oTF3 *P3
SUPPLEMENT DATED OCTOBER 1, 1998
TO THE PROSPECTUS OF
FRANKLIN TAX-FREE TRUST
(TF3 - ARIZONA, COLORADO, CONNECTICUT, FEDERAL INTERMEDIATE,
HIGH YIELD, INDIANA, MICHIGAN, NEW JERSEY, OREGON, PENNSYLVANIA,
AND PUERTO RICO TAX-FREE INCOME FUNDS)
DATED JULY 1, 1998
The prospectus is amended as follows:
I. The second step in the section "How Do I Buy Shares? - Opening Your Account"
is replaced with the following:
2. Determine how much you would like to invest. The funds' minimum investments
are:
o To open a regular account $1,000
o To open a custodial account for a minor (an UGMA/UTMA account) $ 100
o To open an account with an automatic investment plan $ 50
o To add to an account $ 50
For purchases by broker-dealers, registered investment advisors or certified
financial planners who have entered into an agreement with Distributors for
clients participating in comprehensive fee programs, the minimum initial
investment is $250. The minimum initial investment is $100 for officers,
trustees, directors and full-time employees of the Franklin Templeton Funds or
the Franklin Templeton Group, and their family members, consistent with our
then-current policies.
We reserve the right to change the amount of these minimums from time to
time or to waive or lower these minimums for certain purchases. We also reserve
the right to refuse any order to buy shares.
II. The following new category 10 is added to the end of the second list of
sales charge waiver categories in the section "Sales Charge Waivers," found
under "How Do I Buy Shares? - Sales Charge Reductions and Waivers":
10. Qualified registered investment advisors who buy through a broker-dealer or
service agent who has entered into an agreement with Distributors
III. The first paragraph under "May I Exchange Shares for Shares of Another
Fund? - Will Sales Charges Apply to My Exchange?" is replaced with the
following:
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable
sales charge of the new fund, if the difference is more than 0.25%. If you have
never paid a sales charge on your shares because, for example, they have always
been held in a money fund, you will pay the fund's applicable sales charge no
matter how long you have held your shares. These charges may not apply if you
qualify to buy shares without a sales charge.
IV. The following new item is added under "May I Exchange Shares for Shares of
Another Fund? - Exchange Restrictions":
o You must meet the applicable minimum investment amount of the fund you are
exchanging into, or exchange 100% of your fund shares.
V. Distribution option 3 in the section "What Distributions Might I Receive From
the Funds? - Distribution Options" is replaced with the following:
3.RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to
another person or to a checking or savings account, you may need a
signature guarantee. If you send the money to a checking or savings
account, please see "Electronic Fund Transfers" under "Services to Help You
Manage Your Account."
VI. The section "Keeping Your Account Open," found under "Transaction Procedures
and Special Requirements," is replaced in its entirety with the following:
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $250, or less than $50
for employee accounts and custodial accounts for minors. We will only do this
if the value of your account fell below this amount because you voluntarily
sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of your
account to $1,000, or $100 for employee accounts and custodial accounts for
minors. These minimums do not apply to accounts managed by the Franklin
Templeton Group.
VII. The second sentence in the section "Services to Help You Manage Your
Account - Automatic Investment Plan" is replaced with the following:
Under the plan, you can have money transferred automatically from your checking
or savings account to a fund each month to buy additional shares.
VIII. The second paragraph under "Services to Help You Manage Your Account
Systematic Withdrawal Plan" is replaced with the following:
If you would like to establish a systematic withdrawal plan, please complete
the systematic withdrawal plan section of the shareholder application included
with this prospectus and indicate how you would like to receive your payments.
You may choose to direct your payments to buy the same class of shares of
another Franklin Templeton Fund or have the money sent directly to you, to
another person, or to a checking or savings account. If you choose to have the
money sent to a checking or savings account, please see "Electronic Fund
Transfers" below. Once your plan is established, any distributions paid by the
fund will be automatically reinvested in your account.
IX. The section "Services to Help You Manage Your Account - Electronic Fund
Transfers - Class I Only" is replaced with the following:
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions or payments
under a systematic withdrawal plan sent directly to a checking or savings
account. If the account is with a bank that is a member of the Automated
Clearing House, the payments may be made automatically by electronic funds
transfer. If you choose this option, please allow at least fifteen days for
initial processing. We will send any payments made during that time to the
address of record on your account.
X. The definition "Investment Advisory" is deleted and the following definitions
are revised in the "Useful Terms and Definitions" section:
ADVISERS - Franklin Advisers, Inc., the investment manager of each fund
CONTINGENCY PERIOD - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. The holding period begins on the day you buy
your shares. For example, if you buy shares on the 18th of the month, they will
age one month on the 18th day of the next month and each following month.
MANAGER - Franklin Advisers, Inc.
XI. The section "Who Manages the Funds? - Investment Manager" is revised to
reflect that as of October 1, 1998, Advisers is the investment manager of the
Connecticut Fund. The terms and conditions of the management services Advisers
provides to the Connecticut Fund are the same as those of the previous manager.
XII. The section "Who Manages the Funds? - Management Team" is revised to
reflect that as of October 1, 1998, John B. Pinkham is no longer an analyst or
portfolio manager for the Connecticut Fund and is replaced by Stella Wong. The
references to "Investment Advisory" elsewhere in this section are replaced with
"Advisers."
XIII. Under the section "What If I Have Questions About My Account?", the
address for Investment Advisory is deleted.
Please keep this supplement for future reference.
