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 811-04149
Franklin Tax-Free Trust
(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: 2/28
Date of reporting period: 02/28/18
Item 1. | Reports to Stockholders. |
2
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| | | | Annual Report and Shareholder Letter |
| | February 28, 2018 |
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Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
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Sign up for electronic delivery at franklintempleton.com/edelivery
Franklin Templeton Investments
Why choose Franklin Templeton Investments?
Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.
During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.
Dear Shareholder:
The 12 months ended February 28, 2018, benefited from mostly upbeat economic data as the US job market continued to improve and the unemployment rate declined. Accordingly, the US Federal Reserve (Fed) increased its target range for the federal funds rate a quarter point to 1.25%–1.50% at its past December meeting.
During the period, the municipal bond market posted modest performance similar to other US fixed income classes, with generally higher returns for longer term and lower rated municipal bonds. Factors contributing to this positive investment environment for municipals included consistently low inflation and relatively steady interest rates, stagnant wage growth and geopolitical concerns. Federal government fiscal reform uncertainty also benefited tax-free municipals during most of the period, despite some volatility toward period-end in reaction to the government’s tax code revision efforts.
Shortly after the end of the reporting period, the Fed, under new chairman Jerome Powell, raised the federal funds rate
another quarter point to a range of 1.50%-1.75%. The Fed based its decision on a stronger economic outlook in recent months.
In addition, Franklin Tax Free Trust’s annual report includes more detail about municipal bond market conditions and a discussion from the portfolio managers. On our website, franklintempleton.com, you can find updated commentary by our municipal bond experts. Municipal bonds can provide tax-free income and diversification from equities. Despite periods of volatility, municipal bonds historically have had a solid long-term record of performance, driven mostly by their income component. Please remember all securities markets fluctuate, as do mutual fund share prices.
As always, we recommend investors consult their financial advisors to help them make the best decisions for the long term. In a constantly changing market environment, we remain committed to our disciplined strategy as we manage the Fund, keeping in mind the trust you have placed in us.
Not FDIC Insured | May Lose Value | No Bank Guarantee
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franklintempleton.com | | Not part of the annual report | | 1 |
We appreciate your confidence in us and encourage you to contact us when you have questions about your Franklin Templeton tax-free investment.
Sincerely,
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Rupert H. Johnson, Jr.
Chairman
Franklin Tax-Free Trust
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Sheila Amoroso
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Rafael R. Costas Jr.
Senior Vice Presidents and Co-Directors
Franklin Municipal Bond Department
This letter reflects our analysis and opinions as of February 28, 2018, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, state, industry, security or fund. Statements of fact are from sources considered reliable.
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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2 | | Not part of the annual report | | franklintempleton.com |
Annual Report
Municipal Bond Market Overview
The municipal bond market outperformed the US Treasury market but underperformed US stock markets during the 12-month period ended February 28, 2018. Investment-grade municipal bonds, as measured by the Bloomberg Barclays Municipal Bond Index, generated a +2.50% total return for the period, while US Treasuries, as measured by the Bloomberg Barclays US Treasury Index, had a -0.56% total return.1 Both high-yield corporate bonds and high-yield municipal bonds outperformed their investment-grade counterparts. US stocks, as represented by the Standard & Poor’s® 500 Index, outperformed both municipals and US Treasuries with a +17.10% total return for the reporting period.1 US stocks generated strong returns through the first eleven months of the reporting period, but experienced a significant bout of volatility in early February that led to losses in that month and dragged down overall returns. Recent indications of stronger inflation and rising interest rates contributed to the volatility in stock markets and also drove losses in both the municipal bond market and US Treasury market during the first two months of 2018.
Municipal issuance during the reporting period totaled $414 billion.2 This represents an almost 8% decline from total issuance in the previous 12-month period ended February 28, 2017.2 Subdued issuance at the beginning of 2018 largely contributed to this decline, with only $37 billion issued thus far in 2018 (down 38% from the first two months of 2017).2 After accounting for redemptions (bonds that matured or were called out of the market), net issuance stood at $64 billion in 2017, which marked a third consecutive year of positive net issuance.3 However, net issuance turned negative in the first two months of 2018, standing at -$19 billion at period-end.3 According to the Investment Company Institute Trends in Mutual Fund Investing, municipal bond funds reported inflows for 10 of the 12 months of the reporting period, with the only negative flows occurring in December 2017 and February 2018. The total inflows for the period were approximately $28 billion.4
Impending tax reform contained potential implications for the municipal bond market and caused a deluge of supply in December, as issuers rushed to market before the end of the 2017. December supply of $63 billion and fourth-quarter 2017
supply of $145 billion eclipsed previous monthly and quarterly records of municipal bond issuance, respectively.2 Despite this extraordinary supply weighing on the market, strong demand buoyed returns through the end of the 2017. However, diminished issuance, heavy dealer inventories and selling pressures in 2018 led municipals to have a -1.47% total return during the first two months of 2018, as measured by the Bloomberg Barclays Municipal Bond Index, although it still performed better than the -2.10% total return for US Treasuries during the same period, as measured by the Bloomberg Barclays US Treasury Index.1
The Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% at its December 2017 meeting. The target range stood at 1.25%–1.50% at period-end. The Fed also increased the discount rate 0.25% to 2.00% in December. The Fed decided to raise interest rates at its December meeting due to the strength of the US jobs market and continued economic growth. This was the third rate hike of 2017, following increases of 0.25% in March and June.
Jerome Powell spoke before Congress for the first time as Fed Chair after succeeding Janet Yellen in that role. He indicated that the Fed saw signs of a continued strong labor market and economic growth. He reiterated the Fed’s intention to gradually raise interest rates in an effort to keep the economy from overheating as inflation increases toward the Fed’s 2% target. He noted that there was no evidence of the economy overheating and that he had yet to see a clear move upward in wages.
Investors continued to favor risky assets through most of the period. Municipal bonds with longer maturities generally performed better than bonds with shorter maturities, and high yield tax-exempt bonds outperformed their investment-grade counterparts. The Bloomberg Barclays High Yield Municipal Bond Index generated a +4.74% total return for the period and the Bloomberg Barclays Municipal Long Bond (22+ Years) Index returned +4.30% during the 12-month reporting period.1
Several developments affected Puerto Rico bonds over the reporting period. Please visit
1. 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.
2. Source: The Bond Buyer, Thomson Reuters.
3. Source: Barclays Municipal Credit Research.
4. Source: Investment Company Institute, Trends in Mutual Fund Investing February 2018, 3/28/18.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | Annual Report | | 3 |
MUNICIPAL BOND MARKET OVERVIEW
franklintempleton.com/investor/products/fund-resources/puerto-rico for the latest Puerto Rico updates from Franklin Templeton.
At period-end, we maintained our positive view of the municipal bond market. We believe municipal bonds continue to be an attractive asset class among fixed income securities, and we intend to follow our solid discipline of investing to maximize income, while seeking value in the municipal bond market.
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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Investment Strategy and Manager’s Discussion
Investment Strategy
We use a consistent, disciplined strategy with the objective of maximizing tax-free income and capital preservation by focusing on credit selection. We seek to maintain exposure to higher coupon securities, while balancing risk and return within each Fund’s range of allowable investments. We do not purchase high yield securities in our investment-grade funds, however if a security is downgraded we are not required to sell it. Our security selection process includes purchasing securities that we believe are undervalued in the market and which have met our credit selection criteria. We do not use leverage or derivatives, which could add volatility and contribute to underperformance in adverse markets.
Manager’s Discussion
Due to the positive sloping municipal yield curve, we found value in higher quality securities in the 15–30 year maturity range, which allowed us to achieve our objective of maximizing income for our investors. Typically, in declining rate environments, our turnover declines as we maintain exposure to securities that are producing income that exceeds their replacement value in the market. However, when rates rise, our turnover increases as opportunities to purchase securities that have the potential to increase income in the portfolios become available. We believe our consistent, disciplined strategy can help our investors achieve high, tax-free income over the long term.
We invite you to read your Fund report for more detailed performance and portfolio information. Thank you for your participation in Franklin Tax-Free Trust. We look forward to serving your future investment needs
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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franklintempleton.com | | Annual Report | | 5 |
Franklin Alabama Tax-Free Income Fund
This annual report for Franklin Alabama Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and Alabama personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
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Ratings | | % of Total Investments |
AAA | | 6.29% |
AA | | 69.87% |
A | | 2.07% |
BBB | | 2.89% |
Refunded | | 17.74% |
Not Rated | | 1.14% |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.16 on February 28, 2017, to $10.88 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 36.15 cents per share for the same period.2 The Performance Summary beginning on page 8 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.05% based on an annualization of February’s 2.89 cent per share monthly dividend and the maximum offering price of $11.36 on February 28, 2018. An investor in the 2018 maximum combined effective federal and
Dividend Distributions*
3/1/17–2/28/18
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| | Dividend per Share (cents) | |
Month | | Class A | | | Class C | | | Class R6** | | | Advisor Class | |
March | | | 3.09 | | | | 2.57 | | | | — | | | | 3.18 | |
April | | | 3.14 | | | | 2.62 | | | | — | | | | 3.23 | |
May | | | 3.23 | | | | 2.71 | | | | — | | | | 3.32 | |
June | | | 3.08 | | | | 2.56 | | | | — | | | | 3.17 | |
July | | | 3.08 | | | | 2.56 | | | | — | | | | 3.17 | |
August | | | 2.95 | | | | 2.43 | | | | 2.96 | | | | 3.04 | |
September | | | 2.95 | | | | 2.43 | | | | 3.06 | | | | 3.04 | |
October | | | 2.95 | | | | 2.43 | | | | 3.06 | | | | 3.04 | |
November | | | 2.95 | | | | 2.43 | | | | 3.06 | | | | 3.04 | |
December | | | 2.95 | | | | 2.43 | | | | 3.06 | | | | 3.04 | |
January | | | 2.89 | | | | 2.37 | | | | 3.00 | | | | 2.98 | |
February | | | 2.89 | | | | 2.37 | | | | 3.00 | | | | 2.98 | |
Total | | | 36.15 | | | | 29.91 | | | | 21.20 | | | | 37.23 | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
Alabama personal income tax bracket of 45.80% (including 3.80% Medicare tax) would need to earn a distribution rate of 5.63% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 79.
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FRANKLIN ALABAMA TAX-FREE INCOME FUND
State Update
Alabama’s economy grew notably during the 12 months under review. Business sentiment in the state improved and remained generally positive, with firms in many industries expecting growth in capital expenditures, hiring, sales and profits. The state’s housing market improved, as home prices and sales increased. The state’s unemployment rate declined from 5.3% in February 2017 to 3.7% at period-end, which was lower than the 4.1% national average.3
Alabama has two major operating funds: the Education Trust Fund (ETF), the main funding source for education programs; and the general fund, the primary funding source for Medicaid and other non-education government programs. For fiscal year (FY) 2017, which ended September 30, 2017, tax collections contributing to the state’s revenue were up compared with the same prior-year period. The rise was mainly attributed to increased sales taxes, use taxes and total income taxes. The general fund budget for FY 2018, passed in May 2017, kept the spending relatively unchanged compared to the prior year’s budget. The state’s approved ETF budget for FY 2018 was modestly larger than the previous year’s and featured increased spending on K-12 education, pre-kindergarten funding and retirement funding. The proposed FY 2019 general fund and ETF budgets were larger than those enacted for FY 2018. The general fund budget included cost-of-living raises for state employees and spending increases for Medicaid, mental health programs and corrections. The ETF budget proposal included pay raises for education employees and higher spending on pre-kindergarten programs.
Alabama’s net tax-supported debt was 2.6% of personal income and $1,019 per capita compared with the 2.5% and $1,006 national medians, respectively.4 Independent credit rating agency Standard & Poor’s (S&P) affirmed Alabama’s AA rating with a stable outlook.5 The rating reflected S&P’s view of the state’s largely stable economic base, constitutional provisions to mandate expenditure cutbacks in the events of revenue shortfalls, repayment of previously drawn rainy-day reserve funds, revenue streams for capital projects and debt service, and low general obligation debt burden. The stable outlook reflected S&P’s opinion that the state’s steady economic expansion across sectors would continue to provide strong credit support, and the state’s diminished reliance on one-time revenues to obtain budget balance. S&P believes that any misalignment between revenue estimates and actual
Portfolio Composition
2/28/18
| | |
| | % of Total Investments* |
Utilities | | 30.8% |
Refunded** | | 24.0% |
Tax-Supported | | 13.7% |
Higher Education | | 11.6% |
General Obligation | | 10.1% |
Hospital & Health Care | | 5.6% |
Corporate-Backed | | 2.9% |
Transportation | | 1.3% |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
expenditures, resulting in weak reserves, is likely to pressure the rating downward.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
Thank you for your continued participation in Franklin Alabama Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate S&P’s rating of the Fund.
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franklintempleton.com | | Annual Report | | 7 |
FRANKLIN ALABAMA TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
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Share Class | | Cumulative Total Return1 | | Average Annual Total Return2 |
| | |
A | | | | |
1-Year | | +0.72% | | -3.59% |
5-Year | | +9.35% | | +0.92% |
10-Year | | +48.33% | | +3.57% |
| | |
Advisor3 | | | | |
1-Year | | +0.82% | | +0.82% |
5-Year | | +9.50% | | +1.83% |
10-Year | | +48.54% | | +4.04% |
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Share Class | | Distribution Rate4 | | Taxable Equivalent Distribution Rate5 | | 30-Day Standardized Yield6
| | | Taxable Equivalent 30-Day Standardized Yield5 | |
A | | 3.05% | | 5.63% | | | 1.86% | | | | 3.43% | |
Advisor | | 3.29% | | 6.07% | | | 2.04% | | | | 3.76% | |
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 11 for Performance Summary footnotes.
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8 | | Annual Report | | | | franklintempleton.com |
FRANKLIN ALABAMA 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.
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See page 11 for Performance Summary footnotes.
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FRANKLIN ALABAMA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | 8/1/17 | | | 2/28/17 | | | Change | |
A (FRALX) | | $10.88 | | | N/A | | | | $11.16 | | | | -$0.28 | |
C (FALEX) | | $11.02 | | | N/A | | | | $11.30 | | | | -$0.28 | |
R6 (FALRX) | | $10.88 | | $ | 11.13 | | | | N/A | | | | -$0.25 | |
Advisor (FALZX) | | $10.88 | | | N/A | | | | $11.16 | | | | -$0.28 | |
Distributions (3/1/17–2/28/18) | |
Share Class | | Net Investment Income | | | | | | | | | |
A | | $0.3615 | | | | | | | | | | | | |
C | | $0.2991 | | | | | | | | | | | | |
R6 (8/1/17–2/28/18) | | $0.2120 | | | | | | | | | | | | |
Advisor | | $0.3723 | | | | | | | | | | | | |
|
Total Annual Operating Expenses9 | |
| | | | |
Share Class | | | | | | | | | | | |
A | | 0.72% | | | | | | | | | | | | |
Advisor | | 0.62% | | | | | | | | | | | | |
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10 | | Annual Report | | | | franklintempleton.com |
FRANKLIN ALABAMA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 9/15/16, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 9/15/16, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 9/15/16, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 9/15/16 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were -0.51% and -0.35%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and Alabama personal income tax rate of 45.80%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | | | | | Annual Report | | 11 |
FRANKLIN ALABAMA TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual (actual return after expenses) | | Hypothetical (5% annual return before expenses) | | |
| | | | | | | | |
Share Class | | Beginning Account Value | | Ending Account Value 2/28/18 | | Expenses Paid During Period1,2 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2
| | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $990.60 | | $3.75 | | $1,021.03 | | $3.81 | | 0.76% |
C | | $1,000 | | $987.90 | | $6.46 | | $1,018.30 | | $6.56 | | 1.31% |
R6 | | $1,000 | | $992.10 | | $3.06 | | $1,021.72 | | $3.11 | | 0.62% |
Advisor | | $1,000 | | $991.10 | | $3.26 | | $1,021.52 | | $3.31 | | 0.66% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.
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12 | | Annual Report | | | | franklintempleton.com |
Franklin Florida Tax-Free Income Fund
This annual report for Franklin Florida Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal income taxes and any Florida personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | |
Ratings | | % of Total Investments |
AAA | | 8.72% |
| | |
AA | | 24.64% |
| | |
A | | 39.57% |
| | |
BBB | | 4.19% |
| | |
Below Investment Grade | | 2.00% |
| | |
Refunded | | 20.56% |
| | |
Not Rated | | 0.32% |
| | |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $10.88 on February 28, 2017, to $10.47 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 40.96 cents per share for the same period.2 The Performance Summary beginning on page 16 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.52% based on an annualization of February’s 3.21 cent per share monthly dividend and the maximum offering price of $10.93 on February 28, 2018. An
Dividend Distributions*
3/1/17–2/28/18
| | | | | | | | | | | | | | | | |
| | Dividend per Share (cents) | |
Month | | Class A | | | Class C | | | Class R6** | | | Advisor Class | |
March | | | 3.60 | | | | 3.09 | | | | — | | | | 3.69 | |
| | | | | | | | | | | | | | | | |
April | | | 3.61 | | | | 3.10 | | | | — | | | | 3.70 | |
| | | | | | | | | | | | | | | | |
May | | | 3.61 | | | | 3.10 | | | | — | | | | 3.70 | |
| | | | | | | | | | | | | | | | |
June | | | 3.61 | | | | 3.10 | | | | — | | | | 3.70 | |
| | | | | | | | | | | | | | | | |
July | | | 3.61 | | | | 3.10 | | | | — | | | | 3.70 | |
| | | | | | | | | | | | | | | | |
August | | | 3.36 | | | | 2.85 | | | | 3.36 | | | | 3.45 | |
| | | | | | | | | | | | | | | | |
September | | | 3.36 | | | | 2.85 | | | | 3.47 | | | | 3.45 | |
| | | | | | | | | | | | | | | | |
October | | | 3.36 | | | | 2.85 | | | | 3.47 | | | | 3.45 | |
| | | | | | | | | | | | | | | | |
November | | | 3.21 | | | | 2.70 | | | | 3.32 | | | | 3.30 | |
| | | | | | | | | | | | | | | | |
December | | | 3.21 | | | | 2.71 | | | | 3.31 | | | | 3.29 | |
| | | | | | | | | | | | | | | | |
January | | | 3.21 | | | | 2.71 | | | | 3.31 | | | | 3.29 | |
| | | | | | | | | | | | | | | | |
February | | | 3.21 | | | | 2.71 | | | | 3.31 | | | | 3.29 | |
| | | | | | | | | | | | | | | | |
Total | | | 40.96 | | | | 34.87 | | | | 23.55 | | | | 42.01 | |
| | | | | | | | | | | | | | | | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
investor in the 2018 maximum federal income tax bracket of 37.00% (plus 3.80% Medicare tax) would need to earn a distribution rate of 5.95% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 85.
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franklintempleton.com | | Annual Report | | 13 |
FRANKLIN FLORIDA TAX-FREE INCOME FUND
State Update
During the 12 months under review, Florida’s economy continued to grow state employment, gross state product and population growth exceeded the national averages. Florida’s job growth ranks among the fastest in the nation, supported by sectors such as construction, professional and business services, and leisure and hospitality. The state’s unemployment rate declined from 4.5% in February 2017 to 3.9% at period-end, which was lower than the 4.1% national average.3 The state’s growing economy attracted new residents, which pressured Florida’s housing market by tightening supply levels and increasing prices. The state’s foreclosure rate declined during the period to match the lower national rate by period-end.
Florida’s net general revenue collections in fiscal year (FY) 2017 (ended June 30) increased compared with FY 2016, primarily reflecting higher sales tax collections, which remained the state’s largest revenue source. Despite positive general revenue trends, Florida ended FY 2017 with lower general fund and budget stabilization fund balances, when compared to FY 2016. In June 2017, the governor signed the FY 2018 budget into law. The enacted budget was larger than the previous year’s, and was based on increased revenue collections, particularly from sales tax. Other features included reduced business rents; increased corporate tax credits, sales tax exemptions and holidays; and augmented spending for education, state pay raises and environmental projects. In November 2017, the governor’s proposed budget for FY 2019 sought increased spending, compared to the enacted FY 2018 budget, for health care administration, corrections, economic development, environmental protection and education. However, assuming no changes in spending, the state estimates a modest operating deficit in FY 2019, as estimated recurring general revenue falls short of these recurring expenditures.
The strategy employed by the state to pay down debt and slow the pace of issuance led to positive results. Florida’s net tax-supported debt was 2.2% of personal income and $961 per capita, comparable with the 2.5% and $1,006 national medians, respectively.4 Independent credit rating agency Standard & Poor’s (S&P) rated Florida’s general obligation debt at AAA with a stable outlook, reflecting its assessment of the state’s continued strong employment and population growth, revenue growth, structurally balanced budgeting, strong reserve levels, relatively well-funded pensions and moderate debt burden.5 Some potential risks that S&P believes could return Florida to
Portfolio Composition
2/28/18
| | |
| | % of Total Investments* |
Refunded** | | 24.9% |
| | |
Transportation | | 21.5% |
| | |
Hospital & Health Care | | 20.4% |
| | |
Utilities | | 16.1% |
| | |
General Obligation | | 6.8% |
| | |
Tax-Supported | | 3.9% |
| | |
Higher Education | | 2.8% |
| | |
Other Revenue | | 1.6% |
| | |
Subject to Government Appropriations | | 1.1% |
| | |
Housing | | 0.9% |
| | |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
structural budgetary imbalance include a major economic downturn or withdrawal of federal aid. S&P also believes that economic damage or increased debt resulting from catastrophic hurricanes could pressure the state’s credit rating.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
The Fund holds a very small portion of its assets in Puerto Rico bonds, which decreased in price over the period. Puerto Rico and its municipal issuers continue to experience significant financial difficulties and we continue to monitor developments affecting them.
Thank you for your continued participation in Franklin Florida Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate S&P’s rating of the Fund.
| | | | | | |
14 | | Annual Report | | | | franklintempleton.com |
FRANKLIN FLORIDA TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 15 |
FRANKLIN FLORIDA TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
Share Class | | Cumulative Total Return1 | | Average Annual Total Return2 |
A | | | | |
1-Year | | -0.02% | | -4.25% |
5-Year | | +7.14% | | +0.51% |
10-Year | | +44.48% | | +3.30% |
Advisor3 | | | | |
1-Year | | +0.17% | | +0.17% |
5-Year | | +7.49% | | +1.45% |
10-Year | | +44.95% | | +3.78% |
| | | | | | | | |
Share Class | | Distribution Rate4 | | Taxable Equivalent Distribution Rate5 | | 30-Day Standardized Yield6 | | Taxable Equivalent 30-Day Standardized Yield5 |
A | | 3.52% | | 5.95% | | 1.73% | | 2.92% |
Advisor | | 3.76% | | 6.35% | | 1.90% | | 3.21% |
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 19 for Performance Summary footnotes.
| | | | | | |
16 | | Annual Report | | | | franklintempleton.com |
FRANKLIN FLORIDA 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 19 for Performance Summary footnotes.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 17 |
FRANKLIN FLORIDA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | | | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | | 8/1/17 | | | 2/28/17 | | | Change | |
A (FRFLX) | | | $10.47 | | | | N/A | | | | $10.88 | | | | -$0.41 | |
C (FRFIX) | | | $10.69 | | | | N/A | | | | $11.10 | | | | -$0.41 | |
R6 (FRFQX) | | | $10.49 | | | $ | 10.82 | | | | N/A | | | | -$0.33 | |
Advisor (FFTZX) | | | $10.49 | | | | N/A | | | | $10.89 | | | | -$0.40 | |
| |
Distributions (3/1/17–2/28/18) | | | | | |
| | | | |
Share Class | | Net Investment Income | | | | | | | | | | |
A | | | $0.4096 | | | | | | | | | | | | | |
C | | | $0.3487 | | | | | | | | | | | | | |
R6 (8/1/17–2/28/18) | | | $0.2355 | | | | | | | | | | | | | |
Advisor | | | $0.4201 | | | | | | | | | | | | | |
|
Total Annual Operating Expenses9 | |
| | | | |
Share Class | | | | | | | | | | | | |
A | | | 0.65% | | | | | | | | | | | | | |
Advisor | | | 0.55% | | | | | | | | | | | | | |
| | | | | | |
18 | | Annual Report | | | | franklintempleton.com |
FRANKLIN FLORIDA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund holds a very 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 9/15/16, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 9/15/16, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 9/15/16, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 9/15/16 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were -1.09% and -0.75%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the 2018 maximum federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 19 |
FRANKLIN FLORIDA TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual (actual return after expenses) | | Hypothetical (5% annual return before expenses) | | |
| | | | | | | | |
| | | | | | | | | | Expenses | | Net |
Share Class | | Beginning Account Value | | Ending Account Value 2/28/18 | | Expenses Paid During Period1,2 | | Ending Account Value 2/28/18 | | Paid During Period 9/1/17–2/28/181,2 | | Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $986.60 | | $3.45 | | $1,021.32 | | $3.51 | | 0.70% |
C | | $1,000 | | $984.10 | | $6.15 | | $1,018.60 | | $6.26 | | 1.25% |
R6 | | $1,000 | | $987.20 | | $2.76 | | $1,022.02 | | $2.81 | | 0.56% |
Advisor | | $1,000 | | $987.10 | | $2.96 | | $1,021.82 | | $3.01 | | 0.60% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
| | | | | | |
20 | | Annual Report | | | | franklintempleton.com |
Franklin Georgia Tax-Free Income Fund
This annual report for Franklin Georgia Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and Georgia personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | |
| | % of Total |
Ratings | | Investments |
AAA | | 4.87% |
AA | | 58.62% |
A | | 16.15% |
BBB | | 1.19% |
Below Investment Grade | | 0.37% |
Refunded | | 18.25% |
Not Rated | | 0.55% |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.99 on February 28, 2017, to $11.65 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 39.64 cents per share for the same period.2 The Performance Summary beginning on page 24 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.13% based on an annualization of February’s 3.17 cent per share monthly dividend and the maximum offering price of $12.17 on February 28, 2018. An
Dividend Distributions*
3/1/17–2/28/18
| | | | | | | | | | | | | | | | |
| | | | | Dividend per Share (cents) | |
| | | | | | | | | | | Advisor | |
Month | | Class A | | | Class C | | | Class R6** | | | Class | |
March | | | 3.48 | | | | 2.92 | | | | — | | | | 3.58 | |
April | | | 3.48 | | | | 2.92 | | | | — | | | | 3.58 | |
May | | | 3.48 | | | | 2.92 | | | | — | | | | 3.58 | |
June | | | 3.38 | | | | 2.82 | | | | — | | | | 3.48 | |
July | | | 3.33 | | | | 2.77 | | | | — | | | | 3.43 | |
August | | | 3.22 | | | | 2.66 | | | | 3.25 | | | | 3.32 | |
September | | | 3.22 | | | | 2.66 | | | | 3.36 | | | | 3.32 | |
October | | | 3.22 | | | | 2.66 | | | | 3.36 | | | | 3.32 | |
November | | | 3.22 | | | | 2.66 | | | | 3.36 | | | | 3.32 | |
December | | | 3.22 | | | | 2.66 | | | | 3.35 | | | | 3.31 | |
January | | | 3.22 | | | | 2.66 | | | | 3.35 | | | | 3.31 | |
February | | | 3.17 | | | | 2.61 | | | | 3.30 | | | | 3.26 | |
Total | | | 39.64 | | | | 32.92 | | | | 23.33 | | | | 40.81 | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
investor in the 2018 maximum combined effective federal and Georgia personal income tax bracket of 46.80% (including 3.80% Medicare tax) would need to earn a distribution rate of 5.88% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 93.
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franklintempleton.com | | Annual Report | | 21 |
FRANKLIN GEORGIA TAX-FREE INCOME FUND
State Update
During the 12 months under review, Georgia’s well-diversified and broad-based economy outpaced the nation, after some stagnation and contraction following the Great Recession. The Atlanta metropolitan area is the engine of the state’s economic performance, and some of the state’s more rural areas show weaker performance. Nevertheless, personal income grew at a faster pace than much of the southern US, and the state’s low cost of living, strong transportation network, and favorable business costs and weather have attracted business investment and job creation. The state’s employment growth has been broad-based, with jobs in education and health services, construction, professional and business services, and leisure and hospitality increasing significantly. Ongoing job growth has bolstered income tax and sales tax receipts that account for the majority of general fund revenue. Georgia’s unemployment rate declined from 5.2% in February 2017 to 4.5% at period-end, which was higher than the 4.1% national unemployment rate.3
Georgia has a revenue shortfall reserve that acts as a rainy day fund, which was established by statute and has increased annually since 2009. The state does not explicitly budget for additional contributions to the revenue shortfall reserve and does not issue projections for future balances; however, revenue estimates were set to enable building the fund each year. Since Georgia operates under a balanced budget, fiscal year 2018 expenditures should be at or below projected revenue levels. The state’s 2018 fiscal year budget assumed continued revenue growth and included increases for teacher salaries, K-12 student enrollment growth and teacher training, teacher retirement funding and transportation projects. Early during the 2018 fiscal year, which began on July 1, 2017, Governor Nathan Deal indicated that rising school and health care costs and teacher pension obligations may require fiscal year 2018 state agency funding levels to remain unchanged in the following fiscal year.
The state’s overall debt burden remained moderate and has improved slightly. Georgia’s net tax-supported debt was 2.5% of personal income and $992 per capita, compared with the 2.5% and $1,006 national medians.4 Independent credit rating agency Moody’s Investors Service assigned Georgia’s general obligation debt a rating of Aaa with a stable outlook.5 Moody’s rating reflected Georgia’s growing economy, solid financial position and modest long-term liabilities, as well as its strong
Portfolio Composition
2/28/18
| | | | |
| | % of Total Investments* | |
Refunded** | | | 18.7% | |
Hospital & Health Care | | | 18.6% | |
Utilities | | | 17.3% | |
General Obligation | | | 13.3% | |
Subject to Government Appropriations | | | 13.1% | |
Higher Education | | | 7.2% | |
Transportation | | | 5.3% | |
Tax-Supported | | | 5.1% | |
Housing | | | 1.4% | |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
management and governance practices. The stable outlook recognized that the state has probably built up enough reserves to help preserve its credit quality at a high level, even if the economy were to enter a recession.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
The Fund holds a very small portion of its assets in Puerto Rico bonds, which decreased in price over the period. Puerto Rico and its municipal issuers continue to experience significant financial difficulties and we continue to monitor developments affecting them.
Thank you for your continued participation in Franklin Georgia Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate Moody’s rating of the Fund.
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22 | | Annual Report | | | | franklintempleton.com |
FRANKLIN GEORGIA TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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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franklintempleton.com | | | | | | Annual Report | | 23 |
FRANKLIN GEORGIA TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
Share Class | | Cumulative Total Return1 | | Average Annual Total Return2 |
| | |
A | | | | |
1-Year | | +0.46% | | -3.79% |
5-Year | | +8.84% | | +0.83% |
10-Year | | +50.58% | | +3.73% |
| | |
Advisor3 | | | | |
1-Year | | +0.64% | | +0.64% |
5-Year | | +9.09% | | +1.76% |
10-Year | | +50.92% | | +4.20% |
| | | | | | | | | | | | | | | | |
| | Distribution | | | Taxable Equivalent | | | 30-Day | | | Taxable Equivalent 30-Day | |
Share Class | | Rate4 | | | Distribution Rate5 | | | Standardized Yield6 | | | Standardized Yield5 | |
A | | | 3.13% | | | | 5.88% | | | | 1.76% | | | | 3.31% | |
Advisor | | | 3.36% | | | | 6.32% | | | | 1.94% | | | | 3.65% | |
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 27 for Performance Summary footnotes.
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24 | | Annual Report | | | | franklintempleton.com |
FRANKLIN GEORGIA 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.
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See page 27 for Performance Summary footnotes.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 25 |
FRANKLIN GEORGIA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | | | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | | 8/1/17 | | | 2/28/17 | | | Change | |
A (FTGAX) | | | $11.65 | | | | N/A | | | | $11.99 | | | | -$0.34 | |
C (FGAIX) | | | $11.83 | | | | N/A | | | | $12.16 | | | | -$0.33 | |
R6 (FGFQX) | | | $11.66 | | | | $11.94 | | | | N/A | | | | -$0.28 | |
Advisor (FGFZX) | | | $11.66 | | | | N/A | | | | $11.99 | | | | -$0.33 | |
|
Distributions (3/1/17–2/28/18) | |
| | | | |
| | Net Investment | | | | | | | | | | |
Share Class | | Income | | | | | | | | | | |
A | | | $0.3964 | | | | | | | | | | | | | |
C | | | $0.3292 | | | | | | | | | | | | | |
R6 (8/1/17–2/28/18) | | | $0.2333 | | | | | | | | | | | | | |
Advisor | | | $0.4081 | | | | | | | | | | | | | |
|
Total Annual Operating Expenses9 | |
| | | |
Share Class | | | | | | | | | | |
A | | | 0.67% | | | | | | | | | | | | | |
Advisor | | | 0.57% | | | | | | | | | | | | | |
| | | | | | |
26 | | Annual Report | | | | franklintempleton.com |
FRANKLIN GEORGIA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and shareprice 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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund holds a very 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 9/15/16, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 9/15/16, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 9/15/16, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 9/15/16 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were -1.19% and -0.82%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and Georgia personal income tax rate of 46.80%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | | | | | Annual Report | | 27 |
FRANKLIN GEORGIA TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | | | | | | | |
| | | | | | Actual | | | | Hypothetical | | | | |
| | | | | | (actual return after expenses) | | | | (5% annual return before expenses) | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Expenses | | | | Net |
| | Beginning | | | | Ending | | Expenses | | | | Ending | | Paid During | | | | Annualized |
Share | | Account | | | | Account | | Paid During | | | | Account | | Period | | | | Expense |
Class | | Value | | | | Value 2/28/18 | | Period1,2 | | | | Value 2/28/18 | | 9/1/17–2/28/181,2
| | | | Ratio |
| | | | | | | | | | | | |
A | | $1,000 | | | | $989.30 | | $3.50 | | | | $1,021.27 | | $3.56 | | | | 0.71% |
C | | $1,000 | | | | $987.50 | | $6.21 | | | | $1,018.55 | | $6.31 | | | | 1.26% |
R6 | | $1,000 | | | | $990.80 | | $2.81 | | | | $1,021.97 | | $2.86 | | | | 0.57% |
Advisor | | $1,000 | | | | $990.60 | | $3.01 | | | | $1,021.77 | | $3.06 | | | | 0.61% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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28 | | Annual Report | | | | franklintempleton.com |
Franklin Kentucky Tax-Free Income Fund
This annual report for Franklin Kentucky Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and Kentucky personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | | | |
Ratings | | % of Total Investments | |
AAA | | | 4.44% | |
AA | | | 22.84% | |
A | | | 48.16% | |
BBB | | | 6.48% | |
Refunded | | | 15.19% | |
Not Rated | | | 2.89% | |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, declined from $11.01 on February 28, 2017, to $10.77 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 37.20 cents per share for the same period.2 The Performance Summary beginning on page 31 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.20% based on an annualization of February’s 3.00 cent per share monthly dividend and the maximum offering price of $11.25 on February 28, 2018. An investor in the 2018 maximum combined effective federal and
Dividend Distributions*
3/1/17–2/28/18
| | | | | | | | | | | | |
| | Dividend per Share (cents) | |
| | | | |
Month | | Class A | | | Class R6** | | | Advisor Class | |
March | | | 3.25 | | | | — | | | | 3.34 | |
April | | | 3.30 | | | | — | | | | 3.39 | |
May | | | 3.30 | | | | — | | | | 3.39 | |
June | | | 3.15 | | | | — | | | | 3.24 | |
July | | | 3.10 | | | | — | | | | 3.19 | |
August | | | 3.10 | | | | 3.12 | | | | 3.19 | |
September | | | 3.00 | | | | 3.12 | | | | 3.09 | |
October | | | 3.00 | | | | 3.12 | | | | 3.09 | |
November | | | 3.00 | | | | 3.12 | | | | 3.09 | |
December | | | 3.00 | | | | 3.12 | | | | 3.09 | |
January | | | 3.00 | | | | 3.12 | | | | 3.09 | |
February | | | 3.00 | | | | 3.12 | | | | 3.09 | |
Total | | | 37.20 | | | | 21.84 | | | | 38.28 | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
Kentucky personal income tax bracket of 46.80% (including 3.80% Medicare tax) would need to earn a distribution rate of 6.02% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 101.
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franklintempleton.com | | Annual Report | | 29 |
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Commonwealth Update
During the 12 months under review, Kentucky’s economy generally expanded along with the nation, given ongoing population and employment gains. However, it has continued to be hindered by a weak demographic profile and relatively low wealth levels. As of November 2017, total nonfarm employment grew 1.3% year-over-year, just under the overall US rate of 1.4%. Most of the job growth was in service industries, with the health care sector an important component of economic growth and stability in the commonwealth, as Kentucky expanded Medicare under the Affordable Care Act. Kentucky’s unemployment rate decreased from 5.1% in February 2017 to end the period at 4.1%, which matched the national rate.3
Recent revenue growth may assist efforts to achieve structural balance across the commonwealth’s operations despite higher fixed costs, which are an important aspect of Kentucky’s budget. Although annual general fund revenues have slowed in recent years, year-to-date fiscal year 2018 general fund revenues have exceeded 2017 and were higher than revised estimates. Kentucky is a Medicaid expansion state and depends on federal matching funds given its demographic make-up. The commonwealth recently received approval to impose a work requirement on benefit recipients, part of Kentucky’s focus on controlling costs as the federal government has discussed reducing federal support for Medicaid, particularly the expansion aspect.
Kentucky’s net tax-supported debt was 5.3% of personal income and $2,057 per capita, compared with the 2.5% and $1,006 national medians.4 In July 2017, Moody’s Investors Service downgraded Kentucky’s issuer credit rating to Aa3 with a stable outlook.5 The rating reflected an economy that has continued to grow, employment gains across sectors and moderate population growth, as well as a willingness to cut expenditures to balance its budget. The stable outlook reflected the commonwealth’s economic stability and manageable structural imbalance; however, headwinds include revenue underperformance that could adversely affect Kentucky’s ability to increase its low pension funding levels. In addition, the commonwealth has outsized unfunded pension liabilities and high fixed costs, which restrict its financial flexibility.
Portfolio Composition
2/28/18
| | | | |
| | % of Total Investments* | |
Utilities | | | 24.8% | |
Refunded** | | | 20.5% | |
Subject to Government Appropriations | | | 18.8% | |
Hospital & Health Care | | | 16.5% | |
Higher Education | | | 11.8% | |
General Obligation | | | 3.8% | |
Housing | | | 2.9% | |
Transportation | | | 0.9% | |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
Thank you for your continued participation in Franklin Kentucky Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate Moody’s rating of the Fund.
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30 | | Annual Report | | | | franklintempleton.com |
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
Share Class | | Cumulative Total Return1 | | Average Annual Total Return2 |
| | |
A | | | | |
1-Year | | +1.20% | | -3.11% |
5-Year | | +8.81% | | +0.82% |
10-Year | | +49.84% | | +3.67% |
| | |
Advisor3 | | | | |
1-Year | | +1.30% | | +1.30% |
5-Year | | +8.97% | | +1.73% |
10-Year | | +50.05% | | +4.14% |
| | | | | | | | | | | | | | | | |
Share Class | | Distribution Rate4 | | | Taxable Equivalent Distribution Rate5 | | | 30-Day Standardized Yield6 | | | Taxable Equivalent 30-Day Standardized Yield5 | |
A | | | 3.20% | | | | 6.02% | | | | 1.68% | | | | 3.16% | |
Advisor | | | 3.44% | | | | 6.47% | | | | 1.85% | | | | 3.48% | |
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 33 for Performance Summary footnotes.
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FRANKLIN KENTUCKY 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.

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32 | | Annual Report | | | | franklintempleton.com |
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | 8/1/17 | | 2/28/17 | | Change |
A (FRKYX) | | $10.77 | | N/A | | $11.01 | | -$0.24 |
R6 (FKTRX) | | $10.77 | | $10.98 | | N/A | | -$0.21 |
Advisor (FKTZX) | | $10.77 | | N/A | | $11.01 | | -$0.24 |
Distributions (3/1/17–2/28/18)
| | |
Share Class | | Net Investment Income |
A | | $0.3720 |
R6 (8/1/17–2/28/18) | | $0.2184 |
Advisor | | $0.3828 |
Total Annual Operating Expenses9
| | |
Share Class | | |
A | | 0.77% |
Advisor | | 0.67% |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 9/15/16, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 9/15/16, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 9/15/16, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 9/15/16 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were -0.08% and -0.06%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and Kentucky personal income tax rate of 46.80%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | | | | | Annual Report | | 33 |
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual | | Hypothetical | | |
| | | | (actual return after expenses) | | (5% annual return before expenses) | | |
| | | | | | | | |
Share Class | | Beginning Account Value 9/1/17 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $994.50 | | $4.01 | | $1,020.78 | | $4.06 | | 0.81% |
R6 | | $1,000 | | $995.10 | | $3.26 | | $1,021.52 | | $3.31 | | 0.66% |
Advisor | | $1,000 | | $995.00 | | $3.51 | | $1,021.27 | | $3.56 | | 0.71% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.
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34 | | Annual Report | | | | franklintempleton.com |
Franklin Louisiana Tax-Free Income Fund
This annual report for Franklin Louisiana Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and Louisiana personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | | | |
Ratings | | % of Total Investments | |
AAA | | | 3.37% | |
AA | | | 35.54% | |
A | | | 36.51% | |
BBB | | | 1.29% | |
Below Investment Grade | | | 0.61% | |
Refunded | | | 22.68% | |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.15 on February 28, 2017, to $10.90 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 36.68 cents per share for the same period.2 The Performance Summary beginning on page 38 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.10% based on an annualization of February’s 2.94 cent per share monthly dividend and the maximum offering price of $11.38 on February 28, 2018. An investor in the 2018 maximum combined effective federal and
Dividend Distributions*
3/1/17–2/28/18
| | | | | | | | | | | | | | | | |
| | Dividend per Share (cents) | |
| | | | |
Month | | Class A | | | Class C | | | Class R6** | | | Advisor Class | |
March | | | 3.24 | | | | 2.72 | | | | — | | | | 3.33 | |
April | | | 3.24 | | | | 2.72 | | | | — | | | | 3.33 | |
May | | | 3.24 | | | | 2.72 | | | | — | | | | 3.33 | |
June | | | 3.09 | | | | 2.57 | | | | — | | | | 3.18 | |
July | | | 3.04 | | | | 2.52 | | | | — | | | | 3.13 | |
August | | | 2.99 | | | | 2.47 | | | | 3.01 | | | | 3.08 | |
September | | | 2.99 | | | | 2.46 | | | | 3.11 | | | | 3.08 | |
October | | | 2.99 | | | | 2.46 | | | | 3.11 | | | | 3.08 | |
November | | | 2.99 | | | | 2.46 | | | | 3.11 | | | | 3.08 | |
December | | | 2.99 | | | | 2.47 | | | | 3.11 | | | | 3.08 | |
January | | | 2.94 | | | | 2.42 | | | | 3.06 | | | | 3.03 | |
February | | | 2.94 | | | | 2.42 | | | | 3.06 | | | | 3.03 | |
Total | | | 36.68 | | | | 30.41 | | | | 21.57 | | | | 37.76 | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
Louisiana personal income tax bracket of 46.80% (including 3.80% Medicare tax) would need to earn a distribution rate of 5.83% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 107.
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franklintempleton.com | | Annual Report | | 35 |
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
State Update
Louisiana’s economy grew modestly during the 12 months under review, as evidenced by improved employment in certain sectors; however, the growth rate lagged that of the nation. The state’s unemployment rate declined from 5.7% in February 2017 to 4.5% at period-end, which was higher than the 4.1% national average.3
The state initially balanced the fiscal year (FY) 2017 budget (ended June 30, 2017) primarily through revenue enhancement measures and spending cuts. However, mid-year budget gaps led to the use of one-time solutions. Further, in August 2017, the state’s lawmakers closed the budget gap for FY 2017 by relying largely on its escrow account tied to tax litigation, which created uncertainty. However, the state ended FY 2017 with an unanticipated budget surplus, on account of higher-than-projected sales and personal income tax collections. The state’s governor signed the FY 2018 budget in June 2017, and highlights included avoiding funding cuts for most state agencies, full funding for the Taylor Opportunity Program for Students (TOPS) and higher education, and a pay raise for state workers without implementing any new taxes. The budget included spending cuts for mental health, health care and early childhood education, and provided for withholding a portion of funds to address any possible mid-year shortfalls. Lawmakers estimated that the state would face a considerable budget gap in FY 2018–2019, as temporary sales taxes enacted in 2016 are scheduled to expire in July 2018. In January 2018, the governor released the FY 2018–2019 executive budget, which included spending cuts to TOPS, higher education and state health services. Legislators began a special session in mid-February 2018 to address the FY 2018-2019 budget gap.
Louisiana’s net tax-supported debt was 3.7% of personal income and $1,615 per capita, compared with the 2.5% and $1,006 national medians, respectively.4 Independent credit rating agency Standard & Poor’s (S&P) downgraded the state’s general obligation debt rating from AA to AA-.5 The rating reflected S&P’s view of Louisiana’s constitutional requirement that mandates balanced budgets, recently implemented budget adjustments and moderate debt ratios with a strong legal framework for debt repayment. S&P retained its negative outlook, reflecting S&P’s view of the state’s reliance on nonrecurring measures to close mid-fiscal year and year-end gaps, and shrinking reserves. S&P’s outlook also indicated its
Portfolio Composition
2/28/18
| | | | |
| | % of Total Investments* | |
Refunded** | | | 26.6% | |
Tax-Supported | | | 14.6% | |
Utilities | | | 12.7% | |
Hospital & Health Care | | | 11.3% | |
Higher Education | | | 10.4% | |
Transportation | | | 9.6% | |
Subject to Government Appropriations | | | 6.0% | |
General Obligation | | | 5.3% | |
Other Revenue | | | 2.0% | |
Housing | | | 1.5% | |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
view on the expiration of revenue enhancement measures on June 30, 2018.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
The Fund holds a very small portion of its assets in Puerto Rico bonds, which decreased in price over the period. Puerto Rico and its municipal issuers continue to experience significant financial difficulties and we continue to monitor developments affecting them.
Thank you for your continued participation in Franklin Louisiana Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate S&P’s rating of the Fund.
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36 | | Annual Report | | | | franklintempleton.com |
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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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franklintempleton.com | | Annual Report | | 37 |
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
| | Cumulative | | Average Annual |
Share Class | | Total Return1 | | Total Return2 |
| | |
A | | | | |
1-Year | | +1.04% | | -3.22% |
5-Year | | +8.74% | | +0.82% |
10-Year | | +50.34% | | +3.71% |
| | |
Advisor3 | | | | |
1-Year | | +1.14% | | +1.14% |
5-Year | | +8.89% | | +1.72% |
10-Year | | +50.55% | | +4.18% |
| | | | | | | | |
| | Distribution | | Taxable Equivalent | | 30-Day | | Taxable Equivalent 30-Day |
Share Class | | Rate4 | | Distribution Rate5 | | Standardized Yield6 | | Standardized Yield5 |
A | | 3.10% | | 5.83% | | 1.78% | | 3.35% |
Advisor | | 3.34% | | 6.28% | | 1.98% | | 3.72% |
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 41 for Performance Summary footnotes.
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38 | | Annual Report | | | | franklintempleton.com |
FRANKLIN LOUISIANA 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 41 for Performance Summary footnotes.
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franklintempleton.com | | | | | | Annual Report | | 39 |
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | |
| | | | |
Share Class (Symbol) | | 2/28/18 | | 8/1/17 | | 2/28/17 | | Change |
A (FKLAX) | | $10.90 | | N/A | | $11.15 | | -$0.25 |
C (FLAIX) | | $11.07 | | N/A | | $11.32 | | -$0.25 |
R6 (FLAQX) | | $10.90 | | $11.18 | | N/A | | -$0.28 |
Advisor (FLTZX) | | $10.90 | | N/A | | $11.15 | | -$0.25 |
|
Distributions (3/1/17–2/28/18) |
| | | | |
| | Net Investment | | | | | | |
Share Class | | Income | | | | | | |
A | | $0.3668 | | | | | | |
C | | $0.3041 | | | | | | |
R6 (8/1/17–2/28/18) | | $0.2157 | | | | | | |
Advisor | | $0.3776 | | | | | | |
|
Total Annual Operating Expenses9 |
| | | | |
Share Class | | | | | | | | |
A | | 0.68% | | | | | | |
Advisor | | 0.58% | | | | | | |
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40 | | Annual Report | | | | franklintempleton.com |
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund holds a very 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 9/15/16, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 9/15/16, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 9/15/16, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 9/15/16 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were -0.67% and -0.46%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and Louisiana personal income tax rate of 46.80%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | | | | | Annual Report | | 41 |
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual (actual return after expenses) | | Hypothetical (5% annual return before expenses) | | |
| | | | | | | | |
Share Class | | Beginning Account Value | | Ending Account Value 2/28/18 | | Expenses Paid During Period1,2 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $988.20 | | $3.55 | | $1,021.22 | | $3.61 | | 0.72% |
C | | $1,000 | | $984.70 | | $6.25 | | $1,018.50 | | $6.36 | | 1.27% |
R6 | | $1,000 | | $988.80 | | $2.86 | | $1,021.92 | | $2.91 | | 0.58% |
Advisor | | $1,000 | | $988.70 | | $3.06 | | $1,021.72 | | $3.11 | | 0.62% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.
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42 | | Annual Report | | | | franklintempleton.com |
Franklin Maryland Tax-Free Income Fund
This annual report for Franklin Maryland Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and Maryland personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | |
| | % of Total |
Ratings | | Investments |
AAA | | 15.40% |
AA | | 37.44% |
A | | 23.15% |
BBB | | 10.04% |
Below Investment Grade | | 0.84% |
Refunded | | 10.47% |
Not Rated | | 2.66% |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.10 on February 28, 2017, to $10.76 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 35.57 cents per share for the same period.2 The Performance Summary beginning on page 46 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.00% based on an annualization of February’s 2.81 cent per share monthly dividend and the maximum offering price of $11.24 on February 28, 2018. An
Dividend Distributions*
3/1/17–2/28/18
| | | | | | | | | | | | | | | | |
| | Dividend per Share (cents) | |
| | | | | | | | | | | Advisor | |
Month | | Class A | | | Class C | | | Class R6** | | | Class | |
March | | | 3.16 | | | | 2.64 | | | | — | | | | 3.25 | |
April | | | 3.21 | | | | 2.69 | | | | — | | | | 3.30 | |
May | | | 3.21 | | | | 2.69 | | | | — | | | | 3.30 | |
June | | | 3.06 | | | | 2.54 | | | | — | | | | 3.15 | |
July | | | 2.96 | | | | 2.44 | | | | — | | | | 3.05 | |
August | | | 2.91 | | | | 2.39 | | | | 2.93 | | | | 3.00 | |
September | | | 2.86 | | | | 2.34 | | | | 2.98 | | | | 2.95 | |
October | | | 2.86 | | | | 2.34 | | | | 2.98 | | | | 2.95 | |
November | | | 2.86 | | | | 2.34 | | | | 2.98 | | | | 2.95 | |
December | | | 2.86 | | | | 2.34 | | | | 2.98 | | | | 2.95 | |
January | | | 2.81 | | | | 2.29 | | | | 2.93 | | | | 2.90 | |
February | | | 2.81 | | | | 2.29 | | | | 2.93 | | | | 2.90 | |
Total | | | 35.57 | | | | 29.33 | | | | 20.71 | | | | 36.65 | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
investor in the 2018 maximum combined effective federal and Maryland personal income tax bracket of 49.75% (including 3.80% Medicare tax) would need to earn a distribution rate of 5.97% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 115.
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franklintempleton.com | | Annual Report | | 43 |
FRANKLIN MARYLAND TAX-FREE INCOME FUND
State Update
Maryland’s economy continued to grow during the 12 months under review amid mixed housing and labor market conditions. The state’s home prices rose during the review period and the foreclosure rate declined. Maryland’s unemployment rate fell from 4.3% in February 2017 to 4.2% at period-end, which was slightly higher than the 4.1% national average.3
Maryland’s state revenue for fiscal year (FY) 2017 was above its March 2017 estimates, largely due to accrued withholdings. In December 2017, projections for FY 2018 were downgraded compared to September 2017 estimates, largely due to lower individual income and sales and use taxes; however, FY 2019 projections were upgraded. Maryland’s enacted FY 2018 budget was relatively unchanged in comparison to the previous year’s plan, and included structural resolution for a budget gap spanning FY 2017 and FY 2018, with a projected year-over-year growth in current revenue. The budget featured elimination of previously required additional transfers to pension contributions, while continuing to fund actuarially determined and supplemental pension contributions, and provided for a slight increase in estimated year-end general fund balance in FY 2018. The governor’s proposed FY 2019 budget is structurally balanced and prioritized investments in areas such as education, health care, transportation and environment.
The state’s net tax-supported debt was 3.8% of personal income and $2,122 per capita, compared with the 2.5% and $1,006 national medians, respectively.4 Independent credit rating agency Standard & Poor’s (S&P) affirmed the state’s general obligation debt rating of AAA with a stable outlook.5 S&P cited the state’s broad and diverse economy, continued strong wealth and income levels, proactive financial and budget management, well-developed financial and debt management policies and moderate debt levels. The outlook reflected S&P’s view of the state’s continued practice of proactive mid-year budget adjustments in case of slower-than-anticipated revenue growth and to fully fund its pensions.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
Portfolio Composition
2/28/18
| | |
| | % of Total Investments* |
Utilities | | 22.1% |
Hospital & Health Care | | 20.2% |
Refunded** | | 12.8% |
Housing | | 12.3% |
Higher Education | | 11.2% |
General Obligation | | 10.2% |
Transportation | | 3.9% |
Subject to Government Appropriations | | 3.9% |
Other Revenue | | 3.4% |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
The Fund holds a very small portion of its assets in Puerto Rico bonds, which decreased in price over the period. Puerto Rico and its municipal issuers continue to experience significant financial difficulties and we continue to monitor developments affecting them.
Thank you for your continued participation in Franklin Maryland Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate S&P’s rating of the Fund.
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44 | | Annual Report | | | | franklintempleton.com |
FRANKLIN MARYLAND TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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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franklintempleton.com | | Annual Report | | 45 |
FRANKLIN MARYLAND TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
Share Class | | Cumulative Total Return1 | | Average Annual Total Return2 |
| | |
A | | | | |
1-Year | | +0.13% | | -4.11% |
5-Year | | +7.02% | | +0.49% |
10-Year | | +46.08% | | +3.41% |
| | |
Advisor3 | | | | |
1-Year | | +0.22% | | +0.22% |
5-Year | | +7.55% | | +1.47% |
10-Year | | +47.42% | | +3.96% |
| | | | | | | | |
| | Distribution | | Taxable Equivalent | | 30-Day | | Taxable Equivalent 30-Day |
Share Class | | Rate4 | | Distribution Rate5 | | Standardized Yield6 | | Standardized Yield5 |
A | | 3.00% | | 5.97% | | 1.92% | | 3.82% |
Advisor | | 3.23% | | 6.43% | | 2.10% | | 4.18% |
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 49 for Performance Summary footnotes.
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46 | | Annual Report | | | | franklintempleton.com |
FRANKLIN MARYLAND 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.
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See page 49 for Performance Summary footnotes.
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franklintempleton.com | | | | | | Annual Report | | 47 |
FRANKLIN MARYLAND TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | 8/1/17 | | 2/28/17 | | Change |
A (FMDTX) | | $10.76 | | N/A | | $11.10 | | -$0.34 |
C (FMDIX) | | $10.98 | | N/A | | $11.31 | | -$0.33 |
R6 (FMDQX) | | $10.78 | | $11.05 | | N/A | | -$0.27 |
Advisor (FMDZX) | | $10.77 | | N/A | | $11.11 | | -$0.34 |
Distributions (3/1/17–2/28/18)
| | | | |
Share Class | | Net Investment Income | |
A | | | $0.3557 | |
C | | | $0.2933 | |
R6 (8/1/17–2/28/18) | | | $0.2071 | |
Advisor | | | $0.3665 | |
Total Annual Operating Expenses9
| | | | |
Share Class | | | |
A | | | 0.67 | % |
Advisor | | | 0.57 | % |
| | | | | | |
48 | | Annual Report | | | | franklintempleton.com |
FRANKLIN MARYLAND TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund holds a very 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 7/1/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 7/1/09, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 7/1/09, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 7/1/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +40.17% and +3.97%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and Maryland state and local personal income tax rate of 49.75%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | Annual Report | | 49 |
FRANKLIN MARYLAND TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual | | Hypothetical | | |
| | | | (actual return after expenses) | | (5% annual return before expenses) | | |
| | | | | | | | |
Share Class | | Beginning Account Value 9/1/17 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $989.10 | | $3.55 | | $1,021.22 | | $3.61 | | 0.72% |
C | | $1,000 | | $986.60 | | $6.26 | | $1,018.50 | | $6.36 | | 1.27% |
R6 | | $1,000 | | $989.80 | | $2.86 | | $1,021.92 | | $2.91 | | 0.58% |
Advisor | | $1,000 | | $989.60 | | $3.06 | | $1,021.72 | | $3.11 | | 0.62% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.
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50 | | Annual Report | | | | franklintempleton.com |
Franklin Missouri Tax-Free Income Fund
This annual report for Franklin Missouri Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and Missouri personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | |
| | % of Total |
Ratings | | Investments |
AAA | | 9.04% |
AA | | 47.60% |
A | | 19.35% |
BBB | | 11.37% |
Below Investment Grade | | 1.30% |
Refunded | | 11.14% |
Not Rated | | 0.20% |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.74 on February 28, 2017, to $11.38 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 37.62 cents per share for the same period.2 The Performance Summary beginning on page 54 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 2.90% based on an annualization of February’s 2.87 cent per share monthly dividend and the maximum offering price of $11.89 on February 28, 2018. An
| | | | | | | | | | | | | | | | |
Dividend Distributions* | | | | | | | | | |
3/1/17–2/28/18 | | | | | | | | | | | | | |
| | Dividend per Share (cents) | |
| | | | | | | | | | | Advisor | |
Month | | Class A | | | Class C | | | Class R6** | | | Class | |
March | | | 3.53 | | | | 2.98 | | | | — | | | | 3.62 | |
April | | | 3.53 | | | | 2.98 | | | | — | | | | 3.62 | |
May | | | 3.53 | | | | 2.98 | | | | — | | | | 3.62 | |
June | | | 3.37 | | | | 2.82 | | | | — | | | | 3.46 | |
July | | | 3.22 | | | | 2.67 | | | | — | | | | 3.31 | |
August | | | 3.07 | | | | 2.52 | | | | 3.09 | | | | 3.16 | |
September | | | 3.02 | | | | 2.47 | | | | 3.14 | | | | 3.11 | |
October | | | 2.97 | | | | 2.42 | | | | 3.09 | | | | 3.06 | |
November | | | 2.82 | | | | 2.27 | | | | 2.94 | | | | 2.91 | |
December | | | 2.82 | | | | 2.28 | | | | 2.94 | | | | 2.91 | |
January | | | 2.87 | | | | 2.33 | | | | 2.99 | | | | 2.96 | |
February | | | 2.87 | | | | 2.33 | | | | 2.99 | | | | 2.96 | |
Total | | | 37.62 | | | | 31.05 | | | | 21.18 | | | | 38.70 | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
investor in the 2018 maximum combined effective federal and Missouri personal income tax bracket of 46.80% (including 3.80% Medicare tax) would need to earn a distribution rate of 5.45% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 122.
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franklintempleton.com | | Annual Report | | 51 |
FRANKLIN MISSOURI TAX-FREE INCOME FUND
State Update
Missouri’s economy continued to expand during the 12 months under review. The state’s housing market improved as home prices rose and the foreclosure rate, which was below the national average, generally declined. Missouri’s unemployment rate fell from 4.0% in February 2017 to 3.7% at period-end, which was below the 4.1% national average.3
The state concluded fiscal year (FY) 2017 on June 30, 2017, with higher year-to-date general revenue collections than the prior year, despite lower-than-expected collections of individual income taxes, declining corporate income taxes and increased refunds. Although income tax collections declined in FY 2017, the state’s revenue growth reached the threshold to trigger income tax cuts beginning January 1, 2018. In June 2017, the governor signed the FY 2018 budget that included spending cuts in response to underperforming revenue collections. The governor announced restrictions featured lower funding for K-12 schools, public colleges and universities and social services. The restrictions were enacted due to lagging state revenues and rising health care costs. In January 2018, Governor Eric Greitens announced the budget proposal for FY 2019, which included increased funding for infrastructure, education, public safety and programs to protect Missouri’s most vulnerable children, funded largely by reductions in spending on higher education, efficiencies in Medicaid spending and other smaller reductions in government spending. In the same month, the governor also laid out a tax cut proposal that aimed to reduce individual and corporate tax rates.
Missouri’s net tax-supported debt was 1.4% of personal income and $579 per capita compared with the 2.5% and $1,006 national medians, respectively.4 Independent credit rating agency Moody’s Investors Service rated Missouri’s general obligation bonds Aaa with a stable outlook.5 The rating reflected Moody’s view of the state’s history of solid reserve levels, sound fiscal management controls and affordable debt burden. It also incorporated the state’s below-average wealth and demographic indicators, revenue-raising constraints and expectations that the state’s economy will lag behind that of the nation overall. Furthermore, it reflected concerns regarding the state’s ability to balance an income tax cut that will incrementally reduce revenues over the next several years. Moody’s also noted that any economic weakening that negatively affects the state’s revenue collections could lead to a downgrade.
Portfolio Composition
2/28/18
| | |
| | % of Total Investments* |
Utilities | | 27.8% |
Hospital & Health Care | | 23.9% |
Refunded** | | 13.3% |
General Obligation | | 8.1% |
Higher Education | | 8.0% |
Tax-Supported | | 7.7% |
Transportation | | 5.8% |
Subject to Government Appropriations | | 4.3% |
Corporate-Backed | | 1.0% |
Housing | | 0.1% |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
The Fund holds a very small portion of its assets in Puerto Rico bonds, which decreased in price over the period. Puerto Rico and its municipal issuers continue to experience significant financial difficulties and we continue to monitor developments affecting them.
Thank you for your continued participation in Franklin Missouri Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate Moody’s rating of the Fund.
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FRANKLIN MISSOURI TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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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franklintempleton.com | | Annual Report | | 53 |
FRANKLIN MISSOURI TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
Share Class | | Cumulative Total Return1 | | Average Annual Total Return2 |
| | |
A | | | | |
1-Year | | +0.12% | | -4.13% |
5-Year | | +6.58% | | +0.40% |
10-Year | | +45.52% | | +3.37% |
| | |
Advisor3 | | | | |
1-Year | | +0.12% | | +0.12% |
5-Year | | +7.02% | | +1.37% |
10-Year | | +46.73% | | +3.91% |
| | | | | | | | | | | | | | | | |
Share Class | | Distribution Rate4 | | | Taxable Equivalent Distribution Rate5 | | | 30-Day Standardized Yield6 | | | Taxable Equivalent 30-Day Standardized Yield5 | |
A | | | 2.90% | | | | 5.45% | | | | 1.83% | | | | 3.44% | |
Advisor | | | 3.12% | | | | 5.86% | | | | 2.01% | | | | 3.78% | |
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 57 for Performance Summary footnotes.
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54 | | Annual Report | | | | franklintempleton.com |
FRANKLIN MISSOURI 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 57 for Performance Summary footnotes.
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franklintempleton.com | | | | | | Annual Report | | 55 |
FRANKLIN MISSOURI TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | 8/1/17 | | 2/28/17 | | Change |
A (FRMOX) | | $11.38 | | N/A | | $11.74 | | -$0.36 |
C (FMOIX) | | $11.49 | | N/A | | $11.86 | | -$0.37 |
R6 (FMOQX) | | $11.38 | | $11.72 | | N/A | | -$0.34 |
Advisor (FRMZX) | | $11.38 | | N/A | | $11.75 | | -$0.37 |
Distributions (3/1/17–2/28/18)
| | |
Share Class | | Net Investment Income |
A | | $0.3762 |
C | | $0.3105 |
R6 (8/1/17–2/28/18) | | $0.2118 |
Advisor | | $0.3870 |
|
Total Annual Operating Expenses9 |
Share Class | | |
A | | 0.65% |
Advisor | | 0.55% |
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FRANKLIN MISSOURI TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund holds a very 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 7/1/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 7/1/09, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 7/1/09, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 7/1/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +38.64% and +3.84%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and Missouri personal income tax rate of 46.80%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | | | | | Annual Report | | 57 |
FRANKLIN MISSOURI TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual | | Hypothetical | | |
| | | | (actual return after expenses) | | (5% annual return before expenses) | | |
| | | | | | | | |
Share Class | | Beginning Account Value 9/1/17 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $984.10 | | $3.39 | | $1,021.37 | | $3.46 | | 0.69% |
C | | $1,000 | | $980.60 | | $6.09 | | $1,018.65 | | $6.21 | | 1.24% |
R6 | | $1,000 | | $983.80 | | $2.71 | | $1,022.07 | | $2.76 | | 0.55% |
Advisor | | $1,000 | | $983.70 | | $2.90 | | $1,021.87 | | $2.96 | | 0.59% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.
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58 | | Annual Report | | | | franklintempleton.com |
Franklin North Carolina Tax-Free Income Fund
This annual report for Franklin North Carolina Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and North Carolina personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | |
Ratings | | % of Total Investments |
AAA | | 24.12% |
AA | | 48.61% |
A | | 8.09% |
BBB | | 3.31% |
Below Investment Grade | | 1.29% |
Refunded | | 14.58% |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.70 on February 28, 2017, to $11.28 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 36.97 cents per share for the same period.2 The Performance Summary beginning on page 62 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 2.97% based on an annualization of February’s 2.92 cent per share monthly dividend and the maximum offering price of $11.78 on February 28, 2018. An investor in the 2018 maximum combined effective federal and
Dividend Distributions*
3/1/17–2/28/18
| | | | | | | | | | | | | | |
| | Dividend per Share (cents) |
| | | |
Month | | Class A | | | Class C | | | Class R6** | | | Advisor Class |
March | | | 3.45 | | | | 2.90 | | | | — | | | 3.54 |
April | | | 3.45 | | | | 2.90 | | | | — | | | 3.54 |
May | | | 3.45 | | | | 2.90 | | | | — | | | 3.54 |
June | | | 3.34 | | | | 2.79 | | | | — | | | 3.43 |
July | | | 3.14 | | | | 2.59 | | | | — | | | 3.23 |
August | | | 2.82 | | | | 2.27 | | | | 2.84 | | | 2.91 |
September | | | 2.82 | | | | 2.27 | | | | 2.94 | | | 2.91 |
October | | | 2.82 | | | | 2.27 | | | | 2.94 | | | 2.91 |
November | | | 2.92 | | | | 2.37 | | | | 3.04 | | | 3.01 |
December | | | 2.92 | | | | 2.38 | | | | 3.04 | | | 3.01 |
January | | | 2.92 | | | | 2.38 | | | | 3.04 | | | 3.01 |
February | | | 2.92 | | | | 2.38 | | | | 3.04 | | | 3.01 |
Total | | | 36.97 | | | | 30.40 | | | | 20.88 | | | 38.05 |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
North Carolina personal income tax bracket of 46.30% (including 3.80% Medicare tax) would need to earn a distribution rate of 5.53% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 131.
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franklintempleton.com | | Annual Report | | 59 |
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
State Update
North Carolina’s economy continued to grow during the 12 months under review. The housing market improved as home prices rose and foreclosure rates trended downward, although foreclosures remained in line with the national average. North Carolina’s unemployment rate fell from 4.8% in February 2017 to 4.5% at period-end, which was higher than the national average of 4.1%.3
The state ended fiscal year (FY) 2017 on June 30, 2017, with available reserves that were significantly higher than those in the prior year, largely due to growth in franchise, sales and use tax and individual income tax collections. In June 2017, the state legislature approved the 2017–2019 biennium budget the featured additional tax reductions that would take effect from January 1, 2019. The budget also included raises for teachers and state employees and a cost-of-living adjustment for retirees. Revenue growth for FY 2019 in the enacted budget was revised downward, when compared to the May 2017 consensus revenue forecast, to reflect the proposed tax changes. As of January 2018, the general fund revenue for the 2018 fiscal year-to-date was higher than the prior-year period.
North Carolina’s net tax-supported debt remained relatively low at 1.6% of personal income and $659 per capita, compared with the 2.5% and $1,006 national medians, respectively.4 Independent credit rating agency Standard & Poor’s (S&P) affirmed its AAA rating and stable outlook for the state’s general obligation debt.5 S&P cited the state’s strengths, including its diverse economic base, prudent fiscal management, low-to-moderate debt burden, well-funded pension system and progress in addressing other post-employment benefits. The stable outlook reflected S&P’s expectation that the strength of the state’s growing economy and budgetary performance in recent years has led to increasing reserves. S&P also expects North Carolina to continue to focus on structural budget adjustments, as the state monitors revenue performance in the light of recent tax reforms.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
Portfolio Composition
2/28/18
| | |
| | % of Total Investments* |
Refunded** | | 37.4% |
Hospital & Health Care | | 20.0% |
Higher Education | | 14.7% |
Utilities | | 14.6% |
General Obligation | | 5.9% |
Transportation | | 5.4% |
Subject to Government Appropriations | | 1.3% |
Housing | | 0.4% |
Corporate-Backed | | 0.3% |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
The Fund holds a very small portion of its assets in Puerto Rico bonds, which decreased in price over the period. Puerto Rico and its municipal issuers continue to experience significant financial difficulties and we continue to monitor developments affecting them.
Thank you for your continued participation in Franklin North Carolina Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate S&P’s rating of the Fund.
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FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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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franklintempleton.com | | Annual Report | | 61 |
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
Share Class | | Cumulative Total Return1
| | Average Annual Total Return2 |
| | |
A | | | | |
1-Year | | -0.45% | | -4.68% |
5-Year | | +3.90% | | -0.11% |
10-Year | | +43.88% | | +3.25% |
| | |
Advisor3 | | | | |
1-Year | | -0.36% | | -0.36% |
5-Year | | +4.42% | | +0.87% |
10-Year | | +45.09% | | +3.79% |
| | | | | | | | |
Share Class | | Distribution Rate4 | | Taxable Equivalent Distribution Rate5 | | 30-Day Standardized Yield6 | | Taxable Equivalent 30-Day Standardized Yield5 |
A | | 2.97% | | 5.53% | | 1.49% | | 2.77% |
Advisor | | 3.20% | | 5.96% | | 1.64% | | 3.05% |
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 65 for Performance Summary footnotes.
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62 | | Annual Report | | | | franklintempleton.com |
FRANKLIN NORTH CAROLINA 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 65 for Performance Summary footnotes.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 63 |
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | 8/1/17 | | 2/28/17 | | Change |
A (FXNCX) | | $11.28 | | N/A | | $11.70 | | -$0.42 |
C (FNCIX) | | $11.46 | | N/A | | $11.88 | | -$0.42 |
R6 (FNCQX) | | $11.27 | | $11.59 | | N/A | | -$0.32 |
Advisor (FNCZX) | | $11.28 | | N/A | | $11.70 | | -$0.42 |
Distributions (3/1/17–2/28/18)
| | |
Share Class | | Net Investment Income |
A | | $0.3697 |
C | | $0.3040 |
R6 (8/1/17–2/28/18) | | $0.2088 |
Advisor | | $0.3805 |
Total Annual Operating Expenses9
| | | | |
Share Class | | | |
A | | | 0.64 | % |
Advisor | | | 0.54 | % |
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64 | | Annual Report | | | | franklintempleton.com |
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund holds a very 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 7/1/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 7/1/09, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 7/1/09, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 7/1/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +34.77% and +3.50%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and North Carolina personal income tax rate of 46.30%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual | | Hypothetical | | |
| | | | (actual return after expenses) | | (5% annual return before expenses) | | |
| | | | | | | | |
Share Class | | Beginning Account Value 9/1/17 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $986.40 | | $3.40 | | $1,021.37 | | $3.46 | | 0.69% |
C | | $1,000 | | $983.90 | | $6.10 | | $1,018.65 | | $6.21 | | 1.24% |
R6 | | $1,000 | | $986.20 | | $2.71 | | $1,022.07 | | $2.76 | | 0.55% |
Advisor | | $1,000 | | $986.90 | | $2.91 | | $1,021.87 | | $2.96 | | 0.59% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.
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66 | | Annual Report | | | | franklintempleton.com |
Franklin Virginia Tax-Free Income Fund
This annual report for Franklin Virginia Tax-Free Income Fund covers the fiscal year ended February 28, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks to provide as high a level of income exempt from federal and Virginia personal income taxes as is consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.1
Credit Quality Composition*
2/28/18
| | |
Ratings | | % of Total Investments |
AAA | | 20.54% |
AA | | 52.47% |
A | | 8.20% |
BBB | | 2.79% |
Below Investment Grade | | 0.81% |
Refunded | | 15.04% |
Not Rated | | 0.15% |
*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 US 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 composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.31 on February 28, 2017, to $10.91 on February 28, 2018. The Fund’s Class A shares paid dividends totaling 36.41 cents per share for the same period.2 The Performance Summary beginning on page 70 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.09% based on an annualization of February’s 2.93 cent per share monthly dividend and the maximum offering price of $11.39 on February 28, 2018. An
Dividend Distributions*
3/1/17–2/28/18
| | | | | | | | | | | | | | | | |
| | Dividend per Share (cents) | |
| | | | |
Month | | Class A | | | Class C | | | Class R6** | | | Advisor Class | |
March | | | 3.23 | | | | 2.70 | | | | — | | | | 3.32 | |
April | | | 3.23 | | | | 2.70 | | | | — | | | | 3.32 | |
May | | | 3.23 | | | | 2.70 | | | | — | | | | 3.32 | |
June | | | 3.13 | | | | 2.60 | | | | — | | | | 3.22 | |
July | | | 3.03 | | | | 2.50 | | | | — | | | | 3.12 | |
August | | | 2.98 | | | | 2.45 | | | | 3.00 | | | | 3.07 | |
September | | | 2.93 | | | | 2.40 | | | | 3.05 | | | | 3.02 | |
October | | | 2.93 | | | | 2.40 | | | | 3.05 | | | | 3.02 | |
November | | | 2.93 | | | | 2.40 | | | | 3.05 | | | | 3.02 | |
December | | | 2.93 | | | | 2.41 | | | | 3.05 | | | | 3.02 | |
January | | | 2.93 | | | | 2.41 | | | | 3.05 | | | | 3.02 | |
February | | | 2.93 | | | | 2.41 | | | | 3.05 | | | | 3.02 | |
Total | | | 36.41 | | | | 30.08 | | | | 21.30 | | | | 37.49 | |
*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Effective 8/1/17, the Fund began offering Class R6 shares. See the prospectus for details.
investor in the 2018 maximum combined effective federal and Virginia personal income tax bracket of 46.55% (including 3.80% Medicare tax) would need to earn a distribution rate of 5.78% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
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.
1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 140.
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FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Commonwealth Update
Virginia’s economy continued to grow during the 12 months under review. However, the commonwealth’s economic growth lagged that of the nation as a whole. Virginia’s home sales and prices improved, and the foreclosure rate declined. The commonwealth’s unemployment rate declined from 4.0% in February 2017 to 3.5% at period-end, which was lower than the 4.1% national average.3
The commonwealth ended fiscal year (FY) 2017 on June 30, 2017, with a budget surplus after strong revenue growth, matching lawmakers’ expectations. The strong performance was largely due to payroll withholding and corporate tax collections that were higher than in previous years. The state planned to use the surplus for the water quality improvement fund, deposit to cash reserve and offsetting debt for capital projects. In March 2017, the governor signed the amendments to the 2016–2018 biennial budget into law, which included certain revenue enhancement measures and lower spending for higher education and other savings. Additionally, the amended budget included a conservative revenue growth forecast and increased spending to strengthen various programs. In December 2017, the governor proposed amendments to the enacted FY 2018 budget, which would result in additional spending, largely in Medicaid, and a balance that would roll into the 2018–2020 biennium. The governor also released the 2018–2020 biennial budget proposal, which included a below-trend revenue growth forecast, increased spending for Medicaid expansion, education, transportation, workforce development and pay raises for teachers and state employees. The proposal also included funding for core services in priority areas such as health and human services, public safety and veterans’ services as well as provisions for a deposit to the commonwealth’s reserve fund balance.
Virginia’s net tax-supported debt was 2.9% of personal income and $1,486 per capita, compared with the 2.5% and $1,006 national medians, respectively.4 Independent credit rating agency Standard & Poor’s (S&P) affirmed the commonwealth’s general obligation debt rating of AAA, but changed its outlook from stable to negative.5 The rating reflected S&P’s view of Virginia’s strong and diverse economy, strong financial policies and practices, history of proactive and conservative financial management and moderate debt levels. The negative outlook reflected S&P’s opinion of the commonwealth’s recent trends of drawing from reserves rather than implementing
Portfolio Composition
2/28/18
| | |
| | % of Total Investments* |
Refunded** | | 25.9% |
Utilities | | 18.3% |
Hospital & Health Care | | 14.7% |
Transportation | | 14.1% |
Higher Education | | 12.1% |
Housing | | 6.5% |
General Obligation | | 4.2% |
Subject to Government Appropriations | | 2.9% |
Other Revenue | | 1.3% |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
structural reforms. S&P believes that if the commonwealth was to end the biennium with stronger-than-projected reserves and demonstrate sustainable, structural balance, it might lead to a revision of its outlook to stable.
Manager’s Discussion
We used various investment strategies during the 12 months under review as we sought to maximize tax-free income for shareholders. Please read the Investment Strategy and Manager’s Discussion on page 5 for more information.
The Fund holds a very small portion of its assets in Puerto Rico bonds, which decreased in price over the period. Puerto Rico and its municipal issuers continue to experience significant financial difficulties and we continue to monitor developments affecting them.
Thank you for your continued participation in Franklin Virginia Tax-Free Income Fund. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Service, State Government - US: Medians - Total State Debt Remains Essentially Flat in 2017, 5/3/17.
5. This does not indicate S&P’s rating of the Fund.
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68 | | Annual Report | | | | franklintempleton.com |
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of February 28, 2018, 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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franklintempleton.com | | Annual Report | | 69 |
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Performance Summary as of February 28, 2018
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. 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.
Performance as of 2/28/18
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | |
Share Class | | Cumulative Total Return1
| | Average Annual Total Return2 |
| | |
A | | | | |
1-Year | | -0.34% | | -4.56% |
5-Year | | +6.44% | | +0.39% |
10-Year | | +43.91% | | +3.26% |
| | |
Advisor3 | | | | |
1-Year | | -0.15% | | -0.15% |
5-Year | | +7.05% | | +1.37% |
10-Year | | +45.23% | | +3.80% |
| | | | | | | | |
Share Class | | Distribution Rate4 | | Taxable Equivalent Distribution Rate5 | | 30-Day Standardized Yield6 | | Taxable Equivalent 30-Day Standardized Yield5 |
A | | 3.09% | | 5.78% | | 1.49% | | 2.79% |
Advisor | | 3.32% | | 6.21% | | 1.66% | | 3.11% |
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 73 for Performance Summary footnotes.
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70 | | Annual Report | | | | franklintempleton.com |
FRANKLIN VIRGINIA 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.
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See page 73 for Performance Summary footnotes.
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franklintempleton.com | | | | | | Annual Report | | 71 |
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| | | | | | | | |
Share Class (Symbol) | | 2/28/18 | | 8/1/17 | | 2/28/17 | | Change |
A (FRVAX) | | $10.91 | | N/A | | $11.31 | | -$0.40 |
C (FVAIX) | | $11.09 | | N/A | | $11.49 | | -$0.40 |
R6 (FRVRX) | | $10.91 | | $11.25 | | N/A | | -$0.34 |
Advisor (FRVZX) | | $10.92 | | N/A | | $11.31 | | -$0.39 |
Distributions (3/1/17–2/28/18)
| | |
Share Class | | Net Investment Income |
A | | $0.3641 |
C | | $0.3008 |
R6 (8/1/17–2/28/18) | | $0.2130 |
Advisor | | $0.3749 |
Total Annual Operating Expenses9
| | | | |
Share Class | | | |
A | | | 0.65 | % |
Advisor | | | 0.55 | % |
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72 | | Annual Report | | | | franklintempleton.com |
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic and regulatory changes in that state than a geographically diversified fund. The Fund holds a very 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. 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 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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Effective 7/1/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 7/1/09, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 7/1/09, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 7/1/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +36.67% and +3.67%.
4. Distribution rate is based on an annualization of the respective class’s February dividend and the maximum offering price (NAV for Advisor Class) per share on 2/28/18.
5. Taxable equivalent distribution rate and yield assume the published rates as of 1/15/18 for the maximum combined effective federal and Virginia personal income tax rate of 46.55%, based on the federal income tax rate of 37.00% plus 3.80% Medicare tax.
6. 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.
7. Source: Morningstar. The Bloomberg 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/BBB- or higher) by at least two of the following agencies: Moody’s, S&P and Fitch.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections 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.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | | | | | Annual Report | | 73 |
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | Actual | | Hypothetical | | |
| | | | (actual return after expenses) | | (5% annual return before expenses) | | |
| | | | | | | | |
Share Class | | Beginning Account Value 9/1/17 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Ending Account Value 2/28/18 | | Expenses Paid During Period 9/1/17–2/28/181,2 | | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $985.30 | | $3.49 | | $1,021.27 | | $3.56 | | 0.71% |
C | | $1,000 | | $981.90 | | $6.19 | | $1,018.55 | | $6.31 | | 1.26% |
R6 | | $1,000 | | $985.10 | | $2.76 | | $1,022.02 | | $2.81 | | 0.56% |
Advisor | | $1,000 | | $985.80 | | $3.00 | | $1,021.77 | | $3.06 | | 0.61% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
| | | | | | |
74 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin Alabama Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.16 | | | | $11.35 | | | | $11.55 | | | | $11.18 | | | | $11.91 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.35 | | | | 0.39 | | | | 0.42 | | | | 0.44 | | | | 0.44 | |
Net realized and unrealized gains (losses) | | | (0.27 | ) | | | (0.20 | ) | | | (0.20 | ) | | | 0.37 | | | | (0.74) | |
| | | | |
Total from investment operations | | | 0.08 | | | | 0.19 | | | | 0.22 | | | | 0.81 | | | | (0.30) | |
| | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.36 | ) | | | (0.38 | ) | | | (0.42 | ) | | | (0.44 | ) | | | (0.43) | |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (—) | d |
| | | | |
Total distributions | | | (0.36 | ) | | | (0.38 | ) | | | (0.42 | ) | | | (0.44 | ) | | | (0.43) | |
| | | | |
Net asset value, end of year | | | $10.88 | | | | $11.16 | | | | $11.35 | | | | $11.55 | | | | $11.18 | |
| | | | |
| | | | | |
Total returne | | | 0.72% | | | | 1.69% | | | | 1.99% | | | | 7.35% | | | | (2.49)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.74% | | | | 0.72% | | | | 0.71% | | | | 0.72% | | | | 0.71% | |
Net investment income | | | 3.16% | | | | 3.38% | | | | 3.73% | | | | 3.83% | | | | 3.86% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $208,340 | | | | $225,050 | | | | $228,212 | | | | $224,586 | | | | $218,826 | |
Portfolio turnover rate | | | 14.66% | | | | 16.81% | | | | 10.70% | | | | 6.46% | | | | 14.44% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dAmount rounds to less than $0.01 per share.
eTotal 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 | | 75 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Alabama Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.30 | | | | $11.49 | | | | $11.69 | | | | $11.31 | | | | $12.04 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.29 | | | | 0.33 | | | | 0.37 | | | | 0.38 | | | | 0.38 | |
Net realized and unrealized gains (losses) | | | (0.27 | ) | | | (0.20 | ) | | | (0.21 | ) | | | 0.38 | | | | (0.74) | |
| | | | |
Total from investment operations | | | 0.02 | | | | 0.13 | | | | 0.16 | | | | 0.76 | | | | (0.36) | |
| | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.30 | ) | | | (0.32 | ) | | | (0.36 | ) | | | (0.38 | ) | | | (0.37) | |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (—) | d |
| | | | |
Total distributions | | | (0.30 | ) | | | (0.32 | ) | | | (0.36 | ) | | | (0.38 | ) | | | (0.37) | |
| | | | |
Net asset value, end of year | | | $11.02 | | | | $11.30 | | | | $11.49 | | | | $11.69 | | | | $11.31 | |
| | | | |
| | | | | |
Total returne | | | 0.16% | | | | 1.11% | | | | 1.41% | | | | 6.77% | | | | (2.99)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.29% | | | | 1.27% | | | | 1.26% | | | | 1.27% | | | | 1.26% | |
Net investment income | | | 2.61% | | | | 2.83% | | | | 3.18% | | | | 3.28% | | | | 3.31% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $45,422 | | | | $55,619 | | | | $54,075 | | | | $53,424 | | | | $49,940 | |
Portfolio turnover rate | | | 14.66% | | | | 16.81% | | | | 10.70% | | | | 6.46% | | | | 14.44% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dAmount rounds to less than $0.01 per share.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
| | | | | | |
76 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Alabama Tax-Free Income Fund (continued)
| | |
| | Year Ended February 28, 2018a |
| |
Class R6 | | |
| |
Per share operating performance | | |
(for a share outstanding throughout the year) | | |
Net asset value, beginning of year | | $11.13 |
| |
Income from investment operationsb: | | |
Net investment incomec | | 0.22 |
Net realized and unrealized gains (losses) | | (0.26) |
| |
Total from investment operations | | (0.04) |
| |
Less distributions from net investment income | | (0.21) |
| |
Net asset value, end of year | | $10.88 |
| |
Total returnd | | (0.26)% |
| |
Ratios to average net assetse | | |
Expenses before waiver and payments by affiliates | | 0.66% |
Expenses net of waiver and payments by affiliates | | 0.61% |
Net investment income | | 3.29% |
| |
Supplemental data | | |
Net assets, end of year (000’s) | | $1,516 |
Portfolio turnover rate | | 14.66% |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 77 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Alabama Tax-Free Income Fund (continued)
| | | | |
| | Year Ended February 28, |
| | 2018 | | 2017a |
Advisor Class | | | | |
| | |
Per share operating performance | | | | |
(for a share outstanding throughout the year) | | | | |
Net asset value, beginning of year | | $11.16 | | $11.49 |
| | |
Income from investment operationsb: | | | | |
Net investment incomec | | 0.36 | | 0.18 |
Net realized and unrealized gains (losses) | | (0.27) | | (0.33) |
| | |
Total from investment operations | | 0.09 | | (0.15) |
| | |
Less distributions from net investment income | | (0.37) | | (0.18) |
| | |
Net asset value, end of year | | $10.88 | | $11.16 |
| | |
Total returnd | | 0.82% | | (1.33)% |
| | |
Ratios to average net assetse | | | | |
Expenses | | 0.64% | | 0.62% |
Net investment income | | 3.26% | | 3.48% |
| | |
Supplemental data | | | | |
Net assets, end of year (000’s) | | $7,689 | | $5,149 |
Portfolio turnover rate | | 14.66% | | 16.81% |
aFor the period September 15, 2016 (effective date) to February 28, 2017.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | |
78 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Alabama Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 98.7% | | | | | | | | |
Alabama 98.7% | | | | | | | | |
Alabama Federal Aid Highway Finance Authority Special Obligation Revenue, Series A, 5.00%, 6/01/37 | | $ | 3,000,000 | | | $ | 3,495,360 | |
Alabama Special Care Facilities Financing Authority Birmingham Revenue, Ascension Senior Credit Group, Refunding, Series B, 5.00%, 11/15/46 | | | 3,000,000 | | | | 3,359,160 | |
Alabama State Port Authority Docks Facilities Revenue, Pre-Refunded, 6.00%, 10/01/40 | | | 3,000,000 | | | | 3,330,750 | |
Anniston PBA Building Revenue, Judicial Center Project, AGMC Insured, Pre-Refunded, 5.00%, 3/01/43 | | | 4,120,000 | | | | 4,509,340 | |
Auburn University General Fee Revenue, Refunding, Series A, 5.00%, 6/01/33 | | | 2,500,000 | | | | 2,842,575 | |
Baldwin County Board of Education Revenue, | | | | | | | | |
School wts., Refunding, 5.00%, 6/01/24 | | | 2,605,000 | | | | 2,894,650 | |
School wts., Refunding, 5.00%, 6/01/26 | | | 2,870,000 | | | | 3,164,606 | |
School wts., Refunding, 5.00%, 6/01/27 | | | 3,015,000 | | | | 3,323,223 | |
School wts., Refunding, 5.00%, 6/01/31 | | | 2,000,000 | | | | 2,255,620 | |
Bessemer Governmental Utility Services Corp. Water Supply Revenue, Refunding, BAM Insured, 5.00%, 6/01/39 | | | 6,000,000 | | | | 6,737,520 | |
Bessemer Water Revenue, wts., Refunding, AGMC Insured, 5.00%, 1/01/47 | | | 2,590,000 | | | | 2,862,080 | |
Birmingham GO, Capital Appreciation, Series A, 5.00%, 3/01/43 | | | 5,000,000 | | | | 5,514,550 | |
Birmingham Special Care Facilities Financing Authority Health Care Facility Revenue, Children’s Hospital, Assured Guaranty, Pre-Refunded, 6.00%, 6/01/39 | | | 4,000,000 | | | | 4,222,520 | |
Birmingham Water Works Board Water Revenue, | | | | | | | | |
Senior, Refunding, Series A, 4.00%, 1/01/35 | | | 4,000,000 | | | | 4,156,800 | |
Series A, Assured Guaranty, Pre-Refunded, 5.25%, 1/01/39 | | | 5,950,000 | | | | 6,141,411 | |
Series B, 5.00%, 1/01/43 | | | 3,745,000 | | | | 4,120,024 | |
Subordinate, Refunding, Series B, 5.00%, 1/01/43 | | | 10,000,000 | | | | 11,260,000 | |
Butler County IDA Environmental Improvement Revenue, International Paper Co. Projects, Series A, 7.00%, 9/01/32 | | | 1,000,000 | | | | 1,027,140 | |
Calhoun County Board of Education Special Tax School wts. Revenue, BAM Insured, 5.00%, 2/01/46 | | | 6,000,000 | | | | 6,617,280 | |
Chatom IDB Gulf Opportunity Zone Revenue, | | | | | | | | |
PowerSouth Energy Cooperative, Refunding, Series A, Assured Guaranty, 5.00%, 8/01/30 | | | 5,250,000 | | | | 5,592,352 | |
PowerSouth Energy Cooperative, Refunding, Series A, Assured Guaranty, 5.00%, 8/01/37 | | | 5,000,000 | | | | 5,318,750 | |
Cullman GO, wts., Refunding, 5.00%, 7/01/30 | | | 1,100,000 | | | | 1,247,631 | |
Cullman Utilities Board Water Revenue, AGMC Insured, 5.00%, 9/01/41 | | | 3,000,000 | | | | 3,196,230 | |
DCH Health Care Authority Health Care Facilities Revenue, Refunding, 5.00%, 6/01/36 | | | 2,000,000 | | | | 2,196,160 | |
aEast Alabama Health Care Authority Health Care Facilities Revenue, | | | | | | | | |
Mandatory Put, Series A, Pre-Refunded, 5.25%, 9/01/18 | | | 5,000,000 | | | | 5,097,550 | |
Mandatory Put, Series B, Pre-Refunded, 5.50%, 9/01/18 | | | 4,500,000 | | | | 4,592,250 | |
Gadsden Waterworks and Sewer Board Revenue, | | | | | | | | |
Refunding, AGMC Insured, 5.00%, 6/01/29 | | | 1,000,000 | | | | 1,156,000 | |
Refunding, AGMC Insured, 5.00%, 6/01/30 | | | 1,000,000 | | | | 1,150,560 | |
Homewood Educational Building Authority Revenue, Educational Facilities, Samford University, Series A, AGMC Insured, 5.00%, 12/01/41 | | | 10,000,000 | | | | 10,883,000 | |
Homewood GO, Capital Improvement wts., Pre-Refunded, 5.00%, 9/01/42 | | | 4,000,000 | | | | 4,535,760 | |
Huntsville GO, wts., Series B, 5.00%, 5/01/38 | | | 4,775,000 | | | | 5,549,075 | |
Huntsville Water System Revenue, wts., 5.00%, 11/01/35 | | | 4,000,000 | | | | 4,542,480 | |
Infirmary Health System Special Care Facilities Financing Authority of Mobile Revenue, Infirmary Health System Inc., Series A, 5.00%, 2/01/41 | | | 3,000,000 | | | | 3,242,280 | |
Jacksonville State University Tuition and Fee Revenue, Refunding, AGMC Insured, 5.00%, 12/01/36 | | | 5,000,000 | | | | 5,672,100 | |
Leeds Public Educational Building Authority Educational Facilities Revenue, Assured Guaranty, Pre- Refunded, 5.125%, 4/01/33 | | | 3,630,000 | | | | 3,641,253 | |
Limestone County Water and Sewer Authority Water Revenue, | | | | | | | | |
AGMC Insured, 5.00%, 12/01/39 | | | 3,750,000 | | | | 3,919,650 | |
Refunding, Series B, BAM Insured, 5.00%, 12/01/43 | | | 5,920,000 | | | | 6,665,032 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 79 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Alabama Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Alabama (continued) | | | | | | | | |
Madison County Board of Education Capital Outlay Revenue, Tax Anticipation wts., Assured Guaranty, Pre-Refunded, 5.125%, 9/01/34 | | $ | 600,000 | | | $ | 611,490 | |
Madison GO, wts., Series A, 5.00%, 4/01/37 | | | 2,590,000 | | | | 2,900,619 | |
Madison Water and Wastewater Board Water and Sewer Revenue, Refunding, 5.00%, 12/01/41 | | | 4,610,000 | | | | 5,178,644 | |
Marshall County Board of Education Special Tax, School wts., AGMC Insured, 4.00%, 3/01/41 | | | 2,510,000 | | | | 2,551,264 | |
Mobile County GO, wts., 5.00%, 8/01/36 | | | 1,170,000 | | | | 1,338,960 | |
Mobile Public Educational Building Authority Revenue, Limited Obligation School, Series A, Assured Guaranty, Pre-Refunded, 5.00%, 3/01/33 | | | 1,500,000 | | | | 1,500,000 | |
Mobile Water and Sewer Commissioners Water and Sewer Revenue, Refunding, 5.00%, 1/01/36 | | | 10,000,000 | | | | 11,020,400 | |
Morgan County Board of Education Capital Outlay School wts. Revenue, | | | | | | | | |
Pre-Refunded, 5.00%, 3/01/35 | | | 4,300,000 | | | | 4,848,122 | |
Refunding, 5.00%, 3/01/35 | | | 2,720,000 | | | | 3,000,051 | |
Opelika Utilities Board Utility Revenue, | | | | | | | | |
Assured Guaranty, Pre-Refunded, 5.00%, 6/01/37 | | | 3,000,000 | | | | 3,179,280 | |
Refunding, 4.00%, 6/01/41 | | | 2,000,000 | | | | 2,054,440 | |
Oxford GO, wts., Series C, 5.00%, 10/01/29 | | | 1,435,000 | | | | 1,606,483 | |
Pelham GO, wts., 5.00%, 2/01/34 | | | 2,635,000 | | | | 2,979,526 | |
Phenix City GO, School wts., Series A, 5.00%, 8/01/43 | | | 3,000,000 | | | | 3,300,840 | |
Phenix City Water and Sewer Revenue, wts., Series A, AGMC Insured, 5.00%, 8/15/40 | | | 2,000,000 | | | | 2,127,060 | |
Selma IDBR, | | | | | | | | |
Gulf Opportunity Zone, International Paper Co. Project, Series A, 5.80%, 5/01/34 | | | 3,000,000 | | | | 3,253,470 | |
Gulf Opportunity Zone, International Paper Co. Project, Series A, 5.375%, 12/01/35 | | | 3,000,000 | | | | 3,323,580 | |
Talladega County Board of Education Special Tax School wts. Revenue, Sales Tax, Refunding, BAM Insured, 5.00%, 11/01/39 | | | 2,000,000 | | | | 2,253,420 | |
Troy Public Educational Building Authority Educational Facilities Revenue, | | | | | | | | |
AGMC Insured, 5.25%, 12/01/40 | | | 295,000 | | | | 318,110 | |
AGMC Insured, Pre-Refunded, 5.25%, 12/01/40 | | | 1,705,000 | | | | 1,868,185 | |
Trussville GO, | | | | | | | | |
wts., Series B, 5.00%, 10/01/39 | | | 1,895,000 | | | | 2,120,391 | |
wts., Series B, Pre-Refunded, 5.00%, 10/01/39 | | | 1,105,000 | | | | 1,271,015 | |
Tuscaloosa City Board of Education School Tax wts. Revenue, 5.00%, 8/01/41 | | | 4,000,000 | | | | 4,514,720 | |
Tuscaloosa County Board of Education Special Tax, School wts., 4.00%, 2/01/47 | | | 5,000,000 | | | | 5,071,100 | |
Tuscaloosa Public Educational Building Authority Student Housing Revenue, Ridgecrest Student Housing LLC, University of Alabama Ridgecrest Residential Project, Assured Guaranty, Pre-Refunded, 6.75%, 7/01/38 | | | 5,000,000 | | | | 5,088,600 | |
University of Alabama at Birmingham Medicine Finance Authority Revenue, Refunding, Series B, 5.00%, 9/01/29 | | | 5,000,000 | | | | 5,851,450 | |
University of Alabama General Revenue, University of Alabama at Birmingham, Refunding, Series D-2, 5.00%, 10/01/37 | | | 7,520,000 | | | | 8,397,885 | |
University of Montevallo Revenue, Refunding, BAM Insured, 5.00%, 5/01/42. | | | 2,500,000 | | | | 2,818,875 | |
University of South Alabama University Facilities Revenue, Capital Improvement, BHAC Insured, Pre- Refunded, 5.00%, 8/01/38 | | | 5,000,000 | | | | 5,076,050 | |
| | | | | | | | |
Total Municipal Bonds (Cost $250,644,555) 98.7% | | | | | | | 259,456,752 | |
Other Assets, less Liabilities 1.3% | | | | | | | 3,511,359 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | $ | 262,968,111 | |
| | | | | | | | |
See Abbreviations on page 170.
aThe maturity date shown represents the mandatory put date.
| | | | | | |
80 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Florida Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $10.88 | | | | $11.19 | | | | $11.38 | | | | $11.05 | | | | $11.96 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.39 | | | | 0.43 | | | | 0.45 | | | | 0.48 | | | | 0.46 | |
Net realized and unrealized gains (losses) | | | (0.39 | ) | | | (0.31 | ) | | | (0.20 | ) | | | 0.34 | | | | (0.90) | |
| | | | |
Total from investment operations | | | — | | | | 0.12 | | | | 0.25 | | | | 0.82 | | | | (0.44) | |
| | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.41 | ) | | | (0.43 | ) | | | (0.44 | ) | | | (0.49 | ) | | | (0.44 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (0.03) | |
| | | | |
Total distributions | | | (0.41 | ) | | | (0.43 | ) | | | (0.44 | ) | | | (0.49 | ) | | | (0.47) | |
| | | | |
Net asset value, end of year | | | $10.47 | | | | $10.88 | | | | $11.19 | | | | $11.38 | | | | $11.05 | |
| | | | |
| | | | | |
Total returnd | | | (0.02)% | | | | 1.05% | | | | 2.32% | | | | 7.57% | | | | (3.65)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.67% | e | | | 0.65% | | | | 0.64% | | | | 0.64% | | | | 0.62% | |
Net investment income | | | 3.63% | | | | 3.82% | | | | 4.01% | | | | 4.25% | | | | 4.13% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $536,099 | | | | $635,594 | | | | $689,641 | | | | $725,177 | | | | $737,869 | |
Portfolio turnover rate | | | 10.10% | | | | 13.84% | | | | 5.17% | | | | 5.17% | | | | 7.39% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 81 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Florida Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.10 | | | | $11.41 | | | | $11.59 | | | | $11.25 | | | | $12.17 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.34 | | | | 0.37 | | | | 0.39 | | | | 0.42 | | | | 0.41 | |
Net realized and unrealized gains (losses) | | | (0.40 | ) | | | (0.32 | ) | | | (0.19 | ) | | | 0.35 | | | | (0.92) | |
| | | | |
Total from investment operations | | | (0.06 | ) | | | 0.05 | | | | 0.20 | | | | 0.77 | | | | (0.51) | |
| | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.35 | ) | | | (0.36 | ) | | | (0.38 | ) | | | (0.43 | ) | | | (0.38 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (0.03) | |
| | | | |
Total distributions | | | (0.35 | ) | | | (0.36 | ) | | | (0.38 | ) | | | (0.43 | ) | | | (0.41) | |
| | | | |
Net asset value, end of year | | | $10.69 | | | | $11.10 | | | | $11.41 | | | | $11.59 | | | | $11.25 | |
| | | | |
| | | | | |
Total returnd | | | (0.58)% | | | | 0.46% | | | | 1.81% | | | | 6.94% | | | | (4.19)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.22% | e | | | 1.20% | | | | 1.19% | | | | 1.19% | | | | 1.17% | |
Net investment income | | | 3.08% | | | | 3.27% | | | | 3.46% | | | | 3.70% | | | | 3.58% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $73,237 | | | | $90,754 | | | | $88,734 | | | | $89,809 | | | | $89,944 | |
Portfolio turnover rate | | | 10.10% | | | | 13.84% | | | | 5.17% | | | | 5.17% | | | | 7.39% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | |
82 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Florida Tax-Free Income Fund (continued)
| | |
| | Year Ended February 28, 2018a |
| |
Class R6 | | |
| |
Per share operating performance | | |
(for a share outstanding throughout the year) | | |
Net asset value, beginning of year | | $10.82 |
| |
Income from investment operationsb: | | |
Net investment incomec | | 0.24 |
Net realized and unrealized gains (losses) | | (0.33) |
| |
Total from investment operations | | (0.09) |
| |
Less distributions from net investment income | | (0.24) |
| |
Net asset value, end of year | | $10.49 |
| |
Total returnd | | (0.88)% |
| |
Ratios to average net assetse | | |
Expenses before waiver and payments by affiliates | | 0.58% |
Expenses net of waiver and payments by affiliates | | 0.54% |
Net investment income | | 3.76% |
| |
Supplemental data | | |
Net assets, end of year (000’s) | | $2,387 |
Portfolio turnover rate | | 10.10% |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 83 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Florida Tax-Free Income Fund (continued)
| | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017a | |
Advisor Class | | | | | | | | |
| | |
Per share operating performance | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | |
Net asset value, beginning of year | | | $10.89 | | | | $11.23 | |
| | |
Income from investment operationsb: | | | | | | | | |
Net investment incomec | | | 0.40 | | | | 0.20 | |
Net realized and unrealized gains (losses) | | | (0.38 | ) | | | (0.34 | ) |
| | |
Total from investment operations | | | 0.02 | | | | (0.14 | ) |
| | |
Less distributions from net investment income | | | (0.42 | ) | | | (0.20 | ) |
| | |
Net asset value, end of year | | | $10.49 | | | | $10.89 | |
| | |
Total returnd | | | 0.17% | | | | (1.25)% | |
| | |
Ratios to average net assetse | | | | | | | | |
Expenses | | | 0.57% | f | | | 0.55% | |
Net investment income | | | 3.73% | | | | 3.92% | |
| | |
Supplemental data | | | | | | | | |
Net assets, end of year (000’s) | | | $20,467 | | | | $10,916 | |
Portfolio turnover rate | | | 10.10% | | | | 13.84% | |
aFor the period September 15, 2016 (effective date) to February 28, 2017.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | |
84 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Florida Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 98.6% | | | | | | | | |
Florida 96.6% | | | | | | | | |
Alachua County Health Facilities Authority Health Facilities Revenue, | | | | | | | | |
Shands Healthcare Project, Series D-1, Pre-Refunded, 6.50%, 12/01/19 | | $ | 1,215,000 | | | $ | 1,260,490 | |
Shands Healthcare Project, Series D-1, Pre-Refunded, 6.75%, 12/01/22 | | | 1,000,000 | | | | 1,039,290 | |
Shands Healthcare Project, Series D-2, Pre-Refunded, 6.75%, 12/01/30 | | | 5,000,000 | | | | 5,192,650 | |
Brevard County Health Facilities Authority Health Facilities Revenue, | | | | | | | | |
Health First Inc. Project, Refunding, 5.00%, 4/01/39 | | | 5,000,000 | | | | 5,402,700 | |
Health First Inc. Project, Series B, Pre-Refunded, 7.00%, 4/01/39 | | | 2,000,000 | | | | 2,116,100 | |
Broward County Airport System Revenue, 5.00%, 10/01/47 | | | 4,000,000 | | | | 4,457,120 | |
Broward County Water and Sewer Utility Revenue, Series A, Pre-Refunded, 5.25%, 10/01/34 | | | 2,200,000 | | | | 2,250,732 | |
Central Expressway Authority Revenue, | | | | | | | | |
senior lien, Refunding, BAM Insured, 4.00%, 7/01/41 | | | 5,000,000 | | | | 5,109,300 | |
senior lien, Refunding, Series B, 4.00%, 7/01/40 | | | 5,825,000 | | | | 6,046,466 | |
Citizens Property Insurance Corp. Revenue, Personal Lines Account/Commercial Lines Account, senior secured, Series A-1, 5.00%, 6/01/22 | | | 5,000,000 | | | | 5,601,200 | |
City of Winter Park Water and Sewer Revenue, Improvement, Pre-Refunded, 5.00%, 12/01/34 | | | 2,000,000 | | | | 2,117,720 | |
Clearwater City Water and Sewer Revenue, Series A, Pre-Refunded, 5.25%, 12/01/39 | | | 2,000,000 | | | | 2,128,100 | |
Collier County Educational Facilities Authority Revenue, Hodges University Inc. Project, 5.625%, 11/01/28 | | | 2,860,000 | | | | 3,125,093 | |
Collier County IDA Health Care Facilities Revenue, NCH Healthcare System Project, 6.25%, 10/01/39 | | | 5,000,000 | | | | 5,529,650 | |
Duval County School Board COP, Master Lease Program, Series A, Assured Guaranty, Pre-Refunded, 5.25%, 7/01/35 | | | 10,000,000 | | | | 10,490,600 | |
Escambia County Health Facilities Authority Health Facility Revenue, | | | | | | | | |
Baptist Hospital Inc. Project, Refunding, Series A, 5.75%, 8/15/29 | | | 7,195,000 | | | | 7,732,395 | |
Baptist Hospital Inc. Project, Series A, 6.00%, 8/15/36 | | | 11,000,000 | | | | 11,871,090 | |
Florida Higher Educational Facilities Financing Authority Revenue, | | | | | | | | |
Bethune-Cookman University Inc. Project, Refunding, 5.375%, 7/01/32 | | | 3,500,000 | | | | 3,680,775 | |
Nova Southeastern University Project, 6.375%, 4/01/31 | | | 2,750,000 | | | | 3,052,775 | |
Rollins College Project, Pre-Refunded, 5.00%, 12/01/37. | | | 10,000,000 | | | | 10,862,100 | |
The University of Tampa Project, Refunding, Series A, 5.25%, 4/01/42 | | | 2,000,000 | | | | 2,201,440 | |
Florida State Board of Education GO, | | | | | | | | |
Public Education Capital Outlay, Refunding, Series C, 4.00%, 6/01/35 | | | 5,340,000 | | | | 5,679,197 | |
Public Education Capital Outlay, Refunding, Series D, 6.00%, 6/01/23 | | | 15,000,000 | | | | 17,982,450 | |
Public Education Capital Outlay, Refunding, Series F, 4.00%, 6/01/37 | | | 8,000,000 | | | | 8,472,320 | |
Public Education Capital Outlay, Series A, Pre-Refunded, 5.50%, 6/01/38 | | | 5,000,000 | | | | 5,101,600 | |
Public Education Capital Outlay, Series H, 5.00%, 6/01/40 | | | 7,295,000 | | | | 7,793,321 | |
Florida State Governmental Utility Authority Revenue, Lehigh Utility System, Pre-Refunded, 5.25%, 10/01/40 | | | 5,000,000 | | | | 5,599,200 | |
Florida State Mid-Bay Bridge Authority Revenue, | | | | | | | | |
Exchangeable, Series D, ETM, 6.10%, 10/01/22 | | | 3,545,000 | | | | 4,081,997 | |
first senior lien, Refunding, Series A, 5.00%, 10/01/40 | | | 5,000,000 | | | | 5,498,950 | |
Series A, ETM, 6.875%, 10/01/22 | | | 6,000,000 | | | | 6,724,440 | |
Florida State Municipal Loan Council Revenue, Series D, AGMC Insured, 5.50%, 10/01/41 | | | 3,750,000 | | | | 4,171,050 | |
Florida State Municipal Power Agency Revenue, | | | | | | | | |
All-Requirements Power Supply Project, Series A, 5.00%, 10/01/31 | | | 950,000 | | | | 967,908 | |
All-Requirements Power Supply Project, Series A, Pre-Refunded, 5.00%, 10/01/31 | | | 5,050,000 | | | | 5,159,130 | |
All-Requirements Power Supply Project, Series A, Pre-Refunded, 6.25%, 10/01/31 | | | 2,000,000 | | | | 2,147,800 | |
Stanton Project, Refunding, 5.50%, 10/01/19 | | | 1,000,000 | | | | 1,062,070 | |
Fort Pierce Capital Improvement Revenue, Refunding, Series A, Assured Guaranty, 6.00%, 9/01/32 | | | 1,500,000 | | | | 1,532,175 | |
Fort Pierce Utilities Authority Revenue, | | | | | | | | |
Capital Appreciation, Series B, AMBAC Insured, zero cpn., 10/01/20 | | | 3,090,000 | | | | 2,907,721 | |
Capital Appreciation, Series B, AMBAC Insured, zero cpn., 10/01/21 | | | 2,585,000 | | | | 2,361,630 | |
Capital Appreciation, Series B, AMBAC Insured, zero cpn., 10/01/22 | | | 3,090,000 | | | | 2,726,616 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 85 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Florida Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Florida (continued) | | | | | | | | |
Fort Pierce Utilities Authority Revenue, (continued) | | | | | | | | |
Capital Appreciation, Series B, AMBAC Insured, zero cpn., 10/01/23 | | $ | 3,060,000 | | | $ | 2,605,804 | |
Capital Appreciation, Series B, AMBAC Insured, zero cpn., 10/01/24 | | | 2,560,000 | | | | 2,101,734 | |
Greater Orlando Aviation Authority Airport Facilities Revenue, | | | | | | | | |
Priority Subordinated, Series A, 5.00%, 10/01/47 | | | 5,000,000 | | | | 5,545,700 | |
Series A, 5.00%, 10/01/39 | | | 5,000,000 | | | | 5,380,600 | |
Series C, Pre-Refunded, 5.00%, 10/01/39 | | | 4,250,000 | | | | 4,481,413 | |
Halifax Hospital Medical Center Hospital Revenue, | | | | | | | | |
Daytona Beach, Refunding, 5.00%, 6/01/46 | | | 4,250,000 | | | | 4,547,968 | |
Daytona Beach, Refunding and Improvement, 5.00%, 6/01/36 | | | 2,500,000 | | | | 2,725,350 | |
Daytona Beach, Series B-1, AGMC Insured, Pre-Refunded, 5.50%, 6/01/38 | | | 5,000,000 | | | | 5,051,150 | |
Hialeah Housing Authority Revenue, Affordable Housing Program, Refunding, GNMA Secured, 5.30%, 12/20/18 | | | 155,000 | | | | 155,440 | |
Hillsborough County Aviation Authority Revenue, Tampa International Airport, Customer Facility Charge, Series A, 5.00%, 10/01/44 | | | 5,000,000 | | | | 5,489,650 | |
Hillsborough County IDA, PCR, Tampa Electric Co. Project, Series A, 5.65%, 5/15/18 | | | 6,500,000 | | | | 6,553,105 | |
Jacksonville Sales Tax Revenue, Better Jacksonville, Refunding, 5.00%, 10/01/30 | | | 2,000,000 | | | | 2,215,100 | |
Lakeland Hospital Revenue, Lakeland Regional Health Systems, 5.00%, 11/15/45 | | | 12,300,000 | | | | 13,293,963 | |
Martin County Health Facilities Authority Hospital Revenue, Martin Memorial Medical Center, 5.50%, 11/15/42 | | | 2,100,000 | | | | 2,281,041 | |
Melbourne Water and Sewer Improvement Revenue, Capital Appreciation, FGIC Insured, ETM, zero cpn., 10/01/26 | | | 1,500,000 | | | | 1,190,640 | |
Melbourne Water and Sewer Revenue, | | | | | | | | |
Capital Appreciation, Refunding, Series B, NATL Insured, zero cpn., 10/01/22 | | | 1,785,000 | | | | 1,562,339 | |
Capital Appreciation, Refunding, Series B, NATL Insured, zero cpn., 10/01/26 | | | 4,500,000 | | | | 3,369,600 | |
Miami Beach RDA Tax Increment Revenue, City Center/Historic Convention Village, Refunding, Series A, AGMC Insured, 5.00%, 2/01/40 | | | 5,000,000 | | | | 5,627,500 | |
Miami Beach Stormwater Revenue, 5.00%, 9/01/41 | | | 10,000,000 | | | | 11,163,200 | |
Miami Beach Water and Sewer Revenue, Refunding, 5.00%, 9/01/47 | | | 10,000,000 | | | | 11,341,500 | |
Miami Health Facilities Authority Revenue, Miami Jewish Health Systems Inc. Project, Refunding, 5.125%, 7/01/46 | | | 2,250,000 | | | | 2,454,525 | |
Miami Parking System Revenue, Refunding, Assured Guaranty, 5.00%, 10/01/39 | | | 4,000,000 | | | | 4,176,800 | |
Miami Special Obligation Revenue, | | | | | | | | |
Parking, Marlins Stadium Project, Series A, AGMC Insured, 5.25%, 7/01/35 | | | 5,000,000 | | | | 5,358,600 | |
Street and Sidewalk Improvement Program, 5.625%, 1/01/39 | | | 15,000,000 | | | | 15,466,650 | |
Miami-Dade County Aviation Revenue, | | | | | | | | |
Miami International Airport, Hub of the Americas, Refunding, Series A, 5.50%, 10/01/36 | | | 5,000,000 | | | | 5,290,150 | |
Miami International Airport, Refunding, Series A, 5.375%, 10/01/35 | | | 7,500,000 | | | | 8,145,300 | |
Miami International Airport, Refunding, Series B, 5.00%, 10/01/37 | | | 10,000,000 | | | | 11,186,100 | |
Miami International Airport, Refunding, Series B, 5.00%, 10/01/40 | | | 5,000,000 | | | | 5,592,900 | |
Miami-Dade County Expressway Authority Toll System Revenue, Series A, 5.00%, 7/01/40 | | | 18,770,000 | | | | 19,943,876 | |
Miami-Dade County GO, Building Better Communities Program, Series B-1, Pre-Refunded, 5.75%, 7/01/33 | | | 5,000,000 | | | | 5,073,850 | |
Miami-Dade County Health Facilities Authority Hospital Revenue, | | | | | | | | |
Miami Children’s Hospital Project, Series A, 6.125%, 8/01/42 | | | 1,055,000 | | | | 1,141,120 | |
Miami Children’s Hospital Project, Series A, Pre-Refunded, 6.125%, 8/01/42 | | | 2,945,000 | | | | 3,248,188 | |
Nicklaus Children’s Hospital Project, Refunding, 5.00%, 8/01/42 | | | 3,000,000 | | | | 3,330,690 | |
Nicklaus Children’s Hospital Project, Refunding, 4.00%, 8/01/47 | | | 3,500,000 | | | | 3,487,890 | |
Miami-Dade County School Board COP, Master Lease Purchase Agreement, Series A, Assured Guaranty, Pre-Refunded, 5.375%, 2/01/34 | | | 5,000,000 | | | | 5,181,650 | |
Miami-Dade County School District GO, School, 5.00%, 3/15/43 | | | 2,465,000 | | | | 2,720,497 | |
Miami-Dade County Seaport Revenue, Series A, 6.00%, 10/01/38 | | | 10,000,000 | | | | 11,608,700 | |
| | | | | | |
86 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Florida Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Florida (continued) | | | | | | | | |
Miami-Dade County Transit System Sales Surtax Revenue, 5.00%, 7/01/42 | | $ | 15,000,000 | | | $ | 16,413,450 | |
Miami-Dade County Water and Sewer System Revenue, | | | | | | | | |
Assured Guaranty, Pre-Refunded, 5.00%, 10/01/39 | | | 10,000,000 | | | | 10,864,000 | |
Refunding, Series A, 5.00%, 10/01/42 | | | 10,000,000 | | | | 11,084,600 | |
North Sumter County Utility Dependent District Utility Revenue, 5.75%, 10/01/43 | | | 5,000,000 | | | | 5,467,900 | |
Orange County Health Facilities Authority Revenue, | | | | | | | | |
Hospital, Orlando Health Inc., Series A, 5.00%, 10/01/42 | | | 10,000,000 | | | | 10,857,500 | |
Hospital, Orlando Health Obligated Group, Refunding, Series A, 5.00%, 10/01/39 | | | 5,500,000 | | | | 6,060,560 | |
Hospital, Orlando Health Obligated Group, Series B, AGMC Insured, Pre-Refunded, 5.00%, 12/01/32 | | | 5,000,000 | | | | 5,129,622 | |
Hospital, Orlando Regional Healthcare System, Series C, Pre-Refunded, 5.25%, 10/01/35 | | | 4,000,000 | | | | 4,089,880 | |
Presbyterian Retirement Communities Project, 5.00%, 8/01/41 | | | 5,000,000 | | | | 5,491,150 | |
Orange County School Board COP, Series A, Assured Guaranty, Pre-Refunded, 5.50%, 8/01/34 | | | 10,000,000 | | | | 10,561,700 | |
Orlando-Orange County Expressway Authority Revenue, | | | | | | | | |
Refunding, Series A, 5.00%, 7/01/35 | | | 8,330,000 | | | | 9,244,384 | |
senior lien, AMBAC Insured, ETM, 7.625%, 7/01/18 | | | 90,000 | | | | 91,853 | |
Series A, Pre-Refunded, 5.00%, 7/01/40 | | | 5,000,000 | | | | 5,387,250 | |
Series C, Pre-Refunded, 5.00%, 7/01/35 | | | 4,000,000 | | | | 4,300,280 | |
Series C, Pre-Refunded, 5.00%, 7/01/40 | | | 2,755,000 | | | | 2,961,818 | |
Palm Beach County Health Facilities Authority Revenue, Lifespace Communities Inc., Refunding, Series B, 5.00%, 5/15/47 | | | 5,000,000 | | | | 5,459,700 | |
Palm Beach County Solid Waste Authority Revenue, Improvement, Series B, Pre-Refunded, 5.50%, 10/01/25 | | | 5,000,000 | | | | 5,122,500 | |
Palm Beach County Water and Sewer Revenue, 5.00%, 10/01/40 | | | 5,000,000 | | | | 5,254,550 | |
Panama City Beach Utility Revenue, Assured Guaranty, Pre-Refunded, 5.00%, 6/01/39 | | | 3,000,000 | | | | 3,129,960 | |
Port St. Lucie Utility System Revenue, | | | | | | | | |
Assured Guaranty, Pre-Refunded, 5.25%, 9/01/35 | | | 1,775,000 | | | | 1,809,630 | |
Refunding, Assured Guaranty, 5.25%, 9/01/35 | | | 225,000 | | | | 229,187 | |
Sarasota County Health Facilities Authority Revenue, | | | | | | | | |
Retirement Facility, Improvement, Village On The Isle Project, Refunding, 5.00%, 1/01/32 | | | 1,100,000 | | | | 1,205,490 | |
Retirement Facility, Improvement, Village On The Isle Project, Series A, 5.00%, 1/01/37 | | | 1,350,000 | | | | 1,473,930 | |
Retirement Facility, Improvement, Village On The Isle Project, Series A, 5.00%, 1/01/42 | | | 1,600,000 | | | | 1,742,448 | |
Retirement Facility, Improvement, Village On The Isle Project, Series A, 5.00%, 1/01/47 | | | 2,450,000 | | | | 2,660,014 | |
South Lake County Hospital District Revenue, South Lake Hospital Inc., Refunding, 5.25%, 10/01/34 | | | 5,000,000 | | | | 5,280,800 | |
South Miami Health Facilities Authority Hospital Revenue, | | | | | | | | |
Baptist Health South Florida, Refunding, 4.00%, 8/15/42 | | | 5,000,000 | | | | 5,015,550 | |
Baptist Health South Florida, Refunding, 5.00%, 8/15/42 | | | 6,500,000 | | | | 7,251,140 | |
St. Petersburg Public Utilities Revenue, Series A, Pre-Refunded, 5.00%, 10/01/36 | | | 3,180,000 | | | | 3,353,151 | |
Sunrise Utilities System Revenue, | | | | | | | | |
AMBAC Insured, Pre-Refunded, 5.20%, 10/01/22 | | | 1,050,000 | | | | 1,120,161 | |
Refunding, AMBAC Insured, 5.20%, 10/01/22 | | | 1,500,000 | | | | 1,533,360 | |
Tamarac Utility System Revenue, Assured Guaranty, Pre-Refunded, 5.00%, 10/01/39 | | | 1,585,000 | | | | 1,671,303 | |
Tampa Bay Water Regional Water Supply Authority Utility System Revenue, | | | | | | | | |
5.00%, 10/01/38 | | | 10,000,000 | | | | 11,272,200 | |
Pre-Refunded, 5.00%, 10/01/38. | | | 5,000,000 | | | | 5,108,050 | |
Tampa Health System Revenue, Baycare, Series A, 4.00%, 11/15/46 | | | 5,000,000 | | | | 5,024,100 | |
Tampa Hospital Revenue, H. Lee Moffitt Cancer Center Project, Refunding, Series B, 5.00%, 7/01/37 | | | 5,000,000 | | | | 5,511,050 | |
Tampa Sports Authority Revenue, | | | | | | | | |
Guaranteed Package, Tampa Bay Arena Project, NATL Insured, 6.05%, 10/01/20 | | | 1,090,000 | | | | 1,142,549 | |
Guaranteed Package, Tampa Bay Arena Project, NATL Insured, 6.10%, 10/01/26 | | | 2,695,000 | | | | 3,131,725 | |
Tampa-Hillsborough County Expressway Authority Revenue, 5.00%, 7/01/47 | | | 5,000,000 | | | | 5,656,200 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 87 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Florida Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Florida (continued) | | | | | | | | |
University of North Florida FICO Revenue, Capital Improvement, Housing Project, Refunding, AGMC Insured, 5.00%, 11/01/35 | | $ | 5,000,000 | | | $ | 5,611,750 | |
Volusia County Educational Facility Authority Revenue, | | | | | | | | |
Educational Facilities, Embry-Riddle Aeronautical University Inc. Project, Refunding, 5.00%, 10/15/42 | | | 1,500,000 | | | | 1,695,450 | |
Educational Facilities, Embry-Riddle Aeronautical University Inc. Project, Refunding, 5.00%, 10/15/47 | | | 3,500,000 | | | | 3,937,710 | |
| | | | | | | | |
| | | | | | | 610,737,249 | |
| | | | | | | | |
U.S. Territories 2.0% | | | | | | | | |
Puerto Rico 2.0% | | | | | | | | |
aPuerto Rico Electric Power Authority Power Revenue, | | | | | | | | |
Refunding, Series A, 5.00%, 7/01/42 | | | 10,000,000 | | | | 3,762,500 | |
Series XX, 5.25%, 7/01/40 | | | 10,000,000 | | | | 3,762,500 | |
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Revenue, Cogeneration Facility, AES Puerto Rico Project, 6.625%, 6/01/26 | | | 5,900,000 | | | | 4,919,125 | |
| | | | | | | | |
| | | | | | | 12,444,125 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $603,559,805) | | | | | | | 623,181,374 | |
| | | | | | | | |
Short Term Investments (Cost $2,400,000) 0.4% | | | | | | | | |
Municipal Bonds 0.4% | | | | | | | | |
Florida 0.4% | | | | | | | | |
bSt. Lucie County PCR, Florida Power and Light Co. Project, Refunding, Daily VRDN and Put, 1.17%, 9/01/28 | | | 2,400,000 | | | | 2,400,000 | |
| | | | | | | | |
Total Investments (Cost $605,959,805) 99.0% | | | | | | | 625,581,374 | |
Other Assets, less Liabilities 1.0% | | | | | | | 6,607,837 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | $ | 632,189,211 | |
| | | | | | | | |
See Abbreviations on page 170.
aSee Note 7 regarding defaulted securities.
bVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | |
88 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin Georgia Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended February 28, | | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.99 | | | | $12.32 | | | | $12.46 | | | | $12.02 | | | | $12.80 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.39 | | | | 0.42 | | | | 0.45 | | | | 0.46 | | | | 0.46 | |
Net realized and unrealized gains (losses) | | | (0.33 | ) | | | (0.33 | ) | | | (0.14 | ) | | | 0.44 | | | | (0.78) | |
| | | | |
Total from investment operations | | | 0.06 | | | | 0.09 | | | | 0.31 | | | | 0.90 | | | | (0.32) | |
| | | | |
Less distributions from net investment income | | | (0.40 | ) | | | (0.42 | ) | | | (0.45 | ) | | | (0.46 | ) | | | (0.46) | |
| | | | |
Net asset value, end of year | | | $11.65 | | | | $11.99 | | | | $12.32 | | | | $12.46 | | | | $12.02 | |
| | | | |
| | | | | |
Total returnd | | | 0.46% | | | | 0.69% | | | | 2.56% | | | | 7.57% | | | | (2.47)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.69% | e | | | 0.67% | | | | 0.67% | | | | 0.67% | | | | 0.66% | |
Net investment income | | | 3.25% | | | | 3.36% | | | | 3.67% | | | | 3.73% | | | | 3.83% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $363,390 | | | | $428,301 | | | | $429,103 | | | | $410,603 | | | | $391,837 | |
Portfolio turnover rate | | | 9.33% | | | | 8.34% | | | | 4.92% | | | | 11.89% | | | | 5.87% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 89 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Georgia Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended February 28, | | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class C | | | | | | | | | | | | | | | | | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $12.16 | | | | $12.49 | | | | $12.63 | | | | $12.17 | | | | $12.96 | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.33 | | | | 0.35 | | | | 0.39 | | | | 0.40 | | | | 0.40 | |
Net realized and unrealized gains (losses) | | | (0.33 | ) | | | (0.33 | ) | | | (0.15 | ) | | | 0.45 | | | | (0.80) | |
| | | | |
Total from investment operations | | | — | | | | 0.02 | | | | 0.24 | | | | 0.85 | | | | (0.40) | |
| | | | |
Less distributions from net investment income | | | (0.33 | ) | | | (0.35 | ) | | | (0.38 | ) | | | (0.39 | ) | | | (0.39) | |
| | | | |
Net asset value, end of year | | | $11.83 | | | | $12.16 | | | | $12.49 | | | | $12.63 | | | | $12.17 | |
| | | | |
| | | | | |
Total returnd | | | (0.02 | )% | | | 0.12% | | | | 1.97% | | | | 7.06% | | | | (3.06)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.24% | e | | | 1.22% | | | | 1.22% | | | | 1.22% | | | | 1.21% | |
Net investment income | | | 2.70% | | | | 2.81% | | | | 3.12% | | | | 3.18% | | | | 3.28% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $109,722 | | | | $128,544 | | | | $126,117 | | | | $123,265 | | | | $112,533 | |
Portfolio turnover rate | | | 9.33% | | | | 8.34% | | | | 4.92% | | | | 11.89% | | | | 5.87% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | |
90 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Georgia Tax-Free Income Fund (continued)
| | |
| | Year Ended February 28, 2018a |
| |
Class R6 | | |
| |
Per share operating performance | | |
(for a share outstanding throughout the year) | | |
Net asset value, beginning of year | | $11.94 |
Income from investment operationsb: | | |
Net investment incomec | | 0.24 |
Net realized and unrealized gains (losses) | | (0.29) |
Total from investment operations | | (0.05) |
Less distributions from net investment income | | (0.23) |
Net asset value, end of year | | $11.66 |
| |
Total returnd | | (0.40)% |
| |
Ratios to average net assetse | | |
Expenses before waiver and payments by affiliates | | 4.47% |
Expenses net of waiver and payments by affiliates | | 0.55% |
Net investment income | | 3.39% |
| |
Supplemental data | | |
Net assets, end of year (000’s) | | $5 |
Portfolio turnover rate | | 9.33% |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 91 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Georgia Tax-Free Income Fund (continued)
| | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017a | |
| | |
Advisor Class | | | | | | | | |
| | |
Per share operating performance | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | |
Net asset value, beginning of year | | | $11.99 | | | | $12.41 | |
Income from investment operationsb: | | | | | | | | |
Net investment incomec | | | 0.40 | | | | 0.20 | |
Net realized and unrealized gains (losses) | | | (0.32 | ) | | | (0.43) | |
Total from investment operations | | | 0.08 | | | | (0.23) | |
Less distributions from net investment income | | | (0.41 | ) | | | (0.19) | |
Net asset value, end of year | | | $11.66 | | | | $11.99 | |
Total returnd | | | 0.64% | | | | (1.82)% | |
| | |
Ratios to average net assetse | | | | | | | | |
Expenses | | | 0.59% | f | | | 0.57% | |
Net investment income | | | 3.35% | | | | 3.46% | |
| | |
Supplemental data | | | | | | | | |
Net assets, end of year (000’s) | | | $35,389 | | | | $21,454 | |
Portfolio turnover rate | | | 9.33% | | | | 8.34% | |
aFor the period September 15, 2016 (effective date) to February 28, 2017.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | |
92 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Georgia Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 99.0% | | | | | | | | |
Georgia 98.6% | | | | | | | | |
Athens Housing Authority Revenue, | | | | | | | | |
Refunding, 5.00%, 6/15/36 | | $ | 2,390,000 | | | $ | 2,716,665 | |
Refunding, 4.00%, 6/15/40 | | | 5,000,000 | | | | 5,148,500 | |
Athens-Clarke County Unified Government Development Authority Revenue, | | | | | | | | |
UGAREF Central Precinct LLC Project, Refunding, 4.00%, 6/15/32 | | | 2,180,000 | | | | 2,301,099 | |
UGAREF Central Precinct LLC Project, Refunding, 5.00%, 6/15/33 | | | 1,000,000 | | | | 1,148,100 | |
Athens-Clarke County Unified Government Water and Sewerage Revenue, | | | | | | | | |
Pre-Refunded, 5.625%, 1/01/33 | | | 10,000,000 | | | | 10,352,500 | |
Pre-Refunded, 5.50%, 1/01/38 | | | 5,000,000 | | | | 5,171,100 | |
Atlanta Airport General Revenue, | | | | | | | | |
Refunding, Series B, 5.00%, 1/01/42 | | | 2,000,000 | | | | 2,191,460 | |
Refunding, Series C, 6.00%, 1/01/30 | | | 6,000,000 | | | | 6,709,860 | |
Series A, 5.00%, 1/01/40 | | | 9,000,000 | | | | 9,494,370 | |
Atlanta Airport Passenger Facility Charge Revenue, | | | | | | | | |
General, sub. lien, Refunding, Series A, 5.00%, 1/01/33 | | | 4,005,000 | | | | 4,547,277 | |
General, sub. lien, Refunding, Series A, 5.00%, 1/01/34 | | | 3,250,000 | | | | 3,686,280 | |
Atlanta and Fulton County Recreation Authority Revenue, | | | | | | | | |
Park Improvement, Refunding, Series A, 5.00%, 12/01/35 | | | 3,530,000 | | | | 4,008,950 | |
Zoo Atlanta Parking Facility Project, 5.00%, 12/01/35 | | | 1,540,000 | | | | 1,791,497 | |
The Atlanta Development Authority Revenue, | | | | | | | | |
New Downtown Atlanta Stadium Project, senior lien, Series A-1, 5.25%, 7/01/40 | | | 7,750,000 | | | | 8,856,622 | |
New Downtown Atlanta Stadium Project, senior lien, Series A-1, 5.25%, 7/01/44 | | | 3,000,000 | | | | 3,417,810 | |
Tuff Yamacraw LLC Project, Refunding, Series A, AMBAC Insured, 5.00%, 1/01/26 | | | 2,555,000 | | | | 2,751,888 | |
Atlanta Development Authority Student Housing Facilities Revenue, Piedmont/Ellis LLC University Commons Project Located on the Campus of Georgia State University, Pre-Refunded, 5.00%, 9/01/32 | | | 2,000,000 | | | | 2,290,700 | |
Atlanta GO, Assured Guaranty, Pre-Refunded, 5.25%, 12/01/23 | | | 2,000,000 | | | | 2,128,100 | |
Atlanta Tax Allocation, Beltline Project, Refunding, Series B, 5.00%, 1/01/31 | | | 1,780,000 | | | | 2,024,697 | |
Atlanta Water and Wastewater Revenue, | | | | | | | | |
Refunding, 5.00%, 11/01/43 | | | 10,000,000 | | | | 11,252,800 | |
Series A, AGMC Insured, 5.50%, 11/01/27 | | | 5,000,000 | | | | 5,989,300 | |
Series A, Pre-Refunded, 6.00%, 11/01/28 | | | 5,055,000 | | | | 5,422,094 | |
a,bBaldwin County Hospital Authority Revenue, | | | | | | | | |
Oconee Regional Medical Center, 5.25%, 12/01/22 | | | 2,500,000 | | | | 25 | |
Oconee Regional Medical Center, 5.375%, 12/01/28 | | | 2,000,000 | | | | 20 | |
Bartow-Catersville Joint Development Authority Revenue, GHC Student Center LLC Project, AGMC Insured, 5.00%, 6/15/36 | | | 4,155,000 | | | | 4,501,111 | |
Bibb County Development Authority Revenue, Macon State College Foundation Real Estate II LLC Project, AGMC Insured, 5.00%, 7/01/40 | | | 5,000,000 | | | | 5,475,400 | |
Bleckley-Dodge County Joint Development Authority Student Housing Facilities Revenue, MGC Real Estate Foundation II LLC Project, 5.00%, 7/01/33 | | | 3,500,000 | | | | 3,535,805 | |
Brunswick and Glynn County Joint Water and Sewer Commission Revenue, Refunding, Series C, AGMC Insured, 5.00%, 6/01/33 | | | 2,045,000 | | | | 2,173,978 | |
Buford GO, Refunding, Series C, 4.00%, 1/01/43 | | | 5,000,000 | | | | 5,165,250 | |
Bulloch County Development Authority Student Housing Revenue, Georgia Southern University Housing Foundation Five LLC Project, AGMC Insured, 5.00%, 7/01/36 | | | 2,055,000 | | | | 2,227,723 | |
Burke County Development Authority PCR, Oglethorpe Power Corp. Vogtle Project, Refunding, Series D, 4.125%, 11/01/45 | | | 7,000,000 | | | | 6,891,710 | |
Carroll City-County Hospital Authority Revenue, | | | | | | | | |
Anticipation Certificates, Tanner Medical Center Inc. Project, 5.00%, 7/01/41 | | | 2,000,000 | | | | 2,218,700 | |
Anticipation Certificates, Tanner Medical Center Inc. Project, Pre-Refunded, 5.00%, 7/01/40 | | | 5,000,000 | | | | 5,393,250 | |
Anticipation Certificates, Tanner Medical Center Inc. Project, Refunding, Series B, 4.00%, 7/01/34 | | | 1,535,000 | | | | 1,589,984 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 93 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Georgia Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Georgia (continued) | | | | | | | | |
Carroll City-County Hospital Authority Revenue, (continued) | | | | | | | | |
Anticipation Certificates, Tanner Medical Center Inc. Project, Refunding, Series B, 4.00%, 7/01/36 | | $ | 1,445,000 | | | $ | 1,489,376 | |
Carrollton Payroll Development Authority Revenue, UWG Athletic Complex LLC Project, Anticipation Certificates, Refunding, AGMC Insured, 5.00%, 6/15/37 | | | 3,140,000 | | | | 3,530,647 | |
Cherokee County School System GO, 5.00%, 2/01/33 | | | 3,000,000 | | | | 3,422,310 | |
Cherokee County Water and Sewerage Authority Revenue, NATL Insured, 6.90%, 8/01/18 | | | 10,000 | | | | 10,045 | |
Clayton County Development Authority Revenue, Tuff Archives LLC-Secretary of State of Georgia Project, Refunding, 5.00%, 7/01/33 | | | 5,000,000 | | | | 5,566,350 | |
Clayton County Development Authority Student Housing Revenue, CSU Foundation Real Estate II LLC Project, AGMC Insured, 5.00%, 7/01/36 | | | 3,000,000 | | | | 3,247,140 | |
Clayton County Hospital Authority Revenue, | | | | | | | | |
Anticipation Certificates, Southern Regional Medical Center Project, Series A, Pre-Refunded, 5.00%, 8/01/30 | | | 2,000,000 | | | | 2,152,940 | |
Anticipation Certificates, Southern Regional Medical Center Project, Series A, Pre-Refunded, 5.25%, 8/01/35 | | | 1,000,000 | | | | 1,082,360 | |
Clayton County Urban RDAR, Clayton County Project, Refunding, 5.00%, 2/01/28 | | | 1,285,000 | | | | 1,426,851 | |
Cobb County Development Authority Revenue, | | | | | | | | |
Georgia Tech Cobb Research Campus, Series A, 4.00%, 6/01/42 | | | 1,600,000 | | | | 1,647,344 | |
Georgia Tech Cobb Research Campus, Series A, 5.00%, 6/01/49 | | | 2,670,000 | | | | 3,013,175 | |
Cobb County Development Authority Student Housing Revenue, Kennesaw State University Real Estate Foundations Projects, Senior, Refunding, Series A, 5.00%, 7/15/38 | | | 2,000,000 | | | | 2,209,720 | |
Cobb County Development Authority Student Recreation and Activities Center Revenue, | | | | | | | | |
KSU SRAC Real Estate Foundation LLC Project, 5.00%, 7/15/35 | | | 2,500,000 | | | | 2,744,075 | |
KSU SRAC Real Estate Foundation LLC Project, 5.00%, 7/15/38 | | | 2,500,000 | | | | 2,738,650 | |
Columbus Water and Sewerage Revenue, Series A, 5.00%, 5/01/33 | | | 1,030,000 | | | | 1,169,915 | |
Coweta County Development Authority Revenue, Piedmont Healthcare Inc. Project, 5.00%, 6/15/40 | | | 5,000,000 | | | | 5,331,800 | |
Dahlonega Water and Wastewater Revenue, | | | | | | | | |
Series A, Assured Guaranty, Pre-Refunded, 5.25%, 9/01/30 | | | 1,750,000 | | | | 1,784,143 | |
Series A, Assured Guaranty, Pre-Refunded, 5.50%, 9/01/37 | | | 5,000,000 | | | | 5,103,750 | |
Dalton-Whitfield County Joint Development Authority Revenue, Hamilton Health Care System Obligated Group, 4.00%, 8/15/41 | | | 3,000,000 | | | | 3,024,510 | |
Decatur Urban RDAR, City of Decatur Projects, Series A, 5.00%, 1/01/38 | | | 6,195,000 | | | | 6,889,459 | |
DeKalb County Water and Sewerage Revenue, | | | | | | | | |
Refunding, Series B, AGMC Insured, 5.00%, 10/01/35 | | | 10,655,000 | | | | 12,282,445 | |
Second Resolution, Series A, 5.25%, 10/01/41 | | | 11,425,000 | | | | 12,647,361 | |
DeKalb Newton and Gwinnett County Joint Development Authority Revenue, | | | | | | | | |
GGC Student Center LLC Project, Pre-Refunded, 5.50%, 7/01/34 | | | 3,000,000 | | | | 3,157,020 | |
GGCF Athletic Fields LLC Project, Series A, AGMC Insured, 5.00%, 7/01/39 | | | 5,000,000 | | | | 5,477,550 | |
DeKalb Private Hospital Authority Revenue, Anticipation Certificates, Children’s Healthcare of Atlanta Inc. Project, Refunding, 5.25%, 11/15/39 | | | 5,000,000 | | | | 5,277,450 | |
Fairburn GO, AGMC Insured, Pre-Refunded, 5.75%, 12/01/31 | | | 2,000,000 | | | | 2,284,960 | |
Floyd County Hospital Authority Revenue, Anticipation Certificates, Floyd Medical Center Project, Refunding, Series A, 4.00%, 7/01/43 | | | 7,735,000 | | | | 7,800,438 | |
Forsyth County School District GO, 5.00%, 2/01/28 | | | 1,500,000 | | | | 1,712,910 | |
Fulton County Development Authority Hospital Revenue, Anticipation Certificates, Wellstar Health System Inc. Project, Series A, 5.00%, 4/01/47 | | | 1,000,000 | | | | 1,103,520 | |
Fulton County Development Authority Revenue, | | | | | | | | |
AMC Campus Project I LLC Project, AGMC Insured, 5.00%, 6/15/37 | | | 3,075,000 | | | | 3,325,059 | |
Georgia Tech Facilities Inc. Project, Refunding, Series A, 5.00%, 6/01/34 | | | 4,000,000 | | | | 4,153,000 | |
Georgia Tech Facilities Inc. Project, Series A, 5.00%, 6/01/41 | | | 3,500,000 | | | | 3,734,290 | |
Morehouse College Project, Refunding, AMBAC Insured, 5.00%, 12/01/27 | | | 5,000,000 | | | | 5,008,350 | |
| | | | | | |
94 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Georgia Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Georgia (continued) | | | | | | | | |
Fulton County Development Authority Revenue, (continued) | | | | | | | | |
Piedmont Healthcare Inc. Project, Refunding, Series A, 5.00%, 7/01/44 | | $ | 10,000,000 | | | $ | 10,939,700 | |
Piedmont Healthcare Inc. Project, Series A, Pre-Refunded, 5.25%, 6/15/37 | | | 5,000,000 | | | | 5,242,450 | |
Fulton County GO, Library Bond, 4.00%, 7/01/40 | | | 5,000,000 | | | | 5,213,550 | |
Fulton County Residential Care Facilities Elderly Authority Retirement Facility Revenue, Lenbrook Square Foundation Inc. Project, Refunding, 5.00%, 7/01/42 | | | 5,500,000 | | | | 5,995,330 | |
Gainesville and Hall County Hospital Authority Revenue, | | | | | | | | |
Anticipation Certificates, Northeast Georgia Health System Inc. Project, Refunding, Series A, 5.375%, 2/15/40 | | | 1,245,000 | | | | 1,321,368 | |
Anticipation Certificates, Northeast Georgia Health System Inc. Project, Refunding, Series A, 5.00%, 2/15/42 | | | 7,000,000 | | | | 7,727,300 | |
Anticipation Certificates, Northeast Georgia Health System Inc. Project, Series A, Pre-Refunded, 5.375%, 2/15/40 | | | 3,755,000 | | | | 4,023,407 | |
Georgia Municipal Electric Authority Revenue, | | | | | | | | |
Plant Vogtle Units 3 and 4 Project J, Series A, 5.50%, 7/01/60 | | | 3,000,000 | | | | 3,323,460 | |
Power, Series GG, 5.00%, 1/01/39 | | | 7,000,000 | | | | 7,681,030 | |
Project One, Subordinated, Refunding, Series D, 5.50%, 1/01/26 | | | 1,390,000 | | | | 1,408,640 | |
Project One, Subordinated, Series D, Pre-Refunded, 5.50%, 1/01/26 | | | 3,610,000 | | | | 3,658,555 | |
Georgia State GO, Series A-2, 4.00%, 2/01/36 | | | 10,000,000 | | | | 10,858,400 | |
Georgia State HFAR, SFM, Series A, 3.80%, 12/01/37 | | | 5,000,000 | | | | 5,027,850 | |
Georgia State Higher Education Facilities Authority Revenue, | | | | | | | | |
USG Real Estate Foundation I LLC Project, Assured Guaranty, Pre-Refunded, 5.625%, 6/15/38 | | | 3,000,000 | | | | 3,037,020 | |
USG Real Estate Foundation I LLC Project, Pre-Refunded, 6.00%, 6/15/34 | | | 5,000,000 | | | | 5,067,050 | |
Georgia State Municipal Gas Authority Revenue, | | | | | | | | |
Gas Portfolio III Project, Refunding, Series S, 5.00%, 10/01/25 | | | 2,500,000 | | | | 2,794,125 | |
Gas Portfolio III Project, Refunding, Series S, 5.00%, 10/01/26 | | | 2,500,000 | | | | 2,794,125 | |
Glynn-Brunswick Memorial Hospital Authority Revenue, | | | | | | | | |
Anticipation Certificates, Southeast Georgia Health System Project, 5.00%, 8/01/47 | | | 5,000,000 | | | | 5,442,050 | |
Anticipation Certificates, Southeast Georgia Health System Project, Series A, 5.625%, 8/01/34 | | | 530,000 | | | | 537,383 | |
Anticipation Certificates, Southeast Georgia Health System Project, Series A, Pre-Refunded, 5.625%, 8/01/34 | | | 4,470,000 | | | | 4,547,599 | |
Griffin Combined Public Utility Revenue, Refunding, AGMC Insured, 5.00%, 1/01/24 | | | 2,525,000 | | | | 2,823,884 | |
Gwinnett County Development Authority COP, | | | | | | | | |
Gwinnett County Public Schools Project, Refunding, NATL Insured, 5.25%, 1/01/22 | | | 3,000,000 | | | | 3,364,800 | |
Gwinnett County Public Schools Project, Refunding, NATL Insured, 5.25%, 1/01/24 | | | 2,000,000 | | | | 2,329,640 | |
Gwinnett County Hospital Authority Revenue, Anticipation Certificates, Gwinnett Hospital System Inc. Project, Series D, AGMC Insured, 5.50%, 7/01/37 | | | 4,000,000 | | | | 4,167,560 | |
Gwinnett County School District GO, Refunding, 5.00%, 2/01/35 | | | 3,000,000 | | | | 3,462,900 | |
Henry County School District GO, 4.00%, 8/01/33 | | | 9,180,000 | | | | 9,773,579 | |
Hogansville Combined Public Utility System Revenue, Refunding, AGMC Insured, 6.00%, 10/01/23 | | | 2,610,000 | | | | 2,834,747 | |
LaGrange-Troup County Hospital Authority Revenue, Anticipation Certificates, Series A, Pre-Refunded, 5.50%, 7/01/38 | | | 4,000,000 | | | | 4,055,800 | |
Lawrenceville Building Authority Revenue, 5.00%, 4/01/35 | | | 2,270,000 | | | | 2,553,001 | |
Lincoln County School District GO, Pre-Refunded, 5.50%, 4/01/37 | | | 2,200,000 | | | | 2,296,118 | |
Macon Water Authority Revenue, Water and Sewer, 4.00%, 10/01/35 | | | 2,810,000 | | | | 3,101,678 | |
Macon-Bibb County Hospital Authority Revenue, Anticipation Certificates, The Medical Center of Central Georgia Inc. Project, Pre-Refunded, 5.00%, 8/01/35 | | | 5,000,000 | | | | 5,238,800 | |
Main Street Natural Gas Inc. Revenue, Gas Project, Series A, 5.50%, 9/15/27 | | | 5,000,000 | | | | 5,965,850 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 95 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Georgia Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Georgia (continued) | | | | | | | | |
Medical Center Hospital Authority Revenue, | | | | | | | | |
Anticipation Certificates, Columbus Regional Healthcare System Inc. Project, Assured Guaranty, Pre-Refunded, 6.375%, 8/01/29 | | $ | 4,000,000 | | | $ | 4,082,600 | |
Anticipation Certificates, Columbus Regional Healthcare System Inc. Project, Refunding, AGMC Insured, 5.00%, 8/01/41 | | | 5,000,000 | | | | 5,254,900 | |
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue, Third Indenture Series, Series B, 5.00%, 7/01/45 | | | 5,000,000 | | | | 5,720,200 | |
Paulding County Hospital Authority Revenue, Anticipation Certificates, Series A, 5.00%, 4/01/42 | | | 3,500,000 | | | | 3,723,370 | |
Pierce County School District GO, 4.00%, 1/01/43 | | | 3,725,000 | | | | 3,851,017 | |
Private Colleges and Universities Authority Revenue, | | | | | | | | |
Emory University, Refunding, Series A, 5.00%, 9/01/41 | | | 8,695,000 | | | | 9,540,937 | |
Emory University, Refunding, Series A, 5.00%, 10/01/43 | | | 5,000,000 | | | | 5,622,250 | |
Emory University, Refunding, Series B, 5.00%, 9/01/35 | | | 10,000,000 | | | | 10,505,600 | |
Richmond County Hospital Authority Revenue, | | | | | | | | |
Anticipation Certificates, University Health Services Inc. Project, Refunding, 4.00%, 1/01/34 | | | 4,460,000 | | | | 4,613,558 | |
Anticipation Certificates, University Health Services Inc. Project, Refunding, 4.00%, 1/01/35 | | | 5,055,000 | | | | 5,217,923 | |
Anticipation Certificates, University Health Services Inc. Project, Refunding, 4.00%, 1/01/36 | | | 3,250,000 | | | | 3,347,630 | |
Sandy Springs PFAR, City Center Project, 5.00%, 5/01/41 | | | 3,000,000 | | | | 3,424,500 | |
Thomasville Hospital Authority Revenue, | | | | | | | | |
Anticipation Certificates, John D. Archbold Memorial Hospital Inc. Project, Pre-Refunded, 5.25%, 11/01/35 | | | 1,000,000 | | | | 1,092,690 | |
Anticipation Certificates, John D. Archbold Memorial Hospital Inc. Project, Pre-Refunded, 5.375%, 11/01/40 | | | 5,000,000 | | | | 5,479,700 | |
Tift County Hospital Revenue, Anticipation Certificates, Refunding, 5.00%, 12/01/38 | | | 2,000,000 | | | | 2,191,980 | |
Valdosta and Lowndes County Hospital Authority Revenue, | | | | | | | | |
Certificates, South Georgia Medical Center Project, 5.00%, 10/01/33 | | | 2,000,000 | | | | 2,012,940 | |
Certificates, South Georgia Medical Center Project, Series B, 5.00%, 10/01/41 | | | 3,000,000 | | | | 3,198,750 | |
Worth County School District GO, 5.00%, 12/01/42 | | | 5,000,000 | | | | 5,728,200 | |
| | | | | | | | |
| | | | | | | 501,341,032 | |
| | | | | | | | |
U.S. Territories 0.4% | | | | | | | | |
Puerto Rico 0.4% | | | | | | | | |
bPuerto Rico Electric Power Authority Power Revenue, Series XX, 5.25%, 7/01/40 | | | 5,000,000 | | | | 1,881,250 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $491,895,233) | | | | | | | 503,222,282 | |
| | | | | | | | |
Short Term Investments (Cost $100,000) 0.0%† | | | | | | | | |
Municipal Bonds 0.0%† | | | | | | | | |
Georgia 0.0%† | | | | | | | | |
cAthens-Clarke County Unified Government Development Authority Revenue, University of Georgia Athletic Assn. Project, Series B, LOC Wells Fargo Bank, Daily VRDN and Put, 1.10%, 7/01/35 | | | 100,000 | | | | 100,000 | |
| | | | | | | | |
Total Investments (Cost $491,995,233) 99.0% | | | | | | | 503,322,282 | |
Other Assets, less Liabilities 1.0% | | | | | | | 5,183,282 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | $ | 508,505,564 | |
| | | | | | | | |
| | | | | | |
96 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Georgia Tax-Free Income Fund (continued)
See Abbreviations on page 170.
†Rounds to less than 0.1% of net assets.
aFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.
bSee Note 7 regarding defaulted securities.
cVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 97 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Kentucky Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.01 | | | | $11.31 | | | | $11.52 | | | | $11.12 | | | | $11.86 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.37 | | | | 0.40 | | | | 0.41 | | | | 0.43 | | | | 0.43 | |
Net realized and unrealized gains (losses) | | | (0.24 | ) | | | (0.30 | ) | | | (0.21 | ) | | | 0.40 | | | | (0.75) | |
| | | | |
Total from investment operations | | | 0.13 | | | | 0.10 | | | | 0.20 | | | | 0.83 | | | | (0.32) | |
| | | | |
Less distributions from net investment income | | | (0.37 | ) | | | (0.40 | ) | | | (0.41 | ) | | | (0.43 | ) | | | (0.42) | |
| | | | |
Net asset value, end of year | | | $10.77 | | | | $11.01 | | | | $11.31 | | | | $11.52 | | | | $11.12 | |
| | | | |
| | | | | |
Total returnd | | | 1.20% | | | | 0.86% | | | | 1.82% | | | | 7.61% | | | | (2.70)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.79% | | | | 0.77% | | | | 0.76% | | | | 0.78% | | | | 0.76% | |
Net investment income | | | 3.40% | | | | 3.51% | | | | 3.61% | | | | 3.81% | | | | 3.82% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $150,182 | | | | $165,613 | | | | $173,093 | | | | $168,278 | | | | $165,889 | |
Portfolio turnover rate | | | 13.90% | | | | 9.14% | | | | 5.91% | | | | 6.35% | | | | 10.56% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
| | | | | | |
98 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Kentucky Tax-Free Income Fund (continued)
| | |
| | Year Ended February 28, 2018a |
| |
Class R6 | | |
| |
Per share operating performance | | |
(for a share outstanding throughout the year) | | |
Net asset value, beginning of year | | $10.98 |
| |
Income from investment operationsb: | | |
Net investment incomec | | 0.23 |
Net realized and unrealized gains (losses) | | (0.22) |
| |
Total from investment operations | | 0.01 |
| |
Less distributions from net investment income | | (0.22) |
| |
Net asset value, end of year | | $10.77 |
| |
Total returnd | | 0.07% |
| |
Ratios to average net assetse | | |
Expenses before waiver and payments by affiliates | | 0.70% |
Expenses net of waiver and payments by affiliates | | 0.65% |
Net investment income | | 3.54% |
| |
Supplemental data | | |
Net assets, end of year (000’s) | | $2,085 |
Portfolio turnover rate | | 13.90% |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 99 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Kentucky Tax-Free Income Fund (continued)
| | | | |
| | Year Ended February 28, |
| | 2018 | | 2017a |
Advisor Class | | | | |
| | |
Per share operating performance | | | | |
(for a share outstanding throughout the year) | | | | |
Net asset value, beginning of year | | $11.01 | | $11.35 |
| | |
Income from investment operationsb: | | | | |
Net investment incomec | | 0.38 | | 0.19 |
Net realized and unrealized gains (losses) | | (0.24) | | (0.35) |
| | |
Total from investment operations | | 0.14 | | (0.16) |
| | |
Less distributions from net investment income | | (0.38) | | (0.18) |
| | |
Net asset value, end of year | | $10.77 | | $11.01 |
| | |
Total returnd | | 1.30% | | (1.36)% |
| | |
Ratios to average net assetse | | | | |
Expenses | | 0.69% | | 0.67% |
Net investment income | | 3.50% | | 3.61% |
| | |
Supplemental data | | | | |
Net assets, end of year (000’s) | | $7,438 | | $6,896 |
Portfolio turnover rate | | 13.90% | | 9.14% |
aFor the period September 15, 2016 (effective date) to February 28, 2017.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | |
100 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Kentucky Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 97.3% | | | | | | | | |
Kentucky 97.3% | | | | | | | | |
Ashland Medical Center Revenue, Kings Daughters Medical Center Project, Refunding, Series A, 5.00%, 2/01/40 | | $ | 1,000,000 | | | $ | 1,059,570 | |
Bowling Green GO, Public Project, Series A, Pre-Refunded, 5.00%, 6/01/38 | | | 5,000,000 | | | | 5,046,250 | |
Boyle County Revenue, Educational Facilities, Centre College of Kentucky, Refunding, 5.00%, 6/01/37 | | | 2,000,000 | | | | 2,210,180 | |
Fayette County School District Finance Corp. Revenue, School Building, Series D, 5.00%, 8/01/34 | | | 1,985,000 | | | | 2,202,516 | |
Glasgow Healthcare Revenue, T.J. Samson Community Hospital Project, 6.45%, 2/01/41 | | | 2,000,000 | | | | 2,142,960 | |
Greater Kentucky Housing Assistance Corp. Mortgage Revenue, Section 8 Assisted Projects, Refunding, Series A, NATL Insured, 6.10%, 1/01/24 | | | 185,000 | | | | 185,500 | |
Jefferson County School District Finance Corp. School Building Revenue, Refunding, Series B, 4.00%, 12/01/26 Kentucky Economic Development Finance Authority Revenue, | | | 3,500,000 | | | | 3,837,960 | |
Catholic Health Initiatives, Refunding, Series A, 5.00%, 5/01/29 | | | 5,670,000 | | | | 5,816,229 | |
Hospital, Baptist Healthcare System Obligated Group, 5.25%, 8/15/46 | | | 5,000,000 | | | | 5,311,950 | |
Louisville Arena Project, Louisville Arena Authority Inc., Series A, Subseries A-1, Assured Guaranty, Pre-Refunded, 6.00%, 12/01/33 | | | 2,000,000 | | | | 2,023,420 | |
Kentucky Rural Water Finance Corp. Public Project Revenue, | | | | | | | | |
Multimodal, Flexible Term Program, Series A, 5.00%, 2/01/26 | | | 485,000 | | | | 486,402 | |
Multimodal, Flexible Term Program, Series I, 5.00%, 2/01/34 | | | 1,010,000 | | | | 1,012,505 | |
Kentucky State Housing Corp. Conduit MFHR, | | | | | | | | |
Collateral Mortgage Loan, Country Place Apartments Project, GNMA Secured, 5.00%, 4/20/40 | | | 2,280,000 | | | | 2,378,268 | |
Collateral Mortgage Loan, Country Place Apartments Project, GNMA Secured, 5.25%, 4/20/45 | | | 1,850,000 | | | | 1,928,311 | |
Kentucky State Infrastructure Authority Revenue, | | | | | | | | |
Wastewater and Drinking Water Revolving Fund, Series A, 5.00%, 2/01/28 | | | 2,000,000 | | | | 2,228,760 | |
Wastewater and Drinking Water Revolving Fund, Series A, 5.00%, 2/01/31 | | | 4,190,000 | | | | 4,665,900 | |
Kentucky State Municipal Power Agency Power System Revenue, Prairie State Project, Refunding, Series | | | | | | | | |
A, NATL Insured, 5.00%, 9/01/36 | | | 3,000,000 | | | | 3,293,610 | |
Kentucky State Property and Buildings Commission Revenue, | | | | | | | | |
Project No. 90, Pre-Refunded, 5.50%, 11/01/28 | | | 4,375,000 | | | | 4,494,525 | |
Project No. 90, Pre-Refunded, 5.50%, 11/01/28 | | | 625,000 | | | | 642,281 | |
Project No. 108, Refunding, Series A, 5.00%, 8/01/34 | | | 3,500,000 | | | | 3,920,140 | |
Project No. 115, 5.00%, 4/01/38 | | | 2,500,000 | | | | 2,771,025 | |
Project No. 117, Series B, 5.00%, 5/01/26 | | | 1,000,000 | | | | 1,148,510 | |
Project No. 117, Series B, 5.00%, 5/01/27 | | | 2,000,000 | | | | 2,304,480 | |
Kentucky State Turnpike Authority Economic Development Road Revenue, | | | | | | | | |
Revitalization Projects, Refunding, Series A, 5.00%, 7/01/30 | | | 2,500,000 | | | | 2,733,650 | |
Revitalization Projects, Refunding, Series A, 5.00%, 7/01/36 | | | 550,000 | | | | 625,488 | |
Revitalization Projects, Refunding, Series A, 5.00%, 7/01/37 | | | 700,000 | | | | 794,269 | |
Revitalization Projects, Series A, 5.00%, 7/01/32 | | | 2,000,000 | | | | 2,235,300 | |
Revitalization Projects, Series A, 5.00%, 7/01/33 | | | 3,000,000 | | | | 3,404,760 | |
Revitalization Projects, Series A, Pre-Refunded, 5.00%, 7/01/28 | | | 1,000,000 | | | | 1,012,140 | |
Revitalization Projects, Series A, Pre-Refunded, 5.00%, 7/01/29 | | | 1,000,000 | | | | 1,045,780 | |
Lexington-Fayette Urban County Airport Board Revenue, | | | | | | | | |
General Airport, Refunding, Series B, 5.00%, 7/01/29 | | | 1,185,000 | | | | 1,324,427 | |
General Airport, Series A, Pre-Refunded, 5.00%, 7/01/27 | | | 2,000,000 | | | | 2,092,920 | |
Lexington-Fayette Urban County Government Public Facilities Corp. Lease Revenue, Eastern State Hospital Project, Refunding, Series A, 5.25%, 6/01/32 | | | 3,000,000 | | | | 3,245,940 | |
Louisville and Jefferson County Metropolitan Sewer District Revenue, | | | | | | | | |
Sewer and Drainage System, Series A, 5.00%, 5/15/27 | | | 1,000,000 | | | | 1,165,000 | |
Sewer and Drainage System, Series A, 4.00%, 5/15/48 | | | 5,000,000 | | | | 5,125,500 | |
Louisville Regional Airport Authority Airport System Revenue, AGMC Insured, Series A, Pre-Refunded, 5.50%, 7/01/38 | | | 3,000,000 | | | | 3,039,840 | |
| | | | |
franklintempleton.com | | Annual Report | | 101 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Kentucky Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Kentucky (continued) | | | | | | | | |
Louisville/Jefferson County Metro Government Parking Authority Revenue, first mortgage, Series A, Pre-Refunded, 5.375%, 12/01/39 | | $ | 1,995,000 | | | $ | 2,127,069 | |
Louisville/Jefferson County Metro Government Revenue, | | | | | | | | |
College, Bellarmine University Inc. Project, Refunding and Improvement, 5.00%, 5/01/31 | | | 2,000,000 | | | | 2,202,000 | |
College, Bellarmine University Project, Improvement, Series A, Pre-Refunded, 6.00%, 5/01/38 | | | 2,500,000 | | | | 2,519,575 | |
College, Bellarmine University Project, Refunding and Improvement, Series A, 5.00%, 5/01/36 | | | 2,715,000 | | | | 2,912,815 | |
Morehead State University General Receipts Revenue, Refunding, Series A, 5.00%, 10/01/28 | | | 1,910,000 | | | | 2,135,475 | |
Murray Hospital Facilities Revenue, Murray-Calloway County Public Hospital Corp. Project, 6.375%, 8/01/40 | | | 2,500,000 | | | | 2,627,000 | |
Owen County Waterworks System Revenue, | | | | | | | | |
American Water Co. Project, Series A, 6.25%, 6/01/39 | | | 2,000,000 | | | | 2,110,480 | |
American Water Co. Project, Series A, 5.375%, 6/01/40 | | | 2,000,000 | | | | 2,139,780 | |
American Water Co. Project, Series B, 5.625%, 9/01/39 | | | 2,000,000 | | | | 2,109,460 | |
Owensboro Electric Light and Power System Revenue, Refunding, 4.00%, 1/01/27 | | | 1,250,000 | | | | 1,350,325 | |
Owensboro GO, Public Project, 5.00%, 4/01/41 | | | 5,440,000 | | | | 5,850,774 | |
Paducah Electric Plant Board Revenue, | | | | | | | | |
Refunding, Series A, AGMC Insured, 5.00%, 10/01/34 | | | 5,700,000 | | | | 6,302,148 | |
Series A, Assured Guaranty, Pre-Refunded, 5.25%, 10/01/35 | | | 6,500,000 | | | | 6,759,480 | |
Pikeville Hospital Revenue, Pikeville Medical Center, Improvement and Refunding, 6.50%, 3/01/41 | | | 2,875,000 | | | | 3,156,520 | |
Princeton Electric Plant Board Revenue, Series A, Assured Guaranty, 5.00%, 11/01/37 | | | 1,500,000 | | | | 1,572,990 | |
Pulaski County Public Properties Corp. First Mortgage Revenue, AOC Judicial Facility, Pre-Refunded, 6.00%, 12/01/28 | | | 1,000,000 | | | | 1,034,120 | |
Russell Revenue, Bon Secours Health System Inc., Refunding, 5.00%, 11/01/26 | | | 4,000,000 | | | | 4,430,080 | |
Trimble County Environmental Facilities Revenue, Kentucky Utilities Co. Project, Series A, AMBAC Insured, 6.00%, 3/01/37 | | | 5,000,000 | | | | 5,049,950 | |
University of Louisville Revenue, | | | | | | | | |
General Receipts, Series A, 5.00%, 9/01/28 | | | 2,220,000 | | | | 2,442,289 | |
General Receipts, Series D, 5.00%, 3/01/30 | | | 4,140,000 | | | | 4,717,033 | |
Warren County Hospital Facility Revenue, Bowling Green, Warren County, Series A, 5.00%, 10/01/33 | | | 1,000,000 | | | | 1,088,550 | |
Western Kentucky University Revenue, General Receipts, Series A, 5.00%, 5/01/32 | | | 1,625,000 | | | | 1,777,246 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $150,895,130) | | | | | | | 155,371,425 | |
| | | | | | | | |
| | |
Short Term Investments (Cost $3,100,000) 1.9% | | | | | | | | |
Municipal Bonds 1.9% | | | | | | | | |
Kentucky 1.9% | | | | | | | | |
aLouisville/Jefferson County Metro Government Health System Revenue, Norton Healthcare Inc., Series B, LOC PNC Bank, Daily VRDN and Put, 1.09%, 10/01/39 | | | 3,100,000 | | | | 3,100,000 | |
| | | | | | | | |
Total Investments (Cost $153,995,130) 99.2% | | | | | | | 158,471,425 | |
Other Assets, less Liabilities 0.8% | | | | | | | 1,232,786 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | $ | 159,704,211 | |
| | | | | | | | |
See Abbreviations on page 170.
aVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | |
102 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin Louisiana Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.15 | | | | $11.50 | | | | $11.62 | | | | $11.26 | | | | $12.04 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.36 | | | | 0.39 | | | | 0.43 | | | | 0.45 | | | | 0.45 | |
Net realized and unrealized gains (losses) | | | (0.24 | ) | | | (0.34 | ) | | | (0.12 | ) | | | 0.37 | | | | (0.80) | |
| | | | |
Total from investment operations | | | 0.12 | | | | 0.05 | | | | 0.31 | | | | 0.82 | | | | (0.35) | |
| | | | |
Less distributions from net investment income | | | (0.37 | ) | | | (0.40 | ) | | | (0.43 | ) | | | (0.46 | ) | | | (0.43) | |
| | | | |
Net asset value, end of year | | | $10.90 | | | | $11.15 | | | | $11.50 | | | | $11.62 | | | | $11.26 | |
| | | | |
| | | | | |
Total returnd | | | 1.04% | | | | 0.43% | | | | 2.78% | | | | 7.38% | | | | (2.90)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.70% | | | | 0.68% | | | | 0.69% | | | | 0.69% | | | | 0.67% | |
Net investment income | | | 3.23% | | | | 3.41% | | | | 3.77% | | | | 3.95% | | | | 3.91% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $322,080 | | | | $343,042 | | | | $335,785 | | | | $330,742 | | | | $321,748 | |
Portfolio turnover rate | | | 21.83% | | | | 16.87% | | | | 4.13% | | | | 13.28% | | | | 16.98% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal 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 | | 103 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Louisiana Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| |
Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.32 | | | | $11.67 | | | | $11.79 | | | | $11.41 | | | | $12.21 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.30 | | | | 0.33 | | | | 0.37 | | | | 0.40 | | | | 0.39 | |
Net realized and unrealized gains (losses) | | | (0.25 | ) | | | (0.34 | ) | | | (0.12 | ) | | | 0.37 | | | | (0.83) | |
| | | | |
Total from investment operations | | | 0.05 | | | | (0.01 | ) | | | 0.25 | | | | 0.77 | | | | (0.44) | |
| | | | |
Less distributions from net investment income | | | (0.30 | ) | | | (0.34 | ) | | | (0.37 | ) | | | (0.39 | ) | | | (0.36) | |
| | | | |
Net asset value, end of year | | | $11.07 | | | | $11.32 | | | | $11.67 | | | | $11.79 | | | | $11.41 | |
| | | | |
| | | | | |
Total returnd | | | 0.46% | | | | (0.13)% | | | | 2.18% | | | | 6.87% | | | | (3.55)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.25% | | | | 1.23% | | | | 1.24% | | | | 1.24% | | | | 1.22% | |
Net investment income | | | 2.68% | | | | 2.86% | | | | 3.22% | | | | 3.40% | | | | 3.36% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $61,399 | | | | $67,154 | | | | $68,319 | | | | $68,272 | | | | $66,262 | |
Portfolio turnover rate | | | 21.83% | | | | 16.87% | | | | 4.13% | | | | 13.28% | | | | 16.98% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
| | | | | | |
104 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Louisiana Tax-Free Income Fund (continued)
| | | | |
| | Year Ended February 28, 2018a | |
| |
Class R6 | | | | |
| |
Per share operating performance | | | | |
(for a share outstanding throughout the year) | | | | |
Net asset value, beginning of year | | | $11.18 | |
| | | | |
Income from investment operationsb: | | | | |
Net investment incomec | | | 0.22 | |
Net realized and unrealized gains (losses) | | | (0.28 | ) |
| | | | |
Total from investment operations | | | (0.06 | ) |
| | | | |
Less distributions from net investment income | | | (0.22 | ) |
| | | | |
Net asset value, end of year | | | $10.90 | |
| | | | |
| |
Total returnd | | | (0.59)% | |
| |
Ratios to average net assetse | | | | |
Expenses before waiver and payments by affiliates | | | 0.60% | |
Expenses net of waiver and payments by affiliates | | | 0.57% | |
Net investment income | | | 3.36% | |
| |
Supplemental data | | | | |
Net assets, end of year (000’s) | | | $3,683 | |
Portfolio turnover rate | | | 21.83% | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 105 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Louisiana Tax-Free Income Fund (continued)
| | | | | | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017a | |
| | |
Advisor Class | | | | | | | | |
| | |
Per share operating performance | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | |
Net asset value, beginning of year | | | $11.15 | | | | $11.54 | |
Income from investment operationsb: | | | | | | | | |
Net investment incomec | | | 0.37 | | | | 0.19 | |
Net realized and unrealized gains (losses) | | | (0.24) | | | | (0.40) | |
Total from investment operations | | | 0.13 | | | | (0.21) | |
Less distributions from net investment income | | | (0.38) | | | | (0.18) | |
Net asset value, end of year | | | $10.90 | | | | $11.15 | |
| | |
Total returnd | | | 1.14% | | | | (1.79)% | |
| | |
Ratios to average net assetse | | | | | | | | |
Expenses | | | 0.60% | | | | 0.58% | |
Net investment income | | | 3.33% | | | | 3.51% | |
| | |
Supplemental data | | | | | | | | |
Net assets, end of year (000’s) | | | $14,091 | | | | $10,259 | |
Portfolio turnover rate | | | 21.83% | | | | 16.87% | |
aFor the period September 15, 2016 (effective date) to February 28, 2017.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | |
106 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Louisiana Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 99.4% | | | | | | | | |
Louisiana 98.8% | | | | | | | | |
Alexandria Sales and Use Tax Revenue, | | | | | | | | |
Pre-Refunded, 5.00%, 8/01/26 | | $ | 1,710,000 | | | $ | 1,770,021 | |
Pre-Refunded, 5.00%, 8/01/27 | | | 1,790,000 | | | | 1,852,829 | |
Pre-Refunded, 5.00%, 8/01/28 | | | 1,875,000 | | | | 1,940,812 | |
Alexandria Utilities Revenue, Series A, 5.00%, 5/01/38 | | | 10,000,000 | | | | 11,035,400 | |
Baton Rouge Public Improvement Sales Tax Revenue, | | | | | | | | |
Refunding, Series A-1, 5.00%, 8/01/30 | | | 1,000,000 | | | | 1,150,930 | |
Refunding, Series A-1, 5.00%, 8/01/31 | | | 1,480,000 | | | | 1,702,192 | |
Bossier City Public Improvement Sales Tax Revenue, Series ST, 5.00%, 12/01/36 | | | 1,405,000 | | | | 1,578,307 | |
Bossier City Utilities Revenue, | | | | | | | | |
BHAC Insured, Pre-Refunded, 5.50%, 10/01/33 | | | 5,000,000 | | | | 5,122,500 | |
Refunding, 5.00%, 10/01/37 | | | 5,280,000 | | | | 5,980,339 | |
Calcasieu Parish Public Trust Authority Student Lease Revenue, McNeese State University Student Housing, Cowboy Facilities Inc. Project, Refunding, AGMC Insured, 5.00%, 5/01/29 | | | 2,050,000 | | | | 2,239,522 | |
Calcasieu Parish School District No. 23 GO, Public School, Refunding, Series A, 5.00%, 2/15/29 | | | 1,380,000 | | | | 1,511,790 | |
East Baton Rouge Mortgage Finance Authority SFMR, | | | | | | | | |
MBS Program, Refunding, Series A-3, GNMA Secured, 5.00%, 10/01/28 | | | 320,000 | | | | 327,744 | |
MBS Program, Series A-2, GNMA Secured, 5.10%, 10/01/40 | | | 175,000 | | | | 177,490 | |
East Baton Rouge Parish Sales Tax Revenue, | | | | | | | | |
Road and Street Improvement, Assured Guaranty, Pre-Refunded, 5.25%, 8/01/28 | | | 1,000,000 | | | | 1,051,970 | |
Road and Street Improvement, Assured Guaranty, Pre-Refunded, 5.50%, 8/01/30 | | | 1,700,000 | | | | 1,794,265 | |
East Baton Rouge Sewerage Commission Revenue, | | | | | | | | |
Refunding, Series B, 5.00%, 2/01/39 | | | 5,000,000 | | | | 5,600,200 | |
Series A, Pre-Refunded, 5.25%, 2/01/34 | | | 2,500,000 | | | | 2,588,000 | |
Series A, Pre-Refunded, 5.25%, 2/01/39 | | | 6,500,000 | | | | 6,728,800 | |
Greater New Orleans Expressway Commission Toll Revenue, sub. lien, AGMC Insured, 5.00%, 11/01/47 | | | 4,000,000 | | | | 4,514,720 | |
Jefferson Parish Hospital District No. 1 Hospital Revenue, Parish of Jefferson, West Jefferson Medical Center, Series A, Pre-Refunded, 6.00%, 1/01/39 | | | 3,105,000 | | | | 3,456,859 | |
Jefferson Sales Tax District Special Sales Tax Revenue, Parish of Jefferson, Series B, AGMC Insured, 5.00%, 12/01/42 | | | 2,250,000 | | | | 2,562,457 | |
Kenner Consolidated Sewerage District Revenue, AGMC Insured, 5.00%, 11/01/36 | | | 4,000,000 | | | | 4,358,160 | |
Kenner Sales Tax Revenue, Refunding, Series A, 5.00%, 6/01/33 | | | 8,605,000 | | | | 9,549,141 | |
Lafayette Communications System Revenue, | | | | | | | | |
Refunding, AGMC Insured, 5.00%, 11/01/28 | | | 1,345,000 | | | | 1,522,002 | |
Refunding, AGMC Insured, 5.00%, 11/01/31 | | | 2,400,000 | | | | 2,691,456 | |
Lafayette Parish School Board Sales Tax Revenue, 5.00%, 4/01/48 | | | 6,000,000 | | | | 6,789,540 | |
Lafayette Public Improvement Sales Tax Revenue, Pre-Refunded, 5.00%, 3/01/36 | | | 1,865,000 | | | | 2,044,096 | |
Lafayette Public Trust Financing Authority Revenue, | | | | | | | | |
Ragin’ Cajun Facilities Inc. Housing and Parking Project, AGMC Insured, Pre-Refunded, 5.25%, 10/01/30 | | | 4,000,000 | | | | 4,365,480 | |
Ragin’ Cajun Facilities Inc. Project, Assured Guaranty, Pre-Refunded, 5.75%, 10/01/29 | | | 750,000 | | | | 798,983 | |
Ragin’ Cajun Facilities Inc. Project, Assured Guaranty, Pre-Refunded, 6.00%, 10/01/34 | | | 1,750,000 | | | | 1,871,100 | |
Ragin’ Cajun Facilities Inc. Project, Assured Guaranty, Pre-Refunded, 6.00%, 10/01/38 | | | 1,335,000 | | | | 1,427,382 | |
Lafayette Utilities Revenue, Pre-Refunded, 5.00%, 11/01/33 | | | 5,000,000 | | | | 5,430,600 | |
Louisiana HFA, | | | | | | | | |
SFMR, Home Ownership Program, Series A, GNMA Secured, 5.50%, 6/01/40 | | | 1,450,000 | | | | 1,471,083 | |
SFMR, Home Ownership Program, Series B, GNMA Secured, 6.125%, 12/01/33 | | | 285,000 | | | | 286,559 | |
Louisiana Local Government Environmental Facilities and CDA Airport Revenue, Monroe Regional Airport Terminal Project, Assured Guaranty, Pre-Refunded, 5.50%, 2/01/39 | | | 2,000,000 | | | | 2,146,800 | |
| | | | |
franklintempleton.com | | Annual Report | | 107 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Louisiana Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Louisiana (continued) | | | | | | | | |
Louisiana Local Government Environmental Facilities and CDA Revenue, | | | | | | | | |
City of Shreveport, Independence Stadium Project, Pre-Refunded, 5.25%, 3/01/30 | | $ | 8,845,000 | | | $ | 8,845,000 | |
Delta Campus Facilities Corp. Project, Assured Guaranty, Pre-Refunded, 5.50%, 10/01/27 | | | 5,000,000 | | | | 5,121,000 | |
Denham Springs Sewer District No. 1 Project, Assured Guaranty, Pre-Refunded, 5.00%, 12/01/39 | | | 3,750,000 | | | | 3,970,725 | |
East Ascension Consolidated Gravity Drainage District No. 1 Project, Refunding, BAM Insured, 5.00%, 12/01/40 | | | 2,925,000 | | | | 3,255,993 | |
East Baton Rouge Sewerage Commission Projects, sub. lien, Series A, 5.00%, 2/01/34 | | | 2,550,000 | | | | 2,849,319 | |
East Baton Rouge Sewerage Commission Projects, sub. lien, Series A, 5.00%, 2/01/43 | | | 3,000,000 | | | | 3,283,650 | |
Jefferson Parish Projects, Series A, Pre-Refunded, 5.375%, 4/01/31 | | | 2,000,000 | | | | 2,084,720 | |
LCTCS Act 360 Project, 5.00%, 10/01/32 | | | 3,000,000 | | | | 3,405,660 | |
LCTCS Act 360 Project, 5.00%, 10/01/33 | | | 5,000,000 | | | | 5,660,000 | |
Louisiana Tech University Student Housing, Innovative Student Facilities Inc. Project, Series A, AGMC Insured, 4.00%, 10/01/33 | | | 800,000 | | | | 836,056 | |
Louisiana Tech University Student Housing, Innovative Student Facilities Inc. Project, Series A, AGMC Insured, 4.00%, 10/01/34 | | | 620,000 | | | | 646,530 | |
McNeese State University Student Parking, Cowboy Facilities Inc. Project, AGMC Insured, 5.00%, 3/01/36 | | | 1,800,000 | | | | 1,955,880 | |
Ragin’ Cajun Facilities Inc., Student Housing and Parking Project, Refunding, AGMC Insured, 5.00%, 10/01/39 | | | 2,680,000 | | | | 3,014,035 | |
Shreveport Airport Cargo Project, Series C, Assured Guaranty, Pre-Refunded, 6.75%, 1/01/24 | | | 2,620,000 | | | | 2,729,909 | |
Shreveport Airport Cargo Project, Series C, Assured Guaranty, Pre-Refunded, 7.00%, 1/01/33 | | | 2,500,000 | | | | 2,610,000 | |
Woman’s Hospital Foundation Project, Refunding, Series A, 5.00%, 10/01/44 | | | 9,765,000 | | | | 10,789,153 | |
Louisiana Public Facilities Authority Hospital Revenue, | | | | | | | | |
Franciscan Missionaries of Our Lady Health System Project, Refunding, Series A, 5.00%, 7/01/35 | | | 5,000,000 | | | | 5,533,000 | |
Franciscan Missionaries of Our Lady Health System Project, Series A, 5.00%, 7/01/47 | | | 5,000,000 | | | | 5,498,750 | |
Franciscan Missionaries of Our Lady Health System Project, Series A, Pre-Refunded, 6.75%, 7/01/39 . | | | 3,500,000 | | | | 3,735,760 | |
Lafayette General Medical Center Project, Refunding, 5.50%, 11/01/40 | | | 5,000,000 | | | | 5,287,300 | |
Louisiana Public Facilities Authority Revenue, | | | | | | | | |
Archdiocese of New Orleans Project, Refunding, 5.00%, 7/01/37 | | | 3,750,000 | | | | 4,197,450 | |
CHRISTUS Health, Refunding, Series B, Assured Guaranty, 6.50%, 7/01/30. | | | 5,000,000 | | | | 5,177,750 | |
Loyola University Project, 5.00%, 10/01/41 | | | 5,000,000 | | | | 5,163,400 | |
Loyola University Project, Pre-Refunded, 5.00%, 10/01/39 | | | 5,000,000 | | | | 5,352,850 | |
Ochsner Clinic Foundation Project, Pre-Refunded, 5.00%, 5/15/34 | | | 30,000 | | | | 35,677 | |
Ochsner Clinic Foundation Project, Pre-Refunded, 6.75%, 5/15/41 | | | 5,000,000 | | | | 5,741,450 | |
Ochsner Clinic Foundation Project, Pre-Refunded, 5.00%, 5/15/47 | | | 20,000 | | | | 23,785 | |
Ochsner Clinic Foundation Project, Refunding, 5.00%, 5/15/46 | | | 10,000,000 | | | | 10,859,300 | |
Ochsner Clinic Foundation Project, Refunding, 5.00%, 5/15/47 | | | 1,730,000 | | | | 1,882,673 | |
Ochsner Clinic Foundation Project, Series B, ETM, 5.75%, 5/15/23 | | | 2,500,000 | | | | 2,954,200 | |
Tulane University of Louisiana Project, Refunding, Series A, 5.00%, 12/15/41 | | | 3,000,000 | | | | 3,335,280 | |
Tulane University of Louisiana Project, Refunding, Series A, 4.00%, 12/15/50 | | | 2,000,000 | | | | 2,033,980 | |
Tulane University of Louisiana Project, Series B, 5.00%, 10/01/37 | | | 5,540,000 | | | | 6,080,316 | |
Louisiana State Citizens Property Insurance Corp. Assessment Revenue, Series C-2, Assured Guaranty, Pre-Refunded, 6.75%, 6/01/26 | | | 5,000,000 | | | | 5,067,150 | |
Louisiana State Gasoline and Fuels Tax Revenue, | | | | | | | | |
first lien, Refunding, Series A, 5.00%, 5/01/41 | | | 3,000,000 | | | | 3,377,910 | |
second lien, Refunding, Series C, 5.00%, 5/01/40 | | | 5,000,000 | | | | 5,684,900 | |
second lien, Refunding, Series C, 5.00%, 5/01/45 | | | 10,000,000 | | | | 11,299,200 | |
second lien, Refunding, Series C-1, 5.00%, 5/01/43 | | | 5,000,000 | | | | 5,532,850 | |
| | | | | | |
108 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Louisiana Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Louisiana (continued) | | | | | | | | |
Louisiana State GO, | | | | | | | | |
Refunding, Series A, 5.00%, 9/01/36 | | $ | 5,000,000 | | | $ | 5,641,150 | |
Refunding, Series B, 5.00%, 8/01/28 | | | 5,000,000 | | | | 5,807,200 | |
Refunding, Series C, 5.00%, 8/01/27 | | | 7,200,000 | | | | 8,210,088 | |
Louisiana State Highway Improvement Revenue, | | | | | | | | |
Series A, 5.00%, 6/15/30 | | | 2,860,000 | | | | 3,198,367 | |
Series A, 5.00%, 6/15/32 | | | 9,850,000 | | | | 11,200,139 | |
Louisiana State Public Facilities Authority Lease Revenue, | | | | | | | | |
Provident Group, Flagship Properties LLC, Louisiana State University Greenhouse District Project, 5.00%, 7/01/52 | | | 2,000,000 | | | | 2,165,700 | |
Provident Group, Flagship Properties LLC, Louisiana State University Nicholson Gateway Project, Series A, 5.00%, 7/01/46 | | | 6,500,000 | | | | 7,042,555 | |
Louisiana State Transportation Authority Revenue, Refunding, Series A, 5.00%, 8/15/38 | | | 4,500,000 | | | | 5,048,145 | |
Louisiana State Unclaimed Property Special Revenue, | | | | | | | | |
I-49 North Project, 5.00%, 9/01/26 | | | 3,000,000 | | | | 3,368,220 | |
I-49 North Project, 5.00%, 9/01/33 | | | 5,860,000 | | | | 6,515,793 | |
Louisiana State University and Agricultural and Mechanical College Revenue, | | | | | | | | |
Board of Supervisors, Auxiliary, 5.00%, 7/01/37 | | | 4,000,000 | | | | 4,407,800 | |
Board of Supervisors, Auxiliary, Refunding, 5.00%, 7/01/29 | | | 1,000,000 | | | | 1,131,740 | |
Board of Supervisors, Auxiliary, Refunding, 5.00%, 7/01/30 | | | 1,040,000 | | | | 1,174,420 | |
Board of Supervisors, Auxiliary, Refunding, 5.00%, 7/01/34 | | | 1,000,000 | | | | 1,121,230 | |
Board of Supervisors, Auxiliary, Refunding, Series A, 5.00%, 7/01/40 | | | 4,500,000 | | | | 4,990,770 | |
Board of Supervisors, Auxiliary, Series A, Pre-Refunded, 5.00%, 7/01/40 | | | 5,000,000 | | | | 5,381,300 | |
New Orleans Aviation Board Revenue, | | | | | | | | |
General Airport, North Terminal Project, Series A, 5.00%, 1/01/48 | | | 10,000,000 | | | | 11,162,700 | |
Restructuring GARB, Series A-1, Assured Guaranty, Pre-Refunded, 6.00%, 1/01/23 | | | 2,000,000 | | | | 2,076,680 | |
New Orleans Sewage Service Revenue, Assured Guaranty, Pre-Refunded, 6.25%, 6/01/29 | | | 500,000 | | | | 529,350 | |
Port of New Orleans Board of Commissioners Port Facility Revenue, | | | | | | | | |
Refunding, Assured Guaranty, 5.125%, 4/01/38 | | | 5,000,000 | | | | 5,015,050 | |
aSeries A, AGMC Insured, 5.00%, 4/01/48 | | | 2,750,000 | | | | 3,105,245 | |
Ruston Sales Tax Revenue, AGMC Insured, 5.00%, 6/01/35 | | | 1,085,000 | | | | 1,213,019 | |
Shreveport GO, Pre-Refunded, 5.00%, 8/01/29 | | | 4,790,000 | | | | 5,300,279 | |
Shreveport Limited Obligation Revenue, Independence Stadium Project, Refunding, BAM Insured, 5.00%, 3/01/27 | | | 1,500,000 | | | | 1,741,860 | |
Shreveport Water and Sewer Revenue, Series B, 5.00%, 12/01/41 | | | 4,000,000 | | | | 4,413,640 | |
St. Tammany Parish Utilities Revenue, | | | | | | | | |
Series B, 5.50%, 8/01/35 | | | 2,650,000 | | | | 2,892,395 | |
Series B, 5.00%, 8/01/44 | | | 3,290,000 | | | | 3,523,031 | |
Terrebonne Levee and Conservation District Public Improvement Sales Tax Revenue, 5.00%, 7/01/38 | | | 2,000,000 | | | | 2,213,260 | |
Terrebonne Parish Sales and Use Tax Revenue, Morganza Levee Improvement, Series ST, AGMC Insured, 5.00%, 4/01/32 | | | 2,265,000 | | | | 2,456,370 | |
| | | | | | | | |
| | | | | | | 396,399,586 | |
| | | | | | | | |
U.S. Territories 0.6% | | | | | | | | |
Puerto Rico 0.6% | | | | | | | | |
bPuerto Rico Electric Power Authority Power Revenue, Series WW, 5.25%, 7/01/33 | | | 6,450,000 | | | | 2,426,812 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $389,332,125) | | | | | | | 398,826,398 | |
| | | | | | | | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 109 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Louisiana Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
| | |
Short Term Investments (Cost $2,000,000) 0.5% | | | | | | | | |
Municipal Bonds 0.5% | | | | | | | | |
Louisiana 0.5% | | | | | | | | |
cEast Baton Rouge Parish PCR, Exxon Project, Refunding, Daily VRDN and Put, 1.14%, 11/01/19 | | $ | 2,000,000 | | | $ | 2,000,000 | |
| | | | | | | | |
Total Investments (Cost $391,332,125) 99.9% | | | | | | | 400,826,398 | |
Other Assets, less Liabilities 0.1% | | | | | | | 426,114 | |
| | | | | | | | |
Net Assets 100.0%. | | | | | | $ | 401,252,512 | |
| | | | | | | | |
See Abbreviations on page 170.
aA portion or all of the security purchased on a when-issued basis. See Note 1(b).
bSee Note 7 regarding defaulted securities.
cVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | |
110 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin Maryland Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| | | | | |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.10 | | | | $11.35 | | | | $11.55 | | | | $11.20 | | | | $11.98 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.34 | | | | 0.39 | | | | 0.42 | | | | 0.42 | | | | 0.41 | |
Net realized and unrealized gains (losses) | | | (0.32) | | | | (0.24) | | | | (0.21) | | | | 0.35 | | | | (0.79) | |
| | | | |
Total from investment operations | | | 0.02 | | | | 0.15 | | | | 0.21 | | | | 0.77 | | | | (0.38) | |
| | | | |
Less distributions from net investment income | | | (0.36) | | | | (0.40) | | | | (0.41) | | | | (0.42) | | | | (0.40) | |
| | | | |
Net asset value, end of year | | | $10.76 | | | | $11.10 | | | | $11.35 | | | | $11.55 | | | | $11.20 | |
| | | | |
| | | | | |
Total returnd | | | 0.13% | | | | 1.31% | | | | 1.88% | | | | 6.94% | | | | (3.17)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.70% | | | | 0.67% | | | | 0.67% | | | | 0.67% | | | | 0.65% | |
Net investment income | | | 3.07% | | | | 3.47% | | | | 3.70% | | | | 3.63% | | | | 3.62% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $319,120 | | | | $351,933 | | | | $369,661 | | | | $393,022 | | | | $407,061 | |
Portfolio turnover rate | | | 11.36% | | | | 33.34% | | | | 9.77% | | | | 15.88% | | | | 12.30% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal 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 | | 111 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Maryland Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| | | | | |
Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.31 | | | | $11.56 | | | | $11.75 | | | | $11.39 | | | | $12.18 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.28 | | | | 0.34 | | | | 0.36 | | | | 0.36 | | | | 0.35 | |
Net realized and unrealized gains (losses) | | | (0.32) | | | | (0.25) | | | | (0.20) | | | | 0.35 | | | | (0.81) | |
| | | | |
Total from investment operations | | | (0.04) | | | | 0.09 | | | | 0.16 | | | | 0.71 | | | | (0.46) | |
| | | | |
Less distributions from net investment income | | | (0.29) | | | | (0.34) | | | | (0.35) | | | | (0.35) | | | | (0.33) | |
| | | | |
Net asset value, end of year | | | $10.98 | | | | $11.31 | | | | $11.56 | | | | $11.75 | | | | $11.39 | |
| | | | |
| | | | | |
Total returnd | | | (0.34)% | | | | 0.72% | | | | 1.38% | | | | 6.33% | | | | (3.73)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.25% | | | | 1.22% | | | | 1.22% | | | | 1.22% | | | | 1.20% | |
Net investment income | | | 2.52% | | | | 2.92% | | | | 3.15% | | | | 3.08% | | | | 3.07% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $92,553 | | | | $115,011 | | | | $117,167 | | | | $125,328 | | | | $130,550 | |
Portfolio turnover rate | | | 11.36% | | | | 33.34% | | | | 9.77% | | | | 15.88% | | | | 12.30% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
| | | | | | |
112 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Maryland Tax-Free Income Fund (continued)
| | | | |
| | Year Ended February 28, 2018a | |
Class R6 | | | | |
| |
Per share operating performance (for a share outstanding throughout the year) | | | | |
Net asset value, beginning of year | | | $11.05 | |
| | | | |
Income from investment operationsb: | | | | |
Net investment incomec | | | 0.21 | |
Net realized and unrealized gains (losses) | | | (0.27) | |
| | | | |
Total from investment operations | | | (0.06) | |
| | | | |
Less distributions from net investment income | | | (0.21) | |
| | | | |
Net asset value, end of year | | | $10.78 | |
| | | | |
| |
Total returnd | | | (0.58)% | |
| |
Ratios to average net assetse | | | | |
Expenses before waiver and payments by affiliates | | | 0.62% | |
Expenses net of waiver and payments by affiliates | | | 0.56% | |
Net investment income | | | 3.21% | |
| |
Supplemental data | | | | |
Net assets, end of year (000’s) | | | $1,376 | |
Portfolio turnover rate | | | 11.36% | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 113 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Maryland Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.11 | | | | $11.35 | | | | $11.56 | | | | $11.20 | | | | $11.99 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.35 | | | | 0.41 | | | | 0.43 | | | | 0.43 | | | | 0.42 | |
Net realized and unrealized gains (losses) | | | (0.32 | ) | | | (0.24 | ) | | | (0.22 | ) | | | 0.36 | | | | (0.80) | |
| | | | |
Total from investment operations | | | 0.03 | | | | 0.17 | | | | 0.21 | | | | 0.79 | | | | (0.38) | |
| | | | |
Less distributions from net investment income | | | (0.37 | ) | | | (0.41 | ) | | | (0.42 | ) | | | (0.43 | ) | | | (0.41) | |
| | | | |
Net asset value, end of year | | | $10.77 | | | | $11.11 | | | | $11.35 | | | | $11.56 | | | | $11.20 | |
| | | | |
| | | | | |
Total return | | | 0.22% | | | | 1.50% | | | | 1.90% | | | | 7.13% | | | | (3.16)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.60% | | | | 0.57% | | | | 0.57% | | | | 0.57% | | | | 0.55% | |
Net investment income | | | 3.17% | | | | 3.57% | | | | 3.80% | | | | 3.73% | | | | 3.72% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $40,532 | | | | $42,625 | | | | $28,464 | | | | $27,131 | | | | $19,985 | |
Portfolio turnover rate | | | 11.36% | | | | 33.34% | | | | 9.77% | | | | 15.88% | | | | 12.30% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
| | | | | | |
114 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Maryland Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 98.3% | | | | | | | | |
Maryland 95.7% | | | | | | | | |
Annapolis GO, Public Improvements, Pre-Refunded, 5.00%, 8/01/31 | | | $ 1,250,000 | | | | $ 1,385,350 | |
Anne Arundel County GO, | | | | | | | | |
Consolidated General Improvements, Refunding, 5.00%, 4/01/33 | | | 3,140,000 | | | | 3,542,674 | |
Consolidated Water and Sewer, 5.00%, 4/01/41 | | | 12,620,000 | | | | 13,709,989 | |
aAnne Arundel County MFR, Glenview Gardens Apartments Project, Mandatory Put, 5.00%, 1/01/27 | | | 1,940,000 | | | | 2,047,786 | |
Baltimore County GO, | | | | | | | | |
Metropolitan District, 78th Issue, Refunding, 5.00%, 2/01/39 | | | 2,900,000 | | | | 3,310,205 | |
Metropolitan District, 78th Issue, Refunding, 5.00%, 2/01/41 | | | 2,900,000 | | | | 3,299,243 | |
Baltimore Revenue, | | | | | | | | |
Mayor and City Council of Baltimore, Wastewater Projects, Series A, 5.00%, 7/01/41 | | | 14,435,000 | | | | 15,769,516 | |
Mayor and City Council of Baltimore, Wastewater Projects, Series A, AGMC Insured, Pre-Refunded, 5.00%, 7/01/38 | | | 5,000,000 | | | | 5,061,550 | |
Mayor and City Council of Baltimore, Wastewater Projects, Series C, Pre-Refunded, 5.125%, 7/01/34 | | | 1,835,000 | | | | 1,923,263 | |
Mayor and City Council of Baltimore, Wastewater Projects, Series C, Pre-Refunded, 5.625%, 7/01/39 | | | 2,965,000 | | | | 3,127,066 | |
Mayor and City Council of Baltimore, Wastewater Projects, Subordinate, Series A, 5.00%, 7/01/46 | | | 15,000,000 | | | | 16,926,750 | |
Mayor and City Council of Baltimore, Water Projects, Refunding, Series B, 5.00%, 7/01/38 | | | 5,000,000 | | | | 5,567,850 | |
Mayor and City Council of Baltimore, Water Projects, Series A, 5.00%, 7/01/38 | | | 8,930,000 | | | | 9,944,180 | |
Mayor and City Council of Baltimore, Water Projects, Series A, 5.00%, 7/01/41 | | | 7,845,000 | | | | 8,533,320 | |
Mayor and City Council of Baltimore, Water Projects, Subordinate, Series A, Pre-Refunded, 5.375%, 7/01/34 | | | 750,000 | | | | 788,349 | |
Mayor and City Council of Baltimore, Water Projects, Subordinate, Series A, Pre-Refunded, 5.75%, 7/01/39 | | | 1,250,000 | | | | 1,320,375 | |
Frederick County GO, Public Improvements, Series A, Pre-Refunded, 5.00%, 3/01/34 | | | 8,580,000 | | | | 8,886,563 | |
Howard County Housing Commission Revenue, | | | | | | | | |
Gateway Village Apartments, 4.00%, 6/01/46 | | | 2,000,000 | | | | 2,026,580 | |
The Verona at Oakland Mills Project, 5.00%, 10/01/28 | | | 10,000,000 | | | | 10,993,400 | |
Woodfield Oxford Square Apartments, 5.00%, 12/01/46 | | | 5,000,000 | | | | 5,570,900 | |
Maryland Environmental Service Revenue, Mid-Shore II Regional Landfill Project, Refunding, 5.00%, 11/01/30 | | | 3,935,000 | | | | 4,260,975 | |
Maryland Stadium Authority Revenue, Baltimore City Public Schools, Construction and Revitalization Program, 5.00%, 5/01/46 | | | 10,085,000 | | | | 11,318,093 | |
Maryland State Community Development Administration Department of Housing and CDR, Residential, Series B, 4.75%, 9/01/39 | | | 5,335,000 | | | | 5,377,840 | |
Maryland State Community Development Administration Local Government Infrastructure Revenue, | | | | | | | | |
Senior Obligations, Series A-1, 4.00%, 6/01/47 | | | 2,300,000 | | | | 2,340,365 | |
Subordinate Obligations, Series A-2, 5.00%, 6/01/34 | | | 3,500,000 | | | | 3,898,510 | |
Maryland State EDC, PCR, Potomac Electric Project, Refunding, 6.20%, 9/01/22 | | | 10,000,000 | | | | 10,448,200 | |
Maryland State EDC Student Housing Revenue, | | | | | | | | |
Salisbury University Project, Refunding, 5.00%, 6/01/34 | | | 2,040,000 | | | | 2,137,532 | |
Senior, Frostburg State University Project, Refunding, 5.00%, 10/01/33 | | | 5,000,000 | | | | 5,387,600 | |
Senior, Morgan State University Project, Refunding, 5.00%, 7/01/27 | | | 4,750,000 | | | | 5,111,855 | |
Senior, Morgan State University Project, Refunding, 5.00%, 7/01/34 | | | 2,150,000 | | | | 2,251,179 | |
Senior, Towson University Project, 5.00%, 7/01/27 | | | 1,145,000 | | | | 1,255,344 | |
University of Maryland, College Park Projects, Refunding, AGMC Insured, 5.00%, 6/01/35 | | | 4,225,000 | | | | 4,768,969 | |
University of Maryland, College Park Projects, Refunding, AGMC Insured, 5.00%, 6/01/43 | | | 3,305,000 | | | | 3,715,217 | |
University Village at Sheppard Pratt, 5.00%, 7/01/27 | | | 1,500,000 | | | | 1,594,575 | |
University Village at Sheppard Pratt, 5.00%, 7/01/33 | | | 2,495,000 | | | | 2,628,682 | |
Maryland State GO, State and Local Facilities Loan of 2017, First Series A, 5.00%, 3/15/31 | | | 5,000,000 | | | | 5,907,800 | |
| | | | |
franklintempleton.com | | Annual Report | | 115 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Maryland Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Maryland (continued) | | | | | | | | |
Maryland State Health and Higher Educational Facilities Authority Revenue, | | | | | | | | |
Adventist HealthCare Issue, Series A, 5.50%, 1/01/46 | | | $ 8,000,000 | | | | $ 8,910,080 | |
Anne Arundel Health System Issue, Refunding, 5.00%, 7/01/39 | | | 10,000,000 | | | | 11,047,800 | |
Anne Arundel Health System Issue, Series A, Pre-Refunded, 6.75%, 7/01/29 | | | 2,000,000 | | | | 2,131,980 | |
Anne Arundel Health System Issue, Series A, Pre-Refunded, 6.75%, 7/01/39 | | | 2,000,000 | | | | 2,131,980 | |
Charlestown Community Issue, Refunding, Series A, 5.00%, 1/01/45 | | | 4,170,000 | | | | 4,695,420 | |
Goucher College Issue, Refunding, Series A, 5.00%, 7/01/34 | | | 1,500,000 | | | | 1,641,990 | |
Goucher College Issue, Refunding, Series A, 5.00%, 7/01/44 | | | 5,000,000 | | | | 5,525,300 | |
Helix Health Issue, AMBAC Insured, ETM, 5.00%, 7/01/27 | | | 11,000,000 | | | | 12,393,590 | |
Johns Hopkins Medical Institutions Utilities Program Issue, Refunding, Series A, 5.00%, 5/15/37 | | | 10,000,000 | | | | 11,393,200 | |
The Johns Hopkins University Issue, Series A, 5.00%, 7/01/37 | | | 5,000,000 | | | | 5,586,100 | |
The Johns Hopkins University Issue, Series A, 5.00%, 7/01/41 | | | 15,000,000 | | | | 16,738,500 | |
The Johns Hopkins University Issue, Series B, 5.00%, 7/01/38 | | | 5,000,000 | | | | 5,612,100 | |
LifeBridge Health Issue, Refunding, 5.00%, 7/01/44 | | | 3,000,000 | | | | 3,357,960 | |
LifeBridge Health Issue, Refunding, 5.00%, 7/01/47 | | | 3,000,000 | | | | 3,322,590 | |
Loyola University Maryland, Refunding, 5.00%, 10/01/45 | | | 2,250,000 | | | | 2,501,235 | |
Loyola University Maryland, Refunding, Series A, 5.00%, 10/01/39 | | | 5,275,000 | | | | 5,791,950 | |
Maryland Institute College of Art Issue, Refunding, 5.00%, 6/01/29 | | | 1,000,000 | | | | 1,095,150 | |
Maryland Institute College of Art Issue, Refunding, 4.00%, 6/01/42 | | | 5,325,000 | | | | 5,336,715 | |
Medstar Health Issue, Series A, 5.00%, 8/15/38 | | | 5,000,000 | | | | 5,512,700 | |
Medstar Health Issue, Series A, 5.00%, 5/15/45 | | | 5,000,000 | | | | 5,531,600 | |
Meritus Medical Center Issue, Refunding, 5.00%, 7/01/45 | | | 8,535,000 | | | | 9,081,155 | |
Parking, The Johns Hopkins Medical Institutions Parking Facilities Issue, AMBAC Insured, 5.00%, 7/01/27 | | | 655,000 | | | | 656,900 | |
Parking, The Johns Hopkins Medical Institutions Parking Facilities Issue, AMBAC Insured, 5.00%, 7/01/34 | | | 5,000,000 | | | | 5,014,150 | |
Parking, The Johns Hopkins Medical Institutions Parking Facilities Issue, Refunding, Series B, AMBAC Insured, 5.00%, 7/01/38 | | | 6,200,000 | | | | 6,204,774 | |
Peninsula Regional Medical Center Issue, Refunding, 5.00%, 7/01/45 | | | 6,330,000 | | | | 6,801,395 | |
Trinity Health Credit Group, 5.00%, 12/01/46 | | | 1,680,000 | | | | 1,886,002 | |
University of Maryland Medical System Issue, AMBAC Insured, Pre-Refunded, 5.25%, 7/01/28 | | | 15,000,000 | | | | 15,191,850 | |
University of Maryland Medical System Issue, Refunding, 5.00%, 7/01/35 | | | 2,100,000 | | | | 2,342,256 | |
University of Maryland Medical System Issue, Refunding, Series B, 5.00%, 7/01/39 | | | 10,000,000 | | | | 11,142,700 | |
University of Maryland Medical System Issue, Series D, 4.00%, 7/01/48 | | | 5,000,000 | | | | 4,965,000 | |
Montgomery County GO, | | | | | | | | |
Consolidated Public Improvement, Refunding, Series A, 4.00%, 11/01/20 | | | 8,000,000 | | | | 8,315,200 | |
Consolidated Public Improvement, Refunding, Series A, 4.00%, 12/01/33 | | | 7,000,000 | | | | 7,398,160 | |
Montgomery County Revenue, | | | | | | | | |
Department of Liquor Control, Refunding, Series A, 5.00%, 4/01/27 | | | 1,625,000 | | | | 1,776,547 | |
Department of Liquor Control, Refunding, Series A, 5.00%, 4/01/28 | | | 2,230,000 | | | | 2,437,970 | |
Department of Liquor Control, Refunding, Series A, 5.00%, 4/01/31 | | | 2,470,000 | | | | 2,694,152 | |
Department of Liquor Control, Series A, 5.00%, 4/01/30 | | | 1,935,000 | | | | 2,111,801 | |
Montgomery County Water Quality Protection Charge Revenue, | | | | | | | | |
Series A, 5.00%, 4/01/30 | | | 1,855,000 | | | | 1,978,413 | |
Series A, 5.00%, 4/01/31 | | | 1,240,000 | | | | 1,321,183 | |
Prince George’s County COP, Public Safety Communications Center, 5.00%, 10/01/30 | | | 2,060,000 | | | | 2,222,761 | |
Prince George’s County IDA Lease Revenue, Upper Marlboro Justice, Series B, NATL Insured, 4.75%, 6/30/30 | | | 4,000,000 | | | | 4,009,560 | |
| | | | | | |
116 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Maryland Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Maryland (continued) | | | | | | | | |
Washington Suburban Sanitary District GO, | | | | | | | | |
Consolidated Public Improvement, Second Series, 5.00%, 6/01/37 | | $ | 10,000,000 | | | $ | 11,498,500 | |
Consolidated Public Improvement, Second Series, 4.00%, 6/01/43 | | | 8,070,000 | | | | 8,415,315 | |
| | | | | | | | |
| | | | | | | 433,861,329 | |
| | | | | | | | |
District of Columbia 1.8% | | | | | | | | |
Washington Metropolitan Area Transit Authority Gross Revenue, | | | | | | | | |
Transit, Series A, Pre-Refunded, 5.125%, 7/01/32 | | | 2,500,000 | | | | 2,620,250 | |
Transit, Series B, 5.00%, 7/01/42 | | | 5,000,000 | | | | 5,716,500 | |
| | | | | | | | |
| | | | | | | 8,336,750 | |
| | | | | | | | |
U.S. Territories 0.8% | | | | | | | | |
Puerto Rico 0.8% | | | | | | | | |
bPuerto Rico Electric Power Authority Power Revenue, | | | | | | | | |
Series WW, 5.50%, 7/01/38 | | | 5,000,000 | | | | 1,881,250 | |
Series XX, 5.25%, 7/01/40 | | | 5,000,000 | | | | 1,881,250 | |
| | | | | | | | |
| | | | | | | 3,762,500 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $437,053,332) | | | | | | | 445,960,579 | |
| | | | | | | | |
| | |
Short Term Investments (Cost $4,200,000) 0.9% | | | | | | | | |
Municipal Bonds 0.9% | | | | | | | | |
Maryland 0.9% | | | | | | | | |
cMontgomery County GO, Condolidated Public Improvement, Series E, SPA US Bank National Association, Daily VRDN and Put, 1.07%, 11/01/37 | | | 4,200,000 | | | | 4,200,000 | |
| | | | | | | | |
Total Investments (Cost $441,253,332) 99.2% | | | | | | | 450,160,579 | |
Other Assets, less Liabilities 0.8% | | | | | | | 3,420,569 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | $ | 453,581,148 | |
| | | | | | | | |
See Abbreviations on page 170.
aThe maturity date shown represents the mandatory put date.
bSee Note 7 regarding defaulted securities.
cVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 117 |
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin Missouri Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended February 28, | | | | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| | | | | |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.74 | | | | $12.05 | | | | $12.21 | | | | $11.88 | | | | $12.77 | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.36 | | | | 0.42 | | | | 0.45 | | | | 0.47 | | | | 0.46 | |
Net realized and unrealized gains (losses) | | | (0.34 | ) | | | (0.30 | ) | | | (0.18 | ) | | | 0.32 | | | | (0.90) | |
Total from investment operations | | | 0.02 | | | | 0.12 | | | | 0.27 | | | | 0.79 | | | | (0.44) | |
Less distributions from net investment income | | | (0.38 | ) | | | (0.43 | ) | | | (0.43 | ) | | | (0.46 | ) | | | (0.45) | |
Net asset value, end of year | | | $11.38 | | | | $11.74 | | | | $12.05 | | | | $12.21 | | | | $11.88 | |
| | | | | |
Total returnd | | | 0.12% | | | | 0.94% | | | | 2.26% | | | | 6.80% | | | | (3.44)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.66% | | | | 0.65% | | | | 0.64% | | | | 0.63% | | | | 0.62% | |
Net investment income | | | 3.05% | | | | 3.52% | | | | 3.72% | | | | 3.87% | | | | 3.80% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $793,226 | | | | $873,204 | | | | $880,848 | | | | $890,228 | | | | $889,702 | |
Portfolio turnover rate | | | 20.04% | | | | 11.66% | | | | 7.97% | | | | 4.73% | | | | 10.57% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
| | | | | | |
118 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Missouri Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| |
Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.86 | | | | $12.17 | | | | $12.32 | | | | $11.98 | | | | $12.88 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.29 | | | | 0.36 | | | | 0.38 | | | | 0.40 | | | | 0.39 | |
Net realized and unrealized gains (losses) | | | (0.35 | ) | | | (0.31 | ) | | | (0.17 | ) | | | 0.34 | | | | (0.91) | |
| | | | |
Total from investment operations | | | (0.06 | ) | | | 0.05 | | | | 0.21 | | | | 0.74 | | | | (0.52) | |
| | | | |
Less distributions from net investment income | | | (0.31 | ) | | | (0.36 | ) | | | (0.36 | ) | | | (0.40 | ) | | | (0.38) | |
| | | | |
Net asset value, end of year | | | $11.49 | | | | $11.86 | | | | $12.17 | | | | $12.32 | | | | $11.98 | |
| | | | |
| | | | | |
Total returnd | | | (0.53)% | | | | 0.38% | | | | 1.77% | | | | 6.25% | | | | (4.02)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.21% | | | | 1.20% | | | | 1.19% | | | | 1.18% | | | | 1.17% | |
Net investment income | | | 2.50% | | | | 2.97% | | | | 3.17% | | | | 3.32% | | | | 3.25% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $149,306 | | | | $169,821 | | | | $167,284 | | | | $166,282 | | | | $166,226 | |
Portfolio turnover rate | | | 20.04% | | | | 11.66% | | | | 7.97% | | | | 4.73% | | | | 10.57% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal 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 | | 119 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Missouri Tax-Free Income Fund (continued)
| | |
| | Year Ended February 28, 2018a |
| |
Class R6 | | |
| |
Per share operating performance | | |
(for a share outstanding throughout the year) | | |
Net asset value, beginning of year | | $11.72 |
| |
Income from investment operationsb: | | |
Net investment incomec | | 0.22 |
Net realized and unrealized gains (losses) | | (0.35) |
| |
Total from investment operations | | (0.13) |
| |
Less distributions from net investment income | | (0.21) |
| |
Net asset value, end of year | | $11.38 |
| |
Total returnd | | (1.11)% |
| |
Ratios to average net assetse | | |
| |
Expenses before waiver and payments by affiliates | | 0.55% |
Expenses net of waiver and payments by affiliates | | 0.53% |
Net investment income | | 3.18% |
| |
Supplemental data | | |
| |
Net assets, end of year (000’s) | | $17,534 |
Portfolio turnover rate | | 20.04% |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | |
120 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Missouri Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| |
Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.75 | | | | $12.06 | | | | $12.22 | | | | $11.88 | | | | $12.78 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.37 | | | | 0.44 | | | | 0.46 | | | | 0.48 | | | | 0.47 | |
Net realized and unrealized gains (losses) | | | (0.35 | ) | | | (0.31 | ) | | | (0.18 | ) | | | 0.34 | | | | (0.91) | |
| | | | |
Total from investment operations | | | 0.02 | | | | 0.13 | | | | 0.28 | | | | 0.82 | | | | (0.44) | |
| | | | |
Less distributions from net investment income | | | (0.39 | ) | | | (0.44 | ) | | | (0.44 | ) | | | (0.48 | ) | | | (0.46) | |
| | | | |
Net asset value, end of year | | | $11.38 | | | | $11.75 | | | | $12.06 | | | | $12.22 | | | | $11.88 | |
| | | | |
| | | | | |
Total return | | | 0.12% | | | | 1.04% | | | | 2.37% | | | | 7.00% | | | | (3.43)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.56% | | | | 0.55% | | | | 0.54% | | | | 0.53% | | | | 0.52% | |
Net investment income | | | 3.15% | | | | 3.62% | | | | 3.82% | | | | 3.97% | | | | 3.90% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $72,460 | | | | $83,686 | | | | $46,051 | | | | $37,626 | | | | $42,840 | |
Portfolio turnover rate | | | 20.04% | | | | 11.66% | | | | 7.97% | | | | 4.73% | | | | 10.57% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 121 |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Missouri Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 99.3% | | | | | | | | |
Missouri 97.4% | | | | | | | | |
Bi-State Development Agency Missouri-Illinois Metropolitan District Mass Transit Sales Tax Appropriation Revenue, | | | | | | | | |
combined lien, Refunding, Series A, 5.00%, 10/01/33 | | | $14,425,000 | | | | $ 16,142,152 | |
combined lien, Refunding, Series A, 5.00%, 10/01/44 | | | 10,000,000 | | | | 11,130,400 | |
Metrolink Cross County Extension Project, Assured Guaranty, 5.00%, 10/01/35 | | | 5,500,000 | | | | 5,764,165 | |
Metrolink Cross County Extension Project, Assured Guaranty, 5.00%, 10/01/39 | | | 30,300,000 | | | | 31,726,221 | |
Cape Girardeau County IDA Health Facilities Revenue, | | | | | | | | |
St. Francis Medical Center, Refunding, 5.00%, 6/01/39 | | | 7,110,000 | | | | 7,820,929 | |
St. Francis Medical Center, Refunding, Series A, 5.00%, 6/01/33 | | | 5,000,000 | | | | 5,343,350 | |
St. Francis Medical Center, Refunding, Series A, 5.00%, 6/01/37 | | | 11,000,000 | | | | 11,687,830 | |
St. Francis Medical Center, Series A, Pre-Refunded, 5.75%, 6/01/39 | | | 3,150,000 | | | | 3,315,533 | |
Cape Girardeau County IDA Solid Waste Disposal Revenue, The Procter and Gamble Paper Products Co. Project, 5.30%, 5/15/28 | | | 6,875,000 | | | | 6,889,575 | |
Cape Girardeau County School District No. R-2 GO, | | | | | | | | |
Direct Deposit Program, 4.00%, 3/01/34 | | | 1,000,000 | | | | 1,062,690 | |
Direct Deposit Program, 4.00%, 3/01/37 | | | 1,900,000 | | | | 1,983,695 | |
Carroll County Public Water Supply District No. 1 Waterworks Revenue, | | | | | | | | |
Pre-Refunded, 5.625%, 3/01/34 | | | 1,000,000 | | | | 1,000,000 | |
Pre-Refunded, 6.00%, 3/01/39 | | | 1,000,000 | | | | 1,000,000 | |
Clay County Reorganization School District No. R-1 Kearney GO, | | | | | | | | |
Direct Deposit Program, School Building, 3.00%, 3/01/33 | | | 1,620,000 | | | | 1,549,886 | |
Direct Deposit Program, School Building, 3.00%, 3/01/34 | | | 1,670,000 | | | | 1,586,116 | |
Direct Deposit Program, School Building, 3.00%, 3/01/35 | | | 1,730,000 | | | | 1,630,508 | |
Direct Deposit Program, School Building, 3.00%, 3/01/36 | | | 1,540,000 | | | | 1,441,748 | |
Direct Deposit Program, School Building, 3.125%, 3/01/37 | | | 1,855,000 | | | | 1,756,592 | |
Columbia School District GO, Refunding and Improvement, 5.00%, 3/01/36 | | | 1,225,000 | | | | 1,399,930 | |
Curators of the University of Missouri System Facilities Revenue, | | | | | | | | |
Refunding, 5.00%, 11/01/27 | | | 1,065,000 | | | | 1,181,692 | |
Refunding, Series A, 5.00%, 11/01/26 | | | 7,830,000 | | | | 9,128,997 | |
Independence School District GO, | | | | | | | | |
Missouri Direct Deposit Program, Refunding, Series A, 5.00%, 3/01/27 | | | 680,000 | | | | 722,500 | |
Missouri Direct Deposit Program, Refunding, Series A, 5.00%, 3/01/27 | | | 2,620,000 | | | | 2,791,217 | |
Missouri Direct Deposit Program, Refunding, Series A, 5.00%, 3/01/28 | | | 645,000 | | | | 685,313 | |
Missouri Direct Deposit Program, Refunding, Series A, 5.00%, 3/01/28 | | | 2,355,000 | | | | 2,507,934 | |
Missouri Direct Deposit Program, Refunding and Improvement, Series B, 5.50%, 3/01/34 | | | 2,000,000 | | | | 2,412,720 | |
Missouri Direct Deposit Program, Refunding and Improvement, Series B, 5.50%, 3/01/37 | | | 2,070,000 | | | | 2,480,833 | |
Missouri Direct Deposit Program, Series A, 5.00%, 3/01/29 | | | 590,000 | | | | 626,875 | |
Missouri Direct Deposit Program, Series A, 5.00%, 3/01/29 | | | 2,410,000 | | | | 2,565,517 | |
Jackson County Reorganized School District No. 4 Blue Springs GO, | | | | | | | | |
Refunding and Improvement, Series A, 5.00%, 3/01/29 | | | 320,000 | | | | 330,883 | |
Refunding and Improvement, Series A, 5.00%, 3/01/29 | | | 3,680,000 | | | | 3,795,883 | |
Jefferson City School District GO, | | | | | | | | |
Missouri Direct Deposit Program, 4.00%, 3/01/34 | | | 6,840,000 | | | | 7,193,833 | |
Missouri Direct Deposit Program, 4.00%, 3/01/35 | | | 3,000,000 | | | | 3,146,550 | |
Missouri Direct Deposit Program, 5.00%, 3/01/36 | | | 2,700,000 | | | | 3,071,142 | |
Missouri Direct Deposit Program, 5.00%, 3/01/37 | | | 2,750,000 | | | | 3,121,745 | |
Joplin IDA Health Facilities Revenue, | | | | | | | | |
Freeman Health System Project, 5.125%, 2/15/26 | | | 6,000,000 | | | | 6,409,980 | |
Freeman Health System Project, 5.00%, 2/15/28 | | | 1,150,000 | | | | 1,218,230 | |
Freeman Health System Project, 5.50%, 2/15/31 | | | 2,055,000 | | | | 2,196,158 | |
Freeman Health System Project, Refunding, 5.00%, 2/15/35 | | | 4,000,000 | | | | 4,297,600 | |
| | | | | | |
122 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Missouri Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Missouri (continued) | | | | | | | | |
Joplin Schools GO, Direct Deposit Program, Refunding, 4.00%, 3/01/32 | | | $10,000,000 | | | | $ 10,767,100 | |
aKansas City GO, | | | | | | | | |
Refunding, Series A, 4.00%, 2/01/36 | | | 1,500,000 | | | | 1,569,810 | |
Refunding, Series A, 4.00%, 2/01/37 | | | 1,000,000 | | | | 1,043,980 | |
Refunding, Series A, 4.00%, 2/01/38 | | | 1,875,000 | | | | 1,955,869 | |
Kansas City IDAR, | | | | | | | | |
Downtown Redevelopment District, Refunding, Series A, 5.50%, 9/01/29 | | | 5,000,000 | | | | 5,564,950 | |
Downtown Redevelopment District, Refunding, Series A, 5.50%, 9/01/30 | | | 12,000,000 | | | | 13,355,880 | |
Downtown Redevelopment District, Refunding, Series A, 5.00%, 9/01/32 | | | 3,000,000 | | | | 3,271,740 | |
Kansas City Sanitary Sewer System Revenue, | | | | | | | | |
Improvement and Refunding, Series A, 5.00%, 1/01/37 | | | 29,210,000 | | | | 31,558,776 | |
Series A, Pre-Refunded, 5.25%, 1/01/34 | | | 9,500,000 | | | | 9,797,540 | |
Sub Series A, 4.00%, 1/01/42 | | | 5,000,000 | | | | 5,185,150 | |
Kansas City Special Obligation Revenue, Downtown Arena Project, Series C, Pre-Refunded, 5.125%, 4/01/38 | | | 10,000,000 | | | | 10,032,200 | |
Kansas City Water Revenue, | | | | | | | | |
Refunding and Improvement, Series A, 5.25%, 12/01/32 | | | 12,725,000 | | | | 13,080,791 | |
Series A, 4.00%, 12/01/41 | | | 4,970,000 | | | | 5,186,145 | |
Lincoln University Auxiliary System Revenue, Subordinate, Assured Guaranty, 5.125%, 6/01/37 | | | 2,325,000 | | | | 2,332,115 | |
Metropolitan St. Louis Sewer District Wastewater System Revenue, | | | | | | | | |
Improvement and Refunding, Series A, 5.00%, 5/01/42 | | | 8,500,000 | | | | 9,808,745 | |
Improvement and Refunding, Series B, 5.00%, 5/01/38 | | | 8,770,000 | | | | 9,977,629 | |
Improvement and Refunding, Series B, 5.00%, 5/01/45 | | | 17,920,000 | | | | 20,300,672 | |
Series C, 5.00%, 5/01/46 | | | 24,700,000 | | | | 27,909,024 | |
Missouri State Board of Public Buildings Special Obligation Revenue, | | | | | | | | |
Refunding, Series A, 4.00%, 10/01/25 | | | 3,870,000 | | | | 4,011,255 | |
Series A, 3.00%, 4/01/30 | | | 3,230,000 | | | | 3,229,935 | |
Series A, 3.00%, 4/01/32 | | | 5,000,000 | | | | 4,887,250 | |
Missouri State Development Finance Board Revenue, Infrastructure Facilities, City of Independence, Electric System, Dogwood Project, Series A, 5.00%, 6/01/37 | | | 5,000,000 | | | | 5,464,650 | |
Missouri State Development Finance Board Solid Waste Disposal Revenue, The Procter and Gamble Paper Products Co. Project, 5.20%, 3/15/29 | | | 3,000,000 | | | | 3,526,651 | |
Missouri State Environmental Improvement and Energy Resources Authority Water Pollution Control and Drinking Water Revenue, | | | | | | | | |
SRF Programs, Refunding, Series A, 5.00%, 1/01/23 | | | 12,485,000 | | | | 13,245,212 | |
SRF Programs, Refunding, Series A, 5.00%, 1/01/24 | | | 7,890,000 | | | | 8,368,923 | |
SRF Programs, Refunding, Series A, 5.00%, 1/01/26 | | | 2,315,000 | | | | 2,648,059 | |
SRF Programs, Refunding, Series B, 5.50%, 7/01/21 | | | 60,000 | | | | 60,215 | |
SRF Programs, Series A, 5.75%, 1/01/29 | | | 190,000 | | | | 196,604 | |
SRF Programs, Series A, Pre-Refunded, 5.00%, 1/01/23 | | | 15,000 | | | | 15,911 | |
SRF Programs, Series A, Pre-Refunded, 5.75%, 1/01/29 | | | 2,310,000 | | | | 2,391,843 | |
Missouri State Health and Educational Facilities Authority Educational Facilities Revenue, The Washington University, Series A, Pre-Refunded, 5.375%, 3/15/39 | | | 9,825,000 | | | | 9,840,032 | |
Missouri State Health and Educational Facilities Authority Health Facilities Revenue, | | | | | | | | |
Bethesda Health Group Inc., 5.00%, 8/01/40 | | | 1,650,000 | | | | 1,748,225 | |
Bethesda Health Group Inc., 5.00%, 8/01/45 | | | 1,300,000 | | | | 1,369,849 | |
BJC Health System, 5.00%, 1/01/44 | | | 8,175,000 | | | | 8,867,177 | |
CoxHealth, Refunding, 5.50%, 11/15/39 | | | 2,970,000 | | | | 3,035,607 | |
CoxHealth, Refunding, Series A, 5.00%, 11/15/39 | | | 17,000,000 | | | | 18,638,120 | |
CoxHealth, Series A, 5.00%, 11/15/38 | | | 11,680,000 | | | | 12,643,016 | |
CoxHealth, Series A, 5.00%, 11/15/44 | | | 2,760,000 | | | | 2,963,826 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 123 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Missouri Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Missouri (continued) | | | | | | | | |
Missouri State Health and Educational Facilities Authority Health Facilities Revenue, (continued) | | | | | | | | |
CoxHealth, Series A, Pre-Refunded, 5.50%, 11/15/39 | | | $11,355,000 | | | | $ 11,683,273 | |
Lake Regional Health System, Refunding, 5.00%, 2/15/24 | | | 4,000,000 | | | | 4,177,680 | |
Mercy Health, 4.00%, 11/15/42 | | | 8,000,000 | | | | 8,178,720 | |
Mercy Health, Refunding, Series C, 5.00%, 11/15/47 | | | 15,000,000 | | | | 16,706,100 | |
Mercy Health, Series F, 5.00%, 11/15/45 | | | 25,000,000 | | | | 27,461,500 | |
SSM Health Care, Series B, 5.00%, 6/01/30 | | | 16,150,000 | | | | 17,099,135 | |
SSM Health Care, Series B, 5.00%, 6/01/34 | | | 7,000,000 | | | | 7,397,180 | |
St. Anthony’s Medical Center, Refunding, Series B, 5.00%, 2/01/45 | | | 6,870,000 | | | | 7,523,543 | |
St. Luke’s Health System Inc., Refunding, 5.00%, 11/15/35 | | | 3,950,000 | | | | 4,375,770 | |
St. Luke’s Health System Inc., Series A, AGMC Insured, Pre-Refunded, 5.50%, 11/15/35 | | | 10,000,000 | | | | 10,292,700 | |
St. Luke’s Health System Inc., Series B, AGMC Insured, Pre-Refunded, 5.50%, 11/15/35 | | | 6,725,000 | | | | 6,921,841 | |
Missouri State Health and Educational Facilities Authority Revenue, | | | | | | | | |
Educational Facilities, A.T. Still University of Health Sciences, 5.00%, 10/01/26 | | | 3,095,000 | | | | 3,381,690 | |
Educational Facilities, A.T. Still University of Health Sciences, 5.25%, 10/01/31 | | | 1,200,000 | | | | 1,317,948 | |
Educational Facilities, A.T. Still University of Health Sciences, 5.00%, 10/01/39 | | | 1,250,000 | | | | 1,374,175 | |
Educational Facilities, A.T. Still University of Health Sciences, 5.25%, 10/01/41 | | | 4,500,000 | | | | 4,932,540 | |
Educational Facilities, Kansas City University Medicine and Biosciences, Refunding, Series A, 5.00%, 6/01/42 | | | 2,800,000 | | | | 3,117,520 | |
Educational Facilities, Kansas City University Medicine and Biosciences, Refunding, Series A, 5.00%, 6/01/47 | | | 4,875,000 | | | | 5,407,496 | |
Educational Facilities, Lake Regional Health System, Refunding, 5.00%, 2/15/34 | | | 7,000,000 | | | | 7,360,570 | |
Educational Facilities, Maryville University St. Louis Project, 5.00%, 6/15/44 | | | 5,000,000 | | | | 5,175,500 | |
Educational Facilities, St. Louis University, Series A, 5.00%, 10/01/38 | | | 10,000,000 | | | | 11,260,200 | |
Educational Facilities, St. Louis University, Series A, 5.00%, 10/01/47 | | | 15,000,000 | | | | 16,724,550 | |
Educational Facilities, University of Central Missouri, Series C, 5.00%, 10/01/34 | | | 5,000,000 | | | | 5,572,750 | |
Educational Facilities, The Washington University, Series B, 5.00%, 11/15/37 | | | 10,000,000 | | | | 11,005,100 | |
Educational Facilities, Webster University Project, Improvement, Pre-Refunded, 5.00%, 4/01/36 | | | 7,000,000 | | | | 7,668,220 | |
Health Facilities, The Children’s Mercy Hospital, Pre-Refunded, 5.625%, 5/15/39 | | | 7,785,000 | | | | 8,164,285 | |
Health Facilities, The Children’s Mercy Hospital, Refunding, 5.625%, 5/15/39 | | | 1,715,000 | | | | 1,791,901 | |
Senior Living Facilities, Lutheran Senior Services Projects, 5.75%, 2/01/31 | | | 1,900,000 | | | | 2,065,737 | |
Senior Living Facilities, Lutheran Senior Services Projects, 5.375%, 2/01/35 | | | 2,520,000 | | | | 2,616,617 | |
Senior Living Facilities, Lutheran Senior Services Projects, 6.00%, 2/01/41 | | | 4,250,000 | | | | 4,588,257 | |
Senior Living Facilities, Lutheran Senior Services Projects, 5.50%, 2/01/42 | | | 8,985,000 | | | | 9,375,668 | |
Senior Living Facilities, Lutheran Senior Services Projects, Series A, 5.00%, 2/01/46 | | | 15,575,000 | | | | 16,687,678 | |
Missouri State Highways and Transportation Commission State Road Revenue, | | | | | | | | |
Series A, 5.00%, 5/01/20 | | | 6,875,000 | | | | 7,157,150 | |
Series A, 5.00%, 5/01/21 | | | 5,000,000 | | | | 5,205,200 | |
Series A, 5.00%, 5/01/24 | | | 1,150,000 | | | | 1,197,196 | |
Missouri State Housing Development Commission SFMR, | | | | | | | | |
Homeownership Loan Program, Series C, GNMA Secured, 5.00%, 3/01/32 | | | 195,000 | | | | 199,859 | |
Homeownership Loan Program, Series D, GNMA Secured, 4.70%, 3/01/35 | | | 1,165,000 | | | | 1,210,913 | |
Missouri State Joint Municipal Electric Utility Commission Power Project Revenue, | | | | | | | | |
Iatan 2 Project, Refunding, Series A, 5.00%, 1/01/30 | | | 3,000,000 | | | | 3,359,520 | |
Iatan 2 Project, Refunding, Series A, 5.00%, 1/01/31 | | | 2,000,000 | | | | 2,235,100 | |
Iatan 2 Project, Refunding, Series A, 5.00%, 1/01/32 | | | 1,500,000 | | | | 1,673,760 | |
Iatan 2 Project, Refunding, Series A, 5.00%, 1/01/34 | | | 2,000,000 | | | | 2,228,280 | |
Iatan 2 Project, Series A, 5.00%, 12/01/35 | | | 7,335,000 | | | | 8,182,633 | |
Iatan 2 Project, Series A, Pre-Refunded, 6.00%, 1/01/39 | | | 15,750,000 | | | | 16,353,855 | |
Plum Point Project, Refunding, Series A, 5.00%, 1/01/32 | | | 10,000,000 | | | | 11,122,100 | |
Plum Point Project, Refunding, Series A, 5.00%, 1/01/33 | | | 7,500,000 | | | | 8,317,275 | |
| | | | | | |
124 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Missouri Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Missouri (continued) | | | | | | | | |
Missouri State Joint Municipal Electric Utility Commission Power Project Revenue, (continued) | | | | | | | | |
Prairie State Project, Refunding, Series A, 5.00%, 12/01/30 | | | $ 4,000,000 | | | | $ 4,509,080 | |
Prairie State Project, Refunding, Series A, 5.00%, 12/01/31 | | | 6,000,000 | | | | 6,747,000 | |
Prairie State Project, Refunding, Series A, 5.00%, 12/01/34 | | | 1,500,000 | | | | 1,680,435 | |
Prairie State Project, Refunding, Series A, 5.00%, 12/01/40 | | | 27,950,000 | | | | 31,035,121 | |
Missouri State Joint Municipal Electric Utility Commission Power Supply System Revenue, | | | | | | | | |
MoPEP Facilities, Pre-Refunded, 5.00%, 1/01/32 | | | 3,600,000 | | | | 3,924,792 | |
MoPEP Facilities, Pre-Refunded, 5.00%, 1/01/37 | | | 3,400,000 | | | | 3,706,748 | |
Monarch-Chesterfield Levee District Special Tax, | | | | | | | | |
St. Louis County, Levee District, Refunding, 5.00%, 3/01/40 | | | 4,395,000 | | | | 4,766,158 | |
St. Louis County, Levee District Improvement, NATL Insured, 5.75%, 3/01/19 | | | 240,000 | | | | 240,000 | |
Move Rolla Transportation Development District Transportation Sales Tax Revenue, 4.75%, 6/01/47 | | | 5,000,000 | | | | 5,147,550 | |
Peculiar Combined Waterworks and Sewerage System Revenue, | | | | | | | | |
Assured Guaranty, 4.00%, 6/01/39 | | | 1,000,000 | | | | 1,060,270 | |
Assured Guaranty, 4.00%, 6/01/42 | | | 2,405,000 | | | | 2,538,141 | |
Platte County School District Park Hill GO, Direct Deposit Program, 4.00%, 3/01/31 | | | 8,875,000 | | | | 9,462,880 | |
Riverside-Quindaro Bend Levee District Revenue, | | | | | | | | |
Platte County, Levee District Improvement, L-385 Project, Refunding, 5.00%, 3/01/26 | | | 1,000,000 | | | | 1,092,900 | |
Platte County, Levee District Improvement, L-385 Project, Refunding, 5.00%, 3/01/29 | | | 2,585,000 | | | | 2,802,605 | |
Sikeston Electric Revenue, | | | | | | | | |
Refunding, 5.00%, 6/01/20 | | | 5,000,000 | | | | 5,310,800 | |
Refunding, 5.00%, 6/01/21 | | | 13,130,000 | | | | 14,202,721 | |
Refunding, 5.00%, 6/01/22 | | | 12,570,000 | | | | 13,801,734 | |
Springfield School District No. R-12 GO, Missouri Direct Deposit Program, 5.00%, 3/01/33 | | | 1,000,000 | | | | 1,129,800 | |
Springfield Special Obligation Revenue, | | | | | | | | |
Sewer System Improvements Project, 5.00%, 4/01/31 | | | 1,795,000 | | | | 1,990,835 | |
Sewer System Improvements Project, 5.00%, 4/01/32 | | | 1,885,000 | | | | 2,089,108 | |
St. Charles School District GO, | | | | | | | | |
Missouri Direct Deposit Program, 4.00%, 3/01/35 | | | 1,735,000 | | | | 1,819,755 | |
Missouri Direct Deposit Program, 4.00%, 3/01/36 | | | 2,000,000 | | | | 2,091,980 | |
St. Louis Airport Revenue, | | | | | | | | |
Lambert-St. Louis International Airport, Refunding, NATL Insured, 5.50%, 7/01/29 | | | 13,070,000 | | | | 16,302,472 | |
Lambert-St. Louis International Airport, Series A-1, 6.125%, 7/01/24 | | | 2,000,000 | | | | 2,116,160 | |
Lambert-St. Louis International Airport, Series A-1, 6.625%, 7/01/34 | | | 5,000,000 | | | | 5,313,550 | |
Series C, AGMC Insured, 5.00%, 7/01/42 | | | 3,930,000 | | | | 4,449,114 | |
Series C, AGMC Insured, 5.00%, 7/01/47 | | | 8,770,000 | | | | 9,890,981 | |
Series D, AGMC Insured, 5.00%, 7/01/33 | | | 1,000,000 | | | | 1,128,670 | |
Series D, AGMC Insured, 5.00%, 7/01/34 | | | 1,415,000 | | | | 1,591,040 | |
Series D, AGMC Insured, 5.00%, 7/01/36 | | | 1,125,000 | | | | 1,259,235 | |
Series D, AGMC Insured, 5.00%, 7/01/37 | | | 1,000,000 | | | | 1,116,790 | |
St. Louis Lambert International Airport, Refunding, Series A, AGMC Insured, 5.00%, 7/01/31 | | | 1,850,000 | | | | 2,142,578 | |
St. Louis County IDA Senior Living Facilities Revenue, | | | | | | | | |
Friendship Village, St. Louis Obligated Group, Refunding, 5.00%, 9/01/32 | | | 515,000 | | | | 579,622 | |
Friendship Village, St. Louis Obligated Group, Refunding, 5.00%, 9/01/37 | | | 1,195,000 | | | | 1,327,549 | |
Friendship Village, St. Louis Obligated Group, Refunding, 5.00%, 9/01/48 | | | 8,095,000 | | | | 8,917,614 | |
Friendship Village Chesterfield, Pre-Refunded, 5.00%, 9/01/42 | | | 3,165,000 | | | | 3,574,329 | |
Friendship Village Sunset Hills, Series A, 5.875%, 9/01/43 | | | 7,000,000 | | | | 7,967,330 | |
St. Louis County School District No. 101 Affton GO, | | | | | | | | |
Direct Deposit Program, Series A, 5.00%, 3/01/32 | | | 1,500,000 | | | | 1,728,630 | |
Direct Deposit Program, Series A, 5.00%, 3/01/33 | | | 1,595,000 | | | | 1,830,007 | |
Direct Deposit Program, Series A, 5.00%, 3/01/34 | | | 1,700,000 | | | | 1,946,160 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 125 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Missouri Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Missouri (continued) | | | | | | | | |
St. Louis County School District No. 101 Affton GO, (continued) | | | | | | | | |
Direct Deposit Program, Series A, 5.00%, 3/01/35 | | | $ 1,810,000 | | | | $ 2,066,006 | |
Direct Deposit Program, Series A, 5.00%, 3/01/36 | | | 1,920,000 | | | | 2,185,114 | |
St. Louis Municipal Finance Corp. Leasehold Revenue, Convention Center Capital Improvement, Series B, Assured Guaranty, Pre-Refunded, 5.375%, 7/15/38 | | | 22,725,000 | | | | 23,910,563 | |
| | | | | | | | |
| | | | | | | 1,006,310,010 | |
| | | | | | | | |
U.S. Territories 1.9% | | | | | | | | |
Guam 0.6% | | | | | | | | |
Guam Power Authority Revenue, Refunding, Series A, AGMC Insured, 5.00%, 10/01/25 | | | 5,420,000 | | | | 5,941,621 | |
| | | | | | | | |
Puerto Rico 1.3% | | | | | | | | |
bPuerto Rico Electric Power Authority Power Revenue, | | | | | | | | |
Series WW, 5.50%, 7/01/38 | | | 19,320,000 | | | | 7,269,150 | |
Series XX, 5.75%, 7/01/36 | | | 6,000,000 | | | | 2,257,500 | |
Series XX, 5.25%, 7/01/40 | | | 10,000,000 | | | | 3,762,500 | |
| | | | | | | | |
| | | | | | | 13,289,150 | |
| | | | | | | | |
Total U.S. Territories | | | | | | | 19,230,771 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $1,017,459,475) | | | | | | | 1,025,540,781 | |
| | | | | | | | |
Short Term Investments (Cost $500,000) 0.1% | | | | | | | | |
Municipal Bonds 0.1% | | | | | | | | |
Missouri 0.1% | | | | | | | | |
cMissouri State Health and Educational Facilities Authority Educational Facilities Revenue, Kansas City Art Institute, LOC Commerce Bank, Daily VRDN and Put, 1.15%, 12/01/35 | | | 500,000 | | | | 500,000 | |
| | | | | | | | |
Total Investments (Cost $1,017,959,475) 99.4% | | | | | | | 1,026,040,781 | |
Other Assets, less Liabilities 0.6% | | | | | | | 6,485,968 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | | $1,032,526,749 | |
| | | | | | | | |
See Abbreviations on page 170.
aSecurity purchased on a when-issued basis. See Note 1(b).
bSee Note 7 regarding defaulted securities.
cVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | |
126 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin North Carolina Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, |
| | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 |
Class A | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.70 | | | | $11.97 | | | | $12.15 | | | | $11.95 | | | $12.96 |
| | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.35 | | | | 0.41 | | | | 0.43 | | | | 0.46 | | | 0.46 |
Net realized and unrealized gains (losses) | | | (0.40 | ) | | | (0.27 | ) | | | (0.19 | ) | | | 0.21 | | | (1.03) |
| | | |
Total from investment operations | | | (0.05 | ) | | | 0.14 | | | | 0.24 | | | | 0.67 | | | (0.57) |
| | | |
Less distributions from net investment income | | | (0.37 | ) | | | (0.41 | ) | | | (0.42 | ) | | | (0.47 | ) | | (0.44) |
| | | |
Net asset value, end of year | | | $11.28 | | | | $11.70 | | | | $11.97 | | | | $12.15 | | | $11.95 |
| | | |
| | | | | |
Total returnd | | | (0.45)% | | | | 1.19% | | | | 2.01% | | | | 5.70% | | | (4.35)% |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.66% | | | | 0.64% | | | | 0.64% | | | | 0.63% | | | 0.62% |
Net investment income | | | 3.00% | | | | 3.41% | | | | 3.62% | | | | 3.84% | | | 3.79% |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $660,167 | | | | $756,109 | | | | $794,675 | | | | $841,737 | | | $851,504 |
Portfolio turnover rate | | | 10.07% | | | | 18.38% | | | | 7.23% | | | | 6.94% | | | 6.86% |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal 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 | | 127 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin North Carolina Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended February 28, | | | | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
| |
Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.88 | | | | $12.15 | | | | $12.33 | | | | $12.12 | | | | $13.13 | |
| | | | |
| | | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.29 | | | | 0.35 | | | | 0.37 | | | | 0.40 | | | | 0.40 | |
Net realized and unrealized gains (losses) | | | (0.41 | ) | | | (0.27 | ) | | | (0.20 | ) | | | 0.21 | | | | (1.03 | ) |
| | | | |
Total from investment operations | | | (0.12 | ) | | | 0.08 | | | | 0.17 | | | | 0.61 | | | | (0.63 | ) |
| | | | |
Less distributions from net investment income | | | (0.30 | ) | | | (0.35 | ) | | | (0.35 | ) | | | (0.40 | ) | | | (0.38 | ) |
| | | | |
Net asset value, end of year. | | | $11.46 | | | | $11.88 | | | | $12.15 | | | | $12.33 | | | | $12.12 | |
| | | | |
| | | | | |
Total returnd | | | (1.00)% | | | | 0.61% | | | | 1.43% | | | | 5.13% | | | | (4.82)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.21% | | | | 1.19% | | | | 1.19% | | | | 1.18% | | | | 1.17% | |
Net investment income | | | 2.45% | | | | 2.86% | | | | 3.07% | | | | 3.29% | | | | 3.24% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $159,556 | | | | $197,705 | | | | $206,283 | | | | $217,985 | | | | $229,369 | |
Portfolio turnover rate | | | 10.07% | | | | 18.38% | | | | 7.23% | | | | 6.94% | | | | 6.86% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
| | | | | | |
128 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin North Carolina Tax-Free Income Fund (continued)
| | | | |
| | Year Ended February 28, 2018a | |
Class R6 | | | | |
| |
Per share operating performance | | | | |
(for a share outstanding throughout the year) | | | | |
Net asset value, beginning of year | | | $11.59 | |
| | | | |
Income from investment operationsb: | | | | |
Net investment incomec | | | 0.22 | |
Net realized and unrealized gains (losses) | | | (0.33) | |
| | | | |
Total from investment operations | | | (0.11) | |
| | | | |
Less distributions from net investment income | | | (0.21) | |
| | | | |
Net asset value, end of year. | | | $11.27 | |
| | | | |
| |
Total returnd | | | (0.97)% | |
| |
Ratios to average net assetse | | | | |
Expenses before waiver and payments by affiliates | | | 0.56% | |
Expenses net of waiver and payments by affiliates | | | 0.53% | |
Net investment income | | | 3.13% | |
| |
Supplemental data | | | | |
Net assets, end of year (000’s) | | | $9,117 | |
Portfolio turnover rate | | | 10.07% | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 129 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin North Carolina Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, |
| | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 |
Advisor Class | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.70 | | | | $11.97 | | | | $12.15 | | | | $11.95 | | | $12.96 |
| | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.36 | | | | 0.42 | | | | 0.45 | | | | 0.48 | | | 0.47 |
Net realized and unrealized gains (losses) | | | (0.40 | ) | | | (0.26 | ) | | | (0.20 | ) | | | 0.20 | | | (1.02) |
| | | |
Total from investment operations | | | (0.04 | ) | | | 0.16 | | | | 0.25 | | | | 0.68 | | | (0.55) |
| | | |
Less distributions from net investment income | | | (0.38 | ) | | | (0.43 | ) | | | (0.43 | ) | | | (0.48 | ) | | (0.46) |
| | | |
Net asset value, end of year | | | $11.28 | | | | $11.70 | | | | $11.97 | | | | $12.15 | | | $11.95 |
| | | |
| | | | | |
Total return | | | (0.36)% | | | | 1.29% | | | | 2.12% | | | | 5.81% | | | (4.25)% |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.56% | | | | 0.54% | | | | 0.54% | | | | 0.53% | | | 0.52% |
Net investment income | | | 3.10% | | | | 3.51% | | | | 3.72% | | | | 3.94% | | | 3.89% |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $80,819 | | | | $109,365 | | | | $89,119 | | | | $76,935 | | | $63,211 |
Portfolio turnover rate | | | 10.07% | | | | 18.38% | | | | 7.23% | | | | 6.94% | | | 6.86% |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
| | | | | | |
130 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin North Carolina Tax-Free Income Fund
| | | | | | |
| | Principal Amount | | | Value |
Municipal Bonds 99.0% | | | | | | |
North Carolina 97.7% | | | | | | |
Buncombe County Limited Obligation Revenue, Refunding, 5.00%, 6/01/34 | | $ | 3,000,000 | | | $ 3,417,420 |
Cape Fear Public Utility Authority Water and Sewer System Revenue, | | | | | | |
Pre-Refunded, 5.00%, 8/01/35 | | | 15,000,000 | | | 15,231,300 |
Pre-Refunded, 5.00%, 8/01/36 | | | 8,000,000 | | | 8,852,240 |
Refunding, 5.00%, 6/01/40 | | | 2,250,000 | | | 2,544,187 |
Cary Combined Enterprise System Revenue, | | | | | | |
5.00%, 12/01/41 | | | 1,710,000 | | | 1,969,920 |
Pre-Refunded, 5.00%, 12/01/42 | | | 10,000,000 | | | 11,395,700 |
Charlotte Airport Revenue, | | | | | | |
Charlotte Douglas International Airport, Refunding, Series A, 5.50%, 7/01/34 | | | 3,765,000 | | | 4,097,675 |
Charlotte Douglas International Airport, Series A, 5.00%, 7/01/39 | | | 3,000,000 | | | 3,208,110 |
Charlotte Douglas International Airport, Series A, 5.00%, 7/01/41 | | | 10,000,000 | | | 10,911,000 |
Charlotte COP, | | | | | | |
Cultural Arts Facilities, Refunding, Series E, 5.00%, 6/01/39 | | | 6,000,000 | | | 6,223,500 |
Transit Projects, Phase II, Refunding, Series A, 5.00%, 6/01/33 | | | 2,500,000 | | | 2,521,125 |
Charlotte GO, | | | | | | |
Refunding, Series A, 4.00%, 7/01/35 | | | 1,560,000 | | | 1,648,234 |
Refunding, Series A, 4.00%, 7/01/36 | | | 2,250,000 | | | 2,372,220 |
Charlotte Storm Water Fee Revenue, | | | | | | |
Refunding, 4.00%, 12/01/35 | | | 1,100,000 | | | 1,163,195 |
Refunding, 5.00%, 12/01/39 | | | 7,970,000 | | | 9,146,452 |
Charlotte Water and Sewer System Revenue, | | | | | | |
5.00%, 7/01/38 | | | 6,775,000 | | | 6,863,888 |
Refunding, 5.00%, 7/01/26 | | | 5,000,000 | | | 5,891,000 |
Refunding, 5.00%, 7/01/40 | | | 10,000,000 | | | 11,434,200 |
Refunding, Series B, 5.00%, 7/01/38 | | | 10,000,000 | | | 10,769,800 |
The Charlotte-Mecklenburg Hospital Authority Health Care Revenue, | | | | | | |
Carolinas HealthCare System, Refunding, Series A, 5.25%, 1/15/34 | | | 4,000,000 | | | 4,115,600 |
Carolinas HealthCare System, Refunding, Series A, 5.00%, 1/15/38 | | | 5,000,000 | | | 5,584,700 |
Carolinas HealthCare System, Refunding, Series A, 5.00%, 1/15/40 | | | 20,000,000 | | | 22,250,800 |
Carolinas HealthCare System, Series A, 5.125%, 1/15/37 | | | 4,000,000 | | | 4,321,200 |
Carolinas HealthCare System, Series A, 5.25%, 1/15/42 | | | 10,000,000 | | | 10,802,800 |
Columbus County Industrial Facilities and PCFA Revenue, Recovery Zone Facility, International Paper Co. | | | | | | |
Projects, Series A, 5.70%, 5/01/34 | | | 2,500,000 | | | 2,705,950 |
Dare County Utilities Systems Revenue, Pre-Refunded, 5.00%, 2/01/41 | | | 5,000,000 | | | 5,468,550 |
Durham County COP, Series A, Pre-Refunded, 5.00%, 6/01/31 | | | 4,000,000 | | | 4,173,280 |
Durham Utility System Revenue, Pre-Refunded, 5.00%, 6/01/41 | | | 4,000,000 | | | 4,415,200 |
Greensboro Combined Enterprise System Revenue, Green Bonds, Refunding, Series A, 4.00%, 6/01/47 | | | 9,750,000 | | | 10,163,205 |
Greenville Utilities Commission Combined Enterprise System Revenue, | | | | | | |
Refunding, 4.00%, 4/01/35 | | | 1,000,000 | | | 1,037,760 |
Refunding, 4.00%, 4/01/46 | | | 4,225,000 | | | 4,312,711 |
Series A, AGMC Insured, Pre-Refunded, 5.00%, 11/01/33 | | | 6,000,000 | | | 6,148,200 |
Guilford County GO, Public Improvement, Series B, 4.00%, 5/01/33 | | | 5,000,000 | | | 5,352,300 |
Harnett County COP, | | | | | | |
Assured Guaranty, Pre-Refunded, 5.00%, 6/01/28 | | | 1,000,000 | | | 1,043,320 |
Assured Guaranty, Pre-Refunded, 5.00%, 6/01/29 | | | 500,000 | | | 521,660 |
High Point Combined Enterprise System Revenue, AGMC Insured, Pre-Refunded, 5.00%, 11/01/33 | | | 5,000,000 | | | 5,123,500 |
Iredell County COP, | | | | | | |
Iredell County Public Improvement Projects, AGMC Insured, Pre-Refunded, 5.125%, 6/01/27 | | | 4,000,000 | | | 4,038,240 |
Iredell County Public Improvement Projects, AGMC Insured, Pre-Refunded, 5.00%, 6/01/28 | | | 1,000,000 | | | 1,009,250 |
Mecklenburg County COP, Series A, Pre-Refunded, 5.00%, 2/01/28 | | | 350,000 | | | 361,529 |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 131 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin North Carolina Tax-Free Income Fund (continued)
| | | | | | |
| | Principal Amount | | | Value |
Municipal Bonds (continued) | | | | | | |
North Carolina (continued) | | | | | | |
Mecklenburg County GO, | | | | | | |
Public Improvement, Series A, 4.00%, 4/01/30 | | $ | 5,000,000 | | | $ 5,440,400 |
Series A, 5.00%, 4/01/28 | | | 5,000,000 | | | 5,831,150 |
Series A, 5.00%, 4/01/29 | | | 5,000,000 | | | 5,813,500 |
Monroe COP, | | | | | | |
Assured Guaranty, Pre-Refunded, 5.50%, 3/01/34 | | | 2,425,000 | | | 2,523,601 |
Assured Guaranty, Pre-Refunded, 5.50%, 3/01/39 | | | 1,085,000 | | | 1,129,116 |
Nash Health Care System Health Care Facilities Revenue, | | | | | | |
5.00%, 11/01/41 | | | 5,000,000 | | | 5,265,150 |
AGMC Insured, 5.00%, 11/01/30 | | | 2,250,000 | | | 2,284,245 |
New Hanover County Hospital Revenue, | | | | | | |
New Hanover Regional Medical Center, Refunding, 5.00%, 10/01/42 | | | 5,000,000 | | | 5,597,250 |
New Hanover Regional Medical Center, Refunding, 5.00%, 10/01/47 | | | 7,190,000 | | | 7,944,087 |
New Hanover Regional Medical Center Project, Series B, AGMC Insured, Pre-Refunded, 5.00%, 10/01/27 | | | 3,500,000 | | | 3,687,775 |
New Hanover Regional Medical Center Project, Series B, AGMC Insured, Pre-Refunded, 5.125%, 10/01/31 | | | 8,385,000 | | | 8,851,122 |
North Carolina Capital Facilities Finance Agency Educational Facilities Revenue, | | | | | | |
Wake Forest University, Pre-Refunded, 5.00%, 1/01/38 | | | 25,000,000 | | | 25,752,750 |
Wake Forest University, Refunding, 4.00%, 1/01/35 | | | 5,000,000 | | | 5,301,600 |
Wake Forest University, Refunding, 4.00%, 1/01/36 | | | 5,000,000 | | | 5,290,300 |
Wake Forest University, Refunding, 4.00%, 1/01/38 | | | 5,000,000 | | | 5,271,600 |
Wake Forest University, Refunding, 4.00%, 1/01/39 | | | 5,000,000 | | | 5,264,100 |
North Carolina Capital Facilities Finance Agency Revenue, | | | | | | |
Davidson College, 5.00%, 3/01/40 | | | 4,000,000 | | | 4,370,200 |
Davidson College, 5.00%, 3/01/45 | | | 3,500,000 | | | 3,816,960 |
Duke University Project, Refunding, Series B, 5.00%, 10/01/41 | | | 13,585,000 | | | 15,306,763 |
Duke University Project, Refunding, Series B, 5.00%, 7/01/42 | | | 11,000,000 | | | 12,680,140 |
Duke University Project, Refunding, Series B, 4.00%, 10/01/44 | | | 5,085,000 | | | 5,279,603 |
Duke University Project, Refunding, Series B, 5.00%, 10/01/44 | | | 10,000,000 | | | 11,486,600 |
Duke University Project, Series B, Pre-Refunded, 5.00%, 10/01/38 | | | 20,000,000 | | | 20,767,000 |
Methodist University, 5.00%, 3/01/34 | | | 1,500,000 | | | 1,590,150 |
North Carolina Eastern Municipal Power Agency Power System Revenue, Series C, Pre-Refunded, 6.75%, 1/01/24 | | | 3,500,000 | | | 3,654,280 |
North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue, | | | | | | |
Refunding, Series A, 5.00%, 1/01/26 | | | 800,000 | | | 821,864 |
Refunding, Series A, 5.00%, 1/01/30 | | | 2,070,000 | | | 2,382,963 |
Refunding, Series A, 5.00%, 1/01/30 | | | 1,400,000 | | | 1,437,198 |
Refunding, Series A, 5.00%, 1/01/32 | | | 4,200,000 | | | 4,769,646 |
Refunding, Series B, 5.00%, 1/01/21 | | | 5,000,000 | | | 5,283,000 |
Series A, Pre-Refunded, 5.00%, 1/01/26 | | | 1,700,000 | | | 1,751,187 |
Series A, Pre-Refunded, 5.00%, 1/01/30 | | | 3,270,000 | | | 3,368,460 |
North Carolina State Capital Improvement Limited Obligation Revenue, | | | | | | |
Series A, Pre-Refunded, 5.00%, 5/01/28 | | | 5,000,000 | | | 5,030,600 |
Series C, Pre-Refunded, 5.00%, 5/01/29 | | | 10,000,000 | | | 11,012,100 |
North Carolina State GO, | | | | | | |
Public Improvement, Series A, Pre-Refunded, 5.00%, 5/01/23 | | | 10,000,000 | | | 10,733,400 |
Public Improvement, Series A, Pre-Refunded, 5.00%, 5/01/24 | | | 10,000,000 | | | 10,733,400 |
Refunding, Series A, 5.00%, 6/01/23 | | | 5,000,000 | | | 5,746,200 |
Refunding, Series B, 5.00%, 6/01/19 | | | 5,000,000 | | | 5,219,750 |
| | | | | | |
132 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin North Carolina Tax-Free Income Fund (continued)
| | | | | | |
| | Principal Amount | | | Value |
Municipal Bonds (continued) | | | | | | |
North Carolina (continued) | | | | | | |
North Carolina State Medical Care Commission Health Care Facilities Revenue, | | | | | | |
Appalachian Regional Healthcare System, Refunding, Series A, 6.50%, 7/01/31 | | $ | 5,000,000 | | | $ 5,490,500 |
Appalachian Regional Healthcare System, Refunding, Series A, 6.625%, 7/01/34 | | | 6,000,000 | | | 6,604,080 |
Duke University Health System, Refunding, Series D, 4.00%, 6/01/42 | | | 7,000,000 | | | 7,248,570 |
Duke University Health System, Series A, 5.00%, 6/01/42 | | | 10,000,000 | | | 10,895,700 |
Duke University Health System, Series A, Pre-Refunded, 5.00%, 6/01/42 | | | 11,500,000 | | | 12,005,425 |
Duke University Health System, Series A, Pre-Refunded, 5.00%, 6/01/42 | | | 8,150,000 | | | 8,770,296 |
Novant Health Obligated Group, Refunding, Series A, 5.00%, 11/01/46 | | | 20,000,000 | | | 21,879,200 |
Presbyterian Homes, Refunding, Series C, 5.00%, 10/01/31 | | | 5,000,000 | | | 5,633,550 |
Rex Healthcare, Refunding, Series A, 5.00%, 7/01/30 | | | 5,000,000 | | | 5,268,150 |
Scotland Memorial Hospital Project, Assured Guaranty, 5.50%, 10/01/19 | | | 160,000 | | | 160,483 |
Scotland Memorial Hospital Project, Assured Guaranty, 5.50%, 10/01/29 | | | 1,220,000 | | | 1,223,806 |
University Health System, Series D, Pre-Refunded, 6.25%, 12/01/33 | | | 10,000,000 | | | 10,359,800 |
Vidant Health, 5.00%, 6/01/40 | | | 5,000,000 | | | 5,523,300 |
Vidant Health, Refunding, Series A, 5.00%, 6/01/36 | | | 5,000,000 | | | 5,461,950 |
WakeMed Project, Refunding, Series A, 5.00%, 10/01/38 | | | 5,000,000 | | | 5,462,950 |
North Carolina State Medical Care Commission Health System Revenue, | | | | | | |
Mission Health Combined Group, Refunding, 5.00%, 10/01/33 | | | 1,535,000 | | | 1,771,390 |
Mission Health Combined Group, Refunding, 5.00%, 10/01/35 | | | 1,625,000 | | | 1,861,779 |
Mission Health Combined Group, Refunding, 5.00%, 10/01/36 | | | 10,000,000 | | | 11,238,700 |
North Carolina State Medical Care Commission Hospital Revenue, North Carolina Baptist Hospital, | | | | | | |
Refunding, 5.00%, 6/01/34 | | | 10,000,000 | | | 10,590,000 |
North Carolina State Medical Care Commission Retirement Facilities First Mortgage Revenue, | | | | | | |
The United Methodist Retirement Homes, Refunding, Series A, 5.00%, 10/01/37 | | | 1,200,000 | | | 1,313,076 |
The United Methodist Retirement Homes, Refunding, Series A, 5.00%, 10/01/42 | | | 1,250,000 | | | 1,363,775 |
The United Methodist Retirement Homes, Refunding, Series A, 5.00%, 10/01/47 | | | 2,540,000 | | | 2,764,434 |
North Carolina State Ports Authority Port Facilities Revenue, senior lien, Refunding, Series A, 5.25%, 2/01/40 | | | 6,000,000 | | | 6,304,020 |
North Carolina State University at Raleigh Revenue, | | | | | | |
General, Refunding, Series A, 5.00%, 10/01/33 | | | 5,595,000 | | | 6,334,827 |
General, Refunding, Series A, 5.00%, 10/01/42 | | | 8,980,000 | | | 10,003,720 |
North Carolina Turnpike Authority Revenue, | | | | | | |
Monroe Connector System, State Appropriated, 5.00%, 7/01/41 | | | 5,000,000 | | | 5,462,250 |
Monroe Expressway Toll, Refunding, Series A, 5.00%, 7/01/47 | | | 2,500,000 | | | 2,727,300 |
Triangle Expressway System, senior lien, Refunding, AGMC Insured, 5.00%, 1/01/31 | | | 1,000,000 | | | 1,150,760 |
Triangle Expressway System, senior lien, Refunding, AGMC Insured, 5.00%, 1/01/39 | | | 1,200,000 | | | 1,354,140 |
Triangle Expressway System, senior lien, Series A, Assured Guaranty, Pre-Refunded, 5.50%, 1/01/29 | | | 6,400,000 | | | 6,616,320 |
Triangle Expressway System, senior lien, Series A, Assured Guaranty, Pre-Refunded, 5.75%, 1/01/39 | | | 12,120,000 | | | 12,554,623 |
Northern Hospital District of Surry County Health Care Facilities Revenue, | | | | | | |
Pre-Refunded, 6.00%, 10/01/28 | | | 1,000,000 | | | 1,003,840 |
Pre-Refunded, 6.25%, 10/01/38 | | | 2,000,000 | | | 2,008,080 |
Oak Island Enterprise System Revenue, | | | | | | |
AGMC Insured, Refunding, 5.00%, 6/01/33 | | | 1,000,000 | | | 1,147,360 |
Assured Guaranty, Pre-Refunded, 6.00%, 6/01/34 | | | 1,540,000 | | | 1,625,670 |
Assured Guaranty, Pre-Refunded, 6.00%, 6/01/36 | | | 1,000,000 | | | 1,055,630 |
Pitt County Revenue, Limited Obligation, Assured Guaranty, Pre-Refunded, 5.00%, 4/01/34 | | | 1,000,000 | | | 1,070,570 |
Raleigh Combined Enterprise System Revenue, | | | | | | |
Pre-Refunded, 5.00%, 3/01/40 | | | 11,915,000 | | | 13,059,197 |
Refunding, Series A, 5.00%, 3/01/43 | | | 10,000,000 | | | 11,177,500 |
Refunding, Series B, 4.00%, 3/01/34 | | | 1,000,000 | | | 1,061,310 |
Series A, 4.00%, 3/01/46 | | | 10,000,000 | | | 10,430,200 |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 133 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin North Carolina Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
North Carolina (continued) | | | | | | | | |
Raleigh GO, Refunding, Series A, 5.00%, 9/01/26 | | $ | 5,000,000 | | | $ | 6,019,500 | |
Raleigh-Durham Airport Authority Airport Revenue, | | | | | | | | |
Refunding, Series A, 5.00%, 5/01/27 | | | 350,000 | | | | 406,060 | |
Refunding, Series A, 5.00%, 5/01/29 | | | 1,000,000 | | | | 1,152,380 | |
Refunding, Series A, 5.00%, 5/01/30 | | | 550,000 | | | | 631,494 | |
Refunding, Series A, 5.00%, 5/01/36 | | | 10,785,000 | | | | 11,466,612 | |
Union County Enterprise System Revenue, 5.00%, 6/01/34 | | | 1,000,000 | | | | 1,141,010 | |
University of North Carolina at Charlotte Revenue, | | | | | | | | |
General, Board of Governors, 5.00%, 4/01/43 | | | 5,000,000 | | | | 5,605,050 | |
General, Board of Governors, 5.00%, 4/01/45 | | | 9,450,000 | | | | 10,596,096 | |
General, Board of Governors, Refunding, 5.00%, 10/01/42 | | | 4,500,000 | | | | 5,123,880 | |
General, Board of Governors, Refunding, 5.00%, 10/01/47 | | | 5,000,000 | | | | 5,671,200 | |
General, Board of Governors, Refunding, Series A, 4.00%, 10/01/40 | | | 2,250,000 | | | | 2,348,303 | |
General, Board of Governors, Series A, Pre-Refunded, 5.00%, 4/01/37 | | | 12,995,000 | | | | 14,574,802 | |
General, Board of Governors, Series A, Pre-Refunded, 5.00%, 4/01/41 | | | 18,000,000 | | | | 20,188,260 | |
University of North Carolina at Greensboro Revenue, | | | | | | | | |
General, Board of Governors, 5.00%, 4/01/39 | | | 3,500,000 | | | | 3,946,460 | |
General, Board of Governors, Refunding, 4.00%, 4/01/35. | | | 1,205,000 | | | | 1,275,746 | |
General, Board of Governors, Refunding, 4.00%, 4/01/36 | | | 1,000,000 | | | | 1,056,070 | |
General, Board of Governors, Series A, Assured Guaranty, Pre-Refunded, 5.00%, 4/01/34 | | | 1,000,000 | | | | 1,038,350 | |
University of North Carolina at Wilmington Revenue, Student Housing Projects, Limited Obligation, | | | | | | | | |
Refunding, 5.00%, 6/01/37 | | | 3,000,000 | | | | 3,371,430 | |
University of North Carolina Hospitals at Chapel Hill Revenue, Board of Governors, 5.00%, 2/01/46 | | | 4,265,000 | | | | 4,721,867 | |
University of North Carolina System Pool Revenue, | | | | | | | | |
Series A, Assured Guaranty, 5.00%, 10/01/33 | | | 160,000 | | | | 163,082 | |
Series A, Assured Guaranty, Pre-Refunded, 5.00%, 10/01/33 | | | 4,840,000 | | | | 4,943,189 | |
a Wake County GO, Public Improvement, Refunding, Series A, 5.00%, 3/01/30 | | | 8,000,000 | | | | 9,678,240 | |
Wake County Revenue, | | | | | | | | |
Limited Obligation, Pre-Refunded, 5.00%, 1/01/33 | | | 10,820,000 | | | | 11,497,007 | |
Limited Obligation, Pre-Refunded, 5.00%, 6/01/36 | | | 5,000,000 | | | | 5,219,750 | |
Limited Obligation, Pre-Refunded, 5.00%, 1/01/37 | | | 12,000,000 | | | | 12,750,840 | |
Western Carolina University Research and Development Corp. COP, Western Carolina University Student | | | | | | | | |
Housing Project, Assured Guaranty, Pre-Refunded, 5.00%, 6/01/39 | | | 5,000,000 | | | | 5,045,650 | |
Wilmington COP, Series A, Pre-Refunded, 5.00%, 6/01/33 | | | 6,000,000 | | | | 6,055,500 | |
Wilmington Storm Water Fee Revenue, Refunding, AMBAC Insured, 5.00%, 6/01/33 | | | 225,000 | | | | 225,675 | |
Wilson COP, Public Facilities Project, Assured Guaranty, Pre-Refunded, 5.00%, 5/01/33 | | | 3,000,000 | | | | 3,018,360 | |
Winston-Salem City Water and Sewer System Revenue, | | | | | | | | |
4.00%, 6/01/47 | | | 5,000,000 | | | | 5,207,900 | |
Pre-Refunded, 5.00%, 6/01/39 | | | 5,000,000 | | | | 5,219,750 | |
Refunding, Series A, 5.00%, 6/01/33 | | | 2,350,000 | | | | 2,674,652 | |
Refunding, Series A, 4.00%, 6/01/34 | | | 1,350,000 | | | | 1,437,777 | |
Refunding, Series A, 4.00%, 6/01/37 | | | 5,000,000 | | | | 5,265,500 | |
| | | | | | | | |
| | | | | | | 888,875,804 | |
| | | | | | | | |
| | | | | | |
134 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin North Carolina Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
U.S. Territories 1.3% | | | | | | | | |
Puerto Rico 1.3% | | | | | | | | |
bPuerto Rico Electric Power Authority Power Revenue, | | | | | | | | |
Series WW, 5.25%, 7/01/33 | | $ | 6,500,000 | | | $ | 2,445,625 | |
Series WW, 5.50%, 7/01/38 | | | 5,200,000 | | | | 1,956,500 | |
Series XX, 5.25%, 7/01/40 | | | 19,135,000 | | | | 7,199,544 | |
| | | | | | | | |
| | | | | | | 11,601,669 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $894,000,925) | | | | | | | 900,477,473 | |
| | | | | | | | |
| | |
Short Term Investments 0.2% | | | | | | | | |
Municipal Bonds 0.2% | | | | | | | | |
North Carolina 0.2% | | | | | | | | |
CThe Charlotte-Mecklenburg Hospital Authority Health Care Revenue, | | | | | | | | |
Carolinas HealthCare System, Refunding, Series B, SPA JPMorgan Chase Bank, Daily VRDN and Put, 1.12%, 1/15/38 | | | 700,000 | | | | 700,000 | |
Carolinas HealthCare System, Refunding, Series C, SPA JPMorgan Chase Bank, Daily VRDN and Put, 1.12%, 1/15/37 | | | 1,200,000 | | | | 1,200,000 | |
| | | | | | | | |
Total Short Term Investments (Cost $1,900,000) | | | | | | | 1,900,000 | |
| | | | | | | | |
Total Investments (Cost $895,900,925) 99.2% | | | | | | | 902,377,473 | |
Other Assets, less Liabilities 0.8% | | | | | | | 7,281,299 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | $ | 909,658,772 | |
| | | | | | | | |
See Abbreviations on page 170.
aSecurity purchased on a when-issued basis. See Note 1(b).
bSee Note 7 regarding defaulted securities.
cVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 135 |
FRANKLIN TAX-FREE TRUST
Financial Highlights
Franklin Virginia Tax-Free Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.31 | | | | $11.54 | | | | $11.65 | | | | $11.42 | | | | $12.25 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.35 | | | | 0.40 | | | | 0.42 | | | | 0.44 | | | | 0.43 | |
Net realized and unrealized gains (losses) | | | (0.39 | ) | | | (0.23 | ) | | | (0.11 | ) | | | 0.23 | | | | (0.84) | |
| | | | |
Total from investment operations | | | (0.04 | ) | | | 0.17 | | | | 0.31 | | | | 0.67 | | | | (0.41) | |
| | | | |
Less distributions from net investment income | | | (0.36 | ) | | | (0.40 | ) | | | (0.42 | ) | | | (0.44 | ) | | | (0.42) | |
| | | | |
Net asset value, end of year | | | $10.91 | | | | $11.31 | | | | $11.54 | | | | $11.65 | | | | $11.42 | |
| | | | |
| | | | | |
Total returnd | | | (0.34)% | | | | 1.51% | | | | 2.72% | | | | 5.97% | | | | (3.33)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.68% | e | | | 0.65% | | | | 0.65% | | | | 0.65% | | | | 0.64% | |
Net investment income | | | 3.15% | | | | 3.46% | | | | 3.65% | | | | 3.82% | | | | 3.74% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $454,423 | | | | $509,170 | | | | $540,857 | | | | $558,068 | | | | $562,671 | |
Portfolio turnover rate | | | 9.87% | | | | 17.44% | | | | 5.30% | | | | 8.16% | | | | 11.67% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | |
136 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Virginia Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, |
| | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 |
Class C | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.49 | | | | $11.72 | | | | $11.82 | | | | $11.58 | | | $12.42 |
| | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.30 | | | | 0.34 | | | | 0.36 | | | | 0.38 | | | 0.37 |
Net realized and unrealized gains (losses) | | | (0.40 | ) | | | (0.23 | ) | | | (0.11 | ) | | | 0.24 | | | (0.86) |
| | | |
Total from investment operations | | | (0.10 | ) | | | 0.11 | | | | 0.25 | | | | 0.62 | | | (0.49) |
| | | |
Less distributions from net investment income | | | (0.30 | ) | | | (0.34 | ) | | | (0.35 | ) | | | (0.38 | ) | | (0.35) |
| | | |
Net asset value, end of year | | | $11.09 | | | | $11.49 | | | | $11.72 | | | | $11.82 | | | $11.58 |
| | | |
| | | | | |
Total returnd | | | (0.89)% | | | | 0.92% | | | | 2.20% | | | | 5.39% | | | (3.89)% |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.23% | e | | | 1.20% | | | | 1.20% | | | | 1.20% | | | 1.19% |
Net investment income | | | 2.60% | | | | 2.91% | | | | 3.10% | | | | 3.27% | | | 3.19% |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $90,666 | | | | $107,936 | | | | $110,753 | | | | $116,566 | | | $118,953 |
Portfolio turnover rate | | | 9.87% | | | | 17.44% | | | | 5.30% | | | | 8.16% | | | 11.67% |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 137 |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Virginia Tax-Free Income Fund (continued)
| | | | |
| | Year Ended February 28, 2018a | |
Class R6 | | | | |
| |
Per share operating performance | | | | |
(for a share outstanding throughout the year) | | | | |
Net asset value, beginning of year | | | $11.25 | |
| | | | |
Income from investment operationsb: | | | | |
Net investment incomec | | | 0.22 | |
Net realized and unrealized gains (losses) | | | (0.35) | |
| | | | |
Total from investment operations | | | (0.13) | |
| | | | |
Less distributions from net investment income | | | (0.21) | |
| | | | |
Net asset value, end of year | | | $10.91 | |
| | | | |
| |
Total returnd | | | (1.14)% | |
| |
Ratios to average net assetse | | | | |
Expenses before waiver and payments by affiliates | | | 0.57% | |
Expenses net of waiver and payments by affiliates | | | 0.54% | |
Net investment income | | | 3.29% | |
| |
Supplemental data | | | | |
Net assets, end of year (000’s) | | | $5,028 | |
Portfolio turnover rate | | | 9.87% | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
| | | | | | |
138 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Franklin Virginia Tax-Free Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2016a | | | 2015 | | | 2014 | |
Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.31 | | | | $11.54 | | | | $11.65 | | | | $11.42 | | | | $12.25 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
Net investment incomec | | | 0.36 | | | | 0.41 | | | | 0.43 | | | | 0.46 | | | | 0.45 | |
Net realized and unrealized gains (losses) | | | (0.38 | ) | | | (0.22 | ) | | | (0.11 | ) | | | 0.22 | | | | (0.85 | ) |
| | | | |
Total from investment operations | | | (0.02 | ) | | | 0.19 | | | | 0.32 | | | | 0.68 | | | | (0.40 | ) |
| | | | |
Less distributions from net investment income | | | (0.37 | ) | | | (0.42 | ) | | | (0.43 | ) | | | (0.45 | ) | | | (0.43 | ) |
| | | | |
Net asset value, end of year | | | $10.92 | | | | $11.31 | | | | $11.54 | | | | $11.65 | | | | $11.42 | |
| | | | |
| | | | | |
Total return | | | (0.15)% | | | | 1.60% | | | | 2.82% | | | | 6.07% | | | | (3.24)% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.58% | d | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.54% | |
Net investment income | | | 3.25% | | | | 3.56% | | | | 3.75% | | | | 3.92% | | | | 3.84% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | | $85,293 | | | | $87,359 | | | | $52,952 | | | | $46,724 | | | | $37,582 | |
Portfolio turnover rate | | | 9.87% | | | | 17.44% | | | | 5.30% | | | | 8.16% | | | | 11.67% | |
aFor the year ended February 29.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 139 |
FRANKLIN TAX-FREE TRUST
Statement of Investments, February 28, 2018
Franklin Virginia Tax-Free Income Fund
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds 98.9% | | | | | | | | |
Virginia 89.4% | | | | | | | | |
Bristol Utility System Revenue, AGMC Insured, ETM, 5.00%, 7/15/21 | | $ | 1,020,000 | | | $ | 1,076,262 | |
Capital Region Airport Commission Airport Revenue, | | | | | | | | |
Series A, AGMC Insured, Pre-Refunded, 5.00%, 7/01/31 | | | 2,000,000 | | | | 2,024,960 | |
Series A, AGMC Insured, Pre-Refunded, 5.00%, 7/01/38 | | | 5,895,000 | | | | 5,968,570 | |
Chesterfield County EDA, PCR, Virginia Electric and Power Co. Project, Refunding, Series A, 5.00%, 5/01/23 | | | 5,000,000 | | | | 5,193,400 | |
Chesterfield County EDA Revenue, | | | | | | | | |
Bon Secours Health System Inc., Series C-1, AGMC Insured, 5.00%, 11/01/42 | | | 2,250,000 | | | | 2,394,608 | |
Bon Secours Health System Inc., Series C-2, Assured Guaranty, 5.00%, 11/01/42 | | | 8,000,000 | | | | 8,514,160 | |
Fairfax County EDA Residential Care Facilities Mortgage Revenue, | | | | | | | | |
Goodwin House Inc., Refunding, Series A, 4.00%, 10/01/42 | | | 1,500,000 | | | | 1,530,570 | |
Goodwin House Inc., Refunding, Series A, 5.00%, 10/01/42 | | | 5,840,000 | | | | 6,472,881 | |
Fairfax County EDA Revenue, Metrorail Parking System Project, 5.00%, 4/01/42 | | | 5,085,000 | | | | 5,809,816 | |
Fairfax County EDA Transportation District Improvement Revenue, Silver Line Phase I Project, Pre- Refunded, 5.00%, 4/01/36 | | | 10,000,000 | | | | 10,705,700 | |
Fairfax County IDAR, | | | | | | | | |
Health Care, Inova Health System Project, Series A, 5.00%, 5/15/44 | | | 2,500,000 | | | | 2,777,075 | |
Health Care, Inova Health System Project, Series A, Pre-Refunded, 5.50%, 5/15/35 | | | 6,445,000 | | | | 6,757,325 | |
Health Care, Inova Health System Project, Series A, Pre-Refunded, 5.50%, 5/15/35 | | | 3,555,000 | | | | 3,722,903 | |
Health Care, Inova Health System Project, Series C, Pre-Refunded, 5.00%, 5/15/25 | | | 3,500,000 | | | | 3,648,820 | |
Fairfax County Sewer Revenue, | | | | | | | | |
5.00%, 7/15/36 | | | 3,100,000 | | | | 3,630,658 | |
5.00%, 7/15/37 | | | 2,760,000 | | | | 3,225,060 | |
Fairfax County Water Authority Revenue, | | | | | | | | |
Refunding, 5.00%, 4/01/43 | | | 3,510,000 | | | | 4,058,262 | |
Refunding, 5.00%, 4/01/47 | | | 5,000,000 | | | | 5,763,850 | |
Hampton Roads Sanitation District Wastewater Revenue, | | | | | | | | |
Refunding, Subordinate, Series A, 5.00%, 8/01/31 | | | 6,200,000 | | | | 7,256,542 | |
Refunding, Subordinate, Series A, 5.00%, 8/01/33 | | | 5,115,000 | | | | 5,936,571 | |
Refunding, Subordinate, Series A, 5.00%, 8/01/43 | | | 11,840,000 | | | | 13,494,522 | |
Hampton Roads Transportation Accountability Commission Revenue, Transportation Fund, senior lien, Series A, 5.00%, 7/01/48 | | | 15,000,000 | | | | 17,179,500 | |
Henrico County EDA Revenue, Bon Secours Health System Inc., Refunding, 5.00%, 11/01/30 | | | 7,000,000 | | | | 7,713,720 | |
Hopewell Sewer System Revenue, Refunding, Series A, 5.00%, 7/15/42 | | | 4,850,000 | | | | 5,245,857 | |
Lexington IDA Educational Facilities Revenue, | | | | | | | | |
VMI Development Board Inc. Project, Series C, Pre-Refunded, 5.00%, 12/01/36 | | | 5,000,000 | | | | 5,219,750 | |
Washington and Lee University, 5.00%, 1/01/43 | | | 10,000,000 | | | | 10,965,000 | |
Lexington IDA Residential Care Facility Revenue, | | | | | | | | |
Kendal at Lexington, Series A, 5.00%, 1/01/42 | | | 1,000,000 | | | | 1,079,780 | |
Kendal at Lexington, Series A, 5.00%, 1/01/48 | | | 1,250,000 | | | | 1,346,250 | |
Loudoun County Sanitation Authority Water and Sewer Revenue, Refunding, 5.00%, 1/01/29 | | | 4,770,000 | | | | 5,530,624 | |
Lynchburg EDA Hospital Revenue, Centra Health Obligated Group, Refunding, Series A, 5.00%, 1/01/47 | | | 4,500,000 | | | | 4,934,160 | |
Norfolk GO, | | | | | | | | |
Capital Improvement, Series A, 5.00%, 10/01/41 | | | 1,040,000 | | | | 1,187,846 | |
Capital Improvement, Series A, 5.00%, 10/01/46 | | | 2,500,000 | | | | 2,845,300 | |
Capital Improvement, Series A, Pre-Refunded, 5.00%, 8/01/32 | | | 5,845,000 | | | | 6,733,908 | |
Capital Improvement, Series C, Pre-Refunded, 5.00%, 10/01/42 | | | 7,825,000 | | | | 8,596,701 | |
Northern Virginia Transportation Authority Transportation Special Tax Revenue, 5.00%, 6/01/33 | | | 3,000,000 | | | | 3,427,440 | |
Pittsylvania County School GO, Series B, Pre-Refunded, 5.75%, 2/01/30 | | | 5,800,000 | | | | 6,030,376 | |
Portsmouth GO, Public Utility, Refunding, Series A, 5.00%, 7/15/41 | | | 10,000,000 | | | | 11,067,800 | |
Prince William County IDA Health Care Facilities Revenue, Novant Health Obligated Group, Prince William Hospital, Refunding, Series B, 5.00%, 11/01/46 | | | 10,000,000 | | | | 10,641,700 | |
Prince William County IDA Revenue, George Mason University Foundation, Prince William Life Sciences Lab LLC Project, Series AA, Pre-Refunded, 5.125%, 9/01/41 | | | 3,200,000 | | | | 3,551,040 | |
| | | | |
140 | | Annual Report | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Virginia Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Virginia (continued) | | | | | | | | |
Richmond Public Utility Revenue, | | | | | | | | |
Refunding, Series A, 5.00%, 1/15/33 | | $ | 10,000,000 | | | $ | 11,551,500 | |
Refunding, Series A, 5.00%, 1/15/43 | | | 10,000,000 | | | | 11,110,100 | |
Series A, Pre-Refunded, 5.00%, 1/15/35 | | | 11,495,000 | | | | 11,847,092 | |
Riverside Regional Jail Authority Jail Facility Revenue, Refunding, 5.00%, 7/01/31 | | | 6,215,000 | | | | 7,177,579 | |
Roanoke County EDA Lease Revenue, Public Facility Projects, Assured Guaranty, Pre-Refunded, 5.125%, 10/15/37 | | | 10,000,000 | | | | 10,241,400 | |
Roanoke EDA Hospital Revenue, Carilion Clinic Obligated Group, Refunding, 5.00%, 7/01/33 | | | 10,615,000 | | | | 11,247,548 | |
Roanoke IDA Hospital Revenue, | | | | | | | | |
Carilion Health System Obligated Group, Series B, AGMC Insured, 5.00%, 7/01/38 | | | 3,950,000 | | | | 4,140,192 | |
Carilion Health System Obligated Group, Series B, Assured Guaranty, Pre-Refunded, 5.00%, 7/01/38 | | | 50,000 | | | | 53,873 | |
Smyth County GO, Public Improvement, Series A, Pre-Refunded, 5.00%, 11/01/31 | | | 4,145,000 | | | | 4,606,919 | |
Stafford County and Staunton IDAR, | | | | | | | | |
Virginia Municipal League Assn. of Counties Finance Program, XLCA Insured, 5.00%, 8/01/37 | | | 960,000 | | | | 966,288 | |
Virginia Municipal League Assn. of Counties Finance Program, XLCA Insured, Pre-Refunded, 5.00%, 8/01/37 | | | 3,025,000 | | | | 3,071,646 | |
Suffolk GO, | | | | | | | | |
Pre-Refunded, 5.00%, 2/01/41 | | | 7,395,000 | | | | 8,065,948 | |
Pre-Refunded, 5.00%, 2/01/41 | | | 2,605,000 | | | | 2,849,115 | |
Pre-Refunded, 5.00%, 6/01/42 | | | 10,000,000 | | | | 11,038,000 | |
University of Virginia Revenue, | | | | | | | | |
General, Refunding, Series A, 5.00%, 6/01/43 | | | 15,000,000 | | | | 16,911,450 | |
Pre-Refunded, 5.00%, 6/01/40 | | | 17,750,000 | | | | 17,918,802 | |
Refunding, Series A, 5.00%, 4/01/47 | | | 9,630,000 | | | | 11,076,426 | |
Upper Occoquan Sewage Authority Regional Sewerage System Revenue, Refunding, 5.00%, 7/01/28 | | | 10,000,000 | | | | 11,730,500 | |
Virginia College Building Authority Educational Facilities Revenue, | | | | | | | | |
21st Century College and Equipment Programs, Series A, 4.00%, 2/01/30 | | | 7,000,000 | | | | 7,479,570 | |
Liberty University Projects, 5.25%, 3/01/29 | | | 2,860,000 | | | | 3,061,458 | |
Liberty University Projects, 5.00%, 3/01/41 | | | 26,855,000 | | | | 28,489,932 | |
Public Higher Education Financing Program, Refunding, Series A, 5.00%, 9/01/27 | | | 4,000,000 | | | | 4,731,040 | |
Public Higher Education Financing Program, Series A, Pre-Refunded, 5.00%, 9/01/33 | | | 4,010,000 | | | | 4,086,310 | |
Washington and Lee University, Refunding, Series A, 5.00%, 1/01/40 | | | 5,000,000 | | | | 5,629,700 | |
Virginia Port Authority Port Facilities Revenue, Pre-Refunded, 5.00%, 7/01/40 | | | 6,000,000 | | | | 6,274,680 | |
Virginia Small Business Financing Authority Revenue, Transform 66 P3 Project, 5.00%, 12/31/47 | | | 1,600,000 | | | | 1,735,136 | |
Virginia State Commonwealth Transportation Board Revenue, | | | | | | | | |
Federal Transportation Grant Anticipation Notes, 5.00%, 9/15/30 | | | 2,260,000 | | | | 2,650,144 | |
Federal Transportation Grant Anticipation Notes, 5.00%, 9/15/31 | | | 4,000,000 | | | | 4,673,920 | |
Virginia State HDA Commonwealth Mortgage Revenue, Series C, Subseries C-5, 4.80%, 7/01/38 | | | 8,500,000 | | | | 8,509,775 | |
Virginia State HDA Revenue, | | | | | | | | |
Rental Housing, Series B, 5.625%, 6/01/39 | | | 7,240,000 | | | | 7,557,764 | |
Rental Housing, Series B, 5.00%, 6/01/45 | | | 3,050,000 | | | | 3,172,000 | |
Rental Housing, Series E, 5.00%, 10/01/44 | | | 6,540,000 | | | | 6,706,051 | |
Rental Housing, Series F, 5.05%, 12/01/44 | | | 12,125,000 | | | | 12,485,234 | |
Rental Housing, Series F, 5.00%, 4/01/45 | | | 2,125,000 | | | | 2,202,414 | |
Virginia State Public School Authority Revenue, | | | | | | | | |
School Financing, 1997 Resolution, Refunding, Series B, 5.00%, 8/01/24 | | | 10,000,000 | | | | 11,627,200 | |
Special Obligation Fluvanna County, School Financing, Pre-Refunded, 6.00%, 12/01/32 | | | 5,000,000 | | | | 5,176,350 | |
Virginia State Resources Authority Infrastructure Revenue, | | | | | | | | |
Pooled Financing Program, Refunding, Series B, 5.00%, 11/01/41. | | | 3,630,000 | | | | 4,004,652 | |
Pooled Financing Program, Series B, Pre-Refunded, 5.00%, 11/01/41 | | | 5,780,000 | | | | 6,424,123 | |
Virginia Pooled Financing Program, Pre-Refunded, 5.00%, 11/01/38 | | | 1,465,000 | | | | 1,500,687 | |
Virginia Pooled Financing Program, Refunding, 5.00%, 11/01/45 | | | 5,255,000 | | | | 6,008,304 | |
Virginia Pooled Financing Program, Senior Series A, 5.00%, 11/01/38 | | | 135,000 | | | | 138,079 | |
Virginia Pooled Financing Program, Series A, 5.00%, 11/01/38 | | | 5,165,000 | | | | 5,943,675 | |
Virginia State Small Business Financing Authority Healthcare Facilities Revenue, Sentara Healthcare, Refunding, 5.00%, 11/01/40 | | | 23,000,000 | | | | 24,310,540 | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 141 |
FRANKLIN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
Franklin Virginia Tax-Free Income Fund (continued)
| | | | | | | | |
| | Principal Amount | | | Value | |
Municipal Bonds (continued) | | | | | | | | |
Virginia (continued) | | | | | | | | |
Virginia State Small Business Financing Authority Private Activity Revenue, Transform 66 P3 Project, 5.00%, 12/31/49 | | $ | 5,000,000 | | | $ | 5,397,950 | |
Winchester EDA Hospital Revenue, Valley Health System Obligated Group, Refunding, 5.00%, 1/01/44 | | | 5,000,000 | | | | 5,456,600 | |
Winchester IDA Hospital Revenue, Valley Health System Obligated Group, Series E, Pre-Refunded, 5.625%, 1/01/44 | | | 3,350,000 | | | | 3,463,833 | |
| | | | | | | | |
| | | | | | | 567,760,766 | |
| | | | | | | | |
District of Columbia 8.7% | | | | | | | | |
Metropolitan Washington Airports Authority Airport System Revenue, | | | | | | | | |
Refunding, Series A, 5.00%, 10/01/35 | | | 12,000,000 | | | | 12,903,960 | |
Refunding, Series B, BHAC Insured, 5.00%, 10/01/29 | | | 3,000,000 | | | | 3,156,120 | |
Refunding, Series C, 5.125%, 10/01/34 | | | 6,450,000 | | | | 6,582,290 | |
Metropolitan Washington Airports Authority Dulles Toll Road Revenue, | | | | | | | | |
Dulles Metrorail and Capital Improvement Projects, first senior lien, Series A, 5.00%, 10/01/39 | | | 10,000,000 | | | | 10,443,600 | |
Dulles Metrorail and Capital Improvement Projects, first senior lien, Series A, 5.25%, 10/01/44 | | | 12,000,000 | | | | 12,567,120 | |
Washington Metropolitan Area Transit Authority Gross Revenue, | | | | | | | | |
Transit, Refunding, Series A-2, 5.00%, 7/01/34 | | | 1,750,000 | | | | 2,031,400 | |
Transit, Series A, Pre-Refunded, 5.125%, 7/01/32 | | | 2,000,000 | | | | 2,096,200 | |
Transit, Series B, 5.00%, 7/01/42 | | | 5,000,000 | | | | 5,716,500 | |
| | | | | | | | |
| | | | | | | 55,497,190 | |
| | | | | | | | |
| | |
U.S. Territories 0.8% | | | | | | | | |
Puerto Rico 0.8% | | | | | | | | |
a Puerto Rico Electric Power Authority Power Revenue, | | | | | | | | |
Series WW, 5.50%, 7/01/38 | | | 5,200,000 | | | | 1,956,500 | |
Series XX, 5.25%, 7/01/40 | | | 8,400,000 | | | | 3,160,500 | |
| | | | | | | | |
| | | | | | | 5,117,000 | |
| | | | | | | | |
Total Municipal Bonds before Short Term Investments (Cost $614,593,512) | | | | | | | 628,374,956 | |
| | | | | | | | |
Short Term Investments (Cost $800,000) 0.1% | | | | | | | | |
Municipal Bonds 0.1% | | | | | | | | |
Virginia 0.1% | | | | | | | | |
b Virginia College Building Authority Educational Facilities Revenue, University of Richmond Project, SPA Wells Fargo Bank, Daily VRDN and Put, 1.09%, 11/01/36 | | | 800,000 | | | | 800,000 | |
| | | | | | | | |
Total Investments (Cost $615,393,512) 99.0% | | | | | | | 629,174,956 | |
Other Assets, less Liabilities 1.0% | | | | | | | 6,234,330 | |
| | | | | | | | |
Net Assets 100.0% | | | | | | $ | 635,409,286 | |
| | | | | | | | |
See Abbreviations on page 170.
aSee Note 7 regarding defaulted securities.
bVariable rate demand notes (VRDNs) are 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. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end.
| | | | | | |
142 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
February 28, 2018
| | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund | |
| |
Assets: | | | | | | | | | | | | |
Investments in securities: | | | | | | | | | | | | |
Cost - Unaffiliated issuers | | $ | 250,644,555 | | | $ | 605,959,805 | | | $ | 491,995,233 | |
| | | | |
Value - Unaffiliated issuers | | $ | 259,456,752 | | | $ | 625,581,374 | | | $ | 503,322,282 | |
Cash | | | 820,902 | | | | 60,599 | | | | 2,221,581 | |
Receivables: | | | | | | | | | | | | |
Capital shares sold | | | 77,357 | | | | 432,579 | | | | 282,021 | |
Interest | | | 3,224,981 | | | | 8,241,505 | | | | 5,209,169 | |
Other assets | | | 264 | | | | 641 | | | | 518 | |
| | | | |
Total assets | | | 263,580,256 | | | | 634,316,698 | | | | 511,035,571 | |
| | | | |
Liabilities: | | | | | | | | | | | | |
Payables: | | | | | | | | | | | | |
Capital shares redeemed | | | 294,331 | | | | 1,269,384 | | | | 1,945,829 | |
Management fees | | | 119,313 | | | | 257,495 | | | | 211,479 | |
Distribution fees | | | 38,858 | | | | 78,483 | | | | 84,024 | |
Transfer agent fees | | | 23,070 | | | | 67,412 | | | | 50,682 | |
Professional fees | | | 38,036 | | | | 45,711 | | | | 40,582 | |
Distributions to shareholders | | | 82,341 | | | | 374,173 | | | | 165,750 | |
Accrued expenses and other liabilities | | | 16,196 | | | | 34,829 | | | | 31,661 | |
| | | | |
Total liabilities | | | 612,145 | | | | 2,127,487 | | | | 2,530,007 | |
| | | | |
Net assets, at value | | $ | 262,968,111 | | | $ | 632,189,211 | | | $ | 508,505,564 | |
| | | | |
Net assets consist of: | | | | | | | | | | | | |
Paid-in capital | | $ | 271,090,341 | | | $ | 673,961,234 | | | $ | 519,430,083 | |
Undistributed net investment income | | | 456,670 | | | | 1,242,896 | | | | 1,191,002 | |
Net unrealized appreciation (depreciation) | | | 8,812,197 | | | | 19,621,569 | | | | 11,327,049 | |
Accumulated net realized gain (loss) | | | (17,391,097 | ) | | | (62,636,488 | ) | | | (23,442,570 | ) |
| | | | |
Net assets, at value | | $ | 262,968,111 | | | $ | 632,189,211 | | | $ | 508,505,564 | |
| | | | |
Class A: | | | | | | | | | | | | |
Net assets, at value | | $ | 208,340,241 | | | $ | 536,099,354 | | | $ | 363,389,947 | |
| | | | |
Shares outstanding | | | 19,146,461 | | | | 51,222,446 | | | | 31,182,521 | |
| | | | |
Net asset value per sharea | | | $10.88 | | | | $10.47 | | | | $11.65 | |
| | | | |
Maximum offering price per share (net asset value per share ÷ 95.75%) | | | $11.36 | | | | $10.93 | | | | $12.17 | |
| | | | |
Class C: | | | | | | | | | | | | |
Net assets, at value | | $ | 45,422,343 | | | $ | 73,236,761 | | | $ | 109,722,109 | |
| | | | |
Shares outstanding | | | 4,120,254 | | | | 6,851,098 | | | | 9,276,585 | |
| | | | |
Net asset value and maximum offering price per sharea | | | $11.02 | | | | $10.69 | | | | $11.83 | |
| | | | |
Class R6: | | | | | | | | | | | | |
Net assets, at value | | $ | 1,516,032 | | | $ | 2,386,534 | | | $ | 4,880 | |
| | | | |
Shares outstanding | | | 139,313 | | | | 227,531 | | | | 419 | |
| | | | |
Net asset value and maximum offering price per share | | | $10.88 | | | | $10.49 | | | | $11.66b | |
| | | | |
Advisor Class: | | | | | | | | | | | | |
Net assets, at value | | $ | 7,689,495 | | | $ | 20,466,562 | | | $ | 35,388,628 | |
| | | | |
Shares outstanding | | | 706,712 | | | | 1,951,541 | | | | 3,036,003 | |
| | | | |
Net asset value and maximum offering price per share | | | $10.88 | | | | $10.49 | | | | $11.66 | |
| | | | |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
bNet asset value and maximum offering price may not recalculate due to rounding of net assets and/or shares outstanding.
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 143 |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
February 28, 2018 (unaudited)
| | | | | | | | | | | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | |
| |
Assets: | | | | | | | | | | | | |
Investments in securities: | | | | | | | | | | | | |
Cost - Unaffiliated issuers | | $ | 153,995,130 | | | $ | 391,332,125 | | | $ | 441,253,332 | |
| | | | |
Value - Unaffiliated issuers | | $ | 158,471,425 | | | $ | 400,826,398 | | | $ | 450,160,579 | |
Cash | | | 89,204 | | | | 114,036 | | | | 83,901 | |
Receivables: | | | | | | | | | | | | |
Capital shares sold | | | 83,657 | | | | 250,036 | | | | 82,573 | |
Interest | | | 2,090,809 | | | | 4,911,644 | | | | 4,900,853 | |
Other assets | | | 160 | | | | 403 | | | | 457 | |
| | | | |
Total assets | | | 160,735,255 | | | | 406,102,517 | | | | 455,228,363 | |
| | | | |
Liabilities: | | | | | | | | | | | | |
Payables: | | | | | | | | | | | | |
Investment securities purchased | | | — | | | | 3,087,892 | | | | — | |
Capital shares redeemed | | | 859,995 | | | | 1,398,950 | | | | 1,131,500 | |
Management fees | | | 76,847 | | | | 171,350 | | | | 190,907 | |
Distribution fees | | | 11,587 | | | | 55,747 | | | | 71,279 | |
Transfer agent fees | | | 14,567 | | | | 31,976 | | | | 38,799 | |
Professional fees | | | 37,095 | | | | 38,142 | | | | 42,526 | |
Distributions to shareholders | | | 18,159 | | | | 41,329 | | | | 146,499 | |
Accrued expenses and other liabilities | | | 12,794 | | | | 24,619 | | | | 25,705 | |
| | | | |
Total liabilities | | | 1,031,044 | | | | 4,850,005 | | | | 1,647,215 | |
| | | | |
Net assets, at value | | $ | 159,704,211 | | | $ | 401,252,512 | | | $ | 453,581,148 | |
| | | | |
Net assets consist of: | | | | | | | | | | | | |
Paid-in capital | | $ | 165,187,042 | | | $ | 419,140,779 | | | $ | 485,924,204 | |
Undistributed net investment income | | | 294,106 | | | | 501,096 | | | | 1,110,743 | |
Net unrealized appreciation (depreciation) | | | 4,476,295 | | | | 9,494,273 | | | | 8,907,247 | |
Accumulated net realized gain (loss) | | | (10,253,232 | ) | | | (27,883,636 | ) | | | (42,361,046 | ) |
| | | | |
Net assets, at value | | $ | 159,704,211 | | | $ | 401,252,512 | | | $ | 453,581,148 | |
| | | | |
Class A: | | | | | | | | | | | | |
Net assets, at value | | $ | 150,181,976 | | | $ | 322,080,146 | | | $ | 319,120,117 | |
| | | | |
Shares outstanding | | | 13,947,682 | | | | 29,552,722 | | | | 29,649,711 | |
| | | | |
Net asset value per sharea | | | $10.77 | | | | $10.90 | | | | $10.76 | |
| | | | |
Maximum offering price per share (net asset value per share ÷ 95.75%) | | | $11.25 | | | | $11.38 | | | | $11.24 | |
| | | | |
Class C: | | | | | | | | | | | | |
Net assets, at value | | | | | | $ | 61,398,719 | | | $ | 92,552,955 | |
| | | | | | | | |
Shares outstanding | | | | | | | 5,545,122 | | | | 8,431,227 | |
| | | | | | | | |
Net asset value and maximum offering price per sharea | | | | | | | $11.07 | | | | $10.98 | |
| | | | | | | | |
Class R6: | | | | | | | | | | | | |
Net assets, at value | | $ | 2,084,717 | | | $ | 3,683,038 | | | $ | 1,376,296 | |
| | | | |
Shares outstanding | | | 193,575 | | | | 337,924 | | | | 127,721 | |
| | | | |
Net asset value and maximum offering price per share | | | $10.77 | | | | $10.90 | | | | $10.78 | |
| | | | |
Advisor Class: | | | | | | | | | | | | |
Net assets, at value | | $ | 7,437,518 | | | $ | 14,090,609 | | | $ | 40,531,780 | |
| | | | |
Shares outstanding | | | 690,442 | | | | 1,292,526 | | | | 3,761,938 | |
| | | | |
Net asset value and maximum offering price per share | | | $10.77 | | | | $10.90 | | | | $10.77 | |
| | | | |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
| | | | | | |
144 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
February 28, 2018
| | | | | | | | | | | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
| |
Assets: | | | | | | | | | | | | |
Investments in securities: | | | | | | | | | | | | |
Cost - Unaffiliated issuers | | $ | 1,017,959,475 | | | | $895,900,925 | | | $ | 615,393,512 | |
| | | | |
Value - Unaffiliated issuers | | $ | 1,026,040,781 | | | | $902,377,473 | | | $ | 629,174,956 | |
Cash | | | 145,055 | | | | 7,951,380 | | | | 7,930 | |
Receivables: | | | | | | | | | | | | |
Capital shares sold | | | 744,129 | | | | 1,836,764 | | | | 630,364 | |
Interest | | | 13,703,107 | | | | 11,362,932 | | | | 7,576,654 | |
Other assets | | | 1,039 | | | | 918 | | | | 638 | |
| | | | |
Total assets | | | 1,040,634,111 | | | | 923,529,467 | | | | 637,390,542 | |
| | | | |
Liabilities: | | | | | | | | | | | | |
Payables: | | | | | | | | | | | | |
Investment securities purchased | | | 4,569,659 | | | | 9,673,310 | | | | — | |
Capital shares redeemed | | | 2,650,538 | | | | 3,265,237 | | | | 1,329,460 | |
Management fees | | | 407,659 | | | | 361,550 | | | | 258,788 | |
Distribution fees | | | 136,329 | | | | 131,273 | | | | 80,657 | |
Transfer agent fees | | | 23,112 | | | | 77,784 | | | | 69,959 | |
Professional fees | | | 57,348 | | | | 50,779 | | | | 43,922 | |
Distributions to shareholders | | | 206,076 | | | | 258,398 | | | | 167,433 | |
Accrued expenses and other liabilities | | | 56,641 | | | | 52,364 | | | | 31,037 | |
| | | | |
Total liabilities | | | 8,107,362 | | | | 13,870,695 | | | | 1,981,256 | |
| | | | |
Net assets, at value | | $ | 1,032,526,749 | | | | $909,658,772 | | | $ | 635,409,286 | |
| | | | |
Net assets consist of: | | | | | | | | | | | | |
Paid-in capital | | $ | 1,095,280,619 | | | | $988,456,241 | | | $ | 675,409,811 | |
Undistributed net investment income | | | 1,623,790 | | | | 1,899,969 | | | | 998,414 | |
Net unrealized appreciation (depreciation) | | | 8,081,306 | | | | 6,476,548 | | | | 13,781,444 | |
Accumulated net realized gain (loss) | | | (72,458,966 | ) | | | (87,173,986 | ) | | | (54,780,383 | ) |
| | | | |
Net assets, at value | | $ | 1,032,526,749 | | | | $909,658,772 | | | $ | 635,409,286 | |
| | | | |
Class A: | | | | | | | | | | | | |
Net assets, at value | | $ | 793,225,996 | | | | $660,166,753 | | | $ | 454,422,668 | |
| | | | |
Shares outstanding | | | 69,724,849 | | | | 58,548,609 | | | | 41,662,324 | |
| | | | |
Net asset value per sharea | | | $11.38 | | | | $11.28 | | | | $10.91 | |
| | | | |
Maximum offering price per share (net asset value per share ÷ 95.75%) | | | $11.89 | | | | $11.78 | | | | $11.39 | |
| | | | |
Class C: | | | | | | | | | | | | |
Net assets, at value | | $ | 149,306,150 | | | | $159,556,341 | | | $ | 90,665,943 | |
| | | | |
Shares outstanding | | | 12,992,416 | | | | 13,924,942 | | | | 8,176,277 | |
| | | | |
Net asset value and maximum offering price per sharea | | | $11.49 | | | | $11.46 | | | | $11.09 | |
| | | | |
Class R6: | | | | | | | | | | | | |
Net assets, at value | | $ | 17,534,109 | | | | $ 9,117,070 | | | $ | 5,028,109 | |
| | | | |
Shares outstanding | | | 1,540,158 | | | | 808,994 | | | | 460,764 | |
| | | | |
Net asset value and maximum offering price per share | | | $11.38 | | | | $11.27 | | | | $10.91 | |
| | | | |
Advisor Class: | | | | | | | | | | | | |
Net assets, at value | | $ | 72,460,494 | | | | $ 80,818,608 | | | $ | 85,292,566 | |
| | | | |
Shares outstanding | | | 6,365,235 | | | | 7,167,557 | | | | 7,813,185 | |
| | | | |
Net asset value and maximum offering price per share | | | $11.38 | | | | $11.28 | | | | $10.92 | |
| | | | |
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 | | 145 |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the year ended February 28, 2018
| | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund | |
| |
Investment income: | | | | | | | | | | | | |
Interest: | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 10,859,646 | | | $ | 30,113,873 | | | $ | 21,790,317 | |
| | | | |
Expenses: | | | | | | | | | | | | |
Management fees (Note 3a) | | | 1,497,536 | | | | 3,376,821 | | | | 2,719,548 | |
Distribution fees: (Note 3c) | | | | | | | | | | | | |
Class A | | | 220,694 | | | | 599,595 | | | | 399,228 | |
Class C | | | 327,528 | | | | 536,081 | | | | 787,957 | |
Transfer agent fees: (Note 3e) | | | | | | | | | | | | |
Class A | | | 104,677 | | | | 303,067 | | | | 240,088 | |
Class C | | | 23,904 | | | | 41,689 | | | | 72,914 | |
Class R6 | | | 314 | | | | 444 | | | | 135 | |
Advisor Class | | | 3,280 | | | | 8,545 | | | | 19,115 | |
Custodian fees (Note 4) | | | 2,349 | | | | 5,934 | | | | 4,645 | |
Reports to shareholders | | | 17,122 | | | | 34,153 | | | | 32,637 | |
Registration and filing fees | | | 16,111 | | | | 31,796 | | | | 16,610 | |
Professional fees | | | 71,962 | | | | 156,746 | | | | 88,776 | |
Trustees’ fees and expenses | | | 1,531 | | | | 3,884 | | | | 3,047 | |
Other | | | 26,908 | | | | 59,179 | | | | 52,636 | |
| | | | |
Total expenses | | | 2,313,916 | | | | 5,157,934 | | | | 4,437,336 | |
Expenses waived/paid by affiliates (Note 3f) | | | (223 | ) | | | (3,228 | ) | | | (3,709 | ) |
| | | | |
Net expenses | | | 2,313,693 | | | | 5,154,706 | | | | 4,433,627 | |
| | | | |
Net investment income | | | 8,545,953 | | | | 24,959,167 | | | | 17,356,690 | |
| | | | |
Realized and unrealized gains (losses): | | | | | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | |
Unaffiliated issuers | | | (10,536,256 | ) | | | (16,894,594 | ) | | | (12,804,183 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | |
Unaffiliated issuers | | | 3,853,848 | | | | (8,203,562 | ) | | | (2,113,811 | ) |
| | | | |
Net realized and unrealized gain (loss) | | | (6,682,408 | ) | | | (25,098,156 | ) | | | (14,917,994 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | $ | 1,863,545 | | | $ | (138,989 | ) | | $ | 2,438,696 | |
| | | | |
Annual Report | The accompanying notes are an integral part of these financial statements.
| | | | | | |
146 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended February 28, 2018
| | | | | | | | | | | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | |
| |
Investment income: | | | | | | | | | | | | |
Interest: | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 7,087,095 | | | $ | 16,435,243 | | | $ | 18,466,046 | |
| | | | |
Expenses: | | | | | | | | | | | | |
Management fees (Note 3a) | | | 966,567 | | | | 2,122,602 | | | | 2,436,770 | |
Distribution fees: (Note 3c) | | | | | | | | | | | | |
Class A | | | 160,990 | | | | 338,167 | | | | 341,136 | |
Class C | | | — | | | | 423,371 | | | | 674,192 | |
Transfer agent fees: (Note 3e) | | | | | | | | | | | | |
Class A | | | 91,181 | | | | 174,228 | | | | 188,429 | |
Class C | | | — | | | | 33,556 | | | | 57,511 | |
Class R6 | | | 480 | | | | 662 | | | | 323 | |
Advisor Class | | | 4,148 | | | | 6,449 | | | | 23,849 | |
Custodian fees (Note 4) | | | 1,428 | | | | 3,507 | | | | 4,114 | |
Reports to shareholders | | | 13,366 | | | | 24,401 | | | | 27,154 | |
Registration and filing fees | | | 6,955 | | | | 14,931 | | | | 17,420 | |
Professional fees | | | 47,226 | | | | 81,915 | | | | 130,666 | |
Trustees’ fees and expenses | | | 927 | | | | 2,285 | | | | 2,695 | |
Other | | | 23,541 | | | | 42,899 | | | | 41,575 | |
| | | | |
Total expenses | | | 1,316,809 | | | | 3,268,973 | | | | 3,945,834 | |
Expenses waived/paid by affiliates (Note 3f) | | | (332 | ) | | | (407 | ) | | | (235 | ) |
| | | | |
Net expenses | | | 1,316,477 | | | | 3,268,566 | | | | 3,945,599 | |
| | | | |
Net investment income | | | 5,770,618 | | | | 13,166,677 | | | | 14,520,447 | |
| | | | |
Realized and unrealized gains (losses): | | | | | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | |
Unaffiliated issuers | | | (2,905,578 | ) | | | (9,832,164 | ) | | | (20,536,163 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | |
Unaffiliated issuers | | | (772,667 | ) | | | 635,988 | | | | 6,645,446 | |
| | | | |
Net realized and unrealized gain (loss) | | | (3,678,245 | ) | | | (9,196,176 | ) | | | (13,890,717 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | $ | 2,092,373 | | | $ | 3,970,501 | | | $ | 629,730 | |
| | | | |
| | | | | | |
franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 147 |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended February 28, 2018
| | | | | | | | | | | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
| |
Investment income: | | | | | | | | | | | | |
Interest: | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 41,050,667 | | | $ | 37,089,840 | | | $ | 26,110,749 | |
| | | | |
Expenses: | | | | | | | | | | | | |
Management fees (Note 3a) | | | 5,198,954 | | | | 4,772,472 | | | | 3,299,697 | |
Distribution fees: (Note 3c) | | | | | | | | | | | | |
Class A | | | 849,832 | | | | 726,849 | | | | 488,554 | |
Class C | | | 1,059,853 | | | | 1,163,681 | | | | 647,920 | |
Transfer agent fees: (Note 3e) | | | | | | | | | | | | |
Class A | | | 442,852 | | | | 388,052 | | | | 284,254 | |
Class C | | | 84,974 | | | | 95,585 | | | | 58,161 | |
Class R6 | | | 1,970 | | | | 1,270 | | | | 783 | |
Advisor Class | | | 44,908 | | | | 55,247 | | | | 52,801 | |
Custodian fees (Note 4) | | | 9,375 | | | | 8,526 | | | | 5,706 | |
Reports to shareholders | | | 68,035 | | | | 56,335 | | | | 35,733 | |
Registration and filing fees | | | 21,674 | | | | 19,001 | | | | 20,237 | |
Professional fees | | | 258,499 | | | | 220,587 | | | | 143,853 | |
Trustees’ fees and expenses | | | 6,070 | | | | 5,619 | | | | 3,757 | |
Other | | | 84,004 | | | | 82,096 | | | | 48,006 | |
| | | | |
Total expenses | | | 8,131,000 | | | | 7,595,320 | | | | 5,089,462 | |
Expenses waived/paid by affiliates (Note 3f) | | | (832 | ) | | | (699 | ) | | | (3,636 | ) |
| | | | |
Net expenses | | | 8,130,168 | | | | 7,594,621 | | | | 5,085,826 | |
| | | | |
Net investment income | | | 32,920,499 | | | | 29,495,219 | | | | 21,024,923 | |
| | | | |
Realized and unrealized gains (losses): | | | | | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | |
Unaffiliated issuers | | | (32,105,829 | ) | | | (33,994,401 | ) | | | (20,798,156 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | |
Unaffiliated issuers | | | (259,821 | ) | | | (676,097 | ) | | | (2,459,040 | ) |
| | | | |
Net realized and unrealized gain (loss) | | | (32,365,650 | ) | | | (34,670,498 | ) | | | (23,257,196 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | $ | 554,849 | | | $ | (5,175,279 | ) | | $ | (2,232,273 | ) |
| | | | |
| | | | | | |
148 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| | | | | | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | |
| | | | |
| | Year Ended February 28, | | | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | |
Net investment income | | $ | 8,545,953 | | | $ | 9,588,354 | | | $ | 24,959,167 | | | $ | 29,297,923 | |
Net realized gain (loss) | | | (10,536,256 | ) | | | (1,959,347 | ) | | | (16,894,594 | ) | | | (3,398,599 | ) |
Net change in unrealized appreciation (depreciation) | | | 3,853,848 | | | | (3,071,967 | ) | | | (8,203,562 | ) | | | (18,947,625 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | 1,863,545 | | | | 4,557,040 | | | | (138,989 | ) | | | 6,951,699 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | |
Net investment income: | | | | | | | | | | | | | | | | |
Class A | | | (7,207,094 | ) | | | (7,873,113 | ) | | | (22,956,485 | ) | | | (26,252,147 | ) |
Class C | | | (1,347,293 | ) | | | (1,553,356 | ) | | | (2,635,993 | ) | | | (2,989,246 | ) |
Class R6 | | | (15,213 | ) | | | — | | | | (28,763 | ) | | | — | |
Advisor Class | | | (231,050 | ) | | | (45,953 | ) | | | (653,113 | ) | | | (103,588 | ) |
| | | | |
Total distributions to shareholders | | | (8,800,650 | ) | | | (9,472,422 | ) | | | (26,274,354 | ) | | | (29,344,981 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | |
Class A | | | (11,200,991 | ) | | | 707,973 | | | | (76,897,689 | ) | | | (34,514,368 | ) |
Class C | | | (8,984,893 | ) | | | 2,504,253 | | | | (14,489,834 | ) | | | 4,729,811 | |
Class R6 | | | 1,542,655 | | | | — | | | | 2,423,746 | | | | — | |
Advisor Class | | | 2,730,479 | | | | 5,234,258 | | | | 10,302,570 | | | | 11,066,660 | |
| | | | |
Total capital share transactions | | | (15,912,750 | ) | | | 8,446,484 | | | | (78,661,207 | ) | | | (18,717,897 | ) |
| | | | |
Net increase (decrease) in net assets | | | (22,849,855 | ) | | | 3,531,102 | | | | (105,074,550 | ) | | | (41,111,179 | ) |
Net assets: | | | | | | | | | | | | | | | | |
Beginning of year | | | 285,817,966 | | | | 282,286,864 | | | | 737,263,761 | | | | 778,374,940 | |
| | | | |
End of year | | $ | 262,968,111 | | | $ | 285,817,966 | | | $ | 632,189,211 | | | $ | 737,263,761 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | |
End of year | | $ | 456,670 | | | $ | 456,012 | | | $ | 1,242,896 | | | $ | 2,094,827 | |
| | | | |
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 149 |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| | | | | | | | | | | | | | | | |
| | Franklin Georgia Tax-Free Income Fund | | | Franklin Kentucky Tax-Free Income Fund | |
| | | | |
| | Year Ended February 28, | | | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | |
Net investment income | | $ | 17,356,690 | | | $ | 18,853,178 | | | $ | 5,770,618 | | | $ | 6,224,364 | |
Net realized gain (loss) | | | (12,804,183 | ) | | | (1,283,956 | ) | | | (2,905,578 | ) | | | (890,371 | ) |
Net change in unrealized appreciation (depreciation) | | | (2,113,811 | ) | | | (14,859,556 | ) | | | (772,667 | ) | | | (3,957,843 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | 2,438,696 | | | | 2,709,666 | | | | 2,092,373 | | | | 1,376,150 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | |
Net investment income: | | | | | | | | | | | | | | | | |
Class A | | | (13,339,164 | ) | | | (15,021,928 | ) | | | (5,478,565 | ) | | | (6,174,214 | ) |
Class C | | | (3,314,227 | ) | | | (3,677,162 | ) | | | — | | | | — | |
Class R6 | | | (98 | ) | | | — | | | | (25,079 | ) | | | — | |
Advisor Class | | | (1,084,844 | ) | | | (143,973 | ) | | | (255,715 | ) | | | (46,268 | ) |
| | | | |
Total distributions to shareholders | | | (17,738,333 | ) | | | (18,843,063 | ) | | | (5,759,359 | ) | | | (6,220,482 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | |
Class A | | | (53,885,991 | ) | | | 11,486,765 | | | | (11,971,412 | ) | | | (2,678,032 | ) |
Class C | | | (15,541,922 | ) | | | 6,084,625 | | | | — | | | | — | |
Class R6 | | | 5,000 | | | | — | | | | 2,120,659 | | | | — | |
Advisor Class | | | 14,929,163 | | | | 21,640,820 | | | | 713,633 | | | | 6,938,108 | |
| | | | |
Total capital share transactions | | | (54,493,750 | ) | | | 39,212,210 | | | | (9,137,120 | ) | | | 4,260,076 | |
| | | | |
Net increase (decrease) in net assets | | | (69,793,387 | ) | | | 23,078,813 | | | | (12,804,106 | ) | | | (584,256 | ) |
Net assets: | | | | | | | | | | | | | | | | |
Beginning of year | | | 578,298,951 | | | | 555,220,138 | | | | 172,508,317 | | | | 173,092,573 | |
| | | | |
End of year | | | $508,505,564 | | | | $578,298,951 | | | | $159,704,211 | | | | $172,508,317 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | |
End of year | | $ | 1,191,002 | | | $ | 899,849 | | | $ | 294,106 | | | $ | 212,762 | |
| | | | |
| | | | | | |
150 | | Annual Report | | | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Changes in Assets (continued)
| | | | | | | | | | | | | | | | |
| | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | |
| | | | |
| | Year Ended February 28, | | | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | |
| |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | |
Net investment income | | $ | 13,166,677 | | | $ | 14,218,515 | | | $ | 14,520,447 | | | $ | 17,472,751 | |
Net realized gain (loss) | | | (9,832,164 | ) | | | (98,877 | ) | | | (20,536,163 | ) | | | (3,895,421 | ) |
Net change in unrealized appreciation (depreciation) | | | 635,988 | | | | (13,238,468 | ) | | | 6,645,446 | | | | (7,793,798 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | 3,970,501 | | | | 881,170 | | | | 629,730 | | | | 5,783,532 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | |
Net investment income: | | | | | | | | | | | | | | | | |
Class A | | | (11,166,810 | ) | | | (12,455,420 | ) | | | (11,061,560 | ) | | | (13,160,922 | ) |
Class C | | | (1,757,396 | ) | | | (2,036,716 | ) | | | (2,727,699 | ) | | | (3,443,225 | ) |
Class R6 | | | (41,484 | ) | | | — | | | | (14,141 | ) | | | — | |
Advisor Class | | | (423,547 | ) | | | (61,309 | ) | | | (1,438,849 | ) | | | (1,148,417 | ) |
| | | | |
Total distributions to shareholders | | | (13,389,237 | ) | | | (14,553,445 | ) | | | (15,242,249 | ) | | | (17,752,564 | ) |
| | | | | | | | | | | | | | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | |
Class A | | | (13,302,982 | ) | | | 18,716,533 | | | | (22,507,986 | ) | | | (9,152,430 | ) |
Class C | | | (4,347,097 | ) | | | 1,005,431 | | | | (19,453,172 | ) | | | 469,298 | |
Class R6 | | | 3,745,109 | | | | — | | | | 1,398,517 | | | | — | |
Advisor Class | | | 4,121,585 | | | | 10,300,492 | | | | (812,561 | ) | | | 14,929,210 | |
| | | | |
Total capital share transactions | | | (9,783,385 | ) | | | 30,022,456 | | | | (41,375,202 | ) | | | 6,246,078 | |
| | | | |
Net increase (decrease) in net assets | | | (19,202,121 | ) | | | 16,350,181 | | | | (55,987,721 | ) | | | (5,722,954 | ) |
Net assets: | | | | | | | | | | | | | | | | |
Beginning of year | | | 420,454,633 | | | | 404,104,452 | | | | 509,568,869 | | | | 515,291,823 | |
| | | | |
End of year | | $ | 401,252,512 | | | $ | 420,454,633 | | | $ | 453,581,148 | | | $ | 509,568,869 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | |
End of year | | $ | 501,096 | | | $ | 507,657 | | | $ | 1,110,743 | | | $ | 1,276,578 | |
| | | | |
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 151 |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| | | | | | | | | | | | | | | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | |
| | | | |
| | Year Ended February 28, | | | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | |
| |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | |
Net investment income | | $ | 32,920,499 | | | $ | 38,946,568 | | | $ | 29,495,219 | | | $ | 36,415,792 | |
Net realized gain (loss) | | | (32,105,829 | ) | | | (1,793,749 | ) | | | (33,994,401 | ) | | | (2,045,242 | ) |
Net change in unrealized appreciation (depreciation) | | | (259,821 | ) | | | (28,340,864 | ) | | | (676,097 | ) | | | (23,220,087 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | 554,849 | | | | 8,811,955 | | | | (5,175,279 | ) | | | 11,150,463 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | |
Net investment income: | | | | | | | | | | | | | | | | |
Class A | | | (27,525,110 | ) | | | (31,687,565 | ) | | | (23,340,180 | ) | | | (27,459,393 | ) |
Class C | | | (4,322,246 | ) | | | (5,097,384 | ) | | | (4,668,358 | ) | | | (5,886,678 | ) |
Class R6 | | | (170,706 | ) | | | — | | | | (89,080 | ) | | | — | |
Advisor Class | | | (2,869,337 | ) | | | (2,318,580 | ) | | | (3,424,938 | ) | | | (3,520,905 | ) |
| | | | |
Total distributions to shareholders | | | (34,887,399 | ) | | | (39,103,529 | ) | | | (31,522,556 | ) | | | (36,866,976 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | |
Class A | | | (53,544,231 | ) | | | 16,116,234 | | | | (69,441,146 | ) | | | (20,117,683 | ) |
Class C | | | (15,546,130 | ) | | | 7,077,595 | | | | (31,767,148 | ) | | | (3,857,468 | ) |
Class R6 | | | 17,861,593 | | | | — | | | | 9,261,452 | | | | — | |
Advisor Class | | | (8,622,682 | ) | | | 39,625,635 | | | | (24,876,085 | ) | | | 22,794,376 | |
| | | | |
Total capital share transactions | | | (59,851,450 | ) | | | 62,819,464 | | | | (116,822,927 | ) | | | (1,180,775 | ) |
| | | | |
Net increase (decrease) in net assets | | | (94,184,000 | ) | | | 32,527,890 | | | | (153,520,762 | ) | | | (26,897,288 | ) |
Net assets: | | | | | | | | | | | | | | | | |
Beginning of year | | | 1,126,710,749 | | | | 1,094,182,859 | | | | 1,063,179,534 | | | | 1,090,076,822 | |
| | | | |
End of year | | $ | 1,032,526,749 | | | $ | 1,126,710,749 | | | $ | 909,658,772 | | | $ | 1,063,179,534 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | |
End of year | | $ | 1,623,790 | | | $ | 2,838,490 | | | $ | 1,899,969 | | | $ | 3,071,357 | |
| | | | |
| | | | | | |
152 | | Annual Report | | The accompanying notes are an integral part of these financial statements | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| | | | | | | | |
| | Franklin Virginia Tax-Free Income Fund | |
| | | | |
| | Year Ended February 28, | |
| | | | |
| | 2018 | | | 2017 | |
| |
Increase (decrease) in net assets: | | | | | | | | |
Operations: | | | | | | | | |
Net investment income | | $ | 21,024,923 | | | $ | 24,347,026 | |
Net realized gain (loss) | | | (20,798,156 | ) | | | (5,597,045 | ) |
Net change in unrealized appreciation (depreciation) | | | (2,459,040 | ) | | | (9,317,676 | ) |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | (2,232,273 | ) | | | 9,432,305 | |
| | | | |
Distributions to shareholders from: | | | | | | | | |
Net investment income: | | | | | | | | |
Class A | | | (15,951,000 | ) | | | (19,123,178 | ) |
Class C | | | (2,656,037 | ) | | | (3,241,949 | ) |
Class R6 | | | (53,853 | ) | | | — | |
Advisor Class | | | (3,042,828 | ) | | | (2,290,323 | ) |
| | | | |
Total distributions to shareholders | | | (21,703,718 | ) | | | (24,655,450 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | |
Class A | | | (37,540,988 | ) | | | (20,280,705 | ) |
Class C | | | (13,850,790 | ) | | | (580,901 | ) |
Class R6 | | | 5,128,887 | | | | — | |
Advisor Class | | | 1,143,037 | | | | 35,988,363 | |
| | | | |
Total capital share transactions | | | (45,119,854 | ) | | | 15,126,757 | |
| | | | |
Net increase (decrease) in net assets | | | (69,055,845 | ) | | | (96,388 | ) |
Net assets: | | | | | | | | |
Beginning of year | | | 704,465,131 | | | | 704,561,519 | |
| | | | |
End of year | | $ | 635,409,286 | | | $ | 704,465,131 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | |
End of year | | $ | 998,414 | | | $ | 1,128,883 | |
| | | | |
| | | | | | | | |
franklintempleton.com | | | | The accompanying notes are an integral part of these financial statements. | | | Annual Report | | 153 |
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Franklin Tax-Free Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of twenty-two separate funds, nine of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The classes of shares offered within each of the Funds are indicated below. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees. Effective August 1, 2017, the Funds began offering a new class of shares, Class R6.
Class A, Class R6 & Advisor Class
Franklin Kentucky Tax-Free Income Fund
Class A, Class C, Class R6 & Advisor Class
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
The following summarizes the Funds’ significant accounting policies.
a. Financial Instrument Valuation
The Funds’ 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 Funds calculate 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 Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds 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 over-the-counter market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, 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 Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC 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 VC 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 VC 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
Certain or all Funds purchase securities on a when-issued basis with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to
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154 | | Annual Report | | | | franklintempleton.com |
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.
c. Income Taxes
It is each Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each Fund intends to distribute to shareholders substantially all of its income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
Each Fund 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 February 28, 2018, each 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 in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
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. Dividends from net investment income are normally declared daily; these dividends may be reinvested or paid monthly to shareholders. Distributions from realized capital gains and other distributions, if any, are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and 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.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding 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 Trust are insured by either a new issue insurance policy or a secondary insurance policy. Some municipal securities in the Funds are secured by collateral guaranteed by an agency of the U.S. government. Depending on the type of coverage, premiums for insurance are either added to the cost basis of the security or paid by a third party.
Insurance companies typically insure municipal bonds that tend to be of very high quality, with the majority of underlying municipal bonds rated A or better. However, an event involving an insurer could have an adverse effect on the value of the securities insured by that insurance company. There 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 Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
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franklintempleton.com | | | | | | Annual Report | | 155 |
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest
At February 28, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
| | | | | | | | | | | | | | | | |
| | Franklin Alabama | | | Franklin Florida | |
| | Tax-Free Income Fund | | | Tax-Free Income Fund | |
| | | | |
| | Shares | | | Amount | | | Shares | | | Amount | |
| |
Class A Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 1,666,942 | | | $ | 18,487,615 | | | | 3,793,760 | | | $ | 40,704,065 | |
Shares issued in reinvestment of distributions | | | 565,698 | | | | 6,260,259 | | | | 1,685,243 | | | | 18,050,680 | |
Shares redeemed | | | (3,245,676 | ) | | | (35,948,865 | ) | | | (12,690,069 | ) | | | (135,652,434) | |
| | | | |
| | | | |
Net increase (decrease) | | | (1,013,036 | ) | | $ | (11,200,991 | ) | | | (7,211,066 | ) | | $ | (76,897,689) | |
| | | | |
| | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | |
Shares sold | | | 2,446,593 | | | $ | 27,871,411 | | | | 6,187,965 | | | $ | 68,663,404 | |
Shares issued in reinvestment of distributions | | | 598,547 | | | | 6,791,630 | | | | 1,854,320 | | | | 20,590,888 | |
Shares redeemed | | | (2,997,091 | ) | | | (33,955,068 | ) | | | (11,236,313 | ) | | | (123,768,660) | |
| | | | |
| | | | |
Net increase (decrease) | | | 48,049 | | | $ | 707,973 | | | | (3,194,028 | ) | | $ | (34,514,368) | |
| | | | |
| | | | |
Class C Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 290,913 | | | $ | 3,268,067 | | | | 771,415 | | | $ | 8,464,321 | |
Shares issued in reinvestment of distributions | | | 105,680 | | | | 1,184,857 | | | | 214,725 | | | | 2,348,038 | |
Shares redeemed | | | (1,196,247 | ) | | | (13,437,817 | ) | | | (2,310,372 | ) | | | (25,302,193) | |
| | | | |
| | | | |
Net increase (decrease) | | | (799,654 | ) | | $ | (8,984,893 | ) | | | (1,324,232 | ) | | $ | (14,489,834) | |
| | | | |
| | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | |
Shares sold | | | 740,961 | | | $ | 8,553,084 | | | | 1,623,384 | | | $ | 18,498,128 | |
Shares issued in reinvestment of distributions | | | 111,696 | | | | 1,282,723 | | | | 228,236 | | | | 2,584,071 | |
Shares redeemed | | | (640,808 | ) | | | (7,331,554 | ) | | | (1,453,072 | ) | | | (16,352,388) | |
| | | | |
| | | | |
Net increase (decrease) | | | 211,849 | | | $ | 2,504,253 | | | | 398,548 | | | $ | 4,729,811 | |
| | | | |
| | | | |
Class R6 Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018a | | | | | | | | | | | | | | | | |
Shares sold | | | 143,108 | | | $ | 1,584,679 | | | | 257,249 | | | $ | 2,738,701 | |
Shares issued in reinvestment of distributions | | | 1,380 | | | | 15,145 | | | | 2,715 | | | | 28,685 | |
Shares redeemed | | | (5,175 | ) | | | (57,169 | ) | | | (32,433 | ) | | | (343,640) | |
| | | | |
Net increase (decrease) | | | 139,313 | | | $ | 1,542,655 | | | | 227,531 | | | $ | 2,423,746 | |
| | | | |
| | | | |
Advisor Class Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 445,766 | | | $ | 4,952,463 | | | | 1,642,469 | | | $ | 17,714,453 | |
Shares issued in reinvestment of distributions | | | 18,951 | | | | 209,662 | | | | 46,448 | | | | 497,715 | |
Shares redeemed | | | (219,339 | ) | | | (2,431,646 | ) | | | (739,329 | ) | | | (7,909,598) | |
| | | | |
| | | | |
Net increase (decrease) | | | 245,378 | | | $ | 2,730,479 | | | | 949,588 | | | $ | 10,302,570 | |
| | | | |
| | | | |
Year ended February 28, 2017b | | | | | | | | | | | | | | | | |
Shares sold | | | 632,015 | | | $ | 7,168,791 | | | | 1,170,976 | | | $ | 12,903,467 | |
Shares issued in reinvestment of distributions | | | 4,106 | | | | 45,876 | | | | 9,521 | | | | 103,548 | |
Shares redeemed | | | (174,787 | ) | | | (1,980,409 | ) | | | (178,544 | ) | | | (1,940,355) | |
| | | | |
| | | | |
Net increase (decrease) | | | 461,334 | | | $ | 5,234,258 | | | | 1,001,953 | | | $ | 11,066,660 | |
| | | | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bFor the period September 15, 2016 (effective date) to February 28, 2017.
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| | Franklin Georgia | | | | | | Franklin Kentucky | |
| | Tax-Free Income Fund | | | | | | Tax-Free Income Fund | |
| | | | |
| | Shares | | | Amount | | | | | | Shares | | | Amount | |
| |
Class A Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 3,331,945 | | | $ | 39,629,549 | | | | | | | | 1,262,786 | | | $ | 13,825,223 | |
Shares issued in reinvestment of distributions | | | 975,434 | | | | 11,582,996 | | | | | | | | 472,387 | | | | 5,166,120 | |
Shares redeemed | | | (8,844,321 | ) | | | (105,098,536 | ) | | | | | | | (2,827,606 | ) | | | (30,962,755) | |
| | | | |
| | | | | |
Net increase (decrease) | | | (4,536,942 | ) | | $ | (53,885,991 | ) | | | | | | | (1,092,433 | ) | | $ | (11,971,412) | |
| | | | |
| | | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 6,293,438 | | | $ | 77,097,373 | | | | | | | | 1,953,240 | | | $ | 22,019,413 | |
Shares issued in reinvestment of distributions | | | 1,054,658 | | | | 12,927,795 | | | | | | | | 509,425 | | | | 5,724,359 | |
Shares redeemed | | | (6,451,814 | ) | | | (78,538,403 | ) | | | | | | | (2,723,173 | ) | | | (30,421,804) | |
| | | | |
| | | | | |
Net increase (decrease) | | | 896,282 | | | $ | 11,486,765 | | | | | | | | (260,508 | ) | | $ | (2,678,032) | |
| | | | |
| | | | | |
Class C Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 772,220 | | | $ | 9,333,080 | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 237,902 | | | | 2,866,306 | | | | | | | | | | | | | |
Shares redeemed | | | (2,301,939 | ) | | | (27,741,308 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | |
Net increase (decrease) | | | (1,291,817 | ) | | $ | (15,541,922 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,754,629 | | | $ | 21,935,823 | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 250,824 | | | | 3,117,343 | | | | | | | | | | | | | |
Shares redeemed | | | (1,532,790 | ) | | | (18,968,541 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | |
Net increase (decrease) | | | 472,663 | | | $ | 6,084,625 | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | |
Class R6 Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended February 28, 2018a | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 419 | | | $ | 5,000 | | | | | | | | 216,520 | | | $ | 2,372,205 | |
Shares issued in reinvestment of distributions | | | — | | | | — | | | | | | | | 2,302 | | | | 25,008 | |
Shares redeemed | | | — | | | | — | | | | | | | | (25,247 | ) | | | (276,554) | |
| | | | |
Net increase (decrease) | | | 419 | | | $ | 5,000 | | | | | | | | 193,575 | | | $ | 2,120,659 | |
| | | | |
| | | | | |
Advisor Class Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 2,575,769 | | | $ | 30,699,742 | | | | | | | | 501,371 | | | $ | 5,497,353 | |
Shares issued in reinvestment of distributions | | | 76,078 | | | | 902,785 | | | | | | | | 22,477 | | | | 245,939 | |
Shares redeemed | | | (1,404,971 | ) | | | (16,673,364 | ) | | | | | | | (459,442 | ) | | | (5,029,659) | |
| | | | |
| | | | | |
Net increase (decrease) | | | 1,246,876 | | | $ | 14,929,163 | | | | | | | | 64,406 | | | $ | 713,633 | |
| | | | |
| | | | | |
Year ended February 28, 2017b | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,913,903 | | | $ | 23,135,011 | | | | | | | | 737,098 | | | $ | 8,159,017 | |
Shares issued in reinvestment of distributions | | | 10,875 | | | | 130,348 | | | | | | | | 4,167 | | | | 45,877 | |
Shares redeemed | | | (135,651 | ) | | | (1,624,539 | ) | | | | | | | (115,229 | ) | | | (1,266,786) | |
| | | | |
| | | | | |
Net increase (decrease) | | | 1,789,127 | | | $ | 21,640,820 | | | | | | | | 626,036 | | | $ | 6,938,108 | |
| | | | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bFor the period September 15, 2016 (effective date) to February 28, 2017.
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| | | | | | | | | | | | | | | | |
| | Franklin Louisiana | | | Franklin Maryland | |
| | Tax-Free Income Fund | | | Tax-Free Income Fund | |
| | | | |
| | Shares | | | Amount | | | Shares | | | Amount | |
| |
Class A Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 3,904,387 | | | $ | 43,422,516 | | | | 3,102,350 | | | $ | 34,111,775 | |
Shares issued in reinvestment of distributions | | | 964,230 | | | | 10,703,033 | | | | 881,348 | | | | 9,669,457 | |
Shares redeemed | | | (6,076,250 | ) | | | (67,428,531 | ) | | | (6,041,395 | ) | | | (66,289,218) | |
| | | | |
| | | | |
Net increase (decrease) | | | (1,207,633 | ) | | $ | (13,302,982 | ) | | | (2,057,697 | ) | | $ | (22,507,986) | |
| | | | |
| | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | |
Shares sold | | | 6,268,617 | | | $ | 71,854,375 | | | | 4,650,212 | | | $ | 52,870,394 | |
Shares issued in reinvestment of distributions | | | 1,048,054 | | | | 11,945,951 | | | | 1,013,285 | | | | 11,469,209 | |
Shares redeemed | | | (5,750,535 | ) | | | (65,083,793 | ) | | | (6,536,525 | ) | | | (73,492,033) | |
| | | | |
| | | | |
Net increase (decrease) | | | 1,566,136 | | | $ | 18,716,533 | | | | (873,028 | ) | | $ | (9,152,430) | |
| | | | |
| | | | |
Class C Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 381,901 | | | $ | 4,308,602 | | | | 582,215 | | | $ | 6,527,038 | |
Shares issued in reinvestment of distributions | | | 149,173 | | | | 1,682,064 | | | | 222,312 | | | | 2,487,583 | |
Shares redeemed | | | (916,112 | ) | | | (10,337,763 | ) | | | (2,539,707 | ) | | | (28,467,793) | |
| | | | |
| | | | |
Net increase (decrease) | | | (385,038 | ) | | $ | (4,347,097 | ) | | | (1,735,180 | ) | | $ | (19,453,172) | |
| | | | |
| | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | |
Shares sold | | | 788,658 | | | $ | 9,177,668 | | | | 1,326,095 | | | $ | 15,349,359 | |
Shares issued in reinvestment of distributions | | | 165,634 | | | | 1,916,824 | | | | 261,330 | | | | 3,013,333 | |
Shares redeemed | | | (877,536 | ) | | | (10,089,061 | ) | | | (1,560,716 | ) | | | (17,893,394) | |
| | | | |
| | | | |
Net increase (decrease) | | | 76,756 | | | $ | 1,005,431 | | | | 26,709 | | | $ | 469,298 | |
| | | | |
| | | | |
Class R6 Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018a | | | | | | | | | | | | | | | | |
Shares sold | | | 369,029 | | | $ | 4,089,070 | | | | 133,080 | | | $ | 1,457,209 | |
Shares issued in reinvestment of distributions | | | 3,766 | | | | 41,415 | | | | 1,294 | | | | 14,074 | |
Shares redeemed | | | (34,871 | ) | | | (385,376 | ) | | | (6,653 | ) | | | (72,766) | |
| | | | |
Net increase (decrease) | | | 337,924 | | | $ | 3,745,109 | | | | 127,721 | | | $ | 1,398,517 | |
| | | | |
| | | | |
Advisor Class Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 1,110,849 | | | $ | 12,291,234 | | | | 1,535,085 | | | $ | 16,870,246 | |
Shares issued in reinvestment of distributions | | | 35,937 | | | | 399,186 | | | | 99,887 | | | | 1,097,058 | |
Shares redeemed | | | (773,996 | ) | | | (8,568,835 | ) | | | (1,709,539 | ) | | | (18,779,865) | |
| | | | |
| | | | |
Net increase (decrease) | | | 372,790 | | | $ | 4,121,585 | | | | (74,567 | ) | | $ | (812,561) | |
| | | | |
| | | | |
Year ended February 28, 2017b | | | | | | | | | | | | | | | | |
Shares sold | | | 978,976 | | | $ | 10,963,838 | | | | 2,438,890 | | | $ | 27,432,439 | |
Shares issued in reinvestment of distributions | | | 5,498 | | | | 61,244 | | | | 68,080 | | | | 770,230 | |
Shares redeemed | | | (64,738 | ) | | | (724,590 | ) | | | (1,177,481 | ) | | | (13,273,459) | |
| | | | |
| | | | |
Net increase (decrease) | | | 919,736 | | | $ | 10,300,492 | | | | 1,329,489 | | | $ | 14,929,210 | |
| | | | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
bFor the period September 15, 2016 (effective date) to February 28, 2017, for Franklin Louisiana Tax-Free Income Fund.
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | |
| | Franklin Missouri | | | Franklin North Carolina | |
| | Tax-Free Income Fund | | | Tax-Free Income Fund | |
| | | | |
| | Shares | | | Amount | | | Shares | | | Amount | |
| |
Class A Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 8,155,878 | | | $ | 94,873,756 | | | | 7,059,552 | | | $ | 81,347,688 | |
Shares issued in reinvestment of distributions | | | 2,184,153 | | | | 25,388,332 | | | | 1,784,760 | | | | 20,559,119 | |
Shares redeemed | | | (14,971,529 | ) | | | (173,806,319 | ) | | | (14,909,834 | ) | | | (171,347,953) | |
| | | | |
| | | | |
Net increase (decrease) | | | (4,631,498 | ) | | $ | (53,544,231 | ) | | | (6,065,522 | ) | | $ | (69,441,146) | |
| | | | |
| | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | |
Shares sold | | | 11,020,154 | | | $ | 132,145,785 | | | | 9,277,055 | | | $ | 110,437,750 | |
Shares issued in reinvestment of distributions | | | 2,423,027 | | | | 29,008,023 | | | | 2,028,830 | | | | 24,164,126 | |
Shares redeemed | | | (12,163,224 | ) | | | (145,037,574 | ) | | | (13,063,763 | ) | | | (154,719,559) | |
| | | | |
| | | | |
Net increase (decrease) | | | 1,279,957 | | | $ | 16,116,234 | | | | (1,757,878 | ) | | $ | (20,117,683) | |
| | | | |
| | | | |
Class C Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 1,385,917 | | | $ | 16,314,800 | | | | 1,187,754 | | | $ | 13,905,039 | |
Shares issued in reinvestment of distributions | | | 343,043 | | | | 4,027,883 | | | | 346,677 | | | | 4,057,512 | |
Shares redeemed | | | (3,057,910 | ) | | | (35,888,813 | ) | | | (4,244,905 | ) | | | (49,729,699) | |
| | | | |
| | | | |
Net increase (decrease) | | | (1,328,950 | ) | | $ | (15,546,130 | ) | | | (2,710,474 | ) | | $ | (31,767,148) | |
| | | | |
| | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | |
Shares sold | | | 2,440,827 | | | $ | 29,605,080 | | | | 2,187,975 | | | $ | 26,564,558 | |
Shares issued in reinvestment of distributions | | | 386,290 | | | | 4,668,304 | | | | 414,771 | | | | 5,015,672 | |
Shares redeemed | | | (2,255,933 | ) | | | (27,195,789 | ) | | | (2,941,707 | ) | | | (35,437,698) | |
| | | | |
| | | | |
Net increase (decrease) | | | 571,184 | | | $ | 7,077,595 | | | | (338,961 | ) | | $ | (3,857,468) | |
| | | | |
| | | | |
Class R6 Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018a | | | | | | | | | | | | | | | | |
Shares sold | | | 1,822,274 | | | $ | 21,117,056 | | | | 927,116 | | | $ | 10,609,504 | |
Shares issued in reinvestment of distributions | | | 14,849 | | | | 170,414 | | | | 7,833 | | | | 88,985 | |
Shares redeemed | | | (296,965 | ) | | | (3,425,877 | ) | | | (125,955 | ) | | | (1,437,037) | |
| | | | |
Net increase (decrease) | | | 1,540,158 | | | $ | 17,861,593 | | | | 808,994 | | | $ | 9,261,452 | |
| | | | |
| | | | |
Advisor Class Shares: | | | | | | | | | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | | | | | | | | | |
Shares sold | | | 2,774,764 | | | $ | 32,380,256 | | | | 2,610,981 | | | $ | 30,179,959 | |
Shares issued in reinvestment of distributions | | | 196,429 | | | | 2,285,770 | | | | 271,648 | | | | 3,131,310 | |
Shares redeemed | | | (3,728,313 | ) | | | (43,288,708 | ) | | | (5,060,990 | ) | | | (58,187,354) | |
| | | | |
| | | | |
Net increase (decrease) | | | (757,120 | ) | | $ | (8,622,682 | ) | | | (2,178,361 | ) | | $ | (24,876,085) | |
| | | | |
| | | | |
Year ended February 28, 2017 | | | | | | | | | | | | | | | | |
Shares sold | | | 5,264,035 | | | $ | 62,860,659 | | | | 4,081,494 | | | $ | 48,507,973 | |
Shares issued in reinvestment of distributions | | | 136,445 | | | | 1,630,805 | | | | 267,940 | | | | 3,188,806 | |
Shares redeemed | | | (2,096,969 | ) | | | (24,865,829 | ) | | | (2,447,224 | ) | | | (28,902,403) | |
| | | | |
| | | | |
Net increase (decrease) | | | 3,303,511 | | | $ | 39,625,635 | | | | 1,902,210 | | | $ | 22,794,376 | |
| | | | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
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franklintempleton.com | | | | | | Annual Report | | 159 |
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| | | | | | | | |
| | Franklin Virginia Tax-Free Income Fund | |
| | Shares | | | Amount | |
Class A Shares: | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | |
Shares sold | | | 3,915,954 | | | $ | 43,657,746 | |
Shares issued in reinvestment of distributions | | | 1,274,870 | | | | 14,217,434 | |
Shares redeemed | | | (8,566,461 | ) | | | (95,416,168 | ) |
Net increase (decrease) | | | (3,375,637 | ) | | $ | (37,540,988 | ) |
Year ended February 28, 2017 | | | | | | | | |
Shares sold | | | 5,755,146 | | | $ | 66,477,301 | |
Shares issued in reinvestment of distributions | | | 1,483,556 | | | | 17,087,346 | |
Shares redeemed | | | (9,077,851 | ) | | | (103,845,352 | ) |
Net increase (decrease) | | | (1,839,149 | ) | | $ | (20,280,705 | ) |
| | |
Class C Shares: | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | |
Shares sold | | | 524,425 | | | $ | 5,946,438 | |
Shares issued in reinvestment of distributions | | | 214,165 | | | | 2,428,090 | |
Shares redeemed | | | (1,959,030 | ) | | | (22,225,318 | ) |
Net increase (decrease) | | | (1,220,440 | ) | | $ | (13,850,790 | ) |
Year ended February 28, 2017 | | | | | | | | |
Shares sold | | | 1,185,548 | | | $ | 13,896,010 | |
Shares issued in reinvestment of distributions | | | 248,906 | | | | 2,911,502 | |
Shares redeemed | | | (1,491,408 | ) | | | (17,388,413 | ) |
Net increase (decrease) | | | (56,954 | ) | | $ | (580,901 | ) |
| | |
Class R6 Shares: | | | | | | | | |
Year ended February 28, 2018a | | | | | | | | |
Shares sold | | | 550,417 | | | $ | 6,120,617 | |
Shares issued in reinvestment of distributions | | | 4,889 | | | | 53,758 | |
Shares redeemed | | | (94,542 | ) | | | (1,045,488 | ) |
Net increase (decrease) | | | 460,764 | | | $ | 5,128,887 | |
| | |
Advisor Class Shares: | | | | | | | | |
Year ended February 28, 2018 | | | | | | | | |
Shares sold | | | 2,656,299 | | | $ | 29,728,563 | |
Shares issued in reinvestment of distributions | | | 254,655 | | | | 2,841,254 | |
Shares redeemed | | | (2,819,393 | ) | | | (31,426,780 | ) |
Net increase (decrease) | | | 91,561 | | | $ | 1,143,037 | |
Year ended February 28, 2017 | | | | | | | | |
Shares sold | | | 4,153,058 | | | $ | 47,624,408 | |
Shares issued in reinvestment of distributions | | | 177,171 | | | | 2,037,906 | |
Shares redeemed | | | (1,195,895 | ) | | | (13,673,951 | ) |
Net increase (decrease) | | | 3,134,334 | | | $ | 35,988,363 | |
aFor the period August 1, 2017 (effective date) to February 28, 2018.
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
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 Trust 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 |
a. Management Fees
The Funds pay an investment management fee to Advisers based on the month-end net assets of each of the Funds 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 February 28, 2018, each Fund’s gross effective investment management fee rate based on average daily net assets was as follows:
| | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | Franklin Florida Tax-Free Income Fund | | Franklin Georgia Tax-Free Income Fund | | Franklin Kentucky Tax-Free Income Fund | | Franklin Louisiana Tax-Free Income Fund | | |
| | | | | | |
| | 0.537% | | 0.482% | | 0.492% | | 0.571% | | 0.508% | | |
| | | | | | | | | | | | | | | | | | | | |
| | Franklin Maryland Tax-Free Income Fund | | | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | | | | |
| | | | | | | | |
| | | | | |
| | | 0.498% | | | | 0.470% | | | | 0.470% | | | | 0.484% | | | | | |
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on each of the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 161 |
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
c. Distribution Fees (continued)
Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund |
| | | |
Reimbursement Plans: | | | | | | | | | | |
Class A | | | 0.10% | | | | 0.10% | | | 0.10% |
Compensation Plans: | | | | | | | | | | |
Class C | | | 0.65% | | | | 0.65% | | | 0.65% |
| | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund |
| | | |
Reimbursement Plans: | | | | | | | | | | |
Class A | | | 0.10% | | | | 0.10% | | | 0.10% |
Compensation Plans: | | | | | | | | | | |
Class C | | | — | | | | 0.65% | | | 0.65% |
| | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund |
| | | |
Reimbursement Plans: | | | | | | | | | | |
Class A | | | 0.10% | | | | 0.10% | | | 0.10% |
Compensation Plans: | | | | | | | | | | |
Class C | | | 0.65% | | | | 0.65% | | | 0.65% |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
| | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund |
| | | |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $36,463 | | | | $64,180 | | | $61,194 |
CDSC retained | | | $ 5,609 | | | | $13,340 | | | $ 7,204 |
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund |
| | | |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $38,422 | | | | $95,106 | | | $53,489 |
CDSC retained | | | $ 4,359 | | | | $37,269 | | | $ 5,460 |
| | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund |
| | | |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $217,596 | | | | $144,508 | | | $92,970 |
CDSC retained | | | $ 15,916 | | | | $ 17,102 | | | $ 7,853 |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the year ended February 28, 2018, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
| | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund |
| | | |
Transfer agent fees | | | $41,725 | | | | $112,937 | | | $89,171 |
| | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund |
| | | |
Transfer agent fees | | | $26,524 | | | | $61,487 | | | $83,766 |
| | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund |
| | | |
Transfer agent fees | | | $180,353 | | | | $153,154 | | | $114,220 |
f. Waiver and Expense Reimbursements
For Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund and Franklin Virginia Tax-Free Income Fund, Investor Services has voluntarily agreed in advance to waive or limit its fees so that the new transfer agent fee arrangement effective November 1, 2017 will not increase the fees retained by more than 0.02% based on the average net assets of each class. Investor Services may discontinue this waiver in the future.
Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03%. Investor Services may discontinue this waiver in the future.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 163 |
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
g. Interfund Transactions
Certain or all Funds engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. These purchases and sales for the year ended February 28, 2018, were as follows:
| | | | | | | | | | | | | | | | |
| | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund | | | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | |
Purchases | | | $43,800,000 | | | | $5,800,000 | | | | $ 6,915,000 | | | | $8,900,000 | |
Sales | | | $37,700,000 | | | | $7,100,000 | | | | $14,300,000 | | | | $9,300,000 | |
| | | | |
| | Franklin Maryland Tax-Free Income Fund | | | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
Purchases | | | $9,500,000 | | | | $70,317,500 | | | | $8,400,000 | | | | $9,600,000 | |
Sales | | | $8,200,000 | | | | $61,650,000 | | | | $6,050,000 | | | | $6,300,000 | |
4. Expense Offset Arrangement
Effective December 1, 2017, the Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended February 28, 2018, there were no credits earned.
5. 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 February 28, 2018, the capital loss carryforwards were as follows:
| | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund | |
| | | |
Capital loss carryforwards not subject to expiration: | | | | | | | | | | | | |
Short term | | | $ 2,541,375 | | | | $10,670,068 | | | | $ 3,276,905 | |
Long term | | | 14,849,721 | | | | 50,274,426 | | | | 19,439,397 | |
| | | | |
Total capital loss carryforwards | | | $17,391,096 | | | | $60,944,494 | | | | $22,716,302 | |
| | | | |
| | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | |
| | | |
Capital loss carryforwards not subject to expiration: | | | | | | | | | | | | |
Short term | | | $ 2,281,513 | | | | $10,620,771 | | | | $11,476,244 | |
Long term | | | 7,971,719 | | | | 17,262,866 | | | | 30,669,235 | |
| | | | |
Total capital loss carryforwards | | | $10,253,232 | | | | $27,883,637 | | | | $42,145,479 | |
| | | | |
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
| | | |
Capital loss carryforwards subject to expiration: | | | | | | | | | | | | |
2019 | | | $ 835 | | | | $ — | | | | $ — | |
Capital loss carryforwards not subject to expiration: | | | | | | | | | | | | |
Short term | | | 8,969,524 | | | | 23,574,394 | | | | 16,243,110 | |
Long term | | | 61,274,165 | | | | 62,351,920 | | | | 38,336,098 | |
| | | | |
Total capital loss carryforwards | | | $70,244,524 | | | | $85,926,314 | | | | $54,579,208 | |
| | | | |
On February 28, 2018, the following Funds had expired capital loss carryforwards, which were reclassified to paid-in capital.
| | | | | | | | | | | | | | | | | | | | |
| | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | | | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
| | | | |
| | | $782,096 | | | | $205,851 | | | | $760,453 | | | | $16,085 | | | | $1,530,757 | |
The tax character of distributions paid during the years ended February 28, 2018 and 2017, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Distributions paid from tax exempt income | | | $ 8,800,650 | | | | $ 9,472,422 | | | | $26,274,354 | | | | $29,344,981 | | | | $17,738,333 | | | | $18,843,063 | |
| | | | |
| | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Distributions paid from tax exempt income | | | $ 5,759,359 | | | | $ 6,220,482 | | | | $13,389,237 | | | | $14,553,445 | | | | $15,242,249 | | | | $17,752,564 | |
| | | | |
| | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Distributions paid from tax exempt income | | | $34,887,399 | | | | $39,103,529 | | | | $31,522,556 | | | | $36,866,976 | | | | $21,703,718 | | | | $24,655,450 | |
| | | | |
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 165 |
FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes (continued)
At February 28, 2018, the cost of investments, net unrealized appreciation (depreciation) and undistributed tax exempt income for income tax purposes were as follows:
| | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund | |
Cost of investments | | $ | 250,644,053 | | | $ | 607,641,066 | | | $ | 492,557,154 | |
| | | | |
| | | |
Unrealized appreciation | | $ | 9,593,196 | | | $ | 34,724,411 | | | $ | 21,079,815 | |
Unrealized depreciation | | | (780,497 | ) | | | (16,784,103 | ) | | | (10,314,687 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 8,812,699 | | | $ | 17,940,308 | | | $ | 10,765,128 | |
| | | | |
| | | |
Distributable earnings - undistributed tax exempt income | | $ | 538,504 | | | $ | 2,115,986 | | | $ | 1,428,379 | |
| | | | |
| | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | |
Cost of investments | | $ | 153,988,443 | | | $ | 391,360,550 | | | $ | 441,458,412 | |
| | | | |
| | | |
Unrealized appreciation | | $ | 5,232,747 | | | $ | 15,432,250 | | | $ | 16,399,221 | |
Unrealized depreciation | | | (749,765 | ) | | | (5,966,402 | ) | | | (7,697,054 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 4,482,982 | | | $ | 9,465,848 | | | $ | 8,702,167 | |
| | | | |
| | | |
Distributable earnings - undistributed tax exempt income | | $ | 305,581 | | | $ | 739,349 | | | $ | 1,514,006 | |
| | | | |
| | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
Cost of investments | | $ | 1,020,207,442 | | | $ | 897,099,013 | | | $ | 615,565,316 | |
| | | | |
| | | |
Unrealized appreciation | | $ | 33,046,371 | | | $ | 29,981,999 | | | $ | 23,350,519 | |
Unrealized depreciation | | | (27,213,032 | ) | | | (24,703,539 | ) | | | (9,740,879 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 5,833,339 | | | $ | 5,278,460 | | | $ | 13,609,640 | |
| | | | |
| | | |
Distributable earnings - undistributed tax exempt income | | $ | 2,824,324 | | | $ | 2,920,163 | | | $ | 1,497,955 | |
| | | | |
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, wash sales and bond workout expenditures.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Management has reviewed the requirements and believes the adoption of these provisions of the Act will not have a material impact on the financial statements.
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended February 28, 2018, were as follows:
| | | | | | | | | | | | |
| | Franklin Alabama Tax-Free Income Fund | | | Franklin Florida Tax-Free Income Fund | | | Franklin Georgia Tax-Free Income Fund | |
| |
Purchases | | | $40,137,434 | | | | $ 69,640,432 | | | | $ 51,026,659 | |
Sales | | | $50,616,578 | | | | $147,845,822 | | | | $101,372,811 | |
| | | |
| | Franklin Kentucky Tax-Free Income Fund | | | Franklin Louisiana Tax-Free Income Fund | | | Franklin Maryland Tax-Free Income Fund | |
| |
Purchases | | | $22,904,070 | | | | $89,374,716 | | | | $54,268,203 | |
Sales | | | $32,689,070 | | | | $89,429,678 | | | | $84,027,257 | |
| | | |
| | Franklin Missouri Tax-Free Income Fund | | | Franklin North Carolina Tax-Free Income Fund | | | Franklin Virginia Tax-Free Income Fund | |
| |
Purchases | | | $215,499,049 | | | | $100,057,567 | | | | $ 66,313,549 | |
Sales | | | $236,574,205 | | | | $188,712,285 | | | | $108,673,658 | |
7. Defaulted Securities
Certain or all Funds held defaulted securities and/or other securities for which the income has been deemed uncollectible. The Funds discontinue accruing income on securities for which income has been deemed uncollectible and provide an estimate for losses on interest receivable. The securities have been identified in the accompanying Statements of Investments. At February 28, 2018, the aggregate value of these securities was as follows:
| | | | | | | | |
| | Value | | | Percentage of Net Assets | |
| |
Franklin Florida Tax-Free Income Fund | | $ | 7,525,000 | | | | 1.2% | |
Franklin Georgia Tax-Free Income Fund | | | 1,881,295 | | | | 0.4% | |
Franklin Louisiana Tax-Free Income Fund | | | 2,426,812 | | | | 0.6% | |
Franklin Maryland Tax-Free Income Fund | | | 3,762,500 | | | | 0.8% | |
Franklin Missouri Tax-Free Income Fund | | | 13,289,150 | | | | 1.3% | |
Franklin North Carolina Tax-Free Income Fund | | | 11,601,669 | | | | 1.3% | |
Franklin Virginia Tax-Free Income Fund | | | 5,117,000 | | | | 0.8% | |
8. Concentration of Risk
Certain or all Funds invest a large percentage of their total assets in obligations of issuers within their respective state, U.S. territories, and the District of Columbia. Such concentration may subject the Funds to risks associated with industrial or regional matters, and economic, political or legal developments occurring within those states, U.S. territories, and the District of Columbia. Investing in Puerto Rico securities may expose the Funds to heightened risks due to recent adverse economic and market changes, credit downgrades and ongoing restructuring discussions. In addition, investments in these securities are sensitive to interest rate changes and credit risk of the issuer and may subject the Funds to increased market volatility. The market for these investments may be limited, which may make them difficult to buy or sell.
| | | | | | | | |
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
9. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended February 28, 2018, the Funds did not use the Global Credit Facility.
10. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ 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 Funds’ 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 Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of February 28, 2018, in valuing the Funds’ assets carried at fair value, is as follows:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Franklin Alabama Tax-Free Income Fund | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 259,456,752 | | | $ | — | | | $ | 259,456,752 | |
| | | |
Franklin Florida Tax-Free Income Fund | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 623,181,374 | | | $ | — | | | $ | 623,181,374 | |
Short Term Investments | | | — | | | | 2,400,000 | | | | — | | | | 2,400,000 | |
Total Investments in Securities | | $ | — | | | $ | 625,581,374 | | | $ | — | | | $ | 625,581,374 | |
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | | | |
Franklin Georgia Tax-Free Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 503,222,237 | | | $ | 45 | | | $ | 503,222,282 | |
Short Term Investments | | | — | | | | 100,000 | | | | — | | | | 100,000 | |
Total Investments in Securities | | $ | — | | | $ | 503,322,237 | | | $ | 45 | | | $ | 503,322,282 | |
| | | | |
Franklin Kentucky Tax-Free Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 155,371,425 | | | $ | — | | | $ | 155,371,425 | |
Short Term Investments | | | — | | | | 3,100,000 | | | | — | | | | 3,100,000 | |
Total Investments in Securities | | $ | — | | | $ | 158,471,425 | | | $ | — | | | $ | 158,471,425 | |
| | | | |
Franklin Louisiana Tax-Free Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 398,826,398 | | | $ | — | | | $ | 398,826,398 | |
Short Term Investments | | | — | | | | 2,000,000 | | | | — | | | | 2,000,000 | |
Total Investments in Securities | | $ | — | | | $ | 400,826,398 | | | $ | — | | | $ | 400,826,398 | |
| | | | |
Franklin Maryland Tax-Free Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 445,960,579 | | | $ | — | | | $ | 445,960,579 | |
Short Term Investments | | | — | | | | 4,200,000 | | | | — | | | | 4,200,000 | |
Total Investments in Securities | | $ | — | | | $ | 450,160,579 | | | $ | — | | | $ | 450,160,579 | |
| | | | |
Franklin Missouri Tax-Free Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 1,025,540,781 | | | $ | — | | | $ | 1,025,540,781 | |
Short Term Investments | | | — | | | | 500,000 | | | | — | | | | 500,000 | |
Total Investments in Securities | | $ | — | | | $ | 1,026,040,781 | | | $ | — | | | $ | 1,026,040,781 | |
| | | | |
Franklin North Carolina Tax-Free Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 900,477,473 | | | $ | — | | | $ | 900,477,473 | |
Short Term Investments | | | — | | | | 1,900,000 | | | | — | | | | 1,900,000 | |
Total Investments in Securities | | $ | — | | | $ | 902,377,473 | | | $ | — | | | $ | 902,377,473 | |
| | | | |
Franklin Virginia Tax-Free Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Municipal Bonds | | $ | — | | | $ | 628,374,956 | | | $ | — | | | $ | 628,374,956 | |
Short Term Investments | | | — | | | | 800,000 | | | | — | | | | 800,000 | |
Total Investments in Securities | | $ | — | | | $ | 629,174,956 | | | $ | — | | | $ | 629,174,956 | |
aFor detailed categories, see the accompanying Statement of Investments.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the year.
| | | | | | | | |
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FRANKLIN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
11. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
Abbreviations
Selected Portfolio
| | | | | | |
| | | |
AGMC | | Assured Guaranty Municipal Corp. | | IDAR | | Industrial Development Authority Revenue |
AMBAC | | American Municipal Bond Assurance Corp. | | IDB | | Industrial Development Bond/Board |
BAM | | Build America Mutual Assurance Co. | | IDBR | | Industrial Development Board Revenue |
BHAC | | Berkshire Hathaway Assurance Corp. | | LOC | | Letter of Credit |
CDA | | Community Development Authority/Agency | | MBS | | Mortgage-Backed Security |
CDR | | Community Development Revenue | | MFHR | | Multi-Family Housing Revenue |
COP | | Certificate of Participation | | MFR | | Multi-Family Revenue |
EDA | | Economic Development Authority | | NATL | | National Public Financial Guarantee Corp. |
EDC | | Economic Development Corp. | | PBA | | Public Building Authority |
ETM | | Escrow to Maturity | | PCFA | | Pollution Control Financing Authority |
FGIC | | Financial Guaranty Insurance Co. | | PCR | | Pollution Control Revenue |
FICO | | Financing Corp. | | PFAR | | Public Financing Authority Revenue |
GARB | | General Airport Revenue Bonds | | RDA | | Redevelopment Agency/Authority |
GNMA | | Government National Mortgage Association | | RDAR | | Redevelopment Agency Revenue |
GO | | General Obligation | | SFM | | Single Family Mortgage |
HDA | | Housing Development Authority/Agency | | SFMR | | Single Family Mortgage Revenue |
HFA | | Housing Finance Authority/Agency | | SPA | | Standby Purchase Agreement |
HFAR | | Housing Finance Authority Revenue | | SRF | | State Revolving Fund |
IDA | | Industrial Development Authority/Agency | | XLCA | | XL Capital Assurance |
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FRANKLIN TAX-FREE TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Tax-Free Trust and Shareholders of Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, and Franklin Virginia Tax-Free Income Fund
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, and Franklin Virginia Tax-Free Income Fund (the “Funds”) as of February 28, 2018, the related statements of operations for the year ended February 28, 2018, the statements of changes in net assets for each of the two years in the period ended February 28, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of February 28, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended February 28, 2018, and each of the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of February 28, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
PricewaterhouseCoopers LLP
San Francisco, California
April 17, 2018
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 171 |
FRANKLIN TAX-FREE TRUST
Tax Information (unaudited)
Under Section 852(b)(5)(A) of the Internal Revenue Code, the Funds hereby report 100% of the distributions paid from net investment income as exempt-interest dividends for the fiscal year ended February 28, 2018. A portion of the Funds’ exempt-interest dividends may be subject to the federal alternative minimum tax. By mid-February 2019, shareholders will be notified of amounts for use in preparing their 2018 income tax returns.
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FRANKLIN TAX-FREE TRUST
Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017 AND DECEMBER 29, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Franklin Tax-Free Trust was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017 and December 29, 2017. The purpose of the meeting was to elect Trustees of Franklin Tax-Free Trust and to vote on the following proposals for each Fund: to approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval; and to approve an amended fundamental investment restriction regarding investments in commodities. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Franklin Tax-Free Trust: Harris J. Ashton, Terrence J. Checki, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, Jr., J. Michael Luttig, Larry D. Thompson, and John B. Wilson; (ii) the proposal to use a “manager of managers” structure was approved by shareholders of each Fund, except for Franklin Maryland Tax-Free Income Fund; and (iii) the proposal to approve the amended fundamental investment restriction regarding investments in commodities was approved by shareholders of each Fund. No other business was transacted at the meeting.
In connection with the meeting, management is aware that some shareholders received from the proxy solicitor numerous calls and mailings that may have been distracting. Management is taking steps to ensure that, in the future, for any new shareholder meeting solicitations that occur, such activity is not repeated. Management apologizes for any inconvenience that may have been caused as a result of such calls and mailings.
The results of the voting at the meeting are as follows:
Proposal 1. To elect a Board of Trustees:
| | | | | | | | |
Name | | For | | | Withheld | |
Harris J. Ashton | | | 1,485,764,192 | | | | 48,269,290 | |
Terrence J. Checki | | | 1,485,932,300 | | | | 48,101,184 | |
Mary C. Choksi | | | 1,486,925,610 | | | | 47,110,941 | |
Edith E. Holiday | | | 1,487,685,965 | | | | 46,349,353 | |
Gregory E. Johnson | | | 1,487,506,272 | | | | 46,527,212 | |
Rupert H. Johnson, Jr | | | 1,486,183,613 | | | | 47,849,870 | |
J. Michael Luttig | | | 1,487,803,427 | | | | 46,228,223 | |
Larry D. Thompson | | | 1,486,866,073 | | | | 47,167,412 | |
John B. Wilson | | | 1,488,071,744 | | | | 45,961,741 | |
Total Trust Shares Outstanding*: 2,524,132,627
* As of the record date.
| | | | | | | | |
franklintempleton.com | | | | | | Annual Report | | 173 |
FRANKLIN TAX-FREE TRUST
SPECIAL MEETING OF SHAREHOLDERS
| | |
Proposal 2. | | To approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval: |
| | | | |
Franklin Alabama Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 9,996,898 | |
Against | | | 919,863 | |
Abstain | | | 362,057 | |
Broker Non-Votes | | | 2,908,370 | |
Total Fund Shares Voted | | | 14,187,187 | |
Total Fund Shares Outstanding* | | | 25,352,587 | |
| |
Franklin Florida Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 26,767,422 | |
Against | | | 2,709,963 | |
Abstain | | | 2,120,647 | |
Broker Non-Votes | | | 6,575,860 | |
Total Fund Shares Voted | | | 38,173,895 | |
Total Fund Shares Outstanding* | | | 66,072,048 | |
| |
Franklin Georgia Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 19,877,380 | |
Against | | | 1,315,064 | |
Abstain | | | 981,123 | |
Broker Non-Votes | | | 6,055,628 | |
Total Fund Shares Voted | | | 28,229,196 | |
Total Fund Shares Outstanding* | | | 46,875,423 | |
| |
Franklin Kentucky Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 6,842,147 | |
Against | | | 396,788 | |
Abstain | | | 471,151 | |
Broker Non-Votes | | | 1,743,396 | |
Total Fund Shares Voted | | | 9,453,484 | |
Total Fund Shares Outstanding* | | | 15,540,178 | |
| |
Franklin Louisiana Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 13,478,100 | |
Against | | | 1,170,276 | |
Abstain | | | 789,117 | |
Broker Non-Votes | | | 3,983,468 | |
Total Fund Shares Voted | | | 19,420,957 | |
Total Fund Shares Outstanding* | | | 37,798,467 | |
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FRANKLIN TAX-FREE TRUST
SPECIAL MEETING OF SHAREHOLDERS
| | | | |
Franklin Maryland Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 18,768,177 | |
Against | | | 1,499,008 | |
Abstain | | | 1,861,415 | |
Broker Non-Votes | | | 6,315,079 | |
Total Fund Shares Voted | | | 28,443,677 | |
Total Fund Shares Outstanding* | | | 44,762,202 | |
| |
Franklin Missouri Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 41,139,016 | |
Against | | | 4,410,837 | |
Abstain | | | 2,742,307 | |
Broker Non-Votes | | | 10,808,657 | |
Total Fund Shares Voted | | | 59,100,811 | |
Total Fund Shares Outstanding* | | | 96,235,166 | |
| |
Franklin North Carolina Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 34,990,862 | |
Against | | | 2,928,795 | |
Abstain | | | 2,114,596 | |
Broker Non-Votes | | | 9,768,677 | |
Total Fund Shares Voted | | | 49,802,931 | |
Total Fund Shares Outstanding* | | | 89,496,332 | |
| |
Franklin Virginia Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 27,272,936 | |
Against | | | 2,222,082 | |
Abstain | | | 1,099,714 | |
Broker Non-Votes | | | 8,590,479 | |
Total Fund Shares Voted | | | 39,185,215 | |
Total Fund Shares Outstanding* | | | 61,287,996 | |
| | |
Proposal 3 | | To approve an amended fundamental investment restriction regarding investments in commodities: |
| | | | |
| |
Franklin Alabama Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 9,888,990 | |
Against | | | 794,450 | |
Abstain | | | 595,377 | |
Broker Non-Votes | | | 2,908,370 | |
Total Fund Shares Voted | | | 14,187,187 | |
Total Fund Shares Outstanding* | | | 25,352,587 | |
| | | | | | | | |
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SPECIAL MEETING OF SHAREHOLDERS
| | | | |
Franklin Florida Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 26,980,676 | |
Against | | | 2,123,958 | |
Abstain | | | 2,493,402 | |
Broker Non-Votes | | | 6,575,860 | |
Total Fund Shares Voted | | | 38,173,895 | |
Total Fund Shares Outstanding* | | | 66,072,048 | |
| |
Franklin Georgia Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 19,889,393 | |
Against | | | 1,008,207 | |
Abstain | | | 1,275,968 | |
Broker Non-Votes | | | 6,055,628 | |
Total Fund Shares Voted | | | 28,229,196 | |
Total Fund Shares Outstanding* | | | 46,875,423 | |
| |
Franklin Kentucky Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 6,817,478 | |
Against | | | 336,774 | |
Abstain | | | 555,837 | |
Broker Non-Votes | | | 1,743,396 | |
Total Fund Shares Voted | | | 9,453,484 | |
Total Fund Shares Outstanding* | | | 15,540,178 | |
| |
Franklin Louisiana Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 13,865,571 | |
Against | | | 646,369 | |
Abstain | | | 925,549 | |
Broker Non-Votes | | | 3,983,468 | |
Total Fund Shares Voted | | | 19,420,957 | |
Total Fund Shares Outstanding* | | | 37,798,467 | |
| |
Franklin Maryland Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 19,503,988 | |
Against | | | 863,013 | |
Abstain | | | 1,761,597 | |
Broker Non-Votes | | | 6,315,079 | |
Total Fund Shares Voted | | | 28,443,677 | |
Total Fund Shares Outstanding* | | | 44,762,202 | |
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FRANKLIN TAX-FREE TRUST
SPECIAL MEETING OF SHAREHOLDERS
| | | | |
Franklin Missouri Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 41,287,836 | |
Against | | | 3,339,882 | |
Abstain | | | 3,664,436 | |
Broker Non-Votes | | | 10,808,657 | |
Total Fund Shares Voted | | | 59,100,811 | |
Total Fund Shares Outstanding* | | | 96,235,166 | |
| |
Franklin North Carolina Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 34,209,540 | |
Against | | | 2,889,787 | |
Abstain | | | 2,934,926 | |
Broker Non-Votes | | | 9,768,677 | |
Total Fund Shares Voted | | | 49,802,931 | |
Total Fund Shares Outstanding* | | | 89,496,332 | |
| |
Franklin Virginia Tax-Free Income Fund | | | |
| |
| | Shares | |
For | | | 27,445,161 | |
Against | | | 1,634,654 | |
Abstain | | | 1,514,920 | |
Broker Non-Votes | | | 8,590,479 | |
Total Fund Shares Voted | | | 39,185,215 | |
Total Fund Shares Outstanding* | | | 61,287,996 | |
| | | | | | | | |
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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 Trust, principal occupations during at least the past five years and number of US 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
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 1984 | | 139 | | Bar-S Foods (meat packing company) (1981-2010). |
|
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). |
| | | | |
Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since December 2017 | | 113 | | Hess Corporation (exploration of oil and gas) (2014-present). |
|
Principal Occupation During at Least the Past 5 Years: Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014). |
| | | | |
Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2014 | | 139 | | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present). |
|
Principal Occupation During at Least the Past 5 Years: Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); 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) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 1998 | | 139 | | Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-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) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2009 | | 139 | | Boeing Capital Corporation (aircraft financing) (2006-2013). |
|
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). |
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Independent Board Members (continued)
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2007 | | 139 | | The Southern Company (energy company) (2014-present; previously 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; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017 – present); 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 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) One Franklin Parkway San Mateo, CA 94403-1906 | | Lead Independent Trustee | | Trustee since 2007 and Lead Independent Trustee since 2008 | | 113 | | None |
|
Principal Occupation During at Least the Past 5 Years: President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing) (2002-present); Senior Advisor, McKinsey & Co. (consulting) (2017-present); serves on private and non-profit boards; and formerly, President, Staples International and Head of Global Transformation (office supplies) (2012-2016); 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
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2007 | | 153 | | None |
|
Principal Occupation During at Least the Past 5 Years: Chairman of the Board, Member - Office of the Chairman, Director 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 43 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) One Franklin Parkway San Mateo, CA 94403-1906 | | Chairman of the Board and Trustee | | Since 2013 | | 139 | | None |
|
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 41 of the investment companies in Franklin Templeton Investments. |
| | | | |
Sheila Amoroso (1959) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 1999 | | Not Applicable | | Not Applicable |
|
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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Interested Board Members and Officers (continued)
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2012 | | Not Applicable | | Not Applicable |
|
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) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 1999 | | Not Applicable | | Not Applicable |
|
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. |
| | | | |
Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906 | | Chief Financial Officer, Chief Accounting Officer and Treasurer | | Since 2009 | | Not Applicable | | Not Applicable |
|
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) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2009 | | Not Applicable | | Not Applicable |
|
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) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2009 | | Not Applicable | | Not Applicable |
|
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
| | | | |
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906 | | Chief Executive Officer – Finance and Administration | | Since June 2017 | | Not Applicable | | Not Applicable |
|
Principal Occupation During at Least the Past 5 Years: Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton Investments (2009-2017). |
| | | | |
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President - AML Compliance | | Since 2016 | | Not Applicable | | Not Applicable |
|
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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Interested Board Members and Officers (continued)
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
Christopher J. Molumphy (1962) One Franklin Parkway San Mateo, CA 94403-1906 | | President and Chief Executive Officer – Investment Management | | Since 2010 | | Not Applicable | | Not Applicable |
|
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 21 of the investment companies in Franklin Templeton Investments. |
| | | | |
Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | | Vice President | | Since 2013 | | Not Applicable | | Not Applicable |
|
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, 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) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | | Chief Compliance Officer | | Since 2013 | | Not Applicable | | Not Applicable |
|
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) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President and Secretary | | Since 2006 | | Not Applicable | | Not Applicable |
|
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 J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2015 | | Not Applicable | | Not Applicable |
|
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) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2005 | | Not Applicable | | Not Applicable |
|
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) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 1999 | | Not Applicable | | Not Applicable |
|
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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Interested Board Members and Officers (continued)
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | | Vice President | | Since 2011 | | Not Applicable | | Not Applicable |
|
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 US 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 2007. 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 TAX-FREE TRUST
Shareholder Information
Board Approval of Investment Management Agreements
FRANKLIN TAX-FREE TRUST
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
(each a Fund)
At an in-person meeting held on February 27, 2018 (Meeting), the Board of Trustees (Board) of Franklin Tax-Free Trust (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of the investment management agreement between Franklin Advisers, Inc. (Manager) and the Trust, on behalf of each Fund (each a Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of each Management Agreement. Although the Management Agreements for the Funds were considered at the same Board meeting, the Board considered the information provided to it about the Funds together and with respect to each Fund separately as the Board deemed appropriate.
In considering the continuation of each Management Agreement, the Board reviewed and considered information provided by the Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to the Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a telephonic contract renewal meeting at which the Independent Trustees conferred amongst themselves and Independent Trustee counsel about contract renewal matters. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of each Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services provided by the Manager; (ii) the investment performance of each Fund; (iii)
the costs of the services provided and profits realized by the Manager and its affiliates from the relationship with each Fund; (iv) the extent to which economies of scale are realized as each Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.
In approving the continuance of each Management Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the Management Agreement are fair and reasonable and that the continuance of such Management Agreement is in the interests of the applicable Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.
Nature, Extent and Quality of Services
The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by the Manager and its affiliates to the Funds and their shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of the Manager; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for each Fund; reports on expenses, shareholder services, marketing support payments made to financial intermediaries and third party servicing arrangements; legal and compliance matters; risk controls; pricing and other services provided by the Manager and its affiliates; and management fees charged by the Manager and its affiliates to U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board also reviewed and considered an annual report on payments made by Franklin Templeton Investments (FTI) or the Funds to financial intermediaries, as well as a memorandum relating to third-party servicing arrangements in response to a guidance update in 2016 from the U.S. Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees. The Board noted management’s continuing efforts and expenditures in establishing effective business continuity plans and developing strategies to address areas of heightened concern in the mutual fund industry, such as cybersecurity and liquidity risk management. The Board also recognized management’s commitment to facilitating Board oversight of particular areas, including derivatives and payments to intermediaries, by enhanced reporting.
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FRANKLIN TAX-FREE TRUST
SHAREHOLDER INFORMATION
The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the Franklin Templeton family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Manager’s parent, and its commitment to the mutual fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to the market environment and project initiatives and capital investments relating to the services provided to the Funds by the FTI organization.
Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by the Manager and its affiliates to the Funds and their shareholders.
Fund Performance
The Board reviewed and considered the performance results of each Fund over various time periods ended December 31, 2017. The Board considered the performance returns for each Fund in comparison to the performance returns of mutual funds deemed comparable to the Fund included in a universe (Performance Universe) selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds included in a Performance Universe. The Board also reviewed and considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings throughout the year. A summary of each Fund’s performance results is below.
Franklin Alabama Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, and Franklin Maryland Tax-Free Income Fund - The Performance Universe for each of the Franklin Alabama Tax-Free Income Fund and the Franklin Georgia Tax-Free Income Fund included the Fund and all retail and institutional “other states” municipal debt funds. The Performance Universe for the Franklin Maryland Tax-Free Income Fund included the Fund and all retail and institutional Maryland municipal debt funds. The Board noted that the Funds’ annualized income returns for the one-, three-, five- and 10-year periods were above the medians of their respective Performance Universes. The Board also noted that the Funds’ annualized total returns for the one- and three-year periods were below the medians of their respective Performance Universes, but for the five- and 10-year periods were above the medians of their respective Performance Universes. Given the
Funds’ income-oriented investment objective, the Board concluded that the Funds’ performance was satisfactory.
Franklin Louisiana Tax-Free Income Fund - The Performance Universe for this Fund included the Fund and all retail and institutional “other states” municipal debt funds. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one- and five-year periods was below the median of its Performance Universe, but for the three- and 10-year periods was above the median of its Performance Universe. Given the Fund’s income-oriented investment objective, the Board concluded that the Fund’s performance was satisfactory.
Franklin Kentucky Tax-Free Income Fund and Franklin Virginia Tax-Free Income Fund - The Performance Universe for the Franklin Kentucky Tax-Free Income Fund included the Fund and all retail and institutional “other states” municipal debt funds. The Performance Universe for the Franklin Virginia Tax-Free Income Fund included the Fund and all retail and institutional Virginia municipal debt funds. The Board noted that the Funds’ annualized income returns for the one-, three-, five- and 10-year periods were above the medians of their respective Performance Universes. The Board also noted that the Funds’ annualized total returns for the one-, three- and five-year periods were below the medians of their respective Performance Universes, but for the 10-year period were above the medians of their respective Performance Universes. Given the Funds’ income-oriented investment objective, the Board concluded that the Funds’ performance was satisfactory.
Franklin Florida Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, and Franklin North Carolina Tax-Free Income Fund - The Performance Universe for these Funds included the Funds and all retail and institutional “other states” municipal debt funds. The Board noted that the Funds’ annualized income returns for the one-, three-, five- and 10-year periods were above the medians of their Performance Universe. The Board also noted that the Funds’ annualized total returns for the one-, three-, five- and 10-year periods were below the medians of their Performance Universe. Given the Funds’ income-oriented investment objective, the Board concluded that the Funds’ performance was satisfactory.
Comparative Fees and Expenses
The Board reviewed and considered information regarding each Fund’s actual total expense ratio and its various components, including, as applicable, management fees; transfer agent
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FRANKLIN TAX-FREE TRUST
SHAREHOLDER INFORMATION
expenses; underlying fund expenses; Rule 12b-1 and non-Rule 12b-1 service fees; and other non-management fees. The Board also noted the quarterly and annual reports it receives on all marketing support payments made by FTI to financial intermediaries. The Board considered the actual total expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers, if any (Management Rate) of each Fund in comparison to the median expense ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure as the Fund selected by Broadridge (Expense Group). Broadridge fee and 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 and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges, and the actual total expense ratio, for comparative consistency, was shown for Class A shares for funds with multiple classes of shares. The Board received a description of the methodology used by Broadridge to select the mutual funds included in an Expense Group.
Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, and Franklin North Carolina Tax-Free Income Fund - The Expense Group for each Fund included the Fund and between nine and thirteen other “other states” municipal debt funds. The Board noted that the Management Rates and actual total expense ratios for these Funds were below the medians of their respective Expense Groups. The Board concluded that the Management Rates charged to these Funds are reasonable.
Franklin Virginia Tax-Free Income Fund - The Expense Group for this Fund included the Fund and five other Virginia municipal debt funds. The Board noted that the Management Rate for the Fund was equal to the median of its Expense Group, but its actual total expense ratio was below the median of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable.
Franklin Maryland Tax-Free Income Fund - The Expense Group for this Fund included the Fund and six other Maryland
municipal debt funds. The Board noted that the Management Rate for the Fund was above the median of its Expense Group, but its actual total expense ratio was below the median of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable.
Franklin Kentucky Tax-Free Income Fund - The Expense Group for this Fund included the Fund and ten other “other states” municipal debt funds. The Board noted that the Management Rate for the Fund was above the median of its Expense Group, but its actual total expense ratio was equal to the median of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable.
Profitability
The Board reviewed and considered information regarding the profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board considered the Fund profitability analysis provided by the Manager that addresses the overall profitability of FTI’s U.S. fund business, as well as its profits in providing investment management and other services to each of the individual funds during the 12-month period ended September 30, 2017, being the most recent fiscal year-end for FRI. The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product-related changes, the overall methodology has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, PricewaterhouseCoopers LLP, auditor to Franklin Resources, Inc. and certain Franklin Templeton funds, has been engaged by the Manager to periodically review and assess the allocation methodologies to be used solely by the Funds’ Board with respect to the profitability analysis.
The Board noted management’s belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also noted management’s expenditures in improving shareholder services provided to the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent SEC and other regulatory requirements.
The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund
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FRANKLIN TAX-FREE TRUST
SHAREHOLDER INFORMATION
operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with service providers and counterparties. Based upon its consideration of all these factors, the Board concluded that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, extent and quality of services provided to each Fund.
Economies of Scale
The Board reviewed and considered the extent to which the Manager may realize economies of scale, if any, as each Fund grows larger and whether the Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints, which operate generally to share any economies of scale with a Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered the Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments the Manager incurs across the Franklin Templeton family of funds as a whole. The Board concluded that to the extent economies of scale may be realized by the Manager and its affiliates, each Fund’s management fee structure provided a sharing of benefits with the Fund and its shareholders as the Fund grows.
Conclusion
Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the continuation of each Management Agreement for an additional one-year period.
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the US 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 Trust files a complete statement of investments with the US 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.
Householding of Reports and Prospectuses
You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.
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| | Annual Report and Shareholder Letter |
| Franklin Tax-Free Trust |
| 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.
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© 2018 Franklin Templeton Investments. All rights reserved. | | TF2 A 04/18 |
(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 $805,084 for the fiscal year ended February 28, 2018 and $818,858 for the fiscal year ended February 28, 2017.
(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.
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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 $14,000 for the fiscal year ended February 28, 2018 and $255,000 for the fiscal year ended February 28, 2017. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process and derivatives assessments and benchmarking services in connection with the 2015 ICI TA Survey.
(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.
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(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 $14,000 for the fiscal year ended February 28, 2018 and $255,000 for the fiscal year ended February 28, 2017.
(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
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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.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, 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 Matthew T. Hinkle , Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
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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.
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FRANKLIN TAX-FREE TRUST |
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By | | /s/ MATTHEW T. HINKLE |
| | Matthew T. Hinkle |
| | Chief Executive Officer – Finance and Administration |
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Date | | April 26, 2018 |
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.
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By | | /s/ MATTHEW T. HINKLE |
| | Matthew T. Hinkle |
| | Chief Executive Officer – Finance and Administration |
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Date | | April 26, 2018 |
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By | | /s/ GASTON GARDEY |
| | Gaston Gardey |
| | Chief Financial Officer and Chief Accounting Officer |
| |
Date | | April 26, 2018 |
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