As filed with the Securities and Exchange Commission on October 30, 1998
File Nos.
2-60470
811-2790
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 24 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 (X)
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (650) 312-2000
HARMON E. BURNS, 777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Name and Address of Agent for Service of Process)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on January 1, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Shares of Beneficial Interest of:
Franklin California Tax-Free Income Fund - Class I
Franklin California Tax-Free Income Fund - Class II
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
CROSS REFERENCE SHEET
FORM N-1A
PART A: INFORMATION REQUIRED IN THE PROSPECTUS
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
1. Cover Page Cover Page
2. Synopsis "Expense Summary"
3. Condensed Financial "Financial Highlights";
Information
4. General Description "How Is the Fund Organized?";
of Registrant "How Does the Fund Invest Its
Assets?" "What Are the Risks of
Investing in the Fund?"
5. Management of the Fund "Who Manages the Fund?"
5A. Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6. Capital Stock and "How Is the Fund Organized?";
Other Securities "Services to Help You Manage
Your Account"; "What
Distributions Might I Receive
From the Fund?"; "How Taxation
Affects the Fund and Its
Shareholders"; "What If I Have
Questions About My Account?"
7. Purchase of Securities "How Do I Buy Shares?"; "May I
Being Offered Exchange Shares for Shares of
Another Fund?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account";
"Useful Terms and Definitions";
"What If I Have Questions About
My Account?"; "Who Manages the
Fund?"; "Useful Terms and
Definitions"
8. Redemption or Repurchase "May I Exchange Shares for
Shares of Another Fund?"; "How
Do I Sell Shares?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account";
"Useful Terms and Definitions"
9. Pending Legal Proceedings Not Applicable
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
CROSS REFERENCE SHEET
FORM N-1A
PART B: INFORMATION REQUIRED IN THE
STATEMENT OF ADDITIONAL INFORMATION
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives "How Does the Fund Invest Its
and Policies Assets?"; "What Are the Risks of
Investing in the Fund?";
"Investment Restrictions"
14. Management of the Fund "Officers and Directors";
"Investment Management and Other
Services"
15. Control Persons and "Officers and Directors";
Principal Holders of "Investment Management and Other
Securities Services"; "Miscellaneous
Information"
16. Investment Advisory and "Investment Management and Other
Other Services Services"; "The Fund's
Underwriter"
17. Brokerage Allocation and "How Does the Fund Buy
Other Practices Securities for Its Portfolio?"
18. Capital Stock and Not Applicable
Other Securities
19. Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Shares?"; "How Are Fund Shares
Valued?"; "Financial Statements"
20. Tax Status "Additional Information on
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Calculation of "How Does the Fund Measure
Performance Data Performance?"
23. Financial Statements "Financial Statements"
---------------------------------------------------
REDESIGNATION
Class A - Formerly Class I
Class B - New Share Class
Class C - Formerly Class II
---------------------------------------------------
SUPPLEMENT DATED JANUARY 1, 1999
TO THE PROSPECTUS OF
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
DATED AUGUST 1, 1998
The prospectus is amended as follows:
I. As of January 1, 1999, the fund offers three classes of shares: Class A,
Class B and Class C. Before January 1, 1999, Class A shares were designated
Class I and Class C shares were designated Class II. 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 section "Expense Summary" is replaced with the following:
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
fund. It is based on the historical expenses of the fund for the fiscal year
ended March 31, 1998. The fund's actual expenses may vary.
CLASS A(1) CLASS B(2) CLASS C(1)
- -------------------------------------------------------------------------------
A. SHAREHOLDER TRANSACTION EXPENSES(3)
Maximum Sales Charge
(as a percentage of Offering Price) 4.25% 4.00% 1.99%
Paid at time of purchase(4) 4.25% None 1.00%
Paid at redemption(5) None 4.00% 0.99%
Exchange Fee (per transaction)(6) None None None
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Management Fees 0.45% 0.45% 0.45%
Rule 12b-1 Fees(7) 0.07% 0.65% 0.65%
Other Expenses 0.04% 0.04% 0.04%
--------------------------------
Total Fund Operating Expenses 0.56% 1.14% 1.14%
================================
C. EXAMPLE
Assume the annual return for each class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $10,000 that you invest in the
fund.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
CLASS A $480(8) $597 $724 $1097
CLASS B
Assuming you sold your
shares at the end of the
period $516 $662 $828 $1,224(9)
Assuming you stayed in the
fund $116 $362 $628 $1,224(9)
CLASS C $313(10) $459 $721 $1,472
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE shown.
The fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
(1) Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II.
(2) The fund began offering Class B shares on January 1, 1999. Annual fund
operating expenses are based on the expenses for Class A and C for the fiscal
year ended March 31, 1998. The Rule 12b-1 fees are based on the maximum fees
allowed under Class B's Rule 12b-1 plan.
(3) If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
(4) There is no front-end sales charge if you invest $1 million or more in Class
A shares. Although Class B and C have a lower front-end sales charge than Class
A, their Rule 12b-1 fees are higher. Over time you may pay more for Class B and
C shares. Please see "How Do I Buy Shares? - Choosing a Share Class."
(5) A Contingent Deferred Sales Charge of 1% may apply to Class A purchases of
$1 million or more if you sell the shares within one year and to any Class C
purchase if you sell the shares within 18 months. A Contingent Deferred Sales
Charge of up to 4% may apply to any Class B purchase if you sell the shares
within six years. The charge is based on the value of the shares sold or the Net
Asset Value at the time of purchase, whichever is less. The number in the table
shows the charge as a percentage of Offering Price. While the percentage for
Class C is different depending on whether the charge is shown based on the Net
Asset Value or the Offering Price, the dollar amount you would pay is the same.
See "How Do I Sell Shares? - Contingent Deferred Sales Charge" for details.
(6) There is a $5 fee for exchanges by Market Timers.
(7) These fees may not exceed 0.10% for Class A and 0.65% for Class B and C. 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 charge permitted under the NASD's rules.
(8) Assumes a Contingent Deferred Sales Charge will not apply.
(9) Assumes conversion of Class B shares to Class A shares after eight years.
(10) For the same Class C investment, you would pay projected expenses of $215
if you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
III. The following information is added to the section "Financial Highlights":
SIX MONTHS ENDED
SEPTEMBER 30, 1998
(UNAUDITED)
----------------------------
CLASS A CLASS C
----------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period $7.35 $7.35
----------------------------
Income from investment operations:
Net investment income .20 .18
Net realized and unrealized gains .14 .14
----------------------------
Total from investment operations .34 .32
----------------------------
Less distributions from:
Net investment income (.20) (.18)
Net realized gains (.01) (.01)
----------------------------
Total distributions (.21) (.19)
----------------------------
Net asset value, end of period $7.48 $7.48
============================
Total return* 4.66% 4.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $15,557,686 $386,548
Ratio to average net assets:
Expenses .56%** 1.14%**
Net investment income 5.36%** 4.78%**
Portfolio turnover rate 13.93% 13.93%
* Total return does not reflect sales commissions or the Contingent Deferred
Sales Charge, and is not annualized.
** Annualized.
IV. The following paragraph is added under "What Are the Risks of Investing in
the Fund?":
YEAR 2000. When evaluating current and potential portfolio positions, Year 2000
is only one of the factors Advisers considers. Advisers will rely upon public
filings and other statements made by issuers about their Year 2000 readiness.
Advisers, of course, cannot audit each issuer and its major suppliers to verify
their Year 2000 readiness.
If an issuer the fund is invested in 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 the fund's portfolio
holdings will have a similar impact on the price of the fund's shares. Please
see "Who Manages the Fund?" for more information.
V. The following is added after the "Administrative Services" section under "Who
Manages the Fund?":
YEAR 2000 PROBLEM. The fund's 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 fund's operations could be adversely affected if
the computer systems used by Advisers, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the fund's
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.
Advisers 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 fund's ability to reduce the effects of the Year 2000
problem is also very much dependent upon the efforts of third parties over which
the fund and Advisers may have no control.
VI. In the section "Who Manages the Fund? - The Rule 12b-1 Plans,"
(a) the first sentence is replaced with the following:
Each class has a separate distribution or "Rule 12b-1" plan under which it shall
pay or may reimburse Distributors or others for the expenses of activities that
are primarily intended to sell shares of the class.
(b) and the following paragraphs are added:
Under the Class B plan, the fund pays Distributors up to 0.50% per year of Class
B's average daily net assets to pay Distributors for providing distribution and
related services and bearing certain Class B expenses. All distribution expenses
over this amount will be borne by those who have incurred them. Securities
Dealers are not eligible to receive this portion of the Rule 12b-1 fees
associated with the purchase.
The fund may also pay a servicing fee of up to 0.15% per year of Class B's
average daily net assets under the Class B plan. This fee may be used to pay
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from the fund on behalf of customers, and similar servicing and account
maintenance activities. Securities Dealers may be eligible to receive this
portion of the Rule 12b-1 fees from the date of purchase. After 8 years, Class B
shares convert to Class A shares and Securities Dealers may then receive the
Rule 12b-1 fees applicable to Class A.
The expenses relating to the Class B plan are also used to pay Distributors for
advancing the commission costs to Securities Dealers with respect to the initial
sale of Class B shares. Further, the expenses relating to the Class B plan may
be used by Distributors to pay third party financing entities that have provided
financing to Distributors in connection with advancing commission costs to
Securities Dealers.
VII. The first paragraph under "How Is the Fund Organized?" is replaced with the
following:
The fund is a diversified, open-end management investment company, commonly
called a mutual fund. It was organized as a Maryland corporation on November 28,
1977, and is registered with the SEC. The fund offers three classes of shares:
Franklin California Tax-Free Income Fund - Class A, Franklin California Tax-Free
Income Fund - Class B and Franklin California Tax-Free Income Fund - Class C.
Additional classes of shares may be offered in the future.
VIII. The sections "Choosing a Share Class" and "Purchase Price of Fund Shares,"
found under "How Do I Buy Shares?", are replaced with the following:
CHOOSING A SHARE CLASS
Each class has its own sales charge and expense structure, allowing you to
choose the class that best meets your situation. Your investment representative
can help you decide.
CLASS A* CLASS B* CLASS C*
- --------------------------------------------------------------------------------
o Front-end sales o No front-end sales o Front-end sales
charge of 5.75% charge charge of 1%
or less
o Contingent o Contingent Deferred o Contingent Deferred
Deferred Sales Sales Charge of 4% or Sales Charge of 1% on
Charge of 1% on less on shares you shares you sell within
purchases of $1 sell within six years 18 months
million or more
sold within one
year
o Lower annual o Automatic conversion o No conversion to
expenses than to Class A shares Class A shares, so
Class B or C due after eight years, annual expenses do not
to lower Rule reducing future annual decrease
12b-1 fees expenses
o No maximum o Maximum purchase o Maximum purchase
purchase amount amount of $249,999. We amount of $999,999. We
invest any investment invest any investment
of $250,000 or more in of $1 million or more
Class A shares, since in Class A shares,
a reduced front-end since there is no
sales charge is front-end sales charge
available and Class and Class A's annual
A's annual expenses expenses are lower.
are lower.
*Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II. The fund began offering Class B shares on
January 1, 1999.
PURCHASE PRICE OF FUND SHARES
For Class A shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class C shares is 1%
and, unlike Class A, does not vary based on the size of your purchase. There is
no front-end sales charge for Class B shares.
TOTAL SALES CHARGE
AS A PERCENTAGE OF AMOUNT PAID TO
----------------------------- DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------------------------------------------------
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 2.75% 2.83% 2.50%
$500,000
$500,000 but less than 2.15% 2.20% 2.00%
$1,000,000
$1,000,000 or more* None None None
CLASS B* None None None
CLASS C
Under $1,000,000* 1.00% 1.01% 1.00%
*A Contingent Deferred Sales Charge of 1% may apply to Class A purchases of $1
million or more and any Class C purchase. A Contingent Deferred Sales Charge of
up to 4% may apply to any Class B purchase. Please see "How Do I Sell Shares? -
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases.
IX. In the section "Sales Charge Waivers," found under "How Do I Buy Shares? -
Sales Charge Reductions and Waivers,"
(a) the first paragraph is replaced with the following:
SALES CHARGE WAIVERS. If one of the following sales charge waivers applies to
you or your purchase of fund shares, you may buy shares of the fund without a
front-end sales charge or a Contingent Deferred Sales Charge. All of the sales
charge waivers listed below apply to purchases of Class A shares only, except
for items 1 and 2 which also apply to Class B and C purchases.
(b) and 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. If you own both Class A and B shares and you later
sell your shares, we will generally sell your Class A shares first, unless
otherwise instructed.
If you immediately placed your redemption proceeds in a Franklin Bank CD,
you may reinvest them as described above. The proceeds must be reinvested
within 365 days from the date the CD matures, including any rollover.
This waiver does not apply to exchanges. Shares purchased with proceeds
from a money fund may be subject to a sales charge.
X. The section "How Do I Buy Shares? - Other Payments to Securities Dealers" is
replaced with the following:
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate and
are responsible for Class B and C purchases and certain Class A purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not by
the fund or its shareholders.
1. Class A purchases of $1 million or more - up to 0.75% of the amount
invested.
2. Class B purchases - up to 3% of the amount invested.
3. Class C purchases - up to 1% of the purchase price.
4. Class A purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
participating in comprehensive fee programs - up to 0.25% of the amount
invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with investments
described in paragraphs 1 or 3 above will be eligible to receive the Rule 12b-1
fee associated with the purchase starting in the thirteenth calendar month after
the purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES, PLEASE
SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? - OTHER PAYMENTS TO SECURITIES
DEALERS" IN THE SAI.
XI. The second and third paragraphs under "May I Exchange Shares for Shares of
Another Fund?" are replaced with the following:
If you own Class A shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund. Franklin Templeton Money Fund is the only money
fund exchange option available to Class B and C shareholders. Unlike our other
money funds, shares of Franklin Templeton Money Fund may not be purchased
directly and no drafts (checks) may be written on Franklin Templeton Money Fund
accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment goal and
policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have different
investment minimums. Some Franklin Templeton Funds do not offer Class B or C
shares.
XII. The third paragraph in the section "Contingent Deferred Sales Charge,"
found under "May I Exchange Shares for Shares of Another Fund? - Will Sales
Charges Apply to My Exchange?", is replaced with the following:
If you exchange Class A shares into one of our money funds, the time your shares
are held in that fund will not count towards the completion of any Contingency
Period. If you exchange your Class B or C shares for the same class of shares of
Franklin Templeton Money Fund, however, the time your shares are held in that
fund will count towards the completion of any Contingency Period.
XIII. 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.
XIV. The section "Contingent Deferred Sales Charge," found under "How Do I Sell
Shares?", is revised to add the following after the first paragraph:
For Class B shares, there is a Contingent Deferred Sales Charge if you sell your
shares within six years, as described in the table below. The charge is based on
the value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less.
THIS % IS DEDUCTED FROM
IF YOU SELL YOUR CLASS B SHARES YOUR PROCEEDS AS A
WITHIN THIS MANY YEARS AFTER CONTINGENT DEFERRED
BUYING THEM SALES CHARGE
- -------------------------------------------------------------------------
1 Year 4
2 Years 4
3 Years 3
4 Years 3
5 Years 2
6 Years 1
7 Years 0
XV. The fourth paragraph under "What Distributions Might I Receive From the
Fund?" is replaced with the following:
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of each class.
XVI. Distribution option 3 and the paragraph following it in the section "What
Distributions Might I Receive From the Fund? - Distribution Options" are
replaced with the following:
3. Receive distributions in cash - You may receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to another
person or to a checking or savings account, you may need a signature guarantee.
If you send the money to a checking or savings account, please see "Electronic
Fund Transfers" under "Services to Help You Manage Your Account."
Distributions may be reinvested only in the SAME CLASS of shares, except as
follows: (i) Class C shareholders who chose to reinvest their distributions in
Class A shares of the fund or another Franklin Templeton Fund before November
17, 1997, may continue to do so; and (ii) Class B and C shareholders may
reinvest their distributions in shares of any Franklin Templeton money fund.
XVII. In the sections "Joint Accounts" and "Signature Guarantees," found under
"Transaction Procedures and Special Requirements," the references to $50,000 are
replaced with $100,000.
XVIII. The second sentence in the section "Services to Help You Manage Your
Account - Automatic Investment Plan" is replaced with the following:
Under the plan, you can have money transferred automatically from your checking
or savings account to the fund each month to buy additional shares.
XIX. The section "Services to Help You Manage Your Account - Automatic Payroll
Deduction," is revised to reflect that this service is available to both Class A
and Class B shares.
XX. The second paragraph under "Services to Help You Manage Your Account -
Systematic Withdrawal Plan" is replaced with the following:
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking or savings account. If you choose to have the money
sent to a checking or savings account, please see "Electronic Fund Transfers"
below. Once your plan is established, any distributions paid by the fund will be
automatically reinvested in your account.
XXI. The section "Services to Help You Manage Your Account - Electronic Fund
Transfers - Class I Only" is replaced with the following:
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions or payments under
a systematic withdrawal plan sent directly to a checking or savings account. If
the account is with a bank that is a member of the Automated Clearing House, the
payments may be made automatically by electronic funds transfer. If you choose
this option, please allow at least fifteen days for initial processing. We will
send any payments made during that time to the address of record on your
account.
XXII. In the section "Services to Help You Manage Your Account - TeleFACTS(R),"
(a) 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
(b) and the last sentence is replaced with the following:
The code number is 112 for Class A, 312 for Class B and 212 for Class C.
XXIII. In the "Useful Terms and Definitions" section,
(a) the definition of "Class I and Class II" is replaced with the following:
CLASS A, CLASS B AND CLASS C - The fund offers three classes of shares,
designated "Class A," "Class B" and "Class C." The three classes have
proportionate interests in the fund's portfolio. They differ, however, primarily
in their sales charge structures and Rule 12b-1 fees.
(b) and the following definitions are revised:
CONTINGENCY PERIOD - For Class A shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. The contingency period is six years
for Class B shares and 18 months for Class C shares. The holding period begins
on the day you buy your shares. For example, if you buy shares on the 18th of
the month, they will age one month on the 18th day of the next month and each
following month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply if
you sell your Class A or C shares within the Contingency Period. For Class B,
the maximum CDSC is 4% and declines to 0% after six years.
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 4.25% for Class A and 1% for Class C. There is no
front-end sales charge for Class B. We calculate the offering price to two
decimal places using standard rounding criteria.
Please keep this supplement for future reference.
----------------------------------------------------
REDESIGNATION
Class A - Formerly Class I
Class B - New Share Class
Class C - Formerly Class II
----------------------------------------------------
SUPPLEMENT DATED JANUARY 1, 1999
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
DATED AUGUST 1, 1998
The Statement of Additional Information is amended as follows:
I. As of January 1, 1999, the fund offers three classes of shares: Class A,
Class B and Class C. Before January 1, 1999, Class A shares were designated
Class I and Class C shares were designated Class II. All references in the
Statement of Additional Information to Class I shares are replaced with Class A,
and all references to Class II shares are replaced with Class C.
II. The following is added to the "Officers and Directors" section:
As of October 19, 1998, the officers and Board members, as a group, owned of
record and beneficially the following shares of the fund: approximately 129,798
Class A shares, or less than 1% of the total outstanding Class A shares of the
fund.
III. In the section "The Rule 12b-1 Plans," found under "The Fund's
Underwriter,"
(a) the first sentence is replaced with the following:
Each class has a separate distribution or "Rule 12b-1" plan that was adopted
pursuant to Rule 12b-1 of the 1940 Act.
(b) the following paragraph is added after the section "The Class I Plan":
THE CLASS B PLAN. Under the Class B plan, the fund pays Distributors up to 0.50%
per year of Class B's average daily net assets, payable quarterly, for
distribution and related expenses. These fees may be used to compensate
Distributors for providing distribution and related services and bearing certain
Class B expenses. All distribution expenses over this amount will be borne by
those who have incurred them without reimbursement by the fund.
Under the Class B plan, the fund also pays an additional 0.15% per year of Class
B's average daily net assets, payable quarterly, as a servicing fee.
(c) the section "The Class I and Class II Plans" is renamed "The Class A, B and
C Plans."
IV. The following information is added to the applicable sections under "How
Does the Fund Measure Performance?":
TOTAL RETURN
The average annual total return for Class A for the one-, five- and ten-year
periods ended September 30, 1998, was 4.08%, 5.33% and 7.40%, respectively. The
average annual total return for Class C for the one-year period ended September
30, 1998, and for the period from inception (May 1, 1995) through September 30,
1998, was 6.15% and 7.19%, respectively.
The cumulative total return for Class A for the one-, five- and ten-year periods
ended September 30, 1998, was 4.08%, 29.65% and 104.14%, respectively. The
cumulative total return for Class C for the one-year period ended September 30,
1998, and for the period from inception (May 1, 1995) through September 30,
1998, was 6.15% and 26.79%, respectively.
YIELD
The yield for the 30-day period ended September 30, 1998, was 4.24% for Class A
and 3.81% for Class C.
The taxable-equivalent yield for the 30-day period ended September 30, 1998, was
7.74% for Class A and 6.95% for Class C.
CURRENT DISTRIBUTION RATE
The current distribution rate for the 30-day period ended September 30, 1998,
was 5.07% for Class A and 4.71% for Class C.
The taxable-equivalent distribution rate for the 30-day period ended September
30, 1998, was 9.25% for Class A and 8.60% for Class C.
V. The following paragraph is added under "Miscellaneous Information":
The Information Services & Technology division of Resources established a Year
2000 Project Team in 1996. This team has already begun making necessary software
changes to help the computer systems that service the fund and its shareholders
to be Year 2000 compliant. After completing these modifications, comprehensive
tests have been planned to verify their effectiveness. Resources continues to
seek reasonable assurances from all major hardware, software or data-services
suppliers that they will be Year 2000 compliant on a timely basis. Resources is
also in the process of developing contingency plans for Year 2000 failures. In
an operation as complex and geographically distributed as Resources' business,
however, this means identifying only those mission critical systems for which it
is practical to develop a contingency plan.
VI. The following is added to the section "Financial Statements":
The unaudited financial statements contained in the Semiannual Report to
Shareholders of the fund, for the six-month period ended September 30, 1998, are
incorporated herein by reference.
VII. In the "Useful Terms and Definitions" section, the definitions of "Class I
and Class II" and "Offering Price" are replaced with the following:
CLASS A, CLASS B AND CLASS C - The fund offers three classes of shares,
designated "Class A," "Class B" and "Class C." The three classes have
proportionate interests in the fund's portfolio. They differ, however, primarily
in their sales charge structures and Rule 12b-1 fees.
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 4.25% for Class A and 1% for Class C. There is no
front-end sales charge for Class B. We calculate the offering price to two
decimal places using standard rounding criteria.
Please keep this supplement for future reference.
The Registrant's prospectus and statement of additional information as filed
with the Securities and Exchange Commission ("SEC") under 497(c) on August 5,
1998, (File Nos. 2-60470 and 811-1790) are hereby incorporated by reference.
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
FILE NOS. 2-60470
811-2790
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24 FINANCIAL STATEMENTS AND EXHIBITS
(a) (1) Financial Statements incorporated herein by reference
to the Registrant's Annual Report to Shareholders dated
March 31, 1998 as filed with the SEC electronically on Form
Type N-30D on May 14, 1998
(i) Financial Highlights
(ii) Statement of Investments - March 31, 1998
(iii) Statement of Assets and Liabilities - March 31, 1998
(iv) Statement of Operations - for the year ended March 31, 1998
(v) Statements of Changes in Net Assets - for the years ended
March 31, 1998 and 1997
(vi) Notes to Financial Statements
(vii) Independent Auditors' Report
(2) Unaudited Financial Statements incorporated herein by
reference to Registrant's Semi-Annual Report to
Shareholders dated September 30, 1998, to be filed by
amendment
(b) The following exhibits are incorporated herein by reference,
except exhibits 6(ii), 8(iv), 11(i) and 18(i) which are attached
herewith.
(1) copies of the charter as now in effect;
(i) Articles of Incorporation dated November 23, 1977
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(ii) Articles of Amendment dated July 16, 1982
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(iii) Articles of Amendment dated August 7, 1986
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(iv) Articles of Amendment to Articles of Incorporation dated
March 21, 1995
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(2) copies of the existing By-Laws or instruments corresponding
thereto;
(i) By-Laws
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(ii) Amendment to By-Laws dated April 25, 1988
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: July 19, 1996
(3) copies of any voting trust agreement with respect to more than 5
percent of any class of equity securities of the Registrant;
Not Applicable
(4) copies of all instruments defining the rights of the holders of
the securities being registered including, where applicable, the
relevant portion of the articles of incorporation or by-laws of
the Registrant;
Not Applicable
(5) copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(i) Management Agreement between Registrant and Franklin
Advisers, Inc. dated May 1, 1994
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(6) copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(i) Amended and Restated Distribution Agreement between
Registrant and Franklin/Templeton Distributors, Inc. dated
March 30, 1995
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(ii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc. and Securities Dealers
(7) copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Registrant in their capacity as
such; any such plan that is not set forth in a formal document,
furnish a reasonably detailed description thereof;
Not Applicable
(8) copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act, with respect to securities and
similar investments of the Registrant, including the schedule of
remuneration;
(i) Master Custody Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: July 19, 1996
(ii) Terminal Link Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: July 19, 1996
(iii) Amendment dated May 7, 1997 to Master Custody Agreement
between the Registrant and Bank of New York dated February
16, 1996
Filing: Post-Effective Amendment No. 23 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: May 21, 1998
(iv) Amendment dated February 27, 1998, to Exhibit A of the
Master Custody Agreement between Registrant and Bank of New
York dated February 16, 1996
(9) copies of all other material contracts not made in the ordinary
course of business which are to be performed in whole or in part
at or after the date of filing the Registration Statement;
(i) Subcontract for Fund Administrative Services dated October
1, 1996 and Amendment thereto dated March 11, 1998 between
Franklin Advisers, Inc. and Franklin Templeton Services,
Inc.
Registrant: Franklin Tax-Free Trust
Filing: Post-Effective Amendment No. 25 to Registration
Statement on Form N-1A
File No. 2-94222
Filing date: April 29, 1998
(10) an opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid and nonassessable;
(i) Opinion and Consent of Counsel dated May 15, 1998
Filing: Post-Effective Amendment No. 23 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: May 21, 1998
(11) copies of any other opinions, appraisals or rulings and consents
to the use thereof relied on in the preparation of this
registration statement and required by Section 7 of the 1933 act.
(i) Consent of Independent Auditors
(12) all financial statements omitted from Item 23;
Not Applicable
(13) copies of any agreements or understandings made in consideration
for providing the initial capital between or among the
Registrant, the underwriter, adviser, promoter or initial
stockholders and written assurances from promoters or initial
stockholders that their purchases were made for investment
purposes without any present intention of redeeming or reselling;
(i) Letter of Understanding for Class II shares dated April 12,
1995
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(14) copies of the model plan used in the establishment of any
retirement plan in conjunction with which Registrant offers its
securities, any instructions thereto and any other documents
making up the model plan. Such form(s) should disclose the costs
and fees charged in connection therewith;
Not Applicable
(15) copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act, which describes all material aspects of
the financing of distribution of Registrant's shares, and any
agreements with any person relating to implementation of such
plan.
(i) Distribution Plan pursuant to Rule 12b-1 dated May 1, 1994
between Franklin California Tax-Free Income Fund and
Franklin/Templeton Distributors, Inc.
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(ii) Distribution Plan pursuant to Rule 12b-1 between
Franklin/Templeton Distributors, Inc. and the Registrant on
behalf of Franklin California Tax-Free Income Fund - Class
II, dated March 30, 1995
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: June 1, 1995
(16) Schedule for computation of each performance quotation provided
in the registration statement in response to Item 22 (which need
not be audited)
Not Applicable
(17) Powers of Attorney
(i) Power of Attorney dated March 19, 1998
Filing: Post-Effective Amendment No. 23 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: May 21, 1998
(ii) Certificate of Secretary dated March 19, 1998
Filing: Post-Effective Amendment No. 23 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: May 21, 1998
(18) Copies of any plan entered into by Registrant pursuant to Rule
18f-3 under the 1940 Act
(i) Multiple Class Plan dated October 19, 1995
(27) Financial Data Schedule
Not Applicable
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26 NUMBER OF HOLDERS OF SECURITIES
Not Applicable
ITEM 27 INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
a) Franklin Advisers, Inc.
The officers and Directors of the Registrant's manager also serve as officers
and/or directors for (1) the manager's corporate parent, Franklin Resources,
Inc., and/or (2) other investment companies in the Franklin Templeton Group of
Funds. In addition, Mr. Charles B. Johnson was formerly a director of General
Host Corporation.
For additional information please see Part B and Schedules A and D of Form ADV
of the Fund's Investment Manager (SEC File 801-26292), incorporated herein by
reference, which sets forth the officers and directors of the investment manager
and information as to any business, profession, vocation or employment of a
substantial nature engaged in by those officers and directors during the past
two years.
ITEM 29 PRINCIPAL UNDERWRITERS
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of:
Franklin Asset Allocation Fund
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Floating Rate Trust
Franklin Gold Fund
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Mutual Series Fund Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Variable Products Series Fund
b) The information required by this Item 29 with respect to each director
and officer of Distributors is incorporated by reference to Part B of this
N-1A and Schedule A of Form BD filed by Distributors with the Securities and
Exchange Commission pursuant to the Securities Act of 1934 (SEC File No.
8-5889):
c) Not Applicable. Registrant's principal underwriter is an affiliated
person of an affiliated person of the Registrant.
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS
The accounts, books or other documents required to be maintained by Section 31
(a) of the Investment Company Act of 1940 are kept by the Fund or its
shareholder services agent, Franklin/Templeton Investor Services, Inc., both of
whose address is 777 Mariners Island Blvd., San Mateo, CA 94404.
ITEM 31 MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Part A or
Part B.
ITEM 32 UNDERTAKINGS
The Registrant hereby undertakes to comply with the information requirements in
Item 5A of the Form N-1A by including the required information in the Fund's
annual report and to furnish each person to whom a prospectus is delivered a
copy of the annual report upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of San Mateo and the State of California, on the 30th day of October, 1998
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
(Registrant)
By: CHARLES B. JOHNSON*
--------------------
Charles B. Johnson
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
CHARLES B. JOHNSON* Director and Principal
Charles B. Johnson Executive Officer
Dated: October 30, 1998
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: October 30, 1998
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: October 30, 1998
HARRIS J. ASHTON* Director
Harris J. Ashton Dated: October 30, 1998
S. JOSEPH FORTUNATO* Director
S. Joseph Fortunato Dated: October 30, 1998
EDITH E. HOLIDAY* Director
Edith E. Holiday Dated: October 30, 1998
RUPERT H. JOHNSON, JR.* Director
Rupert H. Johnson, Jr. Dated: October 30, 1998
GORDON S. MACKLIN* Director
Gordon S. Macklin Dated: October 30, 1998
*By /s/ Larry L. Greene
Attorney-in-Fact
(Pursuant to Power of Attorney previously filed)
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
REGISTRATION STATEMENT
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Articles of Incorporation dated November *
23, 1977
EX-99.B1(ii) Articles of Amendment dated July 16, 1982 *
EX-99.B1(iii) Articles of Amendment dated August 7, 1986 *
EX-99.B1(iv) Articles of Amendment to Articles of *
Incorporation dated March 21, 1995
EX-99.B2(i) By-Laws *
EX-99.B2(ii) Amendment to By-Laws dated April 25, 1988 *
EX-99.B5(i) Management Agreement between Registrant *
and Franklin Advisers, Inc. dated May 1,
1994
EX-99.B6(i) Amended and Restated Distribution *
Agreement between Registrant and
Franklin/Templeton Distribution, Inc.
dated March 30, 1995
EX-99.B6(ii) Forms of Dealer Agreements between Attached
Franklin/Templeton Distributors, Inc.
and Securities Dealers
EX-99.B8(i) Master Custody Agreement between *
Registrant and Bank of New York dated
February 16, 1996
EX-99.B8(ii) Terminal Link Agreement between Registrant *
and Bank of New York dated February 16,
1996
EX-99.B8(iii) Amendment dated May 7, 1997 to Master *
Custody Agreement between the Registrant
and Bank of New York dated February 16,
1996
EX-99.B8(iv) Amendment dated February 27, 1998, to Attached
Exhibit A of the Master Custody Agreement
between Registrant and Bank of New York
dated February 16, 1996
EX-99.B9(i) Subcontract for Fund Administrative *
Services dated October 1, 1996 and
Amendment thereto dated March 11, 1998
between Franklin Advisers, Inc. and
Franklin Templeton Services, Inc.
EX-99.B10(i) Opinion and Consent of Counsel dated May *
15, 1998
EX-99.B11(i) Consent of Independent Auditors Attached
EX-99.B13(i) Letter of Understanding for Class II *
shares dated April 12, 1995
EX-99.B15(i) Distribution Plan pursuant to 12b-1 Rule *
dated May 1, 1994 between Franklin
California Tax-Free Income Fund, Inc. and
Franklin/Templeton Distributors, Inc.
EX-99.B15(ii) Distribution Plan pursuant to Rule 12b-1 *
between Franklin/Templeton Distributors,
Inc. and the Registrant on behalf of
Franklin California Tax-Free Income Fund -
Class II dated March 30, 1995
EX-99.B17(i) Power of Attorney dated March 19, 1998 *
EX-99.B17(ii) Certificate of Secretary dated March 19, *
1998
EX-99.B18(i) Multiple Class Plan dated October 19, 1995 Attached
* Incorporated by Reference
DEALER AGREEMENT
Effective: March 1, 1998
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to
participate in the distribution of shares of the Franklin Templeton
investment companies (the "Funds") for which we now or in the future serve as
principal underwriter, subject to the terms of this Agreement. We will notify
you from time to time of the Funds which are eligible for distribution and
the terms of compensation under this Agreement. This Agreement supersedes any
prior dealer agreements between us, as stated in Section 18, below.
1. LICENSING.
(a) You represent that you are (i) a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and are presently
licensed to the extent necessary by the appropriate regulatory agency of each
jurisdiction in which you will offer and sell shares of the Funds, or (ii) a
broker, dealer or other company licensed, registered or otherwise qualified to
effect transactions in securities in a country (a "foreign country") other than
the United States of America (the "U.S.") where you will offer or sell shares of
the Funds. You agree that termination or suspension of such membership with the
NASD, or of your license to do business by any regulatory agency having
jurisdiction, at any time shall terminate or suspend this Agreement forthwith
and shall require you to notify us in writing of such action. If you are not a
member of the NASD but are a broker, dealer or other company subject to the laws
of a foreign country, you agree to conform to the Conduct Rules of the NASD.
This Agreement is in all respects subject to the Conduct Rules of the NASD,
particularly Conduct Rule 2830 of the NASD, which shall control any provision to
the contrary in this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection Corporation
("SIPC").
2. SALES OF FUND SHARES. You may offer and sell shares of each Fund and class of
each Fund only at the public offering price which shall be applicable to, and in
effect at the time of, each transaction. The procedures relating to all orders
and the handling of them shall be subject to the terms of the applicable then
current prospectus and statement of additional information (hereafter, the
"prospectus") and new account application, including amendments, for each such
Fund and each class of such Fund, and our written instructions from time to
time. This Agreement is not exclusive, and either party may enter into similar
agreements with third parties.
3. DUTIES OF DEALER: You agree:
(a) To act as principal, or as agent on behalf of your customers, in all
transactions in shares of the Funds except as provided in Section 4 hereof. You
shall not have any authority to act as agent for the issuer (the Funds), for the
Principal Underwriter, or for any other dealer in any respect, nor will you
represent to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already received
from your customers or for your own bona fide investment.
(d) To maintain records of all sales, redemptions and repurchases of shares
made through you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in compliance
with applicable legal requirements, except to the extent that we expressly
undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so as
to profit yourself as a result of such withholding or place orders for shares in
amounts just below the point at which sales charges are reduced so as to benefit
from a higher sales charge applicable to an amount below the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such confirmation
of your original order, you shall forthwith refund to us the full concession,
allowed to you on such orders, including any payments we made to you from our
own resources as provided in Section 6(b) hereof with respect to such orders. We
shall forthwith pay to the appropriate Fund the share, if any, of the sales
charge we retained on such order and shall also pay to such Fund the refund of
the concession we receive from you as herein provided (other than the portion of
such concession we paid to you from our own resources as provided in Section
6(b) hereof). We shall notify you of such repurchase or redemption within a
reasonable time after settlement. Termination or suspension of this Agreement
shall not relieve you or us from the requirements of this subsection.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may be
canceled without notice or demand and without any responsibility or liability on
our part or on the part of the Funds, or at our option, we may sell the shares
which you ordered back to the Funds, in which latter case we may hold you
responsible for any loss to the Funds or loss of profit suffered by us resulting
from your failure to make payment as aforesaid. We shall have no liability for
any check or other item returned unpaid to you after you have paid us on behalf
of a purchaser. We may refuse to liquidate the investment unless we receive the
purchaser's signed authorization for the liquidation.
(i) That you shall assume responsibility for any loss to the Funds caused
by a correction made subsequent to trade date, provided such correction was not
based on any error, omission or negligence on our part, and that you will
immediately pay such loss to the Funds upon notification.
(j) That if on a redemption which you have ordered, instructions in proper
form, including outstanding certificates, are not received within the time
customary or the time required by law, the redemption may be canceled forthwith
without any responsibility or liability on our part or on the part of any Fund,
or at our option, we may buy the shares redeemed on behalf of the Fund, in which
latter case we may hold you responsible for any loss to the Fund or loss of
profit suffered by us resulting from your failure to settle the redemption.
(k) To obtain from your customers all consents required by applicable
privacy laws to permit us, any of our affiliates or the Funds to provide you
either directly or through a service established for that purpose with
confirmations, account statements and other information about your customers'
investments in the Funds.
4. DUTIES OF DEALER: RETIREMENT ACCOUNTS. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan and enrollment in
the plan. You agree to indemnify us and Franklin Templeton Trust Company and/or
Templeton Funds Trust Company as applicable for any claim, loss, or liability
resulting from incorrect investment instructions received from you which cause a
tax liability or other tax penalty.
5. CONDITIONAL ORDERS; CERTIFICATES. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates or confirmations
for shares purchased shall be made by the Funds only against constructive
receipt of the purchase price, subject to deduction for your concession and our
portion of the sales charge, if any, on such sale. No certificates for shares of
the Funds will be issued unless specifically requested.
6. DEALER COMPENSATION.
(a) On each purchase of shares by you from us, the total sales charges and
your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable laws. Such sales charges and
dealer concessions are subject to reductions under a variety of circumstances as
described in the Funds' prospectuses. For an investor to obtain these
reductions, we must be notified at the time of the sale that the sale qualifies
for the reduced charge. If you fail to notify us of the applicability of a
reduction in the sales charge at the time the trade is placed, neither we nor
any of the Funds will be liable for amounts necessary to reimburse any investor
for the reduction which should have been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates may,
but are not obligated to, make payments to you from our own resources as
compensation for certain sales which are made at net asset value ("Qualifying
Sales"). If you notify us of a Qualifying Sale, we may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any of
the shares purchased in a Qualifying Sale are repurchased or redeemed within
twelve months of the month of purchase, we shall be entitled to recover any
advance payment attributable to the repurchased or redeemed shares by reducing
any account payable or other monetary obligation we may owe to you or by making
demand upon you for repayment in cash. We reserve the right to withhold advances
to you, if for any reason we believe that we may not be able to recover unearned
advances from you. Termination or suspension of this Agreement shall not relieve
you or us from the requirements of this subsection.
7. REDEMPTIONS OR REPURCHASES. Redemptions or repurchases of shares of the Funds
will be made at the net asset value of such shares, less any applicable deferred
sales or redemption charges, in accordance with the applicable prospectuses.
Except as permitted by applicable law, you agree not to purchase any shares from
your customers at a price lower than the net asset value of such shares next
computed by the Funds after the purchase (the "Redemption/Repurchase Price").
You shall, however, be permitted to sell shares of the Funds for the account of
the record owner to the Funds at the Redemption/Repurchase Price for such
shares.
8. EXCHANGES. Telephone exchange orders will be effective only for
uncertificated shares or for which share certificates have been previously
deposited and may be subject to any fees or other restrictions set forth in the
applicable prospectuses. Exchanges from a Fund sold with no sales charge to a
Fund which carries a sales charge, and exchanges from a Fund sold with a sales
charge to a Fund which carries a higher sales charge may be subject to a sales
charge in accordance with the terms of the applicable Fund's prospectus. You
will be obligated to comply with any additional exchange policies described in
the applicable Fund's prospectus, including without limitation any policy
restricting or prohibiting "Timing Accounts" as therein defined.
9. TRANSACTION PROCESSING. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares of the Funds or withdraw the
offering of shares of the Funds entirely. Orders will be effected at the
price(s) next computed on the day they are received if, as set forth in the
applicable Fund's current prospectus, the orders are received by us, an agent
appointed by us or the Funds prior to the time the price of the Fund's shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. Dollars. Orders payable by check must be drawn payable in U.S. Dollars on a
U.S. bank, for the full amount of the investment.
10. MULTIPLE CLASSES. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares (each, a "Class") with different sales charges and
distribution related operating expenses. In addition, you will be bound by any
applicable rules or regulations of government agencies or self-regulatory
organizations generally affecting the sale or distribution of shares of
investment companies offering multiple classes of shares.
11. RULE 12B-1 PLANS. You are invited to participate in all distribution plans
(each, a "Plan") adopted for a Class of a Fund or for a Fund that has only a
single Class (each, a "Plan Class") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
To the extent you provide administrative and other services, including, but
not limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Class, answering routine inquiries regarding
a Fund or Class, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, we shall pay you
a Rule 12b-1 servicing fee. To the extent that you participate in the
distribution of Fund shares that are eligible for a Rule 12b-1 distribution fee,
we shall also pay you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing
and distribution fees shall be based on the value of shares attributable to
customers of your firm and eligible for such payment, and shall be calculated on
the basis and at the rates set forth in the compensation schedule then in effect
for the applicable Plan (the "Schedule"). Without prior approval by a majority
of the outstanding shares of a particular Class of a Fund which has a Plan, the
aggregate annual fees paid to you pursuant to such Plan shall not exceed the
amounts stated as the "annual maximums" in such Plan Class' prospectus, which
amount shall be a specified percent of the value of such Plan Class' net assets
held in your customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as such Plan Class uses to compute its
net assets as set forth in its effective prospectus).
You shall furnish us and each Fund that has a Plan Class (each, a "Plan
Fund") with such information as shall reasonably be requested by the Board of
Directors, Trustees or Managing General Partners (hereinafter referred to as
"Directors") of such Plan Fund with respect to the fees paid to you pursuant to
the Schedule of such Plan Fund. We shall furnish to the Boards of Directors of
the Plan Funds, for their review on a quarterly basis, a written report of the
amounts expended under the Plans and the purposes for which such expenditures
were made.
Each Plan and the provisions of any agreement relating to such Plan must be
approved annually by a vote of the Directors of the Fund that has such Plan,
including such persons who are not interested persons of such Plan Fund and who
have no financial interest in such Plan or any related agreement ("Rule 12b-1
Directors"). Each Plan or the provisions of this Agreement relating to such Plan
may be terminated at any time by the vote of a majority of the Rule 12b-1
Directors, or by a vote of a majority of the outstanding shares of the Class
that has such Plan, on sixty (60) days' written notice, without payment of any
penalty. A Plan or the provisions of this Agreement may also be terminated by
any act that terminates the Underwriting Agreement between us and the Fund that
has such Plan, and/or the management or administration agreement between
Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and such Plan Fund. In the event of the termination of a Plan for any
reason, the provisions of this Agreement relating to such Plan will also
terminate.
Continuation of a Plan and provisions of this Agreement relating to such
Plan are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, a Plan Fund is permitted to implement or continue a Plan or the
provisions of this Agreement relating to such Plan from year-to-year only if,
based on certain legal considerations, the Board of Directors of such Plan Fund
is able to conclude that such Plan will benefit the Plan Class. Absent such
yearly determination, such Plan and the provisions of this Agreement relating to
such Plan must be terminated as set forth above. In addition, any obligation
assumed by a Fund pursuant to this Agreement shall be limited in all cases to
the assets of such Fund and no person shall seek satisfaction thereof from
shareholders of a Fund. You agree to waive payment of any amounts payable to you
by us under a Fund's Plan until such time as we are in receipt of such fee from
the Fund.
The provisions of the Plans between the Plan Funds and us shall control
over the provisions of this Agreement in the event of any inconsistency.
12. REGISTRATION OF SHARES. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently noticed,
registered or qualified for offer or sale to the public. We shall have no
obligation to make notice filings of, register or qualify, or to maintain notice
filings of, registration of or qualification of, Fund shares in any state or
other jurisdiction. We shall have no responsibility, under the laws regulating
the sale of securities in any U.S. or foreign jurisdiction, for the
registration, qualification or licensed status of persons offering or selling
Fund shares or for the manner of offering or sale of Fund shares. If it is
necessary to file notice of, register or qualify Fund shares in any foreign
jurisdictions in which you intend to offer the shares of any Funds, it will be
your responsibility to arrange for and to pay the costs of such notice filing,
registration or qualification; prior to any such notice filing, registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such notice
filing, registration or qualification without the written consent of the
applicable Funds and of ourselves. Except as stated in this section, we shall
not, in any event, be liable or responsible for the issue, form, validity,
enforceability and value of such shares or for any matter in connection
therewith, and no obligation not expressly assumed by us in this Agreement shall
be implied. Nothing in this Agreement shall be deemed to be a condition,
stipulation or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act, the rules and regulations of the U.S. Securities and Exchange
Commission, or any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country having jurisdiction over the
offer or sale of shares of the Funds, or to relieve the parties hereto from any
liability arising under such laws, rules and regulations.
13. CONTINUOUSLY OFFERED CLOSED-END FUNDS. This Section 13 relates solely to
shares of Funds that represent a beneficial interest in the Franklin Floating
Rate Trust and shares issued by any other continuously offered closed-end
investment company registered under the 1940 Act for which we or an affiliate of
ours serve as principal underwriter and that periodically repurchases its shares
(each, a "Trust"). Shares of a Trust that are offered to the public will be
registered under the 1933 Act, and are expected to be offered during an offering
period that may continue indefinitely ("Continuous Offering Period"). There is
no guarantee that such a continuous offering will be maintained by a Trust. The
Continuous Offering Period, shares of a Trust and certain of the terms on which
such shares are offered shall be as described in the prospectus of the Trust.
As set forth in a Trust's then current prospectus, we may, but are not
obligated to, provide you with appropriate compensation for selling shares of
the Trust. In addition, you may be entitled to a fee for servicing your clients
who are shareholders in a Trust, subject to applicable law and NASD Conduct
Rules. You agree that any repurchases of shares of a Trust that were originally
purchased as Qualifying Sales shall be subject to Subsection 6(b) hereof.
You expressly acknowledge and understand that, notwithstanding anything to
the contrary in this Agreement:
(a) No Trust has a Rule 12b-1 Plan and in no event will a Trust pay, or
have any obligation to pay, any compensation directly or indirectly to
you.
(b) Shares of a Trust will not be repurchased by either the Trust (other
than through repurchase offers by the Trust from time to time, if any)
or by us and no secondary market for such shares exists currently, or
is expected to develop. Any representation as to a repurchase or
tender offer by a Trust, other than that set forth in the Trust's then
current prospectus, notification letters, reports or other related
material provided by the Trust, is expressly prohibited.
(c) An early withdrawal charge payable by shareholders of a Trust to us
may be imposed on shares accepted for repurchase by the Trust that
have been held for less than a stated period, as set forth in the
Trust's then current Prospectus.
(d) In the event your customer cancels his or her order for shares of a
Trust after confirmation, such shares will not be repurchased,
remarketed or otherwise disposed of by or though us.
14. FUND INFORMATION. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's then current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply reasonable quantities of
prospectuses, supplemental sales literature, sales bulletins, and additional
information as issued by the Fund or us. You agree not to use other advertising
or sales material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by us in
advance of such use. Such approval may be withdrawn by us in whole or in part
upon notice to you, and you shall, upon receipt of such notice, immediately
discontinue the use of such sales literature, sales material and advertising.
You are not authorized to modify or translate any such materials without our
prior written consent.
15. INDEMNIFICATION. You agree to indemnify, defend and hold harmless us, the
Funds, and the respective officers, directors and employees of the Funds and us
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the U.S. or any state or foreign country) or
any alleged tort or breach of contract, in or related to the offer or sale by
you of shares of the Funds pursuant to this Agreement (except to the extent that
our negligence or failure to follow correct instructions received from you is
the cause of such loss, claim, liability or expense), (2) any redemption or
exchange pursuant to telephone instructions received from you or your agents or
employees, or (3) the breach by you of any of the terms and conditions of this
Agreement. This Section 15 shall survive the termination of this Agreement.
16. TERMINATION; SUCCESSION; ASSIGNMENT; AMENDMENT. Each party to this Agreement
may terminate its participation in this Agreement by giving written notice to
the other parties. Such notice shall be deemed to have been given and to be
effective on the date on which it was either delivered personally to the other
parties or any officer or member thereof, or was mailed postpaid or delivered by
electronic transmission to the other parties' chief legal officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will be effective only upon written
notification by us to you. This Agreement will terminate automatically in the
event of its assignment by us. For purposes of the preceding sentence, the word
"assignment" shall have the meaning given to it in the 1940 Act. This Agreement
may not be assigned by you without our prior written consent. This Agreement may
be amended by us at any time by written notice to you and your placing of an
order or acceptance of payments of any kind after the effective date and receipt
of notice of any such Amendment shall constitute your acceptance of such
Amendment.
17. SETOFF; DISPUTE RESOLUTION. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed to us or the
Funds from any other account you have with us, without notice or demand to you.
In the event of a dispute concerning any provision of this Agreement, either
party may require the dispute to be submitted to binding arbitration under the
commercial arbitration rules of the NASD or the American Arbitration
Association. Judgment upon any arbitration award may be entered by any court
having jurisdiction. This Agreement shall be construed in accordance with the
laws of the State of California, not including any provision that would require
the general application of the law of another jurisdiction.
18. ACCEPTANCE; CUMULATIVE EFFECT. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after your receipt
of this Agreement, as it may be amended pursuant to Section 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By /s/ Greg Johnson
------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
415/312-2000
700 Central Avenue
St. Petersburg, Florida 33701-3628
813/823-8712
- --------------------------------------------------------------------------------
Dealer: If you have NOT previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.
__________________________________
DEALER NAME:
By _______________________________
(Signature)
Name:_____________________________
Title: ___________________________
Address: ______________________________
_______________________________________
_______________________________________
Telephone: _______________________
NASD CRD # _______________________
- --------------------------------------------------------------------------------
Franklin Templeton Dealer # ______________________
(Internal Use Only)
- --------------------------------------------------------------------------------
Version 12/31/97
232567.4
Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94403-7777
May 15, 1998
Re: Amendment of Dealer Agreement - Notice Pursuant to Section 16
Dear Securities Dealer:
This letter constitutes notice of amendment of the current Dealer Agreement (the
"Agreement") between Franklin/Templeton Distributors, Inc. ("we" or "us") and
you pursuant to Section 16 of the Agreement. The Agreement is hereby amended as
follows:
1. Defined terms in this amendment have the meanings as stated in the
Agreement unless otherwise indicated.
2. Section 6 is modified to add a subsection 6(c), as follows:
(c) The following limitations apply with respect to shares of each Trust as
described in Section 13 of this Agreement.
(1) Consistent with the NASD Conduct Rules, the total compensation to
be paid to us and selected dealers and their affiliates, including you and your
affiliates, in connection with the distribution of shares of a Trust will not
exceed the underwriting compensation limitation prescribed by NASD Conduct Rule
2710. The total underwriting compensation to be paid to us and selected dealers
and their affiliates, including you and your affiliates, may include: (i) at the
time of purchase of shares a payment to you or another securities dealer of 1%
of the dollar amount of the purchased shares by the Distributor; and (ii) a
quarterly payment at an annual rate of .50% to you or another securities dealer
based on the value of such remaining shares sold by you or such securities
dealer, if after twelve (12) months from the date of purchase, the shares sold
by you or such securities dealer remain outstanding.
(2) The maximum compensation shall be no more than as disclosed in the
section "Payments to Dealers" of the prospectus of the applicable Trust.
Pursuant to Section 16 of the Agreement, your placement of an order or
acceptance of payments of any kind after the effective date and receipt of
notice of this amendment shall constitute your acceptance of this amendment.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By /s/ Greg Johnson
--------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
650/312-2000
100 Fountain Parkway
St. Petersburg, FL 33716
813/299-8712
MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
EFFECTIVE: APRIL 1, 1998
1. INTRODUCTION
The parties to this Agreement are the undersigned bank or trust company
("Bank") and Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets
forth the terms and conditions under which FTDI will execute purchases and
redemptions of shares of the Franklin or Templeton investment companies or
series of such investment companies for which FTDI now or in the future serves
as principal underwriter (each, a "Fund"), at the request of the Bank upon the
order and for the account of Bank's customers ("Customers"). In this Agreement,
"Customer" shall include the beneficial owners of an account and any agent or
attorney-in-fact duly authorized or appointed to act on the owners' behalf with
respect to the account; and "redemptions" shall include redemptions of shares of
Funds that are open-end management investment companies and repurchases of
shares of Funds that are closed-end investment companies by the Fund that is the
issuer of such shares. FTDI will notify Bank from time to time of the Funds
which are eligible for distribution and the terms of compensation under this
Agreement. This Agreement is not exclusive, and either party may enter into
similar agreements with third parties.
2. REPRESENTATIONS AND WARRANTIES OF BANK
Bank warrants and represents to FTDI and the Funds that:
a) Bank is a "bank" as defined in section 3(a)(6) of the Securities
Exchange Act of 1934, as amended (the "1934 Act");
b) Bank is authorized to enter into this Agreement as agent for the
Customers, and Bank's performance of its obligations and receipt of
consideration under this Agreement will not violate any law,
regulation, charter, agreement, or regulatory restriction to which
Bank is subject; and
c) Bank has received all regulatory agency approvals and taken all legal
and other steps necessary for offering the services Bank will provide
to Customers and receiving any applicable compensation in connection
with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER
FTDI warrants and represents to Bank that:
a) FTDI is a broker/dealer registered under the 1934 Act; and
b) FTDI is the principal underwriter of the Funds.
4. COVENANTS OF BANK
a) For each purchase or redemption transaction under this Agreement
(each, a "Transaction"), Bank will:
1) be authorized to engage in the Transaction;
2) act as agent for the Customer, unless Bank is the Customer;
3) act solely at the request of and for the account of the Customer,
unless Bank is the Customer;
4) not submit an order unless Bank has already received the order
from the Customer, unless Bank is the Customer;
5) not offer to sell shares of Fund(s) or submit a purchase order
unless Bank has already delivered to the Customer a copy of the
then current prospectuses for the Fund(s) whose shares are
offered or are to be purchased;
6) not withhold placing any Customer's order for the purpose of
profiting from the delay or place orders for shares in amounts
just below the point at which sales charges are reduced so as to
benefit from a higher Fee (as defined in Paragraph 5(e) below)
applicable to a Transaction in an amount below the breakpoint;
7) have no beneficial ownership of the securities in any purchase
Transaction (the Customer will have the full beneficial
ownership), unless Bank is the Customer (in which case, Bank will
not engage in the Transaction unless the Transaction is legally
permissible for Bank);
8) not accept or withhold any Fee (as defined in Paragraph 5(e) of
this Agreement) otherwise allowed under Paragraphs 5(d) and (e)
of this Agreement, if prohibited by the Employee Retirement
Income Security Act of 1974, as amended, or trust or similar laws
to which Bank is subject, in the case of Transactions of Fund
shares involving retirement plans, trusts, or similar accounts;
9) maintain records of all Transactions of Fund shares made through
Bank and furnish FTDI with copies of such records on request; and
10) distribute prospectuses, statements of additional information and
reports to Customers in compliance with applicable legal
requirements, except to the extent that FTDI expressly undertakes
to do so on behalf of Bank.
b) While this Agreement is in effect, Bank will:
1) not purchase any Fund shares from any person at a price lower
than the redemption or repurchase price as applicable next
determined by the applicable Fund;
2) repay FTDI the full Fee received by Bank under Paragraphs 5(d)
and (e) of this Agreement, and any payments FTDI or its
affiliates made to Bank from their own resources under Paragraph
5(e) of this Agreement ("FTDI Payments"), for any Fund shares
purchased under this Agreement which are redeemed or repurchased
by the Fund within 7 business days after the purchase; in turn,
FTDI shall pay to the Fund the amount repaid by Bank (other than
any portion of such repayment that is a repayment of FTDI
Payments) and will notify Bank of any such redemption within a
reasonable time (termination or suspension of this Agreement
shall not relieve Bank or FTDI from the requirements of this
subparagraph);
3) in connection with orders for the purchase of Fund shares on
behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone,
or wire, act as agent for the custodian or trustee of such plans
(solely with respect to the time of receipt of the application
and payments) and shall not place such an order until Bank has
received from its Customer payment for such purchase and, if such
purchase represents the first contribution to such a plan, the
completed documents necessary to establish the plan and
enrollment in the plan (Bank agrees to indemnify FTDI and
Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting
from incorrect investment instructions received from Bank which
cause a tax liability or other tax penalty);
4) be responsible for compliance with all laws and regulations,
including those of the applicable federal and state bank and
securities regulatory authorities, with regard to Bank and Bank's
Customers; and
5) obtain from its Customers any consents required by applicable
federal and/or state privacy laws to permit FTDI, any of its
affiliates or the Funds to provide Bank with confirmations,
account statements and other information about Customers'
investments in the Funds.
5. TERMS AND CONDITIONS FOR TRANSACTIONS
a) Price
Purchase orders for Fund shares received from Bank will be accepted only at
the public offering price and in compliance with procedures applicable to each
purchase order as set forth in the then current prospectus and statement of
additional information (hereinafter, collectively, "prospectus") for the
applicable Fund. All purchase orders must be accompanied by payment in U.S.
Dollars. Orders payable by check must be drawn payable in U.S. Dollars on a U.S.
bank, for the full amount of the investment. All sales are made subject to
receipt of shares by FTDI from the Funds. FTDI reserves the right in its
discretion, without notice, to suspend the sale of shares or withdraw the
offering of shares entirely.
b) Orders and Confirmations
All orders are subject to acceptance or rejection by FTDI and by the Fund
or its transfer agent at their sole discretion, and become effective only upon
confirmation by FTDI. Transaction orders shall be made using the procedures and
forms required by FTDI from time to time. Orders received by FTDI or an agent
appointed by FTDI or the Funds on any business day after the time for
calculating the price of Fund shares as set forth in each Fund's current
prospectus will be effected at the price determined on the next business day. No
order will be accepted unless Bank or the Customer shall have provided FTDI with
the Customer's full name, address and other information normally required by
FTDI to open a customer account, and FTDI shall be entitled to rely on the
accuracy of the information provided by Bank. A written confirming statement
will be sent to Bank and to Customer upon settlement of each Transaction.
c) Multiple Class Guidelines
FTDI may from time to time provide to Bank written compliance guidelines or
standards relating to the sale or distribution of Funds offering multiple
classes of shares (each, a "Class") with different sales charges and
distribution-related operating expenses. Bank will comply with FTDI's written
compliance guidelines and standards, as well as with any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of investment companies offering multiple
classes of shares, whether or not Bank deems itself otherwise subject to such
rules or regulations.
d) Payments by Bank for Purchases
On the settlement date for each purchase, Bank shall either (i) remit the
full purchase price by wire transfer to an account designated by FTDI, or (ii)
following FTDI's procedures, wire the purchase price less the Fee allowed by
Paragraph 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.
e) Fees and Payments
Where permitted by the prospectus for a Fund, a charge, concession, or fee
(each of the foregoing forms of compensation, a "Fee") may be paid to Bank,
related to services provided by Bank in connection with Transactions in shares
of such Fund. The amount of the Fee, if any, is set by the relevant prospectus.
Adjustments in the Fee are available for certain purchases, and Bank is solely
responsible for notifying FTDI when any purchase or redemption order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any Customer for the reduction which should have been effected.
In accordance with the Funds' prospectuses, FTDI or its affiliates may, but
are not obligated to, make payments from their own resources to Bank as
compensation for certain sales that are made at net asset value ("Qualifying
Sales"). If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent
advance payment up to the maximum amount available for payment on the sale. If
any of the shares purchased in a Qualifying Sale are redeemed or repurchased
within twelve months of the month of purchase, FTDI shall be entitled to recover
any advance payment attributable to the redeemed or repurchased shares by
reducing any account payable or other monetary obligation FTDI may owe to Bank
or by making demand upon Bank for repayment in cash. FTDI reserves the right to
withhold any one or more advances, if for any reason FTDI believes that FTDI may
not be able to recover unearned advances. Termination or suspension of this
Agreement does not relieve Bank from the requirements of this paragraph.
f) Rule 12b-1 Plans
Bank is also invited to participate in all distribution plans (each, a
"Plan") adopted for a Class of a Fund or for a Fund that has only a single Class
(each, a "Plan Class") pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act").
To the extent Bank provides administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
Customers who own shares of a Plan Class, answering routine inquiries regarding
a Fund or Class, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, FTDI shall pay
Bank a Rule 12b-1 servicing fee. To the extent that Bank participates in the
distribution of Fund shares that are eligible for a Rule 12b-1 distribution
fee,FTDI shall also pay Bank a Rule 12b-1 distribution fee. All Rule 12b-1
servicing and distribution fees shall be based on the value of shares
attributable to Customers and eligible for such payment, and shall be calculated
on the basis and at the rates set forth in the compensation schedule then in
effect for the applicable Plan (the "Schedule"). Without prior approval by a
majority of the outstanding shares of a particular Class of a Fund, the
aggregate annual fees paid to Bank pursuant to such Plan shall not exceed the
amounts stated as the "annual maximums" in such Plan Class' prospectus, which
amount shall be a specified percent of the value of such Plan Class' net assets
held in Customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as such Plan Class uses to compute its
net assets as set forth in its effective Prospectus).
Bank shall furnish FTDI and each Fund that has a Plan Class (each, a "Plan
Fund") with such information as shall reasonably be requested by the Board of
Directors, Trustees or Managing General Partners (hereinafter referred to as
"Directors") of such Plan Fund with respect to the fees paid to Bank pursuant to
the Schedule of such Plan Fund. FTDI shall furnish to the Boards of Directors of
the Plan Funds, for their review on a quarterly basis, a written report of the
amounts expended under the Plans and the purposes for which such expenditures
were made.
Each Plan and the provisions of any agreement relating to such Plan must be
approved annually by a vote of the Directors of the Fund that has such Plan,
including such persons who are not interested persons of such Plan Fund and who
have no financial interest in such Plan or any related agreement ("Rule 12b-1
Directors"). Each Plan or the provisions of this Agreement relating to such Plan
may be terminated at any time by the vote of a majority of Rule 12b-1 Directors
of the Fund that has such Plan, or by a vote of a majority of the outstanding
shares of the Class that has such Plan on sixty (60) days' written notice,
without payment of any penalty. A Plan or the provisions of this Agreement may
also be terminated by any act that terminates the Underwriting Agreement between
FTDI and the Fund that has such Plan, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and such Plan Fund. In the event of the termination of a
Plan for any reason, the provisions of this Agreement relating to such Plan will
also terminate.
Continuation of a Plan and the provisions of this Agreement relating to
such Plan are conditioned on Rule 12b-1 Directors being ultimately responsible
for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, a Plan Fund is permitted to implement or continue a Plan or the
provisions of this Agreement relating to such Plan from year-to-year only if,
based on certain legal considerations, the Board of Directors of such Plan Fund
is able to conclude that the Plan will benefit the Plan Class. Absent such
yearly determination, a Plan and the provisions of this Agreement relating to
such Plan must be terminated as set forth above. In addition, any obligation
assumed by a Fund pursuant to this Agreement shall be limited in all cases to
the assets of such Fund and no person shall seek satisfaction thereof from
shareholders of a Fund. Bank agrees to waive payment of any amounts payable to
Bank by FTDI under a Fund's Plan until such time as FTDI is in receipt of such
fee from the Fund.
The provisions of the Plans between the Plan Funds and FTDI shall control
over the provisions of this Agreement in the event of any inconsistency.
g) Other Distribution Services
From time to time, FTDI may offer telephone and other augmented services in
connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.
h) Conditional Orders; Certificates
FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by a Fund only
against constructive receipt of the purchase price, subject to deduction of any
Fee and FTDI's portion of the sales charge, if any, on such sale. No
certificates for shares of the Funds will be issued unless specifically
requested.
i) Cancellation of Orders
If payment for shares purchased is not received within the time customary
or the time required by law for such payment, the sale may be canceled without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability for such a cancellation; alternatively, at FTDI's option, the
unpaid shares may be sold back to the Fund, and Bank shall be liable for any
resulting loss to FTDI or to the Fund(s). FTDI shall have no liability for any
check or other item returned unpaid to Bank after Bank has paid FTDI on behalf
of a purchaser. FTDI may refuse to liquidate the investment unless FTDI receives
the purchaser's signed authorization for the liquidation.
j) Order Corrections
Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.
k) Redemptions; Cancellation
Redemptions or repurchases of shares will be made at the net asset value of
such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. If Bank sells shares for the
account of the record owner to the Funds, Bank shall be deemed to represent to
FTDI that Bank is doing so as agent for the Customer and that Bank is authorized
to do so in such capacity. Such sales to the Funds shall be at the redemption or
repurchase price then currently in effect for such shares. If on a redemption
which Bank has ordered, instructions in proper form, including outstanding
certificates, are not received within the time customary or the time required by
law, the redemption may be canceled forthwith without any responsibility or
liability on the part of FTDI or any Fund, or at the option of FTDI, FTDI may
buy the shares redeemed on behalf of the Fund, in which latter case FTDI may
hold Bank responsible for any loss to the Fund or loss of profit suffered by
FTDI resulting from Bank's failure to settle the redemption.
l) Exchanges
Telephone exchange orders will be effective only for uncertificated shares
or for which share certificates have been previously deposited and may be
subject to any fees or other restrictions set forth in the applicable
prospectuses. Exchanges from a Fund sold with no sales charge to a Fund which
carries a sales charge, and exchanges from a Fund sold with a sales charge to a
Fund which carries a higher sales charge may be subject to a sales charge in
accordance with the terms of the applicable Fund's prospectus. Bank will be
obligated to comply with any additional exchange policies described in the
applicable Fund's prospectus, including without limitation any policy
restricting or prohibiting "Timing Accounts" as therein defined.
m) Qualification of Shares; Indemnification
Upon request, FTDI shall notify Bank of the states or other jurisdictions
in which each Fund's shares are currently noticed, registered or qualified for
offer or sale to the public. FTDI shall have no obligation to make notice
filings of, register or qualify, or to maintain notice filings of, registration
of or qualification of, Fund shares in any state or other jurisdiction. FTDI
shall have no responsibility, under the laws regulating the sale of securities
in any U.S. or foreign jurisdiction, for the registration, qualification or
licensed status of Bank or any of its agents or sub-agents in connection with
the purchase or sale of Fund shares or for the manner of offering, sale or
purchase of Fund shares. Except as stated in this paragraph, FTDI shall not, in
any event, be liable or responsible for the issue, form, validity,
enforceability and value of such shares or for any matter in connection
therewith, and no obligation not expressly assumed by FTDI in this Agreement
shall be implied. If it is necessary to file notice of, register or qualify
shares of any Fund in any country, state or other jurisdiction having authority
over the purchase or sale of Fund shares that are purchased by a Customer, it
will be Bank's responsibility to arrange for and to pay the costs of such notice
filing, registration or qualification; prior to any such notice filing,
registration or qualification, Bank will notify FTDI of its intent and of any
limitations that might be imposed on the Funds, and Bank agrees not to proceed
with such notice filing, registration or qualification without the written
consent of the applicable Funds and of FTDI. Nothing in this Agreement shall be
deemed to be a condition, stipulation, or provision binding any person acquiring
any security to waive compliance with any provision of the Securities Act of
1933, as amended (the "1933 Act"), the 1934 Act, the 1940 Act, the rules and
regulations of the U.S. Securities and Exchange Commission, or any applicable
laws or regulations of any government or authorized agency in the U.S. or any
other country having jurisdiction over the offer or sale of shares of the Funds,
or to relieve the parties hereto from any liability arising under such laws,
rules or regulations.
Bank further agrees to indemnify, defend and hold harmless FTDI, the Funds,
their officers, directors and employees from any and all losses, claims,
liabilities and expenses, arising out of (1) any alleged violation of any
statute or regulation (including without limitation the securities laws and
regulations of the United States of America or any state or foreign country) or
any alleged tort or breach of contract, in or related to any offer, sale or
purchase of shares of the Funds involving Bank or any Customer pursuant to this
Agreement (except to the extent that FTDI's negligence or failure to follow
correct instructions received from Bank is the cause of such loss, claim,
liability or expense), (2) any redemption or exchange pursuant to telephone
instructions received from Bank or its agents or employees, or (3) the breach by
Bank of any of the terms and conditions of this Agreement. This Paragraph 5(m)
shall survive the termination of this Agreement.
n) Prospectus and Sales Materials; Limit on Advertising
No person is authorized to give any information or make any representations
concerning shares of any Fund except those contained in the Fund's current
prospectus or in materials issued by FTDI as information supplemental to such
prospectus. FTDI will supply prospectuses, reasonable quantities of supplemental
sale literature, sales bulletins, and additional information as issued. Bank
agrees not to use other advertising or sales material or other material or
literature relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by FTDI
in advance of such use. Such approval may be withdrawn by FTDI in whole or in
part upon notice to Bank, and Bank shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales material and
advertising. Bank is not authorized to modify or translate any such materials
without the prior written consent of FTDI.
o) Customer Information
1) DEFINITION. For purposes of this Paragraph 5(o), "Customer
Information" means customer names and other identifying
information pertaining to one or more Customers which is
furnished by Bank to FTDI in the ordinary course of business
under this Agreement. Customer Information shall not include any
information obtained from any sources other than the Customer or
the Bank.
2) PERMITTED USES. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements
between the Funds and FTDI, the Funds' prospectuses, or other
duties imposed by law. In addition, FTDI or its affiliates may
use Customer Information in communications to shareholders to
market the Funds or other investment products or services,
including without limitation variable annuities, variable life
insurance, and retirement plans and related services. FTDI may
also use Customer Information if it obtains Bank's prior written
consent.
3) PROHIBITED USES. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer
Information in connection with any advertising, marketing or
solicitation of any products or services, provided that Bank
offers or soon expects to offer comparable products or services
to mutual fund customers and has so notified FTDI.
4) SURVIVAL; TERMINATION. The agreements described in this paragraph
5(o) shall survive the termination of this Agreement, but shall
terminate as to any account upon FTDI's receipt of valid
notification of either the termination of that account with Bank
or the transfer of that account to another bank or dealer.
6. CONTINUOUSLY OFFERED CLOSED-END FUNDS
This Paragraph 6 relates solely to shares of Funds that represent a
beneficial interest in the Franklin Floating Rate Trust or that are issued by
any other continuously offered closed-end investment company registered under
the 1940 Act for which FTDI or an affiliate of FTDI serves as principal
underwriter and that periodically repurchases its shares (each, a "Trust").
Shares of a Trust being offered to the public will be registered under the 1933
Act and are expected to be offered during an offering period that may continue
indefinitely ("Continuous Offering Period"). There is no guarantee that such a
continuous offering will be maintained by the Trust. The Continuous Offering
Period, shares of a Trust and certain of the terms on which such shares are
being offered are more fully described in the prospectus of the Trust.
As set forth in a Trust's then current prospectus, FTDI shall provide Bank
with appropriate compensation for purchases of shares of the Trust made by the
Bank for the account of Customers or by Customers. In addition, Bank may be
entitled to a fee for servicing Customers who are shareholders in a Trust,
subject to applicable law. Bank agrees that any repurchases of shares of a Trust
that were originally purchased as Qualifying Sales shall be subject to Paragraph
5(e) hereof.
Bank expressly acknowledges and understands that, notwithstanding anything
to the contrary in this Agreement:
a) No Trust has a Rule 12b-1 Plan and in no event will a Trust pay, or
have any obligation to pay, any compensation directly or indirectly to
Bank.
b) Shares of a Trust will not be repurchased by either the Trust (other
than through repurchase offers by the Trust from time to time, if any)
or by FTDI and no secondary market for such shares exists currently,
or is expected to develop. Any representation as to a repurchase or
tender offer by the Trust, other than that set forth in the Trust's
then current Prospectus, notification letters, reports or other
related material provided by the Trust, is expressly prohibited.
c) An early withdrawal charge payable by shareholders of a Trust to FTDI
may be imposed on shares accepted for repurchase by the Trust that
have been held for less than a stated period, as set forth in the
Trust's then current Prospectus.
d) In the event a Customer cancels his or her order for shares of a Trust
after confirmation, such shares will not be repurchased, remarketed or
otherwise disposed of by or though FTDI.
7. GENERAL
a) Successors and Assignments
This Agreement shall extend to and be binding upon the parties hereto and
their respective successors and assigns; provided that this Agreement will
terminate automatically in the event of its assignment by FTDI. For purposes of
the preceding sentence, the word "assignment" shall have the meaning given to it
in the 1940 Act. Bank may not assign this Agreement without the advance written
consent of FTDI.
b) Paragraph Headings
The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.
c) Severability
Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.
d) Waivers
There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.
e) Sole Agreement
This Agreement is the entire agreement of Bank and FTDI and supersedes all
oral negotiations and prior writings.
f) Governing Law
This Agreement shall be construed in accordance with the laws of the State
of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.
g) Arbitration
Should Bank owe any sum of money to FTDI under or in relation to this
Agreement for the purchase, sale, redemption or repurchase of any Fund shares,
FTDI may offset and recover the amount owed by Bank to FTDI or the Funds from
any amount owed by FTDI to Bank or from any other account Bank has with FTDI,
without notice or demand to Bank. Either party may submit any dispute under this
Agreement to binding arbitration under the commercial arbitration rules of the
American Arbitration Association. Judgment upon any arbitration award may be
entered by any court having jurisdiction.
h) Amendments
FTDI may amend this Agreement at any time by depositing a written notice of
the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.
i) Term and Termination
This Agreement shall continue in effect until terminated and shall
terminate automatically in the event that Bank ceases to be a "bank" as set
forth in paragraph 2(a) of this Agreement. FTDI or Bank may terminate this
Agreement at any time by written notice to the other, but such termination shall
not affect the payment or repayment of Fees on Transactions prior to the
termination date. Termination also will not affect the indemnities given under
this Agreement.
j) Acceptance; Cumulative Effect
This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 7(h), above, shall constitute Bank's acceptance
of the terms of this Agreement.
Otherwise, Bank's signature below shall constitute Bank's acceptance of
these terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: /s/ Greg Johnson
-----------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal
notices only)
650/312-2000
100 Fountain Parkway
St. Petersburg, Florida 33716
813/299-8712
- --------------------------------------------------------------------------------
To the Bank or Trust Company: If you have not previously signed an agreement
with FTDI for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.
BANK OR TRUST COMPANY:
____________________________________
(Bank's name)
By: ____________________________________
(Signature)
Name: _________________________________
Title: _________________________________
Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94403-7777
May 15, 1998
Re: Amendment of Mutual Fund Purchase and Sales Agreement for Accounts of
Bank and Trust Company Customers - Notice Pursuant to Paragraph 7(h)
Dear Bank or Trust Company:
This letter constitutes notice of amendment of the current Mutual Fund Purchase
and Sales Agreement for Accounts of Bank and Trust Company Customers (the
"Agreement") between Franklin/Templeton Distributors, Inc. ("FTDI") and the bank
or trust company ("the Bank") pursuant to Paragraph 7(h) of the Agreement. The
Agreement is hereby amended as follows:
1. Defined terms in this amendment have the meanings as stated in the
Agreement unless otherwise indicated.
2. Paragraph 5(e) is modified to add the following language:
With respect to shares of each Trust as described in Paragraph 6 of this
Agreement, the total compensation to be paid to FTDI and selected dealers and
their affiliates, including the Bank and the Bank's affiliates, in connection
with the distribution of shares of a Trust will not exceed the underwriting
compensation limitation prescribed by NASD Conduct Rule 2710. The total
underwriting compensation to be paid to FTDI and selected dealers and their
affiliates, including the Bank and the Bank's affiliates, may include: (i) at
the time of purchase of shares a payment to the Bank or a securities dealer of
1% of the dollar amount of the purchased shares by FTDI; and (ii) a quarterly
payment at an annual rate of .50% to the Bank or a securities dealer based on
the value of such remaining shares sold by the Bank or such securities dealer,
if after twelve (12) months from the date of purchase, the shares sold by the
Bank or such securities dealer remain outstanding.
The maximum compensation shall be no more than as disclosed in the section
"Payments to Dealers" of the prospectus of the applicable Trust.
Pursuant to Paragraph 7(h) of the Agreement, the Bank's placement of an order or
acceptance of payments of any kind after the effective date and receipt of
notice of this amendment shall constitute the Bank's acceptance of this
amendment.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By /s/ Greg Johnson
------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
650/312-2000
100 Fountain Parkway
St. Petersburg, FL 33716
813/299-8712
Amendment to Master Custody Agreement
Effective February 27, 1998, The Bank of New York and each of the Investment
Companies listed in the Attachment appended to this Amendment, for themselves
and each series listed in the Attachment, hereby amend the Master Custody
Agreement dated as of February 16, 1996 by:
1. Replacing Exhibit A with the attached; and
2. Only with respect to the Investment Companies and series thereof listed in
the Attachment, deleting paragraphs (a) and (b) of Subsection 3.5 and
replacing them with the following:
(a) Promptly after each purchase of Securities by the Fund, the Fund shall
deliver to the Custodian Proper Instructions specifying with respect to
each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase;
(g) the name of the person from whom or the broker through whom the
purchase was made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custodian shall, upon
receipt of Securities purchased by or for the Fund, pay to the broker
specified in the Proper Instructions out of the money held for the account
of such Series the total amount payable upon such purchase, provided that
the same conforms to the total amount payable as set forth in such Proper
Instructions.
(b) Promptly after each sale of Securities by the Fund, the Fund shall
deliver to the Custodian Proper Instructions specifying with respect to
each such sale: (a) the Series to which such Securities were specifically
allocated; (b) the name of the issuer and the title of the Security; (c)
the number of shares or the principal amount sold, and accrued interest, if
any; (d) the date of sale; (e) the sale price per unit; (f) the total
amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Proper
Instructions against payment of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as
set forth in such Proper Instructions.
Investment Companies The Bank of New York
By: /s/ Elizabeth N. Cohernour By: /s/ Stephen E. Grunston
-------------------------- -----------------------
Name: Elizabeth N. Cohernour Name: Stephen E. Grunston
Title: Authorized Officer Title: Vice President
Attachment
INVESTMENT COMPANY SERIES
Franklin Mutual Series Fund Inc. Mutual Shares Fund
Mutual Qualified Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual European Fund
Mutual Discovery Fund
Franklin Valuemark Funds Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Templeton Variable Products Series Fund Mutual Shares Investments Fund
Mutual Discovery Investments Fund
<TABLE>
<CAPTION>
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series for which the Custodian shall serve under the Master
Custody Agreement dated as of February 16, 1996.
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Portfolios Delaware Business Trust U.S. Government Adjustable Rate Mortgage Portfolio
Adjustable Rate Securities Portfolio
Franklin Asset Allocation Fund Delaware Business Trust
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Trust Franklin California Insured Tax-Free Income Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income Fund California Corporation
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business Trust
Franklin High Income Trust Delaware Business Trust AGE High Income Fund
Franklin Investors Securities Trust Massachusetts Business Trust Franklin Global Government Income Fund
Franklin Short-Intermediate U.S. Govt Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
Franklin Managed Trust Massachusetts Business Trust Franklin Corporate Qualified Dividend Fund
Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Mutual Series Fund Inc. Maryland Corporation Mutual Shares Fund
Mutual Qualified Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual European Fund
Mutual Discovery Fund
Franklin New York Tax-Free Income Fund Delaware Business Trust
Franklin New York Tax-Free Trust Massachusetts Business Trust Franklin New York Tax-Exempt Money Fund
Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
Franklin Real Estate Securities Trust Delaware Business Trust Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio Delaware Business Trust
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin Tax-Exempt Money Fund California Corporation
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Tax-Free Trust Massachusetts Business Trust Franklin Massachusetts Insured Tax-Free Income Fund
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income
Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Michigan Tax-Free Income Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Templeton Fund Allocator Series Delaware Business Trust Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Global Trust Delaware Business Trust Franklin Templeton German Government Bond Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton International Trust Delaware Business Trust Templeton Pacific Growth Fund
Templeton Foreign Smaller Companies Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Trust Franklin Balance Sheet Investment Fund
Franklin MicroCap Value Fund
Franklin Value Fund
Franklin Valuemark Funds Massachusetts Business Trust Money Market Fund
Growth and Income Fund
Natural Resources Securities Fund
Real Estate Securities Fund
Global Utilities Securities Fund
High Income Fund
Templeton Global Income Securities Fund
Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Rising Dividends Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Valuemark Funds (cont.) Massachusetts Business Trust Templeton Pacific Growth Fund
Templeton International Equity Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton Global Asset Allocation Fund
Small Cap Fund
Capital Growth Fund
Templeton International Smaller Companies Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Global Health Care Securities Fund
Value Securities Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Business Trust Money Market Portfolio
Franklin U.S. Government Securities Money Market
Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S. Government
Securities Fund
Franklin Institutional Adjustable Rate Securities Fund
Franklin U.S. Government Agency Money Market Fund
Franklin Cash Reserves Fund
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market Portfolio
Templeton Variable Products Series Fund Mutual Shares Investments Fund
Mutual Discovery Investments Fund
Franklin Growth Investments Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business Trust
Franklin Principal Maturity Trust Massachusetts Business Trust
Franklin Universal Trust Massachusetts Business Trust
INTERVAL FUND
Franklin Floating Rate Trust Delaware Business Trust
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</TABLE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 24
to the Registration Statement of Franklin California Tax-Free Income Fund on
Form N-1A File No. 2-60470 of our report dated May 4, 1998 on our audit of the
financial statements and financial highlights of the Fund, which report is
included in the Annual Report to Shareholders for the year ended March 31, 1998,
which is incorporated by reference in the Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
October 29, 1998
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted by a majority of
each of the Boards of Directors or Trustees ("Boards") of the Franklin Funds and
Fund series listed on the attached Schedule A (the "Funds"). The Boards have
determined that the Plan is in the best interests of each class and each Fund as
a whole. The Plan sets forth the provisions relating to the establishment of
multiple classes of shares for each Fund.
1. Each Fund shall offer two classes of shares, to be known as Class I and
Class II.
2. Class I shares shall carry a front-end sales charge ranging from 0% -
4.50%, and Class II shares shall carry a front-end sales charge 1.00%, all as
set forth in each Fund's Prospectus.
3. Class I shares shall not be subject to a contingent deferred sales
charge ("CDSC") except in the following limited circumstances. On investments of
$1 million or more, a contingent deferred sales charge of 1.00% of the lesser of
the then-current net asset value or the original net asset value at the time of
purchase applies to redemptions of those investments within the contingency
period of 12 months from the calendar month following their purchase. The CDSC
is waived in certain circumstances, as described in each Fund's prospectus.
4. Class II shares redeemed within 18 months of their purchase shall be
assessed a CDSC of 1.00% of the lesser of the then-current net asset value or
the original net asset value at the time of purchase. The CDSC is waived in
certain circumstances as described in each Fund's prospectus.
5. The Rule 12b-1 Plan associated with Class I shares may be used to
reimburse Franklin/Templeton Distributors, Inc. (the "Distributor") or other for
expenses incurred in the promotion and distribution of the shares of Class I.
Such expenses include, but are not limited to, the printing of prospectuses and
reports used for sales purposes, expenses of preparing and distributing sales
literature and related expenses, advertisements, and other distribution -related
expenses including a prorated portion of the Distributor's overhead expenses
attributable to the distribution of Class I shares, as well as any distribution
or service fees paid to securities dealers or their firms or others who have
executed a servicing agreement with the Fund for Class I shares or with the
Distributor or its affiliates.
The Rule 12b-1 Plan associated with Class II shares has two components. The
first component is a shareholder servicing fee, to be paid to broker-dealers,
banks, trust companies and others who will provide personal assistance to
shareholders in servicing their accounts. The second component is an asset-based
sales charge to be retained by the Distributor during the first year after sale
of shares, and, in subsequent years, to be paid to dealers or retained by the
Distributor to be used in the promotion and distribution of Class II shares, in
a manner similar to that described above for Class I shares.
The Plans shall operate in accordance with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., Article III, section
26(d).
6. The only difference in expenses as between Class I and Class II shares
shall relate to differences in the Rule 12b-1 plan expenses of each class, as
described in each class' Rule 12b-1 Plan.
7. There shall be no conversion features associated with the Class I and
Class II shares.
8. Shares of either Class may be exchanged for shares of another investment
company within the Franklin Templeton Group of Funds according to the terms and
conditions stated in each fund's prospectus, as it may be amended from time to
time, to the extent permitted by the Investment Company Act of 1940 and the
rules and regulations adopted thereunder.
9. Each Class will vote separately with respect to the Rule 12b-1 Plan
related to that Class.
10. On an ongoing basis, each Fund's Board pursuant to the fiduciary
responsibilities under the 1940 Act and otherwise, will monitor each Fund for
the existence of any material conflicts between the interests of the two classes
of shares. Each Board, including a majority of the independent Board members,
shall take such action as is reasonably necessary to eliminate any such conflict
that may develop. Franklin Advisers, Inc. and Franklin/Templeton Distributors,
Inc. shall be responsible for alerting the Board to any material conflicts that
arise.
11. All material amendments to this Plan must be approved by a majority of
the Board members of each Fund, including a majority of the Board members who
are not interested persons of each Fund.
I, Deborah R. Gatzek, Secretary of the Franklin Funds, do hereby certify
that this Multiple Class Plan has been adopted by a majority of each of the
Boards of Directors or Trustees of the Franklin Funds and Fund series listed on
the attached Schedule A on April 18, 1995.
Date: October 19, 1995 By: /S/ DEBORAH R. GATZEK
---------------------
Deborah R. Gatzek
Secretary
<TABLE>
<CAPTION>
SCHEDULE A
INVESTMENT COMPANY FUND & CLASS; TITAN NUMBER
- ------------------ --------------------------
<S> <C>
Franklin California Tax-Free Franklin California Tax-Free Income
Income Fund, Inc. Fund - Class II; 212
Franklin New York Tax-Free Franklin New York Tax-Free Income
Income Fund, Inc. Fund - Class II; 215
Franklin Federal Tax-Free Franklin Federal Tax-Free Income Fund -Class II; 216
Income Fund
Franklin Managed Trust Franklin Rising Dividends Fund - Class II; 258
Franklin California Tax-Free Trust Franklin California Insured Tax-Free
Income Fund - Class II; 224
Franklin New York Tax-Free Trust Franklin New York Insured Tax-Free
Income Fund - Class II; 281
Franklin Strategic Series Franklin Global Utilities Fund - Class II; 297
SCHEDULE A
INVESTMENT COMPANY FUND & CLASS; TITAN NUMBER
- ------------------ --------------------------
<S> <C>
Franklin Tax-Free Trust Franklin Alabama Tax-Free Income Fund - Class II; 264
Franklin Arizona Tax-Free Income Fund - Class II; 226
Franklin Colorado Tax-Free Income Fund - Class II; 227
Franklin Connecticut Tax Free Income Fund - Class II; 266
Franklin Florida Tax-Free Income Fund - Class II; 265
Franklin Georgia Tax-Free Income Fund - Class II; 228
Franklin High Yield Tax-Free Income Fund - Class II; 230
Franklin Insured Tax-Free Income Fund - Class II; 221
Franklin Louisiana Tax-Free Income Fund - Class II; 268
Franklin Maryland Tax-Free Income Fund - Class II; 269
Franklin Massachusetts Insured Tax-Free Income
Fund - Class II; 218
Franklin Michigan Insured Tax-Free Income Fund - Class II; 219
Franklin Minnesota Insured Tax-Free Income
Fund - Class II; 220
Franklin Missouri Tax-Free Income Fund - Class II; 260
Franklin New Jersey Tax-Free Income Fund - Class II; 271
Franklin North Carolina Tax-Free Income Fund - Class II; 270
Franklin Ohio Insured Tax-Free Income Fund - Class II; 222
Franklin Oregon Tax-Free Income Fund - Class II; 261
Franklin Pennsylvania Tax-Free Income Fund - Class II; 229
Franklin Puerto Rico Tax-Free Income Fund - Class II; 223
Franklin Texas Tax-Free Income Fund - Class II; 262
Franklin Virginia Tax-Free Income Fund - Class II; 263
</TABLE>
