As filed with the Securities and Exchange Commission on July 15, 2016
File No.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933	[X]
Pre-Effective Amendment No.	[ ]
Post-Effective Amendment No.	[ ]
Franklin Federal Tax-Free Income Fund
(Exact Name of Registrant as Specified in Charter)
(650)312-3200
(Registrant's Area Code and Telephone Number)
One Franklin Parkway, San Mateo, Ca  94403-1906
(Address of Principal Executive Offices: Number, Street, City, State, and Zip Code)
Craig S. Tyle, One Franklin Parkway, San Mateo, Ca  94403-1906
(Name and Address of Agent for Service)
Copies to:
Bruce G. Leto, Esquire
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA  19103-7098
Approximate Date of Proposed Public Offering:  As soon as practicable after this Registration Statement becomes effective under the Securities Act of 1933, as amended.
Title of the securities being registered:  Class A, Class C and Advisor Shares of beneficial interest, no par value, of Franklin Federal Tax-Free Income Fund.  No filing fee is due because Registrant is relying on Section 24(f) of the Investment Company Act of 1940, as amended.
It is proposed that the filing will become effective on September 1, 2016 pursuant to Rule 488 under the Securities Act of 1933.

FRANKLIN INSURED TAX-FREE INCOME FUND

IMPORTANT SHAREHOLDER INFORMATION

These materials are for a Special Meeting of Shareholders of the Franklin Insured Tax-Free Income Fund (the “Insured Tax-Free Fund”) scheduled for November 7, 2016, at 2:00 p.m., Pacific time.  These materials discuss a proposal to be voted on at the meeting and contain a Notice of Special Meeting of Shareholders, a Prospectus/Proxy Statement, and a proxy card.  A proxy card is, in essence, a ballot.  When you complete a proxy card, it tells us how you wish the individuals named on your proxy card to vote on important issues relating to the Insured Tax-Free Fund.  If you complete, sign and return a proxy card, we’ll vote your proxy exactly as you tell us.  If you simply sign and return a proxy card without indicating how your shares are to be voted, we’ll vote your proxy FOR the proposal which is in accordance with the Board of Trustees’ recommendation on page 8 of the Prospectus/Proxy Statement. 

We urge you to review carefully the proposal in the Prospectus/Proxy Statement.  Then, fill out the proxy card and return it to us so that we know how you would like to vote.  When shareholders return their proxy cards promptly, additional costs of having to conduct additional solicitation or mailings may be avoided.

PLEASE COMPLETE, SIGN AND RETURN the proxy card you receive.

We welcome your comments.  If you have any questions, call Fund Information at:

(800) DIAL BEN^® or (800) 342-5236.

TELEPHONE AND INTERNET VOTING

For your convenience, you may be able to vote by telephone or, if eligible, through the Internet, 24 hours a day.  If your account is eligible to vote through the Internet, separate instructions are enclosed. 

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FRANKLIN INSURED TAX-FREE INCOME FUND

One Franklin Parkway

San Mateo, CA 94403-1906

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To be held on November 7, 2016

To the Shareholders of the Franklin Insured Tax-Free Income Fund:

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the “Meeting”) of the Franklin Insured Tax-Free Income Fund (the “Insured Tax-Free Fund”), a series of the Franklin Tax-Free Trust (the “Trust”), will be held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California 94403-1906, on November 7, 2016, at 2:00 p.m., Pacific time.  The Meeting is being called for the following purposes:

1.To approve an Agreement and Plan of Reorganization (the “Plan”) between the Insured Tax-Free Fund, a series of the Trust, and the Franklin Federal Tax-Free Income Fund (the “Federal Tax-Free Fund”), that provides for:  (i) the acquisition of substantially all of the assets of the Insured Tax-Free Fund by the Federal Tax-Free Fund in exchange solely for shares of the Federal Tax-Free Fund, (ii) the distribution of such shares to the shareholders of the Insured Tax-Free Fund, and (iii) the complete liquidation and dissolution of the Insured Tax-Free Fund. 

2.To transact such other business as may properly come before the Meeting.

A copy of the form of the Plan, which more completely sets forth the terms of the proposed reorganization of the Insured Tax-Free Fund with and into the Federal Tax-Free Fund, is attached as Exhibit A to the Prospectus/Proxy Statement. 

Shareholders of record as of the close of business on August 15, 2016 are entitled to notice of, and to vote at, the Meeting or any adjournment of the Meeting. 

By Order of the Board of Trustees of the Trust,

Karen L. Skidmore

Secretary

[September 1,] 2016

You are invited to attend the Meeting, but if you cannot do so, the Board of Trustees, on behalf of the Insured Tax-Free Fund, urges you to complete, date, sign, and return the enclosed proxy card in the enclosed postage-paid return envelope.  It is important that you return your signed proxy card promptly so that a quorum may be ensured at the Meeting.  You may revoke your proxy at any time before it is exercised by the subsequent execution and submission of a revised proxy card, by giving written notice of revocation to the Insured Tax-Free Fund at any time before the proxy is exercised, or by voting in person at the Meeting.  You may also be able to vote by touch-tone telephone by calling the telephone number printed on your proxy card and following the recorded instructions.  In addition, if your account is eligible, you may also be able to vote through the Internet by visiting the website printed on your proxy card and following the online instructions.

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Prospectus/Proxy Statement

When reading this Prospectus/Proxy Statement, you will notice that certain terms are capitalized.  The more significant of those capitalized terms are explained in our glossary section at the back of the Prospectus/Proxy Statement. 

TABLE OF CONTENTS

Page

Cover Page                                                                                                                               Cover

iii

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A.     Form of Agreement and Plan of Reorganization

B.     Principal Holders of Securities

iv

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PROSPECTUS/PROXY STATEMENT

Dated [September 1], 2016

Acquisition of Substantially All of the Assets of

FRANKLIN INSURED TAX-FREE INCOME FUND

(a series of Franklin Tax-Free Trust) (the “Trust”)

By and in Exchange for Shares of

FRANKLIN FEDERAL TAX-FREE INCOME FUND

This Prospectus/Proxy Statement solicits proxies to be voted at a Special Meeting of Shareholders (the “Meeting”) of the Franklin Insured Tax-Free Income Fund (the “Insured Tax-Free Fund”).  At the Meeting, shareholders of the Insured Tax-Free Fund will be asked to approve or disapprove an Agreement and Plan of Reorganization (the “Plan”).  If the Insured Tax-Free Fund shareholders vote to approve the Plan, substantially all of the assets of the Insured Tax-Free Fund will be acquired by the Franklin Federal Tax-Free Income Fund (the “Federal Tax-Free Fund”) in exchange solely for Class A, Class C and Advisor Class shares of the Federal Tax-Free Fund. 

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy or accuracy of this Prospectus/Proxy Statement.  Any representation to the contrary is a criminal offense. 

The Meeting will be held at the offices of the Insured Tax-Free Fund and Federal Tax-Free Fund, One Franklin Parkway, San Mateo, California 94403-1906, on November 7, 2016, at 2:00 p.m., Pacific time. You can reach these offices by calling (800) 342-5236.  The Board of Trustees of the Trust, on behalf of the Insured Tax-Free Fund (the “Board”) is soliciting these proxies.  This Prospectus/Proxy Statement will first be sent to shareholders on or about [September 1], 2016. 

If the Insured Tax-Free Fund shareholders vote to approve the Plan, you will receive Class A, Class C and Advisor Class shares of the Federal Tax-Free Fund of equivalent aggregate net asset value (“NAV”) to your investment in the corresponding class of shares of the Insured Tax-Free Fund.  The Insured Tax-Free Fund will then be liquidated and dissolved. 

The Insured Tax-Free Fund and the Federal Tax-Free Fund (each, a “Fund” and, collectively, the “Funds”) have identical investment goals and similar principal investment strategies and principal investment risks, although there are some differences which are discussed in more detail below.  Both Funds’ fundamental investment goal is to provide investors with as high a level of income exempt from federal income taxes as is consistent with prudent investment management and the preservation of shareholders’ capital.

This Prospectus/Proxy Statement includes information about the Plan and the Federal Tax-Free Fund that you should know before voting on the Plan, which if approved, could result in your investing in the Federal Tax-Free Fund.  You should retain this Prospectus/Proxy Statement for future reference.  Additional information about the Insured Tax-Free Fund, the Federal Tax-Free Fund and the proposed transaction has been filed with the U.S. Securities and Exchange Commission (“SEC”) and can be found in the following documents:

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•      The Prospectus of the Insured Tax-Free Fund - Class A, Class C and Advisor Class shares dated [July 1, 2016] (the “Insured Tax-Free Fund Prospectus”), which is incorporated by reference into and considered a part of this Prospectus/Proxy Statement.

•      The Prospectus of the Federal Tax-Free Fund - Class A, Class C and Advisor Class dated [September 1, 2016] (the “Tax-Free Fund Prospectus”), which is enclosed with, incorporated by reference into and considered a part of this Prospectus/Proxy Statement. 

•      A Statement of Additional Information (“SAI”) dated [September 1,] 2016, relating to this Prospectus/Proxy Statement, which has been filed with the SEC, is incorporated by reference into and considered a part of this Prospectus/Proxy Statement. 

You may request a free copy of the SAI relating to this Prospectus/Proxy Statement, the Insured Tax-Free Fund Prospectus or the Federal Tax-Free Fund Prospectus without charge by calling (800) DIAL-BEN or by writing to Franklin Templeton Investments at One Franklin Parkway, San Mateo, CA 94403-1906.

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SUMMARY

This is only a summary of certain information contained in this Prospectus/Proxy Statement.  You should read the more complete information in the rest of this Prospectus/Proxy Statement, including the form of the Plan (attached as Exhibit A) and the Federal Tax-Free Fund Prospectus (enclosed). 

What am I being asked to vote upon?

Shareholders of the Insured Tax-Free Fund are being asked to approve the Plan between the Trust, on behalf of the Insured Tax-Free Fund, and the Federal Tax-Free Fund, that provides for:  (1) the acquisition of substantially all of the assets of the Insured Tax-Free Fund by the Federal Tax-Free Fund in exchange solely for shares of the Federal Tax-Free Fund, (2) the distribution of such shares to the shareholders of the Insured Tax-Free Fund, and (3) the complete liquidation and dissolution of the Insured Tax-Free Fund. 

What will happen if shareholders approve the Plan?

If the Insured Tax-Free Fund’s shareholders vote to approve the Plan, then shareholders of the Insured Tax-Free Fund will become shareholders of the Federal Tax-Free Fund on or about December 2, 2016, and will no longer be shareholders of the Insured Tax-Free Fund.  Shareholders of the Insured Tax-Free Fund will receive Class A, Class C and Advisor Class shares of the Federal Tax-Free Fund (“Federal Tax-Free Fund Shares”) with an aggregate NAV equivalent to their investment in the corresponding class of shares of the Insured Tax-Free Fund as noted in the chart below.

Insured Tax-Free Fund	Federal Tax-Free Fund
Class A	Class A
Class C	Class C
Advisor Class	Advisor Class

In particular, the Plan provides that (1) substantially all of the assets of the Insured Tax-Free Fund will be acquired by the Federal Tax-Free Fund in exchange for Federal Tax-Free Fund Shares; and (2) the Federal Tax-Free Fund Shares received by the Insured Tax-Free Fund in the exchange will then be distributed to shareholders of the corresponding class of shares of the Insured Tax-Free Fund.  Because the Funds have different NAVs per share, the number of Federal Tax-Free Fund Shares that you receive will likely be different than the number of shares of the Insured Tax-Free Fund that you own, but the total value of your investment will be the same immediately before and after the exchange.  After the Federal Tax-Free Fund Shares are distributed to Insured Tax-Free Fund’s shareholders, the Insured Tax-Free Fund will be completely liquidated and dissolved.  (The proposed transaction is referred to in this Prospectus/Proxy Statement as the “Transaction.”) 

For more information concerning the similarities regarding share purchase, redemption and exchange procedures of the Funds, please see “COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS – What are the distribution and purchase procedures of the Funds?” and “What are the redemption procedures and exchange privileges of the Funds?”

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Why is the Transaction being proposed?

Beginning in the aftermath of the 2008-2009 financial crisis, the municipal bond insurance market experienced dramatic changes which have led to a decrease in supply of insured municipal securities, a reduction in the number of municipal bond insurers, and a concentration of insurance company credit risk.  The Insured Tax-Free Fund’s investment manager has observed that the availability of insurance in the municipal bond market has greatly decreased, falling from a peak of over half of new municipal bond issuance in 2005 to a range of 3-5% over the past several years.  In addition, there has continued to be a lack of any new insurers in the insured municipal securities market.  The Insured Tax-Free Fund has been closed to new investors since March 1, 2013 due to a reduction in both the supply of insured municipal securities and the number of municipal bond insurers.  Given the lack of growth in the insured municipal securities market and the Insured Tax-Free Fund investment manager’s view of the unlikelihood of such growth to occur in the foreseeable future, the investment manager believes it can no longer effectively invest for a dedicated insured municipal securities fund.  Additionally, the Plan would combine a smaller fund with very limited growth prospects with a fund with a larger asset size that is open to investors, similar annual fund operating expenses, and more favorable sales prospects.

How will the Transaction affect me?

If the Transaction is completed, you will cease to be a shareholder of the Insured Tax-Free Fund and become a shareholder of the Federal Tax-Free Fund.  Summarized below are some of the considerations for deciding whether to vote “FOR” the Plan:

Investment Goal, Strategies, Policies and Risks.Both Funds’ fundamental investment goal is to provide investors with as high a level of income exempt from federal income taxes as is consistent with prudent investment management and the preservation of shareholders’ capital.  Under normal market conditions, each Fund invests at least 80% of its total assets in securities whose interest is free from federal income taxes, including the federal alternative minimum tax.  In addition, the Federal Tax-Free Fund requires that the securities subject to the 80% limitation be investment grade securities and the Insured Tax-Free Fund invests at least 80% of its net assets in insured municipal securities that are insured by an insurance policy issued by a municipal bond insurer rated investment grade at the time of purchase.  Although both Funds try to invest all of their assets in tax-free securities, it is possible that up to 20% of each Fund’s assets may be in securities that pay interest that may be subject to the federal alternative minimum tax and, although not anticipated, in securities that pay taxable interest.

Thus, the main difference between the portfolio strategies of the Funds is that the Insured Tax-Free Fund, consistent with its name, invests at least 80% of its net assets in insured municipal securities.  The Federal Tax-Free Fund does not have this policy.  However, the Federal Tax-Free Fund may still invest in insured municipal securities (although not required to do so), and both Funds buy municipal securities that are rated (or insured by an insurer rated) at the time of purchase in one of the top four ratings by a U.S. nationally recognized rating service (or comparable unrated securities); however, the Federal Tax-Free Fund has a fundamental policy requiring that 80% of its total assets be of investment grade. 

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Both Funds’ investment manager selects securities that it believes will provide the best balance between risk and return within the Fund’s range of allowable investments and typically uses a buy and hold strategy.  This means it generally holds securities in the Fund’s portfolio for income purposes, rather than trading securities for capital gains, although the investment manager may sell a security at any time if it believes it could help the Fund meet its goal. 

For a more complete discussion, see the sections below titled: “COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS ‒ Are there any significant differences between the investment goals, strategies, and policies of the Funds?” and “How do the principal investment risks of the Funds compare?” and “COMPARISONS OF INVESTMENT GOALS, STRATEGIES, POLICIES AND RISKS – How do the fundamental investment policies and certain non-fundamental policies of the Funds differ?” and “What are the principal investment risks associated with investments in the Funds?”

Similar Expenses.  As shown in the chart below, the total annual operating expenses of the Federal Tax-Free Fund Shares are the same for Class C and Adviser Class shares and .01% higher for Class A shares of the corresponding share class of the Insured Tax-Free Fund.  The following table compares the annualized net expense ratio for each class of shares of the Federal Tax-Free Fund with those of the corresponding class of shares of the Insured Tax-Free Fund, based on their fiscal years ended February 29, 2016 and April 30, 2016, respectively.

ANNUAL FUND OPERATING EXPENSES¹

Share Class	Insured Tax-Free Fund	Federal Tax-Free Fund
Class A	0.60%	0.61%
Class C	1.16%	1.16%
Advisor Class	0.51%	0.51%

^1.  Expense ratios reflect annual fund operating expenses for February 29, 2016 for the Insured Tax-Free Fund, and April 30, 2016 for the Federal Tax-Free Fund, the most recent fiscal year of the Fund as reflected in such Fund’s current prospectus. 

As of May 31, 2016, the Federal Tax-Free Fund had a significantly larger asset base (approximately $11.1 billion) than the Insured Tax-Free Fund (approximately $1.96 billion).  The Transaction is not projected to have a material impact on the expense ratio of the Federal Tax-Free Fund. 

For a more detailed comparison of the Funds’ fees and expenses, see the sections below titled “COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS ‒ What are the Funds’ investment management fees?” and “What are the fees and expenses of each of the Funds and what might they be after the Transaction?”

In evaluating the Transaction, shareholders may also wish to consider the following:

Past Performance.  [The Insured Tax-Free Fund, on an average annual total return basis, has underperformed the Federal Tax-Free Fund for the one year, five year, ten year and since inception periods as of June 30, 2016].  As of June 30, 2016, the Federal Tax-Free Fund’s 30-day standardized and tax equivalent yield were higher than the Insured Tax-Free Fund’s 30-day standardized and tax equivalent yield as shown below.]

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Average Annual Total Return (at NAV) (as of 6/30/16)	Insured Tax-Free Fund Class A (without sales load)	Federal Tax-Free Fund Class A (without sales load)
1 Year	[  ]%	[   ]%
5 Year	[  ]%	[   ]%
10 Year	[  ]%	[   ]%
Since Inception	[  ]% (04/03/1985)	[   ] %(10/07/1983)

 

Yield (as of 6/30/16)
30-Day Standardized Yield	[   ]%	[   ]%
Tax Equivalent Yield	[   ]%	[   ]%

More detailed performance information is included below under the section titled, “COMPARISON OF SOME IMPORTANT FEATURES OF THE FUNDS - How do the performance records of the Funds compare?” in this Prospectus/Proxy Statement. 

Management Fee Structure.  Both Funds are currently subject to an asset based management fee structure.  While both Funds’ investment management agreement has identical breakpoints, the investment management fee ratio currently paid by the Federal Tax-Free Fund is slightly lower than fee paid by the Insured Tax-Free Fund.  For more information, see the section below titled “COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS – What are the Funds’ investment management fees?”

Costs of the Transaction.  Each Fund will pay 25% of the expenses of the Transaction, including proxy solicitation costs.  Franklin Advisers, Inc. (“FAV” or the “Investment Manager”) will pay the remaining 50% of such expenses.  The total amount of the expenses for the Transaction is estimated to be approximately $305,000 (or approximately $76,250 to be paid by each Fund) and will be allocated in the foregoing manner whether or not the Reorganization is consummated.  The Board of the Trust and Fund management believed that a partial allocation of Transaction expenses to each Fund was appropriate because the Transaction is expected to be beneficial to each Fund and its shareholders.  For a more detailed discussion of the considerations of the Board, see the section below titled “REASONS FOR THE TRANSACTION.”

What are the federal income tax consequences of the Transaction?

The Transaction is intended to qualify as a tax-free reorganization for federal income tax purposes, and the delivery of a legal opinion to that effect is a condition of closing the Transaction, although there can be no assurance that the Internal Revenue Service (“IRS”) will adopt a similar position.  Being a tax-free reorganization means that, subject to the limited exceptions described below under the heading “FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION,” the shareholders of the Insured Tax-Free Fund will recognize no income, gain or loss for federal income tax purposes upon the exchange of all of their shares in the Insured Tax-Free Fund for shares in the Federal Tax-Free Fund.  Shareholders should consult their tax advisers about state and local tax consequences of the Transaction, if any, because the information about tax consequences in this Prospectus/Proxy Statement relates only to the federal income tax consequences of the Transaction.  For more information, please see the section “FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION.”

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How do the distribution and purchase procedures of the Funds compare?

Shares of the Insured Tax-Free Fund and the Federal Tax-Free Fund are sold on a continuous basis by Franklin Templeton Distributors, Inc. (“Distributors”).  Distribution and purchase procedures are the same for each Fund.  Currently, however, the Insured Tax-Free Fund is closed to all new investments (other than reinvestment of dividends and capital gains distributions).

For a more complete discussion, see the section below titled “COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS ‒What are the distribution and purchase procedures of the Funds?”

How do the redemption procedures and exchange privileges of the Funds compare?

The Funds have the same redemption procedures and exchange privileges except that the Insured Tax-Free Fund is closed to all new investments (other than reinvestment of dividends and capital gains distributions).

For a more complete discussion, see the section below titled “COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS ‒What are the redemption procedures and exchange privileges of the Funds?”

What is the anticipated timing of the Transaction?

The Meeting is scheduled to occur on November 7, 2016.  If the necessary approval is obtained, the Transaction will likely be completed on or about December 2, 2016.

What happens if the Transaction is not approved?

If the Transaction is not approved by the Insured Tax-Free Fund’s shareholders or does not close for any reason, such shareholders will remain shareholders of the Insured Tax-Free Fund, and the Insured Tax-Free Fund will continue to operate.  The Board then will consider such other actions as it deems necessary or appropriate, including possible liquidation, for the Insured Tax-Free Fund.

How will shareholder voting be handled?

Shareholders who own shares of the Insured Tax-Free Fund at the close of business on August 15, 2016, will be entitled to vote at the Meeting, and will be entitled to one vote for each full share and a proportionate fractional vote for each fractional share that they hold.  Approval of the Transaction by the Insured Tax-Free Fund requires the affirmative vote of the lesser of:  (i) a majority of the outstanding shares of the Insured Tax-Free Fund or (ii) 67% or more of the outstanding shares of the Insured Tax-Free Fund present at or represented by proxy at the Meeting if the holders of more than 50% of the outstanding shares of the Insured Tax-Free Fund are present or represented by proxy (“1940 Act Majority Vote”).  AST/DF King Group has been retained by the Insured Tax-Free Fund to collect and tabulate shareholder votes.

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Please vote by proxy as soon as you receive this Prospectus/Proxy Statement.  You may cast your vote by completing, signing, and mailing the enclosed proxy card, by calling the number on the enclosed proxy card, or, via the Internet by following the on-line instructions if your account is eligible.  If you vote by any of these methods, the persons appointed as proxies will officially cast your votes on your behalf at the Meeting.  You may also attend the Meeting and cast your vote in person at the Meeting. 

You can revoke your proxy or change your voting instructions at any time until the vote is taken at the Meeting.  For more details about shareholder voting, see the “VOTING INFORMATION” section of this Prospectus/Proxy Statement. 

What is the Board’s recommendation regarding the proposal?

The Board recommends that you vote FOR the Plan.  At a meeting held on May 17, 2016, the Board, on behalf of the Insured Tax-Free Fund, considered the proposal to reorganize the Insured Tax-Free Fund with and into the Federal Tax-Free Fund, unanimously approved the Plan, and voted to recommend that shareholders of the Insured Tax-Free Fund vote to approve the Plan.  For the reasons set forth in the “REASONS FOR THE TRANSACTION” section of this Prospectus/Proxy Statement, the Board, including the Independent Trustees, has determined that participation in the Transaction is in the best interests of the Insured Tax-Free Fund.  The Board also concluded that no dilution in value would result to the shareholders of the Insured Tax-Free Fund as a result of the Transaction. 

THE BOARD, ON BEHALF OF THE INSURED TAX-FREE FUND, RECOMMENDS THAT YOU VOTE TO APPROVE THE PLAN.

COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS

Are there any significant differences between the investment goals, strategies, and policies of the Funds?

Identical Investment Goals.  Both Funds’ fundamental investment goal is to provide investors with as high a level of income exempt from federal income taxes as is consistent with prudent investment management and the preservation of shareholders’ capital. 

Similar Principal Investment Strategies.  The Insured Tax-Free Fund and the Federal Tax-Free Fund have similar principal investment strategies but there are some differences.  Under normal market conditions, each Fund invests at least 80% of its total assets in securities whose interest is free from federal income taxes, including the federal alternative minimum tax.  Although both Funds try to invest all of their assets in tax-free securities, it is possible that up to 20% of each Fund’s assets may be in securities that pay interest that may be subject to the federal alternative minimum tax and, although not anticipated, in securities that pay taxable interest.

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In addition, the Federal Tax-Free Fund invests at least 80% of its total assets in investment grade municipal securities, and the Insured Tax-Free Fund invests at least 80% of its net assets in insured municipal securities.  Under normal market conditions, and to the extent available, the Insured Tax-Free Fund seeks to invest in municipal securities that are secured by an insurance policy issued by an insurer rated investment grade at the time of purchase.  The Federal Tax Free Fund may also invest in insured municipal securities. 

Thus, the main difference between the portfolio strategies of the Funds is that the Insured Tax-Free Fund, consistent with its name, invests at least 80% of its net assets in insured municipal securities.  The Federal Tax-Free Fund does not have this policy.  However, the Federal Tax-Free Fund may still invest in insured municipal securities (although not required to do so), and both Funds buy municipal securities that are rated (or insured by an insurer rated) at the time of purchase in one of the top four ratings by a U.S. nationally recognized rating service (or comparable unrated securities); however,  the Federal Tax-Free Fund has a fundamental policy requiring that 80% of its total assets be of investment grade. 

The Insured Tax-Free Fund and the Federal Tax-Free Fund do not necessarily focus their investments in a particular state or territory.  The Insured Tax-Free Fund may invest up to 35% of its total assets in municipal securities issued by U.S. territories, such as Puerto Rico, Guam and the U.S. Virgin Islands.  The Federal Tax-Free Fund also may invest in municipal securities issued by U.S. territories, but is not subject to a percentage limitation.

The Investment Manager selects securities for both Funds that it believes will provide the best balance between risk and return within the Fund’s range of allowable investments and typically uses a buy and hold strategy.  This means it generally holds securities in the Fund’s portfolio for income purposes, rather than trading securities for capital gains, although the Investment Manager may sell a security at any time if it believes such sale could help the Fund meet its investment goal.  In addition, the Investment Manager for both Funds also may consider the cost of insurance when selecting securities for a Fund. 

Fundamental Investment Policies (i.e., a policy changeable only by shareholders’ vote): The Funds have the same fundamental investment restrictions regarding borrowing money, acting as underwriter, making loans, purchasing or selling real estate or physical commodities, issuing senior securities, concentrating in an industry, and purchasing the securities of any one issuer.

One difference in fundamental policies between the Funds is that the Federal Tax-Free Fund has a fundamental policy to invest under normal market conditions at least 80% of its total assets in investment grade municipal securities whose interest is free from federal income taxes, including the federal alternative minimum tax, whereas the Insured Tax-Free Fund has a fundamental investment policy to invest under normal market conditions at least 80% of its total assets in securities whose interest is free from federal income taxes, including the federal alternative minimum tax.  However, as noted above, the Insured Tax-Free Fund, under normal market conditions and to the extent available, seeks to invest in municipal securities that are insured by an insurance policy issued by a municipal bond insurer rated investment grade at the time of purchase.

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For more information about the investment goals, strategies and policies of the Funds please see the section entitled “COMPARISONS OF INVESTMENT GOALS, STRATEGIES, POLICIES AND RISKS” in this Prospectus/Proxy Statement.  

How do the principal investment risks of the Funds compare?

Investments in both Funds involve risks common to most mutual funds.  You could lose money by investing in either Fund.  Both Funds invest predominantly in the investment grade municipal fixed income securities that pay interest free from federal income taxes.  Thus, for the most part, they are subject to the same risks.  While both Funds have exposure to bond insurer risk, due to the nature of the Insured Tax-Free Fund’s portfolio, the Insured Tax Free Fund has greater exposure to bond insurer risk.

Principal Investment Risks Common to Both Funds	Principal Investment Risk Applicable to the Insured Tax-Free Fund but not the Federal Tax-Free Fund
Interest Rate Market Credit Focus Tax-Exempt Securities Income Prepayment States and U.S. Territories Liquidity Management	Bond Insurers

For more information about the principal risks of the Funds, please see the section “COMPARISONS OF INVESTMENT GOALS, STRATEGIES, POLICIES AND RISKS – What are the principal investment risks associated with investments in the Funds?”

What are the distribution and purchase procedures of the Funds? 

Shares of each Fund are sold on a continuous basis by Distributors.  Currently, however, the Insured Tax-Free Fund is closed to all new investments (other than the reinvestment of dividends and capital gains distributions).  Class A shares of each Fund are generally sold at NAV per share plus a sales charge.  The maximum front-end sales charge imposed on purchases of Class A shares of both Funds is 4.25% with reduced charges for purchases of $100,000 or more and no front-end sales charge for purchases of $1 million or more.  There is a 0.75% contingent deferred sales charge (“CDSC”) for purchases of $1,000,000 or more if the Class A shares are sold within 18 months of purchase.  Class C shares are generally subject to a 1% CDSC on shares sold within 12 months.  Advisor Class shares of each Fund are not subject to a sales charge. 

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Holders of Class A shares of the Insured Tax-Free Fund will not be assessed a sales charge on their receipt of the Federal Tax-Free Class A shares in connection with the Transaction.  No CDSC will be charged to the Insured Tax-Free Fund shareholders in connection with the exchange of their shares pursuant to the terms of the Transaction.  Additional information and specific instructions explaining how to buy shares of each Fund are outlined in each Fund’s Prospectus under the heading “Your Account.”

What are the redemption procedures and exchange privileges of the Funds? 

Each Fund offers the same redemption features pursuant to which redemption proceeds are remitted by check after prompt receipt of proper documents, including signature guarantees under certain circumstances.  Each Fund’s shares may be redeemed at any time at the NAV next calculated after a shareholder’s request is received in proper form.  Each Fund has the same exchange privileges in that you can exchange shares between most Franklin Templeton Funds within the same class, generally without paying any additional sales charges.  Shares of each Fund may be redeemed at their respective NAV per share subject to any applicable CDSC.  However, for purchases of $1 million or more, redemptions of Class A shares of a Fund that were purchased without an initial sales charge generally are subject to a 0.75% CDSC if redeemed within 18 months of their purchase.  Class C shares generally are subject to a 1% CDSC if redeemed within 12 months of their purchase.  Advisor Class shares of each Fund are not subject to a CDSC.  Additional information and specific instructions explaining how to redeem, and exchange shares of each Fund are outlined in each Fund’s Prospectus under the heading “Your Account.”  Each Fund’s Prospectus also lists, under the heading “Questions,” phone numbers for you to call if you have any questions about your account.

Who manages the Funds?

A board of trustees provides general oversight of the business and affairs of each Fund but is not involved in day-to-day management or securities selection.  The Insured Tax-Free Fund (operating as a diversified series of the Trust) and the Federal Tax-Free Fund are each an open-end management investment company (commonly called a mutual fund) registered with the SEC.  The Insured Tax-Free Fund operates as a diversified series of the Trust. 

Investment Manager.  FAV, One Franklin Parkway, San Mateo, CA 94403-1906, serves as Investment Manager for both Funds.  FAV is a wholly owned subsidiary of Franklin Resources, Inc. (“FRI”).  FRI is a publicly owned holding company with its principal offices located at One Franklin Parkway, San Mateo, CA 94403-1906.  FAV and its affiliates serve as investment manager or administrator to 45 registered investment companies, with approximately 162 U.S.-based funds or series.  Franklin Templeton Investments had over $737 billion in assets under management as of May 31, 2016.  Charles B. Johnson (former Chairman and Director of FRI) and Rupert H. Johnson, Jr. are principal shareholders of FRI.

Fund Management Team.  Each Fund is managed by a team of dedicated professionals focused on investments in tax-free securities.  The portfolio managers have responsibility for the day-to-day management of the Funds and operate as a team to develop ideas and implement investment strategy for each of the Funds. 

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Insured Tax-Free Fund Portfolio Management Team	Federal Tax-Free Fund Portfolio Management Team
James Conn, CFA has been a portfolio manager of the Fund since 1999.	Carrie Higgins has been a portfolio manager of the Fund since 2004.
John Pomeroy has been a portfolio manager of the Fund since 1989.	Francisco Rivera has been a portfolio manager of the Fund since 1996.
	Sheila Amoroso has been a portfolio manager of the Fund since 1987.

The current members of the Federal Tax-Free Fund portfolio management team are expected to continue to manage the Federal Tax-Free Fund after the Transaction.  The SAI for the Insured Tax-Free Fund, dated [July 1, 2016] (the “Insured Tax-Free Fund SAI”) and the SAI for the Federal Tax-Free Fund dated [September 1, 2016] (the “Federal Tax-Free Fund SAI”), provide additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers, and the portfolio managers’ ownership of securities in the Funds.  For information on how to obtain a copy of the Insured Tax-Free Fund SAI and the Federal Tax-Free Fund SAI, please see the section entitled “INFORMATION ABOUT THE FUNDS.”

What are the Funds’ investment management fees?

Currently, the investment management fee rate currently paid by the Federal Tax-Free Fund is slightly lower than the Insured Tax-Free Fund due to the Federal Tax-Free Fund’s greater asset size.  The overall annual investment management fee ratio for the Federal Tax-Free Fund is currently 0.45%.  The overall annual investment management fee ratio for the Insured Tax-Free Fund is currently 0.46%.  As shown in the table below, the investment management fee rate, including breakpoints are the same in each Fund’s investment management agreement with FAV and are as follows:

·0.625% of the value of the average daily net assets up to and including $100 million;

·0.500% of the value of the average daily net assets over $100 million up to and including $250 million;

·0.450% of the value of the average daily net assets over $250 million up to and including $7.5 billion;

·0.440% of the value of the average daily net assets over $7.5 billion up to and including $10 billion;

·0.430% of the value of the average daily net assets over $10 billion up to and including $12.5 billion;

·0.420% of the value of the average daily net assets over $12.5 billion up to and including $15 billion;

·0.400% of the value of the average daily net assets over $15 billion up to and including $17.5 billion;

·0.380% of the value of the average daily net assets over $17.5 billion up to and including $20 billion; and

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·0.360% of the value of the average daily net assets in excess of $20 billion.

For the fiscal year ended February 29, 2016, the Insured Tax-Free Fund paid FAV investment management fees of $9,488,983.  For the fiscal year ended April 30, 2016, the Federal Tax-Free Fund paid FAV investment management fees of $49,246,769.  A discussion regarding the basis for the board approval of the investment management agreement for the applicable Fund is available in each Fund’s most recent Annual Report to Shareholders (for the fiscal year ended February 29, 2016, for the Insured Tax-Free Fund and April 30, 2016, for the Federal Tax-Free Fund.)

Each Fund has an investment management arrangement that includes both investment management and administrative services, and the agreements are substantially similar.  FAV has subcontracted with Franklin Templeton Services, LLC (“FT Services”) to provide administrative services and facilities to each Fund.  For such services, FAV pays FT Services an administrative fee out of its investment management fees from a Fund. 

What are the fees and expenses of each Fund and what might they be after the Transaction?

The tables below describe the fees and expenses that you may pay if you buy and hold shares of the Funds.  Expense ratios reflect annual fund operating expenses for the most recently completed fiscal year for each of the Insured Tax-Free Fund and Federal Tax-Free Fund as reflected in each Fund’s current prospectus (i.e., the fiscal year end February 29, 2016 for the Insured Tax-Free Fund and April 30, 2016 for the Federal Tax-Free Fund).  The tables also show the pro forma estimated fees and expenses for the Federal Tax-Free Fund, assuming that (i) shareholders of the Insured Tax-Free Fund approve the Plan; (ii) the Transaction had been completed as of the beginning of the Federal Tax-Free Fund’s last completed fiscal year; and (iii) the Federal Tax-Free Fund had one-year of combined operations.  The purpose of the tables is to assist you in understanding the various costs and expenses that you would bear directly or indirectly as a shareholder of the combined Federal Tax-Free Fund.

You will not pay any initial or deferred sales charge in connection with the Transaction. 

TABLE OF SHAREHOLDER FEES (both Funds)

The following table shows shareholder fees paid directly from a new investment, which will remain the same after the Transaction.  You will not pay these charges in connection with the Transaction. 

Shareholder Fees (fees paid directly from your investment)	Class A	Class C	Advisor Class
Maximum sales charge (load) imposed on purchase (as a percentage of offering price)	4.25%	None	None
Maximum deferred sales charge (load) (as a percentage of the lower of original purchase price or sales proceeds)	None1	1.00%	None

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¹ There is a 0.75% CDSC that applies to investments of $1 million or more (see “Investments of $1 Million or More” under “Choosing a Share Class” in each Fund’s prospectus) and purchases by certain retirement plans without an initial sales charge.

ANNUAL OPERATING EXPENSE TABLE FOR CLASS A, CLASS C AND ADVISOR CLASS SHARES OF THE FUNDS AND PROJECTED FEES AFTER THE TRANSACTION

ANNUAL FUND OPERATING EXPENSES1 (expenses that you pay each year as a percentage of the value of your investment)	Insured Tax-Free Fund (Class A)	Federal Tax-Free Fund (Class A)	Pro Forma Federal Tax-Free Fund2 (Class A)
Management fees	0.46%	0.45%	0.44%
Distribution and service (12b-1) fees	0.09%	0.10%	0.10%
Other expenses	0.05%	0.06%	0.07%
Total annual Fund operating expenses	0.60%	0.61%	0.61%
ANNUAL FUND OPERATING EXPENSES1	Insured Tax-Free Fund (Class C)	Federal Tax-Free Fund (Class C )	Pro Forma Federal Tax-Free Fund2 (Class C)
Management fees	0.46%	0.45%	0.44%
Distribution and service (12b-1) fees	0.65%	0.65%	0.65%
Other expenses	0.05%	0.06%	0.07%
Total annual Fund operating expenses	1.16%	1.16%	1.16%
ANNUAL FUND OPERATING EXPENSES1	Insured Tax-Free Fund (Advisor Class)	Federal Tax-Free Fund (Advisor Class)	Pro Forma Federal Tax-Free Fund2 (Advisor Class)
Management fees	0.46%	0.45%	0.44%
Distribution and service (12b-1) fees	None	None	None
Other expenses	0.05%	0.07%	0.07%
Total annual Fund operating expenses	0.51%	0.51%	0.51%

¹          Expense ratios reflect annual fund operating expenses for February 29, 2016 for the Insured Tax-Free Fund, and April 30, 2016 for the Federal Tax-Free Fund, the most recent fiscal year reflected in such Fund’s current prospectus. 

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²          Pro forma expenses are based on current and anticipated Federal Tax-Free Fund expenses as if (1) the Transaction had been effective as of March 1, 2015 and (2) the Federal Tax-Free Fund had one year of combined operations.  The Federal Tax-Free Fund’s pro forma expenses do not include estimated costs of the Transaction of approximately $76,250 to be borne by each Fund or approximately 0.004% of the Insured Tax-Free Fund’s net assets and 0.001% of the Tax-Free Fund’s net assets as of April 30, 2016.

Example

These examples are intended to help you compare the cost of investing in the Insured Tax-Free Fund’s Class A, Class C and Advisor Class shares with the cost of investing in the Federal Tax-Free Fund Class A, Class C and Advisor Class shares, both before and after the Transaction.  The example assumes:

• You invest $10,000 in the Insured Tax-Free Fund and in the Federal Tax-Free Fund for the periods shown;
• Your investment has a 5% return each year;
• The Fund’s operating expenses remain the same; and
• You sell your shares at the end of the period.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Insured Tax-Free Fund - Class A	$4841	$609	$746	$1,143
Federal Tax-Free Fund - Class A	$4851	$612	$751	$1,155
Pro Forma Federal Tax-Free Fund - Class A (assuming the Transaction is completed)	$485	$612	$751	$1,155

^1.  Assumes a CDSC will not apply.

	1 Year	3 Years	5 Years	10 Years
Insured Tax-Free Fund - Class C	$218	$368	$638	$1,409
Federal Tax-Free Fund - Class C	$218	$368	$638	$1,409
Pro Forma Federal Tax-Free Fund - Class C (assuming the Transaction is completed)	$218	$368	$638	$1,409
If you do not sell your shares:
Insured Tax-Free Fund - Class C	$118	$368	$638	$1,409
Federal Tax-Free Fund - Class C	$118	$368	$638	$1,409
Pro Forma Federal Tax-Free Fund - Class C (assuming the Transaction is completed)	$118	$368	$638	$1,409
	1 Year	3 Years	5 Years	10 Years
Insured Tax-Free Fund – Advisor Class	$52	$164	$285	$640
Federal Tax-Free I Fund – Advisor Class	$52	$164	$285	$640
Pro Forma Federal Tax-Free Fund – Advisor Class (assuming the Transaction is completed)	$52	$164	$285	$640

How do the performance records of the Funds compare?

[The Insured Tax-Free Fund, on an average annual total return basis, has underperformed the Federal Tax-Free Fund for the one year, five year, ten year and since inception periods as of [June 30], 2016]]. The average annual total return for Class A, Class C and Advisor Class shares of the Funds, including any applicable sales charges and before taxes as of [June 30, 2016] are shown below.

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Average Annual Total Return	Insured Tax-Free Fund Class A (with sales load)	Federal Tax-Free Fund Class A (with sales load)
1 Year	[   ]%	[   ]%
5 Year	[   ]%	[   ]%
10 Year	[   ]%	[   ]%
Since Inception	[   ]% (4/3/95)	[   ]% (10/7/83)
Average Annual Total Return	Insured Tax-Free Fund Class A (without sales load)	Federal Tax-Free Fund Class A (without sales load)
1 Year	[   ]%	[   ]%
5 Years	[   ]%	[   ]%
10 Years	[   ]%	[   ]%
Since Inception	[   ]% (4/3/95)	[   ]% (10/7/83)
Average Annual Total Return	Insured Tax-Free Fund Class C (with sales load)	Federal Tax-Free Fund Class C (with sales load)
1 Year	[   ]%	[   ]%
5 Year	[   ]%	[   ]%
10 Year	[   ]%	[   ]%
Since Inception	[   ]% (4/3/95)	[   ]% (10/7/83)
Average Annual Total Return	Insured Tax-Free Fund Class C (without sales load)	Federal Tax-Free Fund Class C (without sales load)
1 Year	[   ]%	[   ]%
5 Year	[   ]%	[   ]%
10 Year	[   ]%	[   ]%
Since Inception	[   ]% (4/3/95)	[   ]% (10/7/83)
Average Annual Total Return	Insured Tax-Free Fund Advisor Class	Federal Tax-Free Fund Advisor Class
1 Year	[   ]%	[   ]%
5 Year	[   ]%	[   ]%
10 Year	[   ]%	[   ]%
Since Inception	[   ]% (4/3/95)	[   ]% (10/7/83)

Included in the financial highlights tables of the Insured Tax-Free Fund Prospectus and the Federal Tax-Free Fund Prospectus (enclosed) are the (1) total returns for the Insured Tax-Free Fund, for the past five fiscal years ended February 29, 2016, and the (2) Federal Tax-Free Fund’s total returns for the past five fiscal years ended April 30, 2016, respectively.

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The Funds’ past performance is not necessarily an indication of how the Funds will perform in the future.  You can obtain updated performance information at franklintempleton.com or by calling (800) DIAL BEN/342-5236.

Where can I find more financial and performance information about the Funds?

The Federal Tax-Free Fund Prospectus (enclosed), the Insured Tax-Free Fund Prospectus, the Federal Tax-Free Fund’s Annual Report to Shareholders for the fiscal year ended February 29, 2016, and the Insured Tax-Free Fund’s Annual Report for the fiscal year ended April 30, 2016 contain additional financial and performance information about the Funds, including each Fund’s financial performance for the past five years, under the heading “Financial Highlights.”  Additional performance information as of the calendar year ended December 31, 2015, including after-tax return information, is contained in the Federal Tax-Free Fund Prospectus (enclosed) under the heading “Performance.”  These documents are available free of charge upon request (see the section “INFORMATION ABOUT THE FUNDS”). 

What are other key features of the Funds?  

Service Providers.  The Funds use the same service providers for the following services:

·Custody Services.  The Bank of New York Mellon, Mutual Funds Division, 100 Church Street, New York, NY 10286, acts as custodian of each Fund’s securities and other assets. 

·Transfer Agency Services.  Franklin Templeton Investor Services, LLC, 3344 Quality Drive, Rancho Cordova, CA 95670-7313, an indirect wholly owned subsidiary of FRI, is each Fund’s shareholder servicing agent and acts as the Funds’ transfer agent and dividend-paying agent. 

·Administrative Services.  FT Services, One Franklin Parkway, San Mateo, CA 94403-1906, an indirect wholly owned subsidiary of FRI, has an agreement with FAV to provide certain administrative services and facilities for the Funds.  The administrative services include preparing and maintaining books, records and tax and financial reports and monitoring compliance with regulatory requirements.

·Distribution Services.  Distributors, One Franklin Parkway, San Mateo, CA 94403-1906, acts as the principal underwriter in the continuous public offering of each Fund’s shares under the same terms and conditions.

·Independent Registered Public Accounting Firm.  PricewaterhouseCoopers LLP, Three Embarcadero Center, San Francisco, CA 94111-4004, serves as each Fund’s independent registered public accounting firm.  The independent registered public accounting firm audits the financial statements included in the Funds’ Annual Report to Shareholders. 

Distribution and Service (12b-1) Fees.  Class A and Class C shares of the Funds have a distribution or “Rule 12b-1” plan.  Under the Rule 12b-1 plan, the Funds may pay Distributors or others for the expenses of activities that are primarily intended to sell shares of that class.  These expenses may include, among others, service fees paid to securities dealers or others who have executed a servicing agreement with a Fund, Distributors or its affiliates and who provide service or account maintenance to shareholders (service fees); and the expenses of printing prospectuses and reports used for sales purposes, of marketing support and of preparing and distributing sales literature and advertisements.  The distribution and service (12b-1) fees charged are based only on expenses attributable to that particular class. 

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Under the Class A Rule 12b-1 Plan for the Funds, each Fund may pay up to 0.10% per year of the average daily net assets of Class A shares.Under the Class C Rule 12b-1 Plan for the Funds, each Fund pays Distributors up to 0.65% per year of Class C’s average daily net assets.  Advisor Class shares have no Rule 12b-1 plan.  For more information regarding the Federal Tax-Free Fund’s Rule 12b-1 plan, please see “The Underwriter—Distribution and service (12b-1) fees – Class A and C” in each Fund’s SAI.

Fiscal Years.  The fiscal year end of the Insured Tax-Free Fund is February 28^th.  The fiscal year end of the Federal Tax-Free Fund is April 30^th.

Dividends and Distributions.  Both Funds intend to pay income dividends at least monthly from net investment income.  The Funds may distribute income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on a Fund.  Capital gains, if any, may be paid at least annually.  The amount of any distribution will vary, and there is no guarantee a Fund will pay either income dividends or capital gain distributions.  Your income dividends and capital gain distributions will be automatically reinvested in additional shares at NAV unless you elect to receive them in cash.

Tax. The tax implications of an investment in each Fund are generally the same.  For more information about the tax implications of investments in the Funds, see the Fund’s Prospectus under the heading “Distributions and Taxes.”

REASONS FOR THE TRANSACTION

At a meeting of the Board on May 17, 2016 (the “May Meeting”), FAV recommended to the Board that it approve the reorganization of the Insured Tax-Free Fund with and into the Federal Tax-Free Fund.  FAV recommended the Transaction because of the identical investment goals, and similar principal investment strategies and principal risks of the Funds and the fact that the Transaction may benefit shareholders of the Insured Tax-Free Fund by enabling them to be investors in a fund with a larger asset size that is open to investors, similar annual fund operating expenses (on a pro forma combined basis), generally comparable credit quality, similar average annual total return, and more favorable sales prospects.

At the May Meeting, the Board considered and approved the proposed Transaction.  The Independent Trustees were advised on this matter by independent counsel. 

The Board requested and received from FAV written materials containing relevant information about the Federal Tax-Free Fund and the proposed Transaction, including fee and expense information on an actual and future estimated basis, and comparative performance data of the Insured Tax-Free Fund and the Federal Tax-Free Fund. 

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The Board reviewed detailed information about: (1) the investment goal, strategies and policies of the Funds; (2) the portfolio management and other service providers of the Funds; (3) the comparability of the investment goals, policies, restrictions and investments of the Funds; (4) the comparative short-term and long-term investment performance of the Funds; (5) the current expense ratios of each Fund and the anticipated post-Transaction expense ratio of the Federal Tax-Free Fund; (6) the relative asset size of each Fund, including the benefits to the Insured Tax-Free Fund of joining with a larger fund; (7) how the costs of the Transaction will be shared, including FAV’s agreement to pay a portion of the expenses related to the Transaction; (8) the federal income tax consequences of the Transaction to each Fund’s shareholders; and (9) the general characteristics of the Funds.

The Board considered the potential benefits, risks and costs of the Transaction to shareholders of the Insured Tax-Free Fund.  In approving the Transaction, the Board considered the following factors:

Limited insured municipal securities market.  FAV has observed that there is a lack of availability of insurance from new insurers in the insured municipal securities market and significantly reduced availability of insurance from existing municipal bond insurers.  Given the lack of growth in the insured municipal securities market, FAV believes it can no longer effectively manage an insured municipal securities fund. 

Larger Acquiring Fund.  As of March 31, 2016, the Federal Tax-Free Fund had a significantly larger asset base (approximately $10.98 billion) than the Insured Tax-Free Fund (approximately $1.98 billion). 

Federal Tax‑Free Fund’s Similar Expenses.  The Federal Tax-Free Fund’s annual operating expense ratios (on a pro forma combined fund basis) for each applicable share class are the same or within one basis point (0.01%) of the Insured Tax-Free Fund’s annual operating expense ratios for the corresponding share class.

Similar Investment Objectives and Strategies.  Both Funds have similar investment strategies and are managed by the same Investment Manager.  Both Funds invest at least 80% of their net assets in fixed income securities whose interest is free from federal income taxes, including the federal alternative minimum tax.  Even though the Insured Tax-Free Fund focuses on investing in insured municipal securities, the Federal Tax-Free Fund may invest in such securities and will be able to hold such securities after the proposed Transaction.  Management expects that the Federal Tax Free Fund will retain a significant majority of the current portfolio holdings of the Insured Tax-Free Fund.

Performance.  The Insured Tax-Free Fund, on both an average annual total return and income total return basis, has outperformed the Federal Tax-Free Fund for the one and three year periods, but the Federal Tax Free Fund has slightly outperformed the Insured Tax Free Fund for the five year, ten year and since inception period as of March 31, 2016. 

Comparable Credit Quality.  As of February 29, 2016, both Funds have invested over 85% of their portfolio in investment grade securities.

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No Asset Growth in Insured Tax-Free Fund.  The Insured Tax-Free Fund has been closed since 2013 to all new investors and additional investments from existing shareholders, except for purchases made through reinvestment of dividends or capital gains distributions.  Management believes it is unlikely that the Fund will re-open to new investments. 

Tax-Free Reorganization.  The Transaction is anticipated to be treated as a tax-free reorganization for federal income tax purposes.

Costs of the Transaction.  The Board considered that the Plan provided that each Fund will pay 25% of the expenses of the Transaction with FAV paying the remaining 50% of such expenses.  In considering the Transaction expenses to be borne by each Fund, the Board also considered that the Transaction will offer shareholders of the Insured Tax-Free Fund the opportunity to reorganize into a fund with a larger asset size that is open to investors and that shareholders of the Federal Tax-Free Fund could benefit from the Transaction to the extent that the Federal Tax-Free Fund receives certain securities for its portfolio that it would otherwise acquire from the Insured Tax-Free Fund without transaction costs.

Based upon their evaluation of the relevant information presented to them, and in light of their fiduciary duties under federal and state law, the Board, on behalf of the Insured Tax-Free Fund, and the Board of the Federal Tax-Free Fund, including all of the Independent Trustees, concluded that participating in the Transaction is in the best interests of the Insured Tax-Free Fund and the Federal Tax-Free Fund, respectively, and that no dilution of value would result to the respective shareholders of the Insured Tax-Free Fund and the Federal Tax-Free Fund from the Transaction.  The Board unanimously approved the Plan on May 17, 2016, and recommended that shareholders of the Insured Tax-Free Fund vote to approve the Plan. 

FOR THE REASONS DISCUSSED ABOVE, THE BOARD, ON BEHALF OF THE INSURED TAX-FREE FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PLAN

INFORMATION ABOUT THE TRANSACTION

This is only a summary of the Plan.  You should read the form of the Plan, which is attached as Exhibit A, for more complete information about the Transaction. 

How will the Transaction be carried out?

If the shareholders of the Insured Tax-Free Fund approve the Plan, the Transaction will be completed after various conditions are satisfied, including the preparation of certain documents.  If the shareholders of the Insured Tax-Free Fund do not approve the Plan, the Transaction will not take place, and the Insured Tax-Free Fund will continue to operate as it currently does, and the Board will consider such other actions as it deems necessary or appropriate. 

If the shareholders of the Insured Tax-Free Fund approve the Plan, the officers of the Trust and the Federal Tax-Free Fund will determine a specific date, called the “closing date,” for the actual Transaction to take place.  The Insured Tax-Free Fund will transfer substantially all of its assets, free and clear of all liens, encumbrances, and claims whatsoever (other than shareholders’ rights of redemption), to the Federal Tax-Free Fund on the closing date, which is scheduled to occur on or about December 2, 2016 (the “Closing Date”), but which may occur on an earlier or later date as the officers of the Trust and the Federal Tax-Free Fund may mutually agree.  The Federal Tax-Free Fund will not assume any liabilities of the Insured Tax-Free Fund, whether accrued or contingent, known or unknown, and the Trust, on behalf of the Insured Tax-Free Fund, will use its reasonable best efforts to discharge all of the known liabilities of the Insured Tax-Free Fund.  In exchange, the Federal Tax-Free Fund will issue the Federal Tax-Free Fund Shares that have an aggregate NAV equal to the dollar value of the assets delivered to the Federal Tax-Free Fund by the Trust, on behalf of the Insured Tax-Free Fund.  The Trust, on behalf of the Insured Tax-Free Fund will distribute to its shareholders the Federal Tax-Free Fund Shares it receives.  Each shareholder of the Insured Tax-Free Fund will receive the Federal Tax-Free Fund Shares with an aggregate NAV equal to the aggregate NAV of his or her shares of the Insured Tax-Free Fund.  The share transfer books of the Insured Tax-Free Fund will be permanently closed as of 1:00 p.m., Pacific time, on the Closing Date.  The Insured Tax-Free Fund will accept requests for redemptions only if received in proper form before 1:00 p.m., Pacific time, on the Closing Date.  Requests received after that time will be considered requests to redeem the Federal Tax-Free Fund Shares.  Prior to the Closing Date, the Trust, on behalf of the Insured Tax-Free Fund, will pay or make provision for payment of all its remaining liabilities, if any.  At the closing, each shareholder of record of the Insured Tax-Free Fund shall have the right to receive any unpaid dividends or distributions declared prior to the closing, including any declared dividend or distribution, with respect to shares of the Insured Tax-Free Fund that such shareholder had on the distribution record date.  The Insured Tax-Free Fund will then terminate its existence, liquidate, and dissolve.

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The obligations under the Plan of the Funds are subject to various conditions, including:

•     the Federal Tax-Free Fund’s Registration Statement on Form N-14 under the Securities Act of 1933, of which this Prospectus/Proxy Statement is a part, shall have been filed with the SEC, such Registration Statement shall have become effective, no stop-order suspending the effectiveness of the Registration Statement shall have been issued, and no proceeding for that purpose shall have been initiated or threatened by the SEC (and not withdrawn or terminated);

•     the shareholders of the Insured Tax-Free Fund shall have approved the Transaction; and

•     both the Trust, on behalf of the Insured Tax-Free Fund, and the Federal Tax-Free Fund, shall have received the tax opinion described below that the consummation of the Transaction will not result in the recognition of gain or loss for federal income tax purposes for the Insured Tax-Free Fund, the Federal Tax-Free Fund, or their shareholders. 

Both the Trust, on behalf of the Insured Tax-Free Fund, and the Federal Tax-Free Fund may terminate or abandon the Plan at any time before or after the approval of the Plan by the shareholders of the Insured Tax-Free Fund. 

Following the Closing Date, any outstanding the Insured Tax-Free Fund share certificates shall be deemed cancelled.

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Who will pay the expenses of the Transaction?

Each Fund will pay 25% of the total cost of the Transaction and FAV will pay 50% of the total cost.  The total amount of such costs and expenses for the Transaction is estimated to be $305,000.  Thus, each Fund is expected to pay approximately $76,250 in connection with the Transaction. 

What should I know about the Federal Tax-Free Fund Shares?

The Federal Tax-Free Fund Shares that will be distributed to the Insured Tax-Free Fund shareholders generally will have the same legal characteristics as the shares of the Insured Tax-Free Fund with respect to such matters as voting rights, assessability, conversion rights, and transferability.  After the Transaction, shareholders of the Insured Tax-Free Fund whose shares are represented by outstanding share certificates will not receive certificates for the Federal Tax-Free Fund Shares and all outstanding the Insured Tax-Free Fund share certificates will be cancelled.  Evidence of share ownership of the former shareholders of the Insured Tax-Free Fund will be reflected electronically in the books and records of the Federal Tax-Free Fund.

What are the capitalizations of the Funds and what might the FederalTax-Free Fund’s capitalization be after the Transaction?

The following table sets forth as of February 29, 2016, the capitalizations of the Insured Tax-Free Fund and the Federal Tax-Free Fund.  The table also shows the projected capitalization of the Federal Tax-Free Fund as adjusted to give effect to the proposed Transaction.  The capitalization of the Federal Tax-Free Fund and its classes is likely to be different when the Transaction is actually consummated.

	Insured Tax-Free Fund	Federal Tax-Free Fund	Pro Forma Adjustments to Capitalization1 (Unaudited)	Federal Tax-Free Fund Pro Forma2 (Unaudited)
Net assets (all classes)	$1,998,546,900	$10,926,292,336	$(152,500)	$12,924,686,736
Total shares outstanding (all classes)	159,824,110	878,269,529	-	1,038,938,478
Class A net assets	$1,665,113,562	$8,295,453,864	$(121,419)	$9,960,446,007
Class A shares outstanding	133,418,065	666,810,657	-	800,662,230
Class A NAV per share	$12.48	$12.44	-	$12.44
Class C net assets	$275,327,489	$1,199,247,322	$(18,874)	$1,474,555,937
Class C shares outstanding	21,748,429	96,475,669	-	118,625,909
Class C NAV per share	$12.66	$12.43	-	$12.43
Advisor Class net assets	$58,105,849	$1,431,591,150	$(12,207)	$1,489,684,792
Advisor Class shares outstanding	4,657,616	114,983,203	-	119,650,339
Advisor Class NAV per share	$12.48	$12.45	-	$12.45

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1.Adjustments reflect the costs of the Transaction incurred by the Funds.

2.Numbers are projected after the Transaction. 

At the closing of the Transaction, shareholders of the Insured Tax-Free Fund will receive the Federal Tax-Free Fund Shares based on the relative NAVs per shares of the Funds as of 1:00 p.m., Pacific time, on the Closing Date.

COMPARISONS OF INVESTMENT GOALS, STRATEGIES, POLICIES AND RISKS

This section describes the similarities and compares the key differences between the investment goals, principal investment strategies and fundamental policies of the Funds, as well as the principal risks associated with such goals, strategies and policies.  The investment goals and certain investment policies of each Fund are fundamental, which means that they cannot be changed without the 1940 Act Majority Vote of that Fund’s outstanding shares.  Unless otherwise noted, the investment policies and strategies of each Fund are non-fundamental and may be changed without shareholder approval.  For a complete description of the Federal Tax-Free Fund’s investment policies, strategies and risks, you should read the Federal Tax-Free Fund Prospectus, which accompanies this Prospectus/Proxy Statement, and the Federal Tax-Free Fund SAI, which is available upon request. 

How do the investment goals, strategies, policies and risks of the Funds compare?

Identical Investment Goals. 

Both Funds’ fundamental investment goal is to provide investors with as high a level of income exempt from federal income taxes as is consistent with prudent investment management and the preservation of shareholders’ capital. 

Similar Principal Investment Strategies. 

The Insured Tax-Free Fund and the Federal Tax-Free Fund have similar principal investment strategies but there are some differences.  The following is a comparison of the Funds’ principal investment strategies, which are non-fundamental (i.e., they may be changed without shareholder approval) unless otherwise noted:

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Insured Tax-Free Fund Principal Investment Strategies	Federal Tax-Free Fund Principal Investment Strategies
Federal Tax-Exempt Income. Under normal market conditions, the Fund invests at least 80% of its total assets in securities whose interest is free from federal income taxes, including the federal alternative minimum tax (fundamental).	Federal Tax-Exempt Income. Under  normal market conditions, the Fund invests at least 80% of its total assets in investment grade municipal securities whose interest is free from federal income taxes, including the federal alternative minimum tax (fundamental).
Taxable Securities. Although the Fund tries to invest all of its assets in tax-free securities, it is possible that up to 20% of the Fund’s total assets may be in securities that pay interest that may be subject to the federal alternative minimum tax and, although not anticipated, in securities that pay taxable interest.	Taxable Securities. Same as Insured Tax-Free Fund.
Investment Grade and Insured Municipal Securities. The Fund invests at least 80% of its net assets in insured municipal securities. Insured municipal securities are covered by insurance policies that guarantee the timely payment of principal and interest. Generally, under normal market conditions and to the extent available, the Fund seeks to invest in insured municipal securities covered by policies issued by municipal bond insurers rated at least BBB.	Limited to Investment Grade Municipal Securities. The Fund only buys municipal securities rated, at the time of purchase, in one of the top four ratings categories by one or more U.S. nationally recognized rating services (or comparable unrated or short-term rated securities).
Municipal Securities of U.S. Territories. The Fund may invest up to 35% of its total assets in municipal securities issued by U.S. territories, such as Puerto Rico, Guam and the U.S. Virgin Islands.	Municipal Securities of U.S. Territories. The Fund may invest in municipal securities issued by U.S. territories, such as Puerto Rico, Guam and the U.S. Virgin Islands.
Focus. The Fund does not necessarily focus its investments in a particular state or territory, and will not invest more than 25% of its total assets in municipal securities of any one state or territory.	Focus. The Fund does not necessarily focus its investments in a particular state.
Security Selection. Although the Investment Manager will search for investments across a large number of municipal securities that finance different types of projects, from time to time, based on economic conditions, the Fund may have significant positions in municipal securities that finance similar types of projects. The Investment Manager selects securities that it believes will provide the best balance between risk and return within the Fund’s range of allowable investments and typically uses a buy and hold strategy. This means it generally holds securities in the Fund’s portfolio for income purposes, rather than trading securities for capital gains, although the Investment Manager may sell a security at any time if it believes it could help the Fund meet its goal. The Investment Manager also may consider the cost of insurance when selecting securities for the Fund.	Security Selection. Same as Insured Tax-Free Fund.

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How do the fundamental investment policies of the Funds differ?

One difference in fundamental policies between the Funds is that the Federal Tax-Free Fund has a fundamental policy to invest under normal market conditions at least 80% of its total assets in investment grade municipal securities whose interest is free from federal income taxes, including the federal alternative minimum tax, whereas the Insured Tax-Free Fund has a fundamental policy to invest under normal market conditions at least 80% of its total assets in securities whose interest is free from federal income taxes, including the federal alternative minimum tax.  The Funds’ fundamental investment policies with respect to borrowing money, acting as underwriter, making loans, purchasing or selling real estate or physical commodities, purchasing the securities of any one issuer, concentrating in an industry, and issuing senior securities are identical. 

What are the principal risk factors associated with investments in the Funds?

Like all investments, an investment in a Fund involves risk.  There is no assurance that any mutual fund will meet its investment goals.  The achievement of the Funds’ goals depends upon market conditions, generally, and on the Investment Manager’s analytical and portfolio management skills.  For more information about the principal risk factors associated with investments in the Funds, see each Prospectus under the heading “Fund Details – Principal Risks” and each Fund’s SAI under the heading “Goals, Strategies and Risks.”

Below are the principal investment risks of each Fund.  Unless noted otherwise, the principal investment risk applies to both Funds.

Interest Rate. When interest rates rise, debt security prices generally fall.  The opposite is also generally true: debt security prices rise when interest rates fall.  Interest rate changes are influenced by a number of factors, including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds.  In general, securities with longer maturities or durations are more sensitive to these interest rate changes.

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Focus. A Fund may invest more than 25% 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, such as proposed legislation on the financing of the project, a shortage of the materials needed for the project, or a declining need for the project, would likely affect all similar projects, thereby increasing market risk.

Credit. An issuer of debt securities may fail to make interest payments or repay principal when due, in whole or in part.  Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.  A change in the credit rating of a municipal bond insurer that insures securities in the Fund’s portfolio may affect the value of the securities it insures, a Fund’s share price and Fund performance.  A Fund might also be adversely impacted by the inability of an insurer to meet its insurance obligations.

Market. The market values of securities or other investments owned by the Fund will go up or down, sometimes rapidly or unpredictably.  A security’s market value may be reduced by market activity or other results of supply and demand unrelated to the issuer.  This is a basic risk associated with all securities.  When there are more sellers than buyers, prices tend to fall. Likewise, when there are more buyers than sellers, prices tend to rise.

Tax-Exempt Securities. While a Fund endeavors to purchase only bona fide tax-exempt securities (i.e., a security issued as paying tax-exempt interest income), there are risks that: (a) a tax-exempt security may be reclassified by the IRS, or a state tax authority, as paying taxable interest income instead and/or (b) future legislative, administrative or court actions could adversely impact the qualification of income from a tax-exempt security as tax-free.  Such reclassifications or actions could cause interest from a security to become taxable, possibly retroactively, subjecting you to increased tax liability.  In addition, such reclassifications or actions could cause the value of the security, and therefore the value of a Fund’s shares, to decline.

Management. A Fund is subject to management risk because it is an actively managed investment portfolio.  FAV applies investment techniques and risk analyses in making investment decisions for a Fund, but there can be no guarantee that these decisions will produce the desired results.

Income. Because a Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds.

Liquidity. From time to time, the trading market for a particular security or type of security in which a Fund invests may become less liquid or even illiquid.  Reduced liquidity will have an adverse impact on a Fund’s ability to sell such securities when necessary to meet the Fund’s liquidity needs or in response to a specific economic event and will also generally lower the value of a security.  Market prices for such securities may be volatile.

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Prepayment. Prepayment risk occurs when a debt security can be repaid in whole or in part prior to the security’s maturity and a Fund must reinvest the proceeds it receives, during periods of declining interest rates, in securities that pay a lower rate of interest.

States and U.S. Territories. A Fund’s portfolio is generally widely diversified among issuers of municipal securities. From time to time, however, a Fund may have a significant position in the municipal securities of a particular state or territory, such as Puerto Rico, Guam and the U.S. Virgin Islands. Under these circumstances, events in that state or territory may affect a Fund’s investments and performance. These events may include economic or political policy changes, tax base erosion, constitutional limits on tax increases, budget deficits and other financial difficulties, and changes in the credit ratings assigned to municipal issuers of the state or territory.

Additional Principal Investment Risk to which the Insured Tax-Free Fund is Subject:

Bond Insurers.  Market conditions or changes to ratings criteria could adversely impact the ratings of municipal bond insurance companies. Downgrades and withdrawal of ratings from municipal bond insurers have substantially limited the availability of insurance sought by municipal bond issuers thereby reducing the supply of insured municipal securities which meet the Insured Tax-Free Fund’s investment guidelines. Because of the consolidation among municipal bond insurers the Insured Tax-Free Fund is subject to additional risks including the risk that credit risk may be concentrated among fewer insurers and the risk that events involving one or more municipal bond insurers could have a significant adverse effect on the value of the securities insured by an insurer and on the municipal markets as a whole.

FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION

The following is a general summary of some of the important U.S. federal income tax consequences of the Transaction and is based upon the current provisions of the Internal Revenue Code (the “Code”), existing U.S. Treasury Regulations thereunder, current administrative rulings of the IRS and published judicial decisions, all of which are subject to change, possibly with retroactive effect.  These considerations are general in nature and individual shareholders should consult their own tax advisers as to the federal, state, local, and foreign tax considerations applicable to them and their individual circumstances.  These same considerations generally do not apply to shareholders who hold their shares in a tax-advantaged account, such as an individual retirement account (IRA) or qualified retirement plan.

The Transaction is intended to qualify as a tax-free reorganization pursuant to Section 368(a) of the Code.  The principal federal income tax consequences that are expected to result from the Transaction are as follows:

•      no gain or loss will be recognized by the Insured Tax-Free Fund or the shareholders of the Insured Tax-Free Fund as a direct result of the Transaction;

•      no gain or loss will be recognized by the Federal Tax-Free Fund as a direct result of the Transaction;

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•      the basis of the assets of the Insured Tax-Free Fund received by the Federal Tax-Free Fund will be the same as the basis of these assets in the hands of the Insured Tax-Free Fund immediately before the Transaction;

•      the holding period of the assets of the Insured Tax-Free Fund received by the Federal Tax-Free Fund will include the period during which such assets were held by the Insured Tax-Free Fund;

•      the aggregate tax basis of the shares of the Federal Tax-Free Fund to be received by a shareholder of the Insured Tax-Free Fund as part of the Transaction will be the same as the shareholder’s aggregate tax basis of the shares of the Insured Tax-Free Fund; and

•      the holding period of the shares of the Federal Tax-Free Fund received by a shareholder of the Insured Tax-Free Fund as part of the Transaction will include the period that the shareholder held the shares of the Insured Tax-Free Fund (provided that such shares of the Insured Tax-Free Fund are capital assets in the hands of such shareholder as of the closing).

Neither of the Funds has requested nor will request an advance ruling from the IRS as to the U.S. federal income tax consequences of the Transaction.  As a condition to closing, Stradley Ronon Stevens & Young, LLP will render a favorable opinion to the Insured Tax-Free Fund and the Federal Tax-Free Fund as to the foregoing federal income tax consequences of the Transaction, which opinion will be conditioned upon, among other things, the accuracy, as of the Closing Date, of certain representations of each Fund upon which Stradley Ronon Stevens & Young, LLP will rely in rendering its opinion.  Notwithstanding the foregoing, no opinion will be expressed as to the effect of the Transaction on the Insured Tax-Free Fund, the Federal Tax-Free Fund, or any Insured Tax-Free Fund shareholder with respect to any asset as to which unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on termination or transfer thereof) under a mark-to-market system of accounting.  A copy of the opinion will be filed with the SEC and will be available for public inspection after the Closing Date of the Transaction.  See “INFORMATION ABOUT THE FUNDS.”

Opinions of counsel are not binding upon the IRS or the courts.  If the Transaction is consummated but the IRS or the courts were to determine that the Transaction did not qualify as a tax-free reorganization under the Code, and thus was taxable, the Insured Tax-Free Fund would recognize gain or loss on the transfer of its assets to the Federal Tax-Free Fund, and each shareholder of the Insured Tax-Free Fund that held shares in a taxable account would recognize a taxable gain or loss equal to the difference between its tax basis in its Insured Tax-Free Fund shares and the fair market value of the shares of the Federal Tax-Free Fund it received.

Final Dividend or Other Distributions.  Prior to the closing of the Transaction, the Insured Tax-Free Fund will declare one or more dividends, and the Federal Tax-Free Fund may declare a dividend payable at or near the time of closing, to their respective shareholders to the extent necessary to avoid entity level tax or as otherwise deemed desirable.  To the extent that such distributions are not “exempt-interest dividends,” the dividends may be taxable to shareholders for federal income tax purposes.  It is anticipated that Fund distributions primarily will be dividends that are exempt from federal income tax, although a portion of such dividends may be taxable to shareholders as ordinary income or capital gain.

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Repositioning of the Insured Tax-Free Fund’s Portfolio Assets.  A portion of the Insured Tax-Free Fund’s portfolio assets may be sold in connection with the Transaction as distinct from normal portfolio turnover.  Such repositioning of the Insured Tax-Free Fund’s portfolio assets may occur before or after the closing of the Transaction.  These sales may result in the realization of capital gains, which to the extent not offset by available capital loss carryovers, would be distributed to shareholders.  The amount of any capital gains that may be realized and distributed to the shareholders will depend upon a variety of factors, including the Insured Tax-Free Fund’s net unrealized appreciation in the value of its portfolio assets at that time and whether such repositioning occurs before or after the Transaction.  Management expects that the Federal Tax-Free Fund will retain, after the Transaction, a significant majority of the current portfolio holdings of the Insured Tax-Free Fund.  Taking into account the Insured Tax-Free Fund’s net unrealized appreciation in portfolio assets on a tax basis at October 31, 2015 of $162.8 million ($12.50 per share; 8.14% of NAV) and the capital loss carryovers available as of such date to offset any capital gains realized by the Insured Tax-Free Fund, it is not anticipated that sales of a portion of the portfolio assets prior to the closing of the Transaction should result in any material amounts of capital gains to be distributed to shareholders.  Please note that if the sale of such portfolio assets were to occur after the closing of the Transaction, the ability of the combined Fund to fully utilize the Insured Tax-Free Fund’s capital loss carryovers as of the closing to offset the resulting capital gain might be limited as described below with the result that shareholders of the Federal Tax-Free Fund may receive a greater amount of capital gain distributions than they would have had the Transaction not occurred.  Transaction costs also may be incurred due to the repositioning of the portfolio.  Management believes that these portfolio transaction costs will be immaterial in amount (less than 0.01% (1 basis point) of annual fund operating expenses). 

General Limitations on Capital Losses.  The Federal Tax-Free Fund will succeed to the tax attributes, including capital loss carryovers, of the Insured Tax-Free Fund.  The capital loss carryovers of both Funds will be available to offset future gains recognized by the combined Fund, subject to limitations under the Code as described further below.  Where these limitations apply, all or a portion of a Fund’s capital loss carryovers may become unavailable, the effect of which may be to accelerate the recognition of taxable gain to the combined Fund and its shareholders post-closing. 

Capital losses of the Insured Tax-Free Fund arising in the taxable year ended February 29, 2012 or thereafter may be carried forward indefinitely to offset future capital gains; capital losses arising in earlier taxable years generally may be carried forward only to each of the eight (8) taxable years succeeding the loss year.¹  A Fund’s capital loss carryforwards are subject to an annual limitation if that Fund undergoes a more than 50% change in ownership.  The Transaction will result in a more than 50% “change in ownership” of the Insured Tax-Free Fund, the smaller of the two Funds.  Accordingly, the capital loss carryovers of the Insured Tax-Free Fund, increased by any current year loss or decreased by any current year gain, together with any net unrealized depreciation in the value of its portfolio investments (collectively, its “aggregate capital loss carryovers”), are expected to become subject to an annual limitation.  Additionally, if either Fund has a net unrealized built-in gain at the time of the Transaction, for five (5) years beginning after that date, such built-in gains, when realized, may not be offset by the losses (including any capital loss carryovers and “built in losses”) of the other Fund.  The Transaction also may result in an earlier expiration of the Insured Tax-Free Fund’s capital loss carryovers because the Transaction may cause the Insured Tax-Free Fund’s tax year to close early in the year of the Transaction.  The capital losses of the Insured Tax-Free Fund that may be used by the Federal Tax-Free Fund (including to offset any “built-in gains” of the Insured Tax-Free Fund itself) for the first taxable year ending after the Closing Date may also be limited.

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1 The Regulated Investment Company Modernization Act of 2010 eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its December 22, 2010 enactment date.  Consequently, these capital losses can be carried forward indefinitely.  However, capital losses incurred in pre-enactment taxable years may not be used to offset capital gains until all net capital losses arising in post-enactment taxable years have been utilized.  As a result, some net capital loss carryovers incurred in pre-enactment taxable years which otherwise would have been utilized under prior law may expire.

The aggregate capital loss carryovers of the Funds and the approximate annual limitation on the use of the Insured Tax-Free Fund’s aggregate capital loss carryovers following the Transaction are as follows:

	Insured Tax-Free Fund (000,000s) (as of 2/29/2016)	Federal Tax-Free Fund (000,000s) (as of 4/30/2016)
Aggregate Loss Carryovers*	$61.3	$187.0
Net Unrealized Appreciation (Depreciation) on a Tax Basis	$162.8	$914.9
Net Assets	$1,998.5	$11,042.3
Approximate Annual Limitation for Capital Losses**	$45.4	N/A

* Based on the long-term tax-exempt rate for ownership changes as of May 2016 of 2.27%.  The actual limitation will equal the aggregate NAV of the Insured Tax-Free Fund on the Closing Date multiplied by the long term tax exempt rate for ownership changes during the month in which the Transaction closes; such limitation will be increased by the amount of any built-in gain (i.e., unrealized appreciation in the value of investments of the Insured Tax-Free Fund on the Closing Date that is recognized in a taxable year).

This annual limitation on the use of Insured Tax-Free Fund’s aggregate capital loss carryovers is not anticipated to be material, depending on the facts at the time of closing the Transaction.

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Appreciation in Value of Investments.  Shareholders of the Insured Tax-Free Fund will receive a proportionate share of any taxable income and gains realized by the combined Federal Tax-Free Fund and not distributed to its shareholders prior to the Transaction when such income and gains are eventually distributed by the combined Federal Tax-Free Fund.  As a result, shareholders of the Insured Tax-Free Fund may receive a greater amount of taxable distributions than they would have had the Transaction not occurred.  In addition, based on the unrealized appreciation (depreciation) in value of investments for income tax purposes as a percentage of its NAV of 8.14% for the Insured Tax-Free Fund as of February 29, 2016 compared to 7.5% for Federal Tax-Free Fund as of October 31, 2015, shareholders of the Insured Tax-Free Fund could be exposed to less unrealized appreciation in portfolio investments, post-closing, resulting in less taxable gain to the shareholders as portfolio investments are sold than they otherwise might have if the Transaction had not occurred.  However, the amount of unrealized appreciation (depreciation) of both Funds is expected to change prior to Closing.

You should consult your tax adviser regarding the effect, if any, of the Transaction in light of your particular circumstances, as well as the state and local tax consequences, if any, of the Transaction because this discussion only relates to the federal income tax consequences. 

INFORMATION ABOUT THE FUNDS

Information about each Fund is included in such Fund’s Prospectus.  The Federal Tax-Free Fund Prospectus and the Insured Tax-Free Fund’s Prospectus are both incorporated by reference into and are considered a part of this Prospectus/Proxy Statement.  The Federal Tax-Free Fund Prospectus also accompanies this Prospectus/Proxy Statement.  Additional information about the Funds is included in each Funds’ SAI.  The Federal Tax-Free Fund SAI and the Insured Tax-Free Fund SAI are incorporated into the Federal Tax-Free Fund Prospectus and the Insured Tax-Free Fund Prospectus, respectively, and into the SAI dated [September 1,] 2016 relating to this Prospectus/Proxy Statement, each of which has been filed with the SEC.  The SAI relating to this Prospectus/Proxy Statement is also considered part of this Prospectus/Proxy Statement.  Information about the Funds is also included in the Funds’ Annual Report to Shareholders (for the fiscal year ended February 29, 2016 for the Insured Tax-Free Fund and April 30, 2016 for the Federal Tax-Free Fund).

You may request a free copy of each Fund’s Prospectus, SAI, Annual or Semi-Annual Report to Shareholders, the SAI relating to this Prospectus/Proxy Statement, and other information by calling (800) DIAL-BEN/342-5236 or by writing to a Fund at P.O. Box 997151, Sacramento, CA  95899-7151. 

The Trust, on behalf of the Insured Tax-Free Fund, and the Federal Tax-free Fund file proxy materials, reports and other information with the SEC in accordance with the informational requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 (the “1940 Act”).  These materials can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. and at certain of the SEC’s regional offices:  SEC Regional Offices: Atlanta – 950 East Paces Ferry NE, Suite 900, Atlanta GA  30326; Boston – 33 Arch Street, 23rd Floor, Boston, MA 02110; Chicago – 175 West Jackson Blvd., Suite 900, Chicago, IL 60604; Denver –1961 Stout Street, Suite 1700, Denver, CO 80294; Fort Worth – Burnett Plaza, Suite 1900, 801 Cherry Street, Unit #18, Fort Worth, TX 76102; Los Angeles – 444 South Flower Street, Suite 900, Los Angeles, CA 90071; Miami – 801 Brickell Ave., Suite 1800, Miami, FL 33131; New York – 200 Vesey Street, Suite 400, New York, NY 10281; Philadelphia – One Penn Center, 1617 JFK Boulevard, Suite 520, Philadelphia, PA 19103; Salt Lake City – 351 S. West Temple Street, Suite 6.100, Salt Lake City, UT 84101; and San Francisco – 44 Montgomery Street, Suite 2800, San Francisco, CA 94104.  You can also obtain copies of this information, after paying a duplicating fee at prescribed rates, by writing to the SEC’s Public Reference Branch, Office of Consumer Affairs and Information Services, Washington, D.C. 20549 or from the SEC’s Internet site at http://www.sec.gov or by electronic request at the following email address:  publicinfo@sec.gov. 

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FURTHER INFORMATION ABOUT THE FUNDS

The following is a discussion of the organization of the Funds and, where applicable, of the Trust.  More detailed information about each Fund’s current structure is contained in a Fund’s SAI. 

Comparison of Capital Structure.  The Federal Tax-Free Fund is a statutory trust, whereas the Insured Tax-Free Fund is a series of the Trust.  Both the Federal Tax-Free Fund and the Trust are open-end management investment companies, commonly called mutual funds.  The Federal Tax-Free Fund was originally organized as a California corporation on January 7, 1982 and converted to a Delaware statutory trust effective September 1, 2007.  The Trust was originally organized as a Massachusetts business trust in September 1984 and converted to a Delaware statutory trust effective October 18, 2006.

The authorized number of shares of each Fund is unlimited, each without par value, and each Fund may issue fractional shares.  Shares of each Fund are fully paid and nonassessable and have no preference, preemptive or subscription rights.  The Insured Tax-Free Fund and the Federal Tax-Free Fund shareholders have no appraisal rights. 

Comparison of Voting Rights.  Shares of each class of a Fund represent proportionate interests in such Fund's assets.  On matters that affect a Fund as a whole, each class has the same voting and other rights and preferences as any other class.  On matters that affect only one class, only shareholders of that class may vote.  Each class votes separately on matters affecting only that class, or matters expressly required to be voted on separately by class, by state or federal law.  Shares of each class of the Insured Tax-Free Fund have the same voting and other rights and preferences as the other classes and series of the Trust for matters that affect the Trust as a whole.  For each Fund, each whole share is entitled to one vote as to any matter on which it is entitled to vote, and each fractional share carries a proportionate fractional vote.  Shareholders of the Funds are not entitled to cumulative voting rights in the election of trustees.  For board member elections, this gives holders of more than 50% of the shares of the Trust and the Federal Tax- Free Fund, respectively, voting the ability to elect all of the members of the board.  If this happens, holders of the remaining shares voting will not be able to elect anyone to the board. 

Proposals Subject to Shareholder Approval.  The 1940 Act provides that shareholders of the Funds have the power to vote with respect to certain matters; specifically, for the election of trustees, the selection of auditors (under certain circumstances), approval of investment management agreements and certain amendments to plans of distribution, and amendments to policies, goals or restrictions deemed to be fundamental.  In addition, shareholders of each Fund are granted the power to vote on certain matters by the laws governing Delaware statutory trusts and by the Trust’s and the Federal Tax-Free Fund’s Agreement and Declaration of Trust, respectively (each a “Trust Instrument” and collectively, the “Trust Instruments”).  For example, the Trust Instruments and bylaws give shareholders the power to vote only on such matters required by the Trust Instruments, the bylaws, the 1940 Act, other applicable law and any registration statement filed with the SEC, the registration of which is effective; and on such other matters as the Board may consider necessary or desirable.

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Quorum and Vote Required to Approve a Proposal.  Quorum for a shareholders’ meeting of a Fund is generally forty per cent (40%) of the shares entitled to vote which are present in person or by proxy.  Under both Trust Instruments, to the extent a larger vote is not required by applicable law, a majority of the votes cast at a meeting at which a quorum is present generally shall decide any questions, with the exception that Trustees are elected by not less than a plurality of the votes cast at such a meeting. 

Setting a Record Date.  Each Funds’ Trust Instrument establishes the maximum number of days prior to a shareholders’ meeting during which a record date may be set by the Board.  The minimum number of days is 10 and the maximum number of days is 120 for both Funds. 

Legal Structures.  Mutual funds formed under the Delaware Statutory Trust Act (the “DSTA”), such as the Trust and the Federal Tax-Free Fund, are granted a significant amount of operational flexibility with respect to features, rights and obligations of the statutory trust and its trustees and shareholders in their organizational instruments.  Mutual funds organized as Delaware statutory trusts have benefited from this flexibility to streamline their operations and minimize expenses.  For example, mutual funds organized as Delaware statutory trusts are not required to hold annual shareholders’ meetings if meetings are not otherwise required by the federal securities laws or their declarations of trust or bylaws, and such funds may create new classes or series of shares without having to obtain the approval of shareholders.  In addition, a fund may provide in its governing documents that certain fund transactions, such as certain mergers, reorganizations and liquidations, may go forward with only trustee approval and not a shareholder vote; such funds are still subject, however, to the voting requirements of the 1940 Act. 

Limited Liability for Shareholders.  Under the DSTA, shareholders of the Funds are entitled to the same limitation of personal liability as is extended to shareholders of a corporation organized for profit under the Delaware General Corporation Law. 

Boards of Trustees.  Pursuant to the DSTA and the Trust Instruments, the responsibility for the general oversight of each Fund is vested in its Board, which, among other things, is empowered by the Trust Instruments to elect officers and provide for the compensation of agents, consultants and other professionals to assist and advise in such management.  Pursuant to the Trust Instruments, no Trustee shall be liable for any act or omission or any conduct whatsoever in his capacity as Trustee, except for an act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing, willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. 

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Inspection Rights.  Each Fund provides shareholders certain inspection rights of its books and records, to at least the extent required by applicable law. 

VOTING INFORMATION

How many votes are necessary to approve the Plan?

A 1940 Act Majority Vote, as defined herein, of the outstanding shares of the Insured Tax-Free Fund is required to approve the Plan.  Each Insured Tax-Free Fund shareholder will be entitled to one vote for each full share, and a proportionate fractional vote for each fractional share, of the Insured Tax-Free Fund held at the close of business on August 15, 2016 (the “Record Date”).  If sufficient votes to approve the Plan are not received by the date of the Meeting, the Meeting may be adjourned to permit further solicitation of proxies. 

Forty percent (40%) of the Insured Tax-Free Fund’s outstanding shares entitled to vote in person or by proxy as of the Record Date shall be a quorum for the transaction of business at the Meeting.  Under relevant state law and the Insured Tax-Free Fund’s Trust Instrument, abstentions and broker non-votes (that is, proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owner or other persons entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will be treated as votes present at the Meeting; abstentions and broker non-votes, however, will not be treated as votes cast at such Meeting.  Thus, under the Trust Instrument, abstentions and broker non-votes will be included for purposes of determining whether a quorum is present but will have the same effect as a vote against the Plan.  However, it is the Trust’s understanding that because broker-dealers, in the absence of specific authorization from their customers, will not have discretionary authority to vote any shares held beneficially by their customers on the single matter expected to be presented at the Meeting, there are unlikely to be any “broker non-votes” at the Meeting.

How do I ensure my vote is accurately recorded?

You can vote in any one of four ways:

•      By mail, with the enclosed proxy card;

•      In person at the Meeting;

•      By telephone; or

•      Through the Internet. 

A proxy card is, in essence, a ballot.  When you vote your proxy, it tells us how you want to vote on important issues relating to the Insured Tax-Free Fund.  If you simply sign, date and return the proxy card but give no voting instructions, your shares will be voted in favor of the Plan and in accordance with the views of management upon any unexpected matters that come before the Meeting or adjournment of the Meeting.  If your shares are held of record by a broker-dealer and you wish to vote in person at the Meeting, you should obtain a legal proxy from your broker of record and present it at the Meeting.

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May I revoke my proxy?

You may revoke your proxy at any time before it is voted by sending a written notice to the Trust expressly revoking your proxy, by signing and forwarding to the Trust a later-dated proxy card that is received at or prior to the Meeting, or by attending the Meeting and voting in person.  If your shares are held in the name of your broker, you will have to make arrangements with your broker to revoke a previously executed proxy.

What other matters will be voted upon at the Meeting?

The Board does not intend to bring any matters before the Meeting other than that described in this Prospectus/Proxy Statement.  The Board is not aware of any other matters to be brought before the Meeting by others.  If any other matter legally comes before the Meeting, proxies for which discretion has been granted will be voted in accordance with the views of management. 

Who is entitled to vote?

Shareholders of record of the Insured Tax-Free Fund on the Record Date will be entitled to vote at the Meeting.  The following table shows the number of shares of each class and the total number of outstanding shares of each class of the Insured Tax-Free Fund as of the Record Date:

Class	Shares Outstanding
Class A	[_________]
Class C	[_________]
Advisor Class	[_________]
Total	[_________]

How will proxies be solicited?

AST/DF King Group, a professional proxy solicitation firm (the “Solicitor”), has been engaged to assist in the solicitation of proxies, at an estimated cost of approximately $61,000.  The Trust, on behalf of the Insured Tax-Free Fund, expects that the solicitation will be primarily by mail.  As the date of the Meeting approaches, however, certain Insured Tax-Free Fund shareholders may receive a telephone call from a representative of the Solicitor if their votes have not yet been received.  Authorization to permit the Solicitor to execute proxies may be obtained by telephonic instructions from shareholders of the Insured Tax-Free Fund.  Proxies that are obtained telephonically will be recorded in accordance with the procedures set forth below.  The Trust believes that these procedures are reasonably designed to ensure that both the identity of the shareholder casting the vote and the voting instructions of the shareholder are accurately determined. 

In all cases where a telephonic proxy is solicited, the Solicitor representative is required to ask for each shareholder’s full name and address and to confirm that the shareholder has received the proxy materials in the mail or by other acceptable means.  If the shareholder is a corporation or other entity, the Solicitor representative is required to ask for the person’s title and for confirmation that the person is authorized to direct the voting of the shares.  If the information solicited agrees with the information provided to the Solicitor, then the Solicitor representative may ask for the shareholder’s instructions on the proposal described in this Prospectus/Proxy Statement.  Although the Solicitor representative is permitted to answer questions about the process, he or she is not permitted to recommend to the shareholder how to vote, other than by reading any recommendation set forth in this Prospectus/Proxy Statement.  The Solicitor representative will record the shareholder’s instructions on the proxy card.  Within 72 hours, the shareholder will be sent a letter to confirm his or her vote and asking the shareholder to call the Solicitor immediately if his or her instructions are not correctly reflected in the confirmation.

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If a shareholder wishes to participate in the Meeting, but does not wish to give a proxy by telephone or over the Internet, the shareholder may submit the proxy card originally sent with this Prospectus/Proxy Statement or attend in person.

The Trust, on behalf of the Insured Tax-Free Fund, will request broker-dealer firms, custodians, nominees, and fiduciaries to forward proxy material to the beneficial owners of the shares of record.  The Trust, on behalf of the Insured Tax-Free Fund, may reimburse broker-dealer firms, custodians, nominees, and fiduciaries for their reasonable expenses incurred in connection with such proxy solicitation.  In addition, certain officers and representatives of the Trust or its affiliates, who will receive no extra compensation for their services, may solicit proxies by telephone or personally.

The Trust, on behalf of the Insured Tax-Free Fund, expects that, before the Meeting, broker-dealer firms holding shares of the Insured Tax-Free Fund in “street name” for their customers will request voting instructions from their customers and beneficial owners.  If these instructions are not received by the date specified in the broker-dealer firms’ proxy solicitation materials, the Trust understands that current New York Stock Exchange rules do not permit the broker-dealers to vote on the Plan, on behalf of their customers and beneficial owners.  Certain broker-dealers may exercise discretion over shares held in their name for which no instructions are received by voting these shares in the same proportion as they vote shares for which they received instructions.

Are there dissenters’ rights?

If the Transaction is approved at the Meeting, shareholders of the Insured Tax-Free Fund will not have the right to dissent and obtain payment of the fair value of their shares because the Trust’s Instrument provides that no shareholder is entitled, as a matter of right, to relief as a dissenting shareholder in respect of any proposal or action involving the Trust.  Shareholders of the Insured Tax-Free Fund, however, will be able to redeem or exchange shares of the Insured Tax-Free Fund at NAV (subject to any applicable CDSC) until the Closing Date of the Transaction.  After the Closing Date, shareholders may redeem the Federal Tax-Free Fund Shares or exchange them for shares of certain other Franklin Templeton funds.  Redemptions are subject to the terms and conditions in the prospectus of the respective Fund.

PRINCIPAL HOLDERS OF SHARES

As of the Record Date, the officers and trustees of the Trust, as a group, owned of record and beneficially less than 1% of the outstanding shares of the Insured Tax-Free Fund, and the officers and trustees of the Federal Tax-Free Fund, as a group, owned of record and beneficially less than 1% of the Federal Tax-Free Fund’s outstanding shares. 

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From time to time, the number of Fund shares held in “street name” accounts of various securities dealers for the benefit of their clients or in centralized securities depositories may exceed 5% of the total shares outstanding.  To the knowledge of the Funds, no other person owned (beneficially or of record) 5% or more of the outstanding shares of any class of either Fund as of the Record Date, except as listed in Exhibit B to this Prospectus/Proxy Statement.  Upon completion of the Transaction, it is not expected that those persons disclosed in Exhibit B as owning 5% or more of the Insured Tax-Free Fund’s outstanding Class A, Class C, or Advisor Class shares will own in excess of 5% of the then outstanding shares of such classes of the Federal Tax-Free Fund upon completion of the Transaction.

SHAREHOLDER PROPOSALS

Neither the Insured Tax-Free Fund nor the Federal Tax-Free Fund is required to hold, and neither intends to hold, regular annual meetings of shareholders.  A shareholder who wishes to submit a proposal for consideration for inclusion in a proxy statement of the Insured Tax-Free Fund or Federal Tax-Free Fund for the next meeting of shareholders (if any) should send a written proposal to the Trust’s offices at One Franklin Parkway, San Mateo, CA 94403-1906, Attention: Secretary, so that it is received within a reasonable time in advance of such meeting in order to be included in the proxy statement of the applicable Fund and proxy card relating to that meeting and presented at the meeting.  A shareholder proposal may be presented at a meeting of shareholders only if such proposal concerns a matter that may be properly brought before the meeting under applicable federal proxy rules, state law, and other governing instruments. 

Submission of a proposal by a shareholder does not guarantee that the proposal will be included in a Fund’s proxy statement or presented at the meeting.

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ADJOURNMENT

The holders of a majority of the shares present (in person or by proxy) and entitled to vote with respect to the Insured Tax-Free Fund at the Meeting, whether or not a quorum is present, or the chairperson of the Board, the president of the Trust (in the absence of the chairperson of the Board), or any vice president or other authorized officer of the Trust (in the absence of the president) may adjourn the Meeting.  Such authority to adjourn the Meeting may be used for any reason whatsoever, including to allow time for further solicitation of proxies.  Any adjournment will not delay or otherwise affect the effectiveness and validity of any business transacted at the Meeting prior to adjournment and any business may be transacted at the adjourned meeting that might have been transacted at the Meeting.  The persons designated as proxies may use their discretionary authority to vote as instructed by management of the Insured Tax-Free Fund on questions of adjournment.  If the Meeting is adjourned to another time or place, written notice need not be given of the adjourned meeting if the time and place is announced at the Meeting, unless a new record date is fixed or unless the adjournment is for more than sixty days after the date of the original meeting. 

By Order of the Board of Trustees of the Trust,

Karen L. Skidmore

Secretary

[September 1,] 2016

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GLOSSARY

Useful Terms and Definitions

1940 Act — The Investment Company Act of 1940, as amended.

1940 Act Majority Vote — The affirmative vote of the lesser of: (i) a majority of the outstanding shares of the Insured Tax-Free Fund, or (ii) 67% or more of the outstanding shares of the Insured Tax-Free Fund present at or represented by proxy at the Meeting if the holders of more than 50% of the outstanding shares of the Insured Tax-Free Fund are present or represented by proxy. 

CDSC — Contingent deferred sales charge.

Distributors — Franklin Templeton Distributors, Inc., One Franklin Parkway, San Mateo, CA 94403-1906, the principal underwriter for the Funds. 

FAV — Franklin Advisers, Inc., the investment manager for the Funds.

Federal Tax-Free Fund – Franklin Federal Tax-Free Income Fund, a registered investment company.

FRI — Franklin Resources, Inc., One Franklin Parkway, San Mateo, CA 94403-1906.

FT Services — Franklin Templeton Services, LLC, the administrator for the Funds.  FT Services is an indirect, wholly owned subsidiary of FRI and is an affiliate to each Fund’s investment manager and principal underwriter. 

IndependentTrustees — The Trustees who are not “interested persons” of a Fund, as such term is defined in the 1940 Act.

Insured Tax-Free Fund — Franklin Insured Tax-Free Income Fund, a series of the Trust.

IRS — U.S. Internal Revenue Service.

Meeting — The Special Meeting of Shareholders of the Insured Tax-Free Fund concerning approval of the Plan.

Net Asset Value (NAV) — The net asset value of a mutual fund is determined by deducting a fund’s liabilities from the total assets of the portfolio.  The net asset value per share is determined by dividing the net asset value of the fund by the number of shares outstanding. 

Plan — The Agreement and Plan of Reorganization adopted by the Trust, on behalf of the  Insured Tax-Free Fund, and the Federal Tax-Free Fund. 

Record Date — August 15, 2016 – The date selected for determining which shareholders of record of the Insured Tax-Free Fund will be entitled to vote on the Transaction.

SAI — Statement of Additional Information, a document that supplements information found in a mutual fund’s prospectus.

SEC — U.S. Securities and Exchange Commission.

The Trust — Franklin Tax-Free Trust, the registered investment company of which the Insured Tax-Free Fund is a series.

Transaction — The proposed transaction contemplated by the Plan.

U.S. — The United States of America.

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EXHIBITS TO PROSPECTUS/PROXY STATEMENT

Exhibit

A.     Form of Agreement and Plan of Reorganization

B.     Principal Holders of Securities

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Exhibit A

FORM OF
AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Plan”) is made as of this 18th day of November, 2016 by and between Franklin Federal Tax-Free Income Fund, a statutory trust created under the laws of the State of Delaware, with its principal place of business at One Franklin Parkway, San Mateo, California 94403-1906 (the “Acquiring Fund”), and Franklin Tax-Free Trust (“FTFT”), a statutory trust created under the laws of the State of Delaware, with its principal place of business at One Franklin Parkway, San Mateo, California 94403-1906, on behalf of its series, Franklin Insured Tax-Free Income Fund (the “Target Fund”).  Franklin Advisers, Inc. (“FAV”), a California corporation, investment manager to the Acquiring Fund and the Target Fund, joins this Plan solely for purposes of Section 7.

PLAN OF REORGANIZATION

The reorganization (hereinafter referred to as the “Reorganization”) will consist of (i) the acquisition by the Acquiring Fund of substantially all of the property, assets and goodwill of the Target Fund in exchange solely for full and fractional Class A, Class C and Advisor Class shares of beneficial interest, with no par value, of the Acquiring Fund (the “Acquiring Fund Shares”); (ii) the distribution of Acquiring Fund Shares to the holders of Class A, Class C and Advisor Class shares of beneficial interest, with no par value, of the Target Fund (the “Target Fund Shares”), respectively, according to their respective interests in the Target Fund in complete liquidation of the Target Fund; and (iii) the dissolution of the Target Fund as soon as is practicable after the closing (as described in Section 3, hereinafter called the “Closing”), all upon and subject to the terms and conditions of the Plan hereinafter set forth. 

AGREEMENT

In order to consummate the Reorganization and in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound hereby, agree as follows:

1.       Sale and Transfer of Assets, Liquidation and Dissolution of the Target Fund.

(a)        Subject to the terms and conditions of the Plan, and in reliance on the representations and warranties herein contained, and in consideration of the delivery by the Acquiring Fund of the number of Acquiring Fund Shares hereinafter provided, FTFT, on behalf of the Target Fund, agrees that, at the time of Closing, it will convey, transfer and deliver to the Acquiring Fund all of the Target Fund’s then existing assets, including any interest in pending or future legal claims in connection with past or present portfolio holdings, whether in form of class action claims, opt-out or other direct litigation claims, or regulator or government-established investor recovery fund claims, and any and all resulting recoveries, free and clear of all liens, encumbrances, and claims whatsoever (other than shareholders’ rights of redemption), except for cash, bank deposits, or cash equivalent securities in an estimated amount necessary to: (i) pay 25% of the costs and expenses of carrying out the Reorganization in accordance with Section 7 of the Plan, (including, but not limited to, fees of counsel and accountants, and expenses of the Target Fund’s liquidation and dissolution contemplated hereunder), which costs and expenses shall be established on the Target Fund’s books as liability reserves; (ii) discharge its unpaid liabilities on its books at the Closing Date (as such term is defined in Section 3), including, but not limited to, its income dividends and capital gains distributions, if any, payable for the period prior to the Closing Date and through the final taxable year ending with the Target Fund’s complete liquidation; and (iii) pay such contingent liabilities, if any, as the officers of FTFT shall reasonably deem to exist against the Target Fund at the Closing Date, for which contingent and other appropriate liability reserves shall be established on the Target Fund’s books (such assets hereinafter “Net Assets”).  The Acquiring Fund shall not assume any liability of the Target Fund, whether accrued or contingent, known or unknown, and the Target Fund shall use its reasonable best efforts to discharge all of its known liabilities so far as may be possible, from the cash, bank deposits and cash equivalent securities described above.

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(b)        Subject to the terms and conditions of the Plan, and in reliance on the representations and warranties herein contained, and in consideration of such sale, conveyance, transfer, and delivery, the Acquiring Fund agrees at the Closing to deliver to FTFT, on behalf of the Target Fund, the number of Acquiring Fund Shares, determined by dividing the net asset value per share of each Class A, Class C and Advisor Class shares of the Target Fund by the net asset value per share each of Class A, Class C and Advisor Class shares of the Acquiring Fund, respectively, and separately multiplying the result thereof by the number of outstanding Class A, Class C and Advisor Class shares, respectively, of the Target Fund as of 1:00 p.m., Pacific time on the Closing Date.  The Acquiring Fund Shares delivered to FTFT, on behalf of the Target Fund, at the Closing shall have an aggregate net asset value equal to the value of the Target Fund’s Net Assets, all determined as provided in Section 2 of the Plan and as of the date and time specified herein.

(c)        Immediately following the Closing, FTFT, on behalf of the Target Fund, shall distribute the Acquiring Fund Shares received by FTFT, on behalf of the Target Fund, pursuant to this Section 1 to the Target Fund’s shareholders of record so that each shareholder receives full and fractional Acquiring Fund Shares of the corresponding class of the Acquiring Fund equal in value to the full and fractional shares of the Target Fund held by the shareholder as of 1:00 p.m., Pacific time, on the Closing Date.  Such distribution shall be accomplished by the establishment of accounts on the share records of the Acquiring Fund of the type and in the amounts due such shareholders based on their respective holdings in the Target Fund as of 1:00 p.m., Pacific time, on the Closing Date.  Fractional Acquiring Fund Shares shall be carried to the third decimal place.  As promptly as practicable after the Closing, each holder of any outstanding certificate or certificates representing Target Fund Shares shall be entitled to surrender the same to the transfer agent for the Acquiring Fund in exchange for the number of Acquiring Fund Shares of the same class into which the Target Fund Shares theretofore represented by the certificate or certificates so surrendered shall have been converted.  Until so surrendered, each outstanding certificate, if any, which, prior to the Closing, represented Target Fund Shares shall be deemed for all Acquiring Fund purposes to evidence ownership of the number of Acquiring Fund Shares into which the Target Fund Shares (which prior to the Closing were represented thereby) have been converted.  Certificates for the Acquiring Fund Shares shall not be issued.  After the distribution, the Target Fund shall be dissolved.

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(d)       At the Closing, each shareholder of record of the Target Fund as of the record date (the “Distribution Record Date”) with respect to any unpaid dividends and other distributions that were declared prior to the Closing, including any dividend or distribution declared pursuant to Section 6(d) hereof, shall have the right to receive such unpaid dividends and distributions with respect to the shares of the Target Fund that such person had on such Distribution Record Date.

(e)        All books and records relating to the Target Fund, including all books and records required to be maintained under the Investment Company Act of 1940 (the “1940 Act”), and the rules and regulations thereunder, shall be available to the Acquiring Fund from and after the date of the Plan, and shall be turned over to the Acquiring Fund on or prior to the Closing.

2.       Valuation.

(a)        The net asset value per share of the Acquiring Fund Shares and the Target Fund Shares and the value of the Target Fund’s Net Assets to be acquired by the Acquiring Fund hereunder shall in each case be computed as of 1:00 p.m., Pacific time, on the Closing Date, unless on such date: (i) the New York Stock Exchange (“NYSE”) is not open for unrestricted trading; or (ii) the reporting of trading on the NYSE or other relevant market is disrupted; or (iii) any other extraordinary financial event or market condition occurs (each of the events described in (i), (ii) or (iii) are referred to as a “Market Disruption”).  The net asset value per share of the Acquiring Fund Shares and the Target Fund Shares and the value of the Target Fund’s Net Assets shall be computed in accordance with the valuation procedures set forth in the most recent respective prospectus of the Acquiring Fund and the Target Fund, as amended or supplemented.

(b)        In the event of a Market Disruption on the proposed Closing Date so that an accurate appraisal of the net asset value per share of the Acquiring Fund Shares or Target Fund Shares or the value of the Target Fund’s Net Assets is impracticable, the Closing Date shall be postponed until the first business day when regular trading on the NYSE shall have been fully resumed and reporting shall have been restored and other trading markets are otherwise stabilized.

(c)        All computations of value regarding the net asset value per share of the Acquiring Fund Shares and Target Fund Shares and the value of the Target Fund’s Net Assets shall be made by the administrator to the Acquiring Fund and Target Fund.

3.       Closing and Closing Date.

The Closing shall take place at the principal office of the Acquiring Fund at 1:00 p.m., Pacific time, on December 2, 2016 or such later date as the officers of the Acquiring Fund and FTFT may mutually agree (the “Closing Date”).  FTFT, on behalf of the Target Fund, shall have provided for delivery as of the Closing the Net Assets to be transferred to the account of the Acquiring Fund’s custodian, The Bank of New York Mellon, Mutual Funds Division, 100 Church Street, New York, NY 10286.  FTFT, on behalf of the Target Fund, shall deliver at the Closing a list of names and addresses of the holders of record of each class of the Target Fund and the number of full and fractional shares of beneficial interest owned by each such shareholder, indicating thereon which such shares are represented by outstanding certificates and which by book-entry accounts, as of 1:00 p.m., Pacific time, on the Closing Date.  The Acquiring Fund shall provide evidence that such Acquiring Fund Shares have been registered in an account on the books of Acquiring Fund in such manner as the officers of FTFT may reasonably request.

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4.       Representations and Warranties.

4.1.      The Acquiring Fund represents and warrants that:

(a)        The Acquiring Fund was originally organized as a California corporation on January 7, 1982 and converted to a Delaware statutory trust effective September 1, 2007.  The Acquiring Fund is validly existing under the laws of the State of Delaware.  The Acquiring Fund is duly registered under the 1940 Act as an open-end management investment company and the Acquiring Fund’s shares sold were sold pursuant to an effective registration statement filed under the Securities Act of 1933 (the “1933 Act”), except for those shares sold pursuant to the private offering exemption for the purpose of raising initial capital or obtaining any required initial shareholder approvals.

(b)        The Acquiring Fund is authorized to issue an unlimited number of shares of beneficial interest, without par value, of the Acquiring Fund.  Each outstanding share of the Acquiring Fund is fully paid, non-assessable, and has full voting rights, and each Acquiring Fund Share when issued pursuant to and in accordance with the Plan, will be fully paid, non-assessable, and will have full voting rights.  The Acquiring Fund currently is divided into three classes of shares: Class A, Class C and Advisor Class shares of beneficial interest, of which Class A, Class C and Advisor Class represent Acquiring Fund Shares.  An unlimited number of shares of beneficial interest of the Acquiring Fund has been allocated and designated to each class of the Acquiring Fund.

(c)        The Acquiring Fund is not a party to or obligated under any provision of its Agreement and Declaration of Trust, as amended, or By-laws, as amended, or any contract or any other commitment or obligation and is not subject to any order or decree, that would be violated by its execution of or performance under the Plan, and no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated by the Plan, except for the registration of Acquiring Fund Shares under the 1933 Act, the 1940 Act, or as may otherwise be required under the federal and state securities laws or the rules and regulations thereunder.

(d)       The financial statements appearing in the Acquiring Fund’s Annual Report to Shareholders for the fiscal year ended April 30, 2015, audited by PricewaterhouseCoopers LLP, the unaudited financial statements appearing in the Acquiring Fund’s Semi-Annual Report to Shareholders for the six month period ended October 31, 2015, and any interim unaudited financial statements, fairly present the financial position of the Acquiring Fund as of their respective dates and the results of the Acquiring Fund’s operations for periods indicated, in conformity with Generally Accepted Accounting Principles applied on a consistent basis.

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(e)        The books and records of the Acquiring Fund accurately summarize the accounting data represented and contain no material omissions with respect to the business and operations of the Acquiring Fund.

(f)        The Acquiring Fund has elected to be treated as a regulated investment company (“RIC”) for federal income tax purposes under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).  The Acquiring Fund is a “fund” as defined in Section 851(g)(2) of the Code, has qualified as a RIC for each taxable year since its inception, has not had any earnings and profits accumulated in any taxable year to which the provisions of Subchapter M of the Code (or the corresponding provisions of prior law) did not apply, and intends to continue to qualify as a RIC after the Closing Date.  Consummation of the transactions contemplated by the Plan will not cause the Acquiring Fund to fail to be qualified as a RIC as of the Closing Date.

(g)        The Acquiring Fund does not have any unamortized or unpaid organizational fees or expenses.

(h)        The Acquiring Fund does not have any known liabilities, costs or expenses of a material amount, contingent or otherwise, other than those reflected in the financial statements referred to in Section 4.1(d) hereof and those incurred in the ordinary course of business as an investment company and of a nature and amount similar to, and consistent with, those shown in such financial statements since the dates of those financial statements.

(i)         There is no inter-corporate indebtedness existing between the Target Fund and the Acquiring Fund that was issued, acquired, or will be settled at a discount.

(j)         The registration statement on Form N-14 referred to in Section 5.1(a) hereof (the “Registration Statement”), including any prospectus or statement of additional information contained or incorporated therein by reference and any supplements or amendments thereto, insofar as it relates to the Acquiring Fund and the Acquiring Fund Shares, will, from the effective date of the Registration Statement through the date of the special meeting of the Target Fund’s shareholders (the “Special Meeting”) and on the Closing Date:  (i) comply in all material respects with the provisions of the 1933 Act, the Securities Exchange Act of 1934 (the “1934 Act”) as amended, the 1940 Act, the rules and regulations thereunder, and all applicable state securities laws and the rules and regulations thereunder; and (ii) not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which the statements were made, not misleading, provided, however, that the representations and warranties of this subparagraph shall not apply to statements in or omissions from the Registration Statement made in reliance upon and in conformity with information that was furnished by the Target Fund for use therein.

(k)        Since October 31, 2015, there has not been any material adverse change in the Acquiring Fund’s financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business.

(l)         On the Closing Date, all material Returns (as defined below) of the Acquiring Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be true, correct and complete in all material respects, and all Taxes (as defined below) shown as due or claimed to be due by any government entity shall have been paid or provision has been made for the payment thereof.  To the Acquiring Fund’s knowledge, no such Return is currently under audit by any federal, state, local or foreign Tax authority; no assessment has been asserted with respect to such Returns; there are no levies, liens or other encumbrances on the Acquiring Fund or its assets resulting from the non-payment of any Taxes; no waivers of the time to assess any such Taxes are outstanding nor are any written requests for such waivers pending; and adequate provision has been made in the Acquiring Fund’s financial statements for all Taxes in respect of all periods ended on or before the date of such financial statements.  As used in this Plan, “Tax” or “Taxes” means any tax, governmental fee or other like assessment or charge of any kind whatsoever (including, but not limited to, withholding on amounts paid to or by any person), together with any interest, penalty, addition to tax or additional amount imposed by any governmental authority (domestic or foreign) responsible for the imposition of any such tax.  “Return” means reports, returns, information returns, elections, agreements, declarations, or other documents of any nature or kind (including any attached schedules, supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any claim for refund, amended return or declaration of estimated Taxes (and including any amendments with respect thereto).

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(m)       All information to be furnished by the Acquiring Fund for use in preparing any registration statement (including the Registration Statement), proxy statement and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations thereto.

(n)        The Acquiring Fund has no outstanding options, warrants, pre-emptive rights or other rights to subscribe for or purchase Acquiring Fund Shares, except for the right of investors to acquire its shares at the applicable stated offering price in the normal course of its business as an open-end management investment company operating under the 1940 Act.

(o)        No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated by the Plan, except as may otherwise be required under federal or state securities laws or the rules and regulations thereunder.

(p)        There is no material suit, judicial action, or legal or administrative proceeding pending or threatened against the Acquiring Fund.  The Acquiring Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects the Acquiring Fund’s business or its ability to consummate the transactions herein contemplated.

(q)        The execution, delivery, and performance of the Plan have been duly authorized by all necessary action of the Acquiring Fund’s Board of Trustees.

(r)        The Acquiring Fund is not under jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.

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4.2.      FTFT, on behalf of the Target Fund, represents and warrants that:

(a)        The Target Fund is a series of FTFT, which was originally organized as a Massachusetts business trust in September 1984 and converted to a Delaware statutory trust effective October 18, 2006 and is validly existing under the laws of the State of Delaware.  FTFT is duly registered under the 1940 Act as an open‑end management investment company and the Target Fund’s shares sold were sold pursuant to an effective registration statement filed under the 1933 Act, except for those shares sold pursuant to the private offering exemption for the purpose of raising initial capital or obtaining any required initial shareholder approvals.

(b)        FTFT is authorized to issue an unlimited number of shares of beneficial interest, without par value of the Target Fund.  Each outstanding share of the Target Fund is fully paid, non-assessable, and has full voting rights.  The Target Fund currently is divided into three classes of shares: Class A, Class C and Advisor Class shares of beneficial interest, which represent Target Fund Shares. An unlimited number of shares of beneficial interest of the Target Fund has been allocated and designated to each class of the Target Fund.

(c)        FTFT, on behalf of the Target Fund, is not a party to or obligated under any provision of its Agreement and Declaration of Trust, as amended, or By-laws, as amended, or any contract or any other commitment or obligation and is not subject to any order or decree that would be violated by its execution of or performance under the Plan, and no consent, approval, authorization or order of any court or governmental authority is required for the consummation by FTFT, on behalf of the Target Fund, of the transactions contemplated by the Plan.  FTFT, on behalf of the Target Fund, has no material contracts or other commitments (other than the Plan or agreements for the purchase of securities entered into in the ordinary course of business and consistent with its obligations under the Plan) which will not be terminated by it in accordance with their terms at or prior to the Closing Date, or which will result in a penalty or additional fee to be due from or payable by it.

(d)       The financial statements appearing in the Target Fund’s Annual Report to Shareholders for the fiscal year ended February 29, 2016, audited by PricewaterhouseCoopers LLP, and any interim unaudited financial statements, fairly present the financial position of the Target Fund as of their respective dates and the results of the Target Fund’s operations for periods indicated, in conformity with Generally Accepted Accounting Principles applied on a consistent basis.

(e)        The books and records of the Target Fund accurately summarize the accounting data represented and contain no material omissions with respect to the business and operations of the Target Fund.

(f)        FTFT has elected to treat the Target Fund as a RIC for federal income tax purposes under Part I of Subchapter M of the Code and the Target Fund is a “fund” as defined in Section 851(g)(2) of the Code.  The Target Fund has qualified as a RIC for each taxable year since inception that has ended prior to the Closing Date and will have satisfied the requirements of Part I of Subchapter M of the Code to maintain such qualification for the period beginning on the first day of its current taxable year and ending on the Closing Date, and consummation of the transactions contemplated by the Plan will not cause it to fail to be qualified as a RIC as of the Closing Date.  The Target Fund has no earnings and profits accumulated in any taxable year to which the provisions of Subchapter M of the Code (or the corresponding provisions of prior law) did not apply.

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(g)        The Target Fund does not have any unamortized or unpaid organizational fees or expenses.

(h)        The Target Fund does not have any known liabilities, costs or expenses of a material amount, contingent or otherwise, other than those reflected in the financial statements referred to in Section 4.2(d) hereof and those incurred in the ordinary course of business as an investment company and of a nature and amount similar to, and consistent with, those shown in such financial statements since the dates of those financial statements.

(i)         There is no inter-corporate indebtedness existing between the Target Fund and the Acquiring Fund that was issued, acquired, or will be settled at a discount.

(j)         The Registration Statement, including any prospectus or statement of additional information contained or incorporated therein by reference and any supplements or amendments thereto, insofar as it relates to the Target Fund, will, from the effective date of the Registration Statement through the date of the Special Meeting and on the Closing Date:  (i) comply in all material respects with the provisions of the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations thereunder, and all applicable state securities laws and the rules and regulations thereunder; and (ii) not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which the statements were made, not misleading, provided, however, that the representations and warranties of this subparagraph shall not apply to statements in or omissions from the Registration Statement made in reliance upon and in conformity with information that was furnished by the Acquiring Fund for use therein.

(k)        Since February 29, 2016, there has been no material adverse change in the Target Fund’s financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business.

(l)         On the Closing Date, all material Returns of the Target Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be true, correct and complete in all material respects, and all Taxes shown as due or claimed to be due by any government entity shall have been paid or provision has been made for the payment thereof.  To FTFT’s knowledge, no such Return is currently under audit by any federal, state, local or foreign Tax authority; no assessment has been asserted with respect to such Returns; there are no levies, liens or other encumbrances on the Target Fund or its assets resulting from the non-payment of any Taxes; no waivers of the time to assess any such Taxes are outstanding nor are any written requests for such waivers pending; and adequate provision has been made in the Target Fund’s financial statements for all Taxes in respect of all periods ended on or before the date of such financial statements.

(m)       All information to be furnished by FTFT, on behalf of the Target Fund, for use in preparing any registration statement (including the Registration Statement), proxy statement and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations thereto.

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(n)        The Target Fund has no outstanding options, warrants, pre-emptive rights or other rights to subscribe for or purchase Target Fund Shares except for the right of investors to acquire its shares at the applicable stated offering price in the normal course of its business as an open-end managed investment company under the 1940 Act.

(o)        No consent, approval, authorization or order of any court or governmental authority is required for the consummation by FTFT, on behalf of the Target Fund, of the transactions contemplated by the Plan, except as may otherwise be required under federal or state securities laws or the rules and regulations thereunder.

(p)        There is no material suit, judicial action, or legal or administrative proceeding pending or threatened against FTFT, on behalf of the Target Fund.  FTFT, on behalf of the Target Fund, is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects the Target Fund’s business or its ability to consummate the transactions herein contemplated.

(q)        The execution, delivery, and performance of the Plan have been duly authorized by all necessary action of the FTFT’s Board of Trustees, subject to approval of the Target Fund’s shareholders.

(r)        The Target Fund is not under jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.

(s)        At the Closing, the Target Fund will have good and marketable title to all of the securities and other assets transferred pursuant to Section 1 above, free and clear of all liens or encumbrances of any nature whatsoever, except such imperfections of title or encumbrances as do not materially detract from the value or use of the assets subject thereto, or materially affect title thereto.

(t)        FTFT, on behalf of the Target Fund, will declare and pay or cause to be paid a dividend prior to the Closing Date, that, together with all previous dividends, shall have the effect of distributing to its shareholders (i) all of the Target Fund’s investment company taxable income for the taxable year ended prior to the Closing Date and substantially all of such investment company taxable income for the final taxable year ending with its complete liquidation (in each case determined without regard to any deductions for dividends paid); and (ii) all of the Target Fund’s net capital gains recognized in its taxable year ended prior to the Closing Date and substantially all of any such net capital gains recognized in such final taxable year (in each case after reduction for any capital loss carryover).

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5.       Covenants of the Acquiring Fund and Covenants of FTFT, on behalf of the Target Fund.

5.1.      The Acquiring Fund:

(a)        Shall file the Registration Statement with the Securities and Exchange Commission (“SEC”) and use its best efforts to provide that the Registration Statement becomes effective as promptly as practicable.

(b)        Shall have mailed to each shareholder of record of the Target Fund entitled to vote at the Special Meeting at which action on the Plan is to be considered, in sufficient time to comply with requirements as to notice thereof, a combined Prospectus/Proxy Statement that complies in all material respects with the applicable provisions of the 1933 Act, Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules and regulations thereunder (the “Prospectus/Proxy Statement”).

(c)        Covenants to operate the Acquiring Fund’s business as presently conducted between the date hereof and the Closing, it being understood that such ordinary course of business will include the distribution of customary dividends and distributions and any other distribution necessary or desirable to minimize federal income or excise Taxes.

(d)       Subject to the provisions of the Plan, shall take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate the transactions contemplated by the Plan.

5.2.      FTFT, on behalf of the Target Fund:

(a)        Shall provide the Acquiring Fund with information reasonably necessary for the preparation and distribution of the Prospectus/Proxy Statement to be included in the Registration Statement, in compliance with the 1933 Act, the 1934 Act and the 1940 Act, in connection with the Special Meeting referred to below.

(b)        As of the Closing, shall have called and held the Special Meeting to consider and vote upon the Plan, and FTFT shall have taken all other actions reasonably necessary to obtain approval of the transactions contemplated herein.

(c)        Covenants to operate the Target Fund’s business as presently conducted between the date hereof and the Closing, it being understood that such ordinary course of business will include the distribution of customary dividends and distributions and any other distribution necessary or desirable to minimize federal income or excise Taxes.

(d)       Subject to the provisions of the Plan, shall take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate the transactions contemplated by the Plan.

(e)        Shall file, by the Closing Date, all of the Target Fund’s federal and other Tax Returns required by law to be filed on or before such date and all federal and other Taxes shown as due on said Returns shall have either been paid or adequate liability reserves shall have been provided for the payment of such Taxes.

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(f)        Shall provide at the Closing:

(1)   A statement of the respective tax basis and holding period of all investments to be transferred by the Target Fund to the Acquiring Fund.

(2)   A copy (which may be in electronic form) of the Target Fund’s shareholder ledger accounts including, without limitation, the name, address and taxpayer identification number of each shareholder of record, the number of shares of beneficial interest held by each shareholder, the dividend reinvestment elections applicable to each shareholder, the backup withholding and nonresident alien withholding certifications, notices or records on file with FTFT, with respect to each shareholder, and such information as the Acquiring Fund may reasonably request concerning Target Fund shares or Target Fund shareholders in connection with Target Fund’s cost basis reporting and related obligations under Sections 1012, 6045, 6045A, and 6045B of the Code and related regulations issued by the United States Treasury (“Treasury Regulations”) following the Closing for all of the shareholders of record of the Target Fund’s shares as of the close of business on the day of valuation as described in Section 2, who are to become holders of the Acquiring Fund as a result of the transfer of assets that is the subject of this Plan (the “Target Fund Shareholder Documentation”).

(3)   A copy of any other Tax books and records of the Target Fund necessary for purposes of preparing any Tax Returns, schedules, forms, statements or related documents (including but not limited to any income, excise or information returns, as well as any transfer statements (as described in Treas. Reg. § 1.6045A-1)) required by law to be filed by the Target Fund after the Closing.

(4)   If requested by the Acquiring Fund, all FASB ASC 740-10-25 (formerly, FIN 48) work papers and supporting statements pertaining to the Target Fund.

(g)        As promptly as practicable, but in any case within sixty days after the date of Closing, the Target Fund shall furnish the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring Fund, a statement of the earnings and profits of the Target Fund for federal income tax purposes that will be carried over by the Acquiring Fund as a result of Section 381 of the Code.

(h)        Undertakes that it will not acquire Acquiring Fund Shares for the purpose of making distributions thereof to anyone other than Target Fund shareholders.

(i)         Undertakes that, if the Plan is consummated, the Target Fund will liquidate and dissolve.

5.3.      The Acquiring Fund and FTFT, on behalf of the Target Fund, intend that the Reorganization will qualify as a reorganization within the meaning of Section 368(a)(1) of the Code.  The Acquiring Fund and FTFT, on behalf of the Target Fund, shall not take any action or cause any action to be taken (including, without limitation the filing of any Tax Return) that is inconsistent with such treatment or results in the failure of such Reorganization to qualify as a reorganization within the meaning of Section 368(a)(1) of the Code.

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6.       Conditions Precedent to be Fulfilled by the Acquiring Fund and by FTFT, on behalf of the Target Fund.

The consummation of the Plan hereunder shall be subject to the following respective conditions:

(a)        That (i) all the representations and warranties of the other party contained herein shall be true and correct as of the Closing with the same effect as though made as of and at such date; and (ii) the other party shall have performed all obligations required by the Plan to be performed by it prior to the Closing.

(b)        That the Registration Statement will have become effective and not have issued an unfavorable management report under Section 25(b) of the 1940 Act or instituted or threatened to institute any proceeding seeking to enjoin consummation of the Plan under Section 25(c) of the 1940 Act.  And, further, no other legal, administrative or other proceeding shall have been instituted or threatened that would materially affect the financial condition of either Fund or would prohibit the transactions contemplated hereby.

(c)        That the Plan and the Reorganization contemplated hereby shall have been adopted and approved by the appropriate action of the shareholders of the Target Fund at a meeting or any adjournment thereof.

(d)       FTFT, on behalf of the Target Fund, shall have declared and paid or cause to have been paid prior to the Closing Date, a dividend or dividends that, together with all previous dividends, shall have the effect of distributing to its shareholders (i) all of the Target Fund’s investment company taxable income for the taxable year ended prior to the Closing Date and substantially all of such investment company taxable income for the final taxable year ending with its complete liquidation (in each case determined without regard to any deductions for dividends paid); (ii) all of the Target Fund’s net capital gains recognized in its taxable year ended prior to the Closing Date and substantially all of any such net capital gains recognized in such final taxable year (in each case after reduction for any capital loss carryover); and (iii) at least 90 percent of the excess, if any, of the Target Fund’s interest income excludible from gross income under Section 103(a) of the Code over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for its taxable year ended prior to the Closing Date and at least 90 percent of such net tax-exempt income for the period from the close of its last fiscal year to the Closing Time on the Closing Date.

(e)        That all required consents of other parties and all other consents, orders, and permits of federal, state and local authorities (including those of the SEC and of state Blue Sky securities authorities, including any necessary “no-action” positions or exemptive orders from such federal and state authorities) to permit consummation of the transaction contemplated hereby shall have been obtained, except where failure to obtain any such consent, order, or permit would not involve a risk of material adverse effect on the assets and properties of the Target Fund or the Acquiring Fund.

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(f)        That there shall be delivered to FTFT, behalf of the Target Fund, an opinion in form and substance satisfactory to FTFT from Stradley Ronon Stevens & Young, LLP, counsel to the Acquiring Fund, to the effect that, subject in all respects to the effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws now or hereafter affecting generally the enforcement of creditors’ rights:

(1)   The Acquiring Fund is a validly existing statutory trust in good standing under the laws of the State of Delaware;

(2)   The Acquiring Fund is an open-end management investment company registered as such under the 1940 Act;

(3)   The execution and delivery of the Plan and the consummation of the transactions contemplated hereby have been duly authorized by all necessary trust action on the part of the Acquiring Fund;

(4)   The Plan is the legal, valid and binding obligation of the Acquiring Fund, and is enforceable against the Acquiring Fund, in accordance with its terms;

(5)   The Acquiring Fund is authorized to issue an unlimited number of shares of beneficial interest, without par value; and

(6)   Acquiring Fund Shares to be issued pursuant to the terms of the Plan have been duly authorized and, when issued and delivered as provided in the Plan and the Registration Statement, will have been validly issued and fully paid and will be non-assessable by the Acquiring Fund.

In giving the opinion set forth above, counsel may state that it is relying on certificates of the officers of the Acquiring Fund with regard to matters of fact, and certain certifications and written statements of governmental officials with respect to the good standing of the Acquiring Fund.

(g)        That there shall be delivered to the Acquiring Fund an opinion in form and substance satisfactory to the Acquiring Fund from Stradley Ronon Stevens & Young, LLP, counsel to FTFT to the effect that, subject in all respects to the effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws now or hereafter affecting generally the enforcement of creditors’ rights:

(1)   The Target Fund is a series of FTFT and that FTFT is a validly existing statutory trust in good standing under the laws of the State of Delaware

(2)   FTFT is an open-end management investment company registered under the 1940 Act;

(3)   The execution and delivery of the Plan and the consummation of the transactions contemplated hereby have been duly authorized by all necessary trust action on the part of FTFT; and

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(4)   The Plan is the legal, valid and binding obligation of FTFT, on behalf of the Target Fund, and is enforceable against FTFT, on behalf of the Target Fund, in accordance with its terms.

In giving the opinion set forth above, counsel may state that it is relying on certificates of the officers of FTFT, on behalf of the Target Fund, with regard to matters of fact, and certain certifications and written statements of governmental officials with respect to the good standing of FTFT, on behalf of the Target Fund.

(h)        That there shall be delivered to FTFT, on behalf of the Target Fund, and the Acquiring Fund, an opinion in form and substance satisfactory to it, from the law firm of Stradley Ronon Stevens & Young, LLP, counsel to the Acquiring Fund and FTFT, to the effect that, provided the transaction contemplated hereby is carried out in accordance with the Plan, and the laws of the State of Delaware, and based upon certificates of the officers of the Acquiring Fund and FTFT, on behalf of the Target Fund, with regard to matters of fact:

(1)   The acquisition by the Acquiring Fund of substantially all of the assets of the Target Fund in exchange solely for the Acquiring Fund Shares followed by the distribution by the Target Fund to its shareholders of the Acquiring Fund Shares in complete liquidation of the Target Fund will qualify as a reorganization within the meaning of Section 368(a)(1) of the Code, and the Target Fund and the Acquiring Fund will each be a “party to the reorganization” within the meaning of Section 368(b) of the Code;

(2)   No gains or loss will be recognized by the Target Fund upon the transfer of substantially all of its assets to the Acquiring Fund in exchange solely for the Acquiring Fund Shares pursuant to Section 361(a) and Section 357(a) of the Code;

(3)   No gains or loss will be recognized by the Acquiring Fund upon the receipt by it of substantially all of the assets of the Target Fund in exchange solely for the Acquiring Fund Shares pursuant to Section 1032(a) of the Code;

(4)   No gains or loss will be recognized by the Target Fund upon the distribution of the Acquiring Fund Shares by the Target Fund to its shareholders in complete liquidation pursuant to Section 361(c)(1) of the Code;

(5)   The tax basis of the assets of the Target Fund received by the Acquiring Fund will be the same as the tax basis of these assets in the hands of the Target Fund immediately prior to the Reorganization pursuant to Section 362(b) of the Code;

(6)   The holding periods of the assets of the Target Fund received by the Acquiring Fund will include the periods during which such assets were held by the Target Fund pursuant to Section 1223(2) of the Code;

(7)   No gains or loss will be recognized by the shareholders of the Target Fund upon the exchange of their Target Fund Shares solely for the Acquiring Fund Shares (including fractional shares to which they may be entitled) pursuant to Section 354(a) of the Code;

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(8)   The aggregate tax basis of the Acquiring Fund Shares to be received by each Target Fund shareholder (including fractional shares to which they may be entitled) will be the same as the aggregate tax basis of the Target Fund Shares exchanged therefor pursuant to Section 358(a)(1) of the Code;

(9)   The holding period of the Acquiring Fund Shares to be received by each Target Fund shareholder (including fractional shares to which they may be entitled) will include the holding period of the Target Fund Shares surrendered in exchange therefor, provided that the shareholder held the Target Fund Shares as a capital asset on the date of the Reorganization pursuant to Section 1223(1) of the Code;

(10) The Acquiring Fund will succeed to and take into account as of the date of the transfer (as defined in Section 1.381(b)-1(b) of Treasury Regulations) the items of the Target Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the Treasury Regulations thereunder.

No opinion will be expressed as to the effect of the Reorganization on: (i) the Target Fund or the Acquiring Fund with respect to any asset as to which any unrealized gains or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting; and (ii) any Target Fund shareholder that is required to recognize unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting. 

(i)         That the Acquiring Fund’s Prospectus contained in the Registration Statement with respect to Acquiring Fund Shares to be delivered to Target Fund shareholders in accordance with the Plan shall be effective, and no stop order suspending the effectiveness of the Registration Statement or any amendment or supplement thereto, shall have been issued prior to the Closing Date or shall be in effect at the Closing, and no proceedings for the issuance of such an order shall be pending or threatened on that date.

(j)         That the Acquiring Fund Shares to be delivered hereunder shall be eligible for sale with each state commission or agency with which such eligibility is required in order to permit the Acquiring Fund Shares lawfully to be delivered to each holder of the Target Fund Shares.

(k)        The Target Fund will provide the Acquiring Fund with (1) a statement of the respective tax basis and holding period of all investments to be transferred by the Target Fund to the Acquiring Fund, (2) the Target Fund Shareholder Documentation, (3) if requested by the Acquiring Fund, all workpapers and supporting statements related to ASC 740-10-25 (formerly, FIN 48) pertaining to the Target Fund, (4) the Tax books and records of the Target Fund for purposes of preparing any Returns required by law to be filed for Tax periods ending after the Closing Date, and (5) a statement of earnings and profits as provided in Section 5.2(g).

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7.       Expenses.

The expenses of entering into and carrying out the provisions of the Plan shall be borne as follows: each Fund will pay 25% of the costs of the Reorganization.  FAV, the investment manager for the Funds, will pay 50% of the costs of the Reorganization. 

8.       Termination; Postponement; Waiver; Order.

(a)        Anything contained in the Plan to the contrary notwithstanding, the Plan may be terminated and the Reorganization abandoned at any time prior (whether before or after approval thereof by the shareholders of the Target Fund) to the Closing, or the Closing may be postponed:

(1)   by mutual consent of the Acquiring Fund and FTFT, on behalf of the Target Fund;

(2)   by FTFT, on behalf of the Target Fund, if any condition of its obligations set forth in Section 6 has not been fulfilled or waived and it reasonably appears that such condition or obligation will not or cannot be met; or

(3)   by the Acquiring Fund, if any conditions of its obligations set forth in Section 6 has not been fulfilled or waived and it reasonably appears that such condition or obligation will not or cannot be met.

(b)        If the transactions contemplated by the Plan have not been consummated by June 1, 2017, the Plan shall automatically terminate on that date, unless a later date is mutually agreed to by officers of the Acquiring Fund and FTFT.

(c)        In the event of termination of the Plan prior to its consummation, pursuant to the provisions hereof, the Plan shall become void and have no further effect, and neither the Acquiring Fund, FTFT, the Target Fund, nor their trustees, officers, or agents or the shareholders of the Target or Acquiring Fund shall have any liability in respect of the Plan, but all expenses incidental to the preparation and carrying out of the Plan shall be paid as provided in Section 7 hereof.

(d)       At any time prior to the Closing, any of the terms or conditions of the Plan may be waived by the Acquiring Fund or FTFT, on behalf of the Target Fund, if, in the judgment of their respective officers, such action or waiver will not have a material adverse effect on the benefits intended under the Plan to such Fund’s shareholders.

(e)        The representations and warranties contained in Section 4 hereof shall expire with and be terminated by the Plan on the Closing Date, and neither the Acquiring Fund, FTFT, the Target Fund, nor any of their respective officers, trustees, agents or shareholders shall have any liability with respect to such representations or warranties after the Closing Date.

(f)        If any order of the SEC with respect to the Plan shall be issued prior to the Closing that imposes any term or condition that is determined by action of the Board of Trustees of FTFT to be acceptable, such term or condition shall be binding as if it were a part of the Plan without a vote or approval of the shareholders of the Target Fund; provided that, if such term or condition would result in a change in the method of computing the number of Acquiring Fund Shares to be issued to the Target Fund, and such term or condition had not been included in the Prospectus/Proxy Statement or other proxy solicitation material furnished to the shareholders of the Target Fund prior to the Special Meeting, the Plan shall not be consummated and shall terminate unless FTFT promptly calls a special meeting of its shareholders at which such condition shall be submitted for approval.

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9.       Cooperation and Exchange of Information; Reporting Responsibility.

(a)        The Acquiring Fund and FTFT will provide each other and their respective representatives with such cooperation, assistance, and information as either of them reasonably may request of the other in filing any Tax returns, amended return or claim for refund, determining a liability for Taxes, or in determining the financial reporting of any tax position, or a right to a refund of Taxes or participating in or conducting any audit or other proceeding in respect of Taxes.  Each party or their respective agents will retain for a period of six (6) years following the Closing all returns, schedules, and workpapers and all material records or other documents relating to Tax matters and financial reporting of tax positions of Target Fund and Acquiring Fund for its taxable period first ending after the Closing and for all prior taxable periods.

(b)        Any reporting responsibility of the Target Fund is and shall remain the responsibility of FTFT, up to and including the Closing Date, and such later date on which the Target Fund is terminated including, without limitation, responsibility for (i) preparing and filing Tax Returns relating to Tax periods ending on or prior to the date of Closing (whether due before or after the Closing); and (ii) preparing and filing other documents with the SEC, any state securities commission, and any federal, state or local Tax authorities or any other relevant regulatory authority, except as otherwise is mutually agreed by the parties.

(c)        After the Closing Date, FTFT, on behalf of the Target Fund, shall or shall cause its agents to prepare any federal, state or local Tax Returns, including any Forms 1099, required to be filed by FTFT with respect to the Target Fund’s final taxable year ending with its complete liquidation and for any prior periods or taxable years and shall further cause such Tax Returns and Forms 1099 to be duly filed with the appropriate taxing authorities.

10.     Liability of the Target Fund and the Acquiring Fund.

(a)        FTFT, on behalf of the Target Fund, acknowledges and agrees that all obligations of the Acquiring Fund under the Plan are binding only with respect to the Acquiring Fund; that any liability of the Acquiring Fund under the Plan or in connection with the transactions contemplated herein shall be discharged only out of the assets of the Acquiring Fund; and that FTFT, on behalf of the Target Fund, shall not seek satisfaction of any such obligation or liability from the shareholders of the Acquiring Fund, the trustees, officers, employees or agents of the Acquiring Fund or any of them.

(b)        The Acquiring Fund acknowledges and agrees that all obligations of FTFT, on behalf of the Target Fund, under the Plan are binding only with respect to FTFT, on behalf of the Target Fund; that any liability of FTFT, on behalf of the Target Fund, under the Plan in connection with the transactions contemplated herein, shall be discharged only out of the assets of the Target Fund; and that the Acquiring Fund shall not seek satisfaction of any such obligation or liability from the shareholders of the Target Fund, the trustees, officers, employees or agents of the Target Fund, or any of them.

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11.     Entire Agreement and Amendments.

The Plan embodies the entire agreement between the parties and there are no agreements, understandings, restrictions, or warranties relating to the transactions contemplated by the Plan other than those set forth herein or herein provided for.  The Plan may be amended only by mutual consent of the parties in writing.  Neither the Plan nor any interest herein may be assigned without the prior written consent of the other party.

12.     Counterparts.

The Plan may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts together shall constitute but one instrument.

13.Governing Law.

The Plan shall be governed by and carried out in accordance with the laws of the State of Delaware.

14.     Notices.

Any notice, report, or demand required or permitted by any provision of the Plan shall be in writing and shall be deemed to have been given if delivered or mailed, first class postage prepaid, addressed to the Acquiring Fund, at Franklin Federal Tax-Free Income Fund, One Franklin Parkway, San Mateo, California 94403-1906, Attention:  Secretary, or the Target Fund, at Franklin Tax-Free Trust, One Franklin Parkway, San Mateo, California 94403-1906, Attention: Secretary, as the case may be.

15.     Headings.

The paragraph headings contained in this Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of this Plan.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Acquiring Fund and FTFT, on behalf of the Target Fund, have caused the Plan to be executed on its behalf by its duly authorized officers, all as of the date and year first-above written.

FRANKLIN FEDERAL TAX-FREE INCOME FUND
By:	Name: Title:

FRANKLIN TAX-FREE TRUST, on behalf of FRANKLIN INSURED TAX-FREE INCOME FUND
By:	Name: Title:

With respect to Section 7 of the Plan only: FRANKLIN ADVISERS, INC.
By:	Name: Title:

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Exhibit B

PRINCIPAL HOLDERS OF SECURITIES

Name and Address	Share Class	Percentage (%)
Insured Tax-Free Fund
Federal Tax-Free Fund

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Franklin Federal Tax-Free Income Fund Prospectus dated September 1, 2016

       The prospectus of the Federal Tax-Free Income Fund dated September 1, 2016, as supplemented to date, is part of this Prospectus/Proxy Statement and will be included in the proxy mailing to all shareholders of record of the Franklin Insured Tax-Free Income Fund and is incorporated by reference from the electronic filing on Form N-1A made by the Federal Tax-Free Income Fund on September 1, 2016 under Accession No. ___________________.

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[PROXY TABULATOR]

[STREET_____________]

[CITY, STATE, ZIP CODE]

EVERY SHAREHOLDER'S VOTE IS IMPORTANT

Vote by Internet

Please go to the electronic voting site at

www.2voteproxy.com/ft.  Follow the on-line instructions.

If you vote by internet, you do not have to return your Ballot.

Vote by Telephone

Please call us toll-free at 1-800-830-3542, and follow the instructions provided.  If you vote by telephone, you do not have to return your Ballot.

Vote by Mail

Mark, sign and date your Ballot and return it promptly in the envelope provided.

Please ensure the address below shows through the window of the enclosed postage paid return envelope.

[PROXY TABULATOR]

[STREET_____________]

[CITY, STATE, ZIP CODE]

PROXY                                                                                                                                                              PROXY

FRANKLIN INSURED TAX-FREE INCOME FUND

a series of Franklin Tax-Free Trust

SPECIAL MEETING OF SHAREHOLDERS

November 7, 2016

The undersigned hereby revokes all previous proxies for his/her shares of the Franklin Insured Tax-Free Income Fund (the “Insured Tax-Free Fund”) and appoints Alison Baur, Steven J. Gray, Karen L. Skidmore and Navid J. Tofigh, and each of them, proxies of the undersigned with full power of substitution to vote all shares of the Insured Tax-Free Fund that the undersigned is entitled to vote at the Insured Tax-Free Fund’s Special Meeting of Shareholders (“Meeting”) to be held at One Franklin Parkway, San Mateo, California 94403-1906 at 2:00 p.m., Pacific time on November 7, 2016, including any postponements or adjournments thereof, upon the matter set forth on the reverse side and instructs them to vote upon any other matters that may properly be acted upon at the Meeting.

This proxy is solicited on behalf of the Board of Trustees of the Franklin Tax-Free Trust, on behalf of the Insured Tax-Free Fund. It will be voted as specified.  If no specification is made, this proxy shall be voted FOR the proposal to approve an agreement and plan of reorganization involving the reorganization of the Insured Tax-Free Fund with and into the Franklin Federal Tax-Free Income Fund.  If any other matters properly come before the Meeting to be voted on, the proxy holders will vote, act and consent on those matters in accordance with the views of management.

IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.

YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY.  THIS WILL SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.

Note: Please sign exactly as your name appears on the proxy. If signing for estates, trusts or corporations, your title or capacity should be stated.  If shares are held jointly, one or more joint owners should sign personally.

Signature

Signature (if held jointly)

Date

(Please see reverse side)

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EVERY SHAREHOLDER'S VOTE IS IMPORTANT

Important Notice Regarding the Availability of Proxy Materials for the

Special Meeting of Shareholders to Be Held on November 7, 2016

The Proxy Statement for this Meeting is available at: www.2voteproxy.com/ft

PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY

THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF PROPOSAL 1.

Please fill in the box(es) as shown using black or blue ink or a No. 2 pencil. Please do not use a fine point pen. x

FOR        AGAINST     ABSTAIN

1.  To approve an agreement and plan of reorganization between the Franklin Insured Tax-Free Income Fund, a series of Franklin Tax-Free Trust, and Franklin Federal Tax-Free Income Fund.

IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY TODAY

PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE.

NO POSTAGE IS REQUIRED IF MAILED IN THE U.S.

[FT302– V2]

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PART B

STATEMENT OF ADDITIONAL INFORMATION

FOR

FRANKLIN FEDERAL TAX-FREE INCOME FUND

Dated September 1, 2016

Acquisition of Substantially All of the Assets of:

FRANKLIN INSURED TAX-FREE INCOME FUND

(a series of Franklin Tax-Free Trust)

by and in Exchange for Shares of

FRANKLIN FEDERAL TAX-FREE INCOME FUND

This Statement of Additional Information (“SAI”) relates specifically to the proposed acquisition of substantially all of the assets of the Franklin Insured Tax-Free Income Fund (the “Insured Tax-Free Fund”) by and in exchange for Class A, Class C and Advisor Class shares of the Franklin Federal Tax-Free Income Fund (the “Federal Tax-Free Fund”).

This SAI consists of this Cover Page and the following documents, each of which was filed electronically with the U.S. Securities and Exchange Commission, is attached hereto and, except as noted below, is incorporated by reference herein (is legally considered to be part of this SAI):

1.Statement of Additional Information of the Insured Tax-Free Fund dated July 1, 2016 (previously filed on EDGAR, Accession No. (0001379491-16-004668).

2.Annual Report of the Insured Tax-Free Fund for the fiscal year ended February 29, 2016 (previously filed on EDGAR, Accession No. (0000757010-16-000080).  Only the audited financial statements and related report of the independent registered public accounting firm included in the Annual Report are incorporated herein by reference, and no other parts of the Annual Report are incorporated herein by reference.

3.Statement of Additional Information of the Federal Tax-Free Fund dated [September 1, 2016] (previously filed on EDGAR, Accession No. ([______________]).

4.Annual Report of the Federal Tax-Free Fund for the fiscal year ended April 30, 2016 (previously filed on EDGAR, Accession No. (0000357310-16-000028).  Only the audited financial statements and related report of the independent registered public accounting firm included in the Annual Report are incorporated herein by reference, and no other parts of the Annual Report are incorporated herein by reference.

This SAI, which is not a prospectus, supplements and should be read in conjunction with the Prospectus/Proxy Statement dated September 1, 2016 (the “Prospectus/Proxy Statement”) relating to the above-referenced transaction and the Special Meeting of Shareholders of the Insured Tax-Free Fund that will be held on November 7, 2016.  You can request a copy of the Prospectus/Proxy Statement by calling (800) DIAL BEN^®/(800) 342-5236) or by writing to Franklin Templeton Investments at P.O. Box 997151, Sacramento, CA  95899-7151.

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Pro Forma Financial Information

FRANKLIN INSURED TAX-FREE INCOME FUND

FRANKLIN FEDERAL TAX-FREE INCOME FUND

PRO FORMA FINANCIAL INFORMATION, FEBRUARY 29, 2016

(UNAUDITED)

The following unaudited Pro Forma financial information gives effect to the proposed reorganization (referred to as the “Reorganization” or “Transaction”), accounted as if the Reorganization had occurred as of March 1, 2015.  In addition, the Pro Forma Financial Information has been prepared based upon the proposed fee and expense structure after the Reorganization, as discussed in the combined Prospectus/Proxy Statement.

The Pro Forma financial information has been estimated in good faith based upon information regarding the Franklin Insured Tax-Free Income Fund and the Franklin Federal Tax-Free Income Fund for the twelve month period ended February 29, 2016.  The Pro Forma Financial Information should be read in conjunction with the historical financial statements and notes thereto of Franklin Insured Tax-Free Income Fund and the Franklin Federal Tax-Free Income Fund, which are available in their respective annual and semi–annual shareholder reports.

Narrative Description of the Pro Forma Effects of the Reorganization

1.   BASIS OF COMBINATION

The unaudited Pro Forma financial information has been prepared to give effect to the proposed Reorganization of the Target Fund into the Acquiring Fund pursuant to an Agreement and Plan of Reorganization as of the beginning of the period as indicated below in the table.

		12 Month Period
Target Fund	Acquiring Fund	Ended
Franklin Insured Tax-Free Income Fund	Franklin Federal Tax-Free Income Fund	February 29, 2016

The Reorganization will be accounted for as a tax-free reorganization of investment companies; therefore, no gain or loss will be recognized by the Acquiring Fund or its shareholders as a result of the Reorganization.  The Target Fund is a series of a registered open-end management investment company, Franklin Tax-Free Trust. The Acquiring Fund is also registered open-end management investment company, that issues its shares in separate series.  The Reorganization would be accomplished by the acquisition of substantially all of the Target Fund’s assets by the Acquiring Fund in exchange for shares of the Acquiring Fund and the distribution of such shares to Target Fund shareholders in complete liquidation of the Target Fund.  It is currently expected that a de minimis (i.e., less than 5%) portion of the Target Fund’s portfolio assets may be sold in connection with the Reorganization.  Actual sales will depend on portfolio composition, market conditions and other factors at the time of the Reorganization.

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2.   SHARES OF BENEFICIAL INTEREST

The table below shows the class and shares that the Target Fund shareholders would have received if the Reorganization were to have taken place on February 29, 2016.

Target Fund Share Class	Target Fund Shares	Acquiring Fund Shares	Acquiring Fund Share Class
Class A	133,418,065	133,851,352	Class A
Class C	21,748,429	22,150,154	Class C
Advisor Class	4,657,616	4,667,118	Advisor Class

3.   NET ASSETS

The table below shows the net assets of the Target Fund and the Acquiring Fund and Pro Forma combined net assets, assuming all the Reorganization was completed as of February 29, 2016.

Fund	Net Assets
Franklin Insured Tax-Free Income Fund (Target Fund)	$  1,998,546,900
Franklin Federal Tax-Free Income Fund (Acquiring Fund)	$10,926,292,335
Franklin Federal Tax-Free Income Fund (Pro Forma Combined)	$12,924,839,235

4.   PRO FORMA ADJUSTMENTS

The table below reflects adjustments to expenses needed to the pro forma combined Fund as if the Reorganization had taken place on March 1, 2015.  The pro forma information has been derived from the books and records used in calculating daily net asset values of the Target Fund and the Acquiring Fund and have been prepared in accordance with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect this information.  Actual results could differ from those estimates.

Expense	Amount of increase (decrease) in expense	Impact to expense ratio
Management feesa	$                  (771,944)	-0.01%
Reports to shareholdersb	$                      (8,456)	0.00%
Registration and filing feesc	$                    (58,853)	0.00%
Professional feesd	$                    (38,667)	0.00%

^a  Pro Forma adjustment for increase in average net assets in the calculation of management fees.

^b  Pro Forma adjustment for removal of duplicative printing fees.

^c  Pro Forma adjustment for removal of duplicative registration fees.

^d  Pro Forma adjustment for removal of duplicative audit fees.

5.   INVESTMENT RESTRICTIONS

None of the securities held by the Target Fund as of the closing date will violate the investment restrictions of the Acquiring Fund.

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6.   ACCOUNTING ESTIMATES

The preparation of the Pro Forma Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Pro Forma Financial Statements and the amounts of income and expenses during the reporting period.  Actual results could differ from those estimates.

7.   REORGANIZATION COSTS

The Target Fund and the Acquiring Fund will each pay 25% of the expenses resulting from their participation in the Reorganization.  Franklin Advisers, Inc. will pay the remaining 50% of such expenses for the Reorganization.  The total amount of such expenses for the Reorganization is estimated to be $305,000 (or approximately $76,250 for each fund).  The expenses associated with the Reorganization will be allocated in the foregoing manner whether or not the Reorganization is consummated.

8.   ACCOUNTING SURVIVOR

The Acquiring Fund will be the accounting survivor.  The surviving fund will have the lead portfolio manager, investment objective, investment strategy and policies/restrictions of the Acquiring Fund.

9.   CAPITAL LOSS CARRYFORWARD

At February 29, 2016, Franklin Insured Tax-Free Income Fund and Franklin Federal Tax-Free Income Fund  had capital loss carryforwards of approximately $61,264,063 and $180,311,282, respectively.

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PART C
OTHER INFORMATION
Item 15.  Indemnification
The Agreement and Declaration of Trust (the "Declaration") provides that any person who is or was a Trustee, officer, employee or other agent, including the underwriter, of such Trust shall be liable to the Trust and its shareholders only for (1) any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing, or (2) the person's own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person (such conduct referred to herein as Disqualifying Conduct) and for nothing else. Except in these instances and to the fullest extent that limitations of liability of agents are permitted by the Delaware Statutory Trust Act (the "Delaware Act"), these Agents (as defined in the Declaration) shall not be responsible or liable for any act or omission of any other Agent of the Trust or any investment adviser or principal underwriter. Moreover, except and to the extent provided in these instances, none of these Agents, when acting in their respective capacity as such, shall be personally liable to any other person, other than such Trust or its shareholders, for any act, omission or obligation of the Trust or any trustee thereof. The Trust shall indemnify, out of its property, to the fullest extent permitted under applicable law, any of the persons who was or is a party, or is threatened to be made a party to any Proceeding (as defined in the Declaration) because the person is or was an Agent of such Trust. These persons shall be indemnified against any Expenses (as defined in the Declaration), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with the Proceeding if the person acted in good faith or, in the case of a criminal proceeding, had no reasonable cause to believe that the conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or plea of nolo contendere or its equivalent shall not in itself create a presumption that the person did not act in good faith or that the person had reasonable cause to believe that the person's conduct was unlawful. There shall nonetheless be no indemnification for a person's own Disqualifying Conduct. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to Trustees, officers and controlling persons of the Trust pursuant to the foregoing provisions, or otherwise, the Trust has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Trust of expenses incurred or paid by a Trustee, officer or controlling person of the Trust in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with securities being registered, the Trust may be required, unless in the opinion of its counsel the matter has been settled by controlling precedent, to submit to a court or appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 16.  Exhibits  The following exhibits are incorporated by reference to the previously filed document indicated below, except Exhibits 11(a), 12(a), 14(a) and 16(a):
(1)	Copies of the charter of the Registrant as now in effect;
	(a)	Agreement and Declaration of Trust of Franklin Federal Tax-Free Income Fund, a Delaware Statutory Trust dated October 18, 2006 Filing: Post-Effective Amendment No. 32 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2007
	(b)	Certificate of Trust of Franklin Federal Tax-Free Income Fund dated October 18, 2006 Filing: Post-Effective Amendment No. 32 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2007
(2)	Copies of the existing by-laws or corresponding instruments of the Registrant;
	(a)	By-Laws of Franklin Federal Tax-Free Income Fund a Delaware Statutory Trust effective as of October 18, 2006 Filing: Post-Effective Amendment No. 32 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2007
(3)	Copies of any voting trust agreement affecting more than 5 percent of any class of equity securities of the Registrant;
Not Applicable
(4)	Copies of the agreement of acquisition, reorganization, merger, liquidation and any amendments to it;
	(a)	Form of Agreement and Plan of Reorganization of Franklin Federal Tax-Free Income Fund and Franklin Tax-Free Trust on behalf of Franklin Federal Insured Tax-Free Income Fund is filed herewith as Exhibit A to the Prospectus/Proxy Statement
(5)	Copies of all instruments defining the rights of holders of the securities being registered including, where applicable, the relevant portion of the articles of incorporation or by-laws of the Registrant;
	(a)	Articles III (Shares), V (Shareholders’ Voting Powers and Meetings), VI (Net Asset Value, Distributions, Redemptions and Transfers), VIII (Certain Transactions) and X (Miscellaneous) of Agreement and Declaration of Trust of the Registrant Filing: Post-Effective Amendment No. 32 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2007
	(b)	Articles II (Meeting of Shareholders), VI (Records and Reports), VII (General Matters) and VIII (Amendment) of the By-Laws of the Registrant Filing: Post-Effective Amendment No. 32 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2007
(6)	Copies of all investment advisory contracts relating to the management of the assets of the Registrant;
	(a)	Management Agreement between the Registrant and Franklin Advisers, Inc. dated September 1, 2007 Filing: Post-Effective Amendment No. 33 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2008
	(b)	Addendum dated January 1, 2008 to the Investment Management Agreement between the Registrant and Franklin Advisers, Inc. Filing: Post-Effective Amendment No. 38 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2012
(7)	Copies of each underwriting or distribution contract between the Registrant and a principal underwriter, and specimens or copies of all agreements between principal underwriters and dealers;
	(a)	Distribution Agreement dated January 1, 2011 between Registrant and Franklin Templeton Distributors, Inc. Filing: Post-Effective Amendment No. 36 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 26, 2011
	(b)	Forms of Selling Agreements between Franklin/Templeton Distributors, Inc. and Securities Dealers dated May 1, 2010 Filing: Post-Effective Amendment No. 36 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 26, 2011
(8)	Copies of all bonus, profit sharing, pension, or other similar contracts or arrangements wholly or partly for the benefit of trustees or officers of the Registrant in their capacity as such. Furnish a reasonably detailed description of any plan that is not set forth in a formal document;
	Not Applicable
(9)	Copies of all custodian agreements and depository contracts under Section 17(f) of the 1940 Act for securities and similar investments of the Registrant, including the schedule of remuneration;
	(a)	Master Custody Agreement between Registrant and The Bank of New York Mellon dated February 16, 1996 Filing: Post-Effective Amendment No. 20 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 21, 1997
	(b)	Amendment dated May 7, 1997 to the Master Custody Agreement dated February 16, 1996 between the Registrant and The Bank of New York Mellon Filing: Post-Effective Amendment No. 21 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: June 23, 1998
	(c)	Amendment dated February 27, 1998 to Master Custody Agreement between the Registrant and The Bank of New York Mellon dated February 16, 1996 Filing: Post-Effective Amendment No. 22 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: December 22, 1998
	(d)	Amendment dated August 21, 2015 to Exhibit A of the Master Custody Agreement between Registrant and The Bank New York Mellon dated February 16, 1996 Filing: Post-Effective Amendment No. 44 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2015
	(e)	Terminal Link Agreement between Registrant and The Bank of New York Mellon dated February 16, 1996 Filing: Post-Effective Amendment No. 20 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 21, 1997
	(f)	Amendment dated August 21, 2015 to Exhibit A of the Terminal Link Agreement between Registrant and The Bank of New York Mellon dated February 16, 1996 Filing: Post-Effective Amendment No. 44 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2015
(10)	Copies of any plan entered into by Registrant pursuant to Rule 12b-1 under the 1940 Act and any agreements with any person relating to implementation of the plan, and copies of any plan entered into by Registrant pursuant to Rule 18f-3 under the 1940 Act, any agreement with any person relating to implementation of the plan, any amendment to the plan, and a copy of the portion of the minutes of the meeting of the Registrant's trustees describing any action taken to revoke the plan;
	(a)	Amended and Restated Class A Distribution Plan pursuant to Rule 12b-1 between the Registrant and Franklin/Templeton Distributors, Inc. dated February 1, 2009 Filing: Post-Effective Amendment No. 34 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2009
	(b)	Amended and Restated Class C Distribution Plan pursuant to Rule 12b-1 between Registrant and Franklin/Templeton Distributors, Inc. dated July 9, 2009 Filing: Post-Effective Amendment No. 35 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2010
	(c)	Multiple Class Plan dated October 17, 2006 Filing: Post-Effective Amendment No. 38 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2012
(11)	An opinion and consent of counsel as to the legality of the securities being registered, indicating whether they will, when sold, be legally issued, fully paid and nonassessable;
	(a)	Legal Opinion dated July 15, 2016, filed herewith
(12)	An opinion, and consent to their use, of counsel or, in lieu of an opinion, a copy of the revenue ruling from the Internal Revenue Service, supporting the tax matters and consequences to shareholders discussed in the prospectus;
	(a)	To be filed by amendment
(13)	Copies of all material contracts of the Registrant not made in the ordinary course of business which are to be performed in whole or in part on or after the date of filing the registration statement;
	(a)	Amended and Restated Subcontract for Fund Administrative Services dated February 28, 2012 between Franklin Advisers, Inc. and Franklin Templeton Services, LLC Filing: Post-Effective Amendment No. 38 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2012
	(b)	Amended and Restated Transfer Agent and Shareholder Services Agreement between the Registrant and Franklin Templeton Investor Services, LLC dated June 1, 2014 Filing: Post-Effective Amendment No. 42 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2014
(14)	Copies of any other opinions, appraisals, or rulings, and consents to their use, relied on in preparing the registration statement and required by Section 7 of the 1933 Act;
	(a)	Consent of Independent Registered Public Accounting Firm, filed herewith
(15)	All financial statements omitted pursuant to Item 14(a)(1);
	Not Applicable
(16)	Manually signed copies of any power of attorney pursuant to which the name of any person has been signed to the registration statement; and
	(a)	Powers of Attorney dated May 19, 2016, filed herewith
(17)	Any additional exhibits which the Registrant may wish to file.
	(a)	Code of Ethics dated May 1, 2013 Filing: Post-Effective Amendment No. 42 to Registration Statement on Form N-1A File No. 002-75925 Filing Date: August 27, 2014
Item 17.  Undertakings
	(a)	The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
	(b)	The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registrations statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
	(c)	The undersigned Registrant agrees to file by Post-Effective Amendment the opinion of counsel regarding the tax consequences of the proposed reorganization required by Item 16 (12)(a) of Form N-14 within a reasonable time after receipt of such opinion.

 

SIGNATURES

As required by the Securities Act of 1933, as amended, this Registration Statement to be signed on its behalf of the Registrant, in the City of San Mateo and the State of California, on the 14th day of July, 2016.

FRANKLIN FEDERAL TAX-FREE INCOME FUND

(Registrant)

By:   /s/Karen L. Skidmore

Karen L. Skidmore

Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

CHRISTOPHER J. MOLUMPHY*
Christopher J. Molumphy	President and Chief Executive Officer- Investment Management
	Dated: July 14, 2016
LAURA F. FERGERSON*
Laura F. Fergerson	Chief Executive Officer- Finance and Administration
	Dated: July 14, 2016
GASTON GARDEY*
Gaston Gardey	Chief Financial Officer and Chief Accounting Officer and Treasurer
	Dated: July 14, 2016
HARRIS J. ASHTON*	Trustee
Harris J. Ashton	Dated: July 14, 2016
MARY C. CHOKSI* Mary C. Choksi	Trustee Dated: July 14, 2016
EDITH E. HOLIDAY*	Trustee
Edith E. Holiday	Dated: July 14, 2016
GREGORY E. JOHNSON*	Trustee
Gregory E. Johnson	Dated: July 14, 2016
RUPERT H. JOHNSON, JR.*	Trustee
Rupert H. Johnson, Jr.	Dated: July 14, 2016
J. MICHAEL LUTTIG*	Trustee
J. Michael Luttig	Dated: July 14, 2016
FRANK A. OLSON*	Trustee
Frank A. Olson	Dated: July 14, 2016
LARRY D. THOMPSON*	Trustee
Larry D. Thompson	Dated: July 14, 2016
JOHN B WILSON*	Trustee
John B. Wilson	Dated: July 14, 2016

 

*By    /s/Karen L. Skidmore

Karen L. Skidmore, Attorney-in-Fact

(Pursuant to Power of Attorney filed herewith)

 

FRANKLIN FEDERAL TAX-FREE INCOME FUND

N-14 REGISTRATION STATEMENT

EXHIBITS INDEX

EXHIBIT NO.	DESCRIPTION	LOCATION
EX-99.(11)(a)	Legal Opinion dated July 15, 2016	Attached
EX-99.(12)(a)	Opinion and consent to their use, of counsel or, in lieu of an opinion, a copy of the revenue ruling from the Internal Revenue Service, supporting the tax matters and consequences to shareholders discussed in the prospectus	To be filed by Amendment
EX-99.(14)(a)	Consent of Independent Registered Public Accounting Firm	Attached
EX-99.(16)(a)	Powers of Attorney dated May 19, 2016	Attached