o CAT *P
SHARE CLASS REDESIGNATION
EFFECTIVE JANUARY 1, 1999
Class A - Formerly Class I
Class C - Formerly Class II
SUPPLEMENT DATED JANUARY 1, 1999
TO THE PROSPECTUS OF
FRANKLIN CALIFORNIA TAX-FREE TRUST
DATED NOVEMBER 1, 1998
The prospectus is amended as follows:
I. As of January 1, 1999, Class I shares are designated Class A and Class II
shares are designated Class C. All references in the prospectus to Class I
shares are replaced with Class A, and all references to Class II shares are
replaced with Class C.
II. The following paragraph is added under "What Are the Risks of Investing in
the Funds?":
YEAR 2000. When evaluating current and potential portfolio positions, Year 2000
is one of the factors the manager considers.
The manager will rely upon public filings and other statements made by issuers
about their Year 2000 readiness. The manager, of course, cannot audit each
issuer and its major suppliers to verify their Year 2000 readiness.
If an issuer in which a fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its security will also be adversely
affected. A decrease in the value of one or more of a fund's portfolio holdings
will have a similar impact on the price of the fund's shares. Please see "Year
2000 Problem" under "Who Manages the Funds?" for more information.
III. The following replaces the section "Year 2000 Issue" under "Who Manages the
Funds?":
YEAR 2000 PROBLEM. The funds' business operations depend on a worldwide network
of computer systems that contain date fields, including securities trading
systems, securities transfer agent operations and stock market links. Many of
the systems currently use a two digit date field to represent the date, and
unless these systems are changed or modified, they may not be able to
distinguish the Year 1900 from the Year 2000 (commonly referred to as the Year
2000 problem). In addition, the fact that the Year 2000 is a non-standard leap
year may create difficulties for some systems.
When the Year 2000 arrives, the funds' operations could be adversely affected if
the computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the funds'
portfolio and operational areas could be impacted, including securities trade
processing, interest and dividend payments, securities pricing, shareholder
account services, reporting, custody functions and others.
The manager and its affiliated service providers are making a concerted effort
to take steps they believe are reasonably designed to address their Year 2000
problems. Of course, the funds' ability to reduce the effects of the Year 2000
problem is also very much dependent upon the efforts of third parties over which
the funds and the manager may have no control.
IV. The section of the chart labeled "Insured Fund - Class I," found under "How
Do I Buy Shares? - Insured and Intermediate Funds - Purchase Price of Fund
Shares," is replaced with the following:
TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF TO DEALER
---------------------------- AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------
INSURED FUND - CLASS A
Under $100,000 4.25% 4.44% 4.00%
$100,000 but less than 3.50% 3.63% 3.25%
$250,000
$250,000 but less than 2.50% 2.56% 2.25%
$500,000
$500,000 but less than 2.00% 2.04% 1.85%
$1,000,000
$1,000,000 or more* None None None
V. In the section "Sales Charge Waivers," found under "How Do I Buy Shares? -
Insured and Intermediate Funds - Sales Charge Reductions and Waivers," the
second waiver category is replaced with the following:
2. Redemption proceeds from the sale of shares of any Franklin Templeton Fund.
The proceeds must be reinvested in the same class of shares, except
proceeds from the sale of Class B shares will be reinvested in Class A
shares.
If you paid a Contingent Deferred Sales Charge when you sold your Class A
or C shares, we will credit your account with the amount of the Contingent
Deferred Sales Charge paid but a new Contingent Deferred Sales Charge will
apply. For Class B shares reinvested in Class A, a new Contingent Deferred
Sales Charge will not apply, although your account will not be credited
with the amount of any Contingent Deferred Sales Charge paid when you sold
your Class B shares.
Proceeds immediately placed in a Franklin Bank CD also may be reinvested
without a front-end sales charge if you reinvest them within 365 days from
the date the CD matures, including any rollover.
This waiver does not apply to shares you buy and sell under our exchange
program. Shares purchased with proceeds from a money fund may be subject to
a sales charge.
VI. The third item in the section "Exchange Restrictions," found under "May I
Exchange Shares for Shares of Another Fund?", is replaced with the following:
o Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature guarantee.
You may, however, exchange shares from a fund account requiring two or more
signatures into an identically registered money fund account requiring only
one signature for all transactions. PLEASE NOTIFY US IN WRITING IF YOU DO
NOT WANT THIS OPTION TO BE AVAILABLE ON YOUR ACCOUNT. Additional procedures
may apply. Please see "Transaction Procedures and Special Requirements."
VII. In the "By Phone" section of the chart under "How Do I Sell Shares?", the
first bulleted item is replaced with the following:
o If the request is $100,000 or less. Institutional accounts may exceed
$100,000 by completing a separate agreement. Call Institutional Services to
receive a copy.
VIII. Under "Transaction Procedures and Special Requirements,"
(a) the section "Joint Accounts" is replaced with the following:
JOINT ACCOUNTS. For accounts with more than one registered owner, the funds
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.
Please keep in mind that if you have previously told us that you do not want
telephone exchange or redemption privileges on your account, then we can only
accept written instructions to exchange or redeem shares if they are signed by
all registered owners on the account.
(b) and the reference to $50,000 in the section "Signature Guarantees" is
replaced with $100,000.
IX. In the section "Services to Help You Manage Your Account - TeleFACTS(R),"
the third bulleted item is replaced with the following:
o exchange shares (within the same class) between identically registered
Franklin Templeton Class A, B or C accounts; and
X. In the "Useful Terms and Definitions" section, the definition of "Class I and
Class II" is replaced with the following:
CLASS A, CLASS B AND CLASS C - The Insured Fund offers two classes of shares,
designated "Class A" and "Class C." The two classes have proportionate interests
in the fund's portfolio. They differ, however, primarily in their sales charge
structures and Rule 12b-1 plans. Shares of the Intermediate and Money funds are
considered Class A shares for redemption, exchange and other purposes. Certain
funds in the Franklin Templeton Funds also offer a class of shares designated
"Class B."
Please keep this supplement for future reference.
