o 116 P-3
SUPPLEMENT DATED JUNE 1, 2000
TO THE PROSPECTUS OF
FRANKLIN FEDERAL TAX-FREE INCOME FUND
DATED SEPTEMBER 1, 1999
The prospectus is amended as follows:
I. The management team on page 10 is replaced with the following:
The team responsible for the fund's management is:
SHEILA AMOROSO, SENIOR VICE PRESIDENT OF ADVISERS
Ms. Amoroso has been an analyst or portfolio manager of the fund since 1987.
She is the co-Director of Franklin's Municipal Bond Department. She joined
the Franklin Templeton Group in 1986.
FRANCISCO RIVERA, PORTFOLIO MANAGER of Advisers Mr. Rivera has been an analyst
or portfolio manager of the Fund since 1996. He joined the Franklin Templeton
Group in 1994.
JOHN WILEY, VICE PRESIDENT of Advisers Mr. Wiley has been an analyst or
portfolio manager of the Fund since 1991. He joined the Franklin Templeton Group
in 1989.
II. The section "Sales charge waivers" on page 20 is replaced with the
following:
SALES CHARGE WAIVERS Class A shares may be purchased without an initial sales
charge or CDSC by various individuals, institutions and retirement plans or
by investors who reinvest certain distributions and proceeds within 365 days.
Certain investors also may buy Class C shares without an initial sales
charge. The CDSC for each class may be waived for certain redemptions and
distributions. If you would like information about available sales charge
waivers, call your investment representative or call Shareholder Services at
1-800/632-2301. A list of available sales charge waivers also may be found
in the Statement of Additional Information (SAI).
III. The section "Minimum investments" on page 20 is replaced with the
following:
MINIMUM INVESTMENTS
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INITIAL ADDITIONAL
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Regular accounts $1,000 $50
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Automatic investment plans $50 $50
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UGMA/UTMA accounts $100 $50
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Broker-dealer sponsored wrap account $250 $50
programs
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Full-time employees, officers, trustees and
directors of Franklin Templeton entities,
and their immediate family members $100 $50
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Please note that you may only buy shares of a Fund eligible for sale in your
state or jurisdiction.
IV. The section "Account Application" on page 21 is replaced with the
following:
ACCOUNT APPLICATION If you are opening a new account, please complete and
sign the enclosed account application. Make sure you indicate the share class
you have chosen. If you do not indicate a class, we will place your purchase
in Class A shares. To save time, you can sign up now for services you may
want on your account by completing the appropriate sections of the
application (see "Investor Services" on page 22). For example, if you would
like to link one of your bank accounts to your Fund account so that you may
use electronic fund transfers to and from your bank account to buy and sell
shares, please complete the bank information section of the application. We
will keep your bank information on file for future purchases and redemptions.
V. Effective July 3, 2000, the following is added to the section "Buying
shares" on page 21:
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[Insert graphic of If you have another Before requesting a
phone] Franklin Templeton telephone purchase,
account with your please make sure we
BY PHONE bank account have your bank
information on file, account information
(Up to $100,000 per you may open a new on file. If we do not
day) account by phone. The have this
1-800/632-2301 accounts must be information, you will
identically need to send written
registered. instructions with
your bank's name and
To make a same day address, a voided
investment, please check or savings
call us by 1:00 p.m. account deposit slip,
Pacific time or the and a signature
close of the New York guarantee if the
Stock Exchange, ownership of the bank
whichever is earlier. and Fund accounts is
different.
To make a same day
investment, please
call us by 1:00 p.m.
Pacific time or the
close of the New York
Stock Exchange,
whichever is earlier.
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VI. The section "Automatic Investment Plan" on page 22 is replaced with the
following:
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest
in the Fund by automatically transferring money from your checking or savings
account each month to buy shares. To sign up, complete the appropriate
section of your account application and mail it to Investor Services.
If you are opening a new account, please include the minimum initial
investment of $50 with your application.
VII. The section "Telephone Privileges" on page 22 is replaced with the
following:
TELEPHONE PRIVILEGES You will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to
buy, sell or exchange your shares and make certain other changes to your
account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the Fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For
all other transactions and changes, all registered owners must sign the
instructions. In addition, our telephone exchange privilege allows you to
exchange shares by phone from a fund account requiring two or more signatures
into an identically registered money fund account requiring only one
signature for all transactions. This type of telephone exchange is available
as long as you have telephone exchange privileges on your account.
As long as we take certain measures to verify telephone requests, we will not
be responsible for any losses that may occur from unauthorized requests. Of
course, you can decline telephone purchase, exchange or redemption privileges
on your account application.
VIII. In the section "Selling Shares," the "By Wire" section of the Selling
Shares table on page 26 is replaced with the following:
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[Insert graphic of You can call or write to have redemption
three lightning bolts] proceeds sent to a bank account. See the
policies above for selling shares by mail
BY ELECTRONIC or phone.
FUNDS TRANSFER
(ACH) Before requesting to have redemption
proceeds sent to a bank account, please
make sure we have your bank account
information on file. If we do not have this
information, you will need to send written
instructions with your bank's name and
address, a voided check or savings account
deposit slip, and a signature guarantee if
the ownership of the bank and fund accounts
is different.
If we receive your request in proper form
by 1:00 p.m. Pacific time, proceeds sent by
ACH generally will be available within two
to three business days.
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IX. The section "Statements and reports" on page 27 is replaced with the
following:
STATEMENTS AND REPORTS You will receive quarterly account statements that
show all your account transactions during the quarter. You also will receive
written notification after each transaction affecting your account (except
for distributions and transactions made through automatic investment or
withdrawal programs, which will be reported on your quarterly statement). You
also will receive the Fund's financial reports every six months. To reduce
Fund expenses, we try to identify related shareholders in a household and
send only one copy of the financial reports. If you need additional copies,
please call 1-800/DIAL BEN.
If there is a dealer or other investment representative of record on your
account, he or she also will receive copies of all notifications and
statements and other information about your account directly from the Fund.
X. The section "Dealer compensation" on page 29 is replaced with the
following:
DEALER COMPENSATION Qualifying dealers who sell Fund shares may receive sales
commissions and other payments. These are paid by Franklin Templeton
Distributors, Inc. (Distributors) from sales charges, distribution and
service (12b-1) fees and its other resources.
CLASS A CLASS B CLASS C
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COMMISSION (%) - 3.00 2.00
Investment under $100,000 4.00 - -
$100,000 but under $250,000 3.25 - -
$250,000 but under $500,000 2.25 - -
$500,000 but under $1 million 1.85 - -
$1 million or more up to 0.75 1 - -
12B-1 FEE TO DEALER 0.10 0.15 2 0.65 3
A dealer commission of up to 1% may be paid on Class C NAV purchases. A dealer
commission of up to 0.25% may be paid on Class A NAV purchases by certain trust
companies and bank trust departments, eligible governmental authorities, and
broker-dealers or others on behalf of clients participating in comprehensive fee
programs.
MARKET TIMERS. Please note that for Class A NAV purchases by market timers,
including purchases of $1 million or more, dealers are not eligible to
receive the dealer commission. Dealers, however, may be eligible to receive
the 12b-1 fee from the date of purchase. If a dealer commission is paid on a
Class A NAV purchase that we later determine was made by a market timer, all
commissions paid in connection with that purchase during the last twelve
months must be returned.
1. During the first year after purchase, dealers may not be eligible to
receive the 12b-1 fee.
2. Dealers may be eligible to receive up to 0.15% from the date of purchase.
After 8 years, Class B shares convert to Class A shares and dealers may then
receive the 12b-1 fee applicable to Class A.
3. Dealers may be eligible to receive up to 0.15% during the first year after
purchase and may be eligible to receive the full 12b-1 fee starting in the
13th month.
Please keep this supplement for future reference.
