SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section)240-14a-11(c) or
(section)240-14a-12
Franklin New York Tax-Free Income Fund, Inc.
(Name of Registrant as Specified In its Charter)
Franklin New York Tax-Free Income Fund, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11:1
4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
IMPORTANT INFORMATION FOR SHAREHOLDERS OF
FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
The attached materials include a proxy statement and your proxy card for the
upcoming shareholders' meeting on September 18, 1996. The proxy card serves
as a ballot, allowing you to express your views regarding certain aspects of
the Fund's operations. Please fill out and sign the proxy card, and return it
in the enclosed postage-prepaid envelope to the Fund and we will vote the
proxy exactly as you tell us at the shareholders' meeting. If you simply sign
and return the proxy card, we will vote as described under "Who is asking for
my vote?"
By completing and signing the proxy card, and mailing it to the Fund, you
reduce the possibility that the Fund will need to conduct additional or
follow-up solicitations of shareholders.
When you review the attached proxy statement, you will discover that the Fund
is requesting your vote on three specific matters, including the election of
the Board of Directors, approval of the Board of Directors' selection of
independent auditors for the Fund, and a change in the place and form of
organization for the Fund.
TABLE OF CONTENTS
A Letter from the President.............................................
Notice of Annual Meeting of Shareholders................................
The Proxy Statement.....................................................
Proposal I - Election of Directors
Proposal II - To ratify or reject the selection of independent auditors
Proposal III - To approve or disapprove a change of the Fund's place
and form of organization from a New York corporation to a Delaware
business trust
Other Information
Appendix A
Appendix B
A LETTER FROM THE PRESIDENT
Dear Shareholders:
My purpose in writing is to request that you consider specific matters that
relate to your ownership of shares in the Franklin New York Tax-Free Income
Fund, Inc. (the "Fund"). The Board of Directors of the Fund asks that you
cast your proxies on three specific issues as listed in the Notice of Annual
Meeting of Shareholders and described in the proxy statement.
As you review the proxy statement for the 1996 Annual Meeting of
Shareholders, you will discover that it now includes explanatory notes (in
italics) that are designed to provide you with a simpler and more concise
explanation of certain issues. While much of the information that must be
furnished in the proxy statement is technical and required by the Fund's
regulator, we hope that the use of these explanations will be helpful to you.
The vote of each shareholder is important to the Fund. On behalf of the
Directors, thank you in advance for the consideration that I am confident you
will give to these issues as you read the proxy statement and execute your
proxy card.
Sincerely,
CHARLES B. JOHNSON
President
THE NOTICE, SET FORTH BELOW, CONSTITUTES THE FORMAL AGENDA FOR THE ANNUAL
MEETING OF SHAREHOLDERS. THE NOTICE SPECIFIES WHAT ISSUES WILL BE CONSIDERED
BY SHAREHOLDERS, AND THE TIME AND LOCATION OF THE MEETING.
All shareholders are cordially invited to attend the meeting in person. If
you do not expect to attend the meeting, please indicate your voting
instructions on the enclosed proxy card, date and sign it, and return it in
the envelope provided, which is addressed for your convenience and needs no
postage if mailed in the United States. In order to avoid the additional
expense to the Fund of further solicitation, we ask your cooperation in
mailing in your proxy promptly.
FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 18, 1996
To the Shareholders of Franklin New York Tax-Free Income Fund, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of Franklin New York Tax-Free Income Fund, Inc. (the "Fund") will
be held at the Westchester Marriott Hotel, 670 White Plains Road, Tarrytown,
New York 10591, at 10:00 a.m. Eastern Time, on September 18, 1996, for the
following purposes:
I. To elect a Board of Directors of the Fund.
II. To ratify or reject the selection of Coopers & Lybrand L.L.P.,
Certified Public Accountants, as the independent auditors for the Fund
for the fiscal year ending May 31, 1997.
III. To approve or disapprove a change of the Fund's place and form of
organization from a New York corporation to a Delaware business trust.
To consider any other business as may properly come before the Meeting.
Pursuant to the Fund's By-Laws, the Board of Directors has fixed the close of
business on July 30, 1996, as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting. Only
shareholders of record at that time will be entitled to vote at the Meeting
or any adjournment thereof.
By Order of the Board of Directors
BRIAN E. LORENZ
Secretary
San Mateo, California
Dated: August 9, 1996
PLEASE RETURN YOUR PROXY CARD PROMPTLY
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
PROXY STATEMENT
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94404
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 18, 1996
THE PROXY STATEMENT IS DESIGNED TO FURNISH SHAREHOLDERS WITH THE INFORMATION
NECESSARY TO VOTE ON THE MATTERS LISTED IN THE NOTICE. CERTAIN INFORMATION IN
THE PROXY STATEMENT MUST BE INCLUDED BECAUSE OF REQUIREMENTS OF THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), THE FUND'S REGULATOR. SOME OF
THIS INFORMATION MAY BE TECHNICAL.
O WHO IS ASKING FOR MY VOTE?
The directors of Franklin New York Tax-Free Income Fund, Inc. (the "Fund")
who are responsible for overseeing the Fund have asked that you vote on
several matters. The vote will be formally taken at the annual meeting (the
"Meeting") of shareholders to be held at the Westchester Marriott Hotel, 670
White Plains Road, Tarrytown, New York 10591, at 10:00 a.m. Eastern Time and
at any and all adjournments thereof.
You may vote in person at the Meeting, or you may vote by returning the
enclosed proxy card in advance of the Meeting. You may revoke your proxy at
any time before it is exercised by delivering a written notice to the Fund
expressly revoking your proxy, by signing and forwarding to the Fund a
later-dated proxy, or by attending the Meeting and casting your votes in
person.
The Fund will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of the shares
of record by such persons. The Fund may reimburse such broker-dealer firms,
custodians, nominees and fiduciaries for their reasonable expenses incurred
in connection with such proxy solicitation. The cost of soliciting these
proxies will be borne by the Fund. In addition to solicitations by mail, some
of the officers and employees of the Fund and Franklin Advisers, Inc. and its
affiliates, without any extra compensation, may conduct additional
solicitations by telephone, telegraph and personal interviews. The Fund has
engaged Shareholder Communications Corporation to solicit proxies from
brokers, banks, other institutional holders and individual shareholders for
an approximate fee, including out-of-pocket expenses, ranging between $97,702
and $216,785. It is expected that this proxy statement will first be mailed
to shareholders on or about August 9, 1996.
The proxyholders will vote all proxies received. It is the present intention
that, absent contrary instructions, the enclosed proxy will be voted: FOR the
election as directors of the nominees named hereinafter, but the proxyholders
reserve full discretion to cast votes for other persons in the event any such
nominees are unable to serve; FOR the ratification of the selection of
Coopers & Lybrand L.L.P., Certified Public Accountants, as independent
auditors for the Fund for the fiscal year ending May 31, 1997; FOR the
approval of a change of the Fund's place and form of organization from a New
York corporation to a Delaware business trust; and in the discretion of the
proxyholders upon such other business not now known or determined which may
legally come before the Meeting. Under relevant state law and the Fund's
charter and By-Laws, abstentions and broker non-votes will be included for
the purpose of determining whether a quorum is present at the Meeting, but
will be treated as votes not cast and, therefore, will not be counted for the
purpose of determining whether matters to be voted upon at the Meeting have
been approved.
O WHO IS ELIGIBLE TO VOTE?
Only shareholders of record at the close of business on July 30, 1996, are
entitled to vote at the Meeting or any adjournment thereof. On that date, the
number of outstanding voting securities (shares) of Franklin New York
Tax-Free Income Fund - Class I was xx, and Franklin New York Tax-Free Income
Fund - Class II was xx, with each share of capital stock having a par value
of one cent ($.01) per share and each share being entitled to one vote. To
the best of the Fund's knowledge, as of July 30, 1996, no person beneficially
or of record owns 5% or more of the outstanding shares of either class of the
Fund.
PROPOSAL 1: ELECTION OF DIRECTORS
THE ROLE OF DIRECTORS IS TO PROVIDE GENERAL OVERSIGHT OF THE FUND'S BUSINESS,
AND TO ENSURE THAT THE FUND IS OPERATED FOR THE BENEFIT OF SHAREHOLDERS. THE
DIRECTORS MEET MONTHLY, AND REVIEW THE FUND'S INVESTMENT PERFORMANCE. THE
DIRECTORS ALSO OVERSEE THE SERVICES FURNISHED TO THE FUND BY ITS INVESTMENT
ADVISER AND VARIOUS OTHER SERVICE PROVIDERS.
The following persons have been nominated to be Directors of the Fund to hold
office until the next annual meeting of shareholders and until their
successors are elected and shall qualify. Each of the nominees is presently
serving as a Director of the Fund, and has previously been elected by the
shareholders.
All of the nominees have consented to serve as Directors. If any nominee is
not available for election at the time of the Meeting, however, the
proxyholders may vote for any other person in their discretion or may refrain
from electing or voting to elect anyone to fill the position. The favorable
vote of the holders of a majority of the shares represented at the Meeting,
in person or by proxy, is required to elect the Directors.
The Fund has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board of
Directors of the Fund (the "Board"). If this happens, holders of the
remaining shares voting will not be able to elect anyone to the Board.
Directors who are "interested persons" of the Fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") are designated by
an asterisk (*). Messrs. Charles B. Johnson, and Rupert H. Johnson, Jr. may
be deemed to be "interested persons" due to their status as officers of the
Fund and their positions with the Fund's investment advisor.
SHARES
BENEFICIALLY
OWNED
NAME, AGE AND AS OF
FIVE-YEAR BUSINESS EXPERIENCE LENGTH OF SERVICE JULY 11, 1996
Harris J. Ashton (75) Director since none
General Host Corporation May 1982
Metro Center, 1 Station Place
Stamford, CT 06904-2045
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
holding company) and Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 55 of the investment companies in the
Franklin Templeton Group of Funds.
S. Joseph Fortunato(64) Director since none
Park Avenue at Morris County May 1982
P. O. Box 1945
Morristown, NJ 07962-1945
Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General
Host Corporation; director, trustee or managing general partner, as the case
may be, of 57 of the investment companies in the Franklin Templeton Group of
Funds.
*Charles B. Johnson(63) Director since none
777 Mariners Island Blvd. May 1982
San Mateo, CA 94404 President since
July 1983
President and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; and officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries of Franklin
Resources, Inc. and of 56 of the investment companies in the Franklin
Templeton Group of Funds.
*Rupert H. Johnson, Jr.(55) Director since none
777 Mariners Island Blvd. May 1983
San Mateo, CA 94404 Vice President
since September 1983
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers,
Inc.; Director, Franklin/Templeton Investor Services, Inc.; and officer
and/or director, trustee or managing general partner, as the case may be, of
most other subsidiaries of Franklin Resources, Inc. and of 60 of the
investment companies in the Franklin Templeton Group of Funds.
Gordon S. Macklin(68) Director since none
8212 Burning Tree Road October 1992
Bethesda, MD 20817
Chairman, White River Corporation (information services); Director, Fund
American Enterprises Holdings, Inc., MCI Communications, Inc., MedImmune,
Inc. (biotechnology), InfoVest Corporation (information services), Fusion
Systems Corporation (industrial technology), and Source One Mortgage Services
Corporation (information services); and director, trustee or managing general
partner, as the case may be, of 52 of the investment companies in the
Franklin Templeton Group of Funds; and formerly held the following positions:
Chairman, Hambrecht and Quist Group; Director, H & Q Healthcare Investors;
and President, National Association of Securities Dealers, Inc.
The executive officers of the Fund other than those listed above are:
NAME, AGE ADDRESS, AND FIVE-YEAR BUSINESS EXPERIENCE
Kenneth V. Domingues (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting Standards of the Fund
since January 1995 and officer in various capacities since September 1986
Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc., and
Franklin Templeton Distributors, Inc.; officer and/or director, as the case
may be, of other subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of 37 of the investment
companies in the Franklin Group of Funds.
Harmon E. Burns (51)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President since July 1987
Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director,
Franklin/Templeton Investor Services, Inc.; officer and/or director, as the
case may be, of other subsidiaries of Franklin Resources, Inc.; and officer
and/or director or trustee of 60 of the investment companies in the Franklin
Templeton Group of Funds.
Martin L. Flanagan (36)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer since January 1995
Senior Vice President, Chief Financial Officer and Treasurer, Franklin
Resources, Inc.; Executive Vice President, Templeton Worldwide, Inc.; Senior
Vice President and Treasurer, Franklin Advisers, Inc. and Franklin Templeton
Distributors, Inc.; Senior Vice President, Franklin/Templeton Investor
Services, Inc.; officer of most other subsidiaries of Franklin Resources,
Inc.; and officer, director and/or trustee of 60 of the investment companies
in the Franklin Templeton Group of Funds.
Deborah R. Gatzek (47)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President since May 1992
Senior Vice President and General Counsel, Franklin Resources, Inc.; Senior
Vice President, Franklin Templeton Distributors, Inc.; Vice President,
Franklin Advisers, Inc. and officer of 60 of the investment companies in the
Franklin Templeton Group of Funds.
Thomas J. Kenny (33)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President since September 1994
Senior Vice President, Franklin Advisers, Inc. and officer of eight of the
investment companies in the Franklin Group of Funds.
Diomedes Loo-Tam (57)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer since January 1995
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
Brian E. Lorenz (55)
One North Lexington Avenue
White Plains, New York 10001-1700
Secretary since inception of the Fund in 1982
Attorney, member of the law firm of Bleakley Platt & Schmidt; officer of
three of the investment companies in the Franklin Group of Funds.
John B. Pinkham (65)
16 South Main Street
Norwalk, CT 06854
Vice President of the Fund since;
Vice President of Franklin Advisers, Inc. in portfolio management capacities;
and officer of one investment company in the Franklin Group of Funds.
All officers serve at the pleasure of the Board.
Directors of the Fund who are not affiliated with Franklin Advisers, Inc.
("nonaffiliated directors") are currently paid fees of $800 per month plus
$800 per meeting attended. Certain of the nonaffiliated directors also serve
as directors, trustees or managing general partners of other investment
companies in the Franklin Templeton Group of Funds from which they may
receive fees for their services. Legal fees and expenses of $29,969 were
paid during the fiscal year ended May 31, 1996, to the law firm of which Mr.
Lorenz is a partner, and which acts as counsel to the Fund. The following
table indicates the total fees paid to nonaffiliated directors by the Fund
and by other funds in the Franklin Templeton Group of Funds.
NUMBER OF TOTAL
BOARDS IN THE COMPENSATION
FRANKLIN FROM THE
TEMPLETON FRANKLIN
GROUP OF TEMPLETON
AGGREGATE FUNDS ON GROUP OF FUNDS,
COMPENSATION WHICH EACH INCLUDING THE
FROM THE SERVES** FUND***
NAME FUND*
- -------------------------------------------------------------------------------
Harris J. Ashton $19,200 56 $327,925
S. Joseph Fortunato $19,200 58 $344,745
Gordon S. Macklin $19,200 53 $321,525
*For the fiscal year ended May 31, 1996.
**The number of boards is based on the number of registered investment
companies in the Franklin Templeton Group of Funds. This number does not
include the total number of series or funds within each investment company
for which the Board members are responsible. The Franklin Templeton Group of
Funds currently includes 60 registered investment companies, with
approximately 166 U.S. based funds or series.
***For the calendar year ended December 31, 1995.
The nonaffiliated Directors of the Fund are also reimbursed for expenses
incurred in connection with attending Board meetings, paid pro rata by each
fund in the Franklin Templeton Group of Funds for which they serve as a
director, trustee or managing general partner.
Certain officers and directors of the Fund are shareholders of Franklin
Resources, Inc. ("Resources") and may be deemed to receive indirect
remuneration by virtue of their participation in the management fees,
underwriting commissions and Rule 12b-1 fees received by Franklin Advisers,
Inc. ("Advisers") and Franklin/Templeton Distributors, Inc ("Distributors").
During the fiscal year ended May 31, 1996, there were twelve meetings of the
Board. All of the Directors attended at least 75% of the meetings.
The Board does not currently have a standing audit, nominating or
compensation committee.
As of July 11, 1996, the officers and directors, as a group, owned of record
and beneficially approximately 21,512.088 shares of Franklin New York
Tax-Free Income Fund - Class I and no shares of Franklin New York Tax-Free
Income Fund - Class II, or less than 1% of the outstanding shares of either
class. Many of the Fund's directors also own shares in various of the other
funds in the Franklin Templeton Group of Funds.
PROPOSAL II: TO RATIFY OR REJECT THE SELECTION
OF INDEPENDENT AUDITORS
The Board is requesting ratification of its designation of Coopers & Lybrand
L.L.P. ("Coopers"), Certified Public Accountants, as independent auditors to
audit the books and accounts of the Fund for the fiscal year ending May 31,
1997. The selection of auditors was approved at a meeting of the Board on
April 18, 1996, including the favorable vote of a majority of the Directors
who are not interested persons of the Fund. During the fiscal year ended May
31, 1996, the auditing services of Coopers consisted of the rendering of an
opinion on the financial statements of the Fund. Coopers does not intend to
send a representative to be present at the Meeting.
Required Vote - The favorable vote of a majority of the shares represented at
the Meeting, in person or by proxy, is required to ratify the selection of
independent auditors.
Recommendation of the Board - The Board unanimously recommends that you vote
in favor of the selection of Coopers as independent auditors of the Fund for
the fiscal year ending May 31, 1997.
PROPOSAL III: TO APPROVE OR DISAPPROVE A CHANGE OF THE FUND'S PLACE
AND FORM OF ORGANIZATION FROM A NEW YORK CORPORATION
TO A DELAWARE BUSINESS TRUST
SUMMARY OF THE PROPOSAL
THE DIRECTORS RECOMMEND THAT YOU APPROVE A CHANGE IN THE PLACE AND FORM OF
ORGANIZATION OF THE FUND FROM A NEW YORK CORPORATION TO A DELAWARE BUSINESS
TRUST. THE PROPOSED CHANGE WILL BE REFERRED TO IN THIS PROXY STATEMENT AS
THE "REORGANIZATION."
o WHAT WILL THE REORGANIZATION MEAN FOR THE FUND AND ITS STOCKHOLDERS?
The Reorganization involves the continuation of the Fund in the form of a
newly created Delaware business trust named "Franklin New York Tax-Free
Income Fund" (referred to in this proxy statement as the "Trust"). The Trust
will have the same investment objective, investment policies and investment
limitations as the Fund; the existing Fund assets will become assets of the
Trust; the nominees for Directors of the Fund will be the Trustees of the
Trust; the current officers of the Fund will be the same as the officers of
the Trust; and each stockholder will own an interest in the Trust that is
equivalent to his or her interest in the Fund on the closing date of the
Reorganization. In essence, your investment in the Fund will not change for
all practical purposes.
o WHY ARE THE DIRECTORS RECOMMENDING THAT I APPROVE THE REORGANIZATION?
The Directors believe that mutual funds formed as Delaware business trusts
have advantages in addition to those available to New York Corporations.
Primarily Because Delaware law permits a less complicated structure and
allows greater flexibility in a fund's business operations.
DELAWARE LAW CONTAINS PROVISIONS SPECIFICALLY DESIGNED FOR MUTUAL FUNDS,
WHICH TAKE INTO ACCOUNT THEIR UNIQUE STRUCTURE AND OPERATIONS, AND ALLOWS
FUNDS TO SIMPLIFY THEIR OPERATIONS BY REDUCING ADMINISTRATIVE BURDENS AND TO
GENERALLY OPERATE MORE EFFICIENTLY THAN UNDER NEW YORK LAW. FOR EXAMPLE,
FUNDS ORGANIZED AS DELAWARE BUSINESS TRUSTS HAVE THE AUTHORITY TO ESTABLISH
MULTIPLE SERIES1 OF SHARES, EACH OF WHICH INVESTS IN A SEPARATE SERIES OF
SECURITIES, AND MAY ALSO ESTABLISH MULTIPLE CLASSES OF SHARES WITHIN SUCH
SERIES IN EACH CASE THROUGH ACTION TAKEN BY THE FUND'S TRUSTEES OR DIRECTORS.
UNDER NEW YORK LAW, SUCH ACTIONS REQUIRE THAT A FUND AMEND ITS ARTICLES OF
INCORPORATION NECESSITATING A MEETING OF SHAREHOLDERS TO APPROVE SUCH
AMENDMENT EACH TIME IT DESIRES TO CREATE A CLASS OR SERIES EVEN THOUGH SUCH
CREATION HAS NO EFFECT ON THE INVESTMENTS OR RIGHTS OF SUCH SHAREHOLDERS.
SIMILARLY, UNDER DELAWARE LAW, SHAREHOLDER MEETINGS ARE REQUIRED ONLY TO
OBTAIN SHAREHOLDER APPROVAL OF MATTERS WHERE SUCH APPROVAL IS REQUIRED UNDER
THE 1940 ACT AND FEDERAL SECURITIES LAW WHEREAS UNDER NEW YORK LAW
STOCKHOLDER MEETINGS MUST BE HELD ANNUALLY WHETHER OR NOT MATTERS REQUIRING
SUCH APPROVAL ARISE.
1 The term "Series" in the mutual fund industry is used to refer to shares
that represent interests in separate portfolios of investments with differing
investment objectives. "Classes" of shares represent sub-division of series
with differing preferences, rights and privileges as the directors or
trustees may determine and, in most circumstances, differing marketing
attributes. The terms do not necessarily correspond to the terms that are
used under the New York corporate law, but will be used for ease of reference
in this discussion.
o WHAT IS INVOLVED IN THE PROCESS OF REORGANIZING THE FUND?
The Reorganization involves a legal transaction through which the Fund will
be reorganized into the Trust, and the Trust, as the Fund's successor, will
continue the business of the Fund for the Fund's stockholders. As outlined
in an Agreement and Plan of Reorganization approved by the Directors, the
Fund will transfer substantially all of its assets (such as its portfolio
securities), subject to any of its liabilities, to the Trust, and the Trust,
in exchange, will provide the Fund with shares of the Trust to be distributed
to the Fund's shareholders. The shares of the Trust will be issued in
classes, as are the existing shares of the Fund, and the Trust will open an
account for each Fund stockholder, and credit to that account the exact
number of shares the stockholders held in the corresponding class of the Fund
on the effective date of the Reorganization. After the Reorganization, the
Fund will be dissolved and will go out of existence.
The Trust was formed for the sole purpose of becoming the successor to the
Fund after the Fund's Directors approved the Reorganization on July 15,
1996. At that time, the officers and Directors of the Fund were appointed as
the officers and Trustees of the Trust, and the Trustees took all the actions
necessary so that the Trust now stands ready to take over the Fund's
business. For example, the Trustees approved an investment management
agreement with Advisers for the Trust that is substantially identical to the
current investment management agreement between Advisers and the Fund. The
Trust will also adopt the Fund's Prospectus as its own Prospectus, with
amendments to show the new name and structure, if stockholders approve the
Reorganization.
If stockholders approve the Reorganization, the Trust will become your mutual
fund. You will own exactly the same amount of shares of either class of the
Trust that you owned in the corresponding class of the Fund, and they will be
worth exactly the same dollar amount as your Fund shares on the effective
date of the Reorganization. Afterwards, the Trust will operate in the same
way that the Fund operated.
o WHAT IS THE EFFECT OF MY "YES" VOTE?
By voting "Yes" to the Reorganization, you will be agreeing to become a
shareholder of a mutual fund organized as a Delaware business trust with its
Trustees, independent auditors, investment management agreement and
distribution plans already in place, and all such arrangements are
substantially identical to those of the Fund. These are items which are
usually separately approved by shareholders either periodically or, if there
are changes, more often as required by the federal securities laws.
This proxy statement contains detailed information about the Trustees of the
Trust; the independent auditors of the Trust; the investment manager and
management agreement for the Trust; and the distribution plan for each class
of shares of the Trust.
o ARE THERE ANY TAX CONSEQUENCES FOR STOCKHOLDERS?
The Reorganization is designed to be tax free for federal and state income
tax purposes so that stockholders do not experience a taxable gain or loss
when the Reorganization is completed.
o WHAT IF I CHOOSE TO SELL MY SHARES AT ANY TIME?
Any request to sell (redeem) shares of the Fund received and processed prior
to the Reorganization will be treated as a redemption of shares of the
appropriate class of Fund. Any request to sell (redeem) shares received or
processed after the Reorganization will be treated as a request for the
redemption of the same number of shares of the appropriate class of the Trust.
o WHAT VOTE IS REQUIRED TO APPROVE THE REORGANIZATION?
Approval of this proposal requires the vote of two-thirds of the Fund's total
outstanding shares issued in its two classes of shares in the aggregate as
well as a majority of outstanding shares issued within each such class
represented either in person at the meeting or through a proxy card.
* * *
At its meeting on July 15, 1996, the Board approved, subject to the approval
of the Fund's stockholders, the concept of the Reorganization, pursuant to
which the Fund's place and form of organization would be changed from a New
York corporation to a Delaware business trust. At the meeting, the Board
also approved an Agreement and Plan of Reorganization (the "Agreement and
Plan"), in substantially the form attached hereto as Appendix A, which
provides for the reorganization of the Fund into the Trust.
Advisers will be responsible for the investment of the Trust's assets,
subject to supervision by the Trust's Board of Trustees, under an investment
management agreement substantially identical to the current agreement between
the Fund and Advisers. For a discussion of the current and proposed
investment management agreements with Advisers, see "Information Concerning
Advisers and the Management Agreements," below. The Trust will enter into an
agreement with Franklin/Templeton Investor Services, Inc. ("Investor
Services") for transfer agency and shareholder servicing which is
substantially identical to the agreement currently in effect for the Fund.
Distributors will act as the Trust's principal underwriter under a
distribution agreement between Distributors and the Trust, which is
substantially identical to the distribution agreement currently in effect for
the Fund. The Trust has adopted a distribution plan for each of its two
classes of shares pursuant to Rule 12b-1 under the 1940 Act, which is
substantially identical to the plan currently in place for each class of the
Fund. More detailed information about the service provider arrangements and
the distribution plans is outlined below.
REASONS FOR THE REORGANIZATION
WHY ARE THE DIRECTORS RECOMMENDING THAT I APPROVE THE REORGANIZATION?
The Directors unanimously recommend conversion of the Fund into a Delaware
business trust, because they have determined that Delaware law affords
advantages to the operations of a mutual fund in addition to those available
under New York law. The Reorganization would also increase uniformity among
the mutual funds within the Franklin Group of FundsAE and the Templeton Funds
(collectively referred to as the "Franklin Templeton Group of Funds") which
currently has several funds organized as Delaware business trusts, and for
which the Delaware business trust form has been chosen for new funds over the
past five years. Increased uniformity among the funds, many of which share
common directors and trustees, officers and service providers, is expected to
reduce the costs and resources devoted to compliance with varying state
corporate laws and also reduce administrative burdens.
The advantages of the Delaware business trust structure for mutual funds
arise from the fact that the Delaware Business Trust Act (the "Delaware Act")
allows greater operational flexibility while continuing the favorable state
tax treatment for mutual funds. The Delaware Act permits a less complicated
structure for mutual funds than most corporate laws, and allows greater
flexibility in drafting a fund's governing documents, which can result in
greater efficiencies of operation and savings for a fund and its shareholders.
The Delaware Act contains certain provisions specifically designed for mutual
funds. For example, mutual funds organized as Delaware business trusts are
not required to hold annual meetings of shareholders, which can result in
substantial savings for funds. In addition, a fund organized as a Delaware
business trust is not required to seek and obtain shareholder approval before
taking actions for which shareholder approval would not be required under the
1940 Act, if the fund's trustees and officers believe that shareholder
approval is not necessary. Unlike New York law, this flexibility allows a
fund, for example, to issue new series or classes of its shares or to change
its name or the name of one of its series without seeking a shareholder
vote. Of course, shareholder voting is still required for certain
fundamental matters and matters affecting the rights or interests of
particular shareholders.
A comparison of the Delaware Act and the New York law applicable to the Trust
and the Fund, respectively, as well as a comparison of relevant provisions of
the governing documents of the Trust and the Fund, is included in Appendix B,
which is entitled "Differences Between the Legal Structure of a Delaware
Business Trust and a New York Corporation."
PROCEDURES FOR REORGANIZATION
WHAT IS INVOLVED IN THE PROCESS OF REORGANIZING THE FUND?
As stated in the Agreement and Plan, on the effective date of the
Reorganization, the Fund will transfer substantially all of its portfolio
securities and any other assets, subject to its liabilities, to the Trust.
In exchange for such assets and the assumption of such liabilities, the Trust
will issue its own shares to the Fund, in exactly the same dollar amount as
that of the assets and liabilities that were transferred by the Fund to the
Trust. The Fund will then distribute those Trust shares pro rata to the
Fund's stockholders, so that stockholders receive exactly the same number and
dollar amount of shares of the particular class of the Trust as the amounts
that they previously held in the corresponding class of the Fund.
Upon completion of the Reorganization, the Trust will continue the Fund's
business with the same investment objective and policies; will hold the same
portfolio of securities previously held by the Fund; and will be operated
under substantially identical overall management, investment management,
distribution and administrative arrangements as those of the Fund. As the
successor to the Fund's operations, the Trust will adopt the Fund's existing
registration statement (which includes its Prospectus) under the Securities
Act of 1933 and the 1940 Act, with amendments to show the new name and
Delaware business trust structure. Completion of the Reorganization, in the
opinion of Bleakley Platt & Schmidt, counsel to both the Fund and Trust, will
not result in the recognition of income, gain or loss for federal and New
York State income tax purposes by the Fund, the Trust or the Fund's
stockholders. See "Federal and State Income Tax Consequences of the
Reorganization."
The Agreement and Plan provides that, as soon as practicable after the
closing of the Reorganization, the officers and Directors of the Fund will
file Articles of Dissolution on behalf of the Fund in the State of New York,
after which the Fund's legal existence will be terminated. As part of the
Reorganization, the Trust will become responsible for all the liabilities and
obligations of the Fund and the liabilities of the Fund or of its
stockholders, directors, or officers shall not be affected by the
Reorganization, nor shall the right of the creditors thereof or any persons
dealing with such persons or any liens upon the property of such persons be
impaired by the Reorganization. The Reorganization is subject to a number of
conditions which are customary in reorganizations of this kind. The
Agreement and Plan may be terminated and the Reorganization abandoned at any
time prior to the effective date of the Reorganization by the Board of
Directors of the Fund.
At present, it appears that the most advantageous time to complete the
Reorganization is on or before October 1, 1996. However, if the
Reorganization is approved by stockholders, the Reorganization will be
completed on such date as the Directors deem advisable and in the best
interest of stockholders. If the Reorganization is not approved or if the
Directors determine to terminate or abandon the Reorganization, the Fund will
continue to operate as a New York corporation.
EFFECT OF STOCKHOLDER APPROVAL OF THE REORGANIZATION
WHAT IS THE EFFECT OF MY "YES" VOTE?
An investment company registered under the 1940 Act is required by the 1940
Act to: (1) submit the selection of the company's independent auditors to all
shareholders for their ratification; (2) provide for the election of the
company's directors (or trustees) by the shareholders; (3) submit the
investment management agreement for the investment company to the
shareholders for initial approval; and (4) submit any plan of distribution
adopted pursuant to Rule 12b-1 under the 1940 Act with respect to any class
or series of such company to the shareholders of the particular class or
series for approval.
The Directors of the Fund believe that it is in the interest of the Fund's
stockholders (who will become the Trust's shareholders if the Reorganization
is approved) to avoid the considerable expense of a shareholders' meeting to
obtain the stockholder approvals described above, shortly after the effective
date of the Reorganization. The Directors also believe that it is not in the
interest of the stockholders to carry out the Reorganization if the surviving
Trust would not have independent auditors, a board of trustees, a management
agreement, or distribution plans which are duly approved by shareholders and,
therefore, which comply with the 1940 Act.
The Directors will, therefore, consider that approval of the Reorganization
by the requisite vote of the stockholders will also constitute, for the
purposes of the 1940 Act: (1) ratification of the selection of Coopers,
previously selected as the Fund's independent auditors, to be the Trust's
independent auditors; (2) election of the Directors of the Fund who are in
office at the time of the effective date of the Reorganization as Trustees of
the Trust; (3) approval of a new investment management agreement between the
Trust and Advisers which is substantially identical to the agreement
currently in place between the Fund and Advisers; and (4) approval of a
separate distribution plan for each class of shares of the Trust adopted
pursuant to Rule 12b-1 under the 1940 Act, which is substantially identical
to the respective plan currently in place for each class of the Fund.
The Trust will issue a single share of each of its classes to the Fund, and,
assuming stockholder approval of the Reorganization, the officers of the
Fund, prior to the Reorganization, will cause the Fund, as the sole
shareholder of each class of the Trust, to vote such shares "FOR" the matters
specified in the above paragraph. The Trust will then consider the
shareholder approval requirements of the 1940 Act referred to above to have
been satisfied.
CAPITALIZATION AND STRUCTURE
The Fund is a corporation established in 1982 pursuant to the New York
Business Corporation Law (the "BCL"). Article Fourth of the Fund's
Certificate of Incorporation ("Articles") currently authorizes the issuance
of five billion (5,000,000,000) shares of stock with a par value of one cent
($0.01) per share sub-divided into shares of "Class I" and "Class II," with
two and one half billion (2,500,000,000) authorized shares being allocated to
each such class of shares. Each of the two classes of the Series has
distinct rights and preferences notably, expenses related to, and
consequently, dividends paid on each class are different as compared to the
other class because each class carries a different distribution plan.
The Trust was created on July 15, 1996 pursuant to the Delaware Act. The
Trust has an unlimited number of shares of beneficial interest authorized,
all of which have a par value of $0.01 per share. A single series of the
Trust has been authorized by the Trustees to correspond with the single
series of the Fund, and an unlimited number of shares have been allocated to
such series. The shares of the single series are further sub-divided into
two classes of shares to correspond with the two classes of shares of the
existing series of the Fund.
Shares of the respective classes of the Fund and the Trust have equal
dividend rights, are fully paid, non-assessable, and freely transferable,
have the same conversion rights and have no preemptive or subscription
rights. Shares of the respective classes of both the Fund and the Trust have
equal voting and liquidation rights and have one vote per share. The Trust
will have the same fiscal year as the Fund.
FEDERAL AND STATE INCOME TAX CONSEQUENCES OF THE REORGANIZATION
ARE THERE ANY TAX CONSEQUENCES FOR STOCKHOLDERS?
It is anticipated that the transaction contemplated by the Agreement and Plan
will be tax free for federal and New York state income tax purposes.
Consummation of the Reorganization is subject to receipt of an opinion of
Messrs. Bleakley Platt & Schmidt, counsel to the Trust and the Fund, that
under the Internal Revenue Code of 1986 (the "Code"), as amended, the
Reorganization will not give rise to the recognition of a gain or loss for
federal or state income tax purposes to the Fund, the Trust or stockholders
of the Fund or shareholders of the Trust. A stockholder's adjusted basis for
tax purposes in the shares of the Trust after the closing of the
Reorganization will be the same as his or her adjusted basis for tax purposes
in the shares of the Fund immediately before the closing of the
Reorganization. Each stockholder should consult his own tax advisor with
respect to the details of these tax consequences and with respect to state
and local tax consequences of the proposed transaction.
TEMPORARY WAIVER OF CERTAIN INVESTMENT RESTRICTIONS
Certain of the Fund's present investment restrictions would preclude the Fund
from carrying out the Reorganization. Specifically, such investment
restrictions prohibit the Fund from acquiring control of any company or
purchasing more than a certain percentage of ownership of another investment
company or other company. Stockholder approval of the Reorganization would
be deemed to be a waiver of these restrictions for the specific purpose of
engaging in the Reorganization.
INFORMATION CONCERNING THE BOARD OF TRUSTEES OF THE TRUST
THE ROLE OF THE TRUSTEES IS TO PROVIDE GENERAL OVERSIGHT OF THE
TRUST'S BUSINESS, AND TO ENSURE THAT THE TRUST IS OPERATED FOR
THE BENEFIT OF ITS SHAREHOLDERS. THE TRUSTEES WILL MEET MONTHLY
AND REVIEW THE TRUST'S INVESTMENT PERFORMANCE. THE TRUSTEES WILL
ALSO OVERSEE THE SERVICES FURNISHED TO THE TRUST BY ITS
INVESTMENT MANAGER AND VARIOUS OTHER SERVICE PROVIDERS.
IF YOU VOTE "YES" TO APPROVE THE REORGANIZATION, YOUR VOTE WILL
ALSO HAVE THE EFFECT OF ELECTING THE CURRENT NOMINEES FOR
DIRECTORS OF THE FUND AS THE TRUSTEES OF THE TRUST.
If the Reorganization is approved, the Fund will vote the share of beneficial
interest it holds of each class of the Trust for the election of each of the
current nominees for Director of the Fund as the Trustees of the Trust. If
approved, each Trustee shall serve as such until the next election or until
his term is terminated as provided in the Trust's governing instrument. The
compensation of such Trustees will be identical to that of the nominees for
Director of the Fund, as described in this proxy statement.
INFORMATION CONCERNING THE INDEPENDENT AUDITORS OF THE TRUST
IF YOU VOTE TO APPROVE THE REORGANIZATION, YOUR VOTE WILL ALSO
HAVE THE SAME EFFECT AS A VOTE RATIFYING THE SELECTION OF COOPERS
AS THE INDEPENDENT AUDITORS FOR THE TRUST FOR THE CURRENT FISCAL
YEAR. COOPERS IS ONE OF THE COUNTRY'S PREEMINENT ACCOUNTING
FIRMS, AND PRESENTLY SERVES AS THE INDEPENDENT AUDITORS FOR THE
FUND.
At a meeting held on April 18, 1996, the Board of Trustees of the Trust
selected Coopers to serve as the independent auditors to audit the books and
accounts of the Trust for the fiscal year ending May 31, 1997. If this
proposal is approved, the Fund will vote the shares of beneficial interest it
holds in the Trust for ratification of the selection of Coopers as the
independent auditors of the Trust. A representative of Coopers is not
expected to be present at the meeting.
INFORMATION CONCERNING ADVISERS AND THE MANAGEMENT AGREEMENTS
IF YOU VOTE TO APPROVE THE REORGANIZATION, YOUR VOTE WILL ALSO
HAVE THE SAME EFFECT AS A VOTE APPROVING THE NEW INVESTMENT
MANAGEMENT AGREEMENT BETWEEN THE TRUST AND ADVISERS, WHICH IS
SUBSTANTIALLY IDENTICAL TO THE AGREEMENT CURRENTLY IN PLACE FOR
THE FUND. THE INVESTMENT MANAGEMENT AGREEMENT ESTABLISHES THE
RELATIONSHIP BETWEEN A MUTUAL FUND AND ITS INVESTMENT MANAGER,
AND OUTLINES THE RESPONSIBILITIES OF THE MANAGER AND THE
COMPENSATION TO BE PAID BY THE FUND FOR THE MANAGEMENT OF ITS
ASSETS.
INCLUDED BELOW IS DETAILED INFORMATION ABOUT ADVISERS AS WELL AS
THE CURRENT AND PROPOSED INVESTMENT MANAGEMENT AGREEMENTS.
If this proposal is approved, the Fund will vote the share of beneficial
interest it holds in each class of the Trust for approval of the management
agreement between the Trust and Advisers.
ADVISERS
Advisers, whose principal address is 777 Mariners Island Boulevard, San
Mateo, California 94404, serves as the investment manager of the Fund and is
proposed to also serve as investment manager of the Trust. Advisers is a
registered investment adviser and a wholly-owned subsidiary of Resources,
whose principal address is 777 Mariners Island Boulevard, San Mateo,
California 94404. Through its subsidiaries, Resources is engaged in various
aspects of the financial services industry.
Advisers also provides advisory and management services to the 36 investment
companies (124 separate series) in the Franklin Group of FundsAE which
collectively have aggregate assets over $81 billion. Charles B. Johnson is
Chairman of the Board of Advisers, Rupert H. Johnson, Jr. is President and
Director of Advisers. Charles B. Johnson and Rupert H. Johnson, Jr.
beneficially own approximately 20% and 16%, respectively, of Resources'
outstanding voting securities, which are traded on the New York Stock
Exchange. Charles B. Johnson and Rupert H. Johnson, Jr. are brothers. See
"Proposal I: Election of Directors" which sets forth the officers of the
Trust and the Fund who are officers of Advisers. The address of each officer
and director of Advisers is the office of Advisers stated above.
Certain officers and directors of the Trust and the Fund, respectively, are
stockholders of Resources and may be deemed to receive indirect remuneration
by virtue of their participation in management fees, underwriting
commissions, or Rule 12b-1 distribution fees received or to be received by
Advisers or Distributors, the Fund's principal underwriter. Distributors'
principal address is 777 Mariners Island Boulevard, San Mateo, California
94404.
MANAGEMENT AGREEMENT WITH THE TRUST
Under the management agreement with the Trust, which is substantially
identical to the management agreement currently in effect for the Fund,
Advisers will provide investment research and portfolio management services,
including the selection of securities for the Trust to purchase, hold or sell
and the selection of brokers through whom the Trust's portfolio transactions
are executed. Advisers' activities will be subject to the review and
supervision of the Trust's Board of Trustees to whom Advisers will render
periodic reports of the Trust's investment activities. Advisers will furnish
the Trust with office space and office furnishings, facilities and equipment
reasonably required for managing the business affairs of the Trust; will
maintain all internal bookkeeping, clerical, secretarial and executive
personnel and services; and provide certain telephone and other mechanical
services. Advisers is covered by fidelity insurance on its officers,
directors and employees for the protection of the Trust. The Trust will bear
all of its expenses not assumed by Advisers.
Pursuant to the management agreement, the Trust will be obligated to pay
Advisers a fee computed as of the close of business on the last business day
of each month equal to a monthly rate of 5/96 of 1% of the value of net
assets up to and including $100,000,000; and 1/24 of 1% of the value of net
assets over $100,000,000 and not over $250,000,000; and; and 9/240 of 1% of
the value of net assets over $250,000,000 and not over $10 billion; and
11/300 of 1% of the value of net assets over $10 billion and not over $12.5
billion; and 7/200 of 1% of the value of net assets over $12.5 billion and
not over $15 billion and; 1/30 of 1% of the value of net assets over $15
billion and not over $17.5 billion; and 19/600 of 1% of the value of net
assets over from $17.5 billion and not over $20 billion; and 3/100 of 1% of
the value of net assets in excess of $20 billion. Each class will pay its
share of the fee as determined by the proportion of the Fund that it
represents. The management agreement specifies that the management fee will
be reduced or eliminated to the extent necessary to comply with the most
stringent limits on the expenses which may be borne by the Trust as
prescribed by any state in which the Trust's shares are registered. The most
stringent current limit requires Advisers to reduce or eliminate its fee to
the extent that aggregate operating expenses of the Trust (excluding
interest, taxes, brokerage commissions and extraordinary expenses such as
litigation costs) would otherwise exceed in any fiscal year 2.5% of the first
$30 million of average net assets of the Trust, 2% of the next $70 million of
average net assets of the Trust and 1.5% of average net assets of the Trust
in excess of $100 million. Expense reductions with respect to the Fund have
not been necessary based on state requirements.
The management agreement was approved by the Board of Trustees at a meeting
held on July 15, 1996. Once the agreement is formalized in connection with
the Reorganization, it will be in effect for an initial period of two years
and may continue in effect for successive annual periods providing such
continuance is specifically approved at least annually by a vote of the
Trust's Board of Trustees or by a vote of the holders of a majority of the
Trust's outstanding voting securities, and in either event by a majority vote
of the Trust's Trustees who are not parties to the management agreement or
interested persons of any such party (other than as trustees of the Trust),
cast in person at a meeting called for that purpose. The management
agreement may be terminated without penalty at any time by the (1) vote of
the Board of Trustees of the Trust or vote of the holders of a majority of
the outstanding voting securities of the Trust, on 30 days' written notice to
Advisers or (2) Advisers, on 30 days' written notice and will automatically
terminate in the event of its assignment as defined in the 1940 Act.
MANAGEMENT AGREEMENT WITH THE FUND
The management agreement between the Fund and Advisers, dated May 1, 1994,
was most recently renewed by the Board of Directors of the Fund on July 15,
1996 to continue in effect until July 31, 1997, and was last submitted to
stockholders on March 2, 1994 for the purpose of approving a new management
agreement with Advisers. The terms of the Fund's management agreement are
the same in all material respects as the Trust's management agreement with
Advisers, except for the effective and termination dates. The Fund paid
management fees to Advisers for the fiscal year ended May 31, 1996 of
$21,810,902. For the fiscal year ended May 31, 1996, the Fund did not pay
any commissions to any affiliated brokers.
SIMILAR FUNDS MANAGED BY ADVISERS
Advisers also serves as the investment manager for certain other mutual funds
whose investment objectives are similar to those of the Fund and the Trust.
The following table provides information about such funds and summarizes the
rate of investment management fees paid to Advisers by such funds:
ASSET SIZE MANAGEMENT FEE RATE
AS OF BASED ON THE VALUE
FUND NAME MAY 31, 1996 OF NET ASSETS
Franklin New York $ 43,166,072 (computed as of the close of
Intermediate-Term business on the last business
Tax-Free Income Fund day of the month)
5/96 of 1% (approximately 5/8 of
1% per year) up to and including
$100,000,000; and
1/24 of 1% (approximately 1/2 of
1% per year) over $100,000,000
and not over $250,000,000; and
9/240 of 1% (approximately
45/100 of 1% per year) in excess
of $250,000,000
Franklin New York $255,466,034 (computed as of the close of
Insured Tax-Free Income business on the last business
Fund day of the month)
5/96 of 1% (approximately 5/8 of
1% per year) up to and including
$100,000,000; and
1/24 of 1% (approximately 1/2 of
1% per year) over $100,000,000
and not over $250,000,000; and
9/240 of 1% (approximately
45/100 of 1% per year) in excess
of $250,000,000
INFORMATION CONCERNING THE TRUST'S DISTRIBUTION PLANS
IF YOU VOTE TO APPROVE THE REORGANIZATION, YOUR VOTE WILL ALSO HAVE THE SAME
EFFECT AS A VOTE APPROVING THE DISTRIBUTION PLANS THAT WERE ADOPTED BY THE
TRUST PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT FOR EACH OF ITS CLASSES (THE
"PLANS"), AND WHICH ARE SUBSTANTIALLY IDENTICAL TO THE DISTRIBUTION PLANS
CURRENTLY IN PLACE FOR THE RESPECTIVE CLASSES OF THE FUND.
EACH PLAN AUTHORIZES THE TRUST TO REIMBURSE DISTRIBUTORS OR OTHERS FOR
EXPENSES RELATING TO THE DISTRIBUTION OF THE SHARES OF THE RESPECTIVE CLASS
OF THE TRUST IN AMOUNTS OF UP TO SPECIFIED PERCENTAGES OF SUCH CLASS' AVERAGE
DAILY NET ASSETS PER YEAR. INCLUDED BELOW IS DETAILED INFORMATION ABOUT THE
PLANS (AND THE EXISTING DISTRIBUTION PLANS CURRENTLY IN PLACE FOR THE FUND),
AS WELL AS INFORMATION ABOUT DISTRIBUTORS.
A separate Plan was approved and adopted by the Board of Trustees for each
class ("Class I Plan" and "Class II Plan," respectively) at a meeting held on
July 15, 1996. If this proposal is approved, the Fund will vote its share of
beneficial interest of each class of the Trust for approval of the Plan
applicable to the particular class.
Under the Plans, Distributors or others will be entitled to be reimbursed
each quarter for actual expenses, subject to certain maximums, incurred in
the distribution and promotion of the Trust's shares, including, but not
limited to, distribution or service fees paid to Securities Dealers or others
who have executed a servicing agreement with the Fund, Distributors or its
affiliates, printing prospectuses and reports used for sales purposes,
preparing and distributing sales literature and advertisements, and a
prorated portion of Distributors' overhead expenses. All expenses of
distribution and marketing over the maximum amounts allowable under the Plans
will be borne by Distributors, or others who have incurred them, without
reimbursement by the Trust, and the Plans do not permit unreimbursed expenses
incurred in a particular year to be carried over to or be reimbursed in
subsequent years.
The maximum amount which the Trust may pay to Distributors or others under
the Class I Plan for distribution expenses is 0.10% per year of the class'
average daily net assets payable on a quarterly basis. In implementing the
Class I Plan, the Board has determined that the annual fees payable under the
Plan will be equal to the sum of: (i) the amount obtained by multiplying
0.10% by the average daily net assets represented by Class I shares of the
Fund and the Trust that were acquired by investors on or after May 1, 1994,
the effective date of the Fund's Class I distribution plan ("New Assets"),
and (ii) the amount obtained by multiplying 0.05% by the average daily net
assets represented by Class I shares of the Fund that were acquired before
the effective date of the Fund's Class I distribution plan ("Old Assets").
Such fees will be paid to the current securities dealer of record on the
shareholder's account. In addition, until such time as the maximum payment
of 0.10% is reached on a yearly basis, up to an additional 0.01% will be paid
to Distributors under the Plan. The payments to be made to Distributors will
be used by Distributors to defray other marketing expenses that have been
incurred in accordance with the Plan, such as advertising.
The fee relating to the Class I Plan is a Class I expense so that all
shareholders regardless of when they purchased their shares will bear Rule
12b-1 expenses at the same rate. The rate at which Rule 12b-1 fees were
charged during the Fund's previous fiscal year was .07% of Class I's average
daily net assets. It is likely that, as the proportion of Class I shares
purchased on or after the effective date of the Class I Plan increases in
relation to outstanding Class I shares, the expenses attributable to payments
under the Plan will also increase (but will never exceed 0.10% of average
daily net assets). While this is the currently anticipated calculation for
fees payable under the Class I Plan, the Class I Plan permits the Trustees of
the Trust to allow the Trust to pay a full 0.10% on all assets attributable
to Class I at any time. The approval of the Board of Trustees would be
required to change the calculation of the payments to be made under the Plan.
Under the Class II Plan, the Trust pays to Distributors distribution and
related expenses up to 0.50% per annum of Class II's average daily net assets
payable quarterly. Such fees may be used to compensate Distributors or
others for providing distribution and related services and bearing certain
expenses of the Class. In addition, the Class II Plan provides for an
additional payment by the Trust of up to 0.15% per annum, payable quarterly,
of the Class II's average daily net assets as a servicing fee. This fee will
be used to pay dealers or others for, among other things, assisting in
establishing and maintaining customer accounts and records; assisting with
purchase and redemption requests; receiving and answering correspondence;
monitoring dividend payments from the Trust on behalf of the customers, and
similar activities related to furnishing personal services and maintaining
shareholder accounts.
Under both Plans, Distributors will be required to report in writing to the
Board of Trustees at least quarterly on the amounts and purpose of any
payment made under the Plan and any related agreements, as well as to furnish
the Board of Trustees with such other information as may be reasonably
requested in order to enable the Board of Trustees to make an informed
determination of whether the Plan should be continued.
Each Plan will be in effect for an initial period of one year from its
adoption, and will be renewable annually by a vote of the Trust's Board of
Trustees, including a majority vote of the Trustees who are non-interested
persons of the Trust, and who have no direct or indirect financial interest
in the operation of the Plans, cast in person at a meeting called for that
purpose. It will also be required that the selection and nomination of such
trustees be made by the non-interested Trustees. The Plans and any related
agreements may be terminated at any time, without any penalty, by vote of a
majority of the non-interested Trustees on not more than 60 days written
notice, by Distributors on not more than 60 days written notice, by any act
that constitutes an assignment of the management agreement with Advisers, or
by vote of a majority of the Trust's outstanding shares. The Class I Plan
may also be terminated by any act that constitutes an assignment of the
underwriting agreement with Distributors. Distributors or any dealer or
other firm may also terminate their respective distribution or service
agreement at any time upon written notice.
The Plans and any related agreements may not be amended to increase
materially the amount to be spent for distribution expenses without approval
by a majority of the relevant class, outstanding shares, and all material
amendments to the Plans or any related agreements shall be approved by a vote
of the non-interested trustees, cast in person at a meeting called for the
purpose of voting on any such amendment.
INFORMATION CONCERNING THE FUND'S DISTRIBUTION PLANS
The Fund has also adopted Class I and Class II distribution plans pursuant to
Rule 12b-1 under the 1940 Act, which were most recently approved by the Board
of Directors of the Fund on July 15, 1996, to continue in effect until July
31, 1997. The Fund's distribution plans are the same in all material
respects as the Trust's Plans, including the way in which the annual fees
payable under the Plans are calculated.
For the fiscal year ended May 31, 1996, the amount of distribution fees paid
by the Fund was $3,162,428 or .07% of the total average net assets of the
Class I shares, and $133,675 or .65% of the average net assets of the Class
II shares. As described above, the purpose of such fees is to compensate or
reimburse Distributors for distribution and related expenses.
INVESTOR SERVICES
Investor Services, a wholly-owned subsidiary of Resources, is the shareholder
servicing agent for the Trust and the Fund and also acts as the transfer
agent and dividend-paying agent for the Trust and the Fund. Investor
Services is compensated on the basis of a fixed fee per account. For the
fiscal year ended May 31, 1996, the Fund paid $1,254,383 to Investor Services
for its services.
OTHER MATTERS
In the event that sufficient votes in favor of the proposals set forth in the
Notice of Annual Meeting of Shareholders are not received by the date of the
Meeting, the proxyholders may propose one or more adjournments of the meeting
for a period or periods of not more than 30 days in the aggregate to permit
further solicitation of proxies, even though a quorum is present. Any such
adjournment will require the affirmative vote of a majority of the votes cast
on the questions, in person or by proxy, at the session of the meeting to be
adjourned. The costs of any such additional solicitation and of any
adjourned session will be borne by the Fund.
OTHER INFORMATION
THE INFORMATION SET OUT BELOW, WHILE NOT DIRECTLY RELATED TO THE PROPOSALS
THAT YOU ARE BEING ASKED TO CONSIDER, IS REQUIRED BY THE SEC TO BE INCLUDED
IN THE PROXY STATEMENT.
SHAREHOLDERS' PROPOSALS
If proposal III is not approved by shareholders, the Fund anticipates holding
its next annual meeting in September 1997. Any shareholder intending to
present any proposal for consideration at the Fund's next meeting must, in
addition to meeting other applicable requirements, mail such proposal so that
it is received at the Fund's executive offices not less than 120 days in
advance of August 9, 1997.
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS
The Annual Report to Shareholders of the Fund, including financial statements
of the Fund for the fiscal year ended May 31, 1996 will be mailed to all
shareholders. UPON REQUEST, SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF
THE ANNUAL REPORT OR THE MOST RECENT SEMI-ANNUAL REPORT BY WRITING THE FUND
AT THE ADDRESS ABOVE OR CALLING THE FUND AT 1-800/DIAL BEN.
Respectfully Submitted,
BRIAN E. LORENZ
Secretary
Dated: August 9, 1996
San Mateo, California
SHAREHOLDERS WHO ARE UNABLE TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO
FILL IN, DATE AND SIGN THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
PREPAID ENVELOPE.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, GIVE
YOUR FULL TITLE AS SUCH. WHERE STOCK IS HELD JOINTLY, BOTH SIGNATURES ARE
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made
this __ day of ______________, 1996 by and between Franklin New York
Tax-Free Income Fund, Inc. (the "Fund") a New York corporation with it
principal place of business at 777 Mariners Island Boulevard, San Mateo, CA
94403-7777, and Franklin New York Tax-Free Income Fund (the "Trust"), a
business trust created under the laws of the State of Delaware with its
principal place of business at 777 Mariners Island Boulevard, San Mateo, CA
94403-7777.
In consideration of the mutual promises contained herein, and intending
to be legally bound, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION.
(a) Upon satisfaction of the conditions precedent described in
Section 3 hereof, the Fund will convey, transfer and deliver to the
Trust at the closing provided for in Section 2 (hereinafter referred to
as the "Closing") all of its then-existing assets. In consideration
thereof, the Trust agrees at the Closing (i) to assume and pay, to the
extent that they exist on or after the Effective Date of the
Reorganization (as defined in Section 2 hereof), all of the Fund's
obligations and liabilities, whether absolute, accrued, contingent or
otherwise, including all fees and expenses in connection with the
Agreement, including without limitation costs of legal advice,
accounting, printing, mailing, proxy solicitation and transfer taxes,
if any, the obligations and liabilities allocated to the Fund to become
the obligations and liabilities of the Trust, and (ii) to deliver to
the Fund full and fractional shares of beneficial interest of the
Trust, par value $0.01, equal in number to the number of full and
fractional shares of common stock, with $0.01 par value, of the Fund.
The transactions contemplated hereby are intended to qualify as a
reorganization within the meaning of Section 368(a) of the Code.
(b) The Trust will effect such delivery by establishing an open
account for each stockholder of the Fund and by crediting to such
account, the exact number of full and fractional shares of the
appropriate class of the Trust such stockholder held in the
corresponding class of the Fund on the Effective Date of the
Reorganization. Fractional shares of the Trust will be carried to the
third decimal place. On the Effective Date of the Reorganization, the
net asset value per share of beneficial interest of each class of the
Trust shall be deemed to be the same as the net asset value per share
of each class of the Fund. On such date, each certificate representing
shares of a class of the Fund will represent the same number of shares
of the corresponding class of the Trust. Each stockholder of the Fund
will have the right to exchange his (her) share certificates for share
certificates of the corresponding class of the Trust. However, a
stockholder need not make this exchange of certificates unless he (she)
so desires. Simultaneously with the crediting of the shares of the
Trust to the stockholders of record of the Fund, the shares of the Fund
held by such stockholder shall be canceled.
(c) As soon as practicable after the Effective Date of the
Reorganization, the Fund shall take all necessary steps under New York
law to effect a complete dissolution of the Fund.
2. CLOSING AND EFFECTIVE DATE OF THE REORGANIZATION. The Closing shall
commence at 3:00 p.m. Pacific time on September 30 1996, or such later date
as the parties may agree, and shall be effective on the business day
following the commencement of the Closing (the "Effective Date"). The Closing
will take place at the principal offices of the Fund and Trust, 777 Mariners
Island Boulevard, San Mateo, CA 94404.
3. CONDITIONS PRECEDENT. The obligations of the Fund and the Trust to
effectuate the Reorganization hereunder shall be subject to the satisfaction
of each of the following conditions:
(a) Such authority and orders from the Securities and Exchange
Commission (the "Commission") and state securities commissions as may
be necessary to permit the parties to carry out the transactions
contemplated by this Agreement shall have been received;
(b) One or more post-effective amendments to the Fund's Registration
Statement on Form N-1A under the Securities Act of 1933 and the "1940
Act", containing (i) such amendments to such Registration Statement as
are determined by the Directors of the Fund to be necessary and
appropriate as a result of the Agreement, and (ii) the adoption by the
Trust as its own of such Registration Statement, as so amended, shall
have been filed with the Commission, and such post-effective amendment
or amendments to the Fund's Registration Statement shall have become
effective, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceeding for
that purpose shall have been initiated or threatened by the Commission
(other than any such stop order, proceeding or threatened proceeding
which shall have been withdrawn or terminated);
(c) Confirmation shall have been received from the Commission or the
Staff thereof that Trust shall, effective upon or before the Closing
Date of the Reorganization, be duly registered as an open-end
management investment company under the Act of 1940, as amended;
(d) Each party shall have received a ruling from the Internal Revenue
Service or an opinion from Messrs. Bleakley Platt & Schmidt, White
Plains, New York, to the effect that the reorganization contemplated by
this Agreement qualifies as a "reorganization" under Section 368(a) of
the Code, and, thus, will not give rise to the recognition of income,
gain or loss for federal or state income tax purposes to the Fund, the
Trust or stockholders of the Fund or the Trust;
(e) The Trust shall have received an opinion from Messrs. Bleakley
Platt & Schmidt, addressed to and in form and substance satisfactory to
it, to the effect that (i) this Agreement and the Reorganization
contemplated thereby, and the execution of this Agreement, has been
duly authorized and approved by the Fund and constitutes a legal, valid
and binding agreement of the fund in accordance with its terms; (ii)
the Fund is duly organized and validly existing under the laws of the
State of New York.
(f) The Fund shall have received an opinion from Messrs. Bleakley,
Platt & Schmidt, White Plains, NY, addressed to and in form and
substance satisfactory to it, to the effect that (i) this Agreement and
the reorganization contemplated thereby and the execution of this
Agreement, has been duly authorized and approved by the Trust and
constitutes a legal, valid and binding agreement of the Trust in
accordance with its terms; (ii) the Trust is duly organized, validly
existing and in good standing under the laws of the State of Delaware;
and (iii) the shares of each class of the
(g) The shares of the Trust shall have been duly qualified for
offering to the public in those states of the United States, and
jurisdictions where they are presently qualified so as to permit the
transfers contemplated by this Agreement to be consummated;
(h) This Agreement and the reorganization contemplated hereby shall
have been adopted and approved by an affirmative vote of at least
two-thirds of all votes entitled to be cast at a meeting of the
stockholders of the Fund including a majority of the shares outstanding
in each class;
(i) The stockholders of the Fund shall have voted to direct the Fund
to vote, and the Fund shall have voted, as sole shareholder of each
class of the Trust, to:
(1) Elect as Trustees of the Trust (the "Trustees") the
following individuals: Messrs. Ashton, Fortunato, Charles B.
Johnson, Rupert H. Johnson, Jr., and Macklin;
(2) Select Coopers as the independent auditors for the
Trust for the fiscal year ending May 31, 1997;
(3) Approve a new investment management agreement between
the Trust and Franklin Advisers, Inc., which is substantially
identical to the current investment management agreement between
the Fund and Franklin Advisers, Inc.; and
(4) Approve a distribution plan for each class of the
only series of the Trust, as adopted pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended, which is
substantially identical to the current 12b-1 distribution plan
for each class of stock of the Fund;
(j) The Trustees shall have taken the following action at a
meeting duly called for such purposes:
(1) Approval of the Trust's Custodian Agreement;
(2) Selection of Coopers & Lybrand, L.L.P. as the Trust's
auditors for the fiscal year ending May 31, 1997;
(3) Approval of an investment management agreement
between the Trust and Franklin Advisers, Inc., which is
substantially identical to the current investment management
agreement between the Fund and Franklin Advisers, Inc.;
(4) Authorization of the issuance by the Trust, prior to
the Effective Date of the Reorganization, of one share of each
class of the Trust, to the Fund in consideration for the payment
of its then current public offering price for the purpose of
enabling the Fund to vote on matters referred to in paragraph (i)
of this Section 3;
(5) Submission of the matters referred to in paragraph
(i) of this Section 3 to the Fund as sole shareholder of the
Trust; and
(6) Authorization of the issuance by the Trust of shares
of the Trust on the Effective Date of the Reorganization in
exchange for the assets of the Fund pursuant to the terms and
provisions of this Agreement.
At any time prior to the Closing, any of the foregoing
conditions may be waived by the Board of Directors of the Fund if, in
the judgment of the Directors, such waiver will not have a material
adverse effect on the benefits intended under this Agreement to the
stockholders of the Fund.
4. TERMINATION. The Board of Directors of the Fund may terminate this
Agreement and abandon the reorganization contemplated hereby, notwithstanding
approval thereof by the stockholders of the Fund, at any time prior to the
Effective Date of the Reorganization if, in the judgment of the Directors,
the facts and circumstances make proceeding with the Agreement inadvisable.
5. ENTIRE AGREEMENT. This Agreement embodies the entire agreement between
the parties and there are no agreements, understandings, restrictions or
warranties among the parties other than those set forth herein or herein
provided for.
6. FURTHER ASSURANCES. The Fund and the Trust shall take such further
action as may be necessary or desirable and proper to consummate the
transactions contemplated hereby.
7. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
8. GOVERNING LAW. This Agreement and the transactions contemplated hereby
shall be governed by and construed and enforced in accordance with the laws
of the State of Delaware.
IN WITNESS WHEREOF, the Trust and the Fund have each caused this
Agreement and Plan of Reorganization to be executed on its behalf by its
President and its seal to be affixed hereto and attested by its Secretary,
all as of the day and year first-above written.
Attest: Franklin New York
Tax-Free Income Fund, Inc.
By: By:
Brian E. Lorenz Charles B. Johnson
Secretary President
Attest: Franklin New York
Tax-Free Income Fund
By: By:
Brian E. Lorenz Charles B. Johnson
Secretary President
APPENDIX B
DIFFERENCES BETWEEN THE LEGAL STRUCTURE OF A DELAWARE
BUSINESS TRUST AND A NEW YORK CORPORATION
The following discussion provides a summary of the material differences
between the legal structure of a Delaware business trust, created pursuant to
the Delaware Business Trust Act (the "Delaware Act"), and a corporation
organized under the New York Business Corporation Law (the "New York Act").
The different legal structures are considered by contrasting the provisions
of the charter documents of the Franklin New York Tax-Free Income Fund, Inc.,
which is a New York corporation (the "Fund"), with the governing documents of
its proposed successor, Franklin New York Tax-Free Income Fund, a Delaware
business trust (the "Trust"), as well as the respective laws applicable to
such entities.
GOVERNING INSTRUMENTS
The business and affairs of the Fund are governed under the New York
Act by its Certificate of Incorporation ("Certificate") and by its bylaws.
An Agreement and Declaration of Trust ("Declaration of Trust") and bylaws are
the instruments which provide for the governance of the business and affairs
of the Trust.
MULTIPLE SERIES AND CLASSES
Mutual funds commonly issue a number of different series of shares of
stock, each of which has its own investment objective and policies and
represents a different pool of portfolio securities. Investors can buy
shares of a fund's various series, such as an equity, bond or money market
series, which are generally viewed by shareholders, in effect, as separate
funds.
The Fund's Certificate currently provide for a single series of stock,
which is further subdivided into two separate classes of shares carrying
differing sales and distribution charges and voting rights. Under the Fund's
Certificate, consistent with the New York Act, the Board of Directors of the
Fund may not, however, create any series or class of shares of the Fund
without seeking and obtaining shareholder approval of an amendment to the
Fund's Certificate.
The Delaware Act, unlike the New York Act, would allow the Board of
Trustees of the Trust to create additional series or classes of beneficial
interests (shares), having such relative rights, powers and duties as the
Declaration of Trust may provide. Furthermore, additional series and/or
classes of shares may be created by resolution of the Board of Trustees
without requiring shareholder approval.
Under the Delaware Act, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series of a multiple series investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act") are
enforceable only against the assets of such series, and not against the
assets of the trust generally, provided that certain requirements are
satisfied. The Trust intends to fulfill such requirements and its
Declaration of Trust provides that each of its series shall not be charged
with the liabilities of another series. The New York Act does not contain
specific statutory provisions addressing series liability with respect to a
multiple series investment company; although, if the stock of a corporation
is divided into series, the New York Act requires the articles of
incorporation to set forth any preferences or restrictions relating to such
series. Therefore, liabilities incurred with respect to a particular series
may be enforceable against the Fund generally.
Notwithstanding the foregoing, a court applying federal securities law
may not respect provisions which serve to limit the liability of one series
of an investment company's shares for the liabilities of another series.
Several Federal district court holdings indicate that the provisions relating
to series liability that are contained in either the governing instrument of
a Delaware Business trust "DBT" or in the articles of incorporation of a New
York corporation may be preempted by the way in which the courts interpret
the 1940 Act. Although provisions relating to series liability in the
governing instrument of a DBT or the articles of incorporation of a New York
corporation may be preempted by judicial interpretation of the 1940 Act, such
provisions in the governing instrument of a DBT may be more likely to be
upheld because the Delaware Act contains an express statutory provision.
SHAREHOLDER VOTING POWERS AND MEETINGS
Shareholders of both a "DBT" and a New York corporation are subject to
the voting requirements contained in the 1940 Act in connection with the
election and removal of trustees or directors, the selection of auditors and
the approval of investment advisory agreements and any plan of distribution.
There are differences, however, in the Delaware Act and the New York Act with
respect to shareholder voting on other matters.
The Delaware Act provides that the governing instrument may grant to,
or withhold from, all or certain trustees or beneficial owners, or a
specified class, group or series of trustees or beneficial owners, the right
to vote, separately or with any or all other classes, groups or series of the
trustees or beneficial owners on any matter.
AMENDING GOVERNING DOCUMENTS. The Delaware Act provides more
flexibility, as compared with the New York Act, with respect to procedures
for amending a fund's governing documents. The Trust's Declaration of Trust
states that, if shares have been issued, shareholder approval is only
required in order to adopt any amendments to the Declaration of Trust which
would adversely affect to a material degree the rights and preferences of the
shares of any series (or class) or to increase or decrease the par value of
the shares of any series (or class). In addition, before adopting any
amendment to the Declaration of Trust relating to shares without shareholder
approval, the trustees are required to determine that it is: (i) consistent
with the fair and equitable treatment of all shareholders; and (ii)
shareholder approval is not required by the 1940 Act or other applicable law.
Under the New York Act, the Fund's Certificate may only be amended,
with certain minor exceptions if approved by both the Board of Directors and
a majority of the Fund's outstanding shares entitled to vote. One practical
effect of the differences between the Delaware Act and the New York Act for
the Fund is that the Fund would be required to seek shareholder approval in
order to amend its Certificate to allow it to create new series or classes;
or change the name of the Fund or its series, while the board of a fund
organized as a DBT could approve such changes without the expense or delay
associated with obtaining shareholder approval.
GENERAL VOTING REQUIREMENTS. The governing documents of the Trust and
Fund contain different requirements with respect to establishing a quorum of
shareholders for purposes of holding a shareholder vote at a meeting of
shareholders. Unless a larger quorum is required by the applicable
provisions of the 1940 Act, the Declaration of Trust of the Trust provides
that a majority of the shares entitled to vote on a matter, present either in
person or by proxy, shall constitute a quorum at a shareholders' meeting.
Consistent with the Declaration of Trust, the bylaws of the Trust further
provide that, when a quorum is present at any meeting, a majority of the
shares voted shall decide any questions, unless the question is one for which
a different vote is required by express provision of Delaware law, the 1940
Act or the Declaration of Trust. With respect to the election of Trustees,
only a plurality vote is necessary.
Similar to the Trust's Declaration of Trust, the Fund's bylaws and the
New York Act provide that the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote shall constitute a
quorum, except as otherwise provided by the 1940 Act or the Fund's
Certificate. When a quorum is present, a majority vote of the shares
entitled to vote held by stockholders present in person or by proxy shall
decide any matter, unless the question is one for which a two-thirds majority
or some other percentage is required under the New York Act, the 1940 Act or
the Fund's Certificate. The bylaws provide that a plurality of the shares
present in person or by proxy shall elect the Directors.
MEETINGS OF SHAREHOLDERS. Under the Delaware Act, annual meetings of a
registered investment company's shareholders are not required to be held.
The Delaware Act does not require annual meetings to be held in any case;
however, the bylaws of the trust provide that an annual meeting of
shareholders will be held if the 1940 Act requires the election of trustees
to be acted upon.
Unlike the Delaware Act, the New York Act requires that a meeting of
shareholders be held annually. Failure to hold such a meeting, however,
neither affects the validity of any corporate action nor will such failure
operate as a forfeiture or dissolution of the corporation.
SHAREHOLDER LIABILITY
The Delaware Act provides that, except to the extent otherwise provided
in the governing instrument, the beneficial owners of a DBT shall be entitled
to the same limitation of personal liability extended to stockholders of a
private corporation organized for profit under the general corporation law of
Delaware. There is no specific provision in the Fund's Declaration of Trust
or bylaws varying this provision. As a general matter, shareholders of a New
York corporation are not liable for the obligations of the corporation.
LIABILITY OF DIRECTORS/TRUSTEES
The Delaware Act provides that a trustee shall not be personally liable
to any person other than the business trust or a beneficial owner for any
act, omission or obligation of the business trust or any trustee. The
Delaware Act also states that the trustee's duties and liabilities to the
trust and its shareholders may be expanded or restricted by provisions in the
governing instrument. In this regard, the Trust's Declaration of Trust
provides that the Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent, employee, manager or
principal underwriter of the Trust, nor shall any Trustee be responsible for
the act or omission of any other trustee. In addition, the Declaration of
Trust also states that the trustees, acting in their capacity as trustees,
shall not be personally liable for acts done by or on behalf of the Trust.
The New York Act requires a director to perform his or her duties in
good faith, in a manner he or she reasonably believes to be in the best
interests of the corporation and its shareholders and with such care,
including reasonable inquiry, that an ordinarily prudent person in a like
position would use under similar circumstances. A director who performs his
or her duties in accordance with this standard has no liability by reason of
being or having been a director. A director, may be personally liable to the
corporation for voting or assenting to a distribution of assets to
stockholders or taking other action which is in violation of its Certificates
or provisions of the New York Act.
INDEMNIFICATION
The Declaration of Trust, consistent with the Delaware Act, provides
that the Trust, subject to its Declaration of Trust and bylaws, may
indemnify, out of its assets, and hold harmless each and every trustee and
officer from and against any and all claims, demands, costs, losses,
expenses, and damages, arising out of, or related to, such trustee's
performance of his or her duties as a trustee or officer. Pursuant to the
Declaration of Trust, the Trust will not indemnify any trustee or officer
from or against any liability to the Trust or any shareholder by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Pursuant to the New York Act a director may not be indemnified if it is
established that the act or omission of the director was material to the
matter giving rise to the proceeding and was committed in bad faith or was
the result of active and deliberate dishonesty; or in the case of any
criminal proceeding, the director had reasonable cause to believe that the
act or omission was unlawful. In the case of a proceeding by or in the right
of the corporation against a director, indemnification may not be made in
respect of any proceeding in which the director is adjudged to be liable to
the corporation. In addition, a director may not be indemnified when he or
she is adjudged to be liable on the basis that he or she improperly received
personal benefits, regardless of whether or not the proceeding involves
action in the director's official capacity. There is a comparable provision
in the Trust's bylaws. Also similar to the bylaws of the Trust, the New York
Act states that the termination of any proceeding by judgment, order or
settlement does not create a presumption that the director did not meet the
standard of conduct to permit indemnification by the Fund.
Similar to the Declaration of Trust, the Fund's bylaws provide that the
Fund shall not protect any officer or director for any liability arising from
the willful misfeasance, bad faith, gross negligence, or the reckless
disregard of the duties involved in the conduct of such person's duties to
the Fund.
INSURANCE
The Delaware Act does not contain a provision specifically related to
insurance. The Declaration of Trust, however, provides that the Trustees
shall be entitled and empowered to the fullest extent permitted by law to
purchase with Trust assets insurance for liability and for all expenses
reasonably incurred or paid or expected to be paid by a trustee or officer in
connection with any claim, action, suit or proceeding in which he or she
becomes involved by virtue of his or her capacity (or former capacity) with
the Trust. The bylaws of the Trust permit insurance coverage to the fullest
extent permitted by law and extend such coverage to employees of the Trust.
The New York Act provides that the Fund may purchase insurance on
behalf of any director, officer or employee of the Fund against any liability
asserted against and incurred by such person in any such capacity or arising
out of such person's position, whether or not the Fund would have the power
to indemnify such person against such liability provided that insurance may
not provide for payment, other than costs of defense where a director,
officer, trustee, or employee is judged to have acted dishonestly or obtained
a profit or gain to which he was not entitled.
FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
The undersigned hereby revokes all previous proxies
for his shares and appoints, Charles B. Johnson,
Brian E. Lorenz, Harmon E. Burns, and Deborah R.
Gatzek, and each of them, proxies of the undersigned
with full power of substitution to vote all shares
of Franklin New York Tax-Free Income Fund, Inc.
(the "Fund") which the undersigned is entitled to
vote at the Fund's Annual Meeting to be held at the
Westchester Marriott Hotel, 670 White Plains Road,
Tarrytown, New York 10591 at 10:00 a.m. Eastern
time on the 18th day of September, 1996, including
any adjournments thereof, upon the matters set forth
below.
TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
TO VOTE, MARK BLOCKS BELOW IN BLUE KEEP THIS PORTION FOR
OR BLACK INK AS FOLLOWS [X] YOUR RECORDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
DETACH AND RETURN THIS PORTION ONLY
FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
1. Election of Directors: 01) Harris
FOR J. Ashton, 02) S. Joseph Fortunato, 03)
FOR WITH ALL Charles B. Johnson, 04) Rupert H. Johnson,
ALL OR HOLD OR EXCEPT Jr., and 05) Gordon S. Macklin
----------------------------------------
FOR AGAINST ABSTAIN
2. To ratify the selection of Coopers &
Lybrand L.L.P., Certified Public
Accountants, as the independent auditors
for the Fund for the fiscal year ending
May 31, 1997.
3. To approve a change of the Fund's
place and form of organization from a New
York corporation to a Delaware business
trust.
WITH
GRANT OR HOLD
To vote upon any other business which may
legally come before the meeting.
PLEASE SIGN AND PROMPTLY RETURN IN THE
ACCOMPANYING ENVELOPE. NO POSTAGE REQUIRED
IF MAILED IN THE U.S. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. IT WILL BE VOTED AS SPECIFIED.
IF NO SPECIFICATION IS MADE, THIS PROXY
SHALL BE VOTED IN FAVOR OF EACH LISTED
PROPOSAL (INCLUDING ALL NOMINEES FOR
DIRECTORS) AND WITHIN THE DISCRETION OF
THE PROXYHOLDERS AS TO ANY OTHER BUSINESS
WHICH MAY LEGALLY COME BEFORE THE MEETING.
- -------------------- ------------------------ -----------
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
Note: please sign exactly as your name appears on the proxy. If signing for
estates, trusts, or corporations, title or capacity should be stated. If
shares are held jointly, each holder must sign.
