Franklin Tax-Free Trust

Transcription

1 Statement of Additional Information July 1, 2017 Franklin Tax-Free Trust Class A C Advisor Franklin Federal Intermediate-Term Tax-Free Income Fund FKITX FCITX FITZX Franklin Federal Limited-Term Tax-Free Income Fund FFTFX FTFZX Franklin High Yield Tax-Free Income Fund FRHIX FHYIX FHYVX Franklin Massachusetts Tax-Free Income Fund FMISX FMAIX FMAHX Franklin New Jersey Tax-Free Income Fund FRNJX FNIIX FNJZX This Statement of Additional Information (SAI) is not a prospectus. It contains information in addition to the information in the Funds (hereafter the Fund ) prospectus. The Fund s prospectus, dated July 1, 2017, which we may amend from time to time, contains the basic information you should know before investing in the Fund. You should read this SAI together with the Fund s prospectus. The audited financial statements and Report of Independent Registered Public Accounting Firm in the Fund s Annual Report to shareholders, for the fiscal year ended February 28, 2017, are incorporated by reference (are legally a part of this SAI). For a free copy of the current prospectus or annual report, contact your investment representative or call (800) DIAL BEN/ CONTENTS Goals, Strategies and Risks... 2 State and U.S. Territory Risks Officers and Trustees Fair Valuation and Liquidity Management and Other Services Portfolio Transactions Distributions and Taxes Organization, Voting Rights and Principal Holders Buying and Selling Shares The Underwriter Performance Miscellaneous Information Description of Ratings State Tax Treatment Mutual funds, annuities, and other investment products: are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government; are not deposits or obligations of, or guaranteed or endorsed by, any bank; and are subject to investment risks, including the possible loss of principal. P.O. Box Sacramento, CA (800) DIAL BEN / TF1 SAI 07/17

2 GOF SA7 02/18 SUPPLEMENT DATED FEBRUARY 1, 2018 TO THE CURRENTLY EFFECTIVE STATEMENT OF ADDITIONAL INFORMATION OF EACH OF THE FUNDS LISTED BELOW Franklin Alternative Strategies Funds Franklin K2 Alternative Strategies Fund Franklin K2 Global Macro Opportunities Fund Franklin K2 Long Short Credit Fund Franklin Pelagos Commodities Strategy Fund Franklin California Tax-Free Income Fund Franklin California Tax-Free Trust Franklin California Intermediate-Term Tax- Free Income Fund Franklin California Ultra-Short Tax-Free Income Fund Franklin Custodian Funds Franklin Dynatech Fund Franklin Focused Growth Fund Franklin Growth Fund Franklin Income Fund Franklin U.S. Government Securities Fund Franklin Utilities Fund Franklin Federal Tax-Free Income Fund Franklin Fund Allocator Series Franklin Corefolio Allocation Fund Franklin Founding Funds Allocation Fund Franklin LifeSmart Retirement Income Fund Franklin LifeSmart 2020 Retirement Target Fund Franklin LifeSmart 2025 Retirement Target Fund Franklin LifeSmart 2030 Retirement Target Fund Franklin LifeSmart 2035 Retirement Target Fund Franklin LifeSmart 2040 Retirement Target Fund Franklin LifeSmart 2045 Retirement Target Fund Franklin LifeSmart 2050 Retirement Target Fund Franklin LifeSmart 2055 Retirement Target Fund Franklin Conservative Allocation Fund Franklin Moderate Allocation Fund Franklin Growth Allocation Fund Franklin NextStep Conservative Fund Franklin NextStep Growth Fund Franklin NextStep Moderate Fund Franklin Payout 2018 Fund Franklin Payout 2019 Fund Franklin Payout 2020 Fund Franklin Payout 2021 Fund Franklin Payout 2022 Fund Franklin Payout 2023 Fund Franklin Global Trust Franklin Global Listed Infrastructure Fund Franklin Global Real Estate Fund Franklin International Growth Fund Franklin International Small Cap Growth Fund Franklin Gold and Precious Metals Fund Franklin Investors Securities Trust Franklin Adjustable U.S. Government Securities Fund Franklin Balanced Fund Franklin Convertible Securities Fund Franklin Equity Income Fund Franklin Floating Rate Daily Access Fund Franklin Low Duration Total Return Fund Franklin Real Return Fund Franklin Total Return Fund Franklin Managed Trust Franklin Rising Dividends Fund Franklin Mutual Series Funds Franklin Mutual Beacon Fund Franklin Mutual European Fund Franklin Mutual Financial Services Fund Franklin Mutual Global Discovery Fund Franklin Mutual International Fund Franklin Mutual Quest Fund Franklin Mutual Shares Fund Franklin New York Tax-Free Trust Franklin New York Intermediate-Term Tax- Free Income Fund Franklin Strategic Mortgage Portfolio Franklin Strategic Series Franklin Biotechnology Discovery Fund Franklin Flexible Alpha Fund Franklin Focused Core Equity Fund Franklin Global Government Bond Fund Franklin Growth Opportunities Fund Franklin Natural Resources Fund Franklin Small Cap Growth Fund Franklin Small-Mid Cap Growth Fund Franklin Strategic Income Fund Franklin Real Estate Securities Trust Franklin Real Estate Securities Fund Franklin High Income Trust Franklin High Income Fund Franklin New York Tax-Free Income Fund Franklin Municipal Securities Trust Franklin California High Yield Municipal Fund Franklin Tennessee Municipal Bond Fund Franklin Tax-Free Trust Franklin Alabama Tax-Free Income Fund Franklin Arizona Tax-Free Income Fund Franklin Colorado Tax-Free Income Fund Franklin Connecticut Tax-Free Income Fund Franklin Federal Intermediate-Term Tax- Free Income Fund Franklin Federal Limited-Term Tax-Free Income Fund Franklin Florida Tax-Free Income Fund Franklin Georgia Tax-Free Income Fund Franklin High Yield Tax-Free Income Fund Franklin Kentucky Tax-Free Income Fund Franklin Louisiana Tax-Free Income Fund Franklin Maryland Tax-Free Income Fund Franklin Massachusetts Tax-Free Income Fund Franklin Michigan Tax-Free Income Fund Franklin Minnesota Tax-Free Income Fund Franklin Missouri Tax-Free Income Fund Franklin New Jersey Tax-Free Income Fund Franklin North Carolina Tax-Free Income Fund Franklin Ohio Tax-Free Income Fund Franklin Oregon Tax-Free Income Fund Franklin Pennsylvania Tax-Free Income Fund Franklin Virginia Tax-Free Income Fund Franklin Templeton Global Trust Templeton Global Currency Fund Franklin Templeton International Trust Franklin India Growth Fund Franklin Templeton Money Fund Trust Franklin Templeton U.S. Government Money Fund Franklin U.S. Government Money Fund Franklin Value Investors Trust Franklin Balance Sheet Investment Fund Franklin Microcap Value Fund Franklin Small Cap Value Fund Templeton China World Fund Templeton Developing Markets Trust Templeton Funds Templeton Foreign Fund Templeton World Fund Templeton Global Investment Trust Templeton Dynamic Equity Fund Templeton Emerging Markets Balanced Fund Templeton Emerging Markets Small Cap Fund Templeton Foreign Smaller Companies Fund Templeton Frontier Markets Fund Templeton Global Balanced Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Growth Fund, Inc. Templeton Income Trust Templeton Emerging Markets Bond Fund Templeton Global Bond Fund Templeton Global Total Return Fund Templeton International Bond Fund Templeton Institutional Funds Emerging Markets Series Foreign Smaller Companies Series Global Equity Series International Equity Series 1

3 The statement of additional information is amended as follows: I. The Buying and Selling Shares Share certificates section is revised as follows: Share certificates We will credit your shares to your Fund account and we do not issue share certificates. This eliminates the costly problem of replacing lost, stolen or destroyed certificates. Any outstanding share certificates must be returned to the Fund if you want to sell, exchange or reregister those shares or if you would like to start a systematic withdrawal plan. The certificates should be properly endorsed. You can do this either by signing the back of the certificate or by completing a share assignment form. For your protection, you may prefer to complete a share assignment form and to send the certificate and assignment form in separate envelopes. We do not issue new share certificates if any outstanding share certificates are returned to the Fund. If a certificate is lost, stolen or destroyed, you may have to pay an insurance premium of up to 2% of the value of the certificate to cancel it. II. The eleventh paragraph under Buying and Selling Shares General Information section is revised as follows: The Fund or its transfer agent may be required (i) pursuant to a validly issued levy, garnishment or other form of legal process, to sell your shares and remit the proceeds to a levying officer or other recipient; or (ii) pursuant to a final order of forfeiture or other form of legal process, to sell your shares and remit the proceeds to the U.S. or state government as directed. Please keep this supplement with your statement of additional information for future reference. 2

4 TF1 SA2 01/18 SUPPLEMENT DATED JANUARY 25, 2018 TO THE STATEMENT OF ADDITIONAL INFORMATION DATED AUGUST 1, 2017 OF FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (a series of Franklin Tax-Free Trust) The statement of additional information (SAI) is amended as follows: I. The Franklin High Yield Tax-Free Income Fund (the Fund ) will begin offering Class M shares on or about January 25, Therefore, on or about January 25, 2018, the Fund will offer five classes of shares, Class A, Class M, Class C, Class R6 and Advisor Class shares. II. The Fund s classes on the cover of the SAI are replaced with the following: Class A Class M Class C Class R6 Advisor Class FRHIX Pending FHYIX Pending FHYVX III. The second paragraph on the cover of the SAI is replaced with the following: The audited financial statements and Report of Independent Registered Public Accounting Firm in the Fund s Annual Report to shareholders, for the fiscal year ended February 28, 2017 and the unaudited financial statements in the Fund s Semi-Annual Report to shareholders, for the period ended August 31, 2017, are incorporated by reference (are legally a part of this SAI). IV. The following is added under the Organization, Voting Rights and Principal Holders section beginning on page 42: Effective on January 25, 2018, the High Yield Fund also began offering Class M shares. The full title of the Class M shares of the Fund is: Franklin High Yield Tax-Free Income Fund - Class M V. The following principal holders list replaces the principal holders list for the Fund under the Organization, Voting Rights and Principal Holders section beginning on page 43: As of January 2, 2018, the principal shareholders of the Fund, beneficial or of record, were: Name and Address Share Class Percentage (%) Edward Jones & Co* Manchester Road St. Louis, MO A Pershing LLC* 1 Pershing Plaza Jersey City, NJ A 7.50 National Financial Services LLC* Attn: Mutual Fund Department 4TH Floor 499 Washington Boulevard Jersey City, NJ A 6.75 WFCS LLC* 2801 Market Street St. Louis, MO A Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ C 8.09 Edward Jones & Co* Manchester Road St. Louis, MO C 9.31 Pershing LLC* 1 Pershing Plaza Jersey City, NJ C

5 National Financial Services LLC* Attn: Mutual Fund Department 4TH Floor 499 Washington Boulevard Jersey City, NJ C 7.09 LPL Financial* Attn: Mutual Fund Trading 4707 Executive Drive San Diego, CA C 6.21 WFCS LLC* 2801 Market Street St. Louis MO C Raymond James* Attn: Courtney Waller 880 Carillon Parkway St. Petersburg, FL C 7.50 Merrill Lynch Pierce Fenner & Smith* 4800 Deer Lake Drive E Jacksonville, FL C 5.93 Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Advisor 8.32 Pershing LLC* 1 Pershing Plaza Jersey City, NJ Advisor 7.95 National Financial Services LLC* Attn: Mutual Fund Department 4TH Floor 499 Washington Boulevard Jersey City, NJ Advisor LPL Financial* Attn: Mutual Fund Trading 4707 Executive Drive San Diego, CA Advisor 8.32 Charles Schwab & Co., Inc.* 211 Main Street San Francisco, CA Advisor 7.14 WFCS LLC* 2801 Market Street St. Louis MO Advisor J.P. Morgan Securities LLC 4 Chase Metrotech Center Weehawken, NJ Advisor 6.08 Merrill Lynch Pierce Fenner & Smith* 4800 Deer Lake Drive E Jacksonville, FL Advisor Edward Jones & Co* Manchester Road St. Louis, MO R *For the benefit of its customer(s). VI. The last paragraph under the Organization, Voting Rights and Principal Holders section on page 46 is replaced with the following: 2

6 As of January 2, 2018, the officers and board members, as a group, owned of record and beneficially less than 1% of the outstanding shares of each class of the Fund. The board members may own shares in other funds in Franklin Templeton Investments. VII. The first two paragraphs under the Buying and Selling Shares Initial sales charges section on page 46 are replaced with the following: Initial sales charges The maximum initial sales charge is 2.25% for Class A of the Federal Limited-Term Fund and Federal Intermediate-Term Fund. For each of the other Funds, the maximum initial sales charge is 4.25% for Class A and Class M. There is no initial sales charge for Class C and Advisor Class. The initial sales charge for Class A shares and Class M shares may be reduced for certain large purchases, as described in the prospectus. We offer several ways for you to combine your purchases in Franklin Templeton funds to take advantage of the lower sales charges for large purchases. VIII. The Buying and Selling Shares Initial sales charges Letter of intent (LOI) section beginning on page 47 is replaced with the following: Letter of intent (LOI). You may buy Class A or Class M shares at a reduced sales charge by completing the LOI section of your account application. An LOI is a commitment by you to invest a specified dollar amount during a 13-month period. The amount you agree to invest determines the sales charge you pay. By completing the LOI section of the application, you acknowledge and agree to the following: You authorize Distributors to reserve approximately 5% of your total intended purchase in Class A or Class M shares registered in your name until you fulfill your LOI. Your periodic statements will include the reserved shares in the total shares you own, and we will pay or reinvest dividend and capital gain distributions on the reserved shares according to the distribution option you have chosen. You give Distributors a security interest in the reserved shares and appoint Distributors as attorney-in-fact. Distributors may sell any or all of the reserved shares to cover any additional sales charge if you do not fulfill the terms of the LOI. Although you may exchange your shares, you may not sell reserved shares until you complete the LOI or pay the higher sales charge. After you file your LOI with the Fund, you may buy Class A or Class M shares at the sales charge applicable to the amount specified in your LOI. Sales charge reductions based on purchases in more than one Franklin Templeton fund will be effective only after notification to Distributors that the investment qualifies for a discount. If you file your LOI with the Fund before a change in the Fund s sales charge, you may complete the LOI at the lower of the new sales charge or the sales charge in effect when the LOI was filed. Your holdings in Franklin Templeton funds acquired before you filed your LOI will be counted towards the completion of the LOI. If the terms of your LOI are met, the reserved shares will be deposited to an account in your name or delivered to you or as you direct. If the amount of your total purchases is less than the amount specified in your LOI, the sales charge will be adjusted upward, depending on the actual amount purchased during the period. You will need to send Distributors an amount equal to the difference in the actual dollar amount of sales charge paid and the amount of sales charge that would have applied to the total purchases if the total of the purchases had been made at one time. Upon payment of this amount, the reserved shares held for your account will be deposited to an account in your name or delivered to you or as you direct. If within 20 days after written request the difference in sales charge is not paid, we will redeem an appropriate number of reserved shares to realize the difference. If you redeem the total amount in your account before you fulfill your LOI, we will deduct the additional sales charge due from the sale proceeds and forward the balance to you. IX. The second paragraph under the Buying and Selling Shares Financial intermediary compensation section on page 47 is replaced with the following: Distributors may pay the following commissions to financial intermediaries who initiate and are responsible for purchases of Class A or Class M shares of $1 million or more: 1% (for mutual funds with a maximum initial sales charge of 5.75%) and 0.75% (for mutual funds with a maximum initial sales charge less than 5.75%) on sales of $1 million or more but less than $4 million, plus 0.50% on sales of $4 million or more but less than $50 million, plus 0.25% on sales of $50 million or more. Consistent with the provisions and limitations set forth in its Class A or Class M Rule 12b-1 distribution plans, the Fund may reimburse Distributors for the cost of these commission payments. 3

7 X. The heading and first paragraph under Buying and Selling Shares Contingent deferred sales charge (CDSC) section on page 49 is replaced with the following: Contingent deferred sales charge (CDSC) - Class A, M & C If you invest any amount in Class C shares or $1 million or more in Class A or Class M shares, either as a lump sum or through our cumulative quantity discount or letter of intent programs, a CDSC may apply on any Class A or Class M shares you sell within 18 months and any Class C shares you sell within 12 months of purchase. The CDSC is 1% for Class C and 0.75% for Class A and Class M of the value of the shares sold or the net asset value at the time of purchase, whichever is less. A CDSC will not apply to Class A purchases over $250 million in the High Yield Fund. XI. The heading under The Underwriter Distribution and service (12b-1 fees) Class A and C section on page 52 is replaced with The Underwriter Distribution and service (12b-1 fees) Class A, M and C. XII. The heading and first paragraph under The Underwriter Distribution and service (12b-1 fees) Class A and C The Class A and C, on page 52 is replaced with the following: The Class A, M and C plans. Each Fund may pay up to 0.10% per year of Class A s average daily net assets except the Federal Limited-Term Fund pays Distributors up to 0.15% per year of the Fund s daily net assets. The High Yield Fund may pay up to 0.25% per year of Class M s average daily net assets. XIII. The following is added under The Underwriter Distribution and service (12b-1 fees) Class A and C The Class A and C plans on page 53: The Class M plans are reimbursement plans. They allow the Fund to reimburse Distributors for eligible expenses that Distributors has shown it has incurred. The Fund will not reimburse more than the maximum amount allowed under the plan. XIV. The second paragraph under Performance Average annual total return before taxes on page 54 is replaced with the following: When considering the average annual total return before taxes quotations for Class A or M shares, you should keep in mind that the maximum initial sales charge reflected in each quotation is a one-time fee charged on all direct purchases, which will have its greatest impact during the early stages of your investment. This charge will affect actual performance less the longer you retain your investment in the Fund. XV. The third paragraph under Performance Average annual total return after taxes on distributions on page 55 is replaced with the following: The Fund s sales literature and advertising commonly refer to this calculation as the Fund s after-tax average annual total return (pre-liquidation). When considering the average annual total return after taxes on distributions quotations for Class A or M shares, you should keep in mind that the maximum initial sales charge reflected in each quotation is a one-time fee charged on all direct purchases, which will have its greatest impact during the early stages of your investment. This charge will affect actual performance less the longer you retain your investment in the Fund. XVI. The fourth paragraph under Performance Average annual total return after taxes on distributions and sale of fund shares on page 55 is replaced with the following: The Fund s sales literature and advertising commonly refer to this calculation as the Fund s after-tax average annual total return (post-liquidation). When considering the average annual total return after taxes on distributions quotations for Class A or M shares, you should keep in mind that the maximum initial sales charge reflected in each quotation is a one-time fee charged on all direct purchases, which will have its greatest impact during the early stages of your investment. This charge will affect actual performance less the longer you retain your investment in the Fund. XVII. The first paragraph under Performance Other performance quotations on page 56 is replaced with the following: The Fund also may quote the performance of Class A and M shares without a sales charge. Sales literature and advertising may quote a cumulative total return, average annual total return and other measures of performance with the substitution of net asset value for the public offering price. Please keep this supplement with your SAI for future reference. 4

8 TF1 SA1 08/17 SUPPLEMENT DATED AUGUST 1, 2017 TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JULY 1, 2017 OF FRANKLIN TAX-FREE TRUST Franklin Federal Intermediate-Term Tax-Free Income Fund Franklin Federal Limited-Term Tax-Free Income Fund Franklin High Yield Tax-Free Income Fund Franklin Massachusetts Tax-Free Income Fund Franklin New Jersey Tax-Free Income Fund The statement of additional information (SAI) is amended as follows: I. The Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Federal Limited-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin Massachusetts Tax-Free Income Fund and Franklin New Jersey Tax- Free Income Fund (each, a Fund and together, the Funds ) will begin offering Class R6 shares on or about August 1, Therefore, on or about August 1, 2017, each Fund, except Franklin Federal Limited-Term Tax-Free Income Fund will offer four classes of shares Class A, Class C, Class R6 and Advisor Class shares,. The Franklin Federal Limited-Term Tax-Free Income Fund, on or about August 1, 2017, will offer three classes of shares, Class A, Class R6 and Advisor Class shares. II. The Fund s classes on the cover of the SAI are replaced with the following: Class A Class C Class R6 Advisor Class Franklin Federal Intermediate- Term Tax-Free Income Fund Franklin Federal Limited-Term Tax-Free Income Fund Franklin High Yield Tax-Free Income Fund Franklin Massachusetts Tax-Free Income Fund Franklin New Jersey Tax-Free Income Fund FKITX FCITX Pending FITZX FFTFX --- Pending FTFZX FRHIX FHYIX Pending FHYVX FMISX FMAIX Pending FMAHX FRNJX FNIIX Pending FNJZX III. The fourth paragraph under Management and Other Services - Shareholder servicing and transfer agent section on page 34 is replaced with the following: For all classes of shares of the Fund, except for Class R6 shares, Investor Services may also pay servicing fees, that will be reimbursed by the Fund, in varying amounts to certain financial institutions (to help offset their costs associated with client account maintenance support, statement preparation and transaction processing) that (i) maintain omnibus accounts with the Fund in the institution's name on behalf of numerous beneficial owners of Fund shares who are either direct clients of the institution or are participants in an IRS-recognized tax-deferred savings plan (including Employer Sponsored Retirement Plans and Section 529 Plans) for which the institution, or its affiliate, provides participant level recordkeeping services (called "Beneficial Owners"); or (ii) provide support for Fund shareholder accounts by sharing account data with Investor Services through the National Securities Clearing Corporation (NSCC) networking system. In addition to servicing fees received from the Fund, these financial institutions also may charge a fee for their services directly to their clients. Investor Services will also receive a fee from the Fund (other than for Class R6 shares) for services provided in support of Beneficial Owners and NSCC networking system accounts. IV. The following is added under the Organization, Voting Rights and Principal Holders section beginning on page 42: Effective on August 1, 2017, the Funds also began offering Class R6 shares. The full title of the Class R6 shares of the Fund is: Franklin Federal Intermediate-Term Tax-Free Income Fund - Class R6 1

9 Franklin Federal Limited-Term Tax-Free Income Fund - Class R6 Franklin High Yield Tax-Free Income Fund - Class R6 Franklin Massachusetts Tax-Free Income Fund - Class R6 Franklin New Jersey Tax-Free Income Fund - Class R6 V. The principal holders list for the Funds under the Organization, Voting Rights and Principal Holders section beginning on page 42 is replaced with the following: As of July 3, 2017, the principal shareholders of the Fund, beneficial or of record, were: Name and Address Federal Intermediate-Term Fund Pershing LLC* 1 Pershing Plaza Jersey City, NJ Edward Jones & Co.* Manchester Road St. Louis, MO WFCS LLC* 2801 Market Street St. Louis, MO Share Class Percentage (%) A 7.24 A 45.0 A 8.69 National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 97AK Deer Lake Drive E Jacksonville, FL A A Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City NJ Edward Jones & Co.* Manchester Road St. Louis, MO Pershing LLC* 1 Pershing Plaza Jersey City, NJ National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ WFCS LLC* 2801 Market Street St. Louis, MO Raymond James* Attn: Courtney Waller 880 Carillon Parkway St. Petersburg, FL C 7.03 C C 8.51 C 5.74 C C

10 Name and Address Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 97GJ Deer Lake Drive E Jacksonville, FL Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Edward Jones & Co.* Manchester Road St. Louis, MO Share Class Percentage (%) C Advisor 5.86 Advisor Ellard CO CO Fiduciary TR CO INTL PO Box 3199 Church Street Station New York, NY Pershing LLC* 1 Pershing Plaza Jersey City, NJ WFCS LLC* 2801 Market Street St. Louis, MO Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 4800 Deer Lake Drive E Jacksonville, FL Advisor Advisor Advisor Advisor 6.94 Federal Limited-Term Fund Pershing LLC* 1 Pershing Plaza Jersey City, NJ Edward Jones & Co.* Manchester Road St. Louis, MO WFCS LLC* 2801 Market Street St. Louis, MO Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 97XA Deer Lake Drive E Jacksonville, FL Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City NJ A 7.15 A A 7.51 A 6.22 Advisor

11 Name and Address Ellard CO CO Fiduciary TR CO INTL PO Box 3199 Church Street Station New York, NY Edward Jones & Co.* Manchester Road St. Louis, MO Pershing LLC* 1 Pershing Plaza Jersey City, NJ SEI Private Trust Company CO Edward Jones Trust CO 1 Freedom Valley Drive Oaks, PA Share Class Percentage (%) Advisor Advisor 7.50 Advisor 8.47 Advisor 8.56 High-Yield Tax-Free Income Fund Pershing LLC* 1 Pershing Plaza Jersey City, NJ Edward Jones & Co.* Manchester Road St. Louis, MO WFCS LLC* 2801 Market Street St. Louis, MO National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Edward Jones & Co.* Manchester Road St. Louis, MO Pershing LLC* 1 Pershing Plaza Jersey City, NJ National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ LPL Financial* 4707 Executive Drive San Diego, CA A 8.23 A A A 6.32 C 8.27 C 8.97 C C 6.59 C

12 Name and Address WFCS LLC* 2801 Market Street St. Louis, MO Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 97GK Deer Lake Drive E Jacksonville, FL Raymond James* Attn: Courtney Waller 880 Carillon Parkway St. Petersburg, FL Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Edward Jones & Co.* Manchester Road St. Louis, MO Share Class Percentage (%) C C 6.83 C 7.69 Advisor 7.80 Advisor 5.98 Pershing LLC* 1 Pershing Plaza Jersey City, NJ National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ LPL Financial* 4707 Executive Drive San Diego, CA Charles Schwab & Co. Inc.* 211 Main Street San Francisco, CA WFCS LLC* 2801 Market Street St. Louis, MO Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 97GK Deer Lake Drive E Jacksonville, FL Advisor 8.00 Advisor 9.83 Advisor 7.32 Advisor 6.94 Advisor Advisor Massachusetts Tax-Free Income Fund Pershing LLC* 1 Pershing Plaza Jersey City, NJ WFCS LLC* 2801 Market Street St. Louis, MO A 5.69 A

13 Name and Address National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 4800 Deer Lake Drive E Jacksonville, FL Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Pershing LLC* 1 Pershing Plaza Jersey City, NJ WFCS LLC* 2801 Market Street St. Louis, MO National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 4800 Deer Lake Drive E Jacksonville, FL Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ UBS WM USA* 1000 Harbor Boulevard Weehawken, NJ Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 9H6SB 4800 Deer Lake Drive E Jacksonville, FL American Enterprise Investment Service* 707 2nd Avenue South Minneapolis, MN Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Share Class Percentage (%) A A 7.50 A 5.28 C C C C 6.55 C 7.57 Advisor Advisor 7.01 Advisor 7.94 Advisor Advisor

14 Name and Address New Jersey Tax-Free Income Fund Share Class Percentage (%) Pershing LLC* 1 Pershing Plaza Jersey City, NJ WFCS LLC* 2801 Market Street St. Louis, MO National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 4800 Deer Lake Drive E Jacksonville, FL Pershing LLC* 1 Pershing Plaza Jersey City, NJ WFCS LLC* 2801 Market Street St. Louis, MO JP Morgan Securities LLC 4 Chase Metrotech Center Brooklyn, NY A 9.26 A A 9.92 A 7.48 C 8.51 C 5.34 C 8.70 C C C 9.01 Morgan Stanley Smith Barney* Attn: Mutual Fund Operations 2 Harborside Financial Center Floor 3 Jersey City, NJ Merrill Lynch Pierce Fenner & Smith Inc.* Attn: Fund Administration 9H6SB 4800 Deer Lake Drive E Jacksonville, FL WFCS LLC* 2801 Market Street St. Louis, MO Advisor Advisor Advisor

15 Name and Address Share Class Percentage (%) National Financial Services LLC* Attn: Mutual Fund Department 4th Floor 499 Washington Boulevard Jersey City, NJ LPL Financial* 4707 Executive Drive San Diego, CA TD Ameritrade, Inc.* PO Box 2226 San Diego, CA American Enterprise Investment Service* 707 2nd Avenue South Minneapolis, MN UBS WM USA* 1000 Harbor Boulevard Weehawken, NJ JP Morgan Securities LLC 4 Chase Metrotech Center Brooklyn, NY Advisor 5.02 Advisor 6.55 Advisor 6.53 Advisor 8.56 Advisor 6.46 Advisor * For the benefit of its customer(s). VI. The last paragraph under the Organization, Voting Rights and Principal Holders section beginning on page 42 is replaced with the following: As of July 3, 2017, the officers and board members, as a group, owned of record and beneficially less than 1% of the outstanding shares of each class of the Fund. The board members may own shares in other funds in Franklin Templeton Investments. VII. The first paragraph under the Buying and Selling Shares - Initial sales charges section on page 46 is replaced with the following: The maximum initial sales charges are 2.25% for Class A of the Federal Limited-Term Fund and Federal Intermediate- Term Fund. For each of the other Funds, the maximum initial sales charge is 4.25%. There is no initial sales charge for Class C, Class R6 and Advisor Class. VIII. The Buying and Selling Shares - Dealer and financial intermediary compensation section beginning on page 47 is replaced with the following: Dealer and financial intermediary compensation Purchases of Certain Share Classes through Financial Intermediaries (Class R6 and Advisor Class) There are no associated sales charges or Rule 12b-1 distribution and service fees for the purchase of Class R6 and Advisor Class shares. However, pursuant to SEC guidance, certain financial intermediaries acting as agents on behalf of their customers may directly impose on shareholders sales charges or transaction fees determined by the financial intermediary related to the purchase of these shares. These charges and fees are not disclosed in this prospectus. You should consult with your financial advisor or visit your financial intermediary s website for more information. The Fund s service providers also may pay financial intermediaries for marketing support and other related services as disclosed below for Advisor Class shares, but not for Class R6 shares. These payments may create a conflict of interest by influencing the financial intermediary and your salesperson to recommend one share class over another. There is some uncertainty concerning whether marketing support or other similar payments may be made or received in connection with Advisor Class shares where a financial intermediary has imposed its own sales charges or transaction fees. Based on future regulatory developments, such payments may be terminated. Financial intermediary compensation Financial intermediaries may at times receive the entire sales charge. A financial intermediary who receives 90% or more of the sales charge may be deemed an underwriter under the Securities Act of 8

16 1933, as amended. Financial institutions or their affiliated brokers may receive an agency transaction fee in the percentages indicated in the financial intermediary compensation table in the Fund s prospectus. Distributors may pay the following commissions to financial intermediaries who initiate and are responsible for purchases of Class A shares of $1 million or more: 1% (for mutual funds with a maximum initial sales charge of 5.75%) and 0.75% (for mutual funds with a maximum initial sales charge less than 5.75%) on sales of $1 million or more but less than $4 million, plus 0.50% on sales of $4 million or more but less than $50 million, plus 0.25% on sales of $50 million or more. Consistent with the provisions and limitations set forth in its Class A Rule 12b-1 distribution plan, the Fund may reimburse Distributors for the cost of these commission payments. These payments may be made in the form of contingent advance payments, which may be recovered from the financial intermediary or set off against other payments due to the financial intermediary if shares are sold within 18 months of the calendar month of purchase. Other conditions may apply. Other terms and conditions may be imposed by an agreement between Distributors, or one of its affiliates, and the financial intermediary. In addition to the sales charge payments described above and the distribution and service (12b-1) fees described below under The Underwriter - Distribution and service (12b-1) fees, Distributors and/or its non-fund affiliates may make the following additional payments to financial intermediaries that sell shares of Franklin Templeton mutual funds: Marketing support payments (applicable to all classes of shares except Class R6). Distributors may make payments to certain financial intermediaries in connection with their efforts to educate financial advisors and provide services which may facilitate, directly or indirectly, investment in Franklin Templeton mutual funds. A financial intermediary s marketing support services may include business planning assistance, advertising, educating financial intermediary personnel about Franklin Templeton mutual funds and shareholder financial planning needs, placement on the financial intermediary s list of offered funds, and access to sales meetings, sales representatives and management representatives of the financial intermediary. Distributors compensates financial intermediaries differently depending upon, among other factors, sales and assets levels, redemption rates and the level and/or type of marketing and educational activities provided by the financial intermediary. Such compensation may include financial assistance to financial intermediaries that enable Distributors to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other financial intermediary-sponsored events. These payments may vary depending upon the nature of the event. Distributors will, on an annual basis, determine whether to continue such payments. In the case of any one financial intermediary, marketing support payments will generally not exceed 0.05% of the total assets of Franklin Templeton mutual funds attributable to that financial intermediary, on an annual basis. For a financial intermediary exceeding $15 billion in total assets of Franklin Templeton mutual funds, Distributors may agree to make annual marketing support payments exceeding 0.05% of such assets. For a financial intermediary exceeding $50 billion in total assets of Franklin Templeton mutual funds, Distributors may agree to make annual marketing support payments up to a limit of 0.06% of such assets. Any assets held on behalf of Employer Sponsored Retirement Plans for which payment is made to a financial intermediary pursuant to the following paragraph will be excluded from the calculation of marketing support payments pursuant to this paragraph. Distributors may also make marketing support payments to financial intermediaries in connection with their activities that are intended to assist in the sale of shares of Franklin Templeton mutual funds, directly or indirectly, to certain Employer Sponsored Retirement Plans that have retained such financial intermediaries as plan service providers. Payments may be made on account of activities that may include, but are not limited to, one or more of the following: business planning assistance for financial intermediary personnel, educating financial intermediary personnel about Franklin Templeton mutual funds, access to sales meetings, sales representatives, wholesalers, and management representatives of the financial intermediary, and detailed sales reporting. A financial intermediary may perform the services itself or may arrange with a third party to perform the services. In the case of any one financial intermediary, such payments will not exceed 0.10% of the total assets of Franklin Templeton mutual funds held, directly or indirectly, by such Employer Sponsored Retirement Plans, on an annual basis. Distributors will, on an annual basis, determine whether to continue such payments. Consistent with the provisions and limitations set forth in its Rule 12b-1 distribution plans, the Fund may reimburse Distributors for the cost of a portion of these marketing support payments. Marketing support payments may be in addition to any servicing and other fees paid by Investor Services, as described further below and under Management and Other Services Shareholder servicing and transfer agent above. The following list includes FINRA member firms (or, in some instances, their respective affiliates) that, as of March 31, 2017, Distributors anticipates will receive marketing support payments. Any firm indicated by one asterisk receives annual marketing support payments exceeding 0.05% of the total assets of Franklin Templeton mutual funds attributable 9

17 to that firm. Any firm indicated by two asterisks receives annual marketing support payments of up to a limit of 0.06% of the total assets of Franklin Templeton mutual funds attributable to that firm. In addition to member firms of FINRA, Distributors also makes marketing support payments, and Distributors non-fund affiliates may make administrative services payments, to certain other financial intermediaries, such as banks, insurance companies, and plan administrators, that sell mutual fund shares or provide services to Franklin Templeton mutual funds and shareholders. These firms may not be included in this list. You should ask your financial intermediary if it receives such payments. 1st Global Capital Corporation, ADP Retirement Services, American Portfolios Financial Services, Inc., American Enterprise Investment Services, Inc., American United Life Insurance Company, Ascensus, Inc., AXA Advisors, LLC, BBVA Securities, Inc., Benjamin F. Edwards & Company, Inc., Cadaret Grant & Co., Inc., Cambridge Investment Research, Inc., Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Financial Specialists LLC, Cetera Investment Services LLC, Citigroup Global Markets Inc., Citizens Securities, Inc., Commonwealth Financial Network, CUNA Brokerage Services, Inc., CUSO Financial Services, L.P., Digital Retirement Solutions, Edward D. Jones & Co., L.P. (dba Edward Jones)**, Empower Retirement, eplan Services, Inc., Fidelity Investments Institutional Services Company, Inc., Fifth Third Securities, Inc., First Allied Securities, Inc., First Command Financial Planning, Inc., FSC Securities Corporation, Girard Securities, Inc., Goldman, Sachs & Co., Group 3 Financial, LLC, IFC Holdings Inc. D/B/A INVEST Financial Corporation, Investacorp, Inc., Investment Centers of America, Inc., J.J.B. Hilliard, W.L. Lyons LLC, J.P. Morgan Securities LLC, Janney Montgomery Scott LLC, John Hancock Distributors LLC, KMS Financial Services, Inc., Legend Equities Corporation, Lincoln Financial Advisors Corporation, Lincoln Financial Securities Corporation, Lincoln Investment Planning, Inc., Lincoln Retirement Services Company LLC, LPL Financial LLC, M&T Securities, Inc., Massachusetts Mutual Life Insurance Company, Merrill Lynch, Pierce, Fenner & Smith, Inc., Minnesota Life Insurance Company, MML Investors Services, LLC, Morgan Stanley, MSCS Financial Services LLC, National Planning Corporation, Nationwide Financial Services, Inc., Newport Retirement Services, Inc., Northwestern Mutual Investment Services, LLC, Paychex Securities Corporation, PFS Investments Inc., PNC Investments LLC, Principal Financial Group, Prudential Insurance Company of America, Raymond James & Associates, Inc., Raymond James Financial Services, Inc., RBC Capital Markets LLC, Richard D. Schubert, Inc., Robert W. Baird & Co., Inc., Royal Alliance Associates, Inc., SagePoint Financial, Inc., Santander Securities LLC, Securities America, Inc., Securities Service Network, Inc., Signator Investors, Inc., SII Investments, Inc., Sorrento Pacific Financial, LLC, Stifel, Nicolaus & Company, Incorporated, Summit Brokerage Services Inc., TD Ameritrade Trust Company, TFS Securities, Inc., The Huntington Investment Company, TIAA-CREF Individual & Institutional Services, LLC, Transamerica Advisors Life Insurance Company, Transamerica Retirement Solutions Corporation, Triad Advisors, Inc., UBS Financial Services Inc., UnionBanc Investment Services, LLC, U.S. Bancorp Investments, Inc., Voya Financial Advisors, Inc., Voya Institutional Plan Services LLP, Wells Fargo Advisors, LLC and Woodbury Financial Services, Inc. Marketing support payments made to organizations located outside the U.S., with respect to investments in the Fund by non-u.s. persons, may exceed the above-stated limitation. In addition to marketing support payments, to the extent permitted by SEC and FINRA rules and other applicable laws and regulations, Distributors may from time to time at its expense make or allow other promotional incentives or additional payments to financial intermediaries that sell or arrange for the sale of shares of the Fund. These payments may include additional compensation to financial intermediaries, including financial intermediaries not listed above, related to transaction support, various financial intermediary-sponsored events intended to educate financial advisers and their clients about the Franklin Templeton mutual funds, and data analytics and support. Transaction support payments. The types of payments that Distributors may make under this category include, among others, payment of ticket charges of up to $20 per purchase or exchange order placed by a financial intermediary or one-time payments for ancillary services such as setting up mutual funds on a financial intermediary s mutual fund trading system. Conference support payments. Compensation may include financial assistance to financial intermediaries that enable Distributors to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events, co-operative advertising, newsletters, and other financial intermediary-sponsored events. These payments may vary depending upon the nature of the event, and can include travel expenses, such as lodging incurred by registered representatives and other employees in connection with training and educational meetings, client prospecting and due diligence trips. Distributors routinely sponsors due diligence meetings for registered representatives during which they receive updates on various Franklin Templeton mutual funds and are afforded the opportunity to speak with portfolio managers. Invitation to these meetings is not conditioned on selling a specific number of shares. Those who have shown an interest in Franklin Templeton mutual funds, however, are more likely to be considered. To the extent permitted by their firm s 10

18 policies and procedures, registered representatives expenses in attending these meetings may be covered by Distributors. Data support payments. Compensation may include data support payments to certain holders or financial intermediaries of record for accounts in one or more of the Franklin Templeton mutual funds. A financial intermediary s data support services may include the provision of analytical data on such accounts. Other payments. Other compensation may be offered to the extent not prohibited by federal or state laws or any selfregulatory agency, such as FINRA. Distributors makes payments for events it deems appropriate, subject to Distributors guidelines and applicable law. You should ask your financial intermediary for information about any payments it receives from Distributors and any services provided. In addition, Investor Services may make payments to financial intermediaries that provide administrative services to defined benefit plans. Investor Services does not seek reimbursement by the Fund for such payments. IX. The second paragraph under The Underwriter section on page 52 is replaced with the following: Distributors does not receive compensation from the Fund for acting as underwriter of the Fund's Class R6 and Advisor Class shares. Please keep this supplement for future reference. 11