As filed with the Securities and Exchange Commission on December 23, 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. 25 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24 (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)
[X] on January 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) 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 Common Stock of:
Franklin California Tax-Free Income Fund - Class A
Franklin California Tax-Free Income Fund - Class B
Franklin California Tax-Free Income Fund - Class C
The Registrant's prospectus and statement of additional information as filed
with the Securities and Exchange Commission ("SEC") under 497 on August 5, 1998,
(File Nos. 2-60470 and 811-1790) are hereby incorporated by reference.
o 112 *P1
SHARE CLASS REDESIGNATION
EFFECTIVE JANUARY 1, 1999
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 fund's historical expenses 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 EXPENSES3
Maximum Sales Charge
(as a percentage of Offering Price) 4.25% 4.00% 1.99%
Paid at time of purchase4 4.25% None 1.00%
Paid at redemption5 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 Fees7 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 $1,097
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,
lowering your annual expenses from that time on.
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
Ratios 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 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 in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its security will also be adversely
affected. A decrease in the value of one or more of the fund's portfolio
holdings will have a similar impact on the price of the fund's shares. Please
see "Year 2000 Problem" under "Who Manages the 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 the
fund 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 an 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 4.25% or charge charge of 1%
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 Higher annual o Higher annual
expenses than expenses than Class A expenses than Class A
Class B or C due (same as Class C) due (same as Class B) due
to lower Rule to higher Rule 12b-1 to higher Rule 12b-1
12b-1 fees fees. Automatic fees. No conversion to
conversion to Class A Class A shares, so
shares after eight annual expenses do not
years, reducing future decrease.
annual 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 AMOUNT PAID TO
AS A PERCENTAGE OF 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 2.50% 2.56% 2.25%
$500,000
$500,000 but less than 2.00% 2.04% 1.85%
$1,000,000
$1,000,000 or more* None None None
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 sell your
Class A shares first, unless otherwise instructed.
Proceeds immediately placed in a Franklin Bank CD also may be
reinvested without a front-end sales charge if you reinvest them within
365 days from the date the CD matures, including any rollover.
This waiver does not apply to shares you buy and sell under our
exchange program. Shares purchased with proceeds from a money fund may
be subject to a sales charge.
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. 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?",
(a) the following sentence is added to the end of the first paragraph:
The purchase price for determining a Contingent Deferred Sales Charge on
exchanged shares will be the price you paid for the original shares.
(b) and the third paragraph 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. The second and third items in the section "Exchange Restrictions,"
found under "May I Exchange Shares for Shares of Another Fund?", are replaced
with the following:
o You may only exchange shares within the same class, except as noted below.
If you exchange your Class B shares for the same class of shares of another
Franklin Templeton Fund, the time your shares are held in that fund will
count towards the eight year period for automatic conversion to Class A
shares.
o Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature guarantee.
You may, however, exchange shares from a fund account requiring two or more
signatures into an identically registered money fund account requiring only
one signature for all transactions. PLEASE NOTIFY US IN WRITING IF YOU DO
NOT WANT THIS OPTION TO BE AVAILABLE ON YOUR ACCOUNT. Additional procedures
may apply. Please see "Transaction Procedures and Special Requirements."
XIV. 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.
XV. 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 YOUR
IF YOU SELL YOUR CLASS B SHARES PROCEEDS AS A CONTINGENT
WITHIN THIS MANY YEARS AFTER BUYING THEM DEFERRED SALES CHARGE
- -------------------------------------------------------------------------
1 Year 4
2 Years 4
3 Years 3
4 Years 3
5 Years 2
6 Years 1
7 Years 0
XVI. 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.
XVII. 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.
XVIII. Under "Transaction Procedures and Special Requirements,"
(a) the section "Joint Accounts" is replaced with the following:
JOINT ACCOUNTS. For accounts with more than one registered owner, the fund
accepts written instructions signed by only one owner for transactions and
account changes that could otherwise be made by phone. For all other
transactions and changes, all registered owners must sign the instructions.
Please keep in mind that if you have previously told us that you do not want
telephone exchange or redemption privileges on your account, then we can only
accept written instructions to exchange or redeem shares if they are signed by
all registered owners on the account.
(b) and the reference to $50,000 in the section "Signature Guarantees" is
replaced with $100,000.
XIX. 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.
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 account 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 plans.
(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.
o 112 *SA
SHARE CLASS REDESIGNATION
EFFECTIVE JANUARY 1, 1999
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 December 7, 1998, the officers and Board members, as a group, owned of
record and beneficially the following shares of the fund: approximately 130,540
Class A shares, or less than 1% of the total outstanding Class A shares of the
fund.
III. The first sentence in the section "Additional Information on Exchanging
Shares," found under "How Do I Buy, Sell and Exchange Shares?", is replaced
with the following:
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be reinvested in the
fund and exchanged into the new fund at Net Asset Value when paid.
IV. 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 paragraphs are 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 the class' average daily net assets, payable quarterly, to pay
Distributors or others for providing distribution and related services and
bearing certain expenses. All distribution expenses over this amount will be
borne by those who have incurred them. The fund may also pay a servicing fee of
up to 0.15% per year of the class' average daily net assets, payable quarterly.
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.
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.
(c) and the section "The Class I and Class II Plans" is renamed "The Class A,
B and C Plans."
V. 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.
VI. 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 are conducted in one of Resources' U.S. test labs 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 beginning to develop a
contingency plan, including identification of those mission critical systems for
which it is practical to develop a contingency plan. However, in an operation as
complex and geographically distributed as Resources' business, the alternatives
to use of normal systems, especially mission critical systems, or supplies of
electricity or long distance voice and data lines are limited.
VII. 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.
VIII. 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 plans.
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.
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 as filed with the SEC
electronically on Form Type N-30D on December 8, 1998
(i) Financial Highlights
(ii) Statement of Investments, September 30, 1998
(iii) Statement of Assets and Liabilities - September 30, 1998
(iv) Statement of Operations - for the six months ended
September 30, 1998
(v) Statements of Changes in Net Assets - for the six months
ended September 30, 1998 and the year ended March 31, 1998
(vi) Notes to Financial Statements
b) Exhibits:
The following exhibits are incorporated herein by reference,
except exhibits 9(i), 11(i), 15(iii) 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
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: October 30, 1998
(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
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-60470
Filing Date: October 30, 1998
(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 April 30, 1998 between
Franklin Advisers, Inc. and Franklin Templeton Services,
Inc.
(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
Registrant, on behalf of Franklin California Tax-Free
Income Fund - Class II, 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
(iii) Form of Distribution Plan pursuant to Rule 12b-1 between
Registrant, on behalf of Franklin California Tax-Free
Income Fund - Class B, and Franklin/Templeton Distributors,
Inc.
(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) Form of Multiple Class Plan for Franklin California
Tax-Free Income Fund, Inc.
(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.
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 certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 23rd day
of December, 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: December 23, 1998
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: December 23, 1998
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: December 23, 1998
HARRIS J. ASHTON* Director
Harris J. Ashton Dated: December 23, 1998
S. JOSEPH FORTUNATO* Director
S. Joseph Fortunato Dated: December 23, 1998
EDITH E. HOLIDAY* Director
Edith E. Holiday Dated: December 23, 1998
RUPERT H. JOHNSON, JR.* Director
Rupert H. Johnson, Jr. Dated: December 23, 1998
GORDON S. MACKLIN* Director
Gordon S. Macklin Dated: December 23, 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 *
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 *
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 Attached
Services dated October 1, 1996 and
Amendment thereto dated April 30, 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.B15(iii) Form of Distribution Plan pursuant to Rule Attached
12b-1 between Registrant, on behalf of
Franklin California Tax-Free Income Fund -
Class B, and Franklin/Templeton
Distributors, Inc.
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) Form of Multiple Class Plan for Franklin Attached
California Tax-Free Income Fund, Inc.
* Incorporated by Reference
SUBCONTRACT FOR FUND ADMINISTRATIVE SERVICES
This Subcontract for Fund Administrative Services ("Subcontract") is
made as of October 1, 1996 between FRANKLIN ADVISERS, INC., a California
corporation, hereinafter called the "Investment Manager," and FRANKLIN TEMPLETON
SERVICES, INC. (the "Administrator").
In consideration of the mutual agreements herein made, the
Administrator and the Investment Manager understand and agree as follows:
I. Prime Contract.
This Subcontract is made in order to assist the Investment Manager in fulfilling
certain of the Investment Manager's obligations under each investment management
and investment advisory agreement ("Agreement") between the Investment Manager
and each Investment Company listed on Exhibit A, ("Investment Company") for
itself or on behalf of each of its series listed on Exhibit A (each, a "Fund").
This Subcontract is subject to the terms of each Agreement, which is
incorporated herein by reference.
II. Subcontractual Provisions.
(1) The Administrator agrees, during the life of this Agreement, to provide
the following services to each Fund:
(a) providing office space, telephone, office equipment and supplies
for the Fund;
(b) providing trading desk facilities for the Fund, unless these
facilities are provided by the Fund's investment adviser;
(c) authorizing expenditures and approving bills for payment on behalf
of the Fund;
(d) supervising preparation of periodic reports to shareholders,
notices of dividends, capital gains distributions and tax credits; and attending
to routine correspondence and other communications with individual shareholders
when asked to do so by the Fund's shareholder servicing agent or other agents of
the Fund;
(e) coordinating the daily pricing of the Fund's investment portfolio,
including collecting quotations from pricing services engaged by the Fund;
providing fund accounting services, including preparing and supervising
publication of daily net asset value quotations, periodic earnings reports and
other financial data; and coordinating trade settlements;
(f) monitoring relationships with organizations serving the Fund,
including custodians, transfer agents, public accounting firms, law firms,
printers and other third party service providers;
(g) supervising compliance by the Fund with recordkeeping requirements
under the federal securities laws, including the 1940 Act and the rules and
regulations thereunder, and under other applicable state and federal laws; and
maintaining books and records for the Fund (other than those maintained by the
custodian and transfer agent);
(h) preparing and filing of tax reports including the Fund's income
tax returns, and monitoring the Fund's compliance with subchapter M of the
Internal Revenue Code, as amended, and other applicable tax laws and
regulations;
(i) monitoring the Fund's compliance with: 1940 Act and other federal
securities laws, and rules and regulations thereunder; state and foreign laws
and regulations applicable to the operation of investment companies; the Fund's
investment objectives, policies and restrictions; and the Code of Ethics and
other policies adopted by the Investment Company's Board of Trustees or
Directors ("Board") or by the Fund's investment adviser and applicable to the
Fund;
(j) providing executive, clerical and secretarial personnel needed to
carry out the above responsibilities;
(k) preparing and filing regulatory reports, including without
limitation Forms N-1A and NSAR, proxy statements, information statements and
U.S. and foreign ownership reports; and
(l) providing support services incidental to carrying out these
duties.
Nothing in this Agreement shall obligate the Investment Company or any Fund to
pay any compensation to the officers of the Investment Company. Nothing in this
Agreement shall obligate the Administrator to pay for the services of third
parties, including attorneys, auditors, printers, pricing services or others,
engaged directly by the Fund to perform services on behalf of the Fund.
(2) The Investment Manager agrees to pay to the Administrator as
compensation for such services a monthly fee equal on an annual basis to 0.15%
of the first $200 million of the average daily net assets of each Fund during
the month preceding each payment, reduced as follows: on such net assets in
excess of $200 million up to $700 million, a monthly fee equal on an annual
basis to 0.135%; on such net assets in excess of $700 million up to $1.2
billion, a monthly fee equal on an annual basis to 0.1%; and on such net assets
in excess of $1.2 billion, a monthly fee equal on an annual basis to 0.075%.
From time to time, the Administrator may waive all or a portion of its fees
provided for hereunder and such waiver shall be treated as a reduction in the
purchase price of its services. The Administrator shall be contractually bound
hereunder by the terms of any publicly announced waiver of its fee, or any
limitation of each affected Fund's expenses, as if such waiver or limitation
were fully set forth herein.
(3) This Subcontract shall become effective on the date written above and
shall continue in effect as to each Investment Company and each Fund so long as
(1) the Agreement applicable to the Investment Company or Fund is in effect and
(2) this Subcontract is not terminated. This Subcontract will terminate as to
any Investment Company or Fund immediately upon the termination of the Agreement
applicable to the Investment Company or Fund, and may in addition be terminated
by either party at any time, without the payment of any penalty, on sixty (60)
days' written notice to the other party.
(4) In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Administrator, or of reckless disregard of its duties and
obligations hereunder, the Administrator shall not be subject to liability for
any act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Subcontract to be
executed by their duly authorized officers.
FRANKLIN ADVISERS, INC.
By: /s/ Deborah R. Gatzek
---------------------
Deborah R. Gatzek
Title: Vice President
& Assistant Secretary
FRANKLIN TEMPLETON SERVICES, INC.
By: /s/ Harmon E. Burns
---------------------
Harmon E. Burns
Title: Executive Vice President
TERMINATION OF AGREEMENT
- ------------------------
Franklin Advisers, Inc. and Templeton Global Investors, Inc., hereby agree that
the Subcontracts for Administrative Services between them dated: (1) August 28,
1996 for the Franklin Templeton Global Trust on behalf of all series of the
Trust; (2) July 24, 1995 for the Franklin Templeton International Trust on
behalf of its series Templeton Foreign Smaller Companies Fund (formerly known as
Franklin International Equity Fund); (3) July 18, 1995 for the Franklin
Templeton International Trust on behalf of its series Templeton Pacific Growth
Fund; and (4) July 14, 1995 for the Franklin Investors Securities Trust on
behalf of its series Franklin Global Government Income Fund are terminated
effective as of the date of the Subcontract for Fund Administrative Services
above.
FRANKLIN ADVISERS, INC.
By /s/ Harmon E. Burns
----------------------
Harmon E. Burns
Executive Vice President
Templeton Global Investors, Inc.
By /s/ Martin L. Flanagan
----------------------
Martin L. Flanagan
President, CEO
AMENDMENT TO SUBCONTRACT FOR
FUND ADMINISTRATIVE SERVICES
The Subcontract for Fund Administrative Services dated October 1, 1996
between FRANKLIN ADVISERS, INC. and FRANKLIN TEMPLETON SERVICES, INC. is hereby
amended, to replace Exhibit A with the attached Exhibit A.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers.
FRANKLIN ADVISERS, INC.
By: /s/ Deborah R. Gatzek
---------------------
Deborah R. Gatzek
Vice President & Assistant Secretary
FRANKLIN TEMPLETON SERVICES, INC.
By: /s/ Harmon E. Burns
---------------------
Harmon E. Burns
Executive Vice President
Date: April 30, 1998
<TABLE>
<CAPTION>
SUBCONTRACT FOR FUND ADMINISTRATIVE SERVICES
BETWEEN
FRANKLIN ADVISERS, INC.
AND
FRANKLIN TEMPLETON SERVICES, INC.
EXHIBIT A
- ----------------------------------------------------- ---------------------------------------------------------------------
INVESTMENT COMPANY SERIES ---(IF APPLICABLE)
- ----------------------------------------------------- ---------------------------------------------------------------------
<S> <C>
Franklin High Income Trust AGE High Income Fund
Franklin Asset Allocation Fund
Franklin California Tax-Free Income
Fund, Inc.
Franklin California Tax-Free 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. Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund
Franklin Federal Tax- Free Income Fund
Franklin Gold Fund
Franklin Investors Securities Trust Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Municipal Securities 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
Franklin New York Tax-Free Trust Franklin New York Tax-Exempt Money Fund
Franklin New York Insured Tax-Free Income Fund
Franklin New York Intermediate-Term Tax-Free
Income Fund*
- ----------------------------------------------------- ---------------------------------------------------------------------
- ----------------------------------------------------- ---------------------------------------------------------------------
INVESTMENT COMPANY SERIES ---(IF APPLICABLE)
- ----------------------------------------------------- ---------------------------------------------------------------------
<S> <C>
Franklin Real Estate Securities Trust Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio**
Franklin Strategic Series 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 Tax-Exempt Money Fund
Franklin Tax-Free 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 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 SERIES ---(IF APPLICABLE)
- ----------------------------------------------------- ---------------------------------------------------------------------
<S> <C>
Franklin Templeton International Trust Templeton Pacific Growth Fund
Templeton Foreign Smaller Companies Fund
Franklin Templeton Global Trust Franklin Templeton German Government Bond Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
CLOSED END FUNDS:
Franklin Multi-Income Trust
Franklin Principal Maturity Trust
Franklin Universal Trust
- ----------------------------------------------------- ---------------------------------------------------------------------
- -----------------------------------
* Effective as of March 19, 1998
**Effective as of February 26, 1998
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 25
to the Registration Statement of Franklin California Tax-Free Income Fund, Inc.
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 Franklin California
Tax-Free Income Fund, Inc., 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
PricewaterhouseCoopers LLP
San Francisco, California
December 18, 1998
CLASS B DISTRIBUTION PLAN
I. Investment Company: FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
II. Fund: FRANKLIN CALIFORNIA TAX-FREE INCOME
FUND - CLASS B
III. Maximum Per Annum Rule 12b-1 Fees for Class B Shares
(as a percentage of average daily net assets of the class)
A. Distribution Fee: 0.50%
B. Service Fee: 0.15%
PREAMBLE TO CLASS B DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by the
Investment Company named above ("Investment Company") for the class B shares
(the "Class") of the Fund named above ("Fund"), which Plan shall take effect
as of the date Class B shares are first offered (the "Effective Date of the
Plan"). The Plan has been approved by a majority of the Board of Directors
of the Investment Company (the "Board"), including a majority of the Board
members who are not interested persons of the Investment Company and who have
no direct, or indirect financial interest in the operation of the Plan (the
"non-interested Board members"), cast in person at a meeting called for the
purpose of voting on such Plan.
In reviewing the Plan, the Board considered the schedule and nature of
payments and terms of the Management Agreement between the Investment Company
and Franklin Advisers, Inc. ("Advisers") and the terms of the Underwriting
Agreement between the Investment Company and Franklin/Templeton Distributors,
Inc. ("Distributors"). The Board concluded that the compensation of
Advisers, under the Management Agreement, and of Distributors, under the
Underwriting Agreement, was fair and not excessive. The approval of the Plan
included a determination that in the exercise of their reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
The Board recognizes that Distributors has entered into an arrangement
with a third party in order to finance the distribution activities of the
Class pursuant to which Distributors may assign its rights to the fees
payable hereunder to such third party. The Board further recognizes that it
has an obligation to act in good faith and in the best interests of the Fund
and its shareholders when considering the continuation or termination of the
Plan and any payments to be made thereunder.
DISTRIBUTION PLAN
1. (a) The Fund shall pay to Distributors a monthly fee not to
exceed the above-stated maximum distribution fee per annum of the Class'
average daily net assets represented by shares of the Class, as may be
determined by the Board from time to time.
(b) In addition to the amounts described in (a) above, the Fund
shall pay (i) to Distributors for payment to dealers or others, or (ii)
directly to others, an amount not to exceed the above-stated maximum service
fee per annum of the Class' average daily net assets represented by shares of
the Class, as may be determined by the Investment Company's Board from time
to time, as a service fee pursuant to servicing agreements which have been
approved from time to time by the Board, including the non-interested Board
members.
2. (a) The monies paid to Distributors pursuant to Paragraph 1(a)
above shall be treated as compensation for Distributors' distribution-related
services including compensation for amounts advanced to securities dealers or
their firms or others selling shares of the Class who have executed an
agreement with the Investment Company, Distributors or its affiliates, which
form of agreement has been approved from time to time by the Board, including
the non-interested Board members, with respect to the sale of Class shares.
In addition, such monies may be used to compensate Distributors for other
expenses incurred to assist in the distribution and promotion of shares of
the Class. Payments made to Distributors under the Plan may be used for,
among other things, 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 pro-rated portion of Distributors' overhead expenses attributable to the
distribution of Class shares, as well as for additional distribution fees
paid to securities dealers or their firms or others who have executed
agreements with the Investment Company, Distributors or its affiliates, or
for certain promotional distribution charges paid to broker-dealer firms or
others, or for participation in certain distribution channels. None of such
payments are the legal obligation of Distributors or its designee.
(b) The monies to be paid pursuant to paragraph 1(b) above
shall be used to pay dealers or others for, among other things, furnishing
personal services and maintaining shareholder accounts, which services
include, among other things, assisting in establishing and maintaining
customer accounts and records; assisting with purchase and redemption
requests; arranging for bank wires; monitoring dividend payments from the
Fund on behalf of customers; forwarding certain shareholder communications
from the Fund to customers; receiving and answering correspondence; and
aiding in maintaining the investment of their respective customers in the
Class. Any amounts paid under this paragraph 2(b) shall be paid pursuant to
a servicing or other agreement, which form of agreement has been approved
from time to time by the Board. None of such payments are the legal
obligation of Distributors or its designee.
3. In addition to the payments which the Fund is authorized to make
pursuant to paragraphs 1 and 2 hereof, to the extent that the Fund, Advisers,
Distributors or other parties on behalf of the Fund, Advisers or Distributors
make payments that are deemed to be payments by the Fund for the financing of
any activity primarily intended to result in the sale of Class shares issued
by the Fund within the context of Rule 12b-1 under the Act, then such
payments shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges which include
payments specified in paragraphs 1 and 2, plus any other payments deemed to
be made pursuant to the Plan under this paragraph, exceed the amount
permitted to be paid pursuant to Rule 2830(d) of the Conduct Rules of the
National Association of Securities Dealers, Inc.
4. Distributors shall furnish to the Board, for its review, on a
quarterly basis, a written report of the monies paid to it and to others
under the Plan, and shall furnish the Board with such other information as
the Board may reasonably request in connection with the payments made under
the Plan in order to enable the Board to make an informed determination of
whether the Plan should be continued.
5. (a) Distributors may assign, transfer or pledge ("Transfer") to
one or more designees (each an "Assignee"), its rights to all or a designated
portion of the fees to which it is entitled under paragraph 1 of this Plan
from time to time (but not Distributors' duties and obligations pursuant
hereto or pursuant to any distribution agreement in effect from time to time,
if any, between Distributors and the Fund), free and clear of any offsets or
claims the Fund may have against Distributors. Each such Assignee's
ownership interest in a Transfer of a specific designated portion of the fees
to which Distributors is entitled is hereafter referred to as an "Assignee's
12b-1 Portion." A Transfer pursuant to this Section 5(a) shall not reduce or
extinguish any claims of the Fund against Distributors.
(b) Distributors shall promptly notify the Fund in writing of
each such Transfer by providing the Fund with the name and address of each
such Assignee.
(c) Distributors may direct the Fund to pay any Assignee's
12b-1 Portion directly to each Assignee. In such event, Distributors shall
provide the Fund with a monthly calculation of the amount to which each
Assignee is entitled (the "Monthly Calculation"). In such event, the Fund
shall, upon receipt of such notice and Monthly Calculation from Distributors,
make all payments required directly to the Assignee in accordance with the
information provided in such notice and Monthly Calculation upon the same
terms and conditions as if such payments were to be paid to Distributors.
(d) Alternatively, in connection with a Transfer, Distributors
may direct the Fund to pay all or a portion of the fees to which Distributors
is entitled from time to time to a depository or collection agent designated
by any Assignee, which depository or collection agent may be delegated the
duty of dividing such fees between the Assignee's 12b-1 Portion and the
balance (such balance, when distributed to Distributors by the depository or
collection agent, the "Distributors' 12b-1 Portion"), in which case only
Distributors' 12b-1 Portion may be subject to offsets or claims the Fund may
have against Distributors.
6. The Plan shall continue in effect for a period of more than one
year only so long as such continuance is specifically approved at least
annually by the Board, including the non-interested Board members, cast in
person at a meeting called for the purpose of voting on the Plan. In
determining whether there is a reasonable likelihood that the continuation of
the Plan will benefit the Fund and its shareholders, the Board may, but is
not obligated to, consider that Distributors has incurred substantial cost
and has entered into an arrangement with a third party in order to finance
the distribution activities for the Class.
7. This Plan and any agreements entered into pursuant to this Plan
may be terminated with respect to the shares of the Class, without penalty,
at any time by vote of a majority of the non-interested Board members of the
Investment Company, or by vote of a majority of outstanding Shares of such
Class. Upon termination of this Plan with respect to the Class, the
obligation of the Fund to make payments pursuant to this Plan with respect to
such Class shall terminate, and the Fund shall not be required to make
payments hereunder beyond such termination date with respect to expenses
incurred in connection with Class shares sold prior to such termination date,
provided, in each case that each of the requirements of a Complete
Termination of this Plan in respect of such Class, as defined below, are
met. For purposes of this Section 7, a "Complete Termination" of this Plan
in respect of the Class shall mean a termination of this Plan in respect of
such Class, provided that: (i) the non-interested Board members of the
Investment Company shall have acted in good faith and shall have determined
that such termination is in the best interest of the Investment Company and
the shareholders of the Fund and the Class; (ii) and the Investment Company
does not alter the terms of the contingent deferred sales charges applicable
to Class shares outstanding at the time of such termination; and (iii) unless
Distributors at the time of such termination was in material breach under the
distribution agreement in respect of the Fund, the Fund shall not, in respect
of such Fund, pay to any person or entity, other than Distributors or its
designee, either the payments described in paragraph 1(a) or 1(b) or in
respect of the Class shares sold by Distributors prior to such termination.
8. The Plan, and any agreements entered into pursuant to this Plan,
may not be amended to increase materially the amount to be spent for
distribution pursuant to Paragraph 1 hereof without approval by a majority of
the outstanding voting securities of the Class of the Fund.
9. All material amendments to the Plan, or any agreements entered
into pursuant to this Plan, shall be approved by the non-interested Board
members cast in person at a meeting called for the purpose of voting on any
such amendment.
10. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Board members shall be committed to the discretion
of such non-interested Board members.
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Investment Company and Distributors as evidenced by their
execution hereof.
Date: October 16, 1998
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
By: __________________________
Deborah R. Gatzek
Vice President & Assistant Secretary
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: __________________________
Harmon E. Burns
Executive Vice President
MULTIPLE CLASS PLAN
ON BEHALF OF
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
This Multiple Class Plan (the "Plan") has been adopted by a majority of
the Board of Directors of FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.,
(the "Fund"). The Board has determined that the Plan, including the expense
allocation, is in the best interests of each class and the Fund as a whole.
The Plan sets forth the provisions relating to the establishment of multiple
classes of shares of the Fund, and supersedes any Plan previously adopted for
the Fund.
1. The Fund shall offer three classes of shares, to be known as
Class A Shares, Class B Shares and Class C Shares.
2. Class A Shares shall carry a front-end sales charge ranging from
0% - 4.25%, and Class C Shares shall carry a front-end sales charge of
1.00%. Class B Shares shall not be subject to any front-end sales charges.
3. Class A 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 the Fund's prospectus.
Class B Shares shall be subject to a CDSC with the following CDSC
schedule: (a) Class B Shares redeemed within 2 years of their purchase shall
be assessed a CDSC of 4% on the lesser of the then-current net asset value or
the original net asset value at the time of purchase; (b) Class B Shares
redeemed within the third and fourth years of their purchase shall be
assessed a CDSC of 3% on the lesser of the then-current net asset value or
the original net asset value at the time of purchase; (c) Class B Shares
redeemed within 5 years of their purchase shall be assessed a CDSC of 2% on
the lesser of the then-current net asset value or the original net asset
value at the time of purchase; and (d) Class B Shares redeemed within 6
years of their purchase shall be assessed a CDSC of 1% on 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 described in the
Fund's prospectus.
Class C Shares redeemed within 18 months of their purchase shall be
assessed a CDSC of 1.00% on 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 the Fund's prospectus.
4. The distribution plan adopted by the Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, (the "Rule 12b-1 Plan")
associated with the Class A Shares may be used to reimburse
Franklin/Templeton Distributors, Inc. (the "Distributor") or others for
expenses incurred in the promotion and distribution of the Class A Shares.
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 the Class
A 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 the Class A Shares, the Distributor or its affiliates.
The Rule 12b-1 Plan associated with the Class B Shares has two
components. The first component is an asset-based sales charge to be
retained by Distributor to compensate Distributor for amounts advanced to
securities dealers or their firms or others with respect to the sale of Class
B Shares. In addition, such payments may be retained by the Distributor to
be used in the promotion and distribution of Class B Shares in a manner
similar to that described above for Class A Shares. The second component is
a shareholder servicing fee to be paid to securities dealers or others who
provide personal assistance to shareholders in servicing their accounts.
The Rule 12b-1 Plan associated with the Class C Shares has two
components. The first component is a shareholder servicing fee, to be paid
to broker-dealers, banks, trust companies and others who 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 the 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 C Shares, in a manner similar to that described above
for Class A Shares.
The Rule 12b-1 Plans for the Class A, Class B and Class C Shares shall
operate in accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., Article III, section 26(d).
5. The only difference in expenses as between Class A, Class B and
Class C Shares shall relate to differences in Rule 12b-1 plan expenses, as
described in the applicable Rule 12b-1 Plans; however, to the extent that
the Rule 12b-1 Plan expenses of one Class are the same as the Rule 12b-1 Plan
expenses of another Class, such classes shall be subject to the same expenses.
6. There shall be no conversion features associated with the Class A
and Class C Shares. Each Class B Share, however, shall be converted
automatically, and without any action or choice on the part of the holder of
the Class B Shares, into Class A Shares on the conversion date specified, and
in accordance with the terms and conditions approved by the Franklin
California Tax-Free Income Fund's Board of Directors and as described, in
each fund's prospectus relating to the Class B Shares, as such prospectus may
be amended from time to time; provided, however, that the Class B Shares
shall be converted automatically into Class A Shares to the extent and on the
terms permitted by the Investment Company Act of 1940 and the rules and
regulations adopted thereunder.
7. Shares of Class A, Class B and Class C 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.
8. Each class will vote separately with respect to any Rule 12b-1
Plan related to, or which now or in the future may affect, that class.
9. On an ongoing basis, the Board members, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will monitor the
Fund for the existence of any material conflicts between the Board members
interests of the various classes of shares. The Board members, 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.
10. All material amendments to this Plan must be approved by a
majority of the Board members, including a majority of the Board members who
are not interested persons of the Fund.
11. I, Brian E. Lorenz, Secretary of the Franklin California Tax-Free
Income Fund, Inc., do hereby certify that this Multiple Class Plan was
adopted by a majority of the Directors of the Fund on March 19, 1998.
----------------------
Brian E. Lorenz
Secretary
