As filed with the Securities and Exchange Commission on August 2, 1996
File Nos.
2-77880
811-3479
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 16 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 19 (X)
FRANKLIN NEW YORK TAX-FREE INCOME FUND
(FORMERLY FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.)
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 312-2000
HARMON E. BURNS, 777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Name and Address of Agent for Service of Process)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[x] on October 1, 1996 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post effective amendment
DECLARATION PURSUANT TO RULE 24F-2. The Registrant has registered an
indefinite number or amount of securities under the Securities Act of 1933
pursuant to Rule 24(f)(2) under the Investment Company Act of 1940. The Rule
24f-2 Notice for the issuer's most recent fiscal year was filed on July 25,
1996.
This amendment is being filed pursuant to Rule 414 under the Securities Act of
1933. The successor issuer, Franklin New York Tax-Free Income Fund is filing the
amendment to the registration statement of the Franklin New York Tax-Free Income
Fund, Inc. the predecessor issuer, and expressly adopting the registration
statement as its own for all purposes of the Securities Act of 1933 and the
Investment Company Act of 1940.
The filing is made in anticipation of the reorganization of the Franklin New
York Tax-Free Income Fund, Inc., a New York corporation, whereby the Fund will
merge into the Franklin New York Tax-Free Income Fund, a Delaware business
trust. Shareholders are expected to approve this reorganization at a meeting
expressly called for that purpose scheduled for September 18, 1996.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
PART A: INFORMATION REQUIRED IN THE PROSPECTUS
N-1A Location in
ITEM NO. ITEM REGISTRATION STATEMENT
1. Cover Page Cover Page
2. Synopsis "Expense Table"
3. Condensed Financial "Financial Highlights"; "How Does
Information the Fund Measure Performance?"
4. General Description "How Is the Trust Organized?";
"How Does the Fund Invest Its
Assets?"; "What Are the Fund's
Potential Risks?"
5. Management of the Fund "Who Manages the Fund?"
5A. Management's Discussion of Contained in Registrant's Annual
Fund Performance Report to Shareholders
6. Capital Stock and Other "How Is the Trust Organized?";
Securities "Services to Help You Manage Your
Account"; "What Distributions
Might I Receive From the Fund?";
"How Taxation Affects You and the
Fund"
7. Purchase of Securities "How Do I Buy Shares?"; "May I
Being Offered Exchange Shares for Shares of
Another Fund?"; "Transaction
Procedures and Special
Requirements?"; "Services to Help
You Manage Your Account"; "Useful
Terms and Definitions"
8. Redemption or Repurchase "May I Exchange Shares for Shares
of Another Fund?"; "How Do I Sell
Shares?"; "Transaction Procedures
and Special Requirements";
"Services to Help You Manage Your
Account"
9. Pending Legal Proceedings Not Applicable
FRANKLIN NEW YORK TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
Part B: Information Required in the
STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and See Prospectus "How Is the Trust
History Organized?"
13. Investment Objectives "How Does the Fund Invest Its
Assets?"; "Investment Restrictions"
14. Management of the Fund "Officers and Trustees"
15. Control Persons and "Officers and Trustees";
Principal Holders of "Investment Advisory and Other
Securities Services"; "Miscellaneous
Information"
16. Investment Advisory and "Investment Advisory and Other
Other Services Services"; "The Fund's Underwriter"
17. Brokerage Allocation "How Does the Fund Buy Securities
for Its Portfolio"
18. Capital Stock and Other See Prospectus "How Is the Trust
Securities Organized?"
19. Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Being Shares?"; How Are Fund Shares
Offered Valued?", "Financial Statements"
20. Tax Status "Additional Information on
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Calculation of Performance "How Does the Fund Measure
Data Performance?"
23. Financial Statements "Financial Statements"
PROSPECTUS & APPLICATION
FRANKLIN NEW YORK TAX-FREE INCOME FUND
OCTOBER 1, 1996
INVESTMENT STRATEGY: TAX-FREE INCOME
This prospectus describes the Franklin New York Tax-Free Income Fund (the
"Fund"). It contains information you should know before investing in the Fund.
Please keep it for future reference.
The Fund's SAI, dated October 1, 1996, as may be amended from time to time,
includes more information about the Fund's procedures and policies. It has been
filed with the SEC and is incorporated by reference into this prospectus. For a
free copy or a larger print version of this prospectus, call 1-800/DIAL BEN or
write the Fund at the address shown.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES REPRESENTATIVE, DEALER,
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
October 1, 1996
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777 1-800/DIAL BEN
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary..........................................
Financial Highlights.....................................
How Does the Fund Invest Its Assets?.....................
What Are the Fund's Potential Risks?.....................
Who Manages the Fund?....................................
How Does the Fund Measure Performance?...................
How Is the Trust Organized?..............................
How Taxation Affects You and the Fund....................
ABOUT YOUR ACCOUNT
How Do I Buy Shares?.....................................
May I Exchange Shares for Shares of Another Fund?........
How Do I Sell Shares?....................................
What Distributions Might I Receive From the Fund?........
Transaction Procedures and Special Requirements..........
Services to Help You Manage Your Account.................
GLOSSARY
Useful Terms and Definitions.............................
When reading this prospectus, you will see certain terms in capital letters.
This means the term is explained in our glossary section.
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class for the fiscal year
ended May 31, 1996. Your actual expenses may vary.
A. SHAREHOLDER TRANSACTION EXPENSES+ CLASS I CLASS II
------- --------
Maximum Sales Charge Imposed on Purchases
(as a percentage of Offering Price) 4.25% 1.00%++
Deferred Sales Charge+++ None 1.00%
B. ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.45% 0.45%
Rule 12b-1 Fees 0.07%* 0.65%*
Other Expenses 0.06% 0.06%
----- -----
Total Fund Operating Expenses 0.58% 1.16%
===== =====
C. EXAMPLE
Assume the annual return for each class is 5% and operating expenses are as
described above. For each $1,000 investment, you would pay the following
projected expenses if you sold your shares after the number of years shown.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS I $48** $60 $74 $112
CLASS II $32 $46 $73 $149
For the same Class II investment, you would pay projected expenses of $22
if you did not sell your shares at the end of the first year. Your
projected expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
++Although Class II has a lower front-end sales charge than Class I, its Rule
12b-1 fees are higher. Over time you may pay more for Class II shares. Please
see "How Do I Buy Shares? - Deciding Which Class to Buy."
+++A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more if you sell the shares within one year and any Class II purchase
if you sell the shares within 18 months. There is no front-end sales charge if
you invest $1 million or more in Class I shares. See "How Do I Sell Shares? -
Contingent Deferred Sales Charge" for details.
* These fees may not exceed 0.10% for Class I. The combination of front-end
sales charges and Rule 12b-1 fees could cause long-term shareholders to pay more
than the economic equivalent of the maximum front-end sales charge permitted
under the NASD's rules.
**Assumes a Contingent Deferred Sales Charge will not apply.
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by Coopers & Lybrand L.L.P., the Fund's independent auditors. Their
audit report covering each of the most recent five years appears in the
financial statements in the Fund's Annual Report to Shareholders for the fiscal
year ended May 31, 1996. The Annual Report to Shareholders also includes more
information about the Fund's performance. For a free copy, please call Fund
Information.
<TABLE>
<CAPTION>
CLASS I SHARES:
YEAR ENDED MAY 31,
---------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of year $11.75 $11.72 $12.07 $11.45 $10.94 $10.85 $11.05 $10.52 $10.73 $11.19
---------------------------------------------------------------------------------------------------
Net investment income 0.70 0.73 0.75 0.77 0.78 0.80 0.80 0.80 0.80 0.91
Net realized & unrealized gain
(loss) on securities (0.279) 0.056 (0.383) 0.630 0.523 0.086 (0.208) 0.542 (0.021) (0.265)
---------------------------------------------------------------------------------------------------
Total from investment
operations 0.421 0.786 0.412 1.400 1.303 0.0886 0.592 1.342 0.779 0.645
---------------------------------------------------------------------------------------------------
Distributions from net
investment income (0.711) (0.756) (0.762) (0.780) (0.793) (0.796) (0.792) (0.812) (0.846) (0.925)
---------------------------------------------------------------------------------------------------
Distributions from Realized
Capital gains - - - - - - - - (0.143) (0.180)
Net asset value at end of year $11.46 $11.75 $11.72 $12.07 $11.45 10.94 10.85 11.05 10.52 10.73
===================================================================================================
TOTAL RETURN* 3.65% 7.10% 3.18% 12.35% 12.05% 8.20 5.25 12.95 7.33 5.19
CLASS I SHARES:
YEAR ENDED MAY 31,
---------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year
(in 000's) $4,709,483 $4,725,056$4,609,999$4,339,249 $3,570,851$3,108,151$2,914,840$2,794,766 $2,547,062 $2,558,855
Ratio of expenses to average
net assets .58% 0.57% 0.52% 0.52% 0.51% 0.50 0.50 0.51 0.51 0.52
Ratio of net investment income
to average net assets 5.99% 6.39% 6.19% 6.56% 7.01% 7.34 7.30 7.42 7.57 7.04
Portfolio turnover rate 28.34% 40.56% 25.67% 12.28% 19.37% 18.62 15.47 25.68 57.94 33.64
</TABLE>
CLASS II SHARES:
YEAR ENDED MAY 31,
----------------------
1996 1995 1,2
------ -----
PER SHARE OPERATING PERFORMANCE
Net asset value at beginning of period $11.73 $11.50+
------ ------
Net investment income 0.65 0.05
Net realized & unrealized gain (loss)
on securities (0.286) 0.243
------ ------
Total from investment operations 0.364 0.293
------ ------
Distributions from net investment income (0.644) (0.063)
------ ------
Net asset value at end of period $11.45 $11.73
====== ======
TOTAL RETURN* 3.14% 2.56%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in 000's) $39,047 $1,913
Ratio of expenses to average net assets 1.16% 1.09%**
Ratio of net investment income to average
net assets 5.43% 5.32%**
Portfolio turnover rate 28.34% 40.56%
*Total return measures the change in value over the periods indicated. It is not
annualized. It does not include the maximum front-end sales charge or the
Contingent Deferred Sales Charge, and assumes reinvestment of dividends and
capital gains at net asset value. Prior to May 1, 1994, dividends were
reinvested at the maximum offering price, and capital gains, if any, at net
asset value. Effective May 1, 1994, with the implementation of the Rule 12b-1
plan for Class I shares, the sales charge on reinvested dividends was
eliminated.
**Annualized.
+ The Fund paid a dividend to shareholders of reccord on the beginning of
business, May 1, 1995 in the amount of $0.063 per share. The net asset value per
share at beginning of year includes this dividend.
1 Per share amounts have been calculated using the daily average shares
outstanding during the period.
2 For the period May 1, 1995 (effective date) to May 31, 1995.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide as high a level of dividend income exempt from
federal, New York state and New York City income taxes as is consistent with
prudent investing, while seeking preservation of shareholder's capital, by
investing the Fund's assets in municipal securities exempt from such taxes. The
objectives are fundamental policies of the Fund and may not be changed without
shareholder approval. The Fund will seek to achieve its objective by investing
primarily in New York state, municipal and public authority debt obligations
with a maturity of more than one year. In addition, the Fund may also invest its
assets in obligations of municipal issuers located in Puerto Rico, the U.S.
Virgin Islands and Guam, since dividends paid by the Fund, to the extent
attributable to such sources, are exempt from regular federal income taxes and
from New York state and New York City personal income taxes. Of course, there is
no assurance that the Fund's objectives will be achieved.
It is the Fund's current policy to invest at least 65% of the Fund's total
assets in securities exempt from New York state individual income taxation. It
is possible, although not anticipated, that up to 35% of the Fund's total assets
may be in qualifying municipal securities and obligations of state or territory
other than New York. As a fundamental policy, at least 80% of the Fund's total
assets will be invested in securities exempt from regular federal income tax and
the federal alternative minimum tax, except where market conditions due to
adverse factors would cause serious erosion of portfolio value, in which case
the Fund's assets may temporarily be substantially invested in short-term
taxable obligations as a defensive measure to preserve net asset value. During
such period, the Fund will not be pursuing its investment objective.
The Fund may invest, without percentage limitations, in securities having at the
time of purchase one of the four highest ratings of municipal securities by
Moody's (Aaa, Aa, A, Baa), S&P (AAA, AA, A, BBB) or Fitch (AAA, AA, A, BBB), or
in securities that are unrated if, in the opinion of Advisers, such securities
are comparable in quality to those within the four highest ratings. Bonds rated
in the fourth highest category are regarded as having an adequate capacity to
pay principal and interest but with greater vulnerability to adverse economic
conditions and some speculative characteristics. If the rating on an issue held
in the Fund's portfolio is lowered by the rating services, this change will be
considered by the Fund in its evaluation of the overall investment merits of
that security, but will not necessarily result in an automatic sale of the
security. For a description of the ratings, please see "Appendix" in the SAI.
Advisers considers the terms of the offering and various other factors when
determining whether securities are consistent with the Fund's investment
objectives and policies and thereafter when determining the issuer's comparative
credit rating. When making these determinations, Advisers may (i) interview
representatives of the issuer at its offices, conducting a tour and inspection
of the physical facilities of the issuer in an effort to evaluate the issuer and
its operations, (ii) perform analysis of the issuer's financial and credit
position, including comparisons of all appropriate ratios, and/or (iii) compare
other similar securities offerings to the issuer's proposed offering.
Under normal market conditions, the Fund will invest its assets as described
above. For temporary defensive purposes, however, the Fund may invest up to 20%
of its assets in fixed-income obligations, that pay interest subject to regular
federal income tax. Any investments in taxable obligations will be substantially
in Treasury bills, commercial paper and obligations of U.S. banks (including
commercial banks and savings and loan associations) with assets of $1 billion or
more.
TYPES OF SECURITIES THE FUND MAY INVEST IN
The term "municipal securities," as used in this Prospectus, means obligations
issued by or on behalf of any state, territory or possession of the U.S. and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which is exempt from federal income tax. An
opinion as to the tax-exempt status of a municipal security is generally
rendered to the issuer by the issuer's counsel at the time of issuance of the
security.
Municipal securities are used to raise money for various public purposes such as
constructing public facilities and making loans to public institutions. Certain
types of municipal bonds are issued to provide funding for privately operated
facilities.
It is possible that the Fund from time to time will invest more than 25% of its
assets in a particular segment of the municipal securities market, including but
not limited to, hospital revenue bonds, housing agency bonds, tax-exempt
industrial development revenue bonds, transportation bonds, or pollution control
revenue bonds. In these circumstances, economic, business, political, or other
changes affecting one bond (such as proposed legislation affecting the financing
of a project; shortages or price increases of needed materials; or declining
markets or needs for the projects) might also affect other bonds in the same
segment, thereby potentially increasing market risk.
Yields on municipal securities vary, depending on a variety of factors including
the general condition of the financial and of the municipal securities markets,
the size of a particular offering, the maturity of the obligation, and the
credit rating of the issuer. Generally, municipal securities of longer
maturities produce higher current yields than municipal securities with shorter
maturities. Prices of longer term securities, however, typically fluctuate more
than those of short-term municipal securities due to changes in interest rates,
tax laws and other general market conditions. Lower-rated municipal securities
generally produce a higher yield than higher-rated municipal securities due to
the perception of a greater degree of risk as to the ability of the issuer to
make timely payment of principal and interest on its obligations.
The Fund's investments in unrated municipal securities may cause the Fund to
recognize income and make distributions to shareholders prior to the receipt of
cash payments. For example, with respect to non-performing obligations, the Fund
may be required to accrue as income the original amount of interest due on its
obligations even though such interest is not received by the Fund. The Fund does
not presently intend to purchase any unrated securities, but reserves the right
to acquire them in the future.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may buy floating rate and
variable rate obligations. These obligations bear interest at rates that are not
fixed, but that vary with changes in prevailing market rates on predesignated
dates. The Fund may also invest in variable or floating rate demand notes
("VRDNs"), which carry a demand feature that permits the Fund to tender the
obligation back to the issuer or a third party at par value plus accrued
interest prior to maturity, according to the terms of the obligation.
Frequently, VRDNs are secured by letters of credit or other credit support
arrangements. Although it is not a put option in the usual sense, such a demand
feature is sometimes known as a "put." With respect to 75% of the Fund's assets,
no more than 5% of such value may be in securities underlying "puts" from the
same institution, except that the Fund may invest up to 10% of its asset value
in unconditional "puts" (exercisable even in the event of a default in the
payment of principal or interest on the underlying security) and other
securities issued by the same institution.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTION. The Fund may buy and sell
municipal securities on a "when-issued" and "delayed-delivery" basis. The price
is subject to market fluctuation, and the value at delivery may be more or less
than the purchase price. Although the Fund will generally buy municipal
securities on a when-issued basis with the intention of acquiring the
securities, it may sell such securities before the settlement date if it is
deemed advisable. When the Fund is the buyer in such a transaction, it will
maintain, in a segregated account with its custodian bank, cash or high-grade
marketable securities having an aggregate value equal to the amount of such
purchase commitments until payment is made. To the extent the Fund engages in
when-issued and delayed delivery transactions, it will do so for the purpose of
acquiring securities for its portfolio consistent with its investment objectives
and policies and not for the purpose of investment leverage.
CERTIFICATES OF PARTICIPATION. The Fund may invest in municipal lease
obligations, primarily through Certificates of Participation ("COPs"). COPs,
which are widely used by state and local governments to finance the purchase of
property, function much like installment purchase agreements. A COP is created
when long-term lease revenue bonds are issued by a governmental corporation to
pay for the acquisition of property or facilities that are then leased to a
municipality. The payments made by the municipality under the lease are used to
repay interest and principal on the bonds issued to purchase the property. Once
these lease payments are completed, the municipality gains ownership of the
property for a nominal sum. This lease format is generally not subject to
constitutional limitations on the issuance of state debt, and COPs enable a
governmental issuer to increase government liabilities beyond constitutional
debt limits.
A feature which distinguishes COPs from municipal debt is that the lease which
is the subject of the transaction contains a "nonappropriation" clause. A
nonappropriation clause provides that, while the municipality will use its best
efforts to make lease payments, the municipality may terminate the lease
annually without penalty if the municipality's appropriating body does not
allocate the necessary funds. Local administrations, when faced with
increasingly tight budgets, have more discretion to curtail payments under COPs
than they do to curtail payments on traditionally funded debt obligations. If
the government lessee does not appropriate sufficient monies to make lease
payments, the lessor or its agent is typically entitled to repossess the
property. The private sector value of the property will be more or less than the
amount the government lessee was paying.
While the risk of nonappropriation is inherent to COP financing, the Fund
believes that this risk is mitigated by its policy of investing only in COPs
rated within the four highest rating categories of Moody's, S&P, or Fitch, or in
unrated COPs believed by Advisers to be of comparable quality. Criteria
considered by the rating agencies and Advisers in assessing this risk include
the issuing municipality's credit rating, how essential the leased property is
to the municipality and the term of the lease compared to the useful life of the
leased property. The Board reviews the COPs held in the Fund's portfolio to
assure that they constitute liquid investments based on various factors reviewed
by Advisers and monitored by the Board. These factors include (a) the credit
quality of the securities and the extent to which they are rated or, if unrated,
comply with existing criteria and procedures followed to ensure that they are of
comparable quality to the ratings required for Fund investment, including an
assessment of the likelihood that the leases will not be canceled; (b) the size
of the municipal securities market, both in general and with respect to COPs;
and (c) the extent to which the type of COPs held by the Fund trade on the same
basis and with the same degree of dealer participation as other municipal bonds
of comparable credit rating or quality. While there is no limit as to the amount
of assets which the Fund may invest in COP's, as of May 31, 1996, the Fund held
31.35% of its assets in these instruments.
PRIVATE ACTIVITY BONDS. The interest on bonds issued to finance public purpose
state and local government operations is generally tax-exempt for regular
federal income tax purposes. Interest on certain private activity bonds issued
after August 7, 1986, while still tax-exempt, constitutes a preference item for
taxpayers in determining the federal alternative minimum tax under the Code.
This interest may subject you to, or increase liability under, the federal
alternative minimum tax. In addition, all distributions derived from interest
exempt from regular federal income tax may subject corporate shareholders to, or
increase their liability under, the federal alternative minimum tax, because
such distributions are included in the corporation's adjusted current earnings.
The Fund does not own and does not presently intend to purchase any private
activity bonds but reserves the right to acquire them in the future.
The Code also imposes certain limitations and restrictions on the use of
tax-exempt bond financing for non-government business activities, such as
Industrial Development Revenue Bonds, and, to the extent interest on such bonds
is not tax-exempt, they will not be purchased by the Fund.
CALLABLE BONDS. The Fund may buy and hold callable munici Zpal bonds that
contain a provision in the indenture permitting the issuer to redeem the bonds
prior to their maturity dates at a specified price. This price typically
reflects a premium over the bonds' original issue price. These bonds generally
have call-protection (that is, a period of time when the bonds may not be
called) that usually lasts for 5 to 10 years, after which time these bonds may
be called away. An issuer may generally be expected to call its bonds, or a
portion of them, during periods of relatively declining interest rates, when
borrowings may be replaced at lower rates than those obtained in prior years. If
the proceeds of a bond called under such circumstances are reinvested, the
result may be a lower overall yield due to lower current interest rates. If the
purchase price of the bonds included a premium related to the appreciated value
of the bonds, some or all of that premium may not be recovered by bondholders,
such as the Fund, depending on the price at which the bonds were redeemed.
Normally, the Fund may not hold called bonds until they are redeemed if that
will result in a lost premium. In many cases, Advisers will attempt to time the
sale to recover what Advisers considers to be the optimum amount of premium
obtainable considering market conditions and the time remaining before
redemption.
OTHER INVESTMENT POLICIES OF THE FUND
ILLIQUID INVESTMENTS. The Fund may not invest more than 10% of its net assets,
at the time of purchase, in illiquid securities. Illiquid securities are
generally securities that cannot be sold within seven days in the normal course
of business at approximately the amount at which the Fund has valued them.
PERCENTAGE RESTRICTIONS. If a percentage restriction noted above is adhered to
at the time of investment, a later increase or decrease in the percentage
resulting from a change in value of portfolio securities or the amount of net
assets will not be considered a violation of any of the foregoing policies.
OTHER POLICIES AND RESTRICTIONS. The Fund has a number of additional investment
restrictions that limit its activities to some extent. Some of these
restrictions may only be changed with shareholder approval. For a list of these
restrictions and more information about the Fund's investment policies, please
see "How Does the Fund Invest Its Assets?" and "Investment Restrictions" in the
SAI.
WHAT ARE THE FUND'S POTENTIAL RISKS?
The value of your shares will increase as the value of the securities owned by
the Fund increases and will decrease as the value of the Fund's investments
decrease. In this way, you participate in any change in the value of the
securities owned by the Fund. In addition to the factors that affect the value
of any particular security that the Fund owns, the value of Fund shares may also
change with movements in the bond market as a whole.
RISK FACTORS IN NEW YORK. This section briefly summarizes certain general
economic and political risks which could affect the Fund, in view of the Fund's
policy of concentrating its investments in securities issued by public entities
in New York. The discussion below is not intended to be comprehensive or to
express any opinion on the future course of political or economic events. In
addition, it should be read in the context of the Fund's other investment
policies, including among others its policies regarding securities ratings and
diversification. (See "Investment Objective and Policies of the Fund" above.)
The discussion is based on information from official statements relating to
securities offerings of New York issuers, from independent municipal credit
reports and other sources believed to be reliable, but has not been
independently verified by the Fund.
RISK FACTORS OF NEW YORK ISSUERS
NEW YORK STATE. New York state ("State"), the third-largest state in the U.S. in
terms of population, has historically been one of the wealthiest and most
economically diverse states as well. The State's economic health is dependent to
a significant extent on the fortunes of New York City ("City"), the largest city
in the nation, and the City's metropolitan area (which spreads into New Jersey
and Connecticut as well).
The State's economy was adversely affected by the recession of the early 1990s,
which lasted longer in the State causing the State economy to lag behind the
national economy. The economy, which exhibited signs of strength in the service,
construction and trade sectors, had significant cutbacks in the manufacturing,
utility, defense, computer and banking industries. In 1995 the State enacted a
tax-reduction program designed to spur economic growth and provide relief for
low and middle-income tax payers. This program will reduce personal income tax
by 20% over a three-year period.
In fiscal 1995 (ended March 31), the State saw a general fund operating deficit,
which could have been significantly higher if the State had not been able to
reduce spending by almost $850 million. The 1996 budget, which is the first to
be enacted under the new administration, projects an absolute year-over year
decline in general fund disbursements. Nominal spending from all State funding
sources, excluding federal aid, is proposed to increase by only 2.5% from fiscal
1995, in contrast to the prior decade when such spending growth averaged more
than 6% per annum.
Based on the 1995 enacted budget, a $5 billion gap in the State Financial Plan
is projected to be closed, through a series of actions, such as cost
containment, disbursement reestimates, other savings in social welfare programs,
including Medicaid, income maintenance and family programs, and reduction on the
State workforce.
Certain agencies, authorities and subdivisions of the State, such as the New
York State Urban Development Corporation ("UDC") and the Housing Finance Agency
("HFA"), depend on continued financial support from the State in order to meet
their obligations under outstanding debt securities. The State's support may
come in the form of appropriations, guarantees, lease-purchase arrangements,
other contractual obligations or moral obligation provisions, many of which
require appropriations by the legislature before any payments can be made.
Failure of the State to appropriate necessary amounts or to take other action to
permit the authorities and agencies to meet their obligations could result in
their default.
Constitutional challenges to State laws or appropriations could limit the amount
of taxes which the State or political subdivisions may impose on real property,
or the amounts these entities may borrow. For example, in 1979, the State's
highest court declared unconstitutional a state law allowing localities and
school districts to impose a special increase in real estate property taxes in
order to raise funds for pensions and other uses. However, in 1994, the State's
highest court rejected a taxpayer challenge to constitutionality of certain debt
incurred by State agencies without voter approval. Final adverse decisions in
cases of this nature could require extraordinary appropriations or expenditure
reductions, or both, and could have a material adverse effect upon the financial
condition of the State and various of its agencies and subdivisions.
NEW YORK CITY. In 1975, New York City ("City") suffered several financial crises
which impaired the borrowing ability of both the City and the State. In that
year, the City lost access to public credit markets, and it was not able to sell
short-term notes to the public until 1979 nor long-term debt to the public until
1981. The City required financial assistance from the State (through the
Municipal Assistance Corporation ("MAC")) and the federal government to resolve
these difficulties. Since 1975, the City's financial condition has been subject
to oversight and review by the New York State Financial Control Board (the
"Control Board") and since 1978 its financial Statements have been audited by
independent accounting firms. To be eligible for guarantees and assistance, the
City was required to submit annually to the Control Board a financial plan for
the next four fiscal years, covering the City and certain agencies showing
balanced budgets determined in accordance with generally accepted accounting
principles. Although the Control Board's powers of prior approval were suspended
effective June 30, 1986, because the City had satisfied certain statutory
conditions, the City continues to submit four-year plans to the Control Board
for its review. In the event the City cannot obtain a balanced budget, there are
concerns as to whether any deficit in the City budget can be financed by MAC
bonds, federal guarantees, federal and State aid and increased revenues. Neither
the State nor the federal government is obligated to provide financial
assistance of any kind to the City in the event of future financial
difficulties. The City is also a defendant in numerous legal actions which
relate to material matters.
Projections for the City's fiscal year 1996 estimate a budget deficit of $2
billion, most of which is expected to result from shortfalls in projected tax
revenues and state aid. Efforts to close this gap will focus on reductions and
spending cuts in the areas of welfare and health-care entitlements, and cuts in
City services and personnel. The City projects significant budget deficits
through fiscal 1998.
CONCLUSION. Both the State and City face potential economic problems which could
seriously affect the ability of both the State and City to meet their financial
obligations. The economic problems of the City adversely affect the State in
numerous ways. In addition, for decades the State economy has grown more slowly
than that of the nation as a whole, resulting in a decline in the position of
New York as one of the country's wealthiest states. The causes of this decline
are varied and complex and some causes reflect international and national trends
beyond the State's and City's control. Some analysts feel that this long-term
decline is the result of State and local taxation, which is among the highest in
the nation, and which may cause corporations to locate outside the State. The
current high level of taxes may limit the ability of the State and City to
impose higher taxes in the event of future difficulties.
DIVERSIFICATION RISK. As a fundamental policy, the Fund may not purchase
securities of any issuer which would result in more than 5% of the value of the
Fund's gross assets being invested in the securities of any one issuer. This
limitation does not apply to investments issued or guaranteed by the U.S.
government or its instrumentalities and is determined as of the time an
investment is made. In determining the issuer of a tax-exempt security, each
state and each political subdivision, agency and instrumentality of each state
and each multi-state agency of which the state is a member is a separate issuer.
Where securities are backed only by assets and revenues of a particular
instrumentality, facility or subdivision, the entity is considered the issuer. A
bond for which the payments of principal and interest are secured by an escrow
account of securities backed by the full faith and credit of the U.S. government
("defeased"), in general, will not be treated as an obligation of the original
municipality for purposes of determining issuer diversification under this
policy. When the Fund proposes to add to its position in the securities of an
issuer, it may value that position at the lesser of cost or current market
value, for the sole purpose of determining the amount of that issuer's
securities which may be purchased consistent with the 5% limitation described in
this paragraph. In addition, the Fund will adhere to the diversification
requirements applicable to diversified investment companies under the 1940 Act.
Please see "What are the Fund's Potential Risks? - Diversification " in the SAI.
CREDIT AND MARKET RISK. Credit risk is a function of the ability of an issuer of
a municipal security to make timely interest payments and to pay the principal
of a security upon maturity. It is generally reflected in a security's
underlying credit rating and its stated interest rate (normally the coupon
rate). A change in the credit risk associated with a municipal security may
cause a corresponding change in the security's price. Market risk is the risk of
price fluctuation of a municipal security caused by changes in general economic
and interest rate conditions generally affecting the market as a whole. A
municipal security's maturity length also affects its price.
INTEREST RATE RISK. Changes in interest rates will affect the value of the
Fund's portfolio and its share price. Rising interest rates, which often occur
during times of inflation or a growing economy, are likely to have a negative
effect on the value of the Fund's shares. Interest rates have increased and
decreased in the past. These changes are unpredictable and may happen again in
the future.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist between the
two classes of shares. While none is expected, the Board will act appropriately
to resolve any material conflict that may arise.
INVESTMENT MANAGER. Advisers is the investment manager of the Fund and other
funds with aggregate assets of over $81 billion, including $43 billion in the
municipal securities market. It is wholly owned by Resources, a publicly owned
company engaged in the financial services industry through its subsidiaries.
Charles B. Johnson and Rupert H. Johnson, Jr. are the principal shareholders of
Resources.
MANAGEMENT TEAM. The team responsible for the day-to-day management of the
Fund's portfolio is: Mr. Thomas Kenny since 1994, Mr. John B. Pinkham since
1985, and Mr. John Pomeroy since 1993.
Thomas Kenny
Senior Vice President of Advisers
Mr. Kenny is the Director of Franklin's Municipal Bond Department. He holds a
Master of Science degree in finance from Golden Gate University and a Bachelor
of Arts degree in business and economics from the University of California at
Santa Barbara. Mr. Kenny joined Franklin in 1986. He is a member of several
municipal securities industry-related committees and associations.
John B. Pinkham
Vice President of Advisers
Mr. Pinkham has a Bachelor of Science degree in business from Columbia
University. He has been in the securities industry since 1956 and with Advisers
since 1985. He is a member of the Financial Analysts Federation.
John Pomeroy
Portfolio Manager of Advisers
Mr. Pomeroy holds a Bachelor of Arts degree in business administration from San
Francisco State University. He joined Advisers in 1986. He is a member of
several securities industry-related committees and associations.
SERVICES PROVIDED BY ADVISERS. Advisers manages the Fund's assets and makes its
investment decisions. Advisers also provides certain administrative services and
facilities for the Fund and performs similar services for other funds. Please
see "Investment Advisory and Other Services" and "Miscellaneous Information" in
the SAI for information on securities transactions and a summary of the Fund's
Code of Ethics.
MANAGEMENT FEES. During the fiscal year ended May 31, 1996, management fees
totaling 0.45% of the average monthly net assets of the Fund were paid to
Advisers. Total expenses of Class I and Class II shares, including fees paid to
Advisers, were 0.58% and 1.16%.
PORTFOLIO TRANSACTIONS. Advisers tries to obtain the best execution on all
transactions. If Advisers believes more than one broker or dealer can provide
the best execution, it may consider research and related services and the sale
of Fund shares when selecting a broker or dealer. Please see "How Does the Fund
Buy Securities For Its Portfolio?" in the SAI for more information.
THE RULE 12B-1 PLANS
Each class has a distribution plan or "Rule 12b-1 Plan" under which it may pay
or reimburse Distributors or others for activities primarily intended to sell
shares of the class. These expenses may include, among others, 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.
Payments by the Fund under the Class I plan may not exceed 0.10% per year of
Class I's average daily net assets. All distribution expenses over this amount
will be borne by those who have incurred them.
Under the Class II plan, the Fund may pay Distributors up to 0.50% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the Class II
purchase.
The Fund may also pay a servicing fee of up to 0.15% per year of Class II's
average daily net assets under the Class II plan. This fee may be used to pay
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from the Fund on behalf of customers, and similar servicing and account
maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Fund's Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measures of performance are total return, current yield and
current distribution rate. Each class may also advertise its taxable-equivalent
yield and distribution rate. Performance figures are usually calculated using
the maximum sales charge, but certain figures may not include the sales charge.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield for each
class shows the income per share earned by that class. The current distribution
rate shows the dividends or distributions paid to shareholders of a class. This
rate is usually computed by annualizing the dividends paid per share during a
certain period and dividing that amount by the current Offering Price of the
class. Unlike current yield, the current distribution rate may include income
distributions from sources other than dividends and interest received by the
Fund. The taxable-equivalent yield and distribution rate show the before-tax
yield or distribution rate that would have to be earned from a taxable
investment to equal the yield or distribution rate of the class, assuming one or
more tax rates.
The investment results of each class will vary. Performance figures are always
based on past performance and do not indicate future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "How Does the Fund Measure Performance?" in the SAI.
HOW IS THE TRUST ORGANIZED?
The Fund is a diversified series of Franklin New York Tax-Free Income Fund (the
"Trust"), an open-end management investment company, commonly called a mutual
fund. It was organized as a Delaware Business Trust on [October 1, 1996], and is
registered with the SEC under the 1940 Act. The Fund began offering two classes
of shares on May 1, 1995: Franklin New York Tax-Free Income Fund - Class I and
Franklin New York Tax-Free Income Fund - Class II. All shares purchased before
that time are considered Class I shares. Additional classes of shares may be
offered in the future.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as the other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters (1) affecting only that class, (2) expressly
required to be voted on separately by state business trust law, or (3) required
to be voted on separately by the 1940 Act. Shares of each class of a series have
the same voting and other rights and preferences as the other classes and series
of the Trust for matters that affect the Trust as a whole. In the future,
additional series may be offered.
The Trust 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. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
A meeting of shareholders shall be held annually for the election of trustees
and for the transaction of other business of the Trust.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Code. By distributing all of its income and meeting certain
other requirements relating to the sources of its income and diversification of
its assets, the Fund will not be liable for federal income or excise taxes.
By meeting certain requirements of the Code, the Fund has qualified and
continues to qualify to pay exempt-interest dividends to you. Exempt-interest
dividends are derived from interest income exempt from regular federal income
tax and are not subject to regular federal income tax to you. In addition, to
the extent that exempt-interest dividends are derived from interest on
obligations of New York state and its political subdivisions or from interest on
U.S. territorial obligations (including Puerto Rico, the U.S. Virgin Islands and
Guam), they will be exempt from New York state and City personal income taxes.
However, for corporate taxpayers subject to the New York state franchise tax,
the foregoing categories of interest income will generally be taxable.
To the extent dividends are derived from taxable income from temporary
investments (including the discount from certain stripped obligations or their
coupons or income from securities loans or other taxable transactions) or from
the excess of net short-term capital gain over net long-term capital loss or
from ordinary income derived from the sale or disposition of bonds purchased
with market discount after April 30, 1993, they are treated as ordinary income
whether you have elected to receive them in cash or in additional shares.
From time to time, the Fund may buy a tax-exempt obligation with market
discount; that is, for a price that is less than the principal amount of the
bond or for a price that is less than the principal amount of the bond where the
bond was issued with original issue discount and such market discount exceeds
the minimum amount under the Code. For such obligations purchased after April
30, 1993, a portion of the gain on sale or disposition (not to exceed the
accrued portion of market discount as of the time of sale or disposition) is
treated as ordinary income rather than capital gain. Any distribution to you by
the Fund of such ordinary income will be subject to regular federal and state
income taxes in your hands. In any fiscal year, the Fund may elect not to
distribute to you its taxable ordinary income and to instead pay federal income
or excise taxes on this income at the Fund level. The amount of such
distributions, if any, is expected to be small.
Pursuant to the Code, certain distributions which are declared in October,
November or December but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax purposes as if
received by the shareholder on December 31 of the calendar year in which they
are declared.
Distributions derived from the excess of net long-term capital gain over net
short-term capital loss are treated as long-term capital gain regardless of the
length of time you have owned Fund shares and regardless of whether you receive
distributions in cash or in additional shares.
Redemptions and exchanges of Fund shares are taxable events on which you may
realize a gain or loss. Any loss incurred on a sale or exchange of Fund shares,
held for six months or less, will be treated as a long-term capital loss to the
extent of capital gain dividends received with respect to such shares and will
be disallowed to the extent of exempt-interest dividends paid with respect to
such shares.
The Fund will inform you of the source of their dividends and distributions at
the time they are paid and will, promptly after the close of each calendar year,
advise you of the tax status for federal income tax purposes of such dividends
and distributions, including the portion of the dividends on an average basis
which constitutes taxable income or income that is a tax preference item under
the federal alternative minimum tax.
If you have not held shares of the Fund for a full calendar year, you may have
designated as tax-exempt or as tax preference income a percentage of income
which is not equal to the actual amount of tax-exempt or tax preference income
earned during the period of your investment in the Fund.
Exempt-interest dividends of the Fund, although exempt from regular federal
income tax in your hands, are includable in the tax base for determining the
extent to which any social security or railroad retirement benefits you receive
will be subject to regular federal income tax. You are required to disclose the
receipt of tax-exempt interest dividends on your federal income tax returns.
Interest on indebtedness incurred by you (directly or indirectly) to buy or
carry Fund shares may not be fully deductible for federal income tax purposes.
If you are not a U.S. person for purposes of federal income taxation, you should
consult with your financial or tax advisor regarding the applicability of U.S.
withholding or other taxes on distributions received by you from the Fund and
the application of foreign tax laws to these distributions.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. PLEASE INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU DO NOT
SPECIFY A CLASS, YOUR PURCHASE WILL BE AUTOMATICALLY INVESTED IN CLASS I SHARES.
MINIMUM
INVESTMENTS*
- ---------------------------------------
To Open Your Account...... $100
To Add to Your Account.... $ 25
*We may refuse any order to buy shares. Currently, the Fund does not allow
investments by Market Timers.
DECIDING WHICH CLASS TO BUY
You should consider a number of factors when deciding which class of shares to
buy. IF YOU PLAN TO BUY $1 MILLION OR MORE IN A SINGLE PAYMENT OR YOU QUALIFY TO
BUY CLASS I SHARES WITHOUT A SALES CHARGE, YOU MAY NOT BUY CLASS II SHARES.
Generally, you should consider buying Class I shares if:
you expect to invest in the Fund over the long term;
you qualify to buy Class I shares at a reduced sales charge; or
you plan to buy $1 million or more over time.
You should consider Class II shares if:
you expect to invest less than $100,000 in the Franklin Templeton Funds; and
you plan to sell a substantial number of your shares within approximately
six years or less of your investment.
Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than approximately six years, you should evaluate whether it is more
economical for you to buy Class I or Class II shares.
For purchases of $1 million or more, it is considered more beneficial for you to
buy Class I shares since there is no front-end sales charge, even though these
purchases may be subject to a Contingent Deferred Sales Charge. Any purchase of
$1 million or more is therefore automatically invested in Class I shares. You
may accumulate more than $1 million in Class II shares through purchases over
time, but if you plan to do this you should determine whether it would be more
beneficial for you to buy Class I shares through a Letter of Intent.
Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF DEALER AS A
--------------------
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------------------------------------------------
CLASS I
Under $100,000 4.25% 4.44% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.50%
$500,000 but less than $1,000,000 2.15% 2.20% 2.00%
$1,000,000 or more* None None None
CLASS II
Under $1,000,000* 1.00% 1.01% 1.00%
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? -
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases. Purchases of Class II
shares are limited to purchases below $1 million. Please see "Deciding Which
Class to Buy."
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify to buy shares under one of the sales charge reduction or
waiver categories described below, please include a written statement with
each purchase order explaining which privilege applies. If you don't
include this statement, we cannot guarantee that you will receive the sales
charge reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS - CLASS I ONLY. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your Class I and Class II
shares in other Franklin Templeton Funds, as well as those of your spouse,
children under the age of 21 and grandchildren under the age of 21. If you are
the sole owner of a company, you may also add any company accounts, including
retirement plan accounts.
LETTER OF INTENT - CLASS I ONLY. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.
Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES - CLASS I ONLY. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
Was formed at least six months ago,
Has a purpose other than buying Fund shares at a discount,
Has more than 10 members,
Can arrange for meetings between our representatives and group members,
Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to
Distributors,
Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
SALES CHARGE WAIVERS. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver categories 1 and 2
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
The Fund's sales charges will not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the sources
in waiver categories 1 or 3:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
REIT sponsored or advised by Franklin Properties, Inc.
2. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
3. Redemptions from any Franklin Templeton Fund if you:
Originally paid a sales charge on the shares,
Reinvest the money within 365 days of the redemption date, and
Reinvest the money in the SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares reinvested were subject
to a Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within 365
days from the date the CD matures, including any rollover.
4. Redemptions from other mutual funds
If you sold shares of a fund that is not a Franklin Templeton Fund within the
past 60 days, you may invest the proceeds without any sales charge if (a) the
investment objectives were similar to the Fund's, and (b) your shares in that
fund were subject to any front-end or contingent deferred sales charges at the
time of purchase. You must provide a copy of the statement showing your
redemption.
The Fund's sales charges will also not apply to Class I purchases by:
5. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held
in a fiduciary, agency, advisory, custodial or similar capacity and over
which the trust companies and bank trust departments or other plan
fiduciaries or participants, in the case of certain retirement plans, have
full or shared investment discretion. We will accept orders for these
accounts by mail accompanied by a check or by telephone or other means of
electronic data transfer directly from the bank or trust company, with
payment by federal funds received by the close of business on the next
business day following the order.
6. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the Fund is
permissible and suitable for you and the effect, if any, of payments by the
Fund on arbitrage rebate calculations.
7. Broker-dealers and qualified registered investment advisors who have
entered into a supplemental agreement with Distributors for their clients
who are participating in comprehensive fee programs, sometimes known as
wrap fee programs.
8. Registered Securities Dealers and their affiliates, for their investment
accounts only
9. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
10. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
11. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
12. Accounts managed by the Franklin Templeton Group
13. Certain unit investment trusts and their holders reinvesting distributions
from the trusts
OTHER PAYMENTS TO SECURITIES DEALERS
The payments below apply to Securities Dealers who initiate and are responsible
for Class II purchases and certain Class I purchases made without a sales
charge. A Securities Dealer may only receive one of the following payments for
each qualifying purchase. The payments described below are paid by Distributors
or one of its affiliates, at its own expense, and not by the Fund or its
shareholders.
1. Securities Dealers may receive up to 1% of the purchase price for Class II
purchases. During the first year after the purchase, Distributors may keep a
part of the Rule 12b-1 fees associated with that purchase.
2. Securities Dealers will receive up to 0.75% of the purchase price for Class I
purchases of $1 million or more.
3. Securities Dealers may receive up to 0.25% of the purchase price for Class I
purchases made under waiver categories 5 and 6 above.
PLEASE SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES - OTHER PAYMENTS TO
SECURITIES DEALERS" IN THE SAI FOR ANY BREAKPOINTS THAT MAY APPLY.
Securities Dealers may receive additional compensation from Distributors or an
affiliated company in connection with selling shares of the Franklin Templeton
Funds. Compensation may include financial assistance for conferences,
shareholder services, automation, sales or training programs, or promotional
activities. Registered representatives and their families may be paid for travel
expenses, including lodging, in connection with business meetings or seminars.
In some cases, this compensation may only be available to Securities Dealers
whose representatives have sold or are expected to sell significant amounts of
shares. Securities Dealers may not use sales of the Fund's shares to qualify for
this compensation if prohibited by the laws of any state or self-regulatory
agency, such as the NASD.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no drafts
(checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Class II shares.
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<CAPTION>
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METHOD STEPS TO FOLLOW
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<S> <C>
BY MAIL 1. Send us written instructions signed by all account owners
2. Include any outstanding share certificates for the shares
you're exchanging
- ------------------------------- ----------------------------------------------------------------
- ------------------------------- ----------------------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to exchange by
phone to apply to your account, please let us
know.
- ------------------------------- ----------------------------------------------------------------
- ------------------------------- ----------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------------- ----------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
CONTINGENT DEFERRED SALES CHARGE - CLASS I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund in the order they were purchased. If you exchange Class I shares into one
of our money funds, the time your shares are held in that fund will not count
towards the completion of any Contingency Period.
CONTINGENT DEFERRED SALES CHARGE - CLASS II. For accounts with Class II shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund proportionately based on the amount of shares subject to a Contingent
Deferred Sales Charge and the length of time the shares have been held. For
example, suppose you own $1,000 in shares that have never been subject to a
CDSC, such as shares from the reinvestment of dividends and capital gains ("free
shares"), $2,000 in shares that are no longer subject to a CDSC because you have
held them for longer than 18 months ("matured shares"), and $3,000 in shares
that are still subject to a CDSC ("CDSC liable shares"). If you exchange $3,000
into a new fund, $500 will be exchanged from free shares, $1,000 from matured
shares, and $1,500 from CDSC liable shares.
Likewise, CDSC liable shares purchased at different times will be exchanged into
a new fund proportionately. For example, assume you purchased $1,000 in shares 3
months ago, 6 months ago, and 9 months ago. If you exchange $1,500 into a new
fund, $500 will be exchanged from shares purchased at each of these three
different times.
While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. We believe the proportional method of exchanging Class II shares
more closely reflects the expectations of Class II shareholders if shares are
sold during the Contingency Period. The tax consequences of a sale or exchange
are determined by the Code and not by the method used by the Fund to transfer
shares.
If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
You may only exchange shares within the SAME CLASS.
The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all
transactions. PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO
BE AVAILABLE ON YOUR ACCOUNT(S). Additional procedures may apply. Please
see "Transaction Procedures and Special Requirements."
The fund you are exchanging into must be eligible for sale in your state.
We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
Currently, the Fund does not allow investments by Market Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
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METHOD STEPS TO FOLLOW
- ------------------------------- ----------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all account owners
2. Include any outstanding share certificates for the shares
you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts may need to send
additional documents. Accounts under court jurisdiction may
have additional requirements.
- ------------------------------- ----------------------------------------------------------------
- ------------------------------- ----------------------------------------------------------------
BY PHONE Call Shareholder Services
(Only available if you have Telephone requests will be accepted:
completed and sent to us the
telephone redemption If the request is $50,000 or less.
agreement included with this Institutional accounts may exceed $50,000 by completing a separate agreement.
prospectus) Call Institutional Services to receive a copy.
If there are no share certificates issued for the shares you want to sell or
you have already returned them to the Fund
Unless the address on your account was changed by phone within the last 30 days
- ------------------------------- ----------------------------------------------------------------
- ------------------------------- ----------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------------- ----------------------------------------------------------------
</TABLE>
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
CONTINGENT DEFERRED SALES CHARGE
A Contingent Deferred Sales Charge may apply to Class I purchases of $1 million
or more if you sell all or a portion of the shares within one year and any Class
II purchase if you sell the shares within 18 months. The charge is 1% of the
value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less. Distributors keeps the charge to recover payments made to
Securities Dealers.
We will first redeem shares not subject to the charge in the following order:
1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period, 2) Shares purchased with reinvested
dividends and capital gain distributions, and 3) Shares held longer than the
Contingency Period.
We then redeem shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
Exchanges
Account fees
Sales of shares purchased pursuant to a sales charge waiver
Redemptions by the Fund when an account falls below the minimum required
account size
Redemptions following the death of the shareholder or beneficial owner
Redemptions through a systematic withdrawal plan set up before
February 1, 1995
Redemptions through a systematic withdrawal plan set up after February 1,
1995, up to 1% a month of an account's Net Asset Value (3% quarterly, 6%
semiannually or 12% annually). For example, if you maintain an annual
balance of $1 million in Class I shares, you can withdraw up to $120,000
annually through a systematic withdrawal plan free of charge. Likewise,
if you maintain an annual balance of $10,000 in Class II shares, $1,200 may
be withdrawn annually free of charge.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund declares dividends from its net investment income monthly to
shareholders of record on the last business day of that month and pays them on
or about the 15th day of the next month.
Capital gains, if any, may be distributed annually, usually in December.
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of each class.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND - You may buy additional shares of the same
class of the Fund (without a sales charge or imposition of a Contingent Deferred
Sales Charge) by reinvesting capital gain distributions, or both dividend and
capital gain distributions. If you own Class II shares, you may also reinvest
your distributions in Class I shares of the Fund. This is a convenient way to
accumulate additional shares and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge). If
you own Class II shares, you may also direct your distributions to buy Class I
shares of another Franklin Templeton Fund. Many shareholders find this a
convenient way to diversify their investments.
3. RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee. If you send
the money to a checking account, please see "Electronic Fund Transfers" under
"Services to Help You Manage Your Account."
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE FUND. You may change your distribution option at any time by notifying us
by mail or phone. Please allow at least seven days prior to the record date for
us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the Exchange is open. We determine the
Net Asset Value per share of each class as of the scheduled close of the
Exchange, generally 1:00 p.m. Pacific time. You can find the prior day's closing
Net Asset Value and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
THE PRICE WE USE WHEN YOU BUY OR SELL SHARES
You buy shares at the Offering Price of the class you wish to purchase, unless
you qualify to buy shares at a reduced sales charge or with no sales charge. The
Offering Price of each class is based on the Net Asset Value per share of the
class and includes the maximum sales charge. We calculate it to two decimal
places using standard rounding criteria. You sell shares at Net Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest between
the time we receive the order from your dealer and the time we receive any
required documents.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. [We must also receive any outstanding share
certificates for those shares.]
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
Your name,
The Fund's name,
The class of shares,
A description of the request,
For exchanges, the name of the fund you're exchanging into, Your account
number,
The dollar amount or number of shares, and
A telephone number where we may reach you during the day, or in the evening
if preferred.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered
owners,
3) The proceeds are not being sent to the address of record, preauthorized
bank account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
We may only be liable for losses resulting from unauthorized telephone
transactions if we do not follow reasonable procedures designed to verify the
identity of the caller. When you call, we will request personal or other
identifying information, and will also record calls. For your protection, we may
delay a transaction or not implement one if we are not reasonably satisfied that
telephone instructions are genuine. If this occurs, we will not be liable for
any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send written
instructions to us, as described elsewhere in this prospectus. If you are unable
to execute a transaction by telephone, we will not be liable for any loss.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, ALL owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, you will not be able
to change owners on the account unless all owners agree in writing. If you would
like another person or owner to sign for you, please send us a current power of
attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
<TABLE>
<CAPTION>
- ------------------------- ----------------------------------------------------------------------
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ------------------------- ----------------------------------------------------------------------
<S> <C>
CORPORATION Corporate Resolution
- ------------------------- ----------------------------------------------------------------------
- ------------------------- ----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that identify the
general partners, or
2. A certification for a partnership agreement
- ------------------------- ----------------------------------------------------------------------
- ------------------------- ----------------------------------------------------------------------
TRUST 1. The pages from the trust document that identify the trustees, or
2. A certification for trust
- ------------------------- ----------------------------------------------------------------------
</TABLE>
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we will not process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
ELECTRONIC INSTRUCTIONS. If there is a Securities Dealer or other representative
of record on your account, we are authorized to use and execute electronic
instructions. We can accept electronic instructions directly from your dealer or
representative without further inquiry. Electronic instructions may be processed
through the services of the NSCC, which currently include the NSCC's
"Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's
PCTrades II(TM) System.
TAX IDENTIFICATION NUMBER
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the automatic investment plan application
included with this prospectus or contact your investment representative. The
market value of the Fund's shares may fluctuate and a systematic investment plan
such as this will not assure a profit or protect against a loss. You may
discontinue the program at any time by notifying Investor Services by mail or
phone.
AUTOMATIC PAYROLL DEDUCTION
You may have money transferred from your paycheck to the Fund to buy additional
shares. Your investments will continue automatically until you instruct the Fund
and your employer to discontinue the plan. To process your investment, we must
receive both the check and payroll deduction information in required form. Due
to different procedures used by employers to handle payroll deductions, there
may be a delay between the time of the payroll deduction and the time we receive
the money.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. If you choose to have the money sent to a
checking account, please see "Electronic Fund Transfers" below.
You will generally receive your payment by the fifth business day of the month
in which a payment is scheduled. When you sell your shares under a systematic
withdrawal plan, it is a taxable transaction.
Because of the front-end sales charge, you may not want to set up a systematic
withdrawal plan if you plan to buy shares on a regular basis. Shares sold under
the plan may also be subject to a Contingent Deferred Sales Charge. Please see
"Contingent Deferred Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? - Systematic
Withdrawal Plan" in the SAI for more information.
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions from the Fund or
payments under a systematic withdrawal plan sent directly to a checking account.
If the checking account is with a bank that is a member of the Automated
Clearing House, the payments may be made automatically by electronic funds
transfer. If you choose this option, please allow at least fifteen days for
initial processing. We will send any payments made during that time to the
address of record on your account.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:
obtain information about your account;
obtain price and performance information about any Franklin Templeton Fund;
exchange shares between identically registered Franklin accounts; and
request duplicate statements and deposit slips.
You will need the code number for each class to use TeleFACTS. The code numbers
for Class I and Class II are 115 and 215.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
Confirmation and account statements reflecting transactions in your
account, including additional purchases and dividend reinvestments. PLEASE
VERIFY THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household
and send only one copy of a report. Call Fund Information if you would like
an additional free copy of the Fund's financial reports or an interim
quarterly report.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. For further information, call Institutional
Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
The Fund, Distributors and Advisers are also located at this address. You may
also contact us by phone at one of the numbers listed below.
HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ------------------------------------------------------------------------------
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m.
(Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the Fund's investment manager
BOARD - The Board of Trustees of the Trust
CD - Certificate of deposit
CLASS I AND CLASS II - The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the contingency
period is 18 months. Regardless of when during the month you purchased shares,
they will age one month on the last day of that month and each following month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
EXCHANGE - New York Stock Exchange
FRANKLIN FUNDS - The mutual funds in the Franklin Group of FundsAE except
Franklin Valuemark Funds and the Franklin Government Securities Trust
FRANKLIN TEMPLETON FUNDS - The Franklin Funds and the Templeton Funds
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MARKET TIMER(S) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 4.25% for Class I and 1% for Class II.
REIT - Real Estate Investment Trust
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TELEFACTSAE - Franklin Templeton's automated customer servicing system
TEMPLETON FUNDS - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or another wholly owned
subsidiary of Resources.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1996
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
TABLE OF CONTENTS
How Does the Fund Invest Its Assets?.........................
What Are the Fund's Potential Risks?.........................
Investment Restrictions......................................
Officers and Trustees........................................
Investment Advisory and Other Services.......................
How Does the Fund Buy Securities For Its Portfolio?..........
How Do I Buy, Sell and Exchange Shares?......................
How Are Fund Shares Valued?..................................
Additional Information on Distributions and Taxes............
The Fund's Underwriter.......................................
How Does the Fund Measure Performance?.......................
Miscellaneous Information....................................
Financial Statements.........................................
Useful Terms and Definitions.................................
Appendix.....................................................
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When reading this SAI, you will see certain terms in capital letters. This
means the term is explained under "Useful Terms and Definitions."
- -----------------------------------------------------------------------------
Franklin New York Tax-Free Income Fund (the "Fund") is a diversified, open-end
management investment company. Its investment objectives are to provide as high
a level of dividend income which is exempt from federal, New York state and New
York City income taxes as is consistent with prudent investing, while seeking
preservation of shareholders' capital. The Fund will seek to achieve its
investment objectives by investing primarily in long-term New York state
municipal and public authority debt obligations. The Fund will invest in
securities which have been rated in the four highest categories by nationally
recognized statistical rating organizations ("NRSROs") such as Moody's Investors
Service ("Moody's"), Standard & Poor's Corporation ("S&P") or Fitch Investors
Service, Inc. ("Fitch") or, if unrated, deemed by Advisers to be of comparable
quality to the four highest ratings categories, at the time of investment.
The Prospectus, dated April 30, 1996, as may be amended from time to time,
contains the basic information you should know before investing in the Fund. For
a free copy, call 1-800/DIAL BEN or write the Fund at the address shown.
THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU
WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND,
AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
- --------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK;
ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
RATINGS
The ratings of Moody's, S&P and Fitch represent their opinions with respect to
the issuers ability to pay interest and repay principal, although they do not
purport to reflect the risk of fluctuations in market value and are not absolute
standards of quality. On May 31, 1996, 100% of the Fund's invested assets were
invested in tax-exempt securities of which 21.7% had a triple-A rating by
Moody's, S&P or Fitch; 15.6% a double-A; 15.2% a single A; 45.6% a triple-B;
1.0% a double-B; and 0.9% a single-B. Securities unrated by the NRSROs
represented 5.2% of the invested assets, of which 5.1% was considered by
Advisers to be comparable to a triple-A rating and 0.1% to a single-A rating.
For an explanation of these ratings, please see "Appendix - Description of
Ratings."
HOW DOES THE FUND INVEST ITS ASSETS?
MUNICIPAL SECURITIES
The Prospectus describes the general categories and nature of municipal
securities. Discussed below are the major attributes of the various municipal
and other securities in which the Fund may invest.
TAX ANTICIPATION NOTES. Tax Anticipation Notes are used to finance working
capital needs of municipalities and are issued in anticipation of various
seasonal tax revenues, which will be used to pay the notes. They are usually
general obligations of the issuer, secured by the taxing power for the payment
of principal and interest.
REVENUE ANTICIPATION NOTES. Revenue Anticipation Notes are issued in expectation
of receipt of other kinds of revenue, such as federal revenues available under
the Federal Revenue Sharing Program. They are usually general obligations of the
issuer.
BOND ANTICIPATION NOTES. Bond Anticipation Notes are normally issued to provide
interim financing until long-term financing can be arranged. Long-term bonds
then provide the money for the repayment of the notes.
CONSTRUCTION LOAN NOTES. Construction Loan Notes are sold to provide
construction financing for specific projects. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration under the Federal National Mortgage Association or the
Government National Mortgage Association.
TAX-EXEMPT COMMERCIAL PAPER. Tax-Exempt Commercial Paper typically represents a
short-term obligation (270 days or less) issued by a municipality to meet
working capital needs.
MUNICIPAL BONDS. Municipal Bonds, which meet longer-term capital needs and
generally have maturities of more than one year when issued, have two principal
classifications: general obligation bonds and revenue bonds.
1. GENERAL OBLIGATION BONDS. Issuers of general obligation bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. The taxes that can be levied for the payment of debt service may
be limited or unlimited as to the rate or amount of special assessments.
2. REVENUE BONDS. A revenue bond is not secured by the full faith, credit and
taxing power of an issuer. Rather, the principal security for a revenue bond is
generally the net revenue derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise tax or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects including: electric, gas, water, and sewer systems; highways,
bridges and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security behind these bonds may vary. Housing finance
authorities have a wide range of security, including partially or fully insured
mortgages, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. Many bonds provide additional
security in the form of a debt service reserve fund, from which money may be
used to make principal and interest payments on the issuer's obligations. Some
authorities are provided with further security in the form of state assurance
(although without obligation) to make up deficiencies in the debt service
reserve fund.
INDUSTRIAL DEVELOPMENT REVENUE BONDS. These are, in most cases, revenue bonds
and are issued by or on behalf of public authorities to raise money for the
financing of various privately operated facilities for business manufacturing,
housing, sports, and pollution control. These bonds are also used to finance
public facilities such as airports, mass transit systems, ports, and parking.
The payment of the principal and interest on such bonds is solely dependent on
the ability of the facilities user to meet its financial obligations and the
pledge, if any, of the real and personal property so financed as security for
such payment. The Fund will purchase Industrial development revenue bonds only
to the extent that the interest paid by a particular bond is tax-exempt pursuant
to the Tax Reform Act of 1986, which limited the types of facilities that may be
financed with tax-exempt industrial development and private activity bonds and
the amounts of such bonds each state may issue.
WHEN-ISSUED PURCHASES. New issues of municipal securities are offered on a
when-issued basis; that is, payment for and delivery of the securities (the
"settlement date") normally takes place after the date that the offer is
accepted. The purchase price and the yield that will be received on the
securities are fixed at the time the buyer enters into the commitment. While the
Fund will always make commitments to purchase such securities with the intention
of actually acquiring the securities, it may nevertheless sell these securities
before the settlement date if it is deemed advisable as a matter of investment
strategy. To the extent that assets of the Fund are held in cash pending the
settlement of a purchase of securities, they would earn no income; however, it
is the Fund's intention to be fully invested to the extent practicable and
subject to the policies stated in the Prospectus. At the time the Fund makes the
commitment to purchase a municipal bond on a when-issued basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. The Fund does not believe that its net asset value or income will
be adversely affected by the purchase of municipal bonds on a when-issued basis.
The Fund will establish a segregated account in which it will maintain cash and
marketable securities equal in value to commitments for when-issued securities.
STRIPPED MUNICIPAL SECURITIES. Municipal securities may also be sold in
"stripped" form. Stripped municipal securities represent separate ownership of
interest and principal payments on municipal obligations.
ZERO-COUPON SECURITIES. A Fund's investment in zero-coupon and delayed interest
bonds may cause the Fund to recognize income and make distributions to
shareholders prior to the receipt of cash payments. Zero-coupon securities make
no periodic interest payments but instead are sold at a deep discount from their
face value. The buyer receives a rate of return determined by the gradual
appreciation of the security, which is redeemed at face value on a specified
maturity date.
Because zero-coupon securities bear no interest and compound semiannually at the
rate fixed at the time of issuance, the value of such securities is generally
more volatile than other fixed-income securities. Since zero-coupon bondholders
do not receive interest payments, zero-coupon securities fall more dramatically
than bonds paying interest on a current basis when interest rates rise. When
interest rates fall, zero-coupon securities rise more rapidly in value, because
the bonds reflect a fixed rate of return.
In order to generate cash to satisfy distribution requirements, a Fund may be
required to dispose of portfolio securities that it otherwise would have
continued to hold or to use cash flows from other sources such as the sale of
Fund shares.
ESCROW-SECURED BONDS OR DEFEASED BONDS. Escrow-Secured Bonds or Defeased Bonds
are created when an issuer refunds in advance of maturity (or pre-refunds) an
outstanding bond issue which is not immediately callable, and it becomes
necessary or desirable to set aside funds for redemption of the bonds at a
future date. In an advance refunding, the issuer will use the proceeds of a new
bond issue to purchase high grade, interest bearing debt securities which are
then deposited in an irrevocable escrow account held by a trustee bank to secure
all future payments of principal and interest of the advance refunded bond.
Escrow-secured bonds will often receive a triple-A rating from S&P and Moody's.
U.S. GOVERNMENT OBLIGATIONS. These are issued by the U.S. Treasury and include
bills, certificates of indebtedness, notes and bonds, or are issued by agencies
and instrumentalities of the U.S. government and backed by the full faith and
credit of the U.S. government.
COMMERCIAL PAPER. There refers to promissory notes issued by corporations in
order to finance their short-term credit needs.
CERTIFICATES OF DEPOSIT. These are issued against funds deposited in a
commercial bank, are for a definite period of time, earn a specified rate of
return and are normally negotiable.
BANKERS' ACCEPTANCES. These are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
REPURCHASE AGREEMENTS. These involve purchase of obligations issued or
guaranteed as to interest and principal by the U.S. government or any agency or
instrumentality thereof or any federally-created corporation. At the same time
the Fund purchases the security, it resells it to the vendor (a member bank of
the Federal Reserve System) and is obligated to redeliver the security to the
vendor on an agreed-upon date in the future. The resale price is in excess of
the purchase price and reflects an agreed-upon market rate unrelated to the
coupon rate on the purchased security. Such transactions afford an opportunity
for the Fund to earn, at no market risk, a return on cash which is only
temporarily available. The Fund's risk is limited to the ability of the vendor
to pay an agreed-upon sum upon the delivery date.
There may, of course, be other types of municipal securities that become
available which are similar to the foregoing described municipal securities in
which the Fund may also invest, to the extent such investments would be
consistent with the foregoing objectives and policies.
WHAT ARE THE FUND'S POTENTIAL RISKS?
DIVERSIFICATION RISK. As a diversified fund, the Fund is subject to the
following restriction. With respect to 75% of its net assets, the Fund, except
as stated below, may not purchase a security if, as a result of the investment,
more than 5% of its total assets would be in the securities of any single issuer
(with the exception of obligations of the U.S. government). The Fund's policy,
as described in the prospectus, applies the 5% limitation to 100% of the Fund's
total assets. For this purpose, each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues private activity bonds on behalf of a private
entity, will be regarded as a separate issuer for determining the
diversification of the Fund's portfolio. A bond for which the payments of
principal and interest are secured by an escrow account of securities backed by
the full faith and credit of the U.S. government ("defeased"), in general, will
not be treated as an obligation of the original municipality for purposes of
determining issuer diversification.
Defeased bonds may be excluded from issuer diversification calculations only
under the following conditions. Only U.S. government securities may be deposited
into the escrow account. The deposit must be irrevocable and pledged only to the
debt service of the underlying bonds, so that the deposited securities will not
be subject to the claims of other creditors of the issuer, even in the case of
economic defeasance. The escrow agent may not be an affiliated person of the
issuer or an affiliated person of an affiliated person of the issuer within the
meaning of section 2(a)(3) of the 1940 Act, and may not have a lien of any type
on the deposited securities for payment of its fees, except with respect to
excess securities. An independent certified public accountant, counsel to
holders of the original bond, or other party acceptable to a nationally
recognized statistical rating agency, must verify at the time of the initial
deposit of securities and at the time any substitute securities are deposited
into the escrow account, that the securities will satisfy all scheduled
principal, interest, and any applicable premiums on the original bonds. The Fund
will invest no more than 25% of its total assets in refunded bonds of the same
municipal issuer.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of the Fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of the Fund or (ii) 67%
or more of the shares of the Fund present at a shareholder meeting if more than
50% of the outstanding shares of the Fund are represented at the meeting in
person or by proxy, whichever is less. The Fund MAY NOT:
1. Borrow money or mortgage or pledge any of its assets, except that borrowings
for temporary or emergency purposes may be made in an amount up to 5% of the
total asset value.
2. Buy any securities on "margin" or sell any securities "short."
3. Lend any of its funds or other assets, except by the purchase of a portion of
an issue of publicly distributed bonds, debentures, notes or other debt
securities, or to the extent the entry into a repurchase agreement may be deemed
a loan. Although such loans are not presently intended, this prohibition will
not preclude the Fund from loaning securities to broker-dealers or other
institutional investors if at least 102% cash collateral is pledged and
maintained by the borrower; provided such security loans may not be made if, as
a result, the aggregate of such loans exceeds 10% of the value of the Fund's
total assets at the time of the most recent loan.
4. Act as underwriter of securities issued by other persons except insofar as
the Fund may be technically deemed an underwriter under the federal securities
laws in connection with the disposition of portfolio securities.
5. Purchase the securities of any issuer which would result in owning more than
10% of the voting securities of such issuer.
6. Purchase from or sell to its officers and trustees, or any firm of which any
officer or trustee is a member, as principal, any securities, but may deal with
such persons or firms as brokers and pay a customary brokerage commission;
retain securities of any issuer if, to the knowledge of the Fund, one or more of
its officers, trustees or Advisers, own beneficially more than 1/2 of 1% of the
securities of such issuer and all such officers and trustees together own
beneficially more than 5% of such securities.
7. Acquire, lease or hold real estate, except such as may be necessary or
advisable for the maintenance of its offices.
8. Invest in commodities and commodity contracts, "puts," "calls," "straddles,"
"spreads" or any combination thereof, or interests in oil, gas or other mineral
exploration or development programs. The Fund may, however, write covered call
options listed for trading on a national securities exchange and purchase call
options to the extent necessary to cancel call options previously written. At
present there are no options listed for trading on a national securities
exchange covering the types of securities which are appropriate for investment
by the Fund and, therefore, there are no option transactions available for the
Fund.
9. Invest in companies for the purpose of exercising control or management.
10. Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization; except to the extent the
Fund invests its uninvested daily cash balances in shares of Franklin New York
Tax-Exempt Money Fund and other tax-exempt money market funds in the Franklin
Group of Funds provided i) its purchases and redemptions of such money market
fund shares may not be subject to any purchase or redemption fees, ii) its
investments may not be subject to duplication of management fees, nor to any
charge related to the expense of distributing the Fund's shares (as determined
under Rule 12b-1, as amended under the federal securities laws) and iii)
provided aggregate investments by the Fund in any such money market fund do not
exceed (A) the greater of (i) 5% of the Fund's total net assets or (ii) $2.5
million, or (B) more than 3% of the outstanding shares of any such money market
fund.
11. Purchase securities, in private placements or in other transactions, for
which there are legal or contractual restrictions on resale.
12. Invest more than 25% of assets in securities of any industry. For purposes
of this limitation, tax-exempt securities issued by governments or political
subdivisions of governments are not considered to be part of any industry.
With respect to the limits set forth in Restrictions (1) and (3) above, it
should be noted that the Fund has not in the past, nor does it intend in the
future, to engage in either of those investment techniques to any extent.
If a percentage restriction is met at the time of investment, a later increase
or decrease in the percentage due to a change in value of portfolio securities
or the amount of assets will not be considered a violation of any of the
foregoing restrictions.
In response to state requirements:
(1) the Fund will not invest in real estate limited partnerships or in interests
(other than publicly traded equity securities) in oil, gas, or other mineral
leases, exploration or development;
(2) the Fund may not invest in warrants (valued at the lower of cost or market)
in excess of 5.0% of the value of the Fund's net assets. No more than 2.0% of
the value of the Fund's net assets may be invested in warrants (valued at the
lower of cost or market) which are not listed on the New York or American Stock
Exchanges. Warrants acquired by the Fund in units or attached to securities may
be deemed to be without value.
OFFICERS AND TRUSTEES
The Board has the responsibility for the overall management of the Fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Fund who are responsible for
administering the Fund's day-to-day operations. The affiliations of the officers
and Board members and their principal occupations for the past five years are
shown below. Members of the Board who are considered "interested persons" of the
Fund under the 1940 Act are indicated by an asterisk (*).
POSITIONS AND PRINCIPAL OCCUPATION
NAME, AGE AND OFFICES WITH THE DURING THE PAST FIVE
ADDRESS TRUST YEARS
- --------------------------------------------------------------------
Harris J. Ashton (64)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
Trustee
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)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Trustee
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)
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Trustee
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. (56)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
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)
8212 Burning Tree Road
Bethesda, MD 20817
Trustee
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.
Harmon E. Burns (51)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
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.
Kenneth V. Domingues (64)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting Standards
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.
Martin L. Flanagan (36)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
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
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
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
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
Brian E. Lorenz (57)
One North Lexington Avenue
White Plains, New York 10001-1700
Secretary
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 (67)
16 South Main Street
Norwalk, CT 06854
Vice President
Vice President of Franklin Advisers, Inc. in portfolio management capacities;
and officer of one investment company in the Franklin Group of Funds.
The table above shows the officers and Board members who are affiliated with
Distributors and Advisers. Nonaffiliated members of the Board are currently paid
$800 per month plus $800 per meeting attended. As shown above, some of the
nonaffiliated Board members also serve as directors, trustees or managing
general partners of other investment companies in the Franklin Templeton Group
of Funds. They may receive fees from these funds for their services. The
following table provides the total fees paid to nonaffiliated Board members by
the Trust and by other funds in the Franklin Templeton Group of Funds.
NUMBER OF BOARDS
IN THE FRANKLIN
TOTAL FEES TEMPLETON GROUP
TOTAL FEES RECEIVED FROM THE OF FUNDS ON
RECEIVED FROM FRANKLIN TEMPLETON WHICH EACH
NAME THE TRUST* GROUP OF FUNDS** SERVES***
- --------------------------------------------------------------------------------
Harris J. Ashton 19,200 327,925 55
S. Joseph Fortunato 19,200 344,745 57
Gordon S. Macklin 19,200 321,525 52
*For the fiscal year ended May 31, 1996.
**For the calendar year ended December 31, 1995.
*** We base the number of boards 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.
Nonaffiliated members of the Board are 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 director, trustee or
managing general partner. Legal fees and expense reimbursements 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. No officer or Board
member received any other compensation, including pension or retirement
benefits, directly or indirectly from the Fund or other funds in the Franklin
Templeton Group of Funds. Certain officers or Board members who are shareholders
of Resources may be deemed to receive indirect remuneration by virtue of their
participation, if any, in the fees paid to its subsidiaries.
As of July 19, 1996, the officers and Board members, as a group, owned of record
and beneficially approximately 22,564.372 shares, or less than 1% of the Fund's
total outstanding shares. Many of the Board members also own shares in other
funds in the Franklin Templeton Group of Funds. Charles B. Johnson and Rupert H.
Johnson, Jr. are brothers.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT MANAGER AND SERVICES PROVIDED. The Fund's investment manager is
Advisers. Advisers provides investment research and portfolio management
services, including the selection of securities for the Fund to buy, hold or
sell and the selection of brokers through whom the Fund's portfolio transactions
are executed. Advisers' extensive research activities include, as appropriate,
traveling to meet with issuers and to review project sites. Advisers' activities
are subject to the review and supervision of the Board to whom Advisers renders
periodic reports of the Fund's investment activities.
Advisers provides office space and furnishings, facilities and equipment
required for managing the business affairs of the Fund. Advisers also maintains
all internal bookkeeping, clerical, secretarial and administrative personnel and
services and provides certain telephone and other mechanical services. Advisers
is covered by fidelity insurance on its officers, directors and employees for
the protection of the Fund.
Advisers acts as investment manager or administrator to 36 U.S. registered
investment companies with 124 separate series. Advisers may give advice and take
action with respect to any of the other funds it manages, or for its own
account, that may differ from action taken by Advisers on behalf of the Fund.
Similarly, with respect to the Fund, Advisers is not obligated to recommend, buy
or sell, or to refrain from recommending, buying or selling any security that
Advisers and access persons, as defined by the 1940 Act, may buy or sell for its
or their own account or for the accounts of any other fund. Advisers is not
obligated to refrain from investing in securities held by the Fund or other
funds that it manages or administers. Of course, any transactions for the
accounts of Advisers and other access persons will be made in compliance with
the Fund's Code of Ethics.
MANAGEMENT FEES. Under its management agreement, the Fund pays Advisers a
management fee equal to a monthly rate of 5/96 of 1% (approximately 5/8 of 1%
per year) for the first $100 million of net assets of the Fund; 1/24 of 1%
(approximately 1/2 of 1% per year) on net assets of the Fund in excess of $100
million up to $250 million; 9/240 of 1% (approximately 45/100 of 1% per year) of
net assets of the Fund in excess of $250 million up to $10 billion; 11/300 of 1%
(approximately 44/100 of 1% per year) of net assets of the Fund in excess of $10
billion up to $12.5 billion; 7/200 of 1% (approximately 42/100 of 1% per year)
of net assets of the Fund in excess of $12.5 billion up to $15 billion; 1/30 of
1% (approximately 40/100 of 1% per year) of net assets of the Fund in excess of
$15 billion up to $17.5 billion; 19/600 of 1% (approximately 38/100 of 1% per
year) of net assets of the Fund in excess of $ 17.5 billion up to $20 billion;
and 3/100 of 1% (approximately 36/100 of 1% per year) of net assets of the Fund
in excess of $20 billion. The fee is computed at the close of business on the
last business day of each month. Each class will pay its proportionate share of
the management fee.
The management fee will be reduced as necessary to comply with the most
stringent limits on Fund expenses of any state where the Fund offers its shares.
Currently, the most restrictive limitation on a fund's allowable expenses for
each fiscal year, as a percentage of its average net assets, is 2.5% of the
first $30 million in assets, 2% of the next $70 million, and 1.5% of assets over
$100 million. Expense reductions have not been necessary based on state
requirements.
For the fiscal years ended May 31, 1994, 1995 and 1996, management fees totaling
$21,149,935, $20,769,558 and $21,810,902 were paid to Advisers.
MANAGEMENT AGREEMENT. The management agreement is in effect until July 31, 1997.
It may continue in effect for successive annual periods if its continuance is
specifically approved at least annually by a vote of the Board or by a vote of
the holders of a majority of the Fund's outstanding voting securities, and in
either event by a majority vote of the Board members who are not parties to the
management agreement or interested persons of any such party (other than as
members of the Board), cast in person at a meeting called for that purpose. The
management agreement may be terminated without penalty at any time by the Board
or by a vote of the holders of a majority of the Fund's outstanding voting
securities, or by Advisers on 30 days' written notice, and will automatically
terminate in the event of its assignment, as defined in the 1940 Act.
SHAREHOLDER SERVICING AGENT. Investor Services, a wholly-owned subsidiary of
Resources, is the Fund's shareholder servicing agent and acts as the Fund's
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account.
CUSTODIANS. Bank of New York, Mutual Funds Division, 90 Washington Street, New
York, New York, 10286, acts as custodian of the securities and other assets of
the Fund. Bank of America NT & SA, 555 California Street, 4th Floor, San
Francisco, California 94104, acts as custodian for cash received in connection
with the purchase of Fund shares. Citibank Delaware, One Penn's Way, New Castle,
Delaware 19720, acts as custodian in connection with transfer services through
bank automated clearing houses. The custodians do not participate in decisions
relating to the purchase and sale of portfolio securities.
AUDITORS. Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California
94105, are the Fund's independent auditors. During the fiscal year ended May 31,
1996, their auditing services consisted of rendering an opinion on the financial
statements of the Trust included in the Fund's Annual Report to Shareholders for
the fiscal year ended May 31, 1996.
HOW DOES THE FUND BUY SECURITIES FOR ITS PORTFOLIO?
Since most purchases by the Fund are principal transactions at net prices, the
Fund incurs little or no brokerage costs. The Fund deals directly with the
selling or buying principal or market maker without incurring charges for the
services of a broker on its behalf, unless it is determined that a better price
or execution may be obtained by using the services of a broker. Purchases of
portfolio securities from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers will include a
spread between the bid and ask prices. As a general rule, the Fund does not buy
bonds in underwritings where it is given no choice, or only limited choice, in
the designation of dealers to receive the commission. The Fund seeks to obtain
prompt execution of orders at the most favorable net price. Transactions may be
directed to dealers in return for research and statistical information, as well
as for special services provided by the dealers in the execution of orders.
It is not possible to place a dollar value on the special executions or on the
research services received by Advisers from dealers effecting transactions in
portfolio securities. The allocation of transactions in order to obtain
additional research services permits Advisers to supplement its own research and
analysis activities and to receive the views and information of individuals and
research staff of other securities firms. As long as it is lawful and
appropriate to do so, Advisers and its affiliates may use this research and data
in their investment advisory capacities with other clients. If the Fund's
officers are satisfied that the best execution is obtained, the sale of Fund
shares may also be considered a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
If purchases or sales of securities of the Fund and one or more other investment
companies or clients supervised by Advisers are considered at or about the same
time, transactions in these securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by
Advisers, taking into account the respective sizes of the funds and the amount
of securities to be purchased or sold. In some cases this procedure could have a
detrimental effect on the price or volume of the security so far as the Fund is
concerned. In other cases it is possible that the ability to participate in
volume transactions and to negotiate lower brokerage commissions will be
beneficial to the Fund.
During the past three years ended May 31, 1996, the Fund paid no brokerage
commissions.
As of May 31, 1996, the Fund did not own securities of its regular
broker-dealers.
HOW DO I BUY, SELL AND EXCHANGE SHARES?
ADDITIONAL INFORMATION ON BUYING SHARES
The Fund continuously offers its shares through Securities Dealers who have an
agreement with Distributors. Securities Dealers may at times receive the entire
sales charge. A Securities Dealer who receives 90% or more of the sales charge
may be deemed an underwriter under the Securities Act of 1933, as amended.
Securities laws of states where the Fund offers its shares may differ from
federal law. Banks and financial institutions that sell shares of the Fund may
be required by state law to register as Securities Dealers. Financial
institutions or their affiliated brokers may receive an agency transaction fee
in the percentages indicated in the table under "How Do I Buy Shares? - Purchase
Price of Fund Shares" in the Prospectus.
When you buy shares, if you submit a check or a draft that is returned unpaid to
the Fund we may impose a $10 charge against your account for each returned item.
Under agreements with certain banks in Taiwan, Republic of China, the Fund's
shares are available to these banks' trust accounts without a sales charge. The
banks may charge service fees to their customers who participate in the trusts.
A portion of these service fees may be paid to Distributors or one of its
affiliates to help defray expenses of maintaining a service office in Taiwan,
including expenses related to local literature fulfillment and communication
facilities.
Class I shares of the Fund may be offered to investors in Taiwan through
securities advisory firms known locally as Securities Investment Consulting
Enterprises. In conformity with local business practices in Taiwan, Class I
shares may be offered with the following schedule of sales charges:
SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE
- ------------------------------- -------------
Under $30,000 3%
$30,000 but less than $100,000 2%
$100,000 but less than $400,000 1%
$400,000 or more 0%
OTHER PAYMENTS TO SECURITIES DEALERS. Distributors will pay the following
commissions, out of its own resources, to Securities Dealers who initiate and
are responsible for purchases of Class I shares of $1 million or more: 0.75% on
sales of $1 million to $2 million, plus 0.60% on sales over $2 million to $3
million, plus 0.50% on sales over $3 million to $50 million, plus 0.25% on sales
over $50 million to $100 million, plus 0.15% on sales over $100 million. These
breakpoints are reset every 12 months for purposes of additional purchases.
LETTER OF INTENT. You may qualify for a reduced sales charge when you buy Class
I shares, as described in the Prospectus. At any time within 90 days after the
first investment that you want to qualify for a reduced sales charge, you may
file with the Fund a signed shareholder application with the Letter of Intent
section completed. After the Letter is filed, each additional investment will be
entitled to the sales charge applicable to the level of investment indicated on
the Letter. Sales charge reductions based on purchases in more than one Franklin
Templeton Fund will be effective only after notification to Distributors that
the investment qualifies for a discount. Your holdings in the Franklin Templeton
Funds, including Class II shares, acquired more than 90 days before the Letter
is filed, will be counted towards completion of the Letter but will not be
entitled to a retroactive downward adjustment in the sales charge. Any
redemptions you make during the 13 month period will be subtracted from the
amount of the purchases for purposes of determining whether the terms of the
Letter have been completed. If the Letter is not completed within the 13 month
period, there will be an upward adjustment of the sales charge, depending on the
amount actually purchased (less redemptions) during the period. If you execute a
Letter prior to a change in the sales charge structure of the Fund, you may
complete the Letter at the lower of the new sales charge structure or the sales
charge structure in effect at the time the Letter was filed.
As mentioned in the Prospectus, five percent (5%) of the amount of the total
intended purchase will be reserved in Class I shares of the Fund registered in
your name until you fulfill the Letter.
If total purchases, less redemptions, equal the amount specified under the
Letter, the reserved shares will be deposited to an account in your name or
delivered to you or as you direct. If total purchases, less redemptions, exceed
the amount specified under the Letter and is an amount that would qualify for a
further quantity discount, a retroactive price adjustment will be made by
Distributors and the Securities Dealer through whom purchases were made pursuant
to the Letter (to reflect such further quantity discount) on purchases made
within 90 days before and on those made after filing the Letter. The resulting
difference in Offering Price will be applied to the purchase of additional
shares at the Offering Price applicable to a single purchase or the dollar
amount of the total purchases. If the total purchases, less redemptions, are
less than the amount specified under the Letter, you will remit to Distributors
an amount equal to the difference in the dollar amount of sales charge actually
paid and the amount of sales charge that would have applied to the aggregate
purchases if the total of the purchases had been made at a single time. Upon
remittance, the reserved shares held for your account will be deposited to an
account in your name or delivered to you or as you direct. If within 20 days
after written request the difference in sales charge is not paid, the redemption
of an appropriate number of reserved shares to realize the difference will be
made. In the event of a total redemption of the account prior to fulfillment of
the Letter, the additional sales charge due will be deducted from the proceeds
of the redemption, and the balance will be forwarded to you.
REINVESTMENT DATE. Shares acquired through the reinvestment of dividends will be
purchased at the Net Asset Value determined on the business day following the
dividend record date (sometimes known as the "ex-dividend date"). The processing
date for the reinvestment of dividends may vary and does not affect the amount
or value of the shares acquired.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
the Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of the Fund under the exchange privilege, the Fund might have to
sell portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the exchange
privilege may result in periodic large inflows of money. If this occurs, it is
the Fund's general policy to initially invest this money in short-term,
tax-exempt municipal securities, unless it is believed that attractive
investment opportunities consistent with the Fund's investment objectives exist
immediately. This money will then be withdrawn from the short-term tax-exempt
municipal securities and invested in portfolio securities in as orderly a manner
as is possible when attractive investment opportunities arise.
The proceeds from the sale of shares of an investment company are generally not
available until the fifth business day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange until
that fifth business day. The sale of Fund shares to complete an exchange will be
effected at Net Asset Value at the close of business on the day the request for
exchange is received in proper form. Please see "May I Exchange Shares for
Shares of Another Fund?" in the Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
SYSTEMATIC WITHDRAWAL PLAN. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
Payments under the plan will be made from the redemption of an equivalent amount
of shares in your account, generally on the first business day of the month in
which a payment is scheduled.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust the
shares in your account if payments exceed distributions received from the Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Because the amount
withdrawn under the plan may be more than your actual yield or income, part of
the payment may be a return of your investment.
The Fund may discontinue a systematic withdrawal plan by notifying you in
writing and will automatically discontinue a systematic withdrawal plan if all
shares in your account are withdrawn or if the Fund receives notification of the
shareholder's death or incapacity.
THROUGH YOUR SECURITIES DEALER. If you sell shares through your Securities
Dealer, it is your dealer's responsibility to transmit the order to the Fund in
a timely fashion. Any loss to you resulting from your dealer's failure to do so
must be settled between you and your Securities Dealer.
REDEMPTIONS IN KIND. The Fund has committed itself to pay in cash (by check) all
requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of the 90-day period. This commitment
is irrevocable without the prior approval of the SEC. In the case of redemption
requests in excess of these amounts, the Board reserves the right to make
payments in whole or in part in securities or other assets of the Fund, in case
of an emergency, or if the payment of such a redemption in cash would be
detrimental to the existing shareholders of the Fund. In these circumstances,
the securities distributed would be valued at the price used to compute the
Fund's net assets and you may incur brokerage fees in converting the securities
to cash. The Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.
GENERAL INFORMATION
If dividend checks are returned to the Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find you
from your account. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of the Fund must be denominated in U.S. dollars. We may, in our sole discretion,
either (a) reject any order to buy or sell shares denominated in any other
currency or (b) honor the transaction or make adjustments to your account for
the transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank.
SPECIAL SERVICES. The Franklin Templeton Institutional Services Department
provides specialized services, including recordkeeping, for institutional
investors. The cost of these services is not borne by the Fund.
Investor Services may pay certain financial institutions that maintain omnibus
accounts with the Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such owners. For each beneficial owner in
the omnibus account, the Fund may reimburse Investor Services an amount not to
exceed the per account fee that the Fund normally pays Investor Services. These
financial institutions may also charge a fee for their services directly to
their clients.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
HOW ARE FUND SHARES VALUED?
We calculate the Net Asset Value per share of each class as of the scheduled
close of the Exchange, generally 1:00 p.m. Pacific time, each day that the
Exchange is open for trading. As of the date of this SAI, the Fund is informed
that the Exchange observes the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
For the purpose of determining the aggregate net assets of the Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date.
Over-the-counter portfolio securities are valued within the range of the most
recent quoted bid and ask prices. Portfolio securities that are traded both in
the over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market as determined by Advisers. Municipal
securities generally trade in the over-the-counter market rather than on a
securities exchange.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of the Board, the
Fund may utilize a pricing service, bank or Securities Dealer to perform any of
the above described functions.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
You may receive two types of distributions from the Fund:
1. INCOME DIVIDENDS. The Fund receives income generally in the form of interest
and other income derived from its investments. This income, less the expenses
incurred in the Fund's operations, is its net investment income from which
income dividends may be distributed. Thus, the amount of dividends paid per
share may vary with each distribution.
2. CAPITAL GAIN DISTRIBUTIONS. The Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by the Fund derived from net short-term and net long-term capital
gains (after taking into account any capital loss carry forward or post October
loss deferral) may generally be made once a year in December to reflect any net
short-term and net long-term capital gains realized by the Fund as of October 31
of the current fiscal year and any undistributed capital gains from the prior
fiscal year. These distributions, when made, will generally be fully taxable to
the Fund's shareholders. The Fund may make more than one distribution derived
from net short-term and net long-term capital gains in any year or adjust the
timing of these distributions for operational or other reasons.
TAXES
As stated in the Prospectus, the Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code. The Board reserves the right
not to maintain the qualification of the Fund as a regulated investment company
if it determines this course of action to be beneficial to shareholders. In that
case, the Fund will be subject to federal and possibly state corporate taxes on
its taxable income and gains, to the alternative minimum tax on a portion of its
tax-exempt income, and distributions (including its tax-exempt interest
dividends) to shareholders will be taxable to the extent of the Fund's available
earnings and profits.
The Code requires all funds to distribute at least 98% of their taxable ordinary
income earned during the calendar year and at least 98% of their capital gain
net income earned during the twelve month period ending October 31 of each year
(in addition to amounts from the prior year that were neither distributed nor
taxed to the Fund) to shareholders by December 31 of each year in order to avoid
the imposition of a federal excise tax. Under these rules, certain distributions
which are declared in October, November or December but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared. The Fund intends
as a matter of policy to declare and pay such dividends, if any, in December to
avoid the imposition of this tax, but does not guarantee that its distributions
will be sufficient to avoid any or all federal excise taxes.
All or a portion of the sales charge incurred in purchasing shares of the Fund
will not be included in the federal tax basis of such shares sold or exchanged
within ninety (90) days of their purchase (for purposes of determining gain or
loss with respect to such shares) if the sales proceeds are reinvested in the
Fund or in another fund in the Franklin Group of Funds (defined under "How To
Buy Shares of the Fund")and a sales charge which would otherwise apply to the
reinvestment is reduced or eliminated. Any portion of such sales charge excluded
from the tax basis of the shares sold will be added to the tax basis of the
shares acquired in the reinvestment. You should consult with your tax advisor
concerning the tax rules applicable to the redemption or exchange of fund
shares.
Since the Fund's income is derived from interest income and gain on the sale of
portfolio securities rather than dividend income, no portion of the Fund's
distributions will generally be eligible for the corporate dividends-received
deduction. None of the distributions paid by the Fund for the fiscal year ended
May 31, 1995 qualified for this deduction and it is not anticipated that any of
the current year's dividends will so qualify.
Redemptions and exchanges of Fund shares are taxable transactions for federal
and state income tax purposes. Gain or loss will be recognized in an amount
equal to the difference between your basis in the shares and the amount you
received, subject to the rules described below. If such shares are a capital
asset in your hands, gain or loss will be capital gain or loss and will be
long-term for federal income tax purposes if your shares have been held for more
than one year.
All or a portion of a loss realized upon a redemption of shares will be
disallowed to the extent other shares of the Fund are purchased (through
reinvestment of dividends or otherwise) within 30 days before or after such
redemption. Any loss disallowed under these rules will be added to the tax basis
of the shares purchased.
Many states grant tax-free status to dividends paid to shareholders of mutual
funds from interest income earned by the Fund from direct obligations of the
U.S. Government, subject in some states to minimum investment requirements that
must be met by the Fund. Investments in GNMA/FNMA securities and repurchase
agreements collateralized by U.S. Government securities do not generally qualify
for tax-free treatment. While it is not the primary investment objective of this
Fund to invest in such obligations, the Fund is authorized to so invest for
temporary or defensive purposes. To the extent that such investments are made,
the Fund will provide you with the percentage of any dividends paid which may
qualify for such tax-free treatment at the end of each calendar year. You should
then consult with your own tax advisor with respect to the application of their
state and local laws to these distributions and on the application of other
state and local laws on distributions and redemption proceeds received from the
Fund.
If you are defined in the Code as a "substantial user" (or a related person) of
facilities financed by private activity bonds should consult with your tax
advisor before purchasing shares of the Fund.
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement in effect until July 31, 1996,
Distributors acts as principal underwriter in a continuous public offering for
both classes of the Fund's shares. The underwriting agreement will continue in
effect for successive annual periods if its continuance is specifically approved
at least annually by a vote of the Board or by a vote of the holders of a
majority of the Fund's outstanding voting securities, and in either event by a
majority vote of the Board members who are not parties to the underwriting
agreement or interested persons of any such party (other than as members of the
Board), cast in person at a meeting called for that purpose. The underwriting
agreement terminates automatically in the event of its assignment and may be
terminated by either party on 90 days' written notice.
Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
Until April 30, 1994, income dividends for Class I shares were reinvested at the
Offering Price and Distributors allowed 50% of the entire commission to the
Securities Dealer of record, if any, on an account. Starting with any income
dividends paid after April 30, 1994, this reinvestment is at Net Asset Value.
In connection with the offering of the Fund's shares, aggregate underwriting
commissions for the fiscal years ended May 31, 1994, 1995 and 1996, were
$24,747,692, $13,734,072 and $13,262,121. After allowances to dealers,
Distributors retained $1,876,562, $794,358 and $845,729 in net underwriting
discounts and commissions, for the respective years and received for the fiscal
year ended May 31, 1996 $54,293 in connection with redemptions or repurchases of
shares. Distributors may be entitled to reimbursement under the Rule 12b-1 plan
for each class, as discussed below. Except as noted, Distributors received no
other compensation from the Fund for acting as underwriter.
THE RULE 12B-1 PLANS
Each class has adopted a distribution plan or "Rule 12b-1 plan" pursuant to Rule
12b-1 of the 1940 Act.
THE CLASS I PLAN. Under the Class I plan, the Fund may pay up to a maximum of
0.10% per year of Class I's average daily net assets, payable quarterly, for
expenses incurred in the promotion and distribution of Class I shares.
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 that were acquired by investors on or after May 1, 1994, the
effective date of the 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 May 1, 1994 ("Old Assets"). These fees
will be paid to the current Securities Dealer of record on the 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 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 is a Class I expense. This means that all Class I shareholders,
regardless of when they purchased their shares, will bear Rule 12b-1 expenses at
the same rate. The initial rate will be at least 0.06% (0.05% plus 0.01%) of the
average daily net assets of Class I and, as Class I shares are sold on or after
May 1, 1994, will increase over time. Thus, as the proportion of Class I shares
purchased on or after May 1, 1994, increases in relation to outstanding Class I
shares, the expenses attributable to payments under the plan will also increase
(but will not exceed 0.10% of average daily net assets). While this is the
currently anticipated calculation for fees payable under the Class I plan, the
plan permits the Board to allow the Fund to pay a full 0.10% on all assets at
any time. The approval of the Board would be required to change the calculation
of the payments to be made under the Class I plan.
THE CLASS II PLAN. Under the Class II plan, the Fund pays Distributors up to
0.50% per year of Class II's average daily net assets, payable quarterly, for
distribution and related expenses. These fees may be used to compensate
Distributors or others for providing distribution and related services and
bearing certain Class II expenses. All distribution expenses over this amount
will be borne by those who have incurred them without reimbursement by the Fund.
Under the Class II Plan, the Fund also pays an additional 0.15% per year of
Class II's average daily net assets, payable quarterly, as a servicing fee.
During the first year after a purchase of Class II shares, Distributors may keep
this portion of the Rule 12b-1 fees associated with the Class II purchase.
THE CLASS I AND CLASS II PLANS. In addition to the payments that Distributors or
others are entitled to under each plan, each plan also provides that to the
extent the Fund, Advisers or Distributors or other parties on behalf of the
Fund, Advisers or Distributors make payments that are deemed to be for the
financing of any activity primarily intended to result in the sale of shares of
each class within the context of Rule 12b-1 under the 1940 Act, then such
payments shall be deemed to have been made pursuant to the plan. The terms and
provisions of each plan relating to required reports, term, and approval are
consistent with Rule 12b-1.
In no event shall the aggregate asset-based sales charges, which include
payments made under each plan, plus any other payments deemed to be made
pursuant to a plan, exceed the amount permitted to be paid pursuant to the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.,
Article III, Section 26(d)4.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plans as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plans for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of the Fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
Each plan has been approved in accordance with the provisions of Rule 12b-1. The
plans are renewable annually by a vote of the Board, including a majority vote
of the Board members who are not interested persons of the Fund 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 is also required that the
selection and nomination of such Board members be done by the non-interested
members of the Board. The plans and any related agreement may be terminated at
any time, without penalty, by vote of a majority of the non-interested Board
members 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 outstanding
shares of the class. 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 outstanding shares of the class, and all material amendments to the plans
or any related agreements shall be approved by a vote of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on any such amendment.
Distributors is required to report in writing to the Board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the plans should be continued.
For the fiscal year ended May 31, 1996, Distributors had eligible expenditures
of $3,792,275 and $420,074 for advertising, printing, and payments to
underwriters and broker-dealers pursuant to the Class I and Class II plans, of
which the Fund paid Distributors $3,158,248 and $113,477 under the Class I and
Class II plans.
HOW DOES THE FUND MEASURE PERFORMANCE?
Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Current yield and average annual total return quotations used by the Fund are
based on the standardized methods of computing performance mandated by the SEC.
If a Rule 12b-1 plan is adopted, performance figures reflect fees from the date
of the plan's implementation. An explanation of these and other methods used by
the Fund to compute or express performance for each class follows. Regardless of
the method used, past performance is not necessarily indicative of future
results, but is an indication of the return to shareholders only for the limited
historical period used.
TOTAL RETURN
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is determined by
finding the average annual rates of return over one-, five- and ten-year periods
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes the maximum front-end sales charge is
deducted from the initial $1,000 purchase, and income dividends and capital gain
distributions are reinvested at Net Asset Value. The quotation assumes the
account was completely redeemed at the end of each one-, five- and ten-year
period and the deduction of all applicable charges and fees. If a change is made
to the sales charge structure, historical performance information will be
restated to reflect the maximum front-end sales charge currently in effect.
When considering the average annual total return quotations, you should keep in
mind that the maximum front-end sales charge reflected in each quotation is a
one time fee charged on all direct purchases, which will have its greatest
impact during the early stages of your investment. This charge will affect
actual performance less the longer you retain your investment in the Fund. The
average annual total return for Class I for the one-, five- and ten-year periods
ended May 31, 1996, was -0.74%, 6.82%, and 7.45%. The average annual total
return for Class II for the one-year period ended May 31, 1996 and since
inception was 1.13% and 3.90%.
These figures were calculated according to the SEC formula:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one-, five- or ten-year periods at the end of
the one-, five- or ten-year periods
CUMULATIVE TOTAL RETURN. The Fund may also quote the cumulative total return for
each class, in addition to the average annual total return. These quotations are
computed the same way, except the cumulative total return will be based on the
actual return for each class for a specified period rather than on the average
return over one-, five- and ten-year periods. The cumulative total return for
Class I for the one-, five- and ten-year periods ended May 31, 1996, was -0.74%,
39.08%, and 105.08%. The cumulative total return for Class II for the one-year
period ended May 31, 1996 and since inception was 1.13% and 4.25%.
YIELD
CURRENT YIELD. Current yield of each class shows the income per share earned by
the Fund. It is calculated by dividing the net investment income per share of
each class earned during a 30-day base period by the applicable maximum Offering
Price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders of
the class during the base period. The yield for each class for the 30-day period
ended May 31, 1996, was 5.38% for Class I and 4.99% for Class II.
These figures were obtained using the following SEC formula:
6
Yield = 2 [(a-b + 1) - 1]
---
cd
where:
a = interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum Offering Price per share on the last day of the period
TAXABLE-EQUIVALENT YIELD. The Fund may also quote a taxable-equivalent yield for
each class that shows the before-tax yield that would have to be earned from a
taxable investment to equal the yield for the class. Taxable-equivalent yield is
computed by dividing the portion of the class' yield that is tax-exempt by one
minus the highest applicable combined federal, state and New York City income
tax rate and adding the product to the portion of the class' yield that is not
tax-exempt, if any. The taxable-equivalent yield for each class for the 30-day
period ended May 31, 1996, was 9.59% for Class I and 8.90% for Class II.
As of the date of this SAI, the state and combined state and federal, and the
combined New York City, State and federal income tax rates upon which the
taxable-equivalent yield quotations are based were 7.1%, 43.9% and 46.6%. From
time to time, as any changes to the rates become effective, taxable-equivalent
yield quotations advertised by the Fund will be updated to reflect these
changes. The Fund expects updates may be necessary as tax rates are changed by
federal, state and local governments. The advantage of tax-free investments,
like the Fund, will be enhanced by any tax rate increases. Therefore, the
details of specific tax increases may be used in sales material for the Fund.
CURRENT DISTRIBUTION RATE
Current yield and taxable-equivalent yield, which are calculated according to a
formula prescribed by the SEC, are not indicative of the amounts which were or
will be paid to shareholders of a class. Amounts paid to shareholders are
reflected in the quoted current distribution rate or taxable-equivalent
distribution rate. The current distribution rate is usually computed by
annualizing the dividends paid per share by a class during a certain period and
dividing that amount by the current maximum Offering Price. The current
distribution rate differs from the current yield computation because it may
include distributions to shareholders from sources other than interest, such as
short-term capital gains and is calculated over a different period of time. The
current distribution rate for each class for the 30-day period ended May 31,
1996, was 5.81% for Class I and 5.85% for Class II.
A taxable-equivalent distribution rate shows the taxable distribution rate
equivalent to the class' current distribution rate. The advertised
taxable-equivalent distribution rate will reflect the most current federal
,state and New York City tax rates available to the Fund. The taxable-equivalent
distribution rate for each class for the 30-day period ended May 31, 1996, was
10.88% for Class I and 10.96% for Class II.
VOLATILITY
Occasionally statistics may be used to show the Fund's volatility or risk.
Measures of volatility or risk are generally used to compare the Fund's Net
Asset Value or performance to a market index. One measure of volatility is beta.
Beta is the volatility of a fund relative to the total market, as represented by
an index considered representative of the types of securities in which the fund
invests. A beta of more than 1.00 indicates volatility greater than the market
and a beta of less than 1.00 indicates volatility less than the market. Another
measure of volatility or risk is standard deviation. Standard deviation is used
to measure variability of Net Asset Value or total return around an average over
a specified period of time. The idea is that greater volatility means greater
risk undertaken in achieving performance.
OTHER PERFORMANCE QUOTATIONS
For investors who are permitted to buy Class I shares without a sales charge,
sales literature about Class I may quote a current distribution rate, yield,
cumulative total return, average annual total return and other measures of
performance as described elsewhere in this SAI with the substitution of Net
Asset Value for the public Offering Price.
The Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Templeton Group of Funds. Resources is the parent company of Advisers and
underwriter of both the Franklin Group of Funds and Templeton Group of Funds.
COMPARISONS
To help you better evaluate how an investment in the Fund may satisfy your
investment objective, advertisements and other materials about the Fund may
discuss certain measures of each class' performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
These comparisons may include, but are not limited to, the following examples:
a) Salomon Brothers Broad Bond Index or its component indices - measures yield,
price, and total return for Treasury, agency, corporate and mortgage bonds.
b) Lehman Brothers Aggregate Bond Index or its component indices - measures
yield, price and total return for Treasury, agency, corporate, mortgage and
Yankee bonds.
c) Smith Barney, Shearson Donoghue's Money Fund Report Industry averages for
7-day annualized and compounded yields of taxable, tax-free and government money
funds.
d) Lehman Brothers Municipal Bond Index or its component indices - measures
yield, price and total return for the municipal bond market.
e) Bond Buyer 20-Bond Index - an index of municipal bond yields based upon
yields of 20 general obligation bonds maturing in 20 years.
f) Bond Buyer 30-Bond Index - an index of municipal bond yields based upon
yields of 20 revenue bonds maturing in 30 years.
g) Bond Buyer's Municipal Bond Index - an index based on the yields of 40
long-term, tax-exempt municipal bonds. Designed to be the basis for the
Municipal Bond Index futures contract.
h) Bond Buyer's 40 Average Dollar Price - a simple average of the current
average dollar bid prices of the 40 bonds in the Bond Buyer's Municipal Bond
Index.
i) Mutual Fund Sourcebook, published by Morningstar, Inc. - analyzes price,
yield, risk, and total return for mutual funds.
k) Financial publications: The Wall Street Journal, Business Week, Financial
World, Forbes, Fortune, and Money magazines - provide performance statistics
over specified time periods.
l) Salomon Brothers Composite High Yield Index or its component indices measures
yield, price and total return for the Long-Term High-Yield Index,
Intermediate-Term High-Yield Index, and Long-Term Utility High-Yield Index.
m) Historical data supplied by the research departments of First Boston
Corporation, the J. P. Morgan companies, Salomon Brothers, Merrill Lynch,
Lehman Brothers and Bloomberg, L.P.
n) Lipper - Mutual Fund Performance Analysis; Lipper - Fixed Income Fund
Performance Analysis; and Lipper Mutual Fund Yield Report - measure total return
and average current yield for the mutual fund industry and rank individual
mutual fund performance over specified time periods, assuming reinvestment of
all distributions, exclusive of any applicable sales charges.
From time to time, advertisements or information for the Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
the Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.
Advertisements or information may also compare a class' performance to the
return on CDs or other investments. You should be aware, however, that an
investment in the Fund involves the risk of fluctuation of principal value, a
risk generally not present in an investment in a CD issued by a bank. For
example, as the general level of interest rates rise, the value of the Fund's
fixed-income investments, as well as the value of its shares that are based upon
the value of such portfolio investments, can be expected to decrease.
Conversely, when interest rates decrease, the value of the Fund's shares can be
expected to increase. CDs are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by the Fund to calculate its figures. In addition,
there can be no assurance that the Fund will continue its performance as
compared to these other averages.
MISCELLANEOUS INFORMATION
The Fund may help you achieve various investment goals such as saving for a down
payment on a home, college costs and other long-term goals. The Franklin College
Costs Planner may help you in determining how much money must be invested on a
monthly basis in order to have a projected amount available in the future to
fund a child's college education. (Projected college cost estimates are based
upon current costs published by the College Board.) Of course, an investment in
the Fund cannot guarantee that these goals will be met.
The Fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 48 years and
now services more than 2.5 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Together, the Franklin Templeton Group has over $145
billion in assets under management for more than 4.1 million U.S. based mutual
fund shareholder and other accounts. The Franklin Templeton Group of Funds
offers 115 U.S. based mutual funds to the public. The Fund may identify itself
by its NASDAQ symbol or CUSIP number.
Franklin is a leader in the tax-free mutual fund industry and manages more than
$43 billion in municipal bond assets for over three quarters of a million
investors. According to Research and Ratings Review, Franklin's municipal
research team ranked number 2 out of 800 investment advisory firms surveyed by
TMS Holdings, Inc. as of March 31, 1996. Also according to the May 31, 1996
report published by Lipper Analytical Services, Inc. the Fund is still the
largest New York municipal bond fund in existence.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one in
service quality for five of the past eight years.
From time to time advertisements or sales material issued by the Fund may
discuss or be based upon information in a recent issue of the Special Report on
Tax Freedom Day published by the Tax Foundation, a Washington, D.C. based
nonprofit research and public education organization. The report illustrates,
among other things, the annual amount of time the average taxpayer works to
satisfy his or her tax obligations to the federal, state and local taxing
authorities.
From time to time, the number of Fund shares held in the "street name" accounts
of various Securities Dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding.
Employees of Resources or its subsidiaries who are access persons under the 1940
Act are permitted to engage in personal securities transactions subject to the
following general restrictions and procedures: (i) the trade must receive
advance clearance from a compliance officer and must be completed within 24
hours after clearance; (ii) copies of all brokerage confirmations must be sent
to a compliance officer and, within 10 days after the end of each calendar
quarter, a report of all securities transactions must be provided to the
compliance officer; and (iii) access persons involved in preparing and making
investment decisions must, in addition to (i) and (ii) above, file annual
reports of their securities holdings each January and inform the compliance
officer (or other designated personnel) if they own a security that is being
considered for a fund or other client transaction or if they are recommending a
security in which they have an ownership interest for purchase or sale by a fund
or other client.
In the event of disputes involving multiple claims of ownership or authority to
control your account, the Fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
the Fund to have a potential property interest in the account, prior to
executing instructions regarding the account; (b) interplead disputed funds or
accounts with a court of competent jurisdiction; or (c) surrender ownership of
all or a portion of the account to the IRS in response to a Notice of Levy.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to Shareholders
of the Fund, for the fiscal year ended May 31, 1996, including the auditors'
report, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the Fund's investment manager
BOARD - The Board of Trustees of the Trust
CD - Certificate of deposit
CLASS I AND CLASS II - The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
CODE - Internal Revenue Code of 1986, as amended
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter
EXCHANGE - New York Stock Exchange
FRANKLIN FUNDS - The mutual funds in the Franklin Group of FundsAE except
Franklin Valuemark Funds and the Franklin Government Securities Trust
FRANKLIN TEMPLETON FUNDS - The Franklin Funds and the Templeton Funds
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered mutual funds in the
Franklin Group of FundsAE and the Templeton Group of Funds
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is []% for Class I and 1% for Class II.
PROSPECTUS - The prospectus for the Fund dated May 31, 1996, as may be amended
from time to time
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution which, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TEMPLETON FUNDS - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund
U.S. - United States
WE/OUR/US - Unless a different meaning is indicated by the context, these terms
refer to the Fund and/or Investor Services, Distributors, or another
wholly-owned subsidiary of Resources.
APPENDIX
DESCRIPTION OF RATINGS
MUNICIPAL BOND RATINGS
MOODY'S
AAA: Municipal bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA: Municipal bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large, fluctuation of protective elements may be of
greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger.
A: Municipal bonds rated A possess many favorable investment attributes and are
considered upper medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
BAA: Municipal bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
BA: Municipal bonds rated Ba are judged to have predominantly speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and, thereby,
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Municipal bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Municipal bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CON.(-): Municipal bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon the
completion of construction or the elimination of the basis of the condition.
S&P
AAA: Municipal bonds rated AAA are the highest-grade obligations. They possess
the ultimate degree of protection as to principal and interest. In the market,
they move with interest rates and, hence, provide the maximum safety on all
counts.
AA: Municipal bonds rated AA also qualify as high-grade obligations, and in the
majority of instances differ from AAA issues only in a small degree. Here, too,
prices move with the long-term money market.
A: Municipal bonds rated A are regarded as upper medium-grade. They have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are regarded
as safe. They predominantly reflect money rates in their market behavior but
also, to some extent, economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Note: The S&P ratings may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.
FITCH
AAA: Municipal bonds rated AAA are considered to be of investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal which is unlikely to be affected by reasonably
foreseeable events.
AA: Municipal bonds rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong although not quite as strong as bonds rated AAA and not
significantly vulnerable to foreseeable future developments.
A: Municipal bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB: Municipal bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefor impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB: Municipal bonds rated BB are considered speculative. The obligor's ability
to pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirements.
B: Municipal bonds rated B are considered highly speculative. While bonds in
this class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC: Municipal bonds rated CCC have certain identifiable characteristics which,
if not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
Plus (+) or minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus or minus are not
used for the AAA and the DDD, DD or D categories.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
FILE NOS. 2-77880
811-3479
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24 FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements are incorporated herein by reference to the
Registrant's Annual Report to Shareholders dated May 31, 1996 as
filed with the SEC electronically on Form Type N-30D on August
1, 1996
(i) Report of Independent Accountants dated June 28, 1996
(ii) Statement of Investments in Securities and Net Assets -
May 31, 1996
(iii) Statement of Assets and Liabilities - May 31, 1996
(iv) Statement of Operations - for the year ended May 31, 1996
(v) Statements of Changes in Net Assets - for the years ended
May 31, 1996 and 1995
(vi) Notes to Financial Statements
b) Exhibits:
The following exhibits are attached herewith, with the exception
of exhibits 6(ii), 8(i), 8(ii), 13(i), 16(i), 17(i) and 17(ii)
which are incorporated by reference as noted.
(1) copies of the charter as now in effect;
(i) Form of Agreement and Declaration of Trust
(ii) Form of Certificate of Trust
(2) copies of the existing By-Laws or instruments corresponding
thereto;
(i) By-Laws
(3) copies of any voting trust agreement with respect to more than
five percent of any class of equity securities of the Registrant;
Not Applicable
(4) specimens or copies of each security issued by the Registrant,
including copies of all constituent instruments, defining the
rights of the holders of such securities, and copies of each
security being registered;
Not Applicable
(5) copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(i) Form of Management Agreement between Registrant and
Franklin Advisers, Inc.
(6) copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(i) Form of Amended and Restated Distribution Agreement between
Registrant and Franklin/Templeton Distributors, Inc.
(ii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc., and Securities Dealers is incorporated
herein by reference to:
Registrant: Franklin Federal Tax-Free Income Fund
Filing: Post-Effective Amendment No. 17 to Registration on
Form N-1A
File No. 2-75925
Filing Date: March 28, 1995
(7) copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Registrant in their capacity as
such; any such plan that is not set forth in a formal document,
furnish a reasonably detailed description thereof;
Not Applicable
(8) copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act, with respect to securities and
similar investments of the Registrant, including the schedule of
remuneration;
(i) Custodian Agreement between Registrant and Bank of America
NT & SA dated April 21, 1990
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 2-77880
Filing Date: July 31, 1995
(ii) Copy of Custodian Agreements between Registrant and
Citibank Delaware:
1. Citicash Management ACH Customer Agreement
2. Citibank Cash Management Services Master
Agreement
3. Short Form Bank Agreement - Deposits and
Disbursements of Funds
Registrant: Franklin Asset Allocation Fund
Filing: Post-Effective Amendment No. 55 to
Registration Statement on Form N-1A
File No. 2-12647
Filing Date: March 1, 1996
(iii) Form of Master Custody Agreement between Registrant and
Bank of New York dated February 16, 1996
(iv) Form of Terminal Link Agreement between Registrant and
Bank of New York dated February 16, 1996
(9) copies of all other material contracts not made in the ordinary
course of business which are to be performed in whole or in part
at or after the date of filing the Registration Statement;
Not Applicable
(10) an opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid and nonassessable;
Not Applicable
(11) copies of any other opinions, appraisals or rulings and consents
to the use thereof relied on in the preparation of this
registration statement and required by Section 7 of the 1933 Act;
(i) Consent of Independent Auditors dated July 30, 1996
(12) all financial statements omitted from Item 23;
Not Applicable
(13) copies of any agreements or understandings made in consideration
for providing the initial capital between or among the
Registrant, the underwriter, adviser, promoter or initial
stockholders and written assurances from promoters or initial
stockholders that their purchases were made for investment
purposes without any present intention of redeeming or reselling;
(i) Letter of Understanding dated April 12, 1995
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 2-77880
Filing Date: July 31, 1995
(14) copies of the model plan used in the establishment of any
retirement plan in conjunction with which Registrant offers its
securities, any instructions thereto and any other documents
making up the model plan. Such form(s) should disclose the costs
and fees charged in connection therewith;
Not Applicable
(15) copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act, which describes all material aspects
of the financing of distribution of Registrant's shares, and any
agreements with any person relating to implementation of such
plan.
(i) Form of Class I Distribution Plan pursuant to Rule 12b-1
between Franklin/Templeton Distributors, Inc., and the
Registrant on behalf of Franklin New York Tax-Free Income
Fund
(ii) Form of Class II Distribution Plan pursuant to Rule 12b-1
between Franklin/Templeton Distributors, Inc., and the
Registrant on behalf of Franklin New York Tax-Free Income
Fund
(16) schedule for computation of each performance quotation provided
in the registration statement in response to Item 22 (which need
not be audited)
(i) Schedule for Computation of Performance Quotation
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 2-77880
Filing Date: July 31, 1995
(17) Power of Attorney
(i) Power of Attorney dated February 16, 1995
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 2-77880
Filing Date: July 31, 1995
(ii) Certificate of Secretary dated February 16, 1995
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 2-77880
Filing Date: July 31, 1995
(18) Multiple Class Plan
(i) Form of Multiple Class Plan
(27) Financial Data Schedule
(i) Financial Data Schedule for Class I shares
(ii) Financial Data Schedule for Class II shares
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
NONE
ITEM 26 NUMBER OF HOLDERS OF SECURITIES
As of May 31, 1996, the number of record holders of the only classes of
securities of the Registrant was as follows:
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Capital Stock
Franklin New York Tax-Free
Income Fund, Inc. - Class I 101,268
Franklin New York Tax-Free
Income Fund, Inc. - Class II 1,187
ITEM 27 INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court or appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 28 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The officers and directors of the Registrant's manager also serve as officers
and/or directors for (1) the manager's corporate parent, Franklin Resources,
Inc., and/or (2) other investment companies in the Franklin Group of Funds(R).
In addition, Mr. Charles B. Johnson is a director of General Host
Corporation. For additional information please see Part B and Schedules A
and D of Form ADV of the Funds' Investment Manager (SEC File 801-26292),
incorporated herein by reference, which sets forth the officers and directors
of the Investment Manager and information as to any business, profession,
vocation or employment of a substantial nature engaged in by those officers
and directors during the past two years.
ITEM 29 PRINCIPAL UNDERWRITERS
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of:
Age High Income Fund, Inc.
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Municipal Securities Trust
Franklin New York Tax-Free Trust
Franklin Asset Allocation Fund
Franklin Real Estate Securities Trust
Franklin Strategic Series
Franklin Strategic Mortgage Portfolio
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities Fund
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Franklin Templeton Japan Fund
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Global Smaller Companies Fund, Inc.
Templeton Global Real Estate Securities Fund
Templeton Variable Products Series Fund
b) The information required by this Item 29 with respect to each director
and officer of Distributors is incorporated by reference to Part B of this
N-1A and Schedule A of Form BD filed by Distributors with the Securities and
Exchange Commission pursuant to the Securities Act of 1934 (SEC File No.
8-5889)
c) Not Applicable. Registrant's principal underwriter is an affiliated
person of an affiliated person of the Registrant.
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS
The accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 are kept by the Fund or its
shareholder services agent, Franklin/Templeton Investor Services, Inc., both
of whose address is 777 Mariners Island Blvd., San Mateo, CA. 94404.
ITEM 31 MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Part A or
Part B.
ITEM 32 UNDERTAKINGS
The Registrant hereby undertakes to comply with the information requirement
in Item 5A of the Form N-1A by including the required information in the
Fund's annual report and to furnish each person to whom a prospectus is
delivered a copy of the annual report upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of San Mateo and the State of
California, on the 1st day of August 1996.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
(Registrant)
By: CHARLES B. JOHNSON*
Charles B. Johnson
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Amendment has been signed below by the following persons in
the capacities and on the dates indicated:
CHARLES B. JOHNSON* Principal Executive Officer and
Charles B. Johnson Trustee
Dated: August 1, 1996
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: August 1, 1996
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: August 1, 1996
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: August 1, 1996
S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: August 1, 1996
RUPERT H. JOHNSON, JR.* Trustee
Rupert H. Johnson, Jr. Dated: August 1, 1996
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: August 1, 1996
*BY /s/ Larry L. Greene
Larry L. Greene, Attorney-in-Fact
(Pursuant to Power of Attorney previously filed)
FRANKLIN NEW YORK TAX-FREE INCOME FUND
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Form of Agreement and Declaration of Trust Attached
EX-99.B1(ii) Form of Certificate of Trust Attached
EX-99.B2(i) By-Laws Attached
EX-99.B5(i) Form of Management Agreement between Attached
Registrant and Franklin Advisers, Inc.
EX-99.B6(i) Form of Distribution Agreement between Attached
Registrant and Franklin/Templeton
Distributors, Inc.
EX-99.B6(ii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors, Inc.,
and Securities Dealers
EX-99.B8(i) Custodian Agreement between Registrant *
and Bank of America NT & SA
EX-99.B8(ii) Copy of Custodian Agreements between *
Registrant and Citibank Delaware
EX-99.B8(iii) Form of Master Custody Agreement between Attached
Registrant and Bank of New York dated
February 16, 1996
EX-99.B8(iv) Form of Terminal Link Agreement between Attached
Registrant and Bank of New York dated
February 16, 1996
EX-99.B11(i) Consent of Independent Auditors Attached
EX-99.B13(i) Letter of Understanding dated April 12, *
1995
EX-99.B15(i) Form of Class I Distribution Plan Attached
pursuant to Rule 12b-1
EX-99.B15(ii) Form of Class II Distribution Plan Attached
Pursuant to Rule 12b-1
EX-99.B16(i) Schedule for Computation of Performance *
Quotation
EX-99.B17(i) Power of Attorney dated February 16, 1995 *
EX-99.B17(ii) Certificate of Secretary dated February *
16, 1995
EX-99.B18(i) Form of Multiple Class Plan Attached
EX-27.B(i) Financial Data Schedule for Class I Shares Attached
EX-27.B(ii) Financial Data Schedule for Class II Attached
Shares
* Incorporated by Reference
AGREEMENT AND DECLARATION OF TRUST
of
FRANKLIN NEW YORK TAX-FREE INCOME FUND
a Delaware Business Trust
Principal Place of Business:
777 Mariners Island Boulevard
San Mateo, California 94404
TABLE OF CONTENTS
Page
ARTICLE I....................................................................1
Name and Definitions..................................................1
Section 1. Name.................................................1
Section 2. Definitions..........................................1
(a) Trust...........................................1
(b) Trust Property..................................1
(c) Trustees........................................1
(d) Shares..........................................2
(e) Shareholder.....................................2
(f) Person..........................................2
(g) 1940 Act........................................2
(h) Commission and Principal
Underwriter....................................2
(i) Declaration of Trust............................2
(j) By-Laws.........................................2
(k) Interested Person...............................2
(1) Investment Manager..............................2
(m) Series..........................................2
ARTICLE II...................................................................2
Purpose of Trust.......................................................2
ARTICLE III..................................................................3
Shares.................................................................3
Section 1. Division of Beneficial Interest......................3
Section 2. Ownership of Shares..................................3
Section 3. Investments in the Trust.............................4
Section 4. Status of Shares and Limitation of
Personal Liability.................................4
Section 5. Power of Board of Trustees to Change
Provisions Relating to Shares......................4
Section 6. Establishment and Designation of
Shares.............................................5
(a) Assets Held with Respect to a Particular Series......5
(b) Liabilities Held with Respect to a Particular Series.6
(c) Dividends, Distributions, Redemptions, and Repurchases
6
(d) Voting...............................................7
(e) Equality.............................................7
(f) Fractions............................................7
(g) Exchange Privilege...................................7
(h) Combination of Series................................7
(i) Elimination of Series................................8
Section 7. Indemnification of Shareholders......................8
ARTICLE IV...................................................................8
The Board of Trustees..................................................8
......Section 1. Number, Election and
Tenure.............................................8
Section 2. Effect of Death, Resignation, etc. of
a Trustee..........................................9
Section 3. Powers...............................................9
Section 4. Payment of Expenses by the Trust....................13
Section 5. Payment of Expenses by Shareholders.................13
Section 6. Ownership of Assets of the Trust....................13
Section 7. Service Contracts...................................14
ARTICLE V 15
Shareholders' Voting Powers and Meetings..............................15
Section 1. Voting Powers.......................................15
Section 2. Voting Power and Meetings...........................16
Section 3. Quorum and Required Vote............................16
Section 4. Action by Written Consent...........................17
Section 5. Record Dates........................................17
Section 6. Additional Provisions...............................17
ARTICLE VI 18
Net Asset Value, Distributions, and Redemptions.......................18
......Section 1. Determination of Net Asset Value, Net
Income, and Distributions.........................18
Section 2. Redemptions and Repurchases.........................18
Section 3. Redemptions at the Option of the
Trust.............................................19
ARTICLE VII 19
Compensation and Limitation of Liability of Trustees..................19
Section 1. Compensation........................................19
Section 2. Indemnification and Limitation of
Liability.........................................19
Section 3. Trustee's Good Faith Action, Expert
Advice, No Bond or Surety.........................20
Section 4. Insurance...........................................20
ARTICLE VIII................................................................20
Miscellaneous.........................................................20
......Section 1. Liability of Third Persons Dealing
with Trustees.....................................20
Section 2. Termination of Trust or Series......................20
Section 3. Merger and Consolidation............................21
Section 4. Amendments..........................................21
Section 5. Filing of Copies, References, Headings..............22
Section 6. Applicable Law......................................22
Section 7. Provisions in Conflict with Law or
Regulations.......................................22
Section 8. Business Trust Only.................................23
Section 9. Use of the name "Franklin"..........................23
AGREEMENT AND DECLARATION OF TRUST
OF
FRANKLIN NEW YORK TAX-FREE INCOME FUND
WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into as
of the date set forth below by the Trustees named hereunder for the purpose
of forming a Delaware business trust in accordance with the provisions
hereinafter set forth,
NOW, THEREFORE, the Trustees hereby direct that a Certificate of Trust be
filed with the office of the Secretary of State of the State of Delaware and
do hereby declare that the Trustees will hold IN TRUST all cash, securities
and other assets which the Trust now possesses or may hereafter acquire from
time to time in any manner and manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders of
Shares in this Trust.
I. Name and Definitions
1.... Name. This trust shall be known as "Franklin New York
Tax-Free Income Fund" and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to time
determine.
2.... Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Delaware business trust
established by this Agreement and Declaration of Trust, as amended from time
to time;
(b) The "Trust Property" means any and all property,
real or personal, tangible or intangible, which is owned or held by or for
the account of the Trust, including without limitation the rights referenced
in Article VIII, Section 9 hereof;
(c) "Trustees" refers to the persons who have signed
this Agreement and Declaration of Trust, so long as they continue in office
in accordance with the terms hereof, and all other persons who may from time
to time be duly elected or appointed to serve on the Board of Trustees in
accordance with the provisions hereof, and reference herein to a Trustee or
the Trustees shall refer to such person or persons in their capacity as
trustees hereunder;
(d) "Shares" means the shares of beneficial interest
into which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares;
(e) "Shareholder" means a record owner of outstanding
Shares;
(f) "Person" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures, estates and
other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof, whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act
of 1940 and the Rules and Regulations thereunder, all as amended from time to
time;
(h) The terms "Commission" and "Principal Underwriter"
shall have the respective meanings given them in Section 2(a)(7) and Section
(2)(a)(29) of the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time and incorporated herein by reference;
(k) The term "Interested Person" has the meaning given
it in Section 2(a)(19) of the 1940 Act;
(l) "Investment Manager" or "Manager" means a party
furnishing services to the Trust pursuant to any contract described in
Article IV, Section 7(a) hereof;
(m) "Series" refers to each Series of Shares established
and designated under or in accordance with the provisions of Article III and
shall mean an entity such as that described in Section 18(f)(2) of the 1940
Act, and subject to Rule 18f-2 thereunder.
II. Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities.
III. Shares
1.... Division of Beneficial Interest. The beneficial
interest in the Trust shall at all times be divided into an unlimited number
of Shares, with a par value of $ .01 per Share. The Trustees may authorize
the division of Shares into separate Series and the division of Series into
separate classes of Shares. The different Series shall be established and
designated, and the variations in the relative rights and preferences as
between the different Series shall be fixed and determined, by the Trustees.
If only one or no Series (or classes) shall be established, the Shares shall
have the rights and preferences provided for herein and in Article III,
Section 6 hereof to the extent relevant and not otherwise provided for
herein, and all references to Series (and classes) shall be construed (as the
context may require) to refer to the Trust.
Subject to the provisions of Section 6 of this Article III, each
Share shall have voting rights as provided in Article V hereof, and holders
of the Shares of any Series shall be entitled to receive dividends, when, if
and as declared with respect thereto in the manner provided in Article VI,
Section I hereof. No Shares shall have any priority or preference over any
other Share of the same Series with respect to dividends or distributions
upon termination of the Trust or of such Series made pursuant to Article
VIII, Section 4 hereof. All dividends and distributions shall be made
ratably among all Shareholders of a particular (class of a) Series from the
assets held with respect to such Series according to the number of Shares of
such (class of such) Series held of record by such Shareholder on the record
date for any dividend or distribution or on the date of termination, as the
case may be. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust or
any Series. The Trustees may from time to time divide or combine the Shares
of any particular Series into a greater or lesser number of Shares of that
Series without thereby materially changing the proportionate beneficial
interest ' of the Shares of that Series in the assets held with respect to
that Series or materially affecting the rights of Shares of any other Series.
2.... Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Series (or class). No certificates certifying the ownership of Shares shall
be issued except as the Board of Trustees may otherwise determine from time
to time. The Trustees may make such rules as they consider appropriate for
the transfer of Shares of each Series (or class) and similar matters. The
record books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders
of each Series (or class) and as to the number of Shares of each Series (or
class) held from time to time by each.
3.... Investments in the Trust. Investments may be accepted
by the Trust from such Persons, at such times, on such terms, and for such
consideration as the Trustees from time to time may authorize. Each
investment shall be credited to the individual Shareholder's account in the
form of full and fractional Shares of the Trust, iii such Series (or class)
as the purchaser shall select, at the net asset value per Share next
determined for such Series (or class) after receipt of the investment;
provided, however, that the Trustees may, in their sole discretion, impose a
sales charge upon investments in the Trust.
4.... Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights
provided in this instrument. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder during
the existence of the Trust shall not operate to terminate the Trust, nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
entitles such representative only to the rights of said deceased Shareholder
under this Trust. ownership of Shares shall not entitle the Shareholder to
any title in or to the whole or any part of the Trust Property or right to
call for a partition or division of the same or for an accounting, nor shall
the ownership of Shares constitute the Shareholders as partners. Neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust shall
have any power to bind personally any Shareholders, nor, except as
specifically provided herein, to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
5.... Power of Board of Trustees to Change Provisions Relating
to Shares. Notwithstanding any other provisions of this Declaration of Trust
and without limiting the power of the Board of Trustees to amend the
Declaration of Trust as provided elsewhere herein, the Board of Trustees
shall have the power to amend this Declaration of Trust, at any time and from
time to time, in such manner as the Board of Trustees may determine in their
sole discretion, without the need for Shareholder action, so as to add to,
delete, replace or otherwise modify any provisions relating to the Shares
contained in this Declaration of Trust, provided that before adopting any
such amendment without Shareholder approval the Board of Trustees shall
determine that it is consistent with the fair and equitable treatment of all
Shareholders or that Shareholder approval is not otherwise required by the
1940 Act or other applicable law. if Shares have been issued, Shareholder
approval shall be required to adopt any amendments to this 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).
Subject to the foregoing Paragraph, the Board of Trustees may
amend the Declaration of Trust to amend any of the provisions set forth in
paragraphs (a) through (i) of Section 6 of this Article III.
6.... Establishment and Designation of Shares. The
establishment and designation of any Series (or class) of Shares shall be
effective upon the resolution by a majority of the then Trustees, adopting a
resolution which sets forth such establishment and designation and the
relative rights and preferences of such Series (or class). Each such
resolution shall be incorporated herein by reference upon adoption.
Shares of each Series (or class) established pursuant to this
Section 6, unless otherwise provided in the resolution establishing such
Series, shall have the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series.
All consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof
from whatever source derived, including, without limitation, any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably be held with respect to that Series for
all purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Trust. Such consideration, assets,
income, earnings, profits and proceeds thereof, from whatever source derived,
including, without limitation, any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are herein
referred to as "assets held with respect to" that Series. In the event that
there are any assets, income, earnings, profits and proceeds thereof, funds
or payments which are not readily identifiable as assets held with respect to
any particular Series (collectively "General Assets"), the Trustees shall
allocate such General Assets to, between or among any one or more of the
Series in such manner and on such basis as the Trustees, in their sole
discretion, deem fair and equitable, and any General Asset so allocated to a
particular Series shall be held with respect to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) Liabilities Held with Respect to a Particular
SERIES. The assets of the Trust held with respect to each particular
Series shall be charged against the liabilities of the Trust held with
respect to that Series and all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities of the Trust which
are not readily identifiable as being held with respect to any particular
Series shall be allocated and charged by the Trustees to and among any one or
more of the Series in such manner and on such basis as the Trustees in their
sole discretion deem fair and equitable. The liabilities, expenses, costs,
charges, and reserves so charged to a Series are herein referred to as
"liabilities held with respect to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Series for all purposes. All
Persons who have extended credit which has been allocated to a particular
Series, or who have a claim or contract which has been allocated to any
particular Series, shall look, and shall be required by contract to look
exclusively, to the assets of that particular Series for payment of such
credit, claim, or contract. In the absence of an express contractual
agreement so limiting the claims of such creditors, claimants and contract
providers, each creditor, claimant and contract provider will be deemed
nevertheless to have impliedly agreed to such limitation unless an express
provision to the contrary has been incorporated in the written contract or
other document establishing the claimant relationship.
(c) Dividends, Distributions, Redemptions, and
REPURCHASES. Notwithstanding any other provisions of this Declaration of
Trust, including, without limitation, Article VI, no dividend or distribution
including, without limitation, any distribution paid upon termination of the
Trust or of any series (or class) with respect to, nor any redemption or
repurchase of, the Shares of any Series (or class) shall be effected by the
Trust other than from the assets held with respect to such Series, nor,
except as specifically provided in Section 7 of this Article III, shall any
Shareholder of any particular Series otherwise have any right or claim
against the assets held with respect to any other Series except to the extent
that such Shareholder has such a right or claim hereunder as a Shareholder of
such other Series. The Trustees shall have full discretion, to the extent
not inconsistent with the 1940 Act, to determine which items shall be treated
as income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on
a matter shall vote separately by Series (and, if applicable, by class): that
is, the Shareholders of each Series (or class) shall have the right to
approve or disapprove matters affecting the Trust and each respective series
(or class) as if the Series (or classes) were separate companies. There are,
however, two exceptions to voting by separate Series (or classes). First, if
the 1940 Act requires all Shares of the Trust to be voted in the aggregate
without differentiation between the separate Series (or classes), then all
the Trust's Shares shall be entitled to vote on a one-vote-per-Share basis.
Second, if any matter affects only the interests of some but not all Series
(or classes), then only the Shareholders of such affected Series (or classes)
shall be entitled to vote on the matter.
(e) Equality. All the Shares of each particular Series
shall represent an equal proportionate undivided interest in the assets held
with respect to that Series (subject to the liabilities held with respect to
that Series and such rights and preferences as may have been established and
designated with respect to classes of Shares within such Series), and each
Share of any particular Series shall be equal to each other Share of that
Series.
(f) Fractions. Any fractional Share of a Series shall
carry proportionately all the rights and obligations of a whole share of that
Series, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the
authority to provide that the holders of Shares of any Series shall have the
right to exchange said Shares for Shares of one or more other Series of
Shares in accordance with such requirements and procedures as may be
established by the Trustees.
(h) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine the assets and liabilities
held with respect to any two or more series into assets and liabilities held
with respect to a single series.
(i) Elimination of Series. At any time that there are
no Shares outstanding of any particular Series (or class) previously
established and designated, the Trustees may by resolution of a majority of
the then Trustees abolish that Series (or class) and rescind the
establishment and designation thereof.
7.... Indemnification of Shareholders. If any Shareholder or
former Shareholder shall be exposed to liability by reason of a claim or
demand relating to his or her being or having been a Shareholder, and not
because of his or her acts or omissions, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators, or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled to be held harmless
from and indemnified out of the assets of the Trust against all loss and
expense arising from such claim or demand.
IV. The Board of Trustees
1.... NUMBER, ELECTION AND TENURE. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a
written instrument signed, or by resolution approved at a duly constituted
meeting, by a majority of the Board of Trustees, provided, however, that the
number of Trustees shall in no event be less than one (1) nor more than
fifteen (15). The Board of Trustees, by action of a majority of the then
Trustees at a duly constituted meeting, may fill vacancies in the Board of
Trustees or remove Trustees with or without cause. Each Trustee shall serve
during the continued lifetime of the Trust until he or she dies, resigns, is
declared bankrupt or incompetent by a court of appropriate jurisdiction, or
is removed, or, if sooner, until the next meeting of Shareholders called for
the purpose of electing Trustees and until the election and qualification of
his or her successor. Any Trustee may resign at any time by written
instrument signed by him and delivered to any officer of the Trust or to a
meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee
resigning and no Trustee removed shall have any right to any compensation for
any period following his or her resignation or removal, or any right to
damages on account of such removal. The Shareholders may fix the number of
Trustees and elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of the Trust.
A meeting of Shareholders for the purpose of electing or removing one or more
Trustees may be called (i) by the Trustees upon their own vote, or (ii) upon
the demand of Shareholders owning 10% or more of the Shares of the Trust in
the aggregate.
2.... EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The
death, declination, resignation, retirement, removal, or incapacity of one or
more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration
of Trust. Whenever a vacancy in the Board of Trustees shall occur, until
such vacancy is filled as provided in Article IV, Section 1, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration of Trust. As conclusive evidence of such vacancy, a written
instrument certifying the existence of such vacancy may be executed by an
officer of the Trust or by a majority of the Board of Trustees. In the event
of the death, declination, resignation, retirement, removal, or incapacity of
all the then Trustees within a short period of time and without the
opportunity for at least one Trustee being able to appoint additional
Trustees to fill vacancies, the Trust's Investment Manager(s) are empowered
to appoint new Trustees subject to the provisions of Section 16(a) of the
1940 Act.
3.... POWERS. Subject to the provisions of this Declaration
of Trust, the business of the Trust shall be managed by the Board of
Trustees, and such Board shall have all powers necessary or convenient to
carry out that responsibility including the power to engage in securities
transactions of all kinds on behalf of the Trust. Trustees in all instances
shall act as principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do any and
all acts and to make and execute any and all contracts and instruments that
they nay consider necessary or appropriate in connection with the
administration of the Trust. Without limiting the foregoing, the Trustees
may: adopt By-Laws not inconsistent with this Declaration of Trust providing
for the regulation and management of the affairs of the Trust and may amend
and repeal them to the extent that such By-Laws do not reserve that right to
the Shareholders; fill vacancies in or remove from their number, and may
elect and remove such officers and appoint and terminate such agents as they
consider appropriate; appoint from their own number and establish and
terminate one or more committees consisting of two or more Trustees which may
exercise the powers and authority of the Board of Trustees to the extent that
the Trustees determine; employ one or more custodians of the assets of the
Trust and may authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems for the central
handling of securities or with a Federal Reserve Bank, retain a transfer
agent or a shareholder servicing agent, or both; provide for the issuance and
distribution of Shares by the Trust directly or through one or more Principal
underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to
applicable law; set record dates for the determination of Shareholders with
respect to various matters; declare and pay dividends and distributions to
Shareholders of each Series from the assets of such Series; establish from
time to time, in accordance with the provisions of Article III, Section 6
hereof, any Series (or class) of Shares, each such Series (or class) to
operate as a separate and distinct investment medium and with separately
defined investment objectives and policies and distinct investment purpose;
and in general delegate such authority as they consider desirable to any
officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian, transfer or shareholder
servicing agent, or Principal Underwriter. Any determination as to what is
in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified or required by law, any action by the Board of Trustees
shall be deemed effective if approved or taken by a majority of the Trustees
then in office. Any action required or permitted to be taken at any meeting
of the Board of Trustees, or any committee thereof, may be taken without a
meeting if all members of the Board of Trustees or committee (as the case may
be) consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of the Board of Trustees, or committee.
Without limiting the foregoing, the Trust shall have power and
authority:
(a) To invest and reinvest cash, to hold cash
uninvested, and to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange,
distribute, write options on, lend or otherwise deal in or dispose of
contracts for the future acquisition or delivery of fixed income or other
securities, and securities of every nature and kind, including, without
limitation, all types of bonds, debentures, stocks, preferred stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any
kind, issued, created guaranteed, or sponsored by any and all Persons,
including, without limitation, states, territories, and possessions of the
United States and the District of Columbia and any political subdivision,
agency, or instrumentality thereof, any foreign government or any political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank or savings institution, or by
any corporation or organization organized under the laws of the United States
or of any state, territory, or possession thereof, or by any corporation or
organization organized under any foreign law, or in "when issued" contracts
for any such securities, to change the investments of the assets of the
Trust; and to exercise any and all rights, powers, and privileges of
ownership or interest in respect of any and all such investments of every
kind and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more
Persons, to exercise any of said rights, powers, and privileges in respect of
any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, lease, or write options with respect to or otherwise deal in any
property rights relating to any or all of the assets of the Trust or any
Series, subject to any requirements of the 1940 Act;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to
execute and deliver proxies or powers of attorney to such person or persons
as the Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the Trustees
shall deem proper;
(d) To exercise powers and right of subscription or
otherwise which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not
indicating that it is trust property, whether in bearer, unregistered or
other negotiable form, or in its own name or in the name of a custodian or
subcustodian or a nominee or nominees or otherwise or to authorize the
custodian or a subcustodian or a nominee or nominees to deposit the same in a
securities depository, subject in each case to proper safeguards according to
the usual practice of investment companies or any rules or regulations
applicable thereto;
(f) To consent to, or participate in, any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and to
pay calls or subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting
through a committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security to, any
such committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in controversy, including but
not limited to claims for taxes;
(i) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) To borrow funds or other property in the name of the
Trust exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or
other obligations of any Person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust
Property such insurance as the Trustees may deem necessary or appropriate for
the conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust or payment of distributions and
principal on its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers,
principal underwriters, or independent contractors of the Trust, individually
against all claims and liabilities of every nature arising by reason of
holding Shares, holding, being or having held any such office or position, or
by reason of any action alleged to have been taken or omitted by any such
Person as Trustee, officer, employee, agent, investment adviser, principal
underwriter, or independent contractor, including any action taken or omitted
that may be determined to constitute negligence, whether or not the Trust
would have the power to indemnify such Person against liability; and
(m) To adopt, establish and carry out pension,
profitsharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
The Trust shall not be limited to investing in obligations
maturing before the possible termination of the Trust or one or more of its
Series. The Trust shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust shall
not be required to obtain any court order to deal with any assets of the
Trust or take any other action hereunder.
4.... PAYMENT OF EXPENSES BY THE TRUST. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust or Series (or class), or partly out of the principal and partly out of
income, and to charge or allocate the same to, between or among such one or
more of the Series (or class) that may be established or designated pursuant
to Article III, Section 6, as they deem fair, all expenses, fees, charges,
taxes and liabilities incurred or arising in connection with the Trust or
Series (or class), or in connection with the management thereof, including,
but not limited to, the Trustees' compensation and such expenses and charges
for the services of the Trust's officers, employees, investment adviser 'or
manager, principal underwriter, auditors, counsel, custodian, transfer agent,
Shareholder servicing agent, and such other agents or independent contractors
and such other expenses and charges as the Trustees may deem necessary or
proper to incur.
5.... PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall
have the power, as frequently as they may determine, to cause each
Shareholder, or each Shareholder of any particular Series, to pay directly,
in advance or arrears, for charges of the Trust's custodian or transfer,
Shareholder servicing or similar agent, an amount fixed from time to time by
the Trustees, by setting off such charges due from such Shareholder from
declared but unpaid dividends owed such Shareholder and/or by reducing the
number of shares in the account of such Shareholder by that number of full
and/or fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.
6.... OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees shall have power to cause legal title to any Trust
Property to be held by or in the name of one or more of the Trustees, or in
the name of the Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who
may hereafter become a Trustee. Upon the resignation, removal or death of a
Trustee he or she shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest of
such Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered.
7. SERVICE CONTRACTS.
(a) Subject to such requirements and restrictions as nay
be set forth in the By-Laws, the Trustees may, at any time and from time to
time, contract for exclusive or nonexclusive advisory, management and/or
administrative services for the Trust or for any Series with any corporation,
trust, association or other organization; and any such contract may contain
such other terms as the Trustees may determine, including without limitation,
authority for the Investment Manager or administrator to determine from time
to time without prior consultation with the Trustees what investments shall
be purchased, held, sold or exchanged and what portion, if any, of the assets
of the Trust shall be held uninvested and to make changes in the Trust's
investments, or such other activities as may specifically be delegated to
such party.
(b) The Trustees may also, at any time and from time to
time, contract with any corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor or
Principal Underwriter for the Shares of one or more of the Series (or
classes) or other securities to be issued by the Trust. Every such contract
shall comply with such requirements and restrictions as may be set forth in
the By-Laws; and any such contract may contain such other terms as the
Trustees may determine.
(c) The Trustees are also empowered, at any time and
from time to time, to contract with any corporations, trusts, associations or
other organizations, appointing it or them the custodian, transfer agent
and/or shareholder servicing agent for the Trust or one or more of its
Series. Every such contract shall comply with such requirements and
restrictions as may be set forth in the By-Laws or stipulated by resolution
of the Trustees.
(d) The Trustees are further empowered, at any tine and
from time to time, to contract with any entity to provide such other services
to the Trust or one or more of the Series, as the Trustees determine to be in
the best interests of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, Manager, adviser, Principal Underwriter, distributor,
or affiliate or agent of or for any corporation, trust,
association, or other organization, or for any parent or
affiliate of any organization with which an advisory, management
or administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or
other type of service contract may have been or may hereafter be
made, or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization
with which an advisory, management or administration contract or
principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other type of service contract may have
been or may hereafter be made also has an advisory, management or
administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or
other service contract with one or more other corporations,
trust, associations, or other organizations, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing
the same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
V. Shareholders' Voting Powers and Meetings
1. VOTING POWERS. Subject to the provisions of Article
III, Section 6(d), the Shareholders shall have power to vote only (i) for the
election or removal of Trustees as provided in Article IV, Section 1, and
(ii) with respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of Trustees. Shares may
be voted in person or by proxy. A proxy with respect to Shares held in the
name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to
be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger.
2. VOTING POWER AND MEETINGS. Meetings of the Shareholders
may be called by the Trustees for the purpose of electing Trustees as
provided in Article IV, Section 1 and for such other purposes as may be
prescribed by law, by this Declaration of Trust or by the By-Laws. Meetings
of the Shareholders may also be called by the Trustees from time to tine for
the purpose of taking action upon any other matter deemed by the Trustees to
be necessary or desirable. A meeting of Shareholders may be held at any
place designated by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven (7) days before such meeting, postage prepaid,
stating the time and place of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. Whenever
notice of a meeting is required to be given to a Shareholder under this
Declaration of Trust or the By-Laws, a written waiver thereof, executed
before or after the meeting by such Shareholder or his or her attorney
thereunto authorized and filed with the records of the meeting, shall be
deemed equivalent to such notice.
3. QUORUM AND REQUIRED VOTE. Except when a larger quorum
is required by applicable law, by the By-Laws or by this Declaration of
Trust, forty percent (40%) of the Shares entitled to vote shall constitute a
quorum at a Shareholders' meeting. When any one or more Series (or classes)
is to vote as a single class separate from any other Shares, forty percent
(40%) of the Shares of each such Series (or classes) entitled to vote shall
constitute a quorum at a Shareholder's meeting of that Series. Any meeting
of Shareholders may be adjourned from time to time by a majority of the votes
properly cast upon the question of adjourning a meeting to another date and
tine, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original
meeting without further notice. Subject to the provisions of Article III,
Section 6(d), when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality shall elect a
Trustee, except when a larger vote is required by any provision of this
Declaration of Trust or the By-Laws or by applicable law.
4. ACTION BY WRITTEN CONSENT. Any action taken by
Shareholders may be taken without a meeting if Shareholders holding a
majority of the Shares entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust or by the By-Laws) and holding a majority (or such
larger proportion as aforesaid) of the Shares of any Series (or class)
entitled to vote separately on the matter consent to the action in writing
and such written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken
at a meeting of Shareholders.
5. RECORD DATES. For the purpose of determining the
Shareholders of any Series (or class) who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than ninety (90) days before the date of any
meeting of Shareholders, as the record date for determining the Shareholders
of such Series (or class) having the right to notice of and to vote at such
meeting and any adjournment thereof, and in such case only Shareholders of
record on such record date shall have such right, notwithstanding any
transfer of shares on the books of the Trust after the record date. For the
purpose of determining the Shareholders of any Series (or class) who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix a date, which shall be before the date for
the payment of such dividend or such other payment, as the record date for
determining the Shareholders of such Series (or class) having the right to
receive such dividend or distribution. Without fixing a record date the
Trustees may for voting and/or distribution purposes close the register or
transfer books for one or more Series for all or any part of the period
between a record date and a meeting of Shareholders or the payment of a
distribution. Nothing in this Section shall be construed as precluding the
Trustees from setting different record dates for different Series (or
classes).
6. ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
VI. Net Asset Value, Distributions, and Redemptions
1. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND
DISTRIBUTIONS. Subject to Article III, Section 6 hereof, the Trustees, in
their absolute discretion, may prescribe and shall set forth in the By-laws
or in a duly adopted vote of the Trustees such bases and time for determining
the per Share or net asset value of the Shares of any Series or net income
attributable to the Shares of any Series, or the declaration and payment of
dividends and distributions on the Shares of any Series, as they may deem
necessary or desirable.
2. REDEMPTIONS AND REPURCHASES. The Trust shall purchase
such Shares as are offered by any Shareholder for redemption, upon the
presentation of a proper instrument of transfer together with a request
directed to the Trust or a Person designated by the Trust that the Trust
purchase such Shares or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and the Trust
will pay therefor the net asset value thereof, in accordance with the By-Laws
and applicable law. Payment for said Shares shall be made by the Trust to
the Shareholder within seven days after the date on which the request is made
in proper form. The obligation set forth in this Section 2 is subject to the
provision that in the event that any time the New York Stock Exchange (the
"Exchange") is closed for other than weekends or holidays, or if permitted by
the Rules of the Commission during periods when trading on the Exchange is
restricted or during any emergency which makes it impracticable for the Trust
to dispose of the investments of the applicable Series or to determine fairly
the value of the net assets held with respect to such Series or during any
other period permitted by order of the Commission for the protection of
investors, such obligations may be suspended or postponed by the Trustees.
The redemption price may in any case or cases be paid wholly or
partly in kind if the Trustees determine that such payment is advisable in
the interest of the remaining Shareholders of the Series for which the Shares
are being redeemed. Subject to the foregoing, the fair value, selection and
quantity of securities or other property so paid or delivered as all or part
of the redemption price may be determined by or under authority of the
Trustees. In no case shall the Trust be liable for any delay of any
corporation or other Person in transferring securities selected for delivery
as all or part of any payment in kind.
3. REDEMPTIONS AT THE OPTION OF THE TRUST. The Trust shall
have the right at its option and at any tine to redeem Shares of any
Shareholder at the net asset value thereof as described in Section 1 of this
Article VI: (i) if at such time such Shareholder owns Shares of any Series
having an aggregate net asset value of less than an amount determined from
time to time by the Trustees prior to the acquisition of said Shares; or (ii)
to the extent that such Shareholder owns Shares of a particular Series equal
to or in excess of a percentage of the outstanding Shares of that Series
determined from time to time by the Trustees; or (iii) to the extent that
such Shareholder owns Shares equal to or in excess of a percentage,
determined from time to time by the Trustees, of the outstanding Shares of
the Trust or of any Series.
VII. Compensation and Limitation of Liability of Trustees
1. COMPENSATION. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or
other services and payment for the same by the Trust.
2. INDEMNIFICATION AND LIMITATION OF LIABILITY. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing 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, and the Trust out of its assets shall indemnify and hold
harmless each and every Trustee from and against any and all claims and
demands whatsoever arising out of or related to each Trustee's performance of
his or her duties as a Trustee of the Trust; provided that nothing herein
contained shall indemnify, hold harmless or protect any Trustee from or
against an y liability to the Trust or any Shareholder to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever issued, executed or done
by or on behalf of the Trust or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been issued, executed or
done only in or with respect to their or his or her capacity as Trustees or
Trustee, and such Trustees or Trustee shall not be personally liable thereon.
3. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be
liable to the Trust and to any Shareholder solely for his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice
of counsel or other experts with respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability for any act or omission
in accordance with such advice nor for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
4. INSURANCE. 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, whether or not the
Trust would have the power to indemnify him or her against such liability
under the provisions of this Article.
VIII. Miscellaneous
1. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No
Person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees
or to see to the application of any payments made or property transferred to
the Trust or upon its order.
2. TERMINATION OF TRUST OR SERIES. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by vote of a majority of the Shares of
each Series entitled to vote, voting separately by Series, or by the Trustees
by written notice to the Shareholders. Any Series may be terminated at any
time by vote of a majority of the Shares of that Series or by the Trustees by
written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may
be), after paying or otherwise providing for all charges, taxes, expenses and
liabilities held, severally, with respect to each Series (or the applicable
Series, as the case may be), whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such
procedures as the Trustees consider appropriate, reduce the remaining assets
held, severally, with respect to each Series (or the applicable Series, as
the case may be), to distributable form in cash or shares or other
securities, or any combination thereof, and distribute the proceeds held with
respect to each Series (or the applicable Series, as the case nay be), to the
Shareholders of that Series, as a Series, ratably according to the number of
Shares of that Series held by the several Shareholders on the date of
termination.
3. MERGER AND CONSOLIDATION. The Trustees may cause (i)
the Trust or one or more of its Series to the extent consistent with
applicable law to be merged into or consolidated with another Trust or
company, (ii) the Shares of the Trust or any Series to be converted into
beneficial interests in another business trust (or series thereof) created
pursuant to this Section 3 of Article VIII, or (iii) the Shares to be
exchanged under or pursuant to any state or federal statute to the extent
permitted by law. Such merger or consolidation, Share conversion or Share
exchange must be authorized by vote of a majority of the outstanding Shares
of the Trust, as a whole, or any affected Series, as may be applicable;
provided that in all respects not governed by statute or applicable law, the
Trustees shall have power to prescribe the procedure necessary or appropriate
to accomplish a sale of assets, merger or consolidation including the power
to create one or more separate business trusts to which all or any part of
the assets, liabilities, profits or losses of the Trust may be transferred
and to provide for the conversion of Shares of the Trust or any Series into
beneficial interests in such separate business trust or trusts (or series
thereof).
4. AMENDMENTS. This Declaration of Trust may be restated
and/or amended at any time by an instrument in writing signed by a majority
of the then Trustees and, if required, by approval of such amendment by
Shareholders in accordance with Article V, Section 3 hereof. Any such
restatement and/or amendment hereto shall be effective immediately upon
execution and approval. The Certificate of Trust of the Trust may be
restated and/or amended by a similar procedure, and any such restatement
and/or amendment shall be effective immediately upon filing with the Office
of the Secretary of State of the State of Delaware or upon such future date
as may be stated therein.
5. FILING OF COPIES, REFERENCES, HEADINGS.
The original or a copy of this instrument and of each restatement
and/or amendment hereto shall be kept at the office of the Trust where it may
be inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
restatements and/or amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were
the original, may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such restatements and/or amendments. In
this instrument and in any such restatements and/or amendment, references to
this instrument, and all expressions like "herein," "hereof" and "hereunder,"
shall be deemed to refer to this instrument as amended or affected by any
such restatements and/or amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the
plural; and the neuter, masculine and feminine genders shall include each
other, as applicable. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
6. APPLICABLE LAW. This Agreement and Declaration of Trust
is created under and is to be governed by and construed and administered
according to the laws of the State of Delaware and the Delaware Business
Trust Act, as amended from time to time (the "Act"). The Trust shall be a
Delaware business trust pursuant to such Act, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a business trust.
7. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of the Declaration of Trust are
severable, and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with the 1940 Act, the regulated
investment company provisions of the Internal Revenue Code or with other
applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of the Declaration of Trust; provided,
however, that such determination shall not affect any of the remaining
provisions of the Declaration of Trust or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of the Declaration of Trust shall
be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or
any other provision of the Declaration of Trust in any jurisdiction.
8. BUSINESS TRUST ONLY. It is the intention of the
Trustees to create a business trust pursuant to the Delaware Business Trust
Act, as amended from time to time (the "Act"), and thereby to create only the
relationship of trustee and beneficial owners within the meaning of such Act
between the Trustees and each Shareholder. It is not the intention of the
Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other
than a business trust pursuant to such Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or
with the Trustees, partners or members of a joint stock association.
9. USE OF THE NAME "FRANKLIN". The name "Franklin" and all
rights to the use of the name "Franklin" belongs to Franklin Resources, Inc.
("Franklin"), the sponsor of the Trust. Franklin has consented to the use by
the Trust of the identifying word "Franklin" and has granted to the Trust a
nonexclusive license to use the name "Franklin" as part of the name of the
Trust and the name of any Series of Shares. In the event Franklin or an
affiliate of Franklin is not appointed as Manager and/or Principal
Underwriter or ceases to be the Manager and/or Principal Underwriter of the
Trust or of any Series using such names, the non-exclusive license granted
herein may be revoked by Franklin and the Trust shall cease using the name
"Franklin" as part of its name or the name of any Series of Shares, unless
otherwise consented to by Franklin or any successor to its interests in such
names.
IN WITNESS WHEREOF, the Trustees named below do hereby make and
enter into this Declaration of Trust as of the ___ day of ____________, 1996.
Harris J.Ashton S. Joseph Fortunato
Metro Center, 1 Station Pl Park Avenue at Morris County
Stamford, Ct 06902 P.O. Box 1945
Morristown, NJ 07962-1945
Charles B. Johnson Rupert H. Johnson, Jr.
777 Mariners Island Blvd. 777 Mariners Island Blvd.
San Mateo, CA 94404 San Mateo, CA 94404
Gordon S. Macklin
8212 Burning Tree Rd.
Bethesda, MD 20817
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS 777 Mariners
Island Boulevard, San Mateo, California 94404
CERTIFICATE OF TRUST
OF
FRANKLIN NEW YORK TAX-FREE INCOME FUND
a Delaware Business Trust
THIS Certificate of Trust of the FRANKLIN NEW YORK TAX-FREE
INCOME FUND (the "Trust"), dated as of this ____ day of ________, 1996, is
being duly executed and filed, in order to form a business trust pursuant to
the Delaware Business Trust Act (the "Act"), Del. Code Ann. tit. 12,
ss.ss.3801-3819.
1. NAME. The name of the business trust formed
hereby is "Franklin New York Tax-Free Income Fund."
2. REGISTERED OFFICE AND REGISTERED AGENT. The
Trust will become, prior to the issuance of beneficial interests, a
registered investment company under the Investment Company Act of 1940, as
amended. Therefore, in accordance with section 3807(b) of the Act, the Trust
has and shall maintain in the State of Delaware a registered office and a
registered agent for service of process.
(a) REGISTERED OFFICE. The registered office of the Trust
in Delaware is The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801.
(b) REGISTERED AGENT. The registered agent for service of
process on the Trust in Delaware is The Corporation Trust
Company.
3. LIMITATION ON LIABILITY. Pursuant to section
3804 of the Act, in the event that the Trust's governing instrument, as
defined in section 3801(f) of the Act, creates one or more series as provided
in section 3806(b)(2) of the Act, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of
such series only, and not against the assets of the Trust generally.
IN WITNESS WHEREOF, the Trustees named below do hereby execute
this Certificate of Trust as of the date first-above written.
Harris J. Ashton S. Joseph Fortunato
Metro Center, 1 Station Pl. Park Avenue at Morris County
Stamford, CT 06902 P.O. Box 1945
Morristown, NJ 07962-1945
Charles B. Johnson Rupert H. Johnson, Jr.
777 Mariners Island Blvd. 777 Mariners Island Blvd.
San Mateo, CA 94404 San Mateo, CA 94404
Gordon S. Macklin
8212 Burning Tree Rd.
Bethesda, MD 20817
BY-LAWS
OF
FRANKLIN NEW YORK TAX-FREE INCOME FUND
A Delaware Business Trust
OFFICES
1. PRINCIPAL OFFICE. The Board of Trustees shall fix and, from
time to time, may change the location of the principal executive office of
the Trust at any place within or outside the State of Delaware.
2. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the
Trust intends to do business.
MEETINGS OF SHAREHOLDERS
1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of Delaware designated by the Board of
Trustees. In the absence of any such designation, shareholders' meetings
shall be held at the principal executive office of the Trust.
2. CALL OF MEETING. A meeting of the shareholders may be called
at any time by the Board of Trustees or by the Chairman of the Board or by
the president.
3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date
and hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected
also shall include the name of any nominee or nominees whom at the time of
the notice are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a trustee has a direct or indirect financial
interest, (ii) an amendment of the Declaration of Trust, (iii) a
reorganization of the Trust, or (iv) a voluntary dissolution of the Trust,
the notice shall also state the general nature of that proposal.
4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class
mail or telegraphic or other written communication, charges prepaid,
addressed to the shareholder at the address of that shareholder appearing on
the books of the Trust or its transfer agent or given by the shareholder to
the Trust for the purpose of notice. If no such address appears on the
Trust's books or is given, notice shall be deemed to have been given if sent
to that shareholder by first-class mail or telegraphic or other written
communication to the Trust's principal executive office, or if published at
least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time
when delivered personally or deposited in the mail or sent by telegram or
other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust by
the United States Postal Service marked to indicate that the Postal Service
is unable to deliver the notice to the shareholder at that address, all
future notices or reports shall be deemed to have been duly given without
further mailing if these shall be available to the shareholder on written
demand of the shareholder at the principal executive office of the Trust for
a period of one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary
or any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, whether
or not a quorum is present, may be adjourned from time to time by the vote of
the majority of the shares represented at that meeting, either in person or
by proxy.
When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless
the adjournment is for more than sixty (60) days from the date set for the
original meeting, in which case the Board of Trustees shall set a new record
date. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 3 and 4 of this Article II. At any adjourned
meeting, the Trust may transact any business which might have been transacted
at the original meeting.
6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders, vote may
be by voice vote or by ballot, provided, however, that any election for
trustees must be by ballot if demanded by any shareholder before the voting
has begun. on any matter other than elections of trustees, any shareholder
may vote part of the shares in favor of the proposal and refrain from voting
the remaining shares or vote them against the proposal, but if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to the total shares that the shareholder is
entitled to vote on such proposal.
7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy
and if either before or after the meeting, each person entitled to vote who
was not present in person or by proxy signs a written waiver of notice or a
consent to a holding of the meeting or an approval of the minutes. The
waiver of notice or consent need not specify either the business to be
transacted or the purpose of any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the
beginning of the meeting.
8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any meeting of shareholders may be taken without
a meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take that action at a meeting at which all shares entitled to vote on that
action were present and voted. All such consents shall be filed with the
Secretary of the Trust and shall be maintained in the Trust's records. Any
shareholder giving a written consent or the shareholder's proxy holders or a
transferee of the shares or a personal representative of the shareholder or
their respective-proxy-holders may revoke the consent by a writing received
by the Secretary of the Trust before written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This
notice shall be given in the manner specified in Section 4 of this Article
II. In the case of approval of (i) contracts or transactions in which a
trustee has a direct or indirect financial interest, (ii) indemnification of
agents of the Trust, and (iii) a reorganization of the Trust, the notice
shall be given at least ten (10) days before the consummation of any action
authorized by that approval.
9. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of
any meeting or to vote or entitled to give consent to action without a
meeting, the Board of Trustees may fix in advance a record date which shall
not be more than ninety (90) days nor less than seven (7) days before the
date of any such meeting as provided in the Declaration of Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to action in writing without a meeting, (i) when no prior action
by the Board of Trustees has been taken, shall be the day on which the first
written consent is given, or (ii) when prior action of the Board of Trustees
has been taken, shall be at the close of business on the day on which the
Board of Trustees adopt the resolution relating to that action or the
seventy-fifth day before the date of such other action, whichever is later.
10. PROXIES. Every person entitled to vote for trustees or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the Trust. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not
state that it is irrevocable shall continue in full force and effect unless
(i) revoked by the person executing it before the vote pursuant to that proxy
by a writing delivered to the Trust stating that the proxy is revoked or by a
subsequent proxy executed by or attendance at the meeting and voting in
person by the person executing that proxy; or (ii) written notice of the
death or incapacity of the maker of that proxy is received by the Trust
before the vote pursuant to that proxy is counted; provided however, that no
proxy shall be valid after the expiration of eleven (11) months from the date
of the proxy unless otherwise provided in the proxy. The revocability of a
proxy that states on its face that it is irrevocable shall be governed by the
provisions of the General Corporation Law of the State of California.
11. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Trustees may appoint any persons other than nominees for office
to act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may and
on the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a majority of
shares or their proxies present at the meeting shall determine whether one
(1) or three (3) inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the chairman of the
meeting may and on the request of any shareholder or a shareholder's proxy,
shall appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
TRUSTEES
1. POWERS. Subject to the applicable provisions of the
Declaration of Trust and these By-Laws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the Trust shall be managed and all powers shall be exercised by or
under the direction of the Board of Trustees.
2. NUMBER AND QUALIFICATION OF TRUSTEES. The exact number of
trustees shall be set forth in the Agreement and Declaration of Trust, until
changed by a duly adopted amendment to the Declaration of Trust.
3. VACANCIES. Vacancies in the Board of Trustees may be filled
by a majority of the remaining trustees, though less than a quorum, or by a
sole remaining trustee, unless the Board of Trustees calls a meeting of
shareholders for the purposes of electing trustees. In the event that at any
time less than a majority of the trustees holding office at that time were so
elected by the holders of the outstanding voting securities of the Trust, the
Board of Trustees shall forthwith cause to be held as promptly as possible,
and in any event within sixty (60) days, a meeting of such holders for the
purpose of electing trustees to fill any existing vacancies in the Board of
Trustees, unless such period is extended by order of the United States
Securities and Exchange Commission.
Notwithstanding the above, whenever and for so long as the Trust is a
participant in or otherwise has in effect a Plan under which the Trust may be
deemed to bear expenses of distributing its shares as that practice is
described in Rule 12b-1 under the Investment Company Act of 1940, then the
selection and nomination of the trustees who are not interested persons of
the Trust (as that term is defined in the Investment Company Act of 1940)
shall be, and is, committed to the discretion of such disinterested trustees.
4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board of Trustees may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the
Board. In the absence of such a designation, regular meetings shall be held
at the principal executive office of the Trust. Any meeting, regular or
special, may be held by conference telephone or similar communication
equipment, so long as all trustees participating in the meeting can hear one
another and all such trustees shall be deemed to be present in person at the
meeting.
5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
shall be held without call at such tine as shall from time to time be fixed
by the Board of Trustees. Such regular meetings may be held without notice.
6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two (2)
trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each trustee at that trustee's
address as it is shown on the records of the Trust. In case the notice is
mailed, it shall be deposited in the United States mail at least seven (7)
days before the tine of the holding of the meeting. In case the notice is
delivered personally, by telephone, to the telegraph company, or by express
mail or similar service, it shall be given at least forty-eight (48) hours
before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the trustee or to a
person at the office of the trustee who the person giving the notice has
reason to believe will promptly communicate it to the trustee. The notice
need not specify the purpose of the meeting or the place if the meeting is to
be held at the principal executive office of the Trust.
7. QUORUM. A majority of the authorized number of trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or
made by a majority of the trustees present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Trustees,
subject to the provisions of the Declaration of Trust. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of trustees if any action taken is approved by a least a
majority of the required quorum for that meeting.
8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting
shall also be deemed given to any trustee who attends the meeting without
protesting before or at its commencement the lack of notice to that trustee.
9. ADJOURNMENT. A majority of the trustees present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is
adjourned for more than forty-eight (48) hours, in which case notice of the
time and place shall be given before the time of the adjourned meeting in the
manner specified in Section 7 of this Article III to the trustees who were
present at the time of the adjournment.
11. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken by the Board of Trustees may be taken without a meeting if a
majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a majority vote of the Board
of Trustees. Such written consent or consents shall be filed with the
minutes of the proceedings of the Board of Trustees.
12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 12 shall not be construed to preclude any
trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two (2) Trustees personally exercise the powers granted
to the Trustees under this Declaration of Trust except as otherwise expressly
provided herein or by resolution of the Board of Trustees.
COMMITTEES
1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
resolution adopted by a majority of the authorized number of trustees
designate one or more committees, each consisting of two (2) or more
trustees, to serve at the pleasure of the Board. The Board may designate one
or more trustees as alternate members of any committee who may replace any
absent member at any meeting of the committee. Any committee to the extent
provided in the resolution of the Board, shall have the authority of the
Board, except with respect to:
(a) the approval of any action which under applicable law also
requires shareholders' approval or approval of the outstanding shares, or
requires approval by a majority of the entire Board or certain members of
said Board;
(b) the filling of vacancies on the Board of Trustees or in
any committee;
(c) the fixing of compensation of the trustees for serving on
the Board of Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of
the By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of
Trustees which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the Trust, except at
a rate or in a periodic amount or within a designated range determined by the
Board of Trustees; or
(g) the appointment of any other committees of the Board of
Trustees or the members of these committees.
2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings
of committees may be determined either by resolution of the Board of Trustees
or by resolution of the committee. Special meetings of committees may also
be called by resolution of the Board of Trustees, and notice of special
meetings of committees shall also be given to all alternate members who shall
have the right to attend all meetings of the committee. The Board of
Trustees may adopt rules for the government of any committee not inconsistent
with the provisions of these By-Laws.
OFFICERS
1. OFFICERS. The officers of the Trust shall be a president, a
secretary, and a treasurer. The Trust may also have, at the discretion of
the Board of Trustees, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of
Section 3 of this Article V. Any number of offices may be held by the same
person.
2. ELECTION OF OFFICERS. The officers of the Trust, except such
officers as may appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Trustees, and
each shall serve at the pleasure of the Board of Trustees, subject to the
rights, if any, of an officer under any contract of employment.
3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
may empower the president to appoint such other officers as the business of
the Trust may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these By-Laws or as
the Board of Trustees may from time to time determine.
4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Trustees at any
regular or special meeting of the Board of Trustees or except in the case of
an officer upon whom such power of removal may be conferred by the Board of
Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a
party.
5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled
in the manner prescribed in these By-Laws for regular appointment to that
office.
6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer is elected, shall if present preside at meetings of the Board of
Trustees and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Trustees or prescribed by the
By-Laws.
7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Trustees to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
Trust and shall, subject to the control of the Board of Trustees, have
general supervision, direction and control of the business and the officers
of the Trust. He shall preside at all meetings of the shareholders and in
the absence of the chairman of the board or if there be none, at all meetings
of the Board of Trustees. He shall have the general powers and duties of
management usually vested in the office of president of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Trustees or these By-Laws.
8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by
the Board of Trustees or if not ranked, a vice president designated by the
Board of Trustees, shall perform all the duties of the president and when so
acting shall have all powers of and be subject to all the restrictions upon
the president. The vice presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them
respectively by the Board of Trustees or by these By-Laws and the president
or the chairman of the board.
9. SECRETARY. The secretary shall keep or cause to be kept at
the principal executive office of the Trust or such other place as the Board
of Trustees may direct a book of minutes of all meetings and actions of
trustees, committees of trustees and shareholders with the time and place of
holding, whether regular or special, and if special, how authorized, the
notice given, the names of those present at trustees' meetings or committee
meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings.
The secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or
registrar, as determined by resolution of the Board of Trustees, a share
register or a duplicate share register showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the
number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Trustees required by these By-Laws or by
applicable law to be given and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these
By-Laws.
10. TREASURER. The treasurer shall be the chief financial officer
of the Trust and shall keep and maintain or cause to be kept and maintained
adequate and correct books and records of accounts of the properties and
business transactions of the Trust, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings and shares. The books of account shall at all reasonable times be
open to inspection by-any trustee.
The treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositories as may be designated by
the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the president and trustees,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board
of Trustees or these By-Laws.
VI INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a trustee, officer, employee
or other agent of this Trust or is or was serving at the request of this
Trust as a trustee, director, officer, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other
enterprise or was a trustee, director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor of another enterprise
at the request of such predecessor entity; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without limitation
attorney's fees and any expenses of establishing a right to indemnification
under this Article.
2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason
of the fact that such person is or was an agent of this Trust, against
expenses, judgments, fines, settlements and other amounts actually and
reasonably.incurred in connection with such proceeding if that person acted
in good faith and in a manner that person reasonably believed to be in the
best interests of this Trust and in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of that person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contenders or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in the best interests of this Trust or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
3. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of this Trust to
procure a judgment in its favor by reason of the fact that the person is or
was an agent of this Trust, against expenses actually and reasonably incurred
by that person in connection with the defense or settlement of that action if
that person acted in good faith, in a manner that person believed to be in
the best interests of this Trust and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances.
4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification
for any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct
of the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the performance of that
person's duty to this Trust, unless and only to the extent that the court in
which that action was brought shall determine upon application that in view
of all the circumstances of the case, that person was not liable by reason of
the disabling conduct set forth in the preceding paragraph and is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine; or
(b) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that personal
benefit was improperly received by him, whether or not the benefit resulted
from an action taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval, or of expenses
incurred in defending a threatened or pending action which is settled or
otherwise disposed of without court approval, unless the required approval
set forth in Section 6 of this Article is obtained.
5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim,
issue or matter therein, before the court or other body before whom the
proceeding was brought, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith,
provided that the Board of Trustees, including a majority who are
disinterested, non-party trustees, also determines that based upon a review
of the facts, the agent was not liable by reason of the disabling conduct
referred to in Section 4 of this Article.
6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust
only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of
this Article and is not prohibited from indemnification because of the
disabling conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are
not parties to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding on receipt of an undertaking by or on behalf of the agent to repay
the amount of the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article, provided
the agent provides a security for his undertaking, or a majority of a quorum
of the disinterested, non-party trustees, or an independent legal counsel in
a written opinion, determine that based on a review of readily available
facts, there is reason to believe that said agent ultimately will be found
entitled to indemnification.
8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than
trustees and officers of this Trust or any subsidiary hereof may be entitled
by contract or otherwise.
9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any
circumstances where it appears:
(a) That it would be inconsistent with a provision of the
Agreement and Declaration of Trust, a resolution of the shareholders, or an
agreement in effect at the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or other
amounts were paid which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against
any liability asserted against or incurred by the agent in such capacity or
arising out of the agent's status as such, but only to the extent that this
Trust would have the power to indemnify the agent against that liability
under the provisions of this Article.
11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any trustee, investment manager or other
fiduciary of an employee benefit plan in that person' s capacity as such,
even though that person may also be an agent of this Trust as defined in
Section 1 of this Article. Nothing contained in this Article shall limit any
right to indemnification to which such a trustee, investment manager, or
other fiduciary may be entitled by contract or otherwise which shall be
enforceable to the extent permitted by applicable law other than this Article.
RECORDS AND REPORTS
1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust
shall keep at its principal executive office or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Trustees, a record of its shareholders, giving the names and
addresses of all shareholders and the number and series of shares held by
each shareholder.
2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep
at its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the
Board of Trustees and any committee or committees of the Board of Trustees
shall be kept at such place or places designated by the Board of Trustees or
in the absence of such designation, at the principal executive office of the
Trust. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any other form capable
of being converted into written form. The minutes and accounting books and
records shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.
The inspection may be made in person or by an agent or attorney and shall
include the right to copy and make extracts.
4. INSPECTION BY TRUSTEES. Every trustee shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind and the physical properties of the Trust. This inspection by a
trustee may be made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts of documents.
5. FINANCIAL STATEMENTS. A copy of any financial statements and
any income statement of the Trust for each quarterly period of each fiscal
year and accompanying balance sheet of the Trust as of the end of each such
period that has been prepared by the Trust shall be kept on file in the
principal executive office of the Trust for at least twelve (12) months and
each such statement shall be exhibited at all reasonable times to any
shareholder demanding an examination of any such statement or a copy shall be
mailed to any such shareholder.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer
of the Trust that the financial statements were prepared without audit from
the books and records of the Trust.
GENERAL MATTERS
1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed by such person or persons and in such manner as from time to time
shall be determined by resolution of the Board of Trustees.
2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the Trust and this authority
may be general or confined to specific instances; and unless so authorized or
ratified by the Board of Trustees or within the agency power of an officer,
no officer, agent, or employee shall have any power or authority to bind the
Trust by any contract or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All
certificates shall be signed in the name of the Trust by the chairman of the
board or the president or vice president and by the treasurer or an assistant
treasurer or the secretary or any assistant secretary, certifying the number
of shares and the series of shares owned by the shareholders. Any or all of
the signatures on the certificate may be facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on a certificate shall have ceased to be that officer, transfer
agent, or registrar before that certificate is issued, it may be issued by
the Trust with the same effect as if that person were an officer, transfer
agent or registrar at the date of issue. Notwithstanding the foregoing, the
Trust may adopt and use a system of issuance, recordation and transfer of its
shares by electronic or other means.
4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificates for shares shall be issued to replace an old certificate
unless the latter is surrendered to the Trust and cancelled at the same
time. The Board of Trustees may in case any share certificate or certificate
for any other security is lost, stolen, or destroyed, authorize the issuance
of a replacement certificate on such terms and conditions as the Board of
Trustees may require, including a provision for indemnification of the Trust
secured by a bond or other adequate security sufficient to protect the Trust
against any claim that may be made against it, including any expense or
liability on account of the alleged loss, theft, or destruction of the
certificate or the issuance of the replacement certificate.
5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST. The
chairman of the board, the president or any vice president or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf
of the Trust any and all shares of any corporation, partnership, trusts, or
other entities, foreign or domestic, standing in the name of the Trust. The
authority granted may be exercised in person or by a proxy duly executed by
such designated person.
6. FISCAL YEAR. The fiscal year of the Trust shall be fixed and
refixed or changed from time to time by resolution of the Trustees. The
fiscal year of the Trust shall be the taxable year of each Series of the
Trust.
AMENDMENTS
1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or
repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by
applicable law or by the Declaration of Trust or these By-Laws.
2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders
as provided in Section 1 of this Article to adopt, amend or repeal By-Laws,
and except as otherwise provided by law or by the Declaration of Trust, these
By-Laws may be adopted, amended, or repealed by the Board of Trustees.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN NEW YORK TAX-FREE
INCOME FUND, a Delaware business trust, (the "Trust") and FRANKLIN ADVISERS,
INC., a California Corporation, (the "Manager").
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ( the "1940 Act")
for the purpose of investing and reinvesting its assets in securities, as set
forth in its Agreement and Declaration of Trust, its By-Laws and its
Registration Statements under the 1940 Act and the Securities Act of 1933,
all as heretofore amended and supplemented; and the Trust desires to avail
itself of the services, information, advice, assistance and facilities of an
investment manager and to have an investment manager perform various
management, statistical, research, investment advisory and other services;
and,
WHEREAS, the Manager is registered as an investment adviser under the
Investment Adviser's Act of 1940, is engaged in the business of rendering
management, investment advisory, counselling and supervisory services to
investment companies and other investment counselling clients, and desires to
provide these services to the Trust.
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE MANAGER. The Trust hereby employs the Manager
to manage the investment and reinvestment of the Trust's assets and to
administer its affairs, subject to the direction of the Board of Trustees and
the officers of the Trust, for the period and on the terms hereinafter set
forth. The Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set forth
for the compensation herein provided. The Manager shall for all purposes
herein be deemed to be an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust any way or otherwise be deemed an
agent of the Trust.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE MANAGER. The
Manager undertakes to provide the services hereinafter set forth and to
assume the following obligations:
A. ADMINISTRATIVE SERVICES. The Manager shall furnish to the
Trust adequate (i) office space, which may be space within the offices of the
Manager or in such other place as may be agreed upon from time to time, (ii)
office furnishings, facilities and equipment as may be reasonably required
for managing the corporate affairs and conducting the business of the Trust,
including complying with the corporate and securities reporting requirements
of the United States and the various states in which the Trust does business,
conducting correspondence and other communications with the shareholders of
the Trust, maintaining all internal bookkeeping, accounting and auditing
services and records in connection with the Trust's investment and business
activities, and computing net asset value. The Manager shall employ or
provide and compensate the executive, secretarial and clerical personnel
necessary to provide such services. The Manager shall also compensate all
officers and employees of the Trust who are officers or employees of the
Manager.
B. INVESTMENT MANAGEMENT SERVICES.
(a) The Manager shall manage the Trust's assets and
portfolio subject to and in accordance with the investment objectives and
policies of the Trust and any directions which the Trust's Board of Trustees
may issue from time to time. In pursuance of the foregoing, the Manager
shall make all determinations with respect to the investment of the Trust's
assets and the purchase and sale of portfolio securities, and shall take such
steps as may be necessary to implement the same. Such determinations and
services shall also include determining the manner in which voting rights,
rights to consent to corporate action and any other rights pertaining to the
Trust's portfolio securities shall be exercised. The Manager shall render
regular reports to the Trust, at regular meetings of the Board of Trustees
and at such other times as may be reasonably requested by the Trust's Board
of Trustees, of (i) the decisions which it has made with respect to the
investment of the Trust's assets and the purchase and sale of portfolio
securities, (ii) the reasons for such decisions and (iii) the extent to which
those decisions have been implemented.
(b) The Manager, subject to and in accordance with
any directions which the Trust's Board of Trustees may issue from time to
time, shall place, in the name of the Trust, orders for the execution of the
Trust's portfolio transactions. When placing such orders the Manager shall
seek to obtain the best net price and execution for the Trust but this
requirement shall not be deemed to obligate the Manager to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The parties
recognize that there are likely to be many cases in which different brokers
are equally able to provide such best price and execution and that, in
selecting among such brokers with respect to particular trades, it is
desirable to choose those brokers who furnish research, statistical
quotations and other information to the Trust and the Manager in accord with
the standards set forth below. Moreover, to the extent that it continues to
be lawful to do so and so long as the Board determines that the Trust will
benefit, directly or indirectly, by doing so, the Manager may place orders
with a broker who charges a commission for that transaction which is in
excess of the amount of commission that another broker would have charged for
effecting that transaction, provided that the excess commission is reasonable
in relation to the value of "brokerage and research services" (as defined in
Section 28(e)(3) of the Securities Exchange Act of 1934) provided by that
broker.
Accordingly, the Trust and the Manager agree that the
Manager shall select brokers for the execution of the Trust's portfolio
transactions from among:
(i) Those brokers and dealers who provide
quotations and other services to the Trust, specifically
including the quotations necessary to determine the Trust's
net assets, in such amount of total brokerage as may
reasonably be required in light of such services;
(ii) Those brokers and dealers who supply research,
statistical and other data to the Manager or its affiliates
which relate directly to portfolio securities, actual or
potential, of the Trust or which place the Manager in a
better position to make decisions in connection with the
management of the Trust's assets and portfolio, whether or
not such data may also be useful to the Manager and its
affiliates in managing other portfolios or advising other
clients, in such amount of total brokerage as may
reasonably be required. Provided that the Trust's officers
are satisfied that the best execution is obtained, the sale
of Trust shares may also be considered as a factor in the
selection of broker-dealers to execute the Trust's
portfolio transactions.
(c) When the Manager has determined that the Trust
should tender securities pursuant to a "tender offer solicitation,"
Franklin/Templeton Distributors, Inc. ("Distributors") shall be designated
as the "tendering dealer" so long as it is legally permitted to act in such
capacity under the Federal securities laws and rules thereunder and the rules
of any securities exchange or association of which it may be a member.
Neither the Manager nor Distributors shall be obligated to make any
additional commitments of capital, expense or personnel beyond that already
committed (other than normal periodic fees or payments necessary to maintain
its corporate existence and membership in the National Association of
Securities Dealers, Inc.) as of the date of this Agreement and this Agreement
shall not obligate the Manager or Distributors (i) to act pursuant to the
foregoing requirement under any circumstances in which they might reasonably
believe that liability might be imposed upon them as a result of so acting,
or (ii) to institute legal or other proceedings to collect fees which may be
considered to be due from others to it as a result of such a tender, unless
the Trust shall enter into an agreement with the Manager to reimburse them
for all expenses connected with attempting to collect such fees including
legal fees and expenses and that portion of the compensation due to their
employees which is attributable to the time involved in attempting to collect
such fees.
(d) The Manager shall render regular reports to the
Trust, not more frequently than quarterly, of how much total brokerage
business has been placed by the Manager with brokers falling into each of the
categories set forth in (b)(i) and (ii) above and the manner in which the
allocation has been accomplished.
(e) The Manager agrees that no investment decision
will be made or influenced by a desire to provide brokerage for allocation in
accordance with the foregoing, and that the right to make such allocation of
brokerage shall not interfere with the Manager's paramount duty to obtain the
best net price and execution for the Trust.
C. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF
SECURITIES REGISTRATION STATEMENTS, AMENDMENTS AND OTHER MATERIALS. The
Manager, its officers and employees will make available and provide
accounting and statistical information required by the Underwriter in the
preparation of registration statements, reports and other documents required
by Federal and state securities laws and with such information as the
Underwriter may reasonably request for use in the preparation of such
documents or of other materials necessary or helpful for the underwriting and
distribution of the Trust's shares.
D. OTHER OBLIGATIONS AND SERVICES. The Manager shall make
available its officers and employees to the Board of Trustees and officers of
the Trust for consultation and discussions regarding the administrative
management of the Trust and its investment activities.
3. EXPENSES OF THE TRUST. It is understood that the Trust will pay
all its expenses other than those expressly assumed by the Manager herein,
which expenses payable by the Trust shall include:
A. Fees to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian, dividend
disbursing agent and shareholder record-keeping services;
D. Expenses of obtaining quotations for calculating the value
of the Trust's net assets;
E. Salaries and other compensation of any of its executive
officers who are not officers, trustees, stockholders or employees of the
Manager;
F. Taxes levied against the Trust;
G. Brokerage fees and commissions in connection with the
purchase and sale of portfolio securities for the Trust;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to corporate meetings of the Trust, reports
to the Trust to its shareholders, the filing of reports with regulatory
bodies and the maintenance of the Trust's corporate existence;
J. Legal fees, including the legal fees related to the
registration and continued qualification of the Trust shares for sale;
K. Costs of printing stock certificates representing shares of
the Trust;
L. Trustees' fees and expenses to trustees who are not
trustees, officers, employees or stockholders of the Manager or any of its
affiliates; and
M. Its pro rata portion of the fidelity bond insurance premium.
4. COMPENSATION OF THE MANAGER. The Trust shall pay a monthly
management fee in cash to the Manager based upon a percentage of the value of
the Trust's net assets, calculated as set forth below, on the first business
day of each month in each year as compensation for the services rendered and
obligations assumed by the Manager during the preceding month. The initial
management fee under this Agreement shall be payable on the first business
day of the first month following the effective date of this Agreement, and
shall be reduced by the amount of any advance payments made by the Trust
relating to the previous month.
A. For purposes of calculating such fee, the value of the net
assets of the Trust shall be the net assets computed as of the close of
business on the last business day of the month preceding the month in which
the payment is being made, determined in the same manner as the Trust uses to
compute the value of its net assets in connection with the determination of
the net asset value of Trust shares, all as set forth more fully in the
Trust's current prospectus. The rate of the monthly management fee shall be
as follows:
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
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.
B. The Management fee payable by the Trust shall be reduced or
eliminated to the extent that Franklin Advisers,Inc. has actually received
cash payments of tender offer solicitation fees less certain costs and
expenses incurred in connection therewith; and to the extent necessary to
comply with the limitations on expenses which may be borne by the Trust as
set forth in the laws, regulations and administrative interpretations of
those states in which the Trust's shares are registered.
C. If this Agreement is terminated prior to the end of any
month, the monthly management fee shall be prorated for the portion of any
month in which this Agreement is in effect which is not a complete month
according to the proportion which the number of calendar days in the fiscal
quarter during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within 10 days after the
date of termination.
5. ACTIVITIES OF THE MANAGER. The services of the Manager to the
Trust hereunder are not to be deemed exclusive, and the Manager and any of
its affiliates shall be free to render similar services to others. Subject
to and in accordance with the Agreement and Declaration of Trust and By-Laws
of the Trust and to Section 10(a) of the 1940 Act, it is understood that
trustees, officers, agents and stockholders of the Trust are or may be
interested in the Manager or its affiliates as trustees, officers, agents or
stockholders, and that trustees, officers, agents or stockholders of the
Manager or its affiliates are or may be interested in the Trust as trustees,
officers, agents, stockholders or otherwise, that the Manager or its
affiliates may be interested in the Trust as stockholders or otherwise; and
that the effect of any such interests shall be governed by said Agreement and
Declaration of Trust, the By-Laws and the 1940 Act.
6. LIABILITIES OF THE MANAGER.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the
Trust or to any shareholder of the Trust for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security by the
Trust.
B. Notwithstanding the foregoing, the Manager agrees to
reimburse the Trust for any and all costs, expenses, and counsel and
trustees' fees reasonably incurred by the Trust in the preparation, printing
and distribution of proxy statements, amendments to its Registration
Statement, holdings of meetings of its shareholders or trustees, the conduct
of factual investigations, any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and
Exchange Commission) which the Trust incurs as the result of action or
inaction of the Manager or any of its affiliates or any of their officers,
trustees, employees or shareholders where the action or inaction
necessitating such expenditures (i) is directly or indirectly related to any
transactions or proposed transaction in the shares or control of the Manager
or its affiliates (or litigation related to any pending or proposed or future
transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Trust's Board of Trustees; or (ii)
is within the control of the Manager or any of its affiliates or any of their
officers, trustees, employees or shareholders. The Manager shall not be
obligated pursuant to the provisions of this Subsection 6(B), to reimburse
the Trust for any expenditures related to the institution of an
administrative proceeding or civil litigation by the Trust or a Trust
shareholder seeking to recover all or a portion of the proceeds derived by
any shareholder of the Manager or any of its affiliates from the sale of his
shares of the Manager, or similar matters. So long as this Agreement is in
effect the Manager shall pay to the Trust the amount due for expenses subject
to this Subsection 6(B) Agreement within 30 days after a bill or statement
has been received by the Trust therefore. This provision shall not be deemed
to be a waiver of any claim the Trust may have or may assert against the
Manager or others for costs, expenses or damages heretofore incurred by the
Trust or for costs, expenses or damages the Trust may hereafter incur which
are not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to
protect any trustee or officer of the Trust, or the Manager, from liability
in violation of Sections 17(h) and (i) of the 1940 Act.
7. RENEWAL AND TERMINATION.
A. This Agreement shall become effective on the date written
below and shall continue in effect for two (2) years thereafter, unless
sooner terminated as hereinafter provided and share continue in effect
thereafter for periods not exceeding one (1) year so long as such
continuation is approved at least annually (i) by a vote of a majority of the
outstanding voting securities of the Trust or by a vote of the Board of
Trustees of the Trust, and (ii) by a vote of a majority of the trustees of
the Trust who are not parties to the Agreement or interested persons of any
parties to the Agreement (other than as Trustees of the Trust) cast in person
at a meeting called for the purpose of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the
payment of any penalty either by vote of the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities of the trust,
on 30 days' written notice to the Manager;
(ii) shall immediately terminate in the event of its
assignment; and
(iii) may be terminated by the Manager on 30 days' written
notice to the Trust.
C. As used in this Section the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting securities" shall
have the meanings set forth for any such terms in the 1940 Act, as amended.
D. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed post-paid, to the other party at any
office of such party.
8. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties here to have caused this
Agreement to be executed the ___ day of _________, 1996.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
By:______________________
FRANKLIN ADVISERS, INC.
By:______________________
FRANKLIN NEW YORK TAX-FREE INCOME FUND
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Amended and Restated Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as an open-end
management investment company or "mutual fund", which is registered under the
Investment Company Act of 1940 (the "1940 Act") and whose shares are
registered under the Securities Act of 1933 (the "1933 Act"). We desire to
issue one or more series or classes of our authorized but unissued shares of
capital stock or beneficial interest (the "Shares") to authorized persons in
accordance with applicable Federal and State securities laws. The Fund's
Shares may be made available in one or more separate series, each of which
may have one or more classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company
is a member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor
for the Shares. We have been authorized to execute and deliver this
Distribution Agreement ("Agreement") to you by a resolution of our Board of
Directors or Trustees ("Board") passed at a meeting at which a majority of
Board members, including a majority who are not otherwise interested persons
of the Fund and who are not interested persons of our investment adviser, its
related organizations or with you or your related organizations, were present
and voted in favor of the said resolution approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement
and in consideration of the agreements on your part herein expressed and upon
the terms and conditions set forth herein, we hereby appoint you as the
exclusive sales agent for our Shares and agree that we will deliver such
Shares as you may sell. You agree to use your best efforts to promote the
sale of Shares, but are not obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales
of its Shares without sales charges consistent with the terms of the then
current prospectus and applicable law, and to engage in other legally
authorized transactions in its Shares which do not involve the sale of Shares
to the general public. Such other transactions may include, without
limitation, transactions between the Fund or any series or class and its
shareholders only, transactions involving the reorganization of the Fund or
any series, and transactions involving the merger or combination of the Fund
or any series with another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no
authority or power to obligate or bind us by your actions, conduct or
contracts except that you are authorized to promote the sale of Shares. You
may appoint sub-agents or distribute through dealers or otherwise as you may
determine from time to time, but this Agreement shall not be construed as
authorizing any dealer or other person to accept orders for sale or
repurchase on our behalf or otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you
with the net asset value of the Shares of each available series and class
which shall be determined in accordance with our then effective prospectus.
All Shares will be sold in the manner set forth in our then effective
prospectus and statement of additional information, and in compliance with
applicable law.
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and
class of each Fund's Shares in the amount of any initial, deferred or
contingent deferred sales charge as set forth in our then effective
prospectus. You may allow any sub-agents or dealers such commissions or
discounts from and not exceeding the total sales commission as you shall deem
advisable, so long as any such commissions or discounts are set forth in our
current prospectus to the extent required by the applicable Federal and State
securities laws. You may also make payments to sub-agents or dealers from
your own resources, subject to the following conditions: (a) any such
payments shall not create any obligation for or recourse against the Fund or
any series or class, and (b) the terms and conditions of any such payments
are consistent with our prospectus and applicable federal and state
securities laws and are disclosed in our prospectus or statement of
additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. You shall also be entitled to
compensation for your services as provided in any Distribution Plan adopted
as to any series and class of any Fund's Shares pursuant to Rule 12b-1 under
the 1940 Act.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale
only in those jurisdictions where they have been properly registered or are
exempt from registration, and only to those groups of people which the Board
may from time to time determine to be eligible to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be
directed to the Fund's shareholder services agent, for acceptance on behalf
of the Fund. At or prior to the time of delivery of any of our Shares you
will pay or cause to be paid to the custodian of the Fund's assets, for our
account, an amount in cash equal to the net asset value of such Shares.
Sales of Shares shall be deemed to be made when and where accepted by the
Fund's shareholder services agent. The Fund's custodian and shareholder
services agent shall be identified in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our
Shares for your own account for purposes of resale to the public, but you may
purchase Shares for your own investment account upon your written assurance
that the purchase is for investment purposes and that the Shares will not be
resold except through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net
asset value to certain of your and our affiliated persons pursuant to the
applicable provisions of the federal securities statutes and rules or
regulations thereunder (the "Rules and Regulations"), including Rule 22d-1
under the 1940 Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified financial
statements of our company to be included in any
Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940 Act,
including the prospectus and statement of additional
information included therein;
(b) Of the preparation, including legal fees, and printing of
all Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the
prospectuses included in the Amendments and the first 10
copies of the definitive prospectuses or supplements
thereto, other than those necessitated by your (including
your "Parent's") activities or Rules and Regulations
related to your activities where such Amendments or
supplements result in expenses which we would not otherwise
have incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which we send to our existing
shareholders; and
(d) Of filing and other fees to Federal and State securities
regulatory authorities necessary to continue offering our
Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to offer our
Shares;
(b) Of the preparation, excluding legal fees, and printing of
all Amendments and supplements to our prospectuses and
statements of additional information if the Amendment or
supplement arises from your (including your "Parent's")
activities or Rules and Regulations related to your
activities and those expenses would not otherwise have been
incurred by us;
(c) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we
have prepared for distribution to our existing
shareholders; and
(d) Incurred by you in advertising, promoting and selling our
Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such
information with respect to each series and class of Shares, in such form and
signed by such of our officers as you may reasonably request, and we warrant
that the statements therein contained, when so signed, will be true and
correct. We will also furnish you with such information and will take such
action as you may reasonably request in order to qualify our Shares for sale
to the public under the Blue Sky Laws of jurisdictions in which you may wish
to offer them. We will furnish you with annual audited financial statements
of our books and accounts certified by independent public accountants, with
semi-annual financial statements prepared by us, with registration statements
and, from time to time, with such additional information regarding our
financial condition as you may reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective
prospectus, you will not issue any sales material or statements except
literature or advertising which conforms to the requirements of Federal and
State securities laws and regulations and which have been filed, where
necessary, with the appropriate regulatory authorities. You will furnish us
with copies of all such materials prior to their use and no such material
shall be published if we shall reasonably and promptly object.
You shall comply with the applicable Federal and State laws and
regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If Shares are
tendered to us for redemption or repurchase by us within seven business days
after your acceptance of the original purchase order for such Shares, you
will immediately refund to us the full sales commission (net of allowances to
dealers or brokers) allowed to you on the original sale, and will promptly,
upon receipt thereof, pay to us any refunds from dealers or brokers of the
balance of sales commissions reallowed by you. We shall notify you of such
tender for redemption within 10 days of the day on which notice of such
tender for redemption is received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as
an underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2)
years. The Agreement is renewable annually thereafter, with respect to the
Fund or, if the Fund has more than one series, with respect to each series,
for successive periods not to exceed one year (i) by a vote of (a) a majority
of the outstanding voting securities of the Fund or, if the Fund has more
than one series, of each series, or (b) by a vote of the Board, AND (ii) by a
vote of a majority of the members of the Board who are not parties to the
Agreement or interested persons of any parties to the Agreement (other than
as members of the Board), cast in person at a meeting called for the purpose
of voting on the Agreement.
This Agreement may at any time be terminated by the Fund or by
any series without the payment of any penalty, (i) either by vote of the
Board or by vote of a majority of the outstanding voting securities of the
Fund or any series on 90 days' written notice to you; or (ii) by you on 90
days' written notice to the Fund; and shall immediately terminate with
respect to the Fund and each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice
to you.
16. MISCELLANEOUS. This Agreement shall be subject to the laws of
the State of California and shall be interpreted and construed to further
promote the operation of the Fund as an open-end investment company. This
Agreement shall supersede all Distribution Agreements and Amendments
previously in effect between the parties. As used herein, the terms "Net
Asset Value," "Offering Price," "Investment Company," "Open-End Investment
Company," "Assignment," "Principal Underwriter," "Interested Person,"
"Parent," "Affiliated Person," and "Majority of the Outstanding Voting
Securities" shall have the meanings set forth in the 1933 Act or the 1940 Act
and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or
to our securities holders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
your duties hereunder, or by reason of your reckless disregard of your
obligations and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance
by signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
FRANKLIN NEW YORK TAX-FREE INCOME FUND
By:_______________________________
Accepted:
Franklin/Templeton Distributors, Inc.
By:__________________________________
DATED: ________________
MASTER CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into as of
February 16, 1996, by and between each Investment Company listed on Exhibit A,
for itself and for each of its Series listed on Exhibit A, and BANK OF NEW YORK,
a New York corporation authorized to do a banking business (the "Custodian").
RECITALS
A. Each Investment Company is an investment company registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act")
that invests and reinvests, for itself or on behalf of its Series, in Domestic
Securities and Foreign Securities.
B. The Custodian is, and has represented to each Investment Company
that the Custodian is, a "bank" as that term is defined in Section 2(a)(5) of
the Investment Company Act of 1940, as amended, and is eligible to receive and
maintain custody of investment company assets pursuant to Section 17(f) and Rule
17f-2 thereunder.
C. The Custodian and each Investment Company, for itself and for
each of its Series, desire to provide for the retention of the Custodian as a
custodian of the assets of each Investment Company and each Series, on the terms
and subject to the provisions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
Section 1.0 FORM OF AGREEMENT
Although the parties have executed this Agreement in the form of a
Master Custody Agreement for administrative convenience, this Agreement shall
create a separate custody agreement for each Investment Company and for each
Series designated on Exhibit A, as though each Investment Company had separately
executed an identical custody agreement for itself and for each of its Series.
No rights, responsibilities or liabilities of any Investment Company or Series
shall be attributed to any other Investment Company or Series.
Section 1.1 DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board" shall mean the Board of Trustees, Directors or Managing
General Partners, as applicable, of an Investment Company.
"Business Day" with respect to any Domestic Security means any day,
other than a Saturday or Sunday, that is not a day on which banking institutions
are authorized or required by law to be closed in The City of New York and, with
respect to Foreign Securities, a London Business Day. "London Business Day"
shall mean any day on which dealings and deposits in U.S. dollars are transacted
in the London interbank market.
"Custodian" shall mean Bank of New York.
"Domestic Securities" shall have the meaning provided in Subsection
2.1 hereof.
"Executive Committee" shall mean the executive committee of a Board.
"Foreign Custodian" shall have the meaning provided in Section 4.1
hereof.
"Foreign Securities" shall have the meaning provided in Section 2.1
hereof.
"Foreign Securities Depository" shall have the meaning provided in
Section 4.1 hereof.
"Fund" shall mean an entity identified on Exhibit A as an Investment
Company, if the Investment Company has no series, or a Series.
"Investment Company" shall mean an entity identified on Exhibit A
under the heading "Investment Company."
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
"Securities" shall have the meaning provided in Section 2.1 hereof.
"Securities System" shall have the meaning provided in Section 3.1
hereof.
"Securities System Account" shall have the meaning provided in
Subsection 3.8(a) hereof.
"Series" shall mean a series of an Investment Company which is
identified as such on Exhibit A.
"Shares" shall mean shares of beneficial interest of the Investment
Company.
"Subcustodian" shall have the meaning provided in Subsection 3.7
hereof, but shall not include any Foreign Custodian.
"Transfer Agent" shall mean the duly appointed and acting transfer
agent for each Investment Company.
"Writing" shall mean a communication in writing, a communication by
telex, facsimile transmission, bankwire or other teleprocess or electronic
instruction system acceptable to the Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. Each Investment Company hereby
appoints and designates the Custodian as a custodian of the assets of each Fund,
including cash denominated in U.S. dollars or foreign currency ("cash"),
securities the Fund desires to be held within the United States ("Domestic
Securities") and securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign Securities are sometimes
referred to herein, collectively, as "Securities." The Custodian hereby accepts
such appointment and designation and agrees that it shall maintain custody of
the assets of each Fund delivered to it hereunder in the manner provided for
herein.
2.2 Delivery of Assets. Each Investment Company may deliver to the
Custodian Securities and cash owned by the Funds, payments of income, principal
or capital distributions received by the Funds with respect to Securities owned
by the Funds from time to time, and the consideration received by the Funds for
such Shares or other securities of the Funds as may be issued and sold from time
to time. The Custodian shall have no responsibility whatsoever for any property
or assets of the Funds held or received by the Funds and not delivered to the
Custodian pursuant to and in accordance with the terms hereof. All Securities
accepted by the Custodian on behalf of the Funds under the terms of this
Agreement shall be in "street name" or other good delivery form as determined by
the Custodian.
2.3 Subcustodians. The Custodian may appoint BNY Western Trust
Company as a Subcustodian to hold assets of the Funds in accordance with the
provisions of this Agreement. In addition, upon receipt of Proper Instructions
and a certified copy of a resolution of the Board or of the Executive Committee,
and certified by the Secretary or an Assistant Secretary, of an Investment
Company, the Custodian may from time to time appoint one or more other
Subcustodians or Foreign Custodians to hold assets of the affected Funds in
accordance with the provisions of this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian or a Foreign
Custodian shall not have any duty or responsibility to manage or recommend
investments of the assets of any Fund held by them or to initiate any purchase,
sale or other investment transaction in the absence of Proper Instructions or
except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE FUNDS HELD
BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and physically
segregate from any property owned by the Custodian, for the account of each
Fund, all non-cash property delivered by each Fund to the Custodian hereunder
other than Securities which, pursuant to Subsection 3.8 hereof, are held through
a registered clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein, individually, as a
"Securities System"), or held by a Subcustodian, Foreign Custodian or in a
Foreign Securities Depository.
3.2 Delivery of Securities. Except as otherwise provided in
Subsection 3.5 hereof, the Custodian, upon receipt of Proper Instructions, shall
release and deliver Securities owned by a Fund and held by the Custodian in the
following cases or as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein, upon sale of such
Securities for the account of the Fund and receipt by the Custodian, a
Subcustodian or a Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the Custodian, a
Subcustodian or a Foreign Custodian in connection with any repurchase agreement
related to such Securities entered into by the Fund;
(c) in the case of a sale effected through a Securities
System, in accordance with the provisions of Subsection 3.8 hereof;
(d) to a tender agent or other authorized agent in connection
with (i) a tender or other similar offer for Securities owned by the Fund, or
(ii) a tender offer or repurchase by the Fund of its own Shares;
(e) to the issuer thereof or its agent when such Securities
are called, redeemed, retired or otherwise become payable; provided, that in any
such case, the cash or other consideration is to be delivered to the Custodian,
a Subcustodian or a Foreign Custodian;
(f) to the issuer thereof, or its agent, for transfer into the
name or nominee name of the Fund, the name or nominee name of the Custodian, the
name or nominee name of any Subcustodian or Foreign Custodian; or for exchange
for a different number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided that, in any such case,
the new Securities are to be delivered to the Custodian, a Subcustodian or
Foreign Custodian;
(g) to the broker selling the same for examination in
accordance with the "street delivery" custom;
(h) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, or reorganization of the issuer of such
Securities, or pursuant to a conversion of such Securities; provided that, in
any such case, the new Securities and cash, if any, are to be delivered to the
Custodian or a Subcustodian;
(i) in the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such warrants, rights or
similar Securities or the surrender of interim receipts or temporary Securities
for definitive Securities; provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian, a subcustodian or a
Foreign Custodian;
(j) for delivery in connection with any loans of Securities
made by the Fund, but only against receipt by the Custodian, a Subcustodian or a
Foreign Custodian of adequate collateral as determined by the Fund (and
identified in Proper Instructions communicated to the Custodian), which may be
in the form of cash or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any loans for
which collateral is to be credited to the account of the Custodian, a
Subcustodian or a Foreign Custodian in the Federal Reserve's book-entry
securities system, the Custodian will not be held liable or responsible for the
delivery of Securities owned by the Fund prior to the receipt of such
collateral;
(k) for delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but only against receipt
by the Custodian, a Subcustodian or a Foreign Custodian of amounts borrowed;
(l) for delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, a Subcustodian or a Foreign Custodian
and a broker-dealer relating to compliance with the rules of registered clearing
corporations and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
(m) for delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, a Subcustodian or a Foreign Custodian
and a futures commission merchant, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Fund;
(n) upon the receipt of instructions from the Transfer Agent
for delivery to the Transfer Agent or to the holders of Shares in connection
with distributions in kind in satisfaction of requests by holders of Shares for
repurchase or redemption; and
(o) for any other proper purpose, but only upon receipt of
Proper Instructions, and a certified copy of a resolution of the Board or of the
Executive Committee certified by the Secretary or an Assistant Secretary of the
Fund, specifying the securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom delivery of such securities
shall be made.
3.3 Registration of Securities. Securities held by the Custodian, a
Subcustodian or a Foreign Custodian (other than bearer Securities) shall be
registered in the name or nominee name of the appropriate Fund, in the name or
nominee name of the Custodian or in the name or nominee name of any Subcustodian
or Foreign Custodian. Each Fund agrees to hold the Custodian, any such nominee,
Subcustodian or Foreign Custodian harmless from any liability as a holder of
record of such Securities.
3.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts for each Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, and shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
hereunder from or for the account of each Fund, other than cash maintained by a
Fund in a bank account established and used in accordance with Rule 17f-3 under
the Fund Act. Funds held by the Custodian for a Fund may be deposited by it to
its credit as Custodian in the banking departments of the Custodian, a
Subcustodian or a Foreign Custodian. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity. In the event a Fund's account for any reason
becomes overdrawn, or in the event an action requested in Proper Instructions
would cause such an account to become overdrawn, the Custodian shall immediately
notify the affected Fund.
3.5 Collection of Income; Trade Settlement; Crediting of Accounts.
The Custodian shall collect income payable with respect to Securities owned by
each Fund, settle Securities trades for the account of each Fund and credit and
debit each Fund's account with the Custodian in connection therewith as stated
in this Subsection 3.5. This Subsection shall not apply to repurchase
agreements, which are treated in Subsection 3.2(b), above.
(a) Upon receipt of Proper Instructions, the Custodian shall
effect the purchase of a Security by charging the account of the Fund on the
contractual settlement date, and by making payment against delivery. If the
seller or selling broker fails to deliver the Security within a reasonable
period of time, the Custodian shall notify the Fund and credit the transaction
amount to the account of the Fund, but the Custodian shall have no further
liability or responsibility for the transaction.
(b) Upon receipt of Proper Instructions, the Custodian shall
effect the sale of a Security by withdrawing a certificate or other indicia of
ownership from the account of the Fund and by making delivery against payment,
and shall credit the account of the Fund with the amount of such proceeds on the
contractual settlement date. If the purchaser or the purchasing broker fails to
make payment within a reasonable period of time, the Custodian shall notify the
Fund, debit the Fund's account for any amounts previously credited to it by the
Custodian as proceeds of the transaction and, if delivery has not been made,
redeposit the Security into the account of the Fund.
(c) The Fund is responsible for ensuring that the Custodian
receives timely and accurate Proper Instructions to enable the Custodian to
effect settlement of any purchase or sale. If the Custodian does not receive
such instructions within the required time period, the Custodian shall have no
liability of any kind to any person, including the Fund, for failing to effect
settlement on the contractual settlement date. However, the Custodian shall use
its best reasonable efforts to effect settlement as soon as possible after
receipt of Proper Instructions.
(d) The Custodian shall credit the account of the Fund with
interest income payable on interest bearing Securities on payable date.
Dividends and other amounts payable with respect to Domestic Securities and
Foreign Securities shall be credited to the account of the Fund when received by
the Custodian. The Custodian shall not be required to commence suit or
collection proceedings or resort to any extraordinary means to collect such
income and other amounts payable with respect to Securities owned by the Fund.
The collection of income due the Fund on Domestic Securities loaned pursuant to
the provisions of Subsection 3.2(j) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Fund is entitled. The Custodian shall have no liability to
any person, including the Fund, if the Custodian credits the account of the Fund
with such income or other amounts payable with respect to Securities owned by
the Fund (other than Securities loaned by the Fund pursuant to Subsection 3.2(j)
hereof) and the Custodian subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable time period, as determined
by the Custodian in its sole discretion. In such event, the Custodian shall be
entitled to reimbursement of the amount so credited to the account of the Fund.
3.6 Payment of Fund Monies. Upon receipt of Proper Instructions
the Custodian shall pay out monies of a Fund in the following cases or as
otherwise directed in Proper Instructions:
(a) upon the purchase of Securities, futures contracts or
options on futures contracts for the account of the Fund but only, except as
otherwise provided herein, (i) against the delivery of such securities, or
evidence of title to futures contracts or options on futures contracts, to the
Custodian or a Subcustodian registered pursuant to Subsection 3.3 hereof or in
proper form for transfer; (ii) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in Subsection 3.8
hereof; or (iii) in the case of repurchase agreements entered into between the
Fund and the Custodian, another bank or a broker-dealer (A) against delivery of
the Securities either in certificated form to the Custodian or a Subcustodian or
through an entry crediting the Custodian's account at the appropriate Federal
Reserve Bank with such Securities or (B) against delivery of the confirmation
evidencing purchase by the Fund of Securities owned by the Custodian or such
broker-dealer or other bank along with written evidence of the agreement by the
Custodian or such broker-dealer or other bank to repurchase such Securities from
the Fund;
(b) in connection with conversion, exchange or surrender of
Securities owned by the Fund
as set forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of Shares issued by the
Fund;
(d) for the payment of any expense or liability incurred by
the Fund, including but not limited to the following payments for the account of
the Fund: custodian fees, interest, taxes, management, accounting, transfer
agent and legal fees and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred expenses;
and
(e) for the payment of any dividends or distributions
declared by the Board with respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may appoint BNY
Western Trust Company or, upon receipt of Proper Instructions, another bank or
trust company, which is itself qualified under the Investment Company Act to act
as a custodian (a "Subcustodian"), as the agent of the Custodian to carry out
such of the duties of the Custodian hereunder as a Custodian may from time to
time direct; provided, however, that the appointment of any Subcustodian shall
not relieve the Custodian of its responsibilities or liabilities hereunder.
3.8 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain Domestic Securities owned by a Fund in a Securities
System in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic Securities of the Fund in
the Depository Trust Company or the Federal Reserve's book entry system or, upon
receipt of Proper Instructions, in another Securities System provided that such
securities are held in an account of the Custodian in the Securities System
("Securities System Account") which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or otherwise for
customers;
(b) the records of the Custodian with respect to Domestic
Securities of the Fund which are maintained in a Securities System shall
identify by book-entry those Domestic Securities belonging to the Fund;
(c) the Custodian shall pay for Domestic Securities purchased
for the account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Securities System
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The Custodian
shall transfer Domestic Securities sold for the account of the Fund upon (A)
receipt of advice from the Securities System that payment for such securities
has been transferred to the Securities System Account, and (B) the making of an
entry on the records of the Custodian to reflect such transfer and payment for
the account of the Fund. Copies of all advices from the Securities System of
transfers of Domestic Securities for the account of the Fund shall be maintained
for the Fund by the Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund confirmation of the transfer to or
from the account of the Fund in the form of a written advice or notice; and
(d) upon request, the Custodian shall provide the Fund with
any report obtained by the Custodian on the Securities System's accounting
system, internal accounting control and procedures for safeguarding domestic
securities deposited in the Securities System.
3.9 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of a Fund, into which account or accounts may be transferred cash and/or
Securities, including Securities maintained in an account by the Custodian
pursuant to Section 3.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer or futures
commission merchant, relating to compliance with the rules of registered
clearing corporations and of any national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or securities in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or sold by the Fund,
and (iii) for other proper corporate purposes, but only, in the case of this
clause (iii), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper corporate
purposes.
3.10 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Fund held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to the Securities
held hereunder, promptly deliver to each Fund all proxies, all proxy soliciting
materials and all notices relating to such Securities. If the Securities are
registered otherwise than in the name of a Fund or a nominee of a Fund, the
Custodian shall use its best reasonable efforts, consistent with applicable law,
to cause all proxies to be promptly executed by the registered holder of such
Securities in accordance with Proper Instructions.
3.12 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to each Fund all written information
(including, without limitation, pendency of calls and maturities of Securities
and expirations of rights in connection therewith and notices of exercise of put
and call options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers of
Securities being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to each Fund all written information
received by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the tender or
exchange offer. If a Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. The Custodian shall each business day
furnish each Fund with a statement summarizing all transactions and entries for
the account of the Fund for the preceding day. At the end of every month, the
Custodian shall furnish each Fund with a list of the cash and portfolio
securities showing the quantity of the issue owned, the cost of each issue and
the market value of each issue at the end of each month. Such monthly report
shall also contain separate listings of (a) unsettled trades and (b) when-issued
securities. The Custodian shall furnish such other reports as may be mutually
agreed upon from time-to-time.
Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE
FUNDS HELD OUTSIDE THE UNITED STATES
4.1 Custody Outside the United States. Each Fund authorizes the
Custodian to hold Foreign Securities and cash in custody accounts which have
been established by the Custodian with (i) its foreign branches, (ii) foreign
banking institutions, foreign branches of United States banks and subsidiaries
of United States banks or bank holding companies (each a "Foreign Custodian")
and (iii) Foreign Securities depositories or clearing agencies (each a "Foreign
Securities Depository"); provided, however, that the appropriate Board or
Executive Committee has approved in advance the use of each such Foreign
Custodian and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is set forth in
Proper Instructions and a certified copy of a resolution of the Board or of the
Executive Committee certified by the Secretary or an Assistant Secretary of the
appropriate Investment Company. Unless expressly provided to the contrary in
this Section 4, custody of Foreign Securities and assets held outside the United
States by the Custodian, a Foreign Custodian or through a Foreign Securities
Depository shall be governed by this Agreement, including Section 3 hereof.
4.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of its foreign branches, Foreign
Custodians and Foreign Securities Depositories to: (i) "foreign securities", as
defined in paragraph (c) (1) of Rule 17f-5 under the Fund Act, and (ii) cash and
cash equivalents in such amounts as the Custodian or an affected Fund may
determine to be reasonably necessary to effect the Fund's Foreign Securities
transactions.
4.3 Omitted.
4.4 Segregation of Securities. The Custodian shall identify on its
books and records as belonging to the appropriate Fund, the Foreign Securities
of each Fund held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each agreement between the
Custodian and a Foreign Custodian shall be substantially in the form as
delivered to the Investment Companies for their Boards' review, and shall not be
amended in a way that materially adversely affects any Fund without the prior
written consent of the Fund. Upon request, the Custodian shall certify to the
Funds that an agreement between the Custodian and a Foreign Custodian meets the
requirements of Rule 17f-5 under the 1940 Act.
4.6 Access of Independent Accountants of the Funds. Upon request of
a Fund, the Custodian will use its best reasonable efforts to arrange for the
independent accountants or auditors of the Fund to be afforded access to the
books and records of any Foreign Custodian insofar as such books and records
relate to the custody by any such Foreign Custodian of assets of the Fund.
4.7 Transactions in Foreign Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall instruct the appropriate Foreign Custodian to
transfer, exchange or deliver Foreign Securities owned by a Fund, but, except to
the extent explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the Custodian shall pay out
or instruct the appropriate Foreign Custodian to pay out monies of a Fund in any
of the cases specified in Subsection 3.6. Notwithstanding anything herein to the
contrary, settlement and payment for Foreign Securities received for the account
of a Fund and delivery of Foreign Securities maintained for the account of a
Fund may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser or dealer.
Foreign Securities maintained in the custody of a Foreign Custodian may be
maintained in the name of such entity or its nominee name to the same extent as
set forth in Section 3.3 of this Agreement and each Fund agrees to hold any
Foreign Custodian and its nominee harmless from any liability as a holder of
record of such securities.
4.8 Liability of Foreign Custodian. Each agreement between the
Custodian and a Foreign Custodian shall, unless otherwise mutually agreed to by
the Custodian and a Fund, require the Foreign Custodian to exercise reasonable
care or, alternatively, impose a contractual liability for breach of contract
without an exception based upon a standard of care in the performance of its
duties and to indemnify and hold harmless the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Custodian's performance of such obligations, excepting,
however, Citibank, N.A., and its subsidiaries and branches, where the
indemnification is limited to direct money damages and requires that the claim
be promptly asserted. At the election of a Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims against a
Foreign Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made whole
for any such loss, damage, cost, expense, liability or claim, unless such
subrogation is prohibited by local law.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform each Fund in the event
that the Custodian learns of a material adverse change in the financial
condition of a Foreign Custodian or learns that a Foreign Custodian's financial
condition has declined or is likely to decline below the minimum levels required
by Rule 17f-5 of the 1940 Act.
(b) The custodian will furnish such information as may be
reasonably necessary to assist each Investment Company's Board in its annual
review and approval of the continuance of all contracts or arrangements with
Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions" means
instructions of a Fund received by the Custodian via telephone or in Writing
which the Custodian believes in good faith to have been given by Authorized
Persons (as defined below) or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Custodian may specify.
Any Proper Instructions delivered to the Custodian by telephone shall promptly
thereafter be confirmed in accordance with procedures, and limited in subject
matter, as mutually agreed upon by the parties. Unless otherwise expressly
provided, all Proper Instructions shall continue in full force and effect until
canceled or superseded. If the Custodian requires test arrangements,
authentication methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the Funds thereafter shall
be given and processed in accordance with such terms and conditions for the use
of such arrangements, methods or devices as the Custodian may put into effect
and modify from time to time. The Funds shall safeguard any testkeys,
identification codes or other security devices which the Custodian shall make
available to them. The Custodian may electronically record any Proper
Instructions given by telephone, and any other telephone discussions, with
respect to its activities hereunder. As used in this Agreement, the term
"Authorized Persons" means such officers or such agents of a Fund as have been
properly appointed pursuant to a resolution of the appropriate Board or
Executive Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Fund under this Agreement. Each of such
persons shall continue to be an Authorized Person until such time as the
Custodian receives Proper Instructions that any such officer or agent is no
longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from
a Fund:
(a) make payments to itself or others for minor expenses of
handling Securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to the Fund;
(b) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Fund except as otherwise
provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions
(conveyed by telephone or in Writing), notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have been properly
given or executed by or on behalf of a Fund. The Custodian may receive and
accept a certified copy of a resolution of a Board or Executive Committee as
conclusive evidence (a) of the authority of any person to act in accordance with
such resolution or (b) of any determination or of any action by the Board or
Executive Committee as described in such resolution, and such resolution may be
considered as in full force and effect until receipt by the Custodian of written
notice by an Authorized Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary information
in its possession (to the extent permissible under applicable law) to the entity
or entities appointed by the appropriate Board to keep the books of account of a
Fund and/or compute the net asset value per Share of the outstanding Shares of a
Fund.
Section 9. RECORDS
The Custodian shall create and maintain all records relating to its
activities under this Agreement which are required with respect to such
activities under Section 31 of the Investment Company Act and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the appropriate
Investment Company and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Investment Company and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at a Fund's request, supply the Fund
with a tabulation of Securities and Cash owned by the Fund and held by the
Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
each Investment Company, on behalf of each Fund, and the Custodian. In addition,
should the Custodian in its discretion advance funds (to include overdrafts) to
or on behalf of a Fund pursuant to Proper Instructions, the Custodian shall be
entitled to prompt reimbursement of any amounts advanced. In the event of such
an advance, and to the extent permitted by the 1940 Act and the Fund's policies,
the Custodian shall have a continuing lien and security interest in and to the
property of the Fund in the possession or control of the Custodian or of a third
party acting in the Custodian's behalf, until the advance is reimbursed. Nothing
in this Agreement shall obligate the Custodian to advance funds to or on behalf
of a Fund, or to permit any borrowing by a Fund except for borrowings for
temporary purposes, to the extent permitted by the Fund's policies.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance of only such
duties as are set forth herein or contained in Proper Instructions and shall use
reasonable care in carrying out such duties. The Custodian shall be liable to a
Fund for any loss which shall occur as the result of the failure of a Foreign
Custodian engaged directly or indirectly by the Custodian to exercise reasonable
care with respect to the safekeeping of securities and other assets of the Fund
to the same extent that the Custodian would be liable to the Fund if the
Custodian itself were holding such securities and other assets. Nothing in this
Agreement shall be read to limit the responsibility or liability of the
Custodian or a Foreign Custodian for their failure to exercise reasonable care
with regard to any decision or recommendation made by the Custodian or
Subcustodian regarding the use or continued use of a Foreign Securities
Depository. In the event of any loss to a Fund by reason of the failure of the
Custodian or a Foreign Custodian engaged by such Foreign Custodian or the
Custodian to utilize reasonable care, the Custodian shall be liable to the Fund
to the extent of the Fund's damages, to be determined based on the market value
of the property which is the subject of the loss at the date of discovery of
such loss and without reference to any special conditions or circumstances. The
Custodian shall be held to the exercise of reasonable care in carrying out this
Agreement, and shall not be liable for acts or omissions unless the same
constitute negligence or willful misconduct on the part of the Custodian or any
Foreign Custodian engaged directly or indirectly by the Custodian. Each Fund
agrees to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims and liabilities (including legal
fees and expenses) incurred by the Custodian or its nominess in connection with
the performance of this Agreement with respect to such Fund, except such as may
arise from any negligent action, negligent failure to act or willful misconduct
on the part of the indemnified entity or any Foreign Custodian. The Custodian
shall be entitled to rely, and may act, on advice of counsel (who may be counsel
for a Fund) on all matters and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian need not
maintain any insurance for the benefit of any Fund.
All collections of funds or other property paid or distributed in
respect of Securities held by the Custodian, agent, Subcustodian or Foreign
Custodian hereunder shall be made at the risk of the Funds. The Custodian shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Custodian, agent, Subcustodian or by a Foreign Custodian of any
payment, redemption or other transaction regarding securities in respect of
which the Custodian has agreed to take action as provided in Section 3 hereof.
The Custodian shall not be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the Board and may
rely on the genuineness of any such documents which it may in good faith believe
to be validly executed. Notwithstanding the foregoing, the Custodian shall not
be liable for any loss resulting from, or caused by, the direction of a Fund to
maintain custody of any Securities or cash in a foreign country including, but
not limited to, losses resulting from nationalization, expropriation, currency
restrictions, civil disturbance, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation or other similar occurrences,
or events beyond the control of the Custodian. Finally, the Custodian shall not
be liable for any taxes, including interest and penalties with respect thereto,
that may be levied or assessed upon or in respect of any assets of any Fund held
by the Custodian.
Section 12. LIMITED LIABILITY OF EACH INVESTMENT COMPANY
The Custodian acknowledges that it has received notice of and
accepts the limitations of liability as set forth in each Investment Company's
Agreement and Declaration of Trust, Articles of Incorporation, or Agreement of
Limited Partnership. The Custodian agrees that each Fund's obligation hereunder
shall be limited to the assets of the Fund, and that the Custodian shall not
seek satisfaction of any such obligation from the shareholders of the Fund nor
from any Board Member, officer, employee, or agent of the Fund or the Investment
Company on behalf of the Fund.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of its
execution and shall continue in full force and effect until terminated as
hereinafter provided. This Agreement may be terminated by each Investment
Company, on behalf of a Fund, or by the Custodian by 90 days notice in Writing
to the other provided that any termination by an Investment Company shall be
authorized by a resolution of the Board, a certified copy of which shall
accompany such notice of termination, and provided further, that such resolution
shall specify the names of the persons to whom the Custodian shall deliver the
assets of the affected Funds held by the Custodian. If notice of termination is
given by the Custodian, the affected Investment Companies shall, within 90 days
following the giving of such notice, deliver to the Custodian a certified copy
of a resolution of the Boards specifying the names of the persons to whom the
Custodian shall deliver assets of the affected Funds held by the Custodian. In
either case the Custodian will deliver such assets to the persons so specified,
after deducting therefrom any amounts which the Custodian determines to be owed
to it hereunder (including all costs and expenses of delivery or transfer of
Fund assets to the persons so specified). If within 90 days following the giving
of a notice of termination by the Custodian, the Custodian does not receive from
the affected Investment Companies certified copies of resolutions of the Boards
specifying the names of the persons to whom the Custodian shall deliver the
assets of the Funds held by the Custodian, the Custodian, at its election, may
deliver such assets to a bank or trust company doing business in the State of
California to be held and disposed of pursuant to the provisions of this
Agreement or may continue to hold such assets until a certified copy of one or
more resolutions as aforesaid is delivered to the Custodian. The obligations of
the parties hereto regarding the use of reasonable care, indemnities and payment
of fees and expenses shall survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement shall (i)
create any fiduciary, joint venture or partnership relationship between the
Custodian and any Fund or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to any Fund of
investment banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall furnish to the
other party hereto such instruments and other documents as such other party may
reasonably request for the purpose of carrying out or evidencing the
transactions contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action or proceeding
relating to this Agreement is brought by a party hereto against the other party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (including allocated costs and disbursements of
in-house counsel), in addition to any other relief to which the prevailing party
may be entitled.
14.4 Notices. Except as otherwise specified herein, each notice or
other communication hereunder shall be in Writing and shall be delivered to the
intended recipient at the following address (or at such other address as the
intended recipient shall have specified in a written notice given to the other
parties hereto):
if to a Fund or Investment Company: if to the Custodian:
[Fund or Investment Company] The Bank of New York
c/o Franklin Resources, Inc. Mutual Fund Custody Manager
777 Mariners Island Blvd. BNY Western Trust Co.
San Mateo, CA 94404 550 Kearney St., Suite 60
Attention: Chief Legal Officer San Francisco, CA 94108
14.5 Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
14.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and both of which, when taken
together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of New York
(without giving effect to principles of conflict of laws).
14.8 Force Majeure. Notwithstanding the provisions of Section 11
hereof regarding the Custodian's general standard of care, no failure, delay or
default in performance of any obligation hereunder shall constitute an event of
default or a breach of this agreement, or give rise to any liability whatsoever
on the part of one party hereto to the other, to the extent that such failure to
perform, delay or default arises out of a cause beyond the control and without
negligence of the party otherwise chargeable with failure, delay or default;
including, but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute; flood; war;
riot; theft; earthquake; natural disaster; breakdown of public or common carrier
communications facilities; computer malfunction; or act, negligence or default
of the other party. This paragraph shall in no way limit the right of either
party to this Agreement to make any claim against third parties for any damages
suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to exercise any
power, right, privilege or remedy hereunder, and no delay on the part of any
person in the exercise of any power, right, privilege or remedy hereunder, shall
operate as a waiver thereof; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
14.11 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of an agreement or instrument
executed on behalf of each of the parties hereto.
14.12 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
14.13 Parties in Interest. None of the provisions of this Agreement
is intended to provide any rights or remedies to any person other than the
Investment Companies, for themselves and for the Funds, and the Custodian and
their respective successors and assigns, if any.
14.14 Pre-Emption of Other Agreements. In the event of any conflict
between this Agreement, including without limitation any amendments hereto, and
any other agreement which may now or in the future exist between the parties,
the provisions of this Agreement shall prevail.
14.15 Variations of Pronouns. Whenever required by the context
hereof, the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; and the neuter
gender shall include the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
THE BANK OF NEW YORK
By: _____________________________
Its: _____________________________
THE INVESTMENT COMPANIES LISTED ON EXHIBIT A
By: ______________________________
Harmon E. Burns
Their: Vice President
By: ______________________________
Deborah R. Gatzek
Their: Vice President & Secretary
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series
for which the Custodian shall serve under the Master Custody Agreement dated as
of February 16, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Delaware Business Trust U.S. Government Adjustable Rate Mortgage
Portfolios Portfolio
Adjustable Rate Securities Portfolio
AGE High Income Fund, Inc. Colorado Corporation
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Franklin California Insured Tax-Free Income
Trust Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income California Corporation
Fund
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business
Trust
Franklin Templeton International Delaware Business Trust Templeton Pacific Growth Fund
Trust Franklin International Equity Fund
Franklin Investors Securities Trust Massachusetts Business Franklin Global Government Income Fund
Trust Franklin Short-Intermediate U.S. Gov't
Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities
Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Managed Trust Massachusetts Business Franklin Corporate Qualified Dividend Fund
Trust Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Institutional Rising Dividends Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
Franklin New York Tax-Free Income New York Corporation
Fund, Inc.
Franklin New York Tax-Free Trust Massachusetts Business Franklin New York Tax-Exempt Money Fund
Trust Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Tax-Advantaged California Limited
International Bond Fund Partnership
Franklin Tax-Advantaged U.S. California Limited
Government Securities Fund Partnership
Franklin Tax-Advantaged High Yield California Limited
Securities Fund. Partnership
Franklin Premier Return Fund California Corporation
Franklin Real Estate Securities Delaware Business Trust Franklin Real Estate Securities Fund
Trust
Franklin Strategic Mortgage Delaware Business Trust
Portfolio
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Institutional MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Tax-Exempt Money Fund California Corporation
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin Massachusetts Insured Tax-Free Income Fund
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin North Carolina Tax-Free Income Fund
(cont.) Trust Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free
Income Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Templeton Global Trust Massachusetts Business Franklin Templeton German Government Bond Fund
Trust Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Franklin Balance Sheet Investment Fund
Trust Franklin MicroCap Value Fund
Franklin Value Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Valuemark Funds Massachusetts Business Money Market Fund
Trust Growth and Income Fund
Precious Metals
Fund Real Estate
Securities Fund
Utility Equity Fund
High Income Fund
Templeton Global
Income Securities
Fund Investment
Grade Intermediate
Bond Fund Income
Securities Fund
U.S. Government
Securities Fund
Zero Coupon Fund -
2000 Zero Coupon
Fund - 2005 Zero
Coupon Fund - 2010
Adjustable U.S.
Government Fund
Rising Dividends
Fund Templeton
Pacific Growth Fund
Templeton
International
Equity Fund
Templeton
Developing Markets
Equity Fund
Templeton Global
Growth Fund
Templeton Global
Asset Allocation
Fund Small Cap Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Business Money Market Portfolio
Trust Franklin Late Day Money Market Portfolio
Franklin U.S. Government Securities Money
Market
Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S.
Government
Securities Fund
Franklin Institutional Adjustable Rate
Securities Fund
Franklin U.S. Government Agency Money Market
Fund
Franklin Cash Reserves Fund
MidCap Growth Portfolio Delaware Business Trust
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market
Portfolio
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business
Trust
Franklin Principal Maturity Trust Massachusetts Business
Trust
Franklin Universal Trust Massachusetts Business
Trust
- ------------------------------------------------------------------------------------------------------------
</TABLE>
TERMINAL LINK AGREEMENT
AGREEMENT made as of February 16, 1996 between The Bank of New York as custodian
(the "Custodian") and each Investment Company listed on Exhibit A, for itself
and for each of Series listed on Exhibit A (each, a "Fund").
WHEREAS, the parties have entered into a Master Custody Agreement dated
as of February 16, 1996;
WHEREAS, the parties desire to provide for the electronic transmission
of instructions from each Fund to the Custodian, as and to the extent permitted
by the Master Custody Agreement; and
WHEREAS, the Board of Directors, Trustees or Managing General Partners,
as applicable, of each Investment Company have previously authorized each
Investment Company to enter into the Master Custody Agreement;
NOW, THEREFORE, in consideration for the mutual promises set forth, the parties
agree as follows:
A. Except as otherwise provided herein, all terms shall have the same meaning as
in the Master Custody Agreement.
B. The term "Certificate" shall mean any Proper Instruction by a Fund to the
Custodian communicated by the Terminal Link.
C . The term "Officer" shall mean an Authorized Person as defined in section 5
of the Master Custody Agreement.
D. The term "Terminal Link" shall mean an electronic data transmission link
between a Fund, Franklin Templeton Investor Services, Inc. acting as agent for
the Fund ("FTISI"), and the Custodian requiring in connection with each use of
the Terminal Link by or on behalf of the Fund use of an authorization code
provided by the Custodian and at least two access codes established by the Fund.
Each Fund represents that FTISI will maintain a transmission line to the
Custodian and has been selected by the Fund to receive electronic data
transmissions from the Custodian or the Fund and forward the same to the Fund or
the Custodian, respectively.
E. Terminal Link
1. The Terminal Link shall be utilized by a Fund only for the purpose of the
Fund providing Certificates to the Custodian with respect to transactions
involving Securities or for the transfer of money to be applied to the payment
of dividends, distributions or redemptions of Fund Shares, and shall be utilized
by the Custodian only for the purpose of providing notices to the Fund. Such use
shall commence only after a Fund shall have established access codes and
safekeeping procedures to safeguard and protect the confidentiality and
availability of such access codes, and shall have reviewed the safekeeping
procedures established by FTISI to assure that transmissions inputted by the
Fund, and only such transmissions, are forwarded by FTISI to the Custodian
without any alteration or omission. Each use of the Terminal Link by a Fund
shall constitute a representation and warranty that the Terminal Link is being
used only for the purposes permitted hereby, that at least two Officers have
each utilized an access code, that such safekeeping procedures have been
established by the Fund, that FTISI has safekeeping procedures reviewed by the
Fund to assure that all transmissions inputted by the Fund, and only such
transmissions, are forwarded by FTISI to the Custodian without any alteration or
omission by FTISI, and that such use does not, to the Fund's knowledge,
contravene the Investment Company Act of 1940, as amended, or the rules or
regulations thereunder.
2. Each Fund shall obtain and maintain at its own cost and expense all equipment
and services, including, but not limited to communications services, necessary
for it to utilize the Terminal Link, and the Custodian shall not be responsible
for the reliability or availability of any such equipment or services.
3. Each Fund acknowledges that any data bases made available as part of, or
through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than which are or become part of the public
domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. Each Fund shall, and shall cause others to which it discloses
the Information, including without limitation FTISI, to keep the Information
confidential, by using the same care and discretion it uses with respect to its
own confidential property and trade secrets, and shall neither make nor permit
any disclosure without the express prior written consent of the Custodian.
4. Upon termination of this Agreement for any reason, the Fund shall return to
the Custodian any and all copies of the Information which are in the Fund's
possession or under its control, or which the Fund distributed to third parties,
including without limitation FTISI. The provisions of this Article shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all information whether or not copyrighted.
5. The Custodian reserves the right to modify the Terminal Link from time to
time without notice to the Funds or FTISI, except that the Custodian shall give
the Funds notice not less than 75 days in advance of any modification which
would materially adversely affect the Funds' operation. The Funds agree that
neither the Funds nor FTISI shall modify or attempt to modify the Terminal Link
without the Custodian's prior written consent. Each Fund acknowledges that any
software or procedures provided the Fund or FTISI as part of the Terminal Link
are the property of the Custodian and, accordingly, agrees that any
modifications to the Terminal Link, whether by the Fund, FTISI or the Custodian
and whether with or without the Custodian's consent, shall become the property
of the Custodian.
6. The Custodian, the Funds, FTISI and any manufacturers and suppliers utilized
by the Custodian, the Funds or FTISI in connection with the Terminal Link, make
no warranties or representations to any other party, express or implied, in fact
or in law, including but not limited to warranties of merchantability and
fitness for a particular purpose.
7. Each Fund will cause its officers and employees to treat the authorization
codes and the access codes applicable to Terminal Link with extreme care, and
irrevocably authorizes the Custodian to act in accordance with and rely on
Certificates received by it through the Terminal Link. Each Fund acknowledges
that it is its responsibility to assure that only its officers and authorized
persons of FTISI use the Terminal Link on its behalf, and that the Custodian
shall not be responsible nor liable for any action taken in good faith in
reliance upon a Certificate, nor for any alteration, omission, or failure to
promptly forward by FTISI.
8. (a) Except as otherwise specifically provided in Section 8(b) of this
Article, the Custodian shall have no liability for any losses, damages,
injuries, claims, costs or expenses arising out of or in connection with any
failure, malfunction or other problem relating to the Terminal Link except for
money damages suffered as the result of the negligence of the Custodian,
provided however, that the Custodian shall have no liability under this Section
8 if the Fund fails to comply with the provisions of section 10.
(b) The Custodian's liability for its negligence in executing or failing
to act in accordance with a Certificate received through Terminal Link shall be
only with respect to a transfer of funds or assets which is not made in
accordance with such Certificate, and shall be subject to Section 11 of this
Article and contingent upon the Fund complying with the provisions of Section 10
of this Article, and shall be limited to the extent of the Fund's damages,
without reference to any special conditions or circumstances.
9. Without limiting the generality of the foregoing, in no event shall the
Custodian or any manufacturer or supplier of its computer equipment, software or
services relating to the Terminal Link be responsible for any special, indirect,
incidental or consequential damages which a Fund or FTISI may incur or
experience by reason of any malfunction of such equipment or software, even if
the Custodian or any manufacturer or supplier has been advised of the
possibility of such damages, nor with respect to the use of the Terminal Link
shall the Custodian or any such manufacturer or supplier be liable for acts of
God, or with respect to the following to the extent beyond such person's
reasonable control: machine or computer breakdown or malfunction, interruption
or malfunction of communication facilities, labor difficulties or any other
similar or dissimilar cause.
10. Each Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, or (ii) the business day on which discovery should have
occurred through the exercise of reasonable care. The Custodian shall promptly
advise the Fund or FTISI whenever the Custodian learns of any errors, omissions
or interruption in, or delay or unavailability of, the Terminal Link.
11. The Custodian shall acknowledge to each affected Fund or to FTISI, by use of
the Terminal Link, receipt of each Certificate the Custodian receives through
the Terminal Link, and in the absence of such acknowledgment the Custodian shall
not be liable for any failure to act in accordance with such Certificate and the
Funds may not claim that such Certificate was received by the Custodian. Such
acknowledgment, which may occur after the Custodian has acted upon such
Certificate, shall be given on the same day on which such Certificate is
received.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective officers, thereunto duly authorized and their respective
seals to be hereto affixed as of the day and year first above written.
THE BANK OF NEW YORK
By: ______________________
Title: ______________________
THE INVESTMENT COMPANIES LISTED ON EXHIBIT A
By: ______________________
Harmon E. Burns
Title: Vice President
By: ______________________
Deborah R. Garzek
Title: Vice President & Secretary
<TABLE>
<CAPTION>
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series
for which the Custodian shall serve under the Master Custody Agreement dated as
of February 16, 1996.
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Portfolios Delaware Business Trust U.S. Government Adjustable Rate Mortgage Portfolio
Adjustable Rate Securities Portfolio
AGE High Income Fund, Inc. Colorado Corporation
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Franklin California Insured Tax-Free Income Fund
Trust Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income Fund California Corporation
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business
Trust
Franklin Templeton International Trust Delaware Business Trust Templeton Pacific Growth Fund
Franklin International Equity Fund
Franklin Investors Securities Trust Massachusetts Business Franklin Global Government Income Fund
Trust Franklin Short-Intermediate U.S. Gov't Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Managed Trust Massachusetts Business Franklin Corporate Qualified Dividend Fund
Trust Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Institutional Rising Dividends Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
Franklin New York Tax-Free Income Fund, New York Corporation
Inc.
Franklin New York Tax-Free Trust Massachusetts Business Franklin New York Tax-Exempt Money Fund
Trust Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Tax-Advantaged International Bond California Limited
Fund Partnership
Franklin Tax-Advantaged U.S. Government California Limited
Securities Fund Partnership
Franklin Tax-Advantaged High Yield California Limited
Securities Fund. Partnership
Franklin Premier Return Fund California Corporation
Franklin Real Estate Securities Trust Delaware Business Trust Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio Delaware Business Trust
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Institutional MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Tax-Exempt Money Fund California Corporation
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin Massachusetts Insured Tax-Free Income Fund
Trust Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin North Carolina Tax-Free Income Fund
(cont.) Trust Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Templeton Global Trust Massachusetts Business Franklin Templeton German Government Bond Fund
Trust Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Franklin Balance Sheet Investment Fund
Trust Franklin MicroCap Value Fund
Franklin Value Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Valuemark Funds Massachusetts Business Money Market Fund
Trust Growth and Income Fund
Precious Metals Fund
Real Estate Securities Fund
Utility Equity Fund
High Income Fund
Templeton Global Income
Securities Fund Investment
Grade Intermediate Bond
Fund Income Securities
Fund U.S. Government
Securities Fund Zero
Coupon Fund -2000 Zero
Coupon Fund -2005 Zero Coupon
Fund -2010 Adjustable U.S. Government
Fund Rising Dividends Fund
Templeton Pacific Growth Fund
Templeton International Equity
Fund Templeton Developing
Markets Equity Fund Templeton
Global Growth Fund Global
Asset Allocation Fund Small
Cap Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Business Money Market Portfolio
Trust Franklin Late Day Money Market Portfolio
Franklin U.S. Government Securities Money Market
Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S. Government
Securities Fund
Franklin Institutional Adjustable Rate Securities Fund
Franklin U.S. Government Agency Money Market Fund
Franklin Cash Reserves Fund
MidCap Growth Portfolio Delaware Business Trust
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market Portfolio
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business
Trust
Franklin Principal Maturity Trust Massachusetts Business
Trust
Franklin Universal Trust Massachusetts Business
Trust
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No.
16 to the Registration Statement of Franklin New York Tax-Free Income Fund on
Form N-1A File Nos. 2-77880 and 811-3479 of our report dated June 28, 1996 on
our audit of the financial statements and financial highlights of Franklin
New York Tax-Free Income Fund, which report is included in the Annual Report
to Shareholders for the year ended May 31, 1996 which is incorporated by
reference in the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
July 30, 1996
FRANKLIN NEW YORK TAX-FREE INCOME FUND
Preamble to Distribution Plan
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-1 under the Investment Company Act of 1940 (the "Act") by
Franklin New York Tax-Free Income Fund (the "Trust"), which Plan shall take
effect on the ___ day of ________, 1996 (the "Effective Date of the Plan").
The Plan has been approved by a majority of the Board of Trustees of the
Trust (the "Board of Trustees"), including a majority of the trustees who are
not interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the Plan (the "non-interested
trustees"), cast in person at a meeting called for the purpose of voting on
such Plan.
In reviewing the Plan, the Board of Trustees considered the schedule
and nature of payments and terms of the Management Agreement between the
Trust and Franklin Advisers, Inc. ("Advisers") and the terms of the
Underwriting Agreement between the Trust and Franklin/Templeton Distributors,
Inc. ("Distributors"). The Board of Trustees concluded that the compensation
of Advisers, under the Management Agreement, and of Distributors, under the
Underwriting Agreement, was fair and not excessive; however, the Board of
Trustees also recognized that uncertainty may exist from time to time with
respect to whether payments to be made by the Trust to Advisers,
Distributors, or others or by Advisers or Distributors to others may be
deemed to constitute distribution expenses. Accordingly, the Board of
Trustees determined that the Plan should provide for such payments and that
adoption of the Plan would be prudent and in the best interest of the Trust
and its shareholders. Such approval included a determination that in the
exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Trust and its shareholders.
DISTRIBUTION PLAN
1. The Trust shall reimburse Distributors or others for all expenses
incurred by Distributors or others in the promotion and distribution of the
shares of the Trust, including but not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of Distributors'
overhead expenses attributable to the distribution of Trust shares, as well
as any distribution or service fees paid to securities dealers or their firms
or others who have executed a servicing agreement with the Trust,
Distributors or its affiliates, which form of agreement has been approved
from time to time by the trustees, including the non-interested trustees.
2. The maximum amount which may be reimbursed by the Trust to Distributors
or others pursuant to Paragraph 1 herein shall be 0.10% per annum of the
average daily net assets of the Trust. Said reimbursement shall be made
quarterly by the Trust to Distributors or others.
3. In addition to the payments which the Trust is authorized to make
pursuant to paragraphs 1 and 2 hereof, to the extent that the Trust,
Advisers, Distributors or other parties on behalf of the Trust, Advisers or
Distributors make payments that are deemed to be payments for the financing
of any activity primarily intended to result in the sale of shares issued by
the Trust within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges which include
payments specified in paragraphs 1 and 2, plus any other payments deemed to
be made pursuant to the Plan under this paragraph, exceed the amount
permitted to be paid pursuant to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., Article III, Section 26(d).
4. Distributors shall furnish to the Board of Trustees, for their review,
on a quarterly basis, a written report of the monies reimbursed to it and to
others under the Plan, and shall furnish the Board of Trustees with such
other information as the Board of Trustees may reasonably request in
connection with the payments made under the Plan in order to enable the Board
of Trustees to make an informed determination of whether the Plan should be
continued.
5. The Plan shall continue in effect for a period of more than one year
only so long as such continuance is specifically approved at least annually
by a vote of the Board of Trustees, including the non-interested trustees,
cast in person at a meeting called for the purpose of voting on the Plan.
6. The Plan, and any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the or by vote of a majority of the
non-interested trustees, on not more than sixty (60) days' written notice, or
by Distributors on not more than sixty (60) days' written notice, and shall
terminate automatically in the event of any act that constitutes an
assignment of the Management Agreement between the Trust and Advisers or the
Underwriting Agreement between the Trust and Distributors.
7. The Plan, and any agreements entered into pursuant to this Plan, may
not be amended to increase materially the amount to be spent for distribution
pursuant to Paragraph 2 hereof without approval by a majority of the Trust's
outstanding voting securities.
8. All material amendments to the Plan, or any agreements entered into
pursuant to this Plan, 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.
9. So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested trustees shall be committed to the discretion of such
non-interested trustees.
This Plan and the terms and provisions thereof are hereby accepted and agreed
to by the Trust and Distributors as evidenced by their execution hereof.
FRANKLIN NEW YORK TAX-FREE INCOME FUND
By:
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
CLASS II DISTRIBUTION PLAN
I. Investment Company: FRANKLIN NEW YORK TAX-FREE INCOME FUND
II. Fund and Class: FRANKLIN NEW YORK TAX-FREE INCOME FUND - CLASS II
III. Maximum Per Annum Rule 12b-1 Fees for Class II Shares
(as a percentage of average daily net assets of the class)
A. Distribution Fee: 0.50%
B. Service Fee: 0.15%
Preamble to Class II Distribution Plan
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Act") by the Investment
Company named above ("Investment Company") for the class II shares (the "Class")
of the Fund named above ("Fund"), which Plan shall take effect as of the date
class II shares are first offered (the "Effective Date of the Plan"). The Plan
has been approved by a majority of the Board of Directors or Trustees of the
Investment Company (the "Board"), including a majority of the Board members who
are not interested persons of the Investment Company and who have no direct, or
indirect financial interest in the operation of the Plan (the "non-interested
Board members"), cast in person at a meeting called for the purpose of voting on
such Plan.
In reviewing the Plan, the Board considered the schedule and nature of payments
and terms of the Management Agreement between the Investment Company and
Franklin Advisers, Inc. and the terms of the Underwriting Agreement between the
Investment Company and Franklin/Templeton Distributors, Inc. ("Distributors").
The Board concluded that the compensation of Advisers, under the Management
Agreement, and of Distributors, under the Underwriting Agreement, was fair and
not excessive. The approval of the Plan included a determination that in the
exercise of their reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Fund and
its shareholders.
Distribution Plan
1. (a) The Fund shall pay to Distributors a quarterly fee not to exceed the
above-stated maximum distribution fee per annum of the Class' average daily net
assets represented by shares of the Class, as may be determined by the Board
from time to time.
(b) In addition to the amounts described in (a) above, the Fund shall pay
(i) to Distributors for payment to dealers or others, or (ii) directly to
others, an amount not to exceed the above-stated maximum service fee per annum
of the Class' average daily net assets represented by shares of the Class, as
may be determined by the Fund's Board from time to time, as a service fee
pursuant to servicing agreements which have been approved from time to time by
the Board, including the non-interested Board members.
2. (a) Distributors shall use the monies paid to it pursuant to Paragraph
1(a) above to assist in the distribution and promotion of shares of the Class.
Payments made to Distributors under the Plan may be used for, among other
things, the printing of prospectuses and reports used for sales purposes,
expenses of preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses, including a pro-rated
portion of Distributors' overhead expenses attributable to the distribution of
Class shares, as well as for additional distribution fees paid to securities
dealers or their firms or others who have executed agreements with the
Investment Company, Distributors or its affiliates, which form of agreement has
been approved from time to time by the Trustees, including the non-interested
trustees. In addition, such fees may be used to pay for advancing the commission
costs to dealers or others with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be used to
pay dealers or others for, among other things, furnishing personal services and
maintaining shareholder accounts, which services include, among other things,
assisting in establishing and maintaining customer accounts and records;
assisting with purchase and redemption requests; arranging for bank wires;
monitoring dividend payments from the Fund on behalf of customers; forwarding
certain shareholder communications from the Fund to customers; receiving and
answering correspondence; and aiding in maintaining the investment of their
respective customers in the Class. Any amounts paid under this paragraph 2(b)
shall be paid pursuant to a servicing or other agreement, which form of
agreement has been approved from time to time by the Board.
3. In addition to the payments which the Fund is authorized to make
pursuant to paragraphs 1 and 2 hereof, to the extent that the Fund, Advisers,
Distributors or other parties on behalf of the Fund, Advisers or Distributors
make payments that are deemed to be payments by the Fund for the financing of
any activity primarily intended to result in the sale of Class shares issued by
the Fund within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges which include
payments specified in paragraphs 1 and 2, plus any other payments deemed to be
made pursuant to the Plan under this paragraph, exceed the amount permitted to
be paid pursuant to the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., Article III, Section 26(d).
4. Distributors shall furnish to the Board, for its review, on a quarterly
basis, a written report of the monies reimbursed to it and to others under the
Plan, and shall furnish the Board with such other information as the Board may
reasonably request in connection with the payments made under the Plan in order
to enable the Board to make an informed determination of whether the Plan should
be continued.
5. The Plan shall continue in effect for a period of more than one year
only so long as such continuance is specifically approved at least annually by
the Board, including the non-interested Board members, cast in person at a
meeting called for the purpose of voting on the Plan.
6. The Plan, and any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the Fund or by vote of a majority of the
non-interested Board members, on not more than sixty (60) days' written notice,
or by Distributors on not more than sixty (60) days' written notice, and shall
terminate automatically in the event of any act that constitutes an assignment
of the Management Agreement between the Fund and Advisers.
7. The Plan, and any agreements entered into pursuant to this Plan, may not
be amended to increase materially the amount to be spent for distribution
pursuant to Paragraph 1 hereof without approval by a majority of the Fund's
outstanding voting securities.
8. All material amendments to the Plan, or any agreements entered into
pursuant to this Plan, shall be approved by the non-interested Board members
cast in person at a meeting called for the purpose of voting on any such
amendment.
9. So long as the Plan is in effect, the selection and nomination of the
Fund's non-interested Board members shall be committed to the discretion of such
non-interested Board members.
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Investment Company and Distributors as evidenced by their
execution hereof.
Date: __________________, 1996
Investment Company
By:________________________________
Franklin/Templeton Distributors, Inc.
By:_____________________________________
FRANKLIN NEW YORK TAX-FREE INCOME FUND
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted by a majority
of the Board of Trustees of the FRANKLIN NEW YORK TAX-FREE INCOME FUND (the
"Trust"). The Board has determined that the Plan is in the best interests of
each class and the Trust as a hole. The Plan sets forth the provisions relating
to the establishment of multiple classes of shares for the Trust.
1. The Trust shall offer two classes of shares, to be known as
Franklin New York Tax-Free Income Fund - Class I and Franklin New York Tax-Free
Income Fund - Class II.
2. Class I shares shall carry a front-end sales charge ranging from 0%
- -4.50%, and Class II shares shall carry a front-end sales charge of 1.00%.
3. Class I shares shall not be subject to a contingent deferred
sales charge ("CDSC") except in the following limited circumstances. On
investments of $1 million or more, a contingent deferred sales charge of 1.00%
of the lesser of the then-current net asset value or the original net asset
value at the time of purchase applies to redemptions of those investments within
the contingency period of 12 months from the calendar month following their
purchase. The CDSC is waived in certain circumstances, as described in the
Trust's prospectus.
4. Class II shares redeemed within 18 months of their purchase shall
be assessed a CDSC of 1.00% on the lesser of the then-current net asset value or
the original net asset value at the time of purchase. The CDSC is waived in
certain circumstances as described in the Trust's prospectus.
5. The Rule 12b-1 Plan associated with Class I shares may be used to
reimburse Franklin/Templeton Distributors, Inc. (the "Distributor") or others
for expenses incurred in the promotion and distribution of the shares of Class
I. Such expenses include, but are not limited to, the printing of prospectuses
and reports used for sales purposes, expenses of preparing and distributing
sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of the Distributor's
overhead expenses attributable to the distribution of Class shares, as well as
any distribution or service fees paid to securities dealers or their firms or
others who have executed a servicing agreement with the Trust for the Class, the
Distributor or its affiliates.
The Rule 12b-1 Plan associated with Class II shares has two
components. The first component is a shareholder servicing fee, to be paid to
broker-dealers, banks, trust companies and others who will provide personal
assistance to shareholders in servicing their accounts. The second component is
an asset-based sales charge to be retained by the Distributor during the first
year after sale of shares, and, in subsequent years, to be paid to dealers or
retained by the Distributor to be used in the promotion and distribution of
Class II shares, in a manner similar to that described above for (Class I
shares.
The Plans shall operate in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., Article III,
section 26(d).
6. The only difference in expenses as between Class I and Class II
shares shall relate to differences in the Rule 12b-1 plan expenses of each
class, as described in each class' Rule 12b-1 Plan.
7. There shall be no conversion features associated with the
Class I and Class II shares.
8. Shares of either Class may be exchanged for shares of another
investment company within the Franklin Templeton Group of Funds according to the
terms and conditions stated in each fund's prospectus, as it may be amended from
time to time, to the extent permitted by the Investment Company Act of 1940 and
the rules and regulations adopted thereunder.
9. Each Class will vote separately with respect to the Rule 12b-1
Plan related to that Class.
10. On an ongoing basis, the trustees pursuant to their fiduciary
responsibilities under the 1940 Act and otherwise, will monitor the Trust for
the existence of any material conflicts between the interests of the two classes
of shares. The trustees, including a majority of the independent trustees, shall
take such action as is reasonably necessary to eliminate any such conflict that
may develop. Franklin Advisers, Inc. and Franklin/Templeton Distributors, Inc.
shall be responsible for alerting the Board to any material conflicts that
arise.
11. All material amendments to this Plan must be approved by a
majority of the trustees of the Trust, including a majority of the trustees who
are not interested persons of the Trust.
I, Deborah R. Gatzek, Secretary of the Franklin Templeton Group of
Funds, do hereby certify that this Multiple Class Plan was adopted by Franklin
New York Tax-Free Income Fund, by a majority of the Trustees of the Trust on
_______________, 1996.
-----------------
Deborah R. Gatzek
Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FRANKLIN
NEW YORK TAX-FREE INCOME FUND MAY 31, 1996 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000703112
<NAME> FRANKLIN NEW YORK TAX-FREE INCOME FUND
<SERIES>
<NUMBER> 011
<NAME> FRANKLIN NEW YORK TAX-FREE INCOME FUND - CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 4,521,611,175
<INVESTMENTS-AT-VALUE> 4,669,164,806
<RECEIVABLES> 93,902,699
<ASSETS-OTHER> 222,013
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,763,289,518
<PAYABLE-FOR-SECURITIES> 9,133,709
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,626,021
<TOTAL-LIABILITIES> 14,759,730
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,589,094,838
<SHARES-COMMON-STOCK> 410,969,338
<SHARES-COMMON-PRIOR> 402,295,032
<ACCUMULATED-NII-CURRENT> 2,622,929
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,258,390
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 147,553,631
<NET-ASSETS> 4,748,529,788
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 314,324,092
<OTHER-INCOME> 0
<EXPENSES-NET> 27,757,776
<NET-INVESTMENT-INCOME> 286,566,316
<REALIZED-GAINS-CURRENT> 16,081,912
<APPREC-INCREASE-CURRENT> (129,808,598)
<NET-CHANGE-FROM-OPS> 172,839,630
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (289,772,039)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,645,245
<NUMBER-OF-SHARES-REDEEMED> (43,189,318)
<SHARES-REINVESTED> 11,218,379
<NET-CHANGE-IN-ASSETS> 21,561,108
<ACCUMULATED-NII-PRIOR> 6,864,571
<ACCUMULATED-GAINS-PRIOR> (6,823,522)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,810,902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,757,776
<AVERAGE-NET-ASSETS> 4,785,942,012
<PER-SHARE-NAV-BEGIN> 11.750
<PER-SHARE-NII> .700
<PER-SHARE-GAIN-APPREC> (.279)
<PER-SHARE-DIVIDEND> (.711)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.460
<EXPENSE-RATIO> .580
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FRANKLIN
NEW YORK TAX-FREE INCOME FUND MAY 31, 1996 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000703112
<NAME> FRANKLIN NEW YORK TAX-FREE INCOME FUND
<SERIES>
<NUMBER> 012
<NAME> FRANKLIN NEW YORK TAX-FREE INCOME FUND - CLASS II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 4,521,611,175
<INVESTMENTS-AT-VALUE> 4,669,164,806
<RECEIVABLES> 93,902,699
<ASSETS-OTHER> 222,013
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,763,289,518
<PAYABLE-FOR-SECURITIES> 9,133,709
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,626,021
<TOTAL-LIABILITIES> 14,759,730
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,589,094,838
<SHARES-COMMON-STOCK> 3,409,918
<SHARES-COMMON-PRIOR> 163,023
<ACCUMULATED-NII-CURRENT> 2,622,929
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,258,390
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 147,553,631
<NET-ASSETS> 4,748,529,788
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 314,324,092
<OTHER-INCOME> 0
<EXPENSES-NET> 27,757,776
<NET-INVESTMENT-INCOME> 286,566,316
<REALIZED-GAINS-CURRENT> 16,081,912
<APPREC-INCREASE-CURRENT> (129,808,598)
<NET-CHANGE-FROM-OPS> 172,839,630
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,035,919)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,404,484
<NUMBER-OF-SHARES-REDEEMED> (209,017)
<SHARES-REINVESTED> 51,428
<NET-CHANGE-IN-ASSETS> 21,561,108
<ACCUMULATED-NII-PRIOR> 6,864,571
<ACCUMULATED-GAINS-PRIOR> (6,823,522)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,810,902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,757,776
<AVERAGE-NET-ASSETS> 4,785,942,012
<PER-SHARE-NAV-BEGIN> 11.730
<PER-SHARE-NII> .650
<PER-SHARE-GAIN-APPREC> (.286)
<PER-SHARE-DIVIDEND> (.644)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.450
<EXPENSE-RATIO> 1.160
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
