | 7,000,000 | 7,639,520 | ||
102,098,453 | ||||
Louisiana 1.9% | ||||
East Baton Rouge Sewerage Commission Revenue, Series A, Pre-Refunded, 5.25%, 2/01/39 | 6,000,000 | 6,715,560 | ||
Lafayette Communications System Revenue, XLCA Insured, Pre-Refunded, 5.25%, 11/01/27. | 12,485,000 | 13,307,137 | ||
Lafayette Public Trust Financing Authority Revenue, Ragin’ Cajun Facilities Inc., Housing and Parking | ||||
Project, Assured Guaranty, 5.50%, 10/01/35 | 6,000,000 | 7,003,260 | ||
Louisiana Local Government Environmental Facilities and CDA Revenue, | ||||
Bossier City Public Improvement Projects, AMBAC Insured, Pre-Refunded, 5.00%, 11/01/32 | 6,730,000 | 7,158,701 | ||
East Baton Rouge Sewerage Commission Projects, sub. lien, Series A, 5.00%, 2/01/44 | 5,820,000 | 6,618,562 | ||
LCTCS Act 360 Project, 5.00%, 10/01/39. | 10,000,000 | 11,357,000 | ||
Louisiana Public Facilities Authority Hospital Revenue, Franciscan Missionaries of Our Lady Health | ||||
System Project, Series A, Pre-Refunded, 6.75%, 7/01/39 | 10,000,000 | 11,790,000 | ||
Louisiana Public Facilities Authority Revenue, | ||||
Millennium Housing LLC Student Housing, Student Housing and Auxiliary Facilities Project, | ||||
Assured Guaranty, 5.00%, 11/01/30 | 10,000,000 | 10,354,900 | ||
Ochsner Clinic Foundation Project, 6.75%, 5/15/41. | 15,500,000 | 18,595,660 | ||
Ochsner Clinic Foundation Project, Refunding, 5.00%, 5/15/47 | 7,500,000 | 8,254,725 | ||
Ochsner Clinic Foundation Project, Series B, 5.25%, 5/15/38 | 7,405,000 | 7,659,214 | ||
Ochsner Clinic Foundation Project, Series B, 5.50%, 5/15/47 | 7,205,000 | 7,439,162 | ||
Ochsner Clinic Foundation Project, Series B, ETM, 5.75%, 5/15/23 | 10,000,000 | 12,872,000 | ||
Ochsner Clinic Foundation Project, Series B, Pre-Refunded, 5.25%, 5/15/38 | 2,855,000 | 2,981,791 | ||
Ochsner Clinic Foundation Project, Series B, Pre-Refunded, 5.50%, 5/15/47 | 2,795,000 | 2,926,281 | ||
Louisiana State Gasoline and Fuels Tax Revenue, second lien, Series B, 5.00%, 5/01/45 | 13,690,000 | 15,308,158 | ||
St. Charles Parish Consolidated Waterworks and Wastewater District No. 1 Revenue, Series A, | ||||
AMBAC Insured, Pre-Refunded, 5.00%, 7/01/36 | 6,230,000 | 6,540,690 | ||
St. John the Baptist Parish Revenue, Marathon Oil Corp. Project, Series A, 5.125%, 6/01/37 | 49,100,000 | 50,347,140 | ||
207,229,941 | ||||
Maine 0.3% | ||||
Maine State Educational Loan Authority Student Loan Revenue, Supplemental Education Loan | ||||
Program, Series A-3, Assured Guaranty, 5.875%, 12/01/39 | 10,670,000 | 11,975,368 | ||
Maine State Health and Higher Educational Facilities Authority Revenue, | ||||
Maine General Medical Center Issue, 6.75%, 7/01/36 | 4,250,000 | 4,770,667 | ||
Maine General Medical Center Issue, 7.00%, 7/01/41 | 10,000,000 | 11,266,000 | ||
28,012,035 |
franklintempleton.com
Annual Report
25
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Maryland 1.1% | ||||
Baltimore Project Revenue, | ||||
Subordinate Project, Wastewater Projects, Series C, 5.00%, 7/01/39 | $ | 10,000,000 | $ | 11,664,000 |
Subordinate Project, Wastewater Projects, Series C, 5.00%, 7/01/44 | 10,000,000 | 11,622,300 | ||
Subordinate Project, Water Projects, Series A, 5.00%, 7/01/39. | 9,430,000 | 10,999,152 | ||
Subordinate Project, Water Projects, Series A, 5.00%, 7/01/44. | 5,500,000 | 6,392,265 | ||
Wastewater Projects, Series C, 5.00%, 7/01/38 | 5,000,000 | 5,832,050 | ||
Wastewater Projects, Series C, 5.00%, 7/01/43 | 10,000,000 | 11,573,800 | ||
Water Projects, Series C, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/37 | 8,130,000 | 8,535,443 | ||
Maryland State EDC, PCR, Potomac Electric Project, Refunding, 6.20%, 9/01/22 | 5,000,000 | 5,690,750 | ||
Maryland State EDC Student Housing Revenue, University of Maryland, College Park Projects, | ||||
Refunding, Assured Guaranty, 5.00%, 6/01/33 | 15,000,000 | 15,050,850 | ||
Maryland State Health and Higher Educational Facilities Authority Revenue, | ||||
Anne Arundel Health System Issue, Series A, Pre-Refunded, 6.75%, 7/01/39 | 3,000,000 | 3,547,290 | ||
LifeBridge Health Issue, Assured Guaranty, Pre-Refunded, 5.00%, 7/01/28 | 1,125,000 | 1,181,104 | ||
LifeBridge Health Issue, Refunding, Assured Guaranty, 5.00%, 7/01/28 | 1,875,000 | 1,964,025 | ||
Upper Chesapeake Hospitals Issue, Series C, Pre-Refunded, 6.00%, 1/01/38 | 5,000,000 | 5,435,250 | ||
Western Maryland Health System Issue, Series A, NATL Insured, Pre-Refunded, 5.00%, 7/01/34 . | 19,345,000 | 19,477,126 | ||
118,965,405 | ||||
Massachusetts 3.1% | ||||
Massachusetts Bay Transportation Authority Revenue, | ||||
Assessment, Refunding, Series A, 5.25%, 7/01/34 | 19,520,000 | 21,247,325 | ||
Assessment, Series A, Pre-Refunded, 5.25%, 7/01/34 | 8,110,000 | 8,878,828 | ||
Massachusetts Bay Transportation Authority Sales Tax Revenue, Refunding, Senior Series A, 5.00%, | ||||
7/01/28 | 10,000,000 | 13,084,700 | ||
Massachusetts State Department of Transportation Metropolitan Highway System Revenue, Senior, | ||||
Refunding, Series B, 5.00%, 1/01/37. | 31,000,000 | 34,648,080 | ||
Massachusetts State Development Finance Agency Revenue, | ||||
Brandeis University Issue, Refunding, Series O-1, 5.00%, 10/01/40 | 19,865,000 | 22,012,605 | ||
Partners Healthcare System Issue, Refunding, Series Q, 5.00%, 7/01/47 | 15,000,000 | 17,724,900 | ||
Wellesley College Issue, Series J, 5.00%, 7/01/42 | 10,000,000 | 11,604,100 | ||
Worcester Polytechnic Institute Issue, Refunding, NATL Insured, 5.00%, 9/01/37 | 10,000,000 | 10,473,500 | ||
Massachusetts State Educational Financing Authority Education Loan Revenue, | ||||
Issue I, 6.00%, 1/01/28 | 9,740,000 | 10,495,921 | ||
Refunding, Series K, 5.25%, 7/01/29 | 8,565,000 | 9,666,630 | ||
Series H, Assured Guaranty, 6.35%, 1/01/30 | 3,490,000 | 3,653,890 | ||
Massachusetts State GO, Consolidated Loan, Series C, AMBAC Insured, Pre-Refunded, 5.00%, | ||||
8/01/37 | 10,000,000 | 10,526,700 | ||
Massachusetts State Health and Educational Facilities Authority Revenue, | ||||
Berklee College of Music Issue, Refunding, Series A, 5.00%, 10/01/37 | 10,000,000 | 10,503,000 | ||
Emmanuel College Issue, NATL Insured, 5.00%, 7/01/37 | 10,000,000 | 10,209,500 | ||
Northeastern University Issue, Series A, 5.00%, 10/01/35 | 20,000,000 | 22,700,400 | ||
Northeastern University Issue, Series R, 5.00%, 10/01/33 | 6,830,000 | 7,457,882 | ||
Springfield College Issue, 5.50%, 10/15/31 | 1,710,000 | 1,913,849 | ||
Springfield College Issue, 5.625%, 10/15/40 | 7,000,000 | 7,754,740 | ||
Massachusetts State HFAR, Housing, Series B, 7.00%, 12/01/38 | 9,140,000 | 9,866,996 | ||
Massachusetts State School Building Authority Dedicated Sales Tax Revenue, Series A, AMBAC | ||||
Insured, 4.50%, 8/15/35 | 30,000,000 | 31,086,000 | ||
Massachusetts State Transportation Fund Revenue, Accelerated Bridge Program, Series A, 4.00%, | ||||
6/01/35 | 10,000,000 | 10,681,100 | ||
Massachusetts State Water Pollution Abatement Trust Revenue, Massachusetts State Water | ||||
Resources Authority Program, Series A, 5.00%, 8/01/32 | 225,000 | 225,673 |
26 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Massachusetts (continued) | ||||
Massachusetts State Water Pollution Abatement Trust Water Pollution Abatement Revenue, | ||||
Massachusetts Water Resources Authority Program, Refunding, Sub Series A, 5.75%, 8/01/29. | $ | 450,000 | $ | 451,692 |
a Massachusetts Water Resources Authority Revenue, General, Green Bond, Refunding, Series C, | ||||
5.00%, 8/01/40. | 30,000,000 | 36,274,200 | ||
University of Massachusetts Building Authority Project Revenue, Senior Series 1, 5.00%, 11/01/39 | 20,000,000 | 23,720,000 | ||
346,862,211 | ||||
Michigan 3.1% | ||||
Detroit City School District GO, | ||||
School Building and Site Improvement, Refunding, Series A, 5.00%, 5/01/30 | 1,245,000 | 1,400,239 | ||
School Building and Site Improvement, Refunding, Series A, 5.00%, 5/01/33 | 1,500,000 | 1,666,875 | ||
Detroit GO, Distributable State Aid, 5.00%, 11/01/30 | 22,500,000 | 23,910,750 | ||
Detroit Water and Sewerage Department Sewage Disposal System Revenue, senior lien, Refunding, | ||||
Series A, 5.25%, 7/01/39. | 12,000,000 | 13,357,560 | ||
Grand Rapids Public Schools GO, School Building and Site, AGMC Insured, Pre-Refunded, 4.50%, | ||||
5/01/31 | 21,800,000 | 22,626,002 | ||
Michigan State Building Authority Revenue, | ||||
Facilities Program, Refunding, Series I-A, 5.375%, 10/15/36 | 6,730,000 | 7,765,141 | ||
Facilities Program, Refunding, Series I-A, 5.25%, 10/15/44 | 20,655,000 | 24,019,906 | ||
Facilities Program, Series H, 5.125%, 10/15/33 | 12,500,000 | 13,900,750 | ||
Facilities Program, Series H, AGMC Insured, 5.00%, 10/15/26 | 5,000,000 | 5,592,900 | ||
Facilities Program, Series I, 6.25%, 10/15/38 | 5,860,000 | 6,538,354 | ||
Facilities Program, Series I, Pre-Refunded, 6.25%, 10/15/38 | 9,140,000 | 10,337,614 | ||
Refunding, Series A1, NATL Insured, 5.00%, 10/15/31 | 4,100,000 | 4,168,306 | ||
Series IA, NATL Insured, Pre-Refunded, 5.00%, 10/15/31 | 5,375,000 | 5,483,629 | ||
Michigan State Finance Authority Hospital Revenue, | ||||
Trinity Health Credit Group, Refunding, Series MI, 5.00%, 12/01/39 | 29,610,000 | 33,604,389 | ||
Trinity Health Credit Group, Refunding, Series MI, 5.00%, 12/01/45 | 20,000,000 | 23,322,800 | ||
Trinity Health Credit Group, Series MI, Pre-Refunded, 5.00%, 12/01/39 | 140,000 | 168,521 | ||
Michigan State Finance Authority Revenue, | ||||
Beaumont, Health Credit Group, Series A, 5.00%, 11/01/44 | 12,425,000 | 14,331,243 | ||
School District of the City of Detroit, Refunding, 5.00%, 6/01/18. | 2,400,000 | 2,515,080 | ||
School District of the City of Detroit, Refunding, 5.00%, 6/01/19. | 1,900,000 | 2,022,873 | ||
School District of the City of Detroit, Refunding, 5.00%, 6/01/20. | 1,500,000 | 1,618,410 | ||
School District of the City of Detroit, Refunding, 5.50%, 6/01/21. | 10,000,000 | 10,770,000 | ||
Michigan State GO, | ||||
Environmental Program, Refunding, Series A, 6.00%, 11/01/24 | 1,000,000 | 1,157,930 | ||
Environmental Program, Refunding, Series A, 5.50%, 11/01/25 | 1,000,000 | 1,142,500 | ||
Michigan State HDA, SFMR, Series A, 5.00%, 12/01/19 | 405,000 | 414,854 | ||
Michigan State Hospital Finance Authority Revenue, | ||||
MidMichigan Obligated Group, Series A, Pre-Refunded, 6.00%, 6/01/29 | 4,000,000 | 4,608,080 | ||
MidMichigan Obligated Group, Series A, Pre-Refunded, 6.125%, 6/01/39 | 5,000,000 | 5,778,950 | ||
Trinity Health Credit Group, Refunding, Series C, 5.00%, 12/01/34 | 9,230,000 | 10,567,704 | ||
Trinity Health Credit Group, Series C, Pre-Refunded, 5.00%, 12/01/34 | 770,000 | 934,387 | ||
Michigan State Strategic Fund Limited Obligation Revenue, The Detroit Edison Co. Exempt Facilities | ||||
Project, Refunding, Series KT, 5.625%, 7/01/20 | 7,000,000 | 8,092,280 | ||
Michigan Tobacco Settlement Finance Authority Revenue, Tobacco Settlement Asset-Backed, Senior | ||||
Series A, 6.00%, 6/01/34. | 40,000,000 | 40,051,200 | ||
Royal Oak Hospital Finance Authority Hospital Revenue, | ||||
William Beaumont Hospital Obligated Group, Series V, Pre-Refunded, 8.25%, 9/01/39 | 20,000,000 | 23,435,200 | ||
William Beaumont Hospital Obligated Group, Series W, Pre-Refunded, 6.375%, 8/01/29 | 10,000,000 | 11,731,100 | ||
Wayne State University Revenue, General, AMBAC Insured, Pre-Refunded, 5.00%, 11/15/36 | 5,000,000 | 5,114,450 | ||
342,149,977 |
franklintempleton.com
Annual Report
27
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Minnesota 0.2% | ||||
Minneapolis Health Care System Revenue, | ||||
Fairview Health Services, Series A, Pre-Refunded, 6.625%, 11/15/28 | $ | 11,000,000 | $ | 12,604,900 |
Fairview Health Services, Series A, Pre-Refunded, 6.75%, 11/15/32. | 6,250,000 | 7,181,437 | ||
a St. Cloud Health Care Revenue, CentraCare Health, Refunding, Series A, 5.00%, 5/01/46 | 5,000,000 | 5,856,150 | ||
25,642,487 | ||||
Mississippi 0.5% | ||||
Mississippi Business Finance Corp. PCR, System Energy Resource Inc. Project, Refunding, 5.875%, | ||||
4/01/22 | 32,520,000 | 32,926,500 | ||
Mississippi Development Bank Special Obligation Revenue, | ||||
City of Jackson Capital City Convention Center Project, Refunding, Series A, 5.00%, 3/01/36 | 10,000,000 | 12,713,800 | ||
City of Jackson Water and Sewer System Project, AGMC Insured, 6.875%, 12/01/40 | 3,400,000 | 4,450,770 | ||
50,091,070 | ||||
Missouri 0.4% | ||||
Missouri State Health and Educational Facilities Authority Health Facilities Revenue, | ||||
Mercy Health, Series F, 5.00%, 11/15/45 | 25,000,000 | 28,779,000 | ||
St. Luke’s Health System, Series B, AGMC Insured, 5.50%, 11/15/35 | 15,000,000 | 16,515,900 | ||
45,294,900 | ||||
Nebraska 1.7% | ||||
Adams County School District No. 018 GO, Hastings Public Schools, AGMC Insured, Pre-Refunded, | ||||
5.00%, 12/15/31. | 5,795,000 | 5,952,450 | ||
Lancaster County Correctional Facility Joint Public Agency GO, Building, 5.00%, 12/01/28 | 5,000,000 | 5,549,250 | ||
Lancaster County School District No. 001 GO, Lincoln Public Schools, Pre-Refunded, 5.00%, 1/15/36 | 24,725,000 | 24,945,300 | ||
Madison County Hospital Authority No. 001 Hospital Revenue, Faith Regional Health Services Project, | ||||
Series A-1, 6.00%, 7/01/33 | 12,000,000 | 13,130,880 | ||
Municipal Energy Agency of Nebraska Power Supply System Revenue, Refunding, Series A, BHAC | ||||
Insured, 5.375%, 4/01/39 | 5,000,000 | 5,549,300 | ||
Omaha Convention Hotel Corp. Revenue, Convention Center, first tier, Refunding, AMBAC Insured, | ||||
5.00%, 2/01/35. | 30,000,000 | 30,811,500 | ||
Omaha Public Facilities Corp. Lease Revenue, Baseball Stadium Project, 5.00%, 6/01/36 | 9,000,000 | 9,960,210 | ||
Omaha Public Power District Electric System Revenue, Series C, 5.00%, 2/01/39 | 23,305,000 | 26,713,589 | ||
Omaha Public Power District Separate Electric System Revenue, | ||||
Nebraska City 2, Refunding, Series A, 5.00%, 2/01/49 | 10,000,000 | 11,577,500 | ||
Nebraska City 2, Series A, 5.25%, 2/01/42. | 10,000,000 | 11,853,600 | ||
a Public Power Generation Agency Revenue, | ||||
Whelan Energy Center Unit 2, Refunding, Series A, 5.00%, 1/01/37 | 6,935,000 | 8,135,587 | ||
Whelan Energy Center Unit 2, Refunding, Series A, 5.00%, 1/01/40 | 1,250,000 | 1,459,288 | ||
Whelan Energy Center Unit 2, Refunding, Series A, 5.00%, 1/01/41 | 1,690,000 | 1,971,351 | ||
University of Nebraska Revenue, | ||||
Lincoln Student Fees and Facilities, 5.00%, 7/01/37 | 5,000,000 | 5,816,050 | ||
Lincoln Student Fees and Facilities, 5.00%, 7/01/42 | 7,500,000 | 8,551,350 | ||
Lincoln Student Fees and Facilities, Series A, 5.25%, 7/01/34 | 5,000,000 | 5,533,750 | ||
Omaha Student Facilities Project, Pre-Refunded, 5.00%, 5/15/32 | 5,000,000 | 5,222,500 | ||
University of Nebraska Omaha Health and Recreation Project, 5.00%, 5/15/38 | 5,000,000 | 5,370,600 | ||
188,104,055 | ||||
Nevada 0.2% | ||||
Clark County School District GO, Refunding, Series A, NATL Insured, 5.00%, 6/15/24 | 15,000,000 | 16,134,300 | ||
Nevada State GO, Municipal Bond Bank Project No. 40-41, Series A, ETM, 6.375%, 12/01/17 | 3,145,000 | 3,157,360 | ||
19,291,660 |
28 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
New Hampshire 0.3% | ||||
Nashua Housing Authority MFR, Clocktower Project, Refunding, GNMA Secured, 6.25%, 6/20/33. | $ | 4,616,000 | $ | 4,631,556 |
New Hampshire Municipal Bond Bank Revenue, Series B, 5.00%, 8/15/39 | 11,250,000 | 12,881,362 | ||
New Hampshire State Business Finance Authority Revenue, Elliot Hospital Obligated Group, Series A, | ||||
6.125%, 10/01/39 | 5,000,000 | 5,618,150 | ||
New Hampshire State Health and Education Facilities Authority Revenue, | ||||
The Memorial Hospital Issue, Refunding, 5.25%, 6/01/26 | 1,000,000 | 1,002,870 | ||
The Memorial Hospital Issue, Refunding, 5.25%, 6/01/36 | 1,100,000 | 1,102,585 | ||
University System of New Hampshire Issue, Refunding, 5.00%, 7/01/45 | 10,350,000 | 12,032,496 | ||
37,269,019 | ||||
New Jersey 3.0% | ||||
Bayonne GO, General Improvement, Pre-Refunded, 5.75%, 7/01/35 | 9,000,000 | 10,346,940 | ||
New Jersey EDA Revenue, | ||||
Motor Vehicle Surcharges, Series A, NATL Insured, 5.00%, 7/01/29 | 10,000,000 | 10,103,600 | ||
Motor Vehicle Surcharges, Series A, NATL Insured, 5.00%, 7/01/34 | 5,000,000 | 5,051,800 | ||
School Facilities, Series U, Pre-Refunded, 5.00%, 9/01/37 | 14,285,000 | 15,095,531 | ||
School Facilities Construction, Refunding, Series NN, 5.00%, 3/01/31. | 14,775,000 | 15,923,461 | ||
School Facilities Construction, Series NN, 5.00%, 3/01/28 | 22,000,000 | 23,917,300 | ||
New Jersey Health Care Facilities Financing Authority State Contract Revenue, Hospital Asset | ||||
Transformation Program, Series A, 5.25%, 10/01/38. | 10,000,000 | 10,735,800 | ||
New Jersey State COP, | ||||
Equipment Lease Purchase Agreement, Series A, 5.25%, 6/15/25 | 20,305,000 | 21,809,397 | ||
Equipment Lease Purchase Agreement, Series A, 5.25%, 6/15/26 | 8,000,000 | 8,575,360 | ||
Equipment Lease Purchase Agreement, Series A, 5.25%, 6/15/27 | 4,000,000 | 4,282,760 | ||
Equipment Lease Purchase Agreement, Series A, 5.25%, 6/15/28 | 2,000,000 | 2,139,520 | ||
New Jersey State Housing and Mortgage Finance Agency Revenue, Series AA, 6.375%, 10/01/28 | 1,320,000 | 1,367,005 | ||
New Jersey State Transportation Trust Fund Authority Revenue, | ||||
Transportation Program, Series AA, 5.00%, 6/15/38 | 25,000,000 | 26,878,000 | ||
Transportation Program, Series AA, 5.00%, 6/15/45 | 15,000,000 | 16,029,150 | ||
Transportation System, Series A, 6.00%, 12/15/38 | 39,505,000 | 43,829,217 | ||
Transportation System, Series A, AMBAC Insured, 5.00%, 12/15/32 | 9,705,000 | 10,246,054 | ||
Transportation System, Series A, Pre-Refunded, 6.00%, 12/15/38 | 20,495,000 | 23,274,737 | ||
Transportation System, Series B, 5.25%, 6/15/36 | 10,000,000 | 10,773,700 | ||
Transportation System, Series C, 5.25%, 6/15/32 | 25,000,000 | 27,602,000 | ||
Transportation System, Series D, 5.25%, 12/15/23 | 15,000,000 | 17,052,000 | ||
New Jersey State Turnpike Authority Turnpike Revenue, | ||||
Growth and Income Securities, Series B, AMBAC Insured, Pre-Refunded, 5.15%, 1/01/35 | 10,000,000 | 10,297,700 | ||
Series E, 5.25%, 1/01/40 | 13,925,000 | 15,415,254 | ||
330,746,286 | ||||
New Mexico 0.1% | ||||
New Mexico State Hospital Equipment Loan Council Hospital Revenue, Presbyterian Healthcare | ||||
Services Obligated Group, Refunding, 5.00%, 8/01/44 | 10,000,000 | 11,629,700 | ||
New York 8.1% | ||||
Long Island Power Authority Electric System Revenue, General, Series A, Pre-Refunded, 6.00%, | ||||
5/01/33 | 12,500,000 | 14,401,625 | ||
MTA Dedicated Tax Fund Revenue, | ||||
Series B, 5.25%, 11/15/28 | 6,000,000 | 6,904,980 | ||
Series B, 5.25%, 11/15/29 | 4,000,000 | 4,600,280 | ||
Series B, 5.25%, 11/15/30 | 3,000,000 | 3,445,710 | ||
Series B, 5.00%, 11/15/34 | 15,000,000 | 16,970,100 |
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29
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
New York (continued) | ||||
MTA Revenue, | ||||
Transportation, Refunding, Series D, 5.25%, 11/15/40 | $ | 15,000,000 | $ | 17,227,650 |
Transportation, Series A, 5.00%, 11/15/37 | 25,000,000 | 26,385,500 | ||
Transportation, Series A, 5.00%, 11/15/38 | 11,800,000 | 13,773,904 | ||
Transportation, Series C, 6.50%, 11/15/28 | 3,690,000 | 4,202,836 | ||
Transportation, Series C, Pre-Refunded, 6.50%, 11/15/28 | 11,310,000 | 12,918,621 | ||
Transportation, Series D, 5.00%, 11/15/34 | 10,000,000 | 11,484,800 | ||
Transportation, Series D, 5.00%, 11/15/36 | 9,500,000 | 11,082,510 | ||
Transportation, Series D, Sub Series D-1, 5.00%, 11/15/39 | 15,000,000 | 17,600,400 | ||
Transportation, Sub Series A-1, 5.00%, 11/15/40 | 30,000,000 | 34,640,400 | ||
New York City GO, | ||||
Fiscal 2002, Series D, 5.50%, 6/01/24 | 180,000 | 180,659 | ||
Fiscal 2010, Refunding, Series C, 5.00%, 8/01/23. | 24,620,000 | 27,761,512 | ||
Series E, Sub Series E-1, 6.25%, 10/15/28 | 480,000 | 543,144 | ||
Series E, Sub Series E-1, Pre-Refunded, 6.25%, 10/15/28 | 9,520,000 | 10,774,831 | ||
Series F, 5.25%, 1/15/23 | 5,000 | 5,018 | ||
New York City Municipal Water Finance Authority Water and Sewer System Revenue, | ||||
Fiscal 2009, Series A, 5.75%, 6/15/40 | 6,000,000 | 6,607,920 | ||
Second General Resolution, Fiscal 2008, Refunding, Series AA, 5.00%, 6/15/37 | 10,000,000 | 10,464,700 | ||
Second General Resolution, Fiscal 2009, Refunding, Series EE, 5.25%, 6/15/40 | 64,970,000 | 72,733,265 | ||
Second General Resolution, Fiscal 2009, Refunding, Series FF-2, 5.50%, 6/15/40 | 15,000,000 | 17,044,350 | ||
Second General Resolution, Fiscal 2012, Refunding, Series AA, 5.00%, 6/15/34 | 10,000,000 | 11,673,600 | ||
Second General Resolution, Fiscal 2013, Refunding, Series DD, 5.00%, 6/15/35 | 30,705,000 | 36,403,848 | ||
Second General Resolution, Fiscal 2014, Refunding, Series BB, 5.00%, 6/15/46 | 15,000,000 | 17,568,300 | ||
Second General Resolution, Fiscal 2015, Refunding, Series FF, 5.00%, 6/15/39. | 10,000,000 | 11,927,100 | ||
Second General Resolution, Fiscal 2015, Refunding, Series HH, 5.00%, 6/15/39 | 15,000,000 | 17,890,650 | ||
New York City Transitional Finance Authority Building Aid Revenue, | ||||
Fiscal 2009, Series S-2, 6.00%, 7/15/38 | 20,000,000 | 22,167,600 | ||
Fiscal 2009, Series S-3, 5.25%, 1/15/34 | 10,170,000 | 11,285,547 | ||
Fiscal 2009, Series S-4, 5.50%, 1/15/34 | 12,890,000 | 14,433,320 | ||
Fiscal 2011, Series S-2, Sub Series S-2A, 5.00%, 7/15/40. | 35,000,000 | 40,513,550 | ||
Fiscal 2012, Series S-1, Sub Series S-1A, 5.25%, 7/15/37. | 5,300,000 | 6,246,421 | ||
New York City Transitional Finance Authority Revenue, | ||||
Future Tax Secured, Fiscal 2011, sub. bond, Series C, 5.00%, 11/01/39 | 15,000,000 | 16,869,000 | ||
Future Tax Secured, Fiscal 2014, sub. bond, Series A, Sub Series A-1, 5.00%, 11/01/34 | 15,000,000 | 18,093,150 | ||
New York Liberty Development Corp. Liberty Revenue, | ||||
One World Trade Center, Port Authority Consolidated, Secured, 5.25%, 12/15/43 | 25,000,000 | 29,380,750 | ||
Second Priority, Bank of America Tower at One Bryant Park Project, Class 1, Refunding, 5.625%, | ||||
1/15/46 | 25,000,000 | 28,959,000 | ||
Seven World Trade Center Project, Refunding, 5.00%, 9/15/43. | 6,500,000 | 7,223,580 | ||
New York Liberty Development Corp. Revenue, | ||||
Goldman Sachs Headquarters Issue, 5.25%, 10/01/35 | 40,000,000 | 50,912,800 | ||
Goldman Sachs Headquarters Issue, 5.50%, 10/01/37 | 24,995,000 | 32,615,476 | ||
New York State Dormitory Authority Lease Revenues, State University Dormitory Facilities, Series A, | ||||
5.00%, 7/01/41. | 10,000,000 | 11,463,100 | ||
New York State Dormitory Authority Revenues, State Supported Debt, Upstate Community Colleges, | ||||
Series C, 6.00%, 7/01/31. | 23,215,000 | 26,344,150 | ||
New York State Dormitory Authority State Personal Income Tax Revenue, | ||||
General Purpose, Series A, 5.00%, 2/15/36 | 15,000,000 | 17,642,100 | ||
Group C, Series B, 5.00%, 2/15/40 | 20,000,000 | 23,591,000 | ||
New York State HFAR, Housing Project Mortgage, Refunding, Series A, AGMC Insured, 6.125%, | ||||
11/01/20 | 85,000 | 85,188 |
30 Annual Report
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
New York (continued) | ||||
New York State Urban Development Corp. Revenue, | ||||
State Personal Income Tax, General Purpose, Series A, 5.00%, 3/15/31 | $ | 10,000,000 | $ | 11,620,300 |
State Personal Income Tax, State Facilities and Equipment, Series B-1, 5.00%, 3/15/36 | 5,000,000 | 5,519,850 | ||
Port Authority of New York and New Jersey Revenue, Consolidated, One Hundred Seventy-Ninth | ||||
Series, 5.00%, 12/01/38 | 20,000,000 | 23,780,000 | ||
Triborough Bridge and Tunnel Authority Revenues, | ||||
General, MTA Bridges and Tunnels, Series A, 5.25%, 11/15/38 | 25,000,000 | 26,972,500 | ||
General, MTA Bridges and Tunnels, Series A-2, 5.25%, 11/15/34 | 7,500,000 | 8,280,600 | ||
General Purpose, Series B, Pre-Refunded, 5.50%, 1/01/30 | 15,000,000 | 18,277,800 | ||
889,494,995 | ||||
North Carolina 2.1% | ||||
Charlotte COP, Cultural Arts Facilities, Refunding, Series E, 5.00%, 6/01/34 | 13,000,000 | 14,411,930 | ||
North Carolina Eastern Municipal Power Agency Power System Revenue, | ||||
Series A, Pre-Refunded, 5.50%, 1/01/26 | 4,500,000 | 5,044,995 | ||
Series B, ETM, 6.00%, 1/01/22. | 1,250,000 | 1,579,600 | ||
Series B, ETM, 6.25%, 1/01/23. | 39,030,000 | 51,342,794 | ||
North Carolina State Capital Improvement Limited Obligation Revenue, | ||||
Series A, 5.00%, 5/01/23 | 20,000,000 | 23,071,800 | ||
Series A, 5.00%, 5/01/26 | 20,000,000 | 23,004,200 | ||
Series A, Pre-Refunded, 5.00%, 5/01/24 | 5,500,000 | 6,169,350 | ||
Series A, Pre-Refunded, 5.00%, 5/01/25 | 5,750,000 | 6,449,775 | ||
Series A, Pre-Refunded, 5.00%, 5/01/27 | 4,500,000 | 5,047,650 | ||
Series A, Pre-Refunded, 5.00%, 5/01/28 | 4,250,000 | 4,767,225 | ||
North Carolina Turnpike Authority Triangle Expressway System Revenue, | ||||
Capital Appreciation, Series B, Assured Guaranty, zero cpn., 1/01/33 | 25,000,000 | 14,140,750 | ||
Capital Appreciation, Series B, Assured Guaranty, zero cpn., 1/01/34 | 15,000,000 | 8,114,250 | ||
Capital Appreciation, Series B, Assured Guaranty, zero cpn., 1/01/35 | 15,215,000 | 7,847,745 | ||
Series A, Assured Guaranty, 5.50%, 1/01/29 | 6,750,000 | 7,480,755 | ||
Series A, Assured Guaranty, 5.75%, 1/01/39 | 10,380,000 | 11,522,319 | ||
Raleigh Combined Enterprise System Revenue, 5.00%, 3/01/40 | 7,915,000 | 9,080,325 | ||
Wake County GO, Refunding, Series C, 5.00%, 3/01/25 | 21,780,000 | 28,017,139 | ||
227,092,602 | ||||
North Dakota 0.3% | ||||
Grand Forks Health Care System Revenue, | ||||
Altru Health System Obligated Group, Assured Guaranty, 5.00%, 12/01/26 | 8,385,000 | 9,007,503 | ||
Altru Health System Obligated Group, Refunding, 5.50%, 12/01/20. | 8,870,000 | 9,512,454 | ||
Altru Health System Obligated Group, Refunding, 5.50%, 12/01/24. | 13,945,000 | 14,955,036 | ||
33,474,993 | ||||
Ohio 3.1% | ||||
Akron Income Tax Revenue, Community Learning Centers, Refunding, Series A, 5.00%, 12/01/29 | 10,000,000 | 11,833,500 | ||
American Municipal Power-Ohio Inc. Revenue, | ||||
Prairie State Energy Campus Project, Refunding, Series A, 5.00%, 2/15/38. | 1,215,000 | 1,288,532 | ||
Prairie State Energy Campus Project, Refunding, Series A, 5.00%, 2/15/39. | 5,000,000 | 5,756,500 | ||
Prairie State Energy Campus Project, Refunding, Series A, 5.00%, 2/15/42. | 2,500,000 | 2,855,750 | ||
Prairie State Energy Campus Project, Series A, Pre-Refunded, 5.00%, 2/15/38 | 21,285,000 | 22,873,925 | ||
Bowling Green Student Housing Revenue, CFP I LLC, State University Project, 6.00%, 6/01/45 | 6,750,000 | 7,268,535 | ||
Buckeye Tobacco Settlement Financing Authority Revenue, | ||||
Tobacco Settlement, Senior, Capital Appreciation, Turbo Term, Series A-3, 6.25%, 6/01/37 | 15,000,000 | 14,946,900 | ||
Tobacco Settlement, Senior Current Interest Turbo Term, Series A-2, 5.75%, 6/01/34 | 10,000,000 | 9,577,200 | ||
Cleveland-Cuyahoga County Port Authority Development Lease Revenue, Administrative Headquarters | ||||
Project, 5.00%, 7/01/37 | 6,000,000 | 7,694,940 |
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31
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Ohio (continued) | ||||
Franklin County Hospital Facilities Revenue, OhioHealth Corp., 5.00%, 5/15/40 | $ | 10,000,000 | $ | 11,675,100 |
Hamilton County Sewer System Revenue, The Metropolitan Sewer District of Greater Cincinnati, | ||||
Improvement and Refunding, Series A, 5.00%, 12/01/38 | 12,000,000 | 13,995,360 | ||
JobsOhio Beverage System Statewide Liquor Profits Revenue, senior lien, Series A, 5.00%, 1/01/38 | 21,060,000 | 24,062,103 | ||
Kent State University Revenues, General Receipts, Series A, 5.00%, 5/01/37 | 10,500,000 | 12,065,655 | ||
Little Miami Local School District GO, School Improvement, AGMC Insured, Pre-Refunded, 5.00%, | ||||
12/01/34 | 4,000,000 | 4,101,800 | ||
Maple Heights City School District GO, School Facilities Improvement, Pre-Refunded, 5.00%, 1/15/37 | 29,370,000 | 30,261,472 | ||
Marysville Wastewater Treatment System Revenue, | ||||
Refunding, XLCA Insured, 5.00%, 12/01/31 | 2,255,000 | 2,307,226 | ||
Refunding, XLCA Insured, 5.00%, 12/01/36 | 3,000,000 | 3,065,280 | ||
XLCA Insured, Pre-Refunded, 5.00%, 12/01/31 | 5,745,000 | 5,889,544 | ||
XLCA Insured, Pre-Refunded, 5.00%, 12/01/36 | 10,725,000 | 10,994,841 | ||
Ohio State Air Quality Development Authority Revenue, | ||||
Environmental Improvement, Buckeye Power Inc. Project, 6.00%, 12/01/40 | 15,000,000 | 17,892,900 | ||
Pollution Control, FirstEnergy Generation Corp. Project, Refunding, Series C, 5.625%, 6/01/18 | 8,500,000 | 9,080,040 | ||
Ohio State GO, | ||||
Infrastructure Improvement, Series A, Pre-Refunded, 5.375%, 9/01/28 | 3,765,000 | 4,078,549 | ||
Infrastructure Improvement, Series A, Pre-Refunded, 5.375%, 9/01/28 | 6,235,000 | 6,760,237 | ||
Ohio State Turnpike and Infrastructure Commission Revenue, Infrastructure Projects, Capital | ||||
Appreciation, junior lien, Series A-3, zero cpn. to 2/14/23, 5.75% thereafter, 2/15/35. | 35,000,000 | 33,753,650 | ||
Ohio State University Revenue, Special Purpose General Receipts, Series A, 5.00%, 6/01/38. | 10,000,000 | 11,527,700 | ||
Ohio State Water Development Authority PCR, FirstEnergy Nuclear Generation Corp. Project, | ||||
Mandatory Put 6/01/16, Refunding, Series A, 5.875%, 6/01/33 | 13,000,000 | 13,045,110 | ||
Scioto County Hospital Facilities Revenue, Southern Ohio Medical Center, Refunding, 5.75%, 2/15/38 | 17,000,000 | 18,223,830 | ||
Toledo Water System Revenue, Improvement and Refunding, 5.00%, 11/15/38 | 20,000,000 | 23,121,600 | ||
339,997,779 | ||||
Oregon 0.7% | ||||
Oregon Health and Science University Revenue, Series A, Pre-Refunded, 5.75%, 7/01/39 | 5,000,000 | 5,756,750 | ||
Oregon State Department of Transportation Highway User Tax Revenue, senior lien, Series A, | ||||
Pre-Refunded, 4.50%, 11/15/32 | 30,000,000 | 31,708,800 | ||
Port of Portland International Airport Revenue, Series Nineteen, Pre-Refunded, 5.50%, 7/01/38 | 25,000,000 | 27,531,750 | ||
Portland Sewer System Revenue, second lien, Series A, 5.00%, 3/01/35 | 11,540,000 | 13,077,128 | ||
78,074,428 | ||||
Pennsylvania 2.4% | ||||
Centennial School District Bucks County GO, Series B, AGMC Insured, 5.25%, 12/15/37 | 13,655,000 | 15,099,836 | ||
Coatesville Area School District GO, AGMC Insured, 5.00%, 8/01/24 | 6,420,000 | 6,740,101 | ||
Commonwealth Financing Authority Revenue, | ||||
Series A, 5.00%, 6/01/33 | 4,550,000 | 5,287,782 | ||
Series B, 5.00%, 6/01/42 | 5,400,000 | 5,986,116 | ||
Delaware Valley Regional Finance Authority Local Government Revenue, Series B, AMBAC Insured, | ||||
5.60%, 7/01/17. | 5,000,000 | 5,269,500 | ||
Erie Water Authority Water Revenue, Refunding, 5.00%, 12/01/43 | 5,000,000 | 5,841,050 | ||
Northampton County General Purpose Authority Hospital Revenue, St. Luke’s Hospital Project, Series | ||||
A, 5.375%, 8/15/28 | 5,000,000 | 5,450,350 | ||
Pennsylvania State Economic Development Financing Authority Water Facilities Revenue, Aqua | ||||
Pennsylvania Inc. Project, Series B, 5.00%, 12/01/43 | 20,000,000 | 22,760,600 | ||
Pennsylvania State Economic Development Financing Authority Water Facility Revenue, Pennsylvania- | ||||
American Water Co. Project, 6.20%, 4/01/39 | 12,500,000 | 13,949,500 |
32 Annual Report
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Pennsylvania (continued) | ||||
Pennsylvania State Turnpike Commission Turnpike Revenue, | ||||
Capital Appreciation, Subordinate, Series C, AGMC Insured, zero cpn. to 6/01/16, 6.25% | ||||
thereafter, 6/01/33 | $ | 5,000,000 | $ | 6,507,500 |
Motor License Fund-Enhanced, Subordinate, Series A, 5.00%, 12/01/37 | 3,000,000 | 3,450,300 | ||
Motor License Fund-Enhanced, Subordinate, Series A, Sub Series A-1, 5.00%, 12/01/38 | 20,000,000 | 22,250,200 | ||
Series C, Sub Series C-1, Assured Guaranty, Pre-Refunded, 6.00%, 6/01/28. | 5,000,000 | 5,528,500 | ||
Series C, Sub Series C-1, Assured Guaranty, Pre-Refunded, 6.25%, 6/01/38. | 15,000,000 | 16,662,450 | ||
sub. bond, Series B, 5.75%, 6/01/39 | 20,000,000 | 22,532,000 | ||
Philadelphia GO, Refunding, Series A, Assured Guaranty, 5.00%, 8/01/24 | 11,000,000 | 12,287,660 | ||
Philadelphia Hospitals and Higher Educational Facilities Authority Revenue, | ||||
Mortgage, North Philadelphia Health Systems, Refunding, Series A, FHA Insured, 5.30%, | ||||
1/01/18 | 370,000 | 371,243 | ||
Mortgage, North Philadelphia Health Systems, Refunding, Series A, FHA Insured, 5.35%, | ||||
1/01/23 | 5,145,000 | 5,164,345 | ||
Mortgage, North Philadelphia Health Systems, Refunding, Series A, FHA Insured, 5.375%, | ||||
1/01/28 | 3,700,000 | 3,707,548 | ||
Philadelphia Municipal Authority Lease Revenue, 6.375%, 4/01/29 | 4,500,000 | 5,131,620 | ||
Philadelphia School District GO, | ||||
2014, Series E, Pre-Refunded, 6.00%, 9/01/38. | 15,000 | 16,782 | ||
Series E, Pre-Refunded, 6.00%, 9/01/38 | 340,000 | 380,389 | ||
Series F, 6.00%, 9/01/38 | 24,645,000 | 26,047,547 | ||
Philadelphia Water and Wastewater Revenue, | ||||
Series A, 5.25%, 1/01/25 | 1,000,000 | 1,103,140 | ||
Series A, 5.00%, 1/01/26 | 5,000,000 | 5,479,000 | ||
Series A, 5.00%, 1/01/27 | 1,750,000 | 1,914,763 | ||
Series A, 5.25%, 1/01/32 | 5,000,000 | 5,492,250 | ||
Series A, 5.00%, 7/01/45 | 15,000,000 | 17,249,850 | ||
Pittsburgh and Allegheny County Sports and Exhibition Authority Hotel Room Regional Enterprise | ||||
Tower Revenue, Refunding, AGMC Insured, 5.00%, 2/01/35 | 18,000,000 | 20,357,280 | ||
268,019,202 | ||||
Rhode Island 0.9% | ||||
Rhode Island Convention Center Authority Revenue, Refunding, Series A, Assured Guaranty, 5.50%, | ||||
5/15/27 | 17,300,000 | 19,573,739 | ||
Rhode Island Housing and Mortgage Finance Corp. Revenue, | ||||
Homeownership Opportunity, Refunding, Series 15-A, 6.85%, 10/01/24 | 155,000 | 155,713 | ||
Homeownership Opportunity, Series 10-A, 6.50%, 10/01/22. | 220,000 | 220,955 | ||
Homeownership Opportunity, Series 10-A, 6.50%, 4/01/27 | 130,000 | 130,564 | ||
Rhode Island State Health and Educational Building Corp. Higher Education Facilities Revenue, Brown | ||||
University Issue, Refunding, Series A, 5.00%, 9/01/39 | 9,000,000 | 10,051,920 | ||
Rhode Island State Health and Educational Building Corp. Higher Education Facility Revenue, New | ||||
England Institute of Technology Issue, Series A, 5.125%, 3/01/40 | 16,435,000 | 18,329,627 | ||
Rhode Island State Health and Educational Building Corp. Revenue, | ||||
Higher Education Facility, Board of Governors for Higher Education, University of Rhode Island, | ||||
Educational and General Issue, Refunding, Series G, AMBAC, 5.00%, 9/15/30 | 10,000,000 | 10,028,800 | ||
Hospital Financing, Lifespan Obligated Group Issue, Refunding, Series A, AGMC Insured, 5.00%, | ||||
5/15/26 | 5,000,000 | 5,013,750 | ||
Hospital Financing, Lifespan Obligated Group Issue, Refunding, Series A, AGMC Insured, 5.00%, | ||||
5/15/32 | 12,440,000 | 12,470,602 | ||
Hospital Financing, Lifespan Obligated Group Issue, Series A, 7.00%, 5/15/39 | 8,200,000 | 9,247,386 | ||
Public Schools, Bond Financing Program, Town of East Greenwich Issue, Series A, 5.00%, | ||||
5/15/37 | 10,000,000 | 11,727,300 | ||
96,950,356 |
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33
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
South Carolina 1.2% | ||||
Greenville County School District Installment Purchase Revenue, Building Equity Sooner for Tomorrow, | ||||
Refunding, 5.00%, 12/01/28 | $ | 7,500,000 | $ | 7,688,700 |
Greenwood Fifty School Facilities Inc. Installment Purchase Revenue, Greenwood School District No. | ||||
50, South Carolina Project, Assured Guaranty, Pre-Refunded, 4.50%, 12/01/32 | 7,030,000 | 7,435,139 | ||
Piedmont Municipal Power Agency Electric Revenue, Series A-2, 5.00%, 1/01/24 | 10,000,000 | 10,543,900 | ||
SCAGO Educational Facilities Corp. for Beaufort School District Revenue, Installment Purchase, | ||||
School District of Beaufort County Project, Refunding, AGMC Insured, 5.00%, 12/01/31 | 5,340,000 | 5,466,825 | ||
SCAGO Educational Facilities Corp. for Chesterfield School District Revenue, Installment Purchase, | ||||
Chesterfield County School District Project, Assured Guaranty, Pre-Refunded, 5.00%, 12/01/29 | 7,500,000 | 7,690,875 | ||
SCAGO Educational Facilities Corp. for Colleton School District Revenue, | ||||
Installment Purchase, School District of Colleton County Project, Assured Guaranty, Pre- | ||||
Refunded, 5.00%, 12/01/25 | 3,340,000 | 3,425,003 | ||
Installment Purchase, School District of Colleton County Project, Assured Guaranty, Pre- | ||||
Refunded, 5.00%, 12/01/26 | 4,000,000 | 4,101,800 | ||
SCAGO Educational Facilities Corp. for Pickens School District Revenue, | ||||
Installment Purchase, School District of Pickens County Project, AGMC Insured, Pre-Refunded, | ||||
5.00%, 12/01/25 | 18,900,000 | 19,375,524 | ||
Installment Purchase, School District of Pickens County Project, AGMC Insured, Pre-Refunded, | ||||
5.00%, 12/01/31 | 10,000,000 | 10,251,600 | ||
South Carolina Jobs EDA Hospital Revenue, | ||||
AnMed Health Project, Refunding and Improvement, Series B, Assured Guaranty, 5.375%, | ||||
2/01/29 | 4,000,000 | 4,414,720 | ||
Palmetto Health, Refunding, Series A, AGMC Insured, 5.00%, 8/01/35 | 20,000,000 | 21,466,800 | ||
Palmetto Health, Refunding and Improvement, 5.75%, 8/01/39. | 3,000,000 | 3,283,020 | ||
South Carolina State Public Service Authority Revenue, | ||||
Refunding, Series B, 5.00%, 12/01/50 | 15,000,000 | 17,086,350 | ||
Series A, Pre-Refunded, 5.50%, 1/01/38 | 7,500,000 | 8,429,475 | ||
Series B, Pre-Refunded, 5.25%, 1/01/34 | 6,000,000 | 6,687,360 | ||
137,347,091 | ||||
South Dakota 0.4% | ||||
Huron School District No. 2-2 GO, 5.00%, 6/15/39 | 4,000,000 | 4,590,680 | ||
South Dakota State Health and Educational Facilities Authority Revenue, | ||||
Avera Health Issue, Series B, 5.50%, 7/01/35 | 3,000,000 | 3,259,200 | ||
Avera Health Issue, Series B, 5.25%, 7/01/38 | 5,000,000 | 5,354,650 | ||
Sanford Health, Pre-Refunded, 5.00%, 11/01/27 | 2,355,000 | 2,452,262 | ||
Sanford Health, Pre-Refunded, 5.00%, 11/01/40 | 12,945,000 | 13,479,629 | ||
Vocational Education Program, Refunding, Series A, 5.00%, 8/01/38 | 3,475,000 | 4,071,970 | ||
Vocational Education Program, Refunding, Series A, 5.00%, 8/01/46 | 6,005,000 | 6,845,039 | ||
Vocational Education Program, Series A, 5.125%, 8/01/46 | 7,000,000 | 8,015,630 | ||
48,069,060 | ||||
Tennessee 0.2% | ||||
Knox County Health Educational and Housing Facility Board Revenue, University Health System Inc., | ||||
Refunding, 5.25%, 4/01/27 | 17,500,000 | 18,118,800 | ||
Texas 11.6% | ||||
a Aledo ISD, GO, Refunding, PSF Guarantee, 5.00%, 2/15/43 | 3,075,000 | 3,667,583 | ||
Allen ISD, | ||||
GO, Collin County, School Building, PSF Guarantee, 5.00%, 2/15/41 | 12,000,000 | 14,312,520 | ||
GO, Collin County, School Building, Series A, Pre-Refunded, 5.00%, 2/15/39. | 11,575,000 | 12,878,576 | ||
Austin Community College District Public Facility Corp. Revenue, | ||||
Educational Facility Project, Round Rock Campus, Pre-Refunded, 5.25%, 8/01/33 | 8,675,000 | 9,526,798 | ||
Hays New Campus Project, 5.00%, 8/01/36 | 5,700,000 | 6,683,934 |
34 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Texas (continued) | ||||
Austin Electric Utility System Revenue, Refunding, Series A, 5.00%, 11/15/45. | $ | 10,000,000 | $ | 11,674,200 |
Austin ISD, GO, Travis County, Refunding, 5.00%, 8/01/33 | 10,000,000 | 10,875,700 | ||
Austin Water and Wastewater System Revenue, Refunding, Series A, 5.00%, 11/15/38 | 20,000,000 | 23,373,800 | ||
Bexar County GO, Certificates of Obligation, Combined Flood Control Tax and Revenue, AGMC | ||||
Insured, Pre-Refunded, 5.00%, 6/15/37 | 20,000,000 | 20,101,800 | ||
Bexar County Hospital District GO, Certificates of Obligation, Combination Tax and Revenue, 5.00%, | ||||
2/15/38 | 10,000,000 | 10,689,100 | ||
Central Texas Regional Mobility Authority Revenue, | ||||
senior lien, Refunding, 6.00%, 1/01/41 | 14,000,000 | 16,595,040 | ||
senior lien, Series A, 5.00%, 1/01/45. | 5,000,000 | 5,717,900 | ||
Corpus Christi Utility System Revenue, | ||||
Improvement, junior lien, 5.00%, 7/15/38 | 6,000,000 | 6,842,220 | ||
Improvement, junior lien, 5.00%, 7/15/43 | 7,000,000 | 7,924,140 | ||
Improvement, junior lien, Series A, 5.00%, 7/15/40 | 13,200,000 | 15,319,128 | ||
Crowley ISD, GO, Tarrant and Johnson Counties, Unlimited Tax School Building, PSF Guarantee, | ||||
5.00%, 8/01/36. | 13,900,000 | 15,080,666 | ||
Dallas Area Rapid Transit Sales Tax Revenue, Refunding, Series A, 5.00%, 12/01/46 | 10,000,000 | 11,873,300 | ||
Dallas Civic Center Revenue, Refunding and Improvement, Assured Guaranty, 5.25%, 8/15/34 | 18,975,000 | 21,224,676 | ||
Dallas County Utility and Reclamation District GO, Refunding, Series A, AMBAC Insured, 5.375%, | ||||
2/15/29 | 28,325,000 | 29,307,311 | ||
Dallas Waterworks and Sewer System Revenue, Refunding, 5.00%, 10/01/35. | 10,000,000 | 11,524,400 | ||
Dallas/Fort Worth International Airport Revenue, | ||||
Joint, Refunding, Series D, 5.25%, 11/01/32. | 10,000,000 | 12,042,400 | ||
Joint Improvement, Series A, 5.00%, 11/01/42 | 25,000,000 | 28,206,500 | ||
Denton ISD, GO, School Building, PSF Guarantee, Pre-Refunded, 5.00%, 8/15/38 | 15,710,000 | 16,542,473 | ||
Ector County ISD, GO, School Building, PSF Guarantee, 5.00%, 8/15/36 | 10,355,000 | 12,083,042 | ||
Forney ISD, | ||||
GO, Refunding, PSF Guarantee, 5.00%, 8/15/37 | 15,000,000 | 17,814,900 | ||
GO, School Building, Series A, PSF Guarantee, Pre-Refunded, 6.00%, 8/15/37 | 2,000,000 | 2,235,980 | ||
Goose Creek Consolidated ISD, GO, Schoolhouse, PSF Guarantee, 5.00%, 2/15/38 | 6,045,000 | 6,973,814 | ||
Grand Parkway Transportation Corp. System Toll Revenue, Capital Appreciation, Series B, zero cpn. to | ||||
9/30/23, 5.80% thereafter, 10/01/45 | 10,000,000 | 8,424,200 | ||
Harris County Cultural Education Facilities Finance Corp. Revenue, Houston Methodist Hospital, | ||||
5.00%, 12/01/45. | 30,000,000 | 34,786,800 | ||
Harris County Health Facilities Development Corp. Hospital Revenue, Memorial Hermann Healthcare | ||||
System, Series B, Pre-Refunded, 7.25%, 12/01/35 | 13,500,000 | 15,695,910 | ||
Harris County Hospital District Revenue, senior lien, Refunding, Series A, NATL Insured, 5.125%, | ||||
2/15/32 | 10,215,000 | 10,522,982 | ||
Harris County MTA Revenue, Sales and Use Tax, Contractual Obligations, Series B, Pre-Refunded, | ||||
5.00%, 11/01/33. | 10,000,000 | 11,395,100 | ||
Hays County GO, Road, 5.00%, 2/15/36 | 6,960,000 | 7,863,338 | ||
Hidalgo County Regional Mobility Authority Vehicle Registration Revenue, | ||||
senior lien, Refunding, 5.25%, 12/01/38. | 5,000,000 | 5,962,450 | ||
senior lien, Refunding, 5.00%, 12/01/43. | 5,000,000 | 5,698,450 | ||
Houston Airport System Revenue, | ||||
Refunding, second lien, Series A, 5.50%, 7/01/34 | 5,000,000 | 5,479,150 | ||
Refunding, second lien, Series A, 5.50%, 7/01/39 | 30,850,000 | 33,688,200 | ||
Houston Utility System Revenue, Combined, first lien, Refunding, Series D, 5.00%, 11/15/36 | 10,000,000 | 11,631,500 | ||
Hutto ISD, GO, Refunding, Series A, PSF Guarantee, 5.00%, 8/01/39 | 10,000,000 | 11,814,000 | ||
Keller ISD, GO, School Building, Pre-Refunded, 5.50%, 2/15/35 | 10,000,000 | 11,277,900 |
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Texas (continued) | ||||
Laredo Waterworks Sewer System Revenue, | ||||
5.25%, 3/01/40 | $ | 16,535,000 | $ | 18,633,953 |
AGMC Insured, 5.00%, 3/01/41 | 2,500,000 | 2,759,600 | ||
Lower Colorado River Authority Revenue, Refunding and Improvement, 2014, Series A, NATL Insured, | ||||
5.00%, 5/15/26. | 50,000 | 50,138 | ||
Lower Colorado River Authority Transmission Contract Revenue, | ||||
LCRA Transmission Services Corp. Project, Refunding, 5.50%, 5/15/36 | 15,310,000 | 17,161,285 | ||
LCRA Transmission Services Corp. Project, Refunding, Series A, 5.00%, 5/15/36 | 10,000,000 | 11,498,300 | ||
Lubbock-Cooper ISD, GO, Refunding, PSF Guarantee, 5.00%, 2/15/41 | 12,500,000 | 14,765,750 | ||
Lufkin Health Facilities Development Corp. Revenue, Memorial Health System of East Texas, | ||||
Pre-Refunded, 6.25%, 2/15/37 | 5,000,000 | 5,734,350 | ||
Manor ISD, GO, School Building, PSF Guarantee, Pre-Refunded, 5.00%, 8/01/37 | 8,175,000 | 8,263,290 | ||
Matagorda County Hospital District Revenue, FHA Insured, 5.00%, 2/15/35 | 10,000,000 | 10,596,200 | ||
New Hope Cultural Education Facilities Finance Corp. Revenue, Texas A&M University Project, Series | ||||
A-1, 5.00%, 4/01/46 | 6,000,000 | 7,049,940 | ||
New Hope Cultural Education Facilities Finance Corp. Student Housing Revenue, NCCD-College | ||||
Station Properties LLC, Texas A&M University Project, Series A, 5.00%, 7/01/47 | 10,000,000 | 10,783,900 | ||
North Fort Bend Water Authority Water System Revenue, Assured Guaranty, 5.25%, 12/15/34 | 20,000,000 | 22,643,400 | ||
North Harris County Regional Water Authority Revenue, | ||||
senior lien, 5.25%, 12/15/33 | 27,000,000 | 29,768,580 | ||
senior lien, 5.50%, 12/15/38 | 25,000,000 | 27,669,000 | ||
North Texas Tollway Authority Revenue, | ||||
Special Projects System, Capital Appreciation, first tier, Refunding, Series I, 6.50%, 1/01/43 | 25,000,000 | 32,900,750 | ||
Special Projects System, Capital Appreciation, Series B, zero cpn., 9/01/37 | 7,500,000 | 3,245,850 | ||
Special Projects System, Capital Appreciation, Series B, zero cpn., 9/01/43 | 7,500,000 | 2,001,075 | ||
Special Projects System, Capital Appreciation, Series C, zero cpn. to 9/01/21, 6.75% thereafter, | ||||
9/01/45 | 25,000,000 | 27,839,500 | ||
System, first tier, Refunding, Series A, 6.25%, 1/01/39 | 12,500,000 | 14,069,250 | ||
System, first tier, Refunding, Series A, 5.75%, 1/01/40 | 17,840,000 | 19,150,170 | ||
System, first tier, Refunding, Series K, Sub Series K-2, 6.00%, 1/01/38 | 15,000,000 | 16,777,350 | ||
System, first tier, Series A, Pre-Refunded, 5.75%, 1/01/40 | 17,160,000 | 18,568,150 | ||
System, second tier, Refunding, Series A, 5.00%, 1/01/35 | 10,000,000 | 11,614,000 | ||
System, second tier, Refunding, Series A, 5.00%, 1/01/38 | 10,000,000 | 11,449,100 | ||
System, second tier, Series F, Pre-Refunded, 5.75%, 1/01/38 | 30,000,000 | 32,461,800 | ||
Port of Houston Authority Harris County GO, Refunding, Series A, 5.625%, 10/01/38 | 14,000,000 | 15,613,500 | ||
Rio Grande City Consolidated ISD, GO, School Building, PSF Guarantee, Pre-Refunded, 5.00%, | ||||
8/15/37 | 10,510,000 | 10,644,738 | ||
Rockwall ISD, GO, School Building, PSF Guarantee, 5.00%, 2/15/46 | 15,000,000 | 17,667,450 | ||
San Antonio Electric and Gas Systems Revenue, junior lien, 5.00%, 2/01/38. | 10,000,000 | 11,656,500 | ||
San Antonio Public Facilities Corp. Lease Revenue, Refunding and Improvement, Convention Center | ||||
Refinancing and Expansion Project, 4.00%, 9/15/42 | 36,500,000 | 38,404,570 | ||
San Jacinto River Authority Special Project Revenue, | ||||
Group Project, AGMC Insured, 5.00%, 10/01/32 | 5,000,000 | 5,561,650 | ||
Group Project, AGMC Insured, 5.00%, 10/01/37 | 3,000,000 | 3,321,180 | ||
Southwest Higher Education Authority Revenue, Southern Methodist University Project, Series A, | ||||
5.00%, 10/01/38. | 24,380,000 | 28,894,445 | ||
Tarrant County Cultural Education Facilities Finance Corp. Hospital Revenue, | ||||
Baylor Scott and White Health Project, Refunding, Series A, 5.00%, 11/15/45 | 5,000,000 | 5,917,700 | ||
Cook Children’s Medical Center, Refunding, Series A, 5.25%, 12/01/39 | 10,000,000 | 11,706,300 | ||
Hendrick Medical Center Obligation Group, Refunding, 5.50%, 9/01/43 | 5,350,000 | 6,162,665 | ||
Tarrant County Cultural Educational Facilities Finance Corp. Revenue, Texas Health Resources, Series | ||||
A, 5.00%, 11/15/52 | 5,000,000 | 5,659,050 |
36 Annual Report
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Texas (continued) | ||||
Tarrant County Health Facilities Development Corp. Health System Revenue, Harris Methodist Health | ||||
System, FGIC Insured, ETM, 6.00%, 9/01/24. | $ | 3,705,000 | $ | 4,445,963 |
Tarrant Regional Water District Water Revenue, Refunding and Improvement, 5.00%, 3/01/37 | 10,000,000 | 11,786,100 | ||
Texas City IDC Marine Terminal Revenue, ARCO Pipe Line Co. Project, Refunding, 7.375%, 10/01/20 | 500,000 | 622,180 | ||
Texas State GO, | ||||
Transportation Commission, Highway Improvement, 5.00%, 4/01/39 | 40,000,000 | 47,386,400 | ||
Transportation Commission, Mobility Fund, Refunding, Series A, 5.00%, 10/01/39 | 30,000,000 | 35,856,000 | ||
Transportation Commission, Mobility Fund, Series A, Pre-Refunded, 5.00%, 4/01/33 | 3,060,000 | 3,178,912 | ||
Transportation Commission, Mobility Fund, Series A, Pre-Refunded, 5.00%, 4/01/33 | 6,940,000 | 7,216,143 | ||
Water Financial Assistance, Refunding, Series C-1, 5.00%, 8/01/34 | 7,000,000 | 7,840,770 | ||
Texas State Municipal Power Agency Revenue, Transmission, sub. lien, Refunding, 5.00%, 9/01/40 | 15,250,000 | 17,183,242 | ||
Texas State Transportation Commission Turnpike System Revenue, | ||||
first tier, Refunding, Series B, 5.00%, 8/15/37 | 10,000,000 | 11,655,700 | ||
second tier, Refunding, Series C, 5.00%, 8/15/42 | 35,000,000 | 39,795,000 | ||
Tyler Health Facilities Development Corp. Hospital Revenue, East Texas Medical Center Regional | ||||
Healthcare System Project, Refunding and Improvement, Series A, 5.25%, 11/01/32 | 6,250,000 | 6,454,563 | ||
Ysleta ISD, GO, School Building, PSF Guarantee, 5.00%, 8/15/45 | 15,000,000 | 17,760,750 | ||
1,285,178,033 | ||||
Utah 1.2% | ||||
Jordan Valley Water Conservancy District Water Revenue, Series B, 5.00%, 10/01/41 | 15,000,000 | 17,329,050 | ||
St. George Electric Revenue, | ||||
AGMC Insured, Pre-Refunded, 5.00%, 6/01/33 | 5,000,000 | 5,436,700 | ||
AGMC Insured, Pre-Refunded, 5.00%, 6/01/38 | 5,000,000 | 5,436,700 | ||
State Board of Regents University of Utah Revenue, General, Refunding, Series A, 5.00%, 8/01/43 | 21,975,000 | 25,529,456 | ||
Uintah County Municipal Building Authority Lease Revenue, Pre-Refunded, 5.50%, 6/01/37 | 5,000,000 | 5,493,500 | ||
Utah Associated Municipal Power Systems Revenue, Central St. George Project, Pre-Refunded, | ||||
5.25%, 12/01/27. | 9,735,000 | 11,206,640 | ||
Utah State Transit Authority Sales Tax Revenue, | ||||
Series A, AGMC Insured, Pre-Refunded, 5.00%, 6/15/36. | 33,000,000 | 35,899,050 | ||
Series A, Pre-Refunded, 5.25%, 6/15/38 | 13,185,000 | 14,412,260 | ||
Weber Basin Water Conservancy District Water Revenue, Series B, 5.00%, 4/01/39 | 7,180,000 | 8,185,128 | ||
128,928,484 | ||||
Vermont 0.5% | ||||
Vermont Educational and Health Buildings Financing Agency Revenue, | ||||
Hospital, Fletcher Allen Health Care Project, Series A, Pre-Refunded, 4.75%, 12/01/36 | 5,000,000 | 5,120,100 | ||
Hospital, Fletcher Allen Health Care Project, Series B, AGMC Insured, Pre-Refunded, 5.00%, | ||||
12/01/34 | 5,500,000 | 5,980,370 | ||
Middlebury College Project, Refunding, 5.00%, 11/01/38 | 10,000,000 | 11,208,000 | ||
Middlebury College Project, Refunding, 5.00%, 11/01/40 | 26,565,000 | 30,451,991 | ||
The University of Vermont Medical Center Project, Refunding, Series A, 5.00%, 12/01/36 | 5,000,000 | 5,849,600 | ||
58,610,061 | ||||
Virginia 0.2% | ||||
Fairfax County EDA Facility Revenue, Community Services Facilities Project, Series A, 4.50%, 3/01/37 . | 11,130,000 | 12,019,843 | ||
Virginia State Resources Authority Infrastructure Revenue, Virginia Pooled Financing Program, Series | ||||
A, 5.00%, 11/01/39 | 12,355,000 | 14,494,145 | ||
26,513,988 |
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37
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Washington 2.9% | ||||
Central Puget Sound Regional Transportation Authority Sales and Use Tax Revenue, Series A, | ||||
Pre-Refunded, 5.00%, 11/01/34 | $ | 11,405,000 | $ | 12,113,821 |
FYI Properties Lease Revenue, | ||||
Washington State District Project, 5.50%, 6/01/34 | 11,935,000 | 13,475,809 | ||
Washington State District Project, 5.50%, 6/01/39 | 16,250,000 | 18,258,662 | ||
King County GO, Sewer Revenues, Pre-Refunded, 5.125%, 1/01/33 | 10,000,000 | 11,140,800 | ||
King County Public Hospital District No. 1 GO, Series B, 5.25%, 12/01/37. | 5,000,000 | 5,386,950 | ||
King County Sewer Revenue, Pre-Refunded, 5.00%, 1/01/32 | 7,085,000 | 8,242,689 | ||
NJB Properties Lease Revenue, | ||||
King County Washington Project, Series A, 5.00%, 12/01/36 | 5,000 | 5,116 | ||
King County Washington Project, Series A, Pre-Refunded, 5.00%, 12/01/36 | 9,995,000 | 10,249,373 | ||
Washington State GO, | ||||
Motor Vehicle Fuel Tax, Senior 520 Corridor Program Toll, Series C, 5.00%, 6/01/33 | 5,000,000 | 5,812,150 | ||
Various Purpose, Series A, Pre-Refunded, 5.00%, 7/01/33 | 44,300,000 | 48,313,137 | ||
Washington State Health Care Facilities Authority Revenue, | ||||
Central Washington Health Services Assn., Pre-Refunded, 6.75%, 7/01/29 | 5,000,000 | 5,903,550 | ||
Fred Hutchinson Cancer Research Center, Series A, Pre-Refunded, 6.00%, 1/01/33 | 7,500,000 | 8,693,400 | ||
MultiCare Health System, Series B, AGMC Insured, 5.00%, 8/15/41 | 9,170,000 | 9,782,189 | ||
MultiCare Health System, Series B, AGMC Insured, Pre-Refunded, 5.00%, 8/15/34 | 17,550,000 | 19,224,796 | ||
MultiCare Health System, Series B, Assured Guaranty, Pre-Refunded, 6.00%, 8/15/39 | 1,500,000 | 1,744,605 | ||
Providence Health and Services, Refunding, Series A, 5.00%, 10/01/42 | 10,175,000 | 11,450,945 | ||
Providence Health and Services, Refunding, Series A, NATL Insured, 5.00%, 10/01/36 | 9,750,000 | 9,907,170 | ||
Providence Health and Services, Refunding, Series C, AGMC Insured, 5.25%, 10/01/33 | 10,000,000 | 10,889,000 | ||
Providence Health and Services, Refunding, Series D, 5.00%, 10/01/41 | 10,000,000 | 11,532,500 | ||
Providence Health and Services, Series A, FGIC Insured, Pre-Refunded, 5.00%, 10/01/36 | 250,000 | 254,613 | ||
Seattle Children’s Hospital, Refunding, Series B, 5.00%, 10/01/38 | 30,000,000 | 35,067,900 | ||
Virginia Mason Medical Center, Series B, ACA Insured, 6.00%, 8/15/37 | 30,000,000 | 31,520,400 | ||
Virginia Mason Medical Center, Series C, Assured Guaranty, 5.50%, 8/15/36 | 16,000,000 | 16,768,640 | ||
Washington State Higher Education Facilities Authority Revenue, | ||||
Whitworth University Project, Refunding, 5.375%, 10/01/29 | 3,000,000 | 3,307,950 | ||
Whitworth University Project, Refunding, 5.875%, 10/01/34 | 6,000,000 | 6,705,420 | ||
315,751,585 | ||||
West Virginia 0.6% | ||||
County Commission of Harrison County Solid Waste Disposal Revenue, Allegheny Energy Supply Co. | ||||
LLC Harrison Station Project, Refunding, Series D, 5.50%, 10/15/37 | 9,000,000 | 9,243,990 | ||
Pleasants County PCR, County Commission, Series F, 5.25%, 10/15/37 | 14,000,000 | 14,430,500 | ||
West Virginia EDA Lottery Revenue, Series A, 5.00%, 6/15/35 | 9,415,000 | 10,785,542 | ||
West Virginia State GO, Series A, NATL Insured, Pre-Refunded, 5.20%, 11/01/26 | 10,000,000 | 11,282,100 | ||
West Virginia State University Revenues, West Virginia University Projects, Series A, 5.00%, 10/01/44 . | 21,800,000 | 25,018,334 | ||
70,760,466 | ||||
Wisconsin 0.7% | ||||
Monroe RDAR, 6.00%, 2/15/39 | 11,790,000 | 13,164,242 | ||
Wisconsin State General Fund Annual Appropriation Revenue, Series A, 6.00%, 5/01/33 | 25,290,000 | 28,975,512 | ||
Wisconsin State Health and Educational Facilities Authority Revenue, | ||||
Marquette University, Refunding, Series B-1, 5.00%, 10/01/30 | 3,880,000 | 4,360,228 | ||
Marquette University, Refunding, Series B-2, 5.00%, 10/01/30 | 2,540,000 | 2,854,376 | ||
Marquette University, Series B-1, Pre-Refunded, 5.00%, 10/01/30 | 2,985,000 | 3,411,437 | ||
Marquette University, Series B-1, Pre-Refunded, 5.00%, 10/01/33 | 1,500,000 | 1,717,185 | ||
Marquette University, Series B-2, Pre-Refunded, 5.00%, 10/01/30 | 930,000 | 1,062,860 | ||
Marquette University, Series B-3, 5.00%, 10/01/30 | 1,570,000 | 1,764,319 | ||
Marquette University, Series B-3, Pre-Refunded, 5.00%, 10/01/30 | 580,000 | 662,859 |
38 Annual Report
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Municipal Bonds (continued) | ||||
Wisconsin (continued) | ||||
Wisconsin State Health and Educational Facilities Authority Revenue, (continued) | ||||
Marquette University, Series B-3, Pre-Refunded, 5.00%, 10/01/33 | $ | 1,750,000 | $ | 2,003,382 |
Ministry Health Care Inc., AGMC Insured, 5.00%, 8/01/31 | 1,500,000 | 1,599,525 | ||
Ministry Health Care Inc., AGMC Insured, 5.00%, 8/01/34 | 8,000,000 | 8,498,640 | ||
Thedacare Inc., Series A, 5.50%, 12/15/38 | 5,000,000 | 5,670,650 | ||
75,745,215 | ||||
Wyoming 0.1% | ||||
Campbell County Solid Waste Facilities Revenue, Basin Electric Power Cooperative, Dry Fork Station | ||||
Facilities, Series A, 5.75%, 7/15/39. | 5,500,000 | 6,236,120 | ||
U.S. Territories 1.8% | ||||
Puerto Rico 1.7% | ||||
Puerto Rico Commonwealth Highways and Transportation Authority Highway Revenue, | ||||
Series Y, Pre-Refunded, 5.00%, 7/01/36 | 62,000,000 | 62,441,440 | ||
Series Y, Pre-Refunded, 5.50%, 7/01/36 | 7,000,000 | 7,055,370 | ||
Puerto Rico Electric Power Authority Power Revenue, | ||||
Refunding, Series A, 5.00%, 7/01/42 | 18,925,000 | 11,307,687 | ||
Series XX, 5.25%, 7/01/40 | 15,000,000 | 8,962,500 | ||
Puerto Rico PBA Guaranteed Revenue, | ||||
Government Facilities, Refunding, Series D, 5.25%, 7/01/27 | 3,265,000 | 1,787,588 | ||
Government Facilities, Refunding, Series N, 5.00%, 7/01/37 | 20,000,000 | 10,400,000 | ||
b Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Refunding, Series B, | ||||
5.50%, 8/01/31. | 21,000,000 | 2,572,500 | ||
Puerto Rico Sales Tax FICO Sales Tax Revenue, | ||||
Capital Appreciation, first subordinate, Series A, zero cpn. to 8/01/16, 6.75% thereafter, 8/01/32 | 25,000,000 | 9,769,250 | ||
Capital Appreciation, first subordinate, Series A, zero cpn. to 8/01/19, 6.25% thereafter, 8/01/33 | 36,500,000 | 10,324,025 | ||
first subordinate, Series A, 5.50%, 8/01/42. | 40,000,000 | 15,800,000 | ||
first subordinate, Series A, 6.00%, 8/01/42. | 22,500,000 | 9,112,500 | ||
first subordinate, Series C, 5.50%, 8/01/40 | 50,000,000 | 19,750,000 | ||
Refunding, Senior Series C, 5.00%, 8/01/40. | 27,825,000 | 16,451,531 | ||
Senior Series C, 5.25%, 8/01/40 | 7,150,000 | 4,263,188 | ||
189,997,579 | ||||
U.S. Virgin Islands 0.1% | ||||
Virgin Islands PFAR, Virgin Islands Matching Fund Loan Note, Working Capital, sub. lien, Refunding, | ||||
Series B, 5.25%, 10/01/29 | 5,750,000 | 6,359,155 | ||
Total U.S. Territories | 196,356,734 | |||
Total Municipal Bonds before Short Term Investments (Cost $9,762,160,935) | ||||
10,680,692,993 |
Short Term Investments 1.5%
Municipal Bonds 1.5%
Georgia 1.4% | ||
c Appling County Development Authority PCR, Georgia Power Co. Plant Hatch Project, Refunding, Daily | ||
VRDN and Put, 0.34%, 9/01/41 | 22,500,000 | 22,500,000 |
c Burke County Development Authority PCR, | ||
Georgia Power Co. Plant Vogtle Project, First Series, Daily VRDN and Put, 0.34%, 5/01/22 | 9,155,000 | 9,155,000 |
Georgia Power Co. Plant Vogtle Project, Refunding, First Series, Daily VRDN and Put, 0.34%, | ||
7/01/49 | 75,010,000 | 75,010,000 |
Georgia Power Co. Plant Vogtle Project, Second Series, Daily VRDN and Put, 0.34%, 10/01/32 | 19,900,000 | 19,900,000 |
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Annual Report
39
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
Principal | ||||
Amount | Value | |||
Short Term Investments (continued) | ||||
Municipal Bonds (continued) | ||||
Georgia (continued) | ||||
c Heard County Development Authority PCR, Georgia Power Co. Plant Wansley Project, First Series, | ||||
Daily VRDN and Put, 0.33%, 9/01/29 | $ | 31,300,000 | $ | 31,300,000 |
157,865,000 | ||||
New York 0.1% | ||||
c New York City Municipal Water Finance Authority Water and Sewer System Revenue, Second General | ||||
Resolution, Refunding, Series AA, Sub Series AA-1, Daily VRDN and Put, 0.30%, 6/15/46 | 6,100,000 | 6,100,000 | ||
Total Short Term Investments (Cost $163,965,000) | 163,965,000 | |||
Total Investments (Cost $9,926,125,935) 98.2% | 10,844,657,993 | |||
Other Assets, less Liabilities 1.8% | 197,727,907 | |||
Net Assets 100.0% | $ | 11,042,385,900 |
See Abbreviations on page 50.
aSecurity purchased on a when-issued basis. See Note 1(b).
bSee Note 6 regarding defaulted securities.
cVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to
receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end.
40 Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Statements
Statement of Assets and Liabilities
April 30, 2016
Assets: | |||
Investments in securities: | |||
Cost | $ | 9,926,125,935 | |
Value | $ | 10,844,657,993 | |
Cash | 113,102,328 | ||
Receivables: | |||
Capital shares sold | 21,916,431 | ||
Interest | 144,212,058 | ||
Other assets | 6,516 | ||
Total assets | 11,123,895,326 | ||
Liabilities: | |||
Payables: | |||
Investment securities purchased | 57,413,381 | ||
Capital shares redeemed | 17,209,547 | ||
Management fees | 4,124,100 | ||
Distribution fees | 1,341,632 | ||
Transfer agent fees | 963,438 | ||
Accrued expenses and other liabilities | 457,328 | ||
Total liabilities | 81,509,426 | ||
Net assets, at value | $ | 11,042,385,900 | |
Net assets consist of: | |||
Paid-in capital | $ | 10,302,843,468 | |
Undistributed net investment income | 13,300,226 | ||
Net unrealized appreciation (depreciation) | 918,532,058 | ||
Accumulated net realized gain (loss) | (192,289,852 | ) | |
Net assets, at value | $ | 11,042,385,900 | |
Class A: | |||
Net assets, at value | $ | 8,384,079,329 | |
Shares outstanding | 671,797,346 | ||
Net asset value per sharea | $ | 12.48 | |
Maximum offering price per share (net asset value per share ÷ 95.75%) | $ | 13.03 | |
Class C: | |||
Net assets, at value | $ | 1,215,034,413 | |
Shares outstanding | 97,434,819 | ||
Net asset value and maximum offering price per sharea | $ | 12.47 | |
Advisor Class : | |||
Net assets, at value | $ | 1,443,272,158 | |
Shares outstanding | 115,552,296 | ||
Net asset value and maximum offering price per share | $ | 12.49 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 41
FRANKLIN FEDERAL TAX-FREE INCOME FUND | |||
FINANCIAL STATEMENTS | |||
Statement of Operations | |||
for the year ended April 30, 2016 | |||
Investment income: | |||
Interest. | $ | 492,779,019 | |
Expenses: | |||
Management fees (Note 3a) | 49,246,769 | ||
Distribution fees: (Note 3c) | |||
Class A. | 8,327,527 | ||
Class C | 7,592,292 | ||
Transfer agent fees: (Note 3e) | |||
Class A. | 4,407,803 | ||
Class C | 617,663 | ||
Advisor Class | 802,415 | ||
Custodian fees | 97,102 | ||
Reports to shareholders | 350,269 | ||
Registration and filing fees | 348,002 | ||
Professional fees | 302,759 | ||
Trustees’ fees and expenses | 119,791 | ||
Other | 313,785 | ||
Total expenses | 72,526,177 | ||
Net investment income | 420,252,842 | ||
Realized and unrealized gains (losses): | |||
Net realized gain (loss) from investments | (6,530,948 | ) | |
Net change in unrealized appreciation (depreciation) on investments | 23,567,487 | ||
Net realized and unrealized gain (loss) | 17,036,539 | ||
Net increase (decrease) in net assets resulting from operations | $ | 437,289,381 |
42 Annual Report | The accompanying notes are an integral part of these financial statements.
franklintempleton.com
FRANKLIN FEDERAL TAX-FREE INCOME FUND | ||||||
FINANCIAL STATEMENTS | ||||||
Statements of Changes in Net Assets | ||||||
Year Ended April 30, | ||||||
2016 | 2015 | |||||
Increase (decrease) in net assets: | ||||||
Operations: | ||||||
Net investment income | $ | 420,252,842 | $ | 419,461,842 | ||
Net realized gain (loss) | (6,530,948 | ) | (4,859,472 | ) | ||
Net change in unrealized appreciation (depreciation) | 23,567,487 | 207,104,904 | ||||
Net increase (decrease) in net assets resulting from operations | 437,289,381 | 621,707,274 | ||||
Distributions to shareholders from: | ||||||
Net investment income: | ||||||
Class A | (318,461,145 | ) | (322,099,075 | ) | ||
Class C | (38,197,482 | ) | (37,256,288 | ) | ||
Advisor Class | (59,596,706 | ) | (58,587,178 | ) | ||
Total distributions to shareholders | (416,255,333 | ) | (417,942,541 | ) | ||
Capital share transactions: (Note 2) | ||||||
Class A | (140,750,827 | ) | 105,143,615 | |||
Class C | 45,176,670 | 25,193,086 | ||||
Advisor Class | (244,965,010 | ) | 349,719,018 | |||
Total capital share transactions | (340,539,167 | ) | 480,055,719 | |||
Net increase (decrease) in net assets | (319,505,119 | ) | 683,820,452 | |||
Net assets: | ||||||
Beginning of year | 11,361,891,019 | 10,678,070,567 | ||||
End of year. | $ | 11,042,385,900 | $ | 11,361,891,019 | ||
Undistributed net investment income included in net assets: | ||||||
End of year. | $ | 13,300,226 | $ | 9,483,380 |
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 43
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Franklin Federal Tax-Free Income Fund (Fund) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Fund offers three classes of shares: Class A, Class C, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Fund’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Debt securities generally trade in the market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
b. Securities Purchased on a When-Issued Basis
The Fund purchases securities on a when-issued basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.
c. Income Taxes
It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of April 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.
d. 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. Amortization of premium and accretion of discount on debt securities are included in interest income. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
e. Insurance
The scheduled payments of interest and principal for each insured municipal security in the Fund are insured by either a new issue insurance policy or a secondary insurance policy. Depending on the type of coverage, premiums for insurance are either added to the cost basis of the security or paid by a third party.
Insurance companies typically insure municipal bonds that tend to be of very high quality, with the majority of underlying municipal bonds rated A or better. However, an event involving an insurer could have an adverse effect on the value of the securities insured by that insurance company. There can be no assurance the insurer will be able to fulfill its obligations under the terms of the policy.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Fund’s organizational documents, its officers and trustees are indemnified by the Fund against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. Currently, the Fund expects the risk of loss to be remote.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest
At April 30, 2016, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:
Year Ended April 30, | ||||||||||
2016 | 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Shares sold | 73,278,237 | $ | 906,090,435 | 84,237,816 | $ | 1,049,424,556 | ||||
Shares issued in reinvestment of distributions. | 22,616,000 | 279,118,681 | 22,334,914 | 277,742,327 | ||||||
Shares redeemed | (107,355,306 | ) | (1,325,959,943 | ) | (98,091,652 | ) | (1,222,023,268 | ) | ||
Net increase (decrease) | (11,461,069 | ) | $ | (140,750,827 | ) | 8,481,078 | $ | 105,143,615 | ||
Class C Shares: | ||||||||||
Shares sold | 14,835,143 | $ | 183,448,788 | 11,986,050 | $ | 149,326,074 | ||||
Shares issued in reinvestment of distributions. | 2,668,410 | 32,918,668 | 2,544,605 | 31,630,682 | ||||||
Shares redeemed | (13,863,413 | ) | (171,190,786 | ) | (12,521,941 | ) | (155,763,670 | ) | ||
Net increase (decrease) | 3,640,140 | $ | 45,176,670 | 2,008,714 | $ | 25,193,086 | ||||
Advisor Class Shares: | ||||||||||
Shares sold | 33,457,419 | $ | 414,012,249 | 44,451,547 | $ | 553,844,105 | ||||
Shares issued in reinvestment of distributions. | 4,103,097 | 50,661,005 | 4,113,961 | 51,221,584 | ||||||
Shares redeemed | (57,598,502 | ) | (709,638,264 | ) | (20,474,768 | ) | (255,346,671 | ) | ||
Net increase (decrease) | (20,037,986 | ) | $ | (244,965,010 | ) | 28,090,740 | $ | 349,719,018 |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
a. Management Fees
The Fund pays an investment management fee to Advisers based on the month-end net assets of the Fund as follows:
Annualized Fee Rate | Net Assets | |
0.625 | % | Up to and including $100 million |
0.500 | % | Over $100 million, up to and including $250 million |
0.450 | % | Over $250 million, up to and including $7.5 billion |
0.440 | % | Over $7.5 billion, up to and including $10 billion |
0.430 | % | Over $10 billion, up to and including $12.5 billion |
0.420 | % | Over $12.5 billion, up to and including $15 billion |
0.400 | % | Over $15 billion, up to and including $17.5 billion |
0.380 | % | Over $17.5 billion, up to and including $20 billion |
0.360 | % | In excess of $20 billion |
For the year ended April 30, 2016, the effective investment management fee rate was 0.448% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
Class A | 0.10 | % |
Class C | 0.65 | % |
d. Sales Charges/Underwriting Agreements |
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the year:
Sales charges retained net of commissions paid to | ||
unaffiliated brokers/dealers | $ | 1,639,495 |
CDSC retained | $ | 133,272 |
e. Transfer Agent Fees |
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
3. | Transactions with Affiliates (continued) |
e. | Transfer Agent Fees (continued) |
For the year ended April 30, 2016, the Fund paid transfer agent fees of $5,827,881, of which $1,925,348 was retained by Investor Services.
f. Interfund Transactions
The Fund engaged in purchases and sales of investments with funds or other accounts that have a common investment manager (or affiliated investment managers), directors, trustees, or officers. During the year ended April 30, 2016, the purchase and sale transactions aggregated $30,800,000 and $0, respectively.
4. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
At April 30, 2016, capital loss carryforwards were as follows:
Capital loss carryforwards subject to expiration: | ||
2017 | $ | 15,858,622 |
2018 | 3,803,336 | |
2019 | 17,435,155 | |
Capital loss carryforwards not subject to expiration: | ||
Short term | 95,398,032 | |
Long term | 54,573,530 | |
Total capital loss carryforwards | $ | 187,068,675 |
The tax character of distributions paid during the years ended April 30, 2016 and 2015, was as follows:
2016 | 2015 | |||
Distributions from tax exempt income | $ | 416,255,333 | $ | 417,942,541 |
At April 30, 2016, the cost of investments, net unrealized appreciation (depreciation) and undistributed tax exempt income for income tax purposes were as follows:
Cost of investments. | $ | 9,929,753,281 | |
Unrealized appreciation | $ | 1,074,344,183 | |
Unrealized depreciation | (159,439,471 | ) | |
Net unrealized appreciation (depreciation) | $ | 914,904,712 | |
Distributable earnings - undistributed tax exempt | |||
income | $ | 13,147,314 |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, bond discounts and premiums, wash sales and bond workout expenditures.
5. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2016, aggregated $652,951,721 and $1,063,316,946, respectively.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
6. Defaulted Securities
The Fund held a defaulted security and/or other securities for which the income has been deemed uncollectible. At April 30, 2016, the value of this security represents less than 0.05% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The security has been identified in the accompanying Statement of Investments.
7. Upcoming Acquisitions/Reorganization
On May 17, 2016, the Board for the Fund approved a proposal to reorganize Franklin Insured Tax-Free Income Fund, a series of Franklin Tax-Free Trust, with and into the Fund, subject to approval by the shareholders of Franklin Insured Tax-Free Income Fund.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 10, 2017. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statement of Operations. During the year ended April 30, 2016, the Fund did not use the Global Credit Facility.
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
At April 30, 2016, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 2 inputs.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
10. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Selected Portfolio
ACA | American Capital Access Holdings Inc. | IDC | Industrial Development Corp. |
AGMC | Assured Guaranty Municipal Corp. | ISD | Independent School District |
AMBAC | American Municipal Bond Assurance Corp. | MFHR | Multi-Family Housing Revenue |
BHAC | Berkshire Hathaway Assurance Corp. | MFR | Multi-Family Revenue |
CDA | Community Development Authority/Agency | MTA | Metropolitan Transit Authority |
COP | Certificate of Participation | NATL | National Public Financial Guarantee Corp. |
EDA | Economic Development Authority | PBA | Public Building Authority |
EDC | Economic Development Corp. | PCC | Pollution Control Corp. |
ETM | Escrow to Maturity | PCR | Pollution Control Revenue |
FGIC | Financial Guaranty Insurance Co. | PFAR | Public Financing Authority Revenue |
FHA | Federal Housing Authority/Agency | PSF | Permanent School Fund |
FICO | Financing Corp. | RDA | Redevelopment Agency/Authority |
GNMA | Government National Mortgage Association | RDAR | Redevelopment Agency Revenue |
GO | General Obligation | SFMR | Single Family Mortgage Revenue |
HDA | Housing Development Authority/Agency | UHSD | Unified/Union High School District |
HFAR | Housing Finance Authority Revenue | USD | Unified/Union School District |
IDA | Industrial Development Authority/Agency | XLCA | XL Capital Assurance |
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Franklin Federal Tax-Free Income Fund
In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Federal Tax-Free Income Fund (the "Fund") at April 30, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at April 30, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
June 15, 2016
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Tax Information (unaudited)
Under Section 852(b)(5)(A) of the Internal Revenue Code, the Fund hereby reports 100% of the distributions paid from net investment income as exempt-interest dividends for the fiscal year ended April 30, 2016. A portion of the Fund’s exempt-interest dividends may be subject to the federal alternative minimum tax. By mid-February 2017, shareholders will be notified of amounts for use in preparing their 2016 income tax returns.
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Fund, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton Investments fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members | |||||
Number of Portfolios in | |||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | ||
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years | |
Harris J. Ashton (1932) | Trustee | Since 1982 | 145 | Bar-S Foods (meat packing company) | |
One Franklin Parkway | (1981-2010). | ||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive | |||||
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998). | |||||
Mary C. Choksi (1950) | Trustee | Since 2014 | 121 | Avis Budget Group Inc. (car rental) | |
One Franklin Parkway | (2007-present), Omnicom Group Inc. | ||||
San Mateo, CA 94403-1906 | (advertising and marketing | ||||
communications services) | |||||
(2011-present) and H.J. Heinz | |||||
Company (processed foods and allied | |||||
products) (1998-2006). | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Senior Advisor, Strategic Investment Group (investment management group) (2015–present); director of various companies; and formerly, | |||||
Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); Founding Partner and Managing Director, Emerging | |||||
Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment | |||||
Officer, World Bank Group (international financial institution) (1977-1987). | |||||
Edith E. Holiday (1952) | Trustee | Since 2005 | 145 | Hess Corporation (exploration and | |
One Franklin Parkway | refining of oil and gas) (1993-present), | ||||
San Mateo, CA 94403-1906 | Canadian National Railway (railroad) | ||||
(2001-present), White Mountains | |||||
Insurance Group, Ltd. (holding | |||||
company) (2004-present) RTI | |||||
International Metals, Inc. (manufacture | |||||
and distribution of titanium) | |||||
(1999-2015) and H.J. Heinz Company | |||||
(processed foods and allied products) | |||||
(1994-2013). | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the | |||||
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant | |||||
Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989). | |||||
J. Michael Luttig (1954) | Trustee | Since 2009 | 145 | Boeing Capital Corporation (aircraft | |
One Franklin Parkway | financing) (2006-2013). | ||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company) (2006-present); | |||||
and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006). | |||||
Frank A. Olson (1932) | Trustee | Since 2007 | 145 | Hess Corporation (exploration and | |
One Franklin Parkway | refining of oil and gas) (1998-2013). | ||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive | |||||
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June – December 1987). | |||||
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Independent Board Members (continued) | |||||
Number of Portfolios in | |||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | ||
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years | |
Larry D. Thompson (1945) | Trustee | Since 2007 | 145 | The Southern Company (energy | |
One Franklin Parkway | company) (2014-present); previously | ||||
San Mateo, CA 94403-1906 | 2010-2012), Graham Holdings | ||||
Company (education and media | |||||
organization) (2011-present) and | |||||
Cbeyond, Inc. (business | |||||
communications provider) | |||||
(2010-2012). | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; | |||||
previously 2011-2012); and formerly, Executive Vice President -— Government Affairs, General Counsel and Corporate Secretary, PepsiCo, | |||||
Inc. (consumer products) (2012-2014); Senior Vice PresidentGovernment Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. | |||||
(consumer products) (2012-2014); Senior Vice President -— Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); | |||||
Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney | |||||
General, U.S. Department of Justice (2001-2003). | |||||
John B. Wilson (1959) | Lead | Trustee since | 121 | None | |
One Franklin Parkway | Independent | 2006 and Lead | |||
San Mateo, CA 94403-1906 | Trustee | Independent | |||
Trustee since | |||||
2008 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity | |||||
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) | |||||
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President – | |||||
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm) | |||||
(1986-1990). | |||||
Interested Board Members and Officers | |||||
Number of Portfolios in | |||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | ||
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years | |
**Gregory E. Johnson (1961) | Trustee | Since 2007 | 160 | None | |
One Franklin Parkway | |||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Chairman of the Board, Member - Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer | |||||
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment | |||||
companies in Franklin Templeton Investments; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, | |||||
Inc. (1994-2015). | |||||
**Rupert H. Johnson, Jr. (1940) | Chairman of | Chairman of the | 145 | None | |
One Franklin Parkway | the Board and | Board and Trustee | |||
San Mateo, CA 94403-1906 | Trustee | since 2013 | |||
Principal Occupation During at Least the Past 5 Years: | |||||
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice | |||||
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of | |||||
Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments. | |||||
Sheila Amoroso (1959) | Vice President | Since 1999 | Not Applicable | Not Applicable | |
One Franklin Parkway | |||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Senior Vice President, Franklin Advisers, Inc.; and officer of seven of the investment companies in Franklin Templeton Investments. | |||||
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Alison E. Baur (1964) | Vice President | Since 2012 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 | ||||
of the investment companies in Franklin Templeton Investments. | ||||
Rafael R. Costas, Jr. (1965) | Vice President | Since 1999 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Vice President, Franklin Advisers, Inc.; and officer of seven of the investment companies in Franklin Templeton Investments. | ||||
Laura F. Fergerson (1962) | Chief | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | Executive | |||
San Mateo, CA 94403-1906 | Officer – | |||
Finance and | ||||
Administration | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and | ||||
officer of 45 of the investment companies in Franklin Templeton Investments. | ||||
Gaston Gardey (1967) | Treasurer, | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | Chief Financial | |||
San Mateo, CA 94403-1906 | Officer and | |||
Chief | ||||
Accounting | ||||
Officer | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 28 of the investment companies in Franklin | ||||
Templeton Investments. | ||||
Aliya S. Gordon (1973) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton | ||||
Investments. | ||||
Steven J. Gray (1955) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin | ||||
Alternative Strategies Advisers, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. | ||||
Robert Lim (1948) | Vice President | Since May 2016 | Not Applicable | Not Applicable |
One Franklin Parkway | – AML | |||
San Mateo, CA 94403-1906 | Compliance | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton | ||||
Investor Services, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Interested Board Members and Officers (continued) | |||||
Number of Portfolios in | |||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | ||
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years | |
Christopher J. Molumphy | President and | Since 2010 | Not Applicable | Not Applicable | |
(1962) | Chief | ||||
One Franklin Parkway | Executive | ||||
San Mateo, CA 94403-1906 | Officer – | ||||
Investment | |||||
Management | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Director and Executive Vice President, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer of | |||||
some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments. | |||||
Kimberly H. Novotny (1972) | Vice President | Since 2013 | Not Applicable | Not Applicable | |
300 S.E. 2nd Street | |||||
Fort Lauderdale, FL 33301-1923 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the | |||||
South; Vice President and Assistant Secretary, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer | |||||
of 45 of the investment companies in Franklin Templeton Investments. | |||||
Robert C. Rosselot (1960) | Chief | Since 2013 | Not Applicable | Not Applicable | |
300 S.E. 2nd Street | Compliance | ||||
Fort Lauderdale, FL 33301-1923 | Officer | ||||
Principal Occupation During at Least the Past 5 Years: | |||||
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the | |||||
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments | |||||
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013). | |||||
Karen L. Skidmore (1952) | Vice President | Since 2006 | Not Applicable | Not Applicable | |
One Franklin Parkway | and Secretary | ||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton | |||||
Investments. | |||||
Navid Tofigh (1972) | Vice President | Since November | Not Applicable | Not Applicable | |
One Franklin Parkway | 2015 | ||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. | |||||
Craig S. Tyle (1960) | Vice President | Since 2005 | Not Applicable | Not Applicable | |
One Franklin Parkway | |||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, | |||||
Inc. and of 45 of the investment companies in Franklin Templeton Investments. | |||||
Thomas Walsh (1961) | Vice President | Since 1999 | Not Applicable | Not Applicable | |
One Franklin Parkway | |||||
San Mateo, CA 94403-1906 | |||||
Principal Occupation During at Least the Past 5 Years: | |||||
Senior Vice President, Franklin Advisers, Inc.; and officer of seven of the investment companies in Franklin Templeton Investments. | |||||
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Lori A. Weber (1964) | Vice President | Since 2011 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | ||||
Fort Lauderdale,FL 33301-1923 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and | ||||
Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. | ||||
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These | ||||
portfolios have a common investment manager or affiliated investment managers. | ||||
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin | ||||
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person | ||||
of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources. | ||||
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson. | ||||
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change. | ||||
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit | ||||
Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined | ||||
that there is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board | ||||
believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of | ||||
Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and | ||||
experience, the Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general | ||||
application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that | ||||
present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and | ||||
procedures for financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under | ||||
the relevant Securities and Exchange Commission Rules and Releases. | ||||
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. | ||||
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI. |
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
Shareholder Information
Board Review of Investment Management Agreement
At a meeting held February 23, 2016, the Board of Trustees (Board), including a majority of trustees that are not “interested persons” as such term is defined in section 2(a)(19) of the Investment Company Act of 1940 (hereinafter referred to as “non-interested Trustees” or “independent Trustees”), approved renewal of the investment management agreement for Franklin Federal Tax-Free Income Fund (Fund). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for the Fund, along with periodic reports on expenses, shareholder services, legal and compliance matters, risk control, pricing, and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for the Fund prepared by Broadridge Financial Solutions, Inc. (Broadridge), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Broadridge report, which utilizes data from Lipper, Inc. (Lipper), compared the Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Fund by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also received a report on all marketing support payments made by
FTI to financial intermediaries during the past year, as well as a memorandum relating to third-party servicing arrangements in response to a Guidance Update from the U.S. Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees.
In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. In approving continuance of the investment management agreement for the Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Fund and its shareholders. In addition to investment performance and expenses discussed later, the Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for the Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of shares of different funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Additionally, the Board noted the Manager’s continued attention to pricing and valuation issues, particularly with respect to complex securities. Consideration was also given to the experience of the Fund’s portfolio management team, the
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SHAREHOLDER INFORMATION
number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a pre-designated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager and steps taken by FTI to enhance analytical support to the investment management groups and provide additional oversight of liquidity risk and complex securities. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Fund and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued introduction of new funds and reassessment of fund offerings in response to the market environment.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings during the year, particular attention in assessing such performance was given to the Broadridge report furnished for the agreement renewals. The Broadridge report prepared for the Fund showed the investment performance of its Class A shares during 2015 as well as the previous 10 years ended December 31, 2015, in comparison to a performance universe consisting of all retail and institutional general and insured municipal debt funds as selected by Lipper. The Broadridge report showed the income return for the Fund during 2015 to be in the second-highest quintile of its performance universe, and on an annualized basis during each of the previous three-, five- and 10-year periods to be in either the highest or second-highest quintile of its Lipper performance universe. The Broadridge report showed the Fund’s total return during 2015 to be in the second-lowest performing quintile of its Lipper performance universe, and on an annualized basis to be in the middle performing quintile of such universe for the previous three-year period and the second-highest performing quintile of such universe for the previous five- and 10-year periods. The Board expressed its satisfaction with the Fund’s comparative performance as shown in the Broadridge report, noting its income oriented objective.
COMPARATIVE EXPENSES. Consideration was given to the management fees and total expense ratio of the Fund compared with those of a group of other funds selected by Lipper as its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on the Fund’s contractual investment management fee in comparison with the contractual investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expenses of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges as being part of the contractual investment management fee, and total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares for funds having multiple share classes. The results of such expense comparisons showed the contractual investment management fee rate for the Fund to be approximately 3.3 basis points above its Lipper expense group median, but its actual total expense ratio to be approximately 9.5 basis points below the expense group median. The Board found the level of expenses of the Fund in comparison to its expense group as shown in the Broadridge report to be acceptable.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2015, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
SHAREHOLDER INFORMATION
the primary drivers and activity measurements has remained consistent with that used in the Fund’s profitability report presentations from prior years. Additionally, the Fund’s independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Fund’s Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services and potential benefits resulting from personnel and systems enhancement necessitated by fund growth, increased leverage with service providers and counterparties, allocation of fund brokerage and the use of commission dollars to pay for research. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Fund grows larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board also noted that economies of scale are shared with a fund and its shareholders through management fee breakpoints so that as a
fund grows in size, its effective management fee rate declines. The fee structure under the Fund’s investment management agreement provides an initial fee of 0.625% on the first $100 million of assets; 0.50% on the next $150 million of assets; 0.45% on the next $7.25 billion of assets; 0.44% on the next $2.5 billion of assets, with breakpoints continuing in stages thereafter until declining to a final breakpoint of 0.36% on assets in excess of $20 billion. The Fund had assets of approximately $10.8 billion at the end of 2015 and the Board believes that to the extent any economies of scale may be realized by the Manager and its affiliates, the schedule of fees under the investment management agreement provides a sharing of benefits with the Fund and its shareholders as the Fund grows.
Proxy Voting Policies and Procedures
The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Fund files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
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SHAREHOLDER INFORMATION
Householding of Reports and Prospectuses
You will receive the Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely
unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.
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Annual Report and Shareholder Letter
Franklin Federal Tax-Free Income Fund
Investment Manager
Franklin Advisers, Inc.
Distributor
Franklin Templeton Distributors, Inc.
(800) DIAL BEN® / 342-5236
franklintempleton.com
Shareholder Services
(800) 632-2301
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
© 2016 Franklin Templeton Investments. All rights reserved. | 116 A 06/16 |
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is John B. Wilson and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $65,859 for the fiscal year ended April 30, 2016 and $61,372 for the fiscal year ended April 30, 2015.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning.
(d) All Other Fees
There were no fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant other than services reported in paragraphs (a)-(c) of Item 4 were $672,151 for the fiscal year ended April 30, 2016 and $0 for the fiscal year ended April 30, 2015. The services for which these fees were paid included preparation and review of materials provided to the fund Board in connection with the investment management contract renewal process and derivative assessment, and the review of system processes related to fixed income securities.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $672,151 for the fiscal year ended April 30, 2016 and $0 for the fiscal year ended April 30, 2015.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
By /s/ LAURA F. FERGERSON
Laura F. Fergerson
Chief Executive Officer –
Finance and Administration
Date June 24, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/ LAURA F. FERGERSON
Laura F. Fergerson
Chief Executive Officer –
Finance and Administration
Date June 24, 2016
By /s/GASTON GARDEY_____
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date June 24, 2016