SUPPLEMENT DATED MAY 1, 1995
TO THE PROSPECTUS FOR
FRANKLIN CALIFORNIA TAX-FREE TRUST
Franklin California Insured Tax-Free Income Fund
Franklin California Tax-Exempt Money Fund
dated November 1, 1994
INTRODUCTION. As of May 1, 1995, the Franklin California Insured
Tax-Free Income Fund (the "Insured Fund") offers two classes to its
investors: Franklin California Insured Tax-Free Income Fund - Class
I ("Class I") and Franklin California Insured Tax-Free Income Fund
- - Class II ("Class II"). Investors can choose between Class I
shares, which generally bear a higher front-end sales charge and
lower ongoing Rule 12b-1 distribution fees ("Rule 12b-1 fees"), and
Class II shares, which generally have a lower front-end sales
charge and higher ongoing Rule 12b-1 fees. Investors should
consider the differences between the two classes, including the
impact of sales charges and distribution fees, in choosing the more
suitable class given their anticipated investment amount and time
horizon.
This Supplement must be read in conjunction with the Prospectus for
the Insured Fund and the Franklin California Tax-Exempt Money Fund
(the "Money Fund"). All investment objectives and policies of the
Insured Fund described in the Prospectus apply equally to both
classes of shares in the new multiclass structure. Further, all
operational procedures apply equally to both classes, unless
otherwise specified in the following discussion.
THE NEW APPLICATION FORM INCLUDED WITH THIS SUPPLEMENT MUST BE USED
FOR ALL PURCHASES OF THE INSURED FUND. DO NOT USE THE APPLICATION
FORM INCLUDED IN THE PROSPECTUS FOR THE INSURED FUND.
MULTICLASS FUND STRUCTURE. The Insured Fund has two classes of
shares available for investment: Class I and Class II. ALL INSURED
FUND SHARES OUTSTANDING BEFORE THE IMPLEMENTATION OF THE MULTICLASS
STRUCTURE HAVE BEEN REDESIGNATED AS CLASS I SHARES, AND WILL RETAIN
THEIR PREVIOUS RIGHTS AND PRIVILEGES. VOTING RIGHTS ATTRIBUTABLE TO
EACH CLASS WILL, HOWEVER, BE DIFFERENT. See the Prospectus for more
details about Class I shares. Class II shares are explained in
detail in the following discussion. Except as described below,
shares of both classes represent identical interests in the Insured
Fund's investment portfolio.
EXPENSE TABLE - INSURED FUND
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder will bear
directly or indirectly in connection with an investment in the
Insured Fund. The figures for both classes of shares are based on
the aggregate operating expenses of the Class I shares for the
fiscal year ended June 30, 1994.
CLASS I CLASS II
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering 4.25% 1.00%^
price)
Deferred Sales Charge NONE^^ 1.00%+
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.47% 0.47%
Rule 12b-1 Fees 0.09%* 0.65%*
Other Expenses:
Shareholder Servicing Costs 0.02% 0.02%
Reports to Shareholders 0.02% 0.02%
Other 0.01% 0.01%
Total Other Expenses 0.05% 0.05%
Total Fund Operating Expenses 0.61% 1.17%^
^Although Class II has a lower front-end sales charge than Class I,
over time the higher Rule 12b-1 fee for Class II may cause
shareholders to pay more for Class II shares than for Class I
shares. Given the maximum front-end sales charge and the rate of
Rule 12b-1 fees of each class, it is estimated that this will take
approximately six years for shareholders who maintain total shares
valued at less than $100,000 in the Franklin Templeton Funds.
Shareholders with larger investments in the Franklin Templeton
Funds will reach the crossover point more quickly.
^^Class I investments of $1 million or more are not subject to a
front-end sales charge; however, a contingent deferred sales charge
of 1%, which has not been reflected in the Example below, is
generally imposed on certain redemptions within a "contingency
period" of 12 months of the calendar month following such
investments. See "How to Sell Shares of the Funds - Contingent
Deferred Sales Charge - Insured Fund."
+Class II shares redeemed within a "contingency period" of 18
months of the calendar month following such investments are subject
to a 1% contingent deferred sales charge. See "How to Sell Shares
of the Funds - Contingent Deferred Sales Charge - Insured Fund."
*Rule 12b-1 fees for Class I are annualized. Actual Rule 12b-1 fees
incurred by Class I for the two months ended June 30, 1994 were
0.015%. Rule 12b-1 fees for Class II are based on the maximum
amount allowed under Class II's plan of distribution. Consistent
with National Association of Securities Dealers, Inc.'s rules, it
is possible that the combination of front-end sales charges and
Rule 12b-1 fees could cause long-term shareholders to pay more than
the economic equivalent of the maximum front-end sales charges
permitted under those same rules.
Investors should be aware that the above table is not intended to
reflect in precise detail the fees and expenses associated with an
individual's own investment in the Insured Fund. Rather, the table
has been provided only to assist investors in gaining a more
complete understanding of fees, charges and expenses that an
investor in the classes will bear directly or indirectly. For a
more detailed discussion of these matters, investors should refer
to the appropriate sections of the Prospectus and this Supplement.
EXAMPLE
As required by SEC regulations, the following example illustrates
the expenses, including the maximum front-end sales charge and
applicable contingent deferred sales charge, that apply to a $1,000
investment in the Insured Fund over various time periods assuming
(1) a 5% annual rate of return and (2) redemption at the end of
each time period.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS I^^ $48 $61 $75 $115
CLASS II+ $32 $47 $74 $151
THIS EXAMPLE IS BASED ON THE AGGREGATE OPERATING EXPENSES SHOWN
ABOVE AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. The operating
expenses are borne by the Insured Fund and only indirectly by
shareholders as a result of their investment in the Insured Fund.
(See "Management of the Trust" in the Prospectus for a description
of the Insured Fund's expenses.) In addition, federal securities
regulations require the example to assume an annual return of 5%,
but the Insured Fund's actual return may be more or less than 5%.
FINANCIAL HIGHLIGHTS
Set forth below is a table containing the unaudited financial
highlights for the Money Fund and a share of Class I of the Insured
Fund for the 6-month period ended December 31, 1994. Information
regarding Class II shares of the Insured Fund will be included in
this table after they have been offered to the public for a
reasonable period of time. See the discussion "Report to
Shareholders" under "General Information."
INSURED FUND MONEY FUND+
- CLASS I+
PER SHARE OPERATING
PERFORMANCE
Net asset value at $11.74 $ 1.00
beginning of period
Net investment income 0.34 0.013
Net realized & unrealized (0.454) ---
gain (loss) on securities
Total from investment (0.114) 0.013
operations
Distributions from net (0.336) 0.013
investment income
Net asset value at end of $11.29 $ 1.00
period
Total Return** (0.99)% 1.30%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period $1,369,075 $692,157
(in 000's)
Ratio of expenses to
average net assets .59%* .62%*
Ratio of net investment
income to average net assets 5.85%* 2.59%*
Portfolio turnover rate 5.63% ---
+For the six months ended December 31, 1994.
*Annualized.
**Total return measures the change in value of an investment during
the period indicated. It is not annualized. It does not include the
Insured Fund's maximum front-end sales charge, and assumes
reinvestment of dividends at the offering price and capital gains,
if any, at net asset value for the Insured Fund and assumes
reinvestment of dividends and capital gains, if any, at net asset
value for the Money Fund. Effective May 1, 1994, with the
implementation of the Rule 12b-1 distribution plan for Class I of
the Insured Fund, the Insured Fund's sales charge on reinvested
dividends was eliminated.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully
evaluate their anticipated investment amount and time horizon prior
to determining which class of shares of the Insured Fund to
purchase. Generally, an investor who expects to invest less than
$100,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of
investment should consider purchasing Class II shares. Over time,
however, the higher annual Rule 12b-1 fees on Class II shares will
accumulate over time to outweigh the difference in front-end sales
charges. For this reason, Class I shares may be more attractive to
long-term investors even if no sales charge reductions are
available to them. Investors should also consider that the higher
Rule 12b-1 fees for Class II shares will generally result in lower
dividends and consequently lower yields for Class II shares. See
"General Information" in the SAI for more information regarding the
calculation of dividends and yields.
Investors who qualify to purchase Class I shares at reduced sales
charges definitely should consider purchasing Class I shares,
especially if they intend to hold their shares for six years or
more. Investors who qualify to purchase Class I shares at reduced
sales charges but who intend to hold their shares less than six
years should evaluate whether it is more economical to purchase
Class I shares through a Letter of Intent or under Rights of
Accumulation or other means rather than purchasing Class II shares.
INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE PAYMENT AND
OTHER INVESTORS WHO QUALIFY TO PURCHASE CLASS I SHARES AT NET ASSET
VALUE WILL BE PRECLUDED FROM PURCHASING CLASS II SHARES. See "How
to Buy Shares of the Funds" in the Prospectus.
Each class represents the same interest in the investment portfolio
of the Insured Fund and has the same rights, except that each class
has a different sales charge, bears the separate expenses of its
Rule 12b-1 distribution plan, and has exclusive voting rights with
respect to such plan. The two classes also have separate exchange
privileges.
Each class also has a separate schedule for compensating securities
dealers for selling Insured Fund shares. Investors should take all
of the factors regarding an investment in each class of the Insured
Fund into account before deciding which class of shares to
purchase.
ALTERNATIVE PURCHASE ARRANGEMENTS. The difference between Class I
and Class II shares lies primarily in their front-end and
contingent deferred sales charges and Rule 12b-1 fees as described
below.
A separate plan of distribution has been approved and adopted for
each class of the Insured Fund ("Class I Plan" and "Class II Plan,"
respectively) pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended ("1940 Act"). The Rule 12b-1 fees charged
to each class of the Insured Fund will be based solely on the
distribution and servicing fees attributable to that particular
class. Any portion of fees remaining from either plan after
distribution to securities dealers of up to the maximum amount
permitted under each plan may be used by the class to reimburse
Franklin/Templeton Distributors, Inc. ("Distributors") for routine
ongoing promotion and distribution expenses incurred with respect
to such class. See "Plan of Distribution (Insured Fund)" under
"Management of the Trust" in the Prospectus for a description of
such expenses.
CLASS I. Class I shares are generally subject to a variable sales
charge upon purchase and not subject to any sales charge upon
redemption. Class I shares are subject to Rule 12b-1 fees of up to
an annual maximum of 0.10% of average daily net assets of such
shares. With this structure, Class I shares have higher front-end
sales charges than Class II shares and comparatively lower Rule 12b-
1 fees.
Plan of Distribution. Under the Class I Plan, the Insured Fund will
reimburse Distributors or other securities dealers for expenses
incurred in the promotion, servicing, and distribution of Class I
Fund shares. (See "Plan of Distribution (Insured Fund)" in the
Prospectus and "The Trust's Underwriter - Distribution Plan" in the
Statement of Additional Information ("SAI")).
Quantity Discounts and Purchases At Net Asset Value. Class I shares
may be purchased at a reduced front-end sales charge or at net
asset value if certain conditions are met. See "How to Buy Shares
of the Funds - Insured Fund."
Contingent Deferred Sales Charge. In most circumstances, a
contingent deferred sales charge will not be assessed against
redemptions of Class I shares. A contingent deferred sales charge
will be imposed on Class I shares only if shares valued at $1
million or more are purchased after February 1, 1995 without a
sales charge and are subsequently redeemed within 12 months of the
calendar month following their purchase. See "Contingent Deferred
Sales Charge - Insured Fund" under "How to Sell Shares of the
Funds" in this Supplement.
CLASS II. The current public offering price of Class II shares is
equal to the net asset value, plus a front-end sales charge of 1.0%
of the amount invested. Class II shares are also subject to a
contingent deferred sales charge of 1.0% if shares are redeemed
within 18 months of the calendar month following purchase. In
addition, Class II shares are subject to Rule 12b-1 fees of up to a
maximum of 0.65% of average daily net assets of such shares. Class
II shares have lower front-end sales charges than Class I shares
and comparatively higher Rule 12b-1 fees.
Purchases of Class II shares are limited to amounts below $1
million. Any purchases of $1 million or more will automatically be
invested in Class I shares, since that is more beneficial to
investors. Such purchases, however, may be subject to a contingent
deferred sales charge. Investors may exceed $1 million in Class II
shares by cumulative purchases over a period of time. Investors who
intend to make investments exceeding $1 million, however, should
consider purchasing Class I shares through a Letter of Intent
instead of purchasing Class II shares. See "How to Buy Shares of
the Funds - Insured Fund" in the Prospectus for more information.
Plan of Distribution. Class II's operating expenses will generally
be higher under the Class II Plan. During the first year following
a purchase of Class II shares, Distributors will keep a portion of
the Class II Plan fees attributable to those shares to partially
recoup fees Distributors pays to securities dealers. Distributors,
or its affiliates, may pay, from its own resources, a commission of
up to 1% of the amount invested to securities dealers who initiate
and are responsible for purchases of Class II shares.
Contingent Deferred Sales Charge. Unless a waiver applies, a
contingent deferred sales charge of 1% will be imposed on Class II
shares redeemed within 18 months of their purchase. See "Contingent
Deferred Sales Charge - Insured Fund" under "How to Sell Shares of
the Funds" in this Supplement.
MANAGEMENT OF THE TRUST
The subsidiaries of Resources are described as the "Franklin
Templeton Group."
The Board of Trustees has carefully reviewed the multiclass
structure to ensure that no material conflict exists between the
two classes of shares. Although the Board does not expect to
encounter material conflicts in the future, the Board will continue
to monitor the Insured Fund and will take appropriate action to
resolve such conflicts if any should later arise.
In developing the multiclass structure, the Insured Fund has
retained the authority to establish additional classes of shares.
It is the Insured Fund's present intention to offer only two
classes of shares, but new classes may be offered in the future.
For more information regarding the responsibilities of the Board
and the management of the Insured Fund, please see "Management of
the Trust" in the Prospectus.
CLASS II PLAN OF DISTRIBUTION
Under the Class II Plan, the maximum amount which the Insured Fund
is permitted to pay to Distributors or others for distribution and
related expenses is 0.50% per annum of Class II shares' average
daily net assets, payable quarterly. All expenses of distribution,
marketing and related services over that amount will be borne by
Distributors or others who have incurred them, without
reimbursement by the Insured Fund. In addition, the Class II Plan
provides for an additional payment by the Insured Fund of up to
0.15% per annum of the class' average daily net assets as a
servicing fee, payable quarterly. This fee will be used to pay
securities dealers or others for, among other things, assisting in
establishing and maintaining customer accounts and records;
assisting with purchase and redemption requests; receiving and
answering correspondence; monitoring dividend payments from the
Insured Fund on behalf of the customers, or similar activities
related to furnishing personal services and/or maintaining
shareholder accounts.
The Class II Plan also covers any payments to or by the Insured
Fund, Advisers, Distributors, or other parties on behalf of the
Insured Fund, Advisers or Distributors, to the extent such payments
are deemed to be for the financing of any activity primarily
intended to result in the sale of Class II shares issued by the
Insured Fund within the context of Rule 12b-1. The payments under
the Class II Plan are included in the maximum operating expenses
which may be borne by Class II of the Insured Fund.
During the first year after the purchase of Class II shares,
Distributors will keep a portion of the Class II Plan fees assessed
on Class II shares to partially recoup fees Distributors pays to
securities dealers.
See "Plan of Distribution (Insured Fund)" in the "Management of the
Trust" section in the Prospectus and "The Trust's Underwriter -
Distribution Plan" in the SAI for more information about both Class
I and Class II Plans.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gains will be calculated and distributed in
the same manner for Class I and Class II shares. The per share
amount of any income dividends will generally differ only to the
extent that each class is subject to different Rule 12b-1 fees.
Because ongoing Rule 12b-1 expenses will be lower for Class I than
Class II, the per share dividends distributed to Class I shares
will generally be higher than those distributed to Class II shares.
Unless otherwise requested in writing or on the Shareholder
Application, income dividends and capital gain distributions, if
any, will be automatically reinvested in the shareholder's account
in the form of additional shares, valued at the closing net asset
value (without a front-end sales charge) on the dividend
reinvestment date. Dividend and capital gain distributions are only
eligible for investment at net asset value in the same class of
shares of the Insured Fund or the same class of another of the
Franklin Templeton Funds. See "Distributions to Shareholders" in
the Prospectus and the SAI for more information.
HOW TO BUY SHARES OF THE FUNDS - INSURED FUND
The following discussion supplements the one included in the
Prospectus under "How to Buy Shares of the Funds - Insured Fund."
THE APPLICATION FORM INCLUDED WITH THIS SUPPLEMENT MUST ACCOMPANY
ANY PURCHASE OF SHARES OF THE INSURED FUND. DO NOT USE THE
APPLICATION INCLUDED IN THE PROSPECTUS.
PURCHASE PRICE OF INSURED FUND SHARES
Shares of both classes of the Insured Fund are offered at the
public offering price, which is the net asset value per share plus
a front-end sales charge, next computed (1) after the shareholder's
securities dealer receives the order which is promptly transmitted
to the Insured Fund, or (2) after receipt of an order by mail from
the shareholder directly in proper form (which generally means a
completed Shareholder Application accompanied by a negotiable
check).
CLASS I. The sales charge for Class I shares is a variable
percentage of the offering price depending upon the amount of the
sale. On orders for 100,000 shares or more, the offering price will
be calculated to four decimal places. On orders for less than
100,000 shares, the offering price will be calculated to two
decimal places using standard rounding criteria. A description of
the method of calculating net asset value per share is included
under the caption "Valuation of Shares of Each of the Funds" in the
Prospectus.
Set forth below is a table of total front-end sales charges or
underwriting commissions and dealer concessions for Class I shares:
TOTAL SALES CHARGE
SIZE OF AS A PERCENTAGE AS A PERCENTAGE DEALER
TRANSACTION AT OF OFFERING OF NET AMOUNT CONCESSION AS A
OFFERING PRICE PRICE INVESTED PERCENTAGE OF
OFFERING
PRICE*, ***
Less than 4.25% 4.44% 4.00%
$100,000
$100,000 but 3.50% 3.63% 3.25%
less than
$250,000
$250,000 but 2.75% 2.83% 2.50%
less than
$500,000
$500,000 but 2.15% 2.20% 2.00%
less than
$1,000,000
$1,000,000 or none none (see below)**
more
*Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
**The following commissions will be paid by Distributors, out of
its own resources, to securities dealers who initiate and are
responsible for purchases of $1 million or more: 0.75% on sales of
$1 million but less than $2 million, plus 0.60% on sales of $2
million but less than $3 million, plus 0.50% on sales of $3 million
but less than $50 million, plus 0.25% on sales of $50 million but
less than $100 million, plus 0.15% on sales of $100 million or
more. Dealer concession breakpoints are reset every 12 months for
purposes of additional purchases.
***At the discretion of Distributors, all sales charges may at
times be allowed to the securities dealer. If 90% or more of the
sales commission is allowed, such securities dealer may be deemed
to be an underwriter as that term is defined in the Securities Act
of 1933, as amended.
No front-end sales charge applies on investments of $1 million or
more, but a contingent deferred sales charge of 1% is imposed on
certain redemptions of all or a portion of investments of $1
million or more within the contingency period. See "How to Sell
Shares of the Funds - Contingent Deferred Sales Charge - Insured
Fund" in this Supplement.
The size of a transaction which determines the applicable sales
charge on the purchase of Class I shares is determined by adding
the amount of the shareholder's current purchase plus the cost or
current value (whichever is higher) of a shareholder's existing
investment in one or more of the funds in the Franklin Group of
Funds(Registered Trademark) and the Templeton Group of Funds.
Included for these aggregation purposes are (a) the mutual funds in
the Franklin Group of Funds except Franklin Valuemark Funds and
Franklin Government Securities Trust (the "Franklin Funds"), (b)
other investment products underwritten by Distributors or its
affiliates (although certain investments may not have the same
schedule of sales charges and/or may not be subject to reduction),
and (c) the U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton
Variable Annuity Fund, and Templeton Variable Products Series Fund
(the "Templeton Funds"). (Franklin Funds and Templeton Funds are
collectively referred to as the "Franklin Templeton Funds.") Sales
charge reductions based upon aggregate holdings of (a), (b) and (c)
above ("Franklin Templeton Investments") may be effective only
after notification to Distributors that the investment qualifies
for a discount.
Distributors, or one of its affiliates, may make payments, out of
its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases
made at net asset value by certain trust companies and trust
departments of banks. See "Description of Special Net Asset Value
Purchases" and the SAI.
CLASS II. Unlike Class I shares, the front-end sales charge and
dealer concessions for Class II shares do not vary depending on the
amount of purchase. See table below:
TOTAL SALES CHARGE
AS A DEALER
SIZE OF TRANSACTION AS A PERCENTAGE PERCENTAGE CONCESSION AS
AT OFFERING PRICE OF OFFERING OF NET A PERCENTAGE
PRICE AMOUNT OF OFFERING
INVESTED PRICE*
any amount (less
than $1 million) 1.00% 1.01% 1.00%
* During the first year following a purchase of Class II shares,
Distributors will keep a portion of the plan fees attributable to
those shares to partially recoup fees Distributors pays to
securities dealers. Distributors, or one of its affiliates, may
make an additional payment to the securities dealer, from its own
resources, of up to 1% of the amount invested.
Class II shares redeemed within eighteen months of their purchase
will be assessed a contingent deferred sales charge of 1.0% on the
lesser of the then-current net asset value or the net asset value
of such shares at the time of purchase, unless such charge is
waived as described under "How to Sell Shares of the Funds -
Contingent Deferred Sales Charge - Insured Fund."
PURCHASES AT NET ASSET VALUE
The following section, which supersedes that included in the
Prospectus, describes the categories of investors who may purchase
Class I shares of the Insured Fund at net asset value and when
Class I and Class II shares may be purchased at net asset value.
The sections in the Prospectus titled "Quantity Discounts in Sales
Charges" and "Group Purchases" only apply to Class I shares.
Although sales charges on Class II shares may not be reduced
through a Letter of Intent or Rights of Accumulation as described
under "Quantity Discounts in Sales Charges," the value of Class II
shares owned by an investor may be included in determining the
appropriate sales charges for Class I shares.
Class I shares may be purchased without the imposition of either a
front-end sales charge ("net asset value") or a contingent deferred
sales charge by (1) officers, trustees, directors and full-time
employees of the Trust, any of the Franklin Templeton Funds, or of
the Franklin Templeton Group, and by their spouses and family
members, including any subsequent payments made to such parties
after cessation of employment; (2) companies exchanging shares or
selling assets pursuant to a merger, acquisition or exchange offer;
(3) registered securities dealers and their affiliates, for their
investment account only; and (4) registered personnel and employees
of securities dealers and by their spouses and family members, in
accordance with the internal policies and procedures of the
employing securities dealer.
For either Class I or Class II, the same class of shares of the
Insured Fund may be purchased at net asset value by persons who
have redeemed, within the previous 120 days, their shares of the
Insured Fund or another of the Franklin Templeton Funds which were
purchased with a front-end sales charge or assessed a contingent
deferred sales charge on redemption. If a different class of shares
is purchased, the full front-end sales charge must be paid at the
time of purchase of the new shares. An investor may reinvest an
amount not exceeding the redemption proceeds. While credit will be
given for any contingent deferred sales charge paid on the shares
redeemed and subsequently repurchased, a new contingency period
will begin. Shares of the Insured Fund redeemed in connection with
an exchange into another fund (see "Exchange Privilege") are not
considered "redeemed" for this privilege. In order to exercise this
privilege, a written order for the purchase of shares of the
Insured Fund must be received by the Insured Fund or the Insured
Fund's Shareholder Services Agent within 120 days after the
redemption. The 120 days, however, do not begin to run on
redemption proceeds placed immediately after redemption in a
Franklin Bank Certificate of Deposit ("CD") until the CD (including
any rollover) matures. Reinvestment at net asset value may also be
handled by a securities dealer or other financial institution, who
may charge the shareholder a fee for this service. The redemption
is a taxable transaction but reinvestment without a sales charge
may affect the amount of gain or loss recognized and the tax basis
of the shares reinvested. If there has been a loss on the
redemption, the loss may be disallowed if a reinvestment in the
same fund is made within a 30-day period. Information regarding the
possible tax consequences of such a reinvestment is included in the
tax section of the Prospectus and the SAI.
For either Class I or Class II, the same class of shares of the
Insured Fund or of another of the Franklin Templeton Funds may be
purchased at net asset value and without a contingent deferred
sales charge by persons who have received dividends and capital
gain distributions in cash from investments in that class of shares
of the Insured Fund within 120 days of the payment date of such
distribution. To exercise this privilege, a written request to
reinvest the distribution must accompany the purchase order.
Additional information may be obtained from Shareholder Services at
1-800/632-2301. See "Distributions in Cash" under "Distributions to
Shareholders" in the Prospectus.
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who
have, within the past 60 days, redeemed an investment in a mutual
fund which is not part of the Franklin Templeton Funds and which
charged the investor a contingent deferred sales charge upon
redemption and which has an investment objective similar to that of
the Insured Fund.
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers
who have entered into a supplemental agreement with Distributors,
or by registered investment advisors affiliated with such broker-
dealers, on behalf of their clients who are participating in a
comprehensive fee program (sometimes known as a wrap fee program).
Class I shares may also be purchased at net asset value and without
the imposition of a contingent deferred sales charge by any state,
county, or city, or any instrumentality, department, authority or
agency thereof which has determined that the Insured Fund is a
legally permissible investment and which is prohibited by
applicable investment laws from paying a sales charge or commission
in connection with the purchase of shares of any registered
management investment company ("an eligible governmental
authority"). SUCH INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS
TO DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF THE INSURED
FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal investors
considering investment of proceeds of bond offerings into the
Insured Fund should consult with expert counsel to determine the
effect, if any, of various payments made by the Insured Fund or its
investment manager on arbitrage rebate calculations. If an
investment by an eligible governmental authority at net asset value
is made through a securities dealer who has executed a dealer
agreement with Distributors, Distributors or one of its affiliates
may make a payment, out of its own resources, to such securities
dealer in an amount not to exceed 0.25% of the amount invested.
Contact Franklin's Institutional Sales Department for additional
information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies
and bank trust departments for funds over which they exercise
exclusive discretionary investment authority and which are held in
a fiduciary, agency, advisory, custodial or similar capacity. Such
purchases are subject to minimum requirements with respect to
amount of purchase, which may be established by Distributors.
Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Insured Fund
or any of the Franklin Templeton Investments must total at least
$1,000,000. Orders for such accounts will be accepted by mail
accompanied by a check or by telephone or other means of electronic
data transfer directly from the bank or trust company, with payment
by federal funds received by the close of business on the next
business day following such order.
For a complete understanding of how to buy shares of the Insured
Fund, this Supplement must be read in conjunction with the
Prospectus. Refer to the SAI for further information regarding net
asset value purchases of Class I shares.
PURCHASING CLASS I AND CLASS II SHARES OF THE INSURED FUND
When placing purchase orders, investors should clearly indicate
which class of shares they intend to purchase. A purchase order
that fails to specify a class will automatically be invested in
Class I shares. Initial purchases of $1 million or more in a single
payment will be invested in Class I shares. There are no conversion
features attached to either class of shares.
Investors who qualify to purchase Class I shares at net asset value
should purchase Class I rather than Class II shares. See the
section "Purchases at Net Asset Value" and "Description of Special
Net Asset Value Purchases" above for a discussion of when shares
may be purchased at net asset value.
"Timing Accounts" are not currently permitted to buy shares of the
Insured Fund. See "Exchange Privilege" for a description.
GENERAL
Each Fund may impose a $10 charge for each returned item, against
any shareholder account which, in connection with the purchase of a
Fund's shares, submits a check or a draft which is returned unpaid
to such Fund.
OTHER PROGRAMS AND PRIVILEGES AVAILABLE TO SHAREHOLDERS OF THE
FUNDS
With the exception of Systematic Withdrawal Plans, all programs and
privileges detailed under the discussion of "Other Programs and
Privileges Available to Shareholders of the Funds" will remain in
effect as described in the Prospectus for the new multiclass
structure. For a complete discussion of these programs, see "Other
Programs and Privileges Available to Shareholders of the Funds" in
the Prospectus.
SYSTEMATIC WITHDRAWAL PLANS. Subject to the requirements outlined
in the Prospectus, a shareholder may establish a Systematic
Withdrawal Plan for his or her account. With respect to Class I
shares, the contingent deferred sales charge is waived for
redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans set
up on or after February 1, 1995, the applicable contingent deferred
sales charge is waived for Class I and Class II share redemptions
of up to 1% monthly of an account's net asset value (12% annually,
6% semiannually, 3% quarterly). For example, if the account
maintained an annual balance of $10,000, only $1,200 could be
withdrawn through a once-yearly Systematic Withdrawal Plan free of
charge; any amount over that $1,200 would be assessed a 1% (or
applicable) contingent deferred sales charge.
EXCHANGE PRIVILEGE
"Timing Accounts" are not currently permitted to exchange into the
Insured Fund. This policy does not affect any other types of
investor. "Timing Accounts" generally include market timing or
allocation services; accounts administered as to redeem or purchase
shares based upon certain predetermined market indicators; or any
person whose transactions seem to follow a timing pattern.
Shareholders are entitled to exchange their shares for shares of
the same class of other Franklin Templeton Funds which are eligible
for sale in the shareholder's state of residence and in conformity
with such fund's stated eligibility requirements and investment
minimums. Some funds, however, may not offer Class II shares. Class
I shares may be exchanged for Class I shares of any Franklin
Templeton Funds. Class II shares may be exchanged for Class II
shares of any Franklin Templeton Funds. No exchanges between
different classes of shares will be allowed. A contingent deferred
sales charge will not be imposed on exchanges. If, however, the
exchanged shares were subject to a contingent deferred sales charge
in the original fund purchased and shares are subsequently redeemed
within twelve months (Class I shares) or eighteen months (Class II
shares) of the calendar month of the original purchase date, a
contingent deferred sales charge will be imposed. Investors should
review the prospectus of the fund they wish to exchange from and
the fund they wish to exchange into for all specific requirements
or limitations on exercising the exchange privilege, for example,
minimum holding periods or applicable sales charges.
EXCHANGES OF CLASS I SHARES
The contingency period of Class I shares will be tolled (or
stopped) for the period such shares are exchanged into and held in
a Franklin or Templeton money market fund. If a Class I account has
shares subject to a contingent deferred sales charge, Class I
shares will be exchanged into the new account on a "first-in, first-
out" basis. See also "How to Sell Shares of the Funds - Contingent
Deferred Sales Charge - Insured Fund."
EXCHANGES OF CLASS II SHARES
When an account is composed of Class II shares subject to the
contingent deferred sales charge, and shares that are not, the
shares will be transferred proportionately into the new fund.
Shares received from reinvestment of dividends and capital gains
are referred to as "free shares," shares which were originally
subject to a contingent deferred sales charge but to which the
contingent deferred sales charge no longer applies are called
"matured shares," and shares still subject to the contingent
deferred sales charge are referred to as "CDSC liable shares." CDSC
liable shares held for different periods of time are considered
different types of CDSC liable shares. For instance, if a
shareholder has $1,000 in free shares, $2,000 in matured shares,
and $3,000 in CDSC liable shares, and the shareholder exchanges
$3,000 into a new fund, $500 will be exchanged from free shares,
$1,000 from matured shares, and $1,500 from CDSC liable shares.
Similarly, if CDSC liable shares have been purchased at different
periods, a proportionate amount will be taken from shares held for
each period. If, for example, a shareholder holds $1,000 in shares
bought 3 months ago, $1,000 bought 6 months ago, and $1,000 bought
9 months ago, and the shareholder exchanges $1,500 into a new fund,
$500 from each of these shares will be deemed exchanged into the
new fund.
The only money market fund exchange option available to Class II
shareholders is the Franklin Templeton Money Fund II ("Money Fund
II"), a series of the Franklin Templeton Money Fund Trust. No
drafts (checks) may be written on Money Fund II accounts, nor may
shareholders purchase shares of Money Fund II directly. Class II
shares exchanged for shares of Money Fund II will continue to age
and a contingent deferred sales charge will be assessed if CDSC
liable shares are redeemed. No other money market funds, including
the Money Fund described in this Prospectus, are available for
Class II shareholders for exchange purposes. Class I shares may be
exchanged for shares of any of the money market funds in the
Franklin Templeton Funds except Money Fund II. Draft writing
privileges and direct purchases are allowed on these other money
market funds as described in their respective prospectuses.
To the extent shares are exchanged proportionately, as opposed to
another method, such as first-in first-out, or free-shares followed
by CDSC liable shares, the exchanged shares may, in some instances,
be CDSC liable even though a redemption of such shares, as
discussed elsewhere herein, may no longer be subject to a CDSC. The
proportional method is believed by management to more closely meet
and reflect the expectations of Class II shareholders in the event
shares are redeemed during the contingency period. For federal
income tax purposes, the cost basis of shares redeemed or exchanged
is determined under the Code without regard to the method of
transferring shares chosen by the Insured Fund for purposes of
exchanging or redeeming shares.
TRANSFERS
Transfers between identically registered accounts in the same fund
and class are treated as non-monetary and non-taxable events, and
are not subject to a contingent deferred sales charge. The
transferred shares will continue to age from the date of original
purchase. Like exchanges, shares will be moved proportionately
from each type of shares in the original account.
CONVERSION RIGHTS
It is not presently anticipated that Class II shares will be
converted to Class I shares. A shareholder may, however, sell his
or her Class II shares and use the proceeds to purchase Class I
shares, subject to all applicable sales charges.
See "Exchange Privilege" in the Prospectus for more information.
HOW TO SELL SHARES OF THE FUNDS
For a discussion regarding the sale of either class of Insured Fund
shares, refer to the section in the Prospectus titled "How to Sell
Shares of the Funds." In addition, the charges described in this
Supplement will also apply to the sale of all Insured Fund shares.
CONTINGENT DEFERRED SALES CHARGE - INSURED FUND
CLASS I. In order to recover commissions paid to securities dealers
on investments of $1 million or more, a contingent deferred sales
charge of 1% applies to redemptions of those investments within the
contingency period of 12 months of the calendar month following
their purchase. The charge is 1% of the lesser of the value of the
shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the total cost of such shares at the time of
purchase, and is retained by Distributors. The contingent deferred
sales charge is waived in certain instances. See below and
"Purchases at Net Asset Value" under "How to Buy Shares of the
Funds - Insured Fund."
CLASS II. Class II shares redeemed within the contingency period of
18 months of the calendar month following their purchase will be
assessed a contingent deferred sales charge, unless one of the
exceptions described below applies. The charge is 1% of the lesser
of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the net asset value at
the time of purchase of such shares, and is retained by
Distributors. The contingent deferred sales charge is waived in
certain instances. See below.
CLASS I AND CLASS II. In determining if a contingent deferred sales
charge applies, shares not subject to a contingent deferred sales
charge are deemed to be redeemed first, in the following order: (i)
Shares representing amounts attributable to capital appreciation of
those shares held less than the contingency period (12 months in
the case of Class I shares and 18 months in the case of Class II
shares); (ii) shares purchased with reinvested dividends and
capital gain distributions; and (iii) other shares held longer than
the contingency period; and followed by any shares held less than
the contingency period, on a "first in, first out" basis. For tax
purposes, a contingent deferred sales charge is treated as either a
reduction in redemption proceeds or an adjustment to the cost basis
of the shares redeemed.
The contingent deferred sales charge on each class of shares is
waived, as applicable, for: exchanges; any account fees;
redemptions through a Systematic Withdrawal Plan set up for shares
prior to February 1, 1995, and for Systematic Withdrawal Plans set
up thereafter, redemptions of up to 1% monthly of an account's net
asset value (3% quarterly, 6% semiannually or 12% annually); and
redemptions initiated by the Insured Fund due to a shareholder's
account falling below the minimum specified account size.
All investments made during a calendar month, regardless of when
during the month the investment occurred, will age one month on the
last day of that month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless
otherwise specified, will result in additional shares being
redeemed to cover any applicable contingent deferred sales charge,
while requests for redemption of a SPECIFIC NUMBER of shares will
result in the applicable contingent deferred sales charge being
deducted from the total dollar amount redeemed.
CONTINGENT DEFERRED SALES CHARGE - MONEY FUND
The Money Fund does not impose either a front-end sales charge or a
contingent deferred sales charge. If, however, the shares redeemed
were shares acquired by exchange from another of the Franklin
Templeton Funds which would have assessed a contingent deferred
sales charge upon redemption, such charge will be made by the Money
Fund, as described above. The 12-month contingency period will be
tolled (or stopped) for the period such shares are exchanged into
and held in the Money Fund.
VALUATION OF SHARES OF EACH OF THE FUNDS
The following sentence replaces the first sentence of the first
paragraph in this section; the subsequent paragraph is added to the
end of this section.
The net asset value per share of each class of the Insured Fund is
determined as of the scheduled closing time of the New York Stock
Exchange ("Exchange") (generally 1:00 p.m. Pacific time) each day
that the Exchange is open for trading. The net asset value per
share of the Money Fund is determined at 3:00 p.m. Pacific time
each day that the Exchange is open for trading.
Each of the Insured Fund's classes will bear, pro rata, all of the
common expenses of the Insured Fund. The net asset value of all
outstanding shares of each class of the Insured Fund will be
computed on a pro rata basis for each outstanding share based on
the proportionate participation in the Insured Fund represented by
the value of shares of such classes, except that the Class I and
Class II shares will bear the Rule 12b-1 expenses payable under
their respective plans. Due to the specific distribution expenses
and other costs that will be allocable to each class, the dividends
paid to each class of the Insured Fund may vary.
HOW TO GET INFORMATION REGARDING AN INVESTMENT IN THE FUNDS
The following paragraph replaces the second paragraph in this
section of the Prospectus:
From a touch tone phone, shareholders may access the automated
Franklin TeleFACTS system (day or night) at 1-800/247-1753 to
obtain current price, yield or other performance information
specific to a fund in the Franklin Funds, process an exchange as
discussed under the "Exchange Privilege" in the Prospectus, and
request duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips. Current prices for the
Templeton Funds are also available through TeleFACTS. The system
codes for the two classes of shares of the Insured Fund and the
share code for the Money Fund, which will be needed to access
system information, are 124 for Class I, 224 for Class II and 125
for the Money Fund followed by the # sign. The system's automated
operator will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added in the
future.
PERFORMANCE (CLASS II)
Because Class II shares were not offered prior to May 1, 1995, no
performance data is available for these shares. After a sufficient
period of time has passed, Class II performance data as described
in the "Performance" section of the Prospectus will be available.
Except as noted, it is likely that the performance data relating to
Class II shares will reflect lower total return and yield figures
than those for Class I shares because Class II Rule 12b-1 fees are
higher than Class I Rule 12b-1 fees. During at least the first year
of operation, Class II share performance will be higher than Class
I in light of the higher initial sales charge applicable to Class I
shares.
GENERAL INFORMATION
With the exception of "Voting Rights" as they pertain to the
Insured Fund, all rights and privileges detailed under the
discussion of "General Information" will remain in effect as
described in the Prospectus for the new multiclass structure. For
a complete discussion of these rights and privileges, see "General
Information" in the Prospectus.
VOTING RIGHTS - INSURED FUND. Shares of each class represent
proportionate interests in the assets of the Insured Fund and have
the same voting and other rights and preferences as the other class
of the Insured Fund for matters that affect the Insured Fund as a
whole. For matters that only affect a certain class of the Insured
Fund's shares, however, only shareholders of that class will be
entitled to vote. Therefore, each class of shares will vote
separately on matters (1) affecting only that class, (2) expressly
required to be voted on separately by the state business trust law,
or (3) required to be voted on separately by the 1940 Act or the
rules adopted thereunder. For instance, if a change to the Rule 12b-
1 plan relating to Class I shares requires shareholder approval,
only shareholders of Class I may vote on changes to the Rule 12b-1
plan affecting that class. Similarly, if a change to the Rule 12b-1
plan relating to Class II shares requires shareholder approval,
only shareholders of Class II may vote on the change to such plan.
On the other hand, if there is a proposed change to the investment
objective of the Insured Fund, this affects all shareholders,
regardless of which class of shares they hold, and therefore, each
share has the same voting rights. For more information regarding
voting rights, see the "Voting Rights" discussion in the Prospectus
under the heading "General Information."
SUPPLEMENT DATED MAY 1, 1995
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN CALIFORNIA TAX-FREE TRUST
dated November 1, 1994
As described in its Prospectus, the Franklin California Insured
Tax-Free Income Fund (the "Insured Fund") now offers two classes
of shares to its investors. This new structure allows investors
to consider, among other features, the impact of sales charges
and distribution fees ("Rule 12b-1 fees") on their investments in
the Insured Fund.
ADD THE FOLLOWING AS THE LAST SENTENCE OF THE PARAGRAPH
DESCRIBING FEES PAID TO THE MANAGER UNDER "INVESTMENT ADVISORY
AND OTHER SERVICES":
Each class of the Insured Fund will pay its share of the fee
as determined by the proportion of the Insured Fund that it
represents.
EACH NEW CLASS OF SHARES OF THE INSURED FUND HAS A SEPARATE
DISTRIBUTION PLAN. FOR THIS REASON, THE FIRST PARAGRAPH OF THE
SECTION "THE TRUST'S UNDERWRITER - DISTRIBUTION PLAN" HAS BEEN
REPLACED WITH THE FOLLOWING PARAGRAPH:
PLANS OF DISTRIBUTION
Each class of the Insured Fund has adopted a distribution
plan ("Class I Plan" and "Class II Plan," respectively,)
pursuant to Rule 12b-1 under the 1940 Act. The Franklin
California Intermediate-Term Tax-Free Income Fund has also
adopted a distribution plan pursuant to Rule 12b-1 (the
"Intermediate-Term Plan"). The distribution plans for each
Fund and class may be collectively referred to as the
"Plans."
THE FOLLOWING SENTENCE SHOULD BE ADDED AS THE FIRST SENTENCE IN
THE NEXT PARAGRAPH:
Pursuant to the Class I Plan and the Intermediate-Term Plan,
the Insured Fund and the Intermediate-Term Fund may each pay
up to a maximum of 0.10% per annum (0.10 of 1%) of its
average daily net assets for expenses incurred in the
promotion and distribution of its shares.
THE PARAGRAPH DESCRIBED ABOVE ONLY CONCERNS THE CLASS I PLAN
AND THE INTERMEDIATE-TERM PLAN. THE FOLLOWING PARAGRAPHS HAVE
BEEN ADDED TO THIS SECTION AFTER THE DISCUSSION OF THE CLASS I
PLAN AND THE INTERMEDIATE-TERM PLAN TO DESCRIBE THE CLASS II
PLAN:
THE CLASS II PLAN
Under the Class II Plan, the Insured Fund is permitted to
pay to Distributors or others annual distribution fees,
payable quarterly, of .50% of Class II's average daily
net assets, in order to compensate Distributors or others
for providing distribution and related services and
bearing certain expenses of the Class. All expenses of
distribution and marketing over that amount will be borne
by Distributors, or others who have incurred them,
without reimbursement by the Insured Fund. In addition to
this amount, under the Class II Plan, the Insured Fund
shall pay .15% per annum, payable quarterly, of the
Class' average daily net assets as a servicing fee. This
fee will be used to pay dealers or others for, among
other things, assisting in establishing and maintaining
customer accounts and records; assisting with purchase
and redemption requests; receiving and answering
correspondence; monitoring dividend payments from the
Insured Fund on behalf of the customers, and similar
activities related to furnishing personal services and
maintaining shareholder accounts. Distributors may pay
the securities dealer, from its own resources, a
commission of up to 1% of the amount invested.
THE SUBSEQUENT PARAGRAPHS IN THE SECTION "DISTRIBUTION PLAN"
APPLY EQUALLY TO THE PLANS, WITH THE EXCEPTION THAT (1) THE
SENTENCE REGARDING UNREIMBURSED EXPENSES REFERS TO THE CLASS I
PLAN AND THE INTERMEDIATE-TERM PLAN ONLY, AND (2) THE CLASS II
PLAN WAS APPROVED BY THE BOARD OF TRUSTEES AND THE SOLE INITIAL
SHAREHOLDER PRIOR TO MAY 1, 1995 AND IS EFFECTIVE FROM MAY 1,
1995.
THE "TRUSTEES AND OFFICERS" SECTION IS REVISED TO READ AS
FOLLOWS:
TRUSTEES AND OFFICERS
The Board of Trustees has the responsibility for the
overall management of the Trust, including general
supervision and review of its investment activities. The
trustees, in turn, elect the officers of the Trust who
are responsible for administering the day-to-day
operations of the Trust. The affiliations of the officers
and trustees and their principal occupations for the past
five years are listed below. Trustees who are deemed to
be "interested persons" of the Trust, as defined in the
1940 Act, are indicated by an asterisk (*).
NAME, POSITIONS AND
ADDRESS OFFICES WITH PRINCIPAL OCCUPATIONS
AND AGE THE TRUST DURING PAST FIVE YEARS
Frank H. Abbott, III (74)
1045 Sansome St.
San Francisco, CA 94111
Trustee
President and Director, Abbott Corporation (an investment
company); and director, trustee or managing general
partner, as the case may be, of 30 of the investment
companies in the Franklin Group of Funds.
Harris J. Ashton (62)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
Trustee
President, Chief Executive Officer and Chairman of the
Board, General Host Corporation (nursery and craft
centers); Director, RBC Holdings, Inc. (a bank holding
company) and Bar-S Foods; and director, trustee or
managing general partner, as the case may be, of 54 of
the investment companies in the Franklin Templeton Group
of Funds.
*Harmon E. Burns (50)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
Executive Vice President, Secretary and Director,
Franklin Resources, Inc.; Executive Vice President and
Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.;
officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer
and/or director or trustee of 41 of the investment
companies in the Franklin Templeton Group of Funds.
S. Joseph Fortunato (62)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Trustee
Member of the law firm of Pitney, Hardin, Kipp & Szuch;
Director of General Host Corporation; director, trustee
or managing general partner, as the case may be, of 56 of
the investment companies in the Franklin Templeton Group
of Funds.
David W. Garbellano (80)
111 New Montgomery St., #402
San Francisco, CA 94105
Trustee
Private Investor; Assistant Secretary/Treasurer and
Director, Berkeley Science Corporation (a venture capital
company); and director, trustee or managing general
partner, as the case may be, of 29 of the investment
companies in the Franklin Group of Funds.
*Charles B. Johnson (62)
777 Mariners Island Blvd.
San Mateo, CA 94404
Chairman of the Board and Trustee
President and Director, Franklin Resources, Inc.;
Chairman of the Board and Director, Franklin Advisers,
Inc. and Franklin Templeton Distributors, Inc.; Director,
Franklin/Templeton Investor Services, Inc. and General
Host Corporation; and officer and/or director, trustee or
managing general partner, as the case may be, of most
other subsidiaries of Franklin Resources, Inc. and of 55
of the investment companies in the Franklin Templeton
Group of Funds.
*Rupert H. Johnson, Jr. (54)
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Trustee
Executive Vice President and Director, Franklin
Resources, Inc. and Franklin Templeton Distributors,
Inc.; President and Director, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.; and
officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries
of Franklin Resources, Inc. and of 42 of the investment
companies in the Franklin Templeton Group of Funds.
Frank W. T. LaHaye (66)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
Trustee
General Partner, Peregrine Associates and Miller &
LaHaye, which are General Partners of Peregrine Ventures
and Peregrine Ventures II (venture capital firms);
Chairman of the Board and Director, Quarterdeck Office
Systems, Inc.; Director, FischerImaging Corporation; and
director or trustee, as the case may be, of 25 of the
investment companies in the Franklin Group of Funds.
Gordon S. Macklin (66)
8212 Burning Tree Road
Bethesda, MD 20817
Trustee
Chairman, White River Corporation (information services);
Director, Fund American Enterprises Holdings, Inc.,
Martin Marietta Corporation, MCI Communications
Corporation, MedImmune, Inc. (biotechnology), and
Infovest Corporation (information services), and Fusion
Systems Corporation (industrial technology); and
director, trustee or managing general partner, as the
case may be, of 51 of the investment companies in the
Franklin Templeton Group of Funds; formerly, Chairman,
Hambrecht and Quist Group; Director, H & Q Healthcare
Investors; and President, National Association of
Securities Dealers, Inc.
Kenneth V. Domingues (62)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting
Standards
Senior Vice President, Franklin Resources, Inc., Franklin
Advisers, Inc., and Franklin Templeton Distributors,
Inc.; officer and/or director, as the case may be, of
other subsidiaries of Franklin Resources, Inc.; and
officer and/or managing general partner, as the case may
be, of 36 of the investment companies in the Franklin
Group of Funds.
Martin L. Flanagan (34)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and
Treasurer, Franklin Resources, Inc.; Executive Vice
President, Templeton Worldwide, Inc.; Senior Vice
President and Treasurer, Franklin Advisers, Inc. and
Franklin Templeton Distributors, Inc.;
Senior Vice President, Franklin/Templeton Investor
Services, Inc.; officer of most other subsidiaries of
Franklin Resources, Inc.; and officer of 60 of the
investment companies in the Franklin Templeton Group of
Funds.
Deborah R. Gatzek (46)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc.
and Franklin Templeton Distributors, Inc.; Vice
President, Franklin Advisers, Inc. and officer of 36 of
the investment companies in the Franklin Group of Funds.
Diomedes Loo-Tam (56)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 36 of
the investment companies in the Franklin Group of Funds.
Edward V. McVey (57)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin
Templeton Distributors, Inc.; and officer of 31 of the
investment companies in the Franklin Group of Funds.
Trustees not affiliated with the investment manager
("nonaffiliated trustees") are currently paid fees of $640
per month plus $640 per meeting attended. During the fiscal
year ended June 30, 1994, fees totaling $93,440 were paid to
nonaffiliated trustees of the Trust. As indicated above,
certain of the trustees and officers hold positions with
other companies in the Franklin Group of Funds(Registered
Trademark) and the Templeton Funds ("Franklin Templeton
Funds"). The following table shows the fees paid by the
Trust to its nonaffiliated trustees and the total fees paid
to such trustees by the Trust and other Franklin Templeton
Funds for which they serve as directors, trustees or
managing general partners.
TOTAL
COMPENSATION
AGGREGATE NUMBER OF FRANKLIN FROM FRANKLIN
COMPENSATION TEMPLETON FUND BOARDS TEMPLETON FUNDS,
NAME FROM TRUST* ON WHICH EACH SERVES INCLUDING THE TRUST**
Mr. Abbott $16,000 30 $176,870
Mr. Ashton $15,360 54 $319,925
Mr. Fortunato $15,360 56 $336,065
Mr. Garbellano $16,000 29 $153,300
Mr. LaHaye $15,360 25 $150,817
Mr. Macklin $15,360 51 $303,685
* For the fiscal year ended June 30, 1994.
** For the calendar year ended December 31, 1994.
Nonaffiliated trustees are also reimbursed for expenses
incurred in connection with attending Board meetings, paid
pro rata by each Franklin Templeton Fund for which they
serve as directors, trustees or managing general partners.
No officer or trustee received any other compensation
directly from the Trust. As of March 31, 1995, the trustees
and officers, as a group, owned of record and beneficially
approximately 9,519,441 shares of the Franklin California
Tax-Exempt Money Fund, or 1.4% of the total outstanding
shares of such Fund, and did not own any shares of the
Insured Fund or the Intermediate-Term Fund. In addition,
many of the trustees own shares in various of the other
funds in the Franklin Templeton Funds. Certain officers and
trustees who are shareholders of Franklin Resources, Inc.
may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr.
are brothers.
THE FOLLOWING SUBSTITUTES THE SUBSECTION "PURCHASES AT NET ASSET
VALUE (INTERMEDIATE-TERM AND INSURED FUNDS)" UNDER "ADDITIONAL
INFORMATION REGARDING THE FUNDS' SHARES":
SPECIAL NET ASSET VALUE PURCHASES
As discussed in the Prospectuses under "How to Buy Shares
of the Fund(s) - Description of Special Net Asset Value
Purchases," certain categories of investors may purchase
shares of the Intermediate-Term Fund and Class I shares
of the Insured Fund at net asset value (without a front-
end or contingent deferred sales charge). Distributors or
one of its affiliates may make payments, out of its own
resources, to securities dealers who initiate and are
responsible for such purchases. Distributors may make
these payments in the form of contingent advance
payments, which may require reimbursement from the
securities dealer with respect to certain redemptions
made within 12 months of the calendar month following
purchase, as well as other conditions, all of which may
be imposed by an agreement between Distributors, or its
affiliates, and the securities dealer. For purchases made
at net asset value by certain trust companies and trust
departments of banks, Distributors or one of its
affiliates, out of its own resources, may pay up to 1% of
the amount invested.
THE FOLLOWING PARAGRAPHS ARE ADDED TO "ADDITIONAL INFORMATION
REGARDING THE FUNDS' SHARES":
Each Fund may impose a $10 charge for each returned item,
against any shareholder account which, in connection with
the purchase of Fund shares, submits a check or a draft
which is returned unpaid to the Fund.
LETTER OF INTENT
An investor may qualify for a reduced sales charge on the
purchase of shares of the Intermediate-Term Fund and
Class I shares of the Insured Fund, as described in the
Prospectuses. At any time within 90 days after the first
investment which the investor wants to qualify for the
reduced sales charge, a signed Shareholder Application,
with the Letter of Intent ("Letter") section completed,
may be filed with the Insured Fund or the Intermediate-
Term Fund. After the Letter is filed, each additional
investment made will be entitled to the sales charge
applicable to the level of investment indicated on the
Letter. Sales charge reductions based upon purchases in
more than one company in the Franklin Templeton Group
will be effective only after notification to Distributors
that the investment qualifies for a discount. The
shareholder's holdings in the Franklin Templeton Group,
including class II shares, acquired more than 90 days
before the Letter is filed will be counted towards
completion of the Letter but will not be entitled to a
retroactive downward adjustment of sales charge. Any
redemptions made by the shareholder during the 13-month
period will be subtracted from the amount of the
purchases for purposes of determining whether the terms
of the Letter have been completed. If the Letter is not
completed within the 13-month period, there will be an
upward adjustment of the sales charge, depending upon the
amount actually purchased (less redemptions) during the
period. An investor who executes a Letter prior to a
change in the sales charge structure for the Insured Fund
or the Intermediate-Term Fund will be entitled to
complete the Letter at the lower of the new sales charge
structure or the sales charge structure in effect at the
time the Letter was filed with the Insured Fund or the
Intermediate-Term Fund.
As mentioned in the Prospectuses, five percent (5%) of
the amount of the total intended purchase will be
reserved in shares of the Insured Fund or the
Intermediate-Term Fund registered in the investor's name.
If the total purchases, less redemptions, equal the
amount specified under the Letter, the reserved shares
will be deposited to an account in the name of the
investor or delivered to the investor or the investor's
order. If the total purchases, less redemptions, exceed
the amount specified under the Letter and is an amount
which would qualify for a further quantity discount, a
retroactive price adjustment will be made by Distributors
and the dealer through whom purchases were made pursuant
to the Letter (to reflect such further quantity discount)
on purchases made within 90 days before and on those made
after filing the Letter. The resulting difference in
offering price will be applied to the purchase of
additional shares at the offering price applicable to a
single purchase or the dollar amount of the total
purchases. If the total purchases, less redemptions, are
less than the amount specified under the Letter, the
investor will remit to Distributors an amount equal to
the difference in the dollar amount of sales charge
actually paid and the amount of sales charge which would
have applied to the aggregate purchases if the total of
such purchases had been made at a single time. Upon such
remittance, the reserved shares held for the investor's
account will be deposited to an account in the name of
the investor or delivered to the investor or to the
investor's order. If within 20 days after written request
such difference in sales charge is not paid, the
redemption of an appropriate number of reserved shares to
realize such difference will be made. In the event of a
total redemption of the account prior to fulfillment of
the Letter, the additional sales charge due will be
deducted from the proceeds of the redemption, and the
balance will be forwarded to the investor.
THE "PURCHASES AND REDEMPTIONS THROUGH SECURITIES DEALERS" AND
"CALCULATION OF NET ASSET VALUE" SUBSECTIONS ARE MODIFIED TO
REFLECT THAT THE NET ASSET VALUE FOR THE INSURED FUND IS
CALCULATED FOR EACH CLASS SEPARATELY AND THE NET ASSET VALUE FOR
THE INTERMEDIATE-TERM FUND AND EACH CLASS OF THE INSURED FUND IS
CALCULATED AS OF THE SCHEDULED CLOSING OF THE NEW YORK STOCK
EXCHANGE (GENERALLY 1:00 P.M. PACIFIC TIME).
THE PARAGRAPH REGARDING PRINCIPAL SHAREHOLDERS UNDER
"MISCELLANEOUS INFORMATION - OWNERSHIP AND AUTHORITY DISPUTES" IS
REVISED TO READ AS FOLLOWS:
As of April 3, 1995, the only principal shareholder of any
of the Funds, beneficial or of record, the shareholder's
address and the amount of share ownership was as follows:
FUND NUMBER OF SHARES HELD PERCENTAGE
Money Fund
Kenneth Rainin
5400 Hollis St.
Emeryville, CA
94608-2508 53,485,744.156 7.6%
THE FOLLOWING SECTION HAS BEEN ADDED AFTER "APPENDICES."
FINANCIAL STATEMENTS
In addition to the financial statements that follow, see the
unaudited financial statements of the Trust for the six months
ended December 31, 1994, contained in the Trust's Semi-Annual
Report to Shareholders dated December 31, 1994, which is
incorporated herein by reference.
