FRANKLIN NEW YORK TAX FREE TRUST
497, 1995-05-03
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Franklin New York Tax-Exempt Money Fund
Franklin New York Tax-Free Trust
PROSPECTUS
May 1, 1995
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777  1-800/DIAL BEN

The Franklin New York Tax-Exempt Money Fund (the "Fund") is
one of three non-diversified series of the Franklin New York
Tax-Free Trust (the "Trust"), an open-end management
investment company. The Fund is a no-load, non-diversified,
open-end series of the Trust offering individual investors,
corporations and other institutions a convenient way to
invest in a professionally managed portfolio of high
quality, short-term municipal securities, primarily of the
state of New York, its political subdivisions and New York
City. The Fund's investment objective is to provide
investors with as high a level of income exempt from federal
income taxes and New York State and New York City personal
income taxes as is consistent with prudent investment
management, while seeking preservation of shareholders'
capital and liquidity in its investments.

This Prospectus is intended to set forth in a clear and
concise manner information about the Fund that a prospective
investor should know before investing. After reading the
Prospectus, it should be retained for future reference; it
contains information about the purchase and sale of shares
and other items which a prospective investor will find
useful to have.

An investment in the Fund is neither insured nor guaranteed
by the U.S. government. There can be no assurance that the
Fund will be able to maintain a stable net asset value of
$1.00.

Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any bank; further, such shares
are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
Shares of the Fund involve investment risks, including the
possible loss of principal.

A Statement of Additional Information ("SAI") concerning the
Trust, dated May 1, 1995, as may be amended from time to
time, provides a further discussion of certain areas in this
Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by
reference. A copy is available without charge from the Fund
or the Fund's principal underwriter, Franklin/Templeton
Distributors, Inc. ("Distributors"), at the address or
telephone number shown above.

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 the
underwriter.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Contents                                  Page

Expense Table

Financial Highlights

About the Trust

Investment Objective and
Policies of the Fund

Management of the Fund

Distributions to Shareholders

Taxation of the Fund
and Its Shareholders

How to Buy Shares of the Fund

How to Redeem Shares of the Fund

Other Programs and Privileges
Available to Fund Shareholders

Exchange Privilege

Telephone Transactions

Valuation of Fund Shares

How to Get Information
Regarding an Investment in the Fund

Performance

General Information

Account Registrations

Important Notice Regarding
Taxpayer IRS Certifications

Risk Factors in New York

Expense Table

The purpose of this table is to assist an investor in
understanding the various costs and expenses that a
shareholder will bear directly or indirectly in connection
with an investment in the Fund. These figures are based on
aggregate operating expenses of the Fund, before fee waivers
and expense reductions, for the fiscal year ended December
31, 1994.

Annual Fund Operating Expenses   
(as a percentage of average net
assets)

Management Fees                  0.63%*
12b-1 Fees                       NONE
                                 
Other Expenses:
  Shareholder Servicing Costs    0.13%
  Reports to Shareholders        0.12%
  Other                          0.05%
Total Other Expenses             0.30%
Total Fund Operating Expenses    0.93%*

*Represents the amount that would have been payable to the
investment manager absent a fee reduction by the investment
manager. The investment manager, however, agreed in advance
to waive a portion of its management fees and to assume
responsibility for making payments to offset certain
operating expenses otherwise payable by the Fund. With this
reduction, management fees and total operating expenses
represented 0.30% and 0.60%, respectively, of the average
net assets of the Fund. This arrangement may be terminated
by the investment manager at any time.

Investors should be aware that the above table is not
intended to reflect in precise detail the fees and expenses
associated with an individual's own investment in the Fund.
Rather, the table has been provided only to assist investors
in gaining a more complete understanding of fees, charges
and expenses. For a more detailed discussion of these
matters, investors should refer to the appropriate sections
of this Prospectus.

Example

As required by SEC regulations, the following example
illustrates the expenses that apply to a $1,000 investment
in the Fund over various time periods assuming (1) a 5%
annual rate of return and (2) redemption at the end of each
time period.

1 year          3 years          5 years         10 years
$9              $30              $51             $114

This example is based on the aggregate annual operating
expenses, before fee waivers or expense reductions, shown
above and should not be considered a representation of past
or future expenses, which may be more or less than those
shown. The operating expenses are borne by the Fund and only
indirectly by shareholders as a result of their investment
in the Fund. In addition, federal regulations require the
example to assume an annual return of 5%, but the Fund's
actual return may be more or less than 5%.

Financial Highlights

Set forth below is a table containing the financial
highlights for a share of the Fund outstanding throughout
the nine fiscal years ended December 31, 1994. The
information for each of the five fiscal years in the period
ended December 31, 1994, has been audited by Coopers &
Lybrand L.L.P., independent auditors, whose audit report
appears in the Trust's Annual Report dated December 31,
1994. The remaining figures, which are also audited, are not
covered by the auditors' current report. See the discussion
"Reports to Shareholders" under "General Information."

<TABLE>
<CAPTION>


                                 PER SHARE OPERATING PERFORMANCE+
- -------------------------------------------------------------------------------------------------
               NET ASSET                  NET REALIZED                  DISTRIBUTIONS    NET ASSET
   YEAR          VALUE         NET        & UNREALIZED    TOTAL FROM      FROM NET         VALUE
   ENDED       BEGINNING    INVESTMENT      GAINS ON      INVESTMENT     INVESTMENT        AT END
DECEMBER 31     OF YEAR       INCOME       SECURITIES     OPERATIONS       INCOME         OF YEAR
- -------------------------------------------------------------------------------------------------
<S>              <C>          <C>            <C>             <C>           <C>             <C>
1986*            $1.00        $.014          $ -             $.014         $(.014)         $1.00
1987**            1.00         .041            -              .041          (.041)          1.00
1988**            1.00         .044            -              .044          (.044)          1.00
1989              1.00         .056            -              .056          (.056)          1.00
1990              1.00         .050            -              .050          (.050)          1.00
1991              1.00         .036            -              .036          (.036)          1.00
1992              1.00         .021            -              .021          (.021)          1.00
1993              1.00         .017            -              .017          (.017)          1.00
1994              1.00         .021            -              .021          (.021)          1.00
</TABLE>

<TABLE>
<CAPTION>
                                         RATIOS/SUPPLEMENTAL DATA
                           ------------------------------------------------------
                           NET ASSETS      RATIO OF       RATIO OF
   YEAR                      AT END        EXPENSES      NET INCOME     PORTFOLIO
  ENDED         TOTAL        OF YEAR      TO AVERAGE     TO AVERAGE     TURNOVER
DECEMBER 31    RETURN++    (IN 000'S)    NET ASSETS++    NET ASSETS       RATE
- ---------------------------------------------------------------------------------
<S>             <C>         <C>             <C>             <C>             <C>
1986*           1.07%       $ 3,825           -%            4.27%***        -%
1987**          4.17         54,886         .44             4.04            -
1988**          4.51         53,877         .46             4.46            -
1989            5.75         75,556         .57             5.59            -
1990            5.13         92,277         .59             5.02            -
1991            3.63         70,503         .69             3.52            -
1992            2.10         54,122         .65             2.12            -
1993            1.67         50,317         .63             1.68            -
1994            2.11         64,835         .60             2.12            -
</TABLE>


*For the period October 10, 1986 (effective date of
registration) to December 31, 1986.
**Restated for change in fiscal year from August 31 to
December 31.
***Annualized.
+Total return measures the change in value of an investment
over the periods indicated. It assumes reinvestment of
dividends and capital gains, if any, at net asset value.
++During the periods indicated, the investment manager
agreed in advance to waive a portion of its management fees
and to assume responsibility for making payments to offset
certain operating expenses otherwise payable by the Fund.
Had such action not been taken, the ratio of operating
expenses to average net assets for the periods ended
December 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993 and
1994 would have been: .78%, .82%, .82%, .79%, .84%, .89%,
.97% and .93%.

About the Trust

The Trust is an open-end management investment company, or
mutual fund, organized as a Massachusetts business trust in
July 1986 and registered with the SEC under the Investment
Company Act of 1940 (the "1940 Act"). The Trust currently
consists of three series, each of which issues a separate
series of the Trust's shares and maintains a totally
separate investment portfolio. This Prospectus relates only
to the Franklin New York Tax-Exempt Money Fund.

The Fund attempts to maintain a stable net asset value of
$1.00 per share, although there is no assurance that this
will be achieved. Although a shareholder may write
redemption drafts (similar to checks) against the account,
the purchase of shares of the Fund does not create a
checking or other bank account.

Shares of the Fund may be purchased at net asset value
(without a sales charge) with an initial investment of at
least $500 and subsequent investments of $25 or more. (See
"How to Buy Shares of the Fund.")

Investment Objective and Policies of the Fund

The Fund seeks to provide investors with as high a level of
income exempt from federal income taxes and from the
personal income taxes of New York State and New York City as
is consistent with prudent investment management, while
seeking the preservation of shareholders' capital and
liquidity. This objective is a fundamental policy of the
Fund and may not be changed without shareholder approval. As
with any investment, there is no assurance that the Fund's
objective will be achieved.

Under normal market conditions, the Fund attempts to invest
100% and, as a matter of fundamental policy, will invest at
least 80% of its total assets in debt obligations issued by
or on behalf of the state of New York or any state,
territory or possession of the United States, the District
of Columbia and their respective authorities, agencies,
instrumentalities and political sub-divisions, the interest
on which is exempt from regular federal income taxes and is
not subject to the federal alternative minimum tax. It is
possible, although not anticipated, that up to 20% of the
Fund's net assets could be in municipal securities subject
to the alternative minimum tax and/or in taxable
obligations.

In addition, under normal market conditions, the Fund will
invest at least 65% of its total assets in high quality
municipal securities and obligations issued by or on behalf
of the state of New York and its local governments,
municipalities, authorities, agencies and political
subdivisions, and those of certain other governmental
issuers, such as the Commonwealth of Puerto Rico, which pay
income exempt from regular federal and New York State and
New York City income taxes ("New York Municipal
Securities"). Dividends paid by the Fund which are derived
from interest on tax-exempt obligations that are not New
York Municipal Securities will be exempt from federal income
tax, but will be subject to New York State and New York City
personal income taxes. It is possible, although not
anticipated, that up to 35% of the Fund's net assets could
be in municipal securities from a state other than New York.

For temporary defensive purposes only, the Fund may invest
(i) more than 20% of its assets (which could be up to 100%)
in money market instruments the interest on which is subject
to regular federal income tax and/or the alternative minimum
tax, and (ii) more than 35% of the value of its net assets
(which could be up to 100%) in money market instruments the
interest on which is exempt from regular federal income
taxes but not New York State and New York City personal
income taxes. Periods when a defensive posture is warranted
include those periods when the Fund's monies available for
investment exceed the New York Municipal Securities then
available for purchase and which meet the Fund's objective
or, in the investment manager's opinion, there exist
uncertain economic, market, political, or legal conditions
which may jeopardize the value of some or all types of
municipal securities.

In accordance with procedures adopted pursuant to Rule 2a-7
under the 1940 Act, the Fund limits its investments to those
U.S. dollar denominated instruments which the Board of
Trustees of the Trust determines present minimal credit
risks and which are, as required by the federal securities
laws, rated in one of the two highest rating categories
(within which there may be sub-categories or gradations
indicating relative standing) as determined by nationally
recognized statistical rating organizations, or which are
unrated and of comparable quality, with remaining maturities
of 397 calendar days or less ("Eligible Securities"). The
Fund maintains a dollar weighted average maturity of the
securities in its portfolio of 90 days or less. These
procedures are not fundamental policies of the Fund. See the
SAI for a description of ratings.

If a security ceases to be rated in the highest rating
category, or the investment manager becomes aware that a
security has been rated below the second highest rating
category, not including changes in a security's relative
standing within a category, subsequent to its purchase by
the Fund, the Board of Trustees will promptly reassess
whether such security presents minimal credit risks and
shall take such action as it deems to be in the best
interest of the Fund and its shareholders, unless such
security is sold or matures within five business days of the
investment manager becoming aware of the new rating category
and the trustees are notified of the investment manager's
actions. In addition to considering ratings assigned by the
rating services in its selection of portfolio securities for
the Fund, the investment manager will consider, among other
things, information concerning the financial history and
condition of the issuer, the revenue and expense prospects
and, in the case of revenue bonds, the financial history and
condition of the source of revenue to service the bonds.
Because the Fund limits its investments to high quality
securities, the Fund's portfolio will generally earn lower
yields than if the Fund purchased securities with a lower
rating and correspondingly greater risk and the yield to
shareholders in the Fund is accordingly likely to be lower.

The Fund may borrow from banks for temporary or emergency
purposes and pledge up to 5% of its total assets therefor.
Although the Fund does not currently intend to do so,
consistent with procedures approved by the Board of Trustees
and subject to the following conditions, the Fund may lend
its portfolio securities to qualified securities dealers or
other institutional investors, provided that such loans do
not exceed 10% of the value of the Fund's total assets at
the time of the most recent loan. See the SAI for more
information.

It is the policy of the Fund that restricted securities and
other illiquid securities (securities that cannot be
disposed of within seven days in the normal course of
business at approximately the amount at which the Fund has
valued the securities) may not constitute, at the time of
the purchase, more than 10% of the value of the total net
assets of the Fund.

Municipal Securities

The term "municipal securities," as used in this Prospectus,
means obligations issued by or on behalf of the state of New
York or 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 bond 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 obtain funding for privately
operated facilities. The Fund will purchase municipal
securities only to the extent the purchase of such
securities would be consistent with the maturity and other
requirements of Rule 2a-7 under the 1940 Act. Further
information on the maturity and funding classifications of
municipal securities is included in the SAI.

The Fund may invest up to 25% of its net assets in the debt
obligations of a single municipal issuer. It is possible,
from time to time, that the Fund 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, industrial development
bonds, transportation bonds, or pollution control revenue
bonds. In such 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.

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" (including those for housing and
student loans) issued after August 7, 1986, while still tax-
exempt, constitutes a preference item for taxpayers in
determining the federal alternative minimum tax under the
Internal Revenue Code of 1986, as amended (the "Code"), and
under the income tax provisions of some states. This
interest could subject a shareholder to, or increase the
shareholder's liability under, the federal alternative
minimum tax, depending on the shareholder's tax situation.
In addition, all distributions derived from interest exempt
from regular federal income tax may subject a corporate
shareholder to, or increase its liability under, the federal
alternative minimum tax, because such distributions are
included in the corporation's "adjusted current earnings."
In states with a corporate franchise tax, distributions of
the Fund may also be fully taxable to a corporate
shareholder under its state franchise tax system. Consistent
with the Fund's investment objective, the Fund may acquire
such private activity bonds if, in the investment manager's
opinion, such bonds represent the most attractive investment
opportunity then available to the Fund. As of December 31,
1994, the Fund had derived 6.07% of its income from bonds,
the interest on which constitutes a preference item subject
to the federal alternative minimum tax for certain
investors.

The Fund may purchase 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, which amount may be more or
less than the amount the Fund paid for such obligation.
Because of the demand feature, the prices of VRDNs may be
higher and the yields lower than they otherwise would be for
obligations without a demand feature. The Fund may invest in
floating rate and variable rate obligations carrying stated
maturities in excess of one year at the date of purchase by
the Fund if such obligations carry demand features that
comply with certain conditions and rules adopted by the SEC.
The Fund will limit its purchase of municipal securities
that are floating rate and variable rate obligations to
those meeting the quality standards set forth in this
Prospectus. Frequently, such obligations are secured by
letters of credit or other credit support arrangements. The
quality of the underlying creditor must, as determined by
the investment manager under the supervision of the Board of
Trustees, also be equivalent to the quality standards set
forth in this Prospectus. In addition, the investment
manager monitors the earning power, cash flow and other
liquidity ratios of the issuers of such obligations, as well
as the creditworthiness of the institution responsible for
paying the principal amount of the obligation under the
demand feature.

The Fund may purchase and sell municipal securities on a
"when-issued" and "delayed delivery" basis. These
transactions are subject to market fluctuation and the value
at delivery may be more or less than the purchase price.
Although the Fund will generally purchase municipal
securities on a when-issued basis with the intention of
acquiring such 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, 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 the Fund's
portfolio consistent with its investment objective and
policies and not for the purpose of investment leverage.

The Fund may also 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. For example, a COP may be
created when long-term lease revenue bonds are issued by a
governmental corporation to pay for the acquisition of
property or facilities which 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. The lessor is, in effect, a
lender secured by the property being leased. 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 must
contain a "nonappropriation" or "abatement" clause. A
nonappropriation clause provides that, while the
municipality will use its best efforts to make lease
payments, the municipality may terminate the lease without
penalty if the municipality's appropriating body does not
allocate the necessary funds. Local administrations, being
faced with increasingly tight budgets, therefore 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. In most cases,
however, the private sector value of the property will be
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 in the two highest
rating categories as determined by Moody's, S&P or Fitch, or
in unrated COPs believed to be of comparable quality.
Criteria considered by the rating agencies and the
investment manager in assessing such risk include the
issuing municipality's credit rating, evaluation of 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 of Trustees reviews the COPs held in the
Fund's portfolio to assure that they constitute liquid
investments based on various factors reviewed by the
investment manager and monitored by the Board. Such factors
include (a) the credit quality of such 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
the Fund's 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 COPs, as of December 31, 1994, the Fund did not
hold any COPs or other municipal leases.

Yields on municipal securities vary, depending on a variety
of factors, including the general condition of the financial
markets and of the municipal securities market, 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,
but are subject to greater price fluctuation due to changes
in interest rates, tax laws and other general market
factors. 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 pay principal and interest obligations.

The Fund is subject to a number of additional investment
restrictions, some of which may be changed only with the
approval of shareholders, which limit its activities to some
extent. For a list of these restrictions and more
information concerning the policies discussed herein, please
see the SAI.

Investment Risk Considerations

While an investment in the Fund is not without risk, certain
policies are followed in managing the Fund which may help to
reduce the investor's risk. There are two categories of
risks to which the Fund is subject: credit risk and market
risk. Credit risk is a function of the ability of an issuer
of a municipal security to maintain 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. As with other debt instruments, the price of the
securities in which the Fund invests are likely to decrease
in times of rising interest rates. Conversely, when rates
fall, the value of the Fund's investments may rise. Since
the Fund will generally invest primarily in New York
Municipal Securities, there are certain specific factors and
considerations concerning New York which may affect the
credit and market risk of the municipal securities that the
Fund may purchase. See "Risk Factors in New York" for a
discussion of these factors.

As a non-diversified series of the Trust, the Fund is not
subject to any statutory restriction under the 1940 Act with
respect to the concentration of its investments in the
assets of one or more issuers. This concentration may
present greater risks than in the case of a diversified
series of an investment company. (See the SAI for the
diversification requirements the Fund intends to meet in
order to qualify as a regulated investment company under the
Code.)

Management of the Fund

The Board of Trustees has the primary responsibility for the
overall management of the Fund and for electing the officers
of the Fund who are responsible for administering its day-to-
day operations.

Franklin Advisers, Inc. ("Advisers" or "Manager") serves as
the Fund's investment manager. Advisers is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Resources"), a
publicly owned holding company, the principal shareholders
of which are Charles B. Johnson and Rupert H. Johnson, Jr.,
who own approximately 20% and 16%, respectively, of
Resources' outstanding shares. Through its subsidiaries,
Resources is engaged in various aspects of the financial
services industry. Advisers acts as investment manager or
administrator to 33 U.S. registered investment companies
(111 separate series) with aggregate assets of over $74
billion, approximately $40 billion of which are in the
municipal securities market.

Pursuant to the management agreement, the Manager supervises
and implements the Fund's investment activities and provides
certain administrative services and facilities which are
necessary to conduct the Fund's business.

During the fiscal year ended December 31, 1994, fees
totaling 0.63% of the average daily net assets of the Fund
would have accrued to Advisers. Total operating expenses,
including management fees, would have represented 0.93% of
the average daily net assets of the Fund. Pursuant to an
agreement by Advisers to limit its fees, the Fund paid
management fees totaling 0.30% of the average daily net
assets of the Fund and operating expenses totaling 0.60%.

It is not anticipated that the Fund will incur a significant
amount of brokerage expenses because municipal securities
are generally traded on a "net" basis, that is, in principal
transactions without the addition or deduction of brokerage
commissions or transfer taxes. In the event that the Fund
does participate in transactions involving brokerage
commissions, it is the Manager's responsibility to select
brokers through which such transactions will be effected.
The Manager will try to obtain the best execution on all
such transactions. If it is felt that more than one broker
is able to provide the best execution, the Manager will
consider the furnishing of quotations and of other market
services, research, statistical and other data for the
Manager and its affiliates, as well as the sale of shares of
the Fund, as factors in selecting a broker. Further
information is included under "The Trust's Policies
Regarding Brokers Used on Portfolio Transactions" in the
SAI.

Shareholder accounting and many of the clerical functions
for the Fund are performed by Franklin/Templeton Investor
Services, Inc. ("Investor Services" or "Shareholder Services
Agent"), in its capacity as transfer agent and dividend-
paying agent. Investor Services is a wholly-owned subsidiary
of Resources.

Distributions to Shareholders

The Fund declares dividends for each day that its net asset
value is calculated, payable to shareholders of record as of
the close of business the preceding day. The amount of
dividends may fluctuate from day to day and dividends may be
omitted on some days, depending on changes in the factors
that comprise the Fund's net investment income. The Fund
does not pay "interest" to its shareholders, nor is any
amount of dividends or return guaranteed in any way.

Dividends are automatically reinvested daily in the form of
additional shares of the Fund at the net asset value per
share at the close of business each day. The daily dividend
includes accrued interest and any original issue and market
discount, plus or minus any gain or loss on the sale of
portfolio securities and changes in unrealized appreciation
or depreciation in portfolio securities (to the extent
required to maintain a stable net asset value per share),
less amortization of any premium paid on the purchase of
portfolio securities and the estimated expenses of the Fund.

The federal income tax treatment of dividends and
distributions is the same whether received in cash or
reinvested in Fund shares.

The SAI includes a further discussion of distributions.

Dividends in Cash

Shareholders may request to have their dividends paid out
monthly in cash by notifying Investor Services. For such
shareholders, the shares reinvested and credited to their
account during the month will be redeemed as of the close of
business on the last business day of the month and the
proceeds will be paid to them in cash. By completing the
"Special Payment Instructions for Dividends" section of the
Shareholder Application included with this Prospectus, a
shareholder may direct the selected distributions to another
fund in the Franklin Group of Funds(Registered Trademark) or
the Templeton Group, to another person, or directly to a
checking account. If the bank at which the account is
maintained is a member of the Automated Clearing House, the
payments may be made automatically by electronic funds
transfer. If this last option is requested, the shareholder
should allow at least 15 days for initial processing.
Dividends which may be paid in the interim will be sent to
the address of record. Additional information regarding
automated fund transfers may be obtained from Franklin's
Shareholder Services Department.

Taxation of the Fund and Its Shareholders

The following discussion reflects some of the tax
considerations that affect mutual funds and their
shareholders. Additional information on tax matters relating
to the Fund and its shareholders is included in the section
entitled "Additional Information Regarding Distributions and
Taxation" in the SAI.

Each series of the Trust is treated as a separate entity for
federal income tax purposes. The Fund intends to continue to
qualify for treatment 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 its shareholders. Such exempt-interest
dividends are derived from interest income exempt from
regular federal income tax and are not subject to regular
federal income tax for Fund shareholders. In addition, to
the extent that exempt-interest dividends are derived from
interest on obligations of New York and its political
subdivisions, from interest on direct obligations of the
federal government, or from interest on U.S. territorial
obligations (including Puerto Rico, the U.S. Virgin Islands
and Guam), they will also be exempt from New York State and
New York City personal income taxes. For corporate taxpayers
subject to the New York State franchise tax, however, 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), 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
the shareholder has elected to receive them in cash or in
additional shares.

Pursuant to the Code, certain distributions which are
declared in 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.

Redemptions and exchanges of Fund shares are taxable events
on which a shareholder may realize a gain or loss. Any loss
incurred on the sale or exchange of Fund shares, held for
six months or less, will be disallowed to the extent of
exempt interest dividends paid with respect to such shares.

Since the Fund's income is derived from interest 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 December 31, 1994, qualified for this
deduction and it is not anticipated that any of the current
year's dividends will so qualify.

The Fund will inform shareholders 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
them 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 interest
income that is a tax preference item under the alternative
minimum tax. Shareholders who have not held shares of the
Fund for a full calendar year 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 their
investment in the Fund.

Exempt-interest dividends of the Fund, although exempt from
regular federal income tax in the hands of a shareholder,
are includible in the tax base for determining the extent to
which a shareholder's social security or railroad retirement
benefits will be subject to federal income tax. Shareholders
are required to disclose the receipt of tax-exempt interest
on their federal income tax returns.

Interest on indebtedness incurred (directly or indirectly)
by shareholders to purchase or carry Fund shares will not be
deductible for federal income tax purposes.

The foregoing description relates solely to federal income
tax law and to New York State and New York City personal
income tax treatment to the extent indicated. Shareholders
should consult their tax advisors with respect to the
applicability of other state and local income tax laws to
distributions and redemption proceeds received from the
Fund. Corporate, individual and trust shareholders should
contact their tax advisors to determine the impact of Fund
dividend distributions under the alternative minimum tax
that may be applicable to a shareholder's particular tax
situation.

Shareholders who are not U.S. persons for purposes of
federal income taxation should consult with their financial
or tax advisors regarding the applicability of U.S.
withholding or other taxes on distributions received by them
from the Fund and the application of foreign tax laws to
these distributions.

How to Buy Shares of the Fund

Shares of the Fund are continuously offered through
securities dealers which execute an agreement with
Distributors, the principal underwriter of the Fund's
shares, and by the Fund directly. The use of the term
"securities dealer" shall include other financial
institutions which, pursuant to an agreement with
Distributors (directly or through affiliates), handle
customer orders and accounts with the Fund. Such reference,
however, is for convenience only and does not indicate a
legal conclusion of capacity. All shares of the Fund are
purchased at the net asset value, without a sales charge,
next determined after receipt of a purchase order in proper
form. The minimum initial investment is $500 and subsequent
investments must be $25 or more. These minimums may be
waived when the shares are purchased through plans
established at Franklin. The Fund currently does not permit
investment by market timing or allocation services ("Timing
Accounts"), which generally include accounts administered so
as to redeem or purchase shares based upon certain
predetermined market indicators.

Purchases in proper form received by the Fund prior to 3:00
p.m. Pacific time (6:00 p.m. Eastern time) will be credited
to the shareholder's account on that business day. If
received after 3:00 p.m., the purchase will be credited the
following business day. Many of the types of instruments in
which the Fund invests must be paid for in federal funds,
which are monies held by its custodian bank on deposit at
the Federal Reserve Bank of San Francisco and elsewhere.
Therefore, the monies paid by an investor for shares of the
Fund generally cannot be invested by the Fund until they are
converted into and are available to the Fund in federal
funds, which may take up to two days. In such cases,
purchases by investors may not be considered in proper form
and effective until such conversion and availability. In the
event the Fund is able to make investments immediately
(within one business day), it may accept a purchase order
with payment other than in federal funds; in such event,
shares of the Fund will be purchased at the net asset value
next determined after receipt of the order and payment.

Shares may be purchased in any of the following ways:

By Mail

(1)  For an initial investment, include the completed
Shareholder Application contained in this Prospectus. For
subsequent investments, the deposit slips which are included
with the shareholder's monthly statement or checkbook (if
one has been requested) may be used, or the shareholder
should reference the account number on the check.

(2)  Make the check, Federal Reserve draft or negotiable
bank draft payable to Franklin New York Tax-Exempt Money
Fund. Instruments drawn on other investment companies may
not be accepted.

(3)  Send the check, Federal Reserve draft or negotiable
bank draft to Franklin New York Tax-Exempt Money Fund, 777
Mariners Island Blvd., P.O. Box 7777, San Mateo, California
94403-7777.

By Wire

(1)  Call Franklin's Shareholder Services Department at 1-
800/632-2301. If that line is busy, call 415/312-2000
collect, to advise that funds will be wired for investment.
The Fund will supply a wire control number for the
investment. It is necessary to obtain a new wire control
number every time money is wired into an account in the
Fund. Wire control numbers are effective for one transaction
only and may not be used more than once. Shareholders should
contact Franklin's Shareholder Services Department at the
above telephone number to obtain a wire control number each
time funds are to be wired for investment to the Fund. Wired
money which is not properly identified with a currently
effective wire control number will be returned to the bank
from which it was wired and will not be credited to the
shareholder's account.

(2)  Wire funds to Bank of America, ABA routing number
121000358, for credit to Franklin New York Tax-Exempt Money
Fund, A/C 1493-3-04779. The wire control number and
shareholder's name must be included. Wired funds received by
the Bank and reported by the Bank to the Fund by 3:00 p.m.
Pacific time are normally credited on that day. Later wires
are credited the following business day.

(3)  If the purchase is not to an existing account, a
completed Shareholder Application must be sent to Franklin
New York Tax-Exempt Money Fund, at 777 Mariners Island
Blvd., P.O. Box 7777, San Mateo, California 94403-7777, to
assure proper credit for the wire.

Through Securities Dealers

Investors may, if they wish, invest in the Fund by
purchasing shares through a securities dealer as noted
above. Securities dealers which process orders on behalf of
their customers may charge a reasonable fee for their
services. Investments made directly, without the assistance
of a securities dealer, are without charge. In certain
states, shares of the Fund may be purchased only through
registered securities dealers.

Automatic Investment Plan

Under the Automatic Investment Plan, a shareholder may be
able to arrange to make additional purchases of shares
automatically on a monthly basis by electronic funds
transfer from a checking account if the bank which maintains
the account is a member of the Automated Clearing House, or
by preauthorized checks drawn on the shareholder's bank
account. A shareholder may, of course, terminate the program
at any time. The Automatic Investment Plan Application
included with this Prospectus contains the requirements
applicable to this program.

General

The Fund and Distributors reserve the right to reject any
order for the purchase of shares of the Fund. In addition,
the offering of shares of the Fund may be suspended by the
Fund at any time and resumed at any time thereafter.

The Fund may impose a $10 charge for each returned item,
against any shareholder account which, in connection with
the purchase of Fund shares, submits a check or a draft
which is returned unpaid to the Fund.

Securities laws of states in which the Fund's shares are
offered for sale may differ from the interpretations of
federal law, and banks and financial institutions selling
Fund shares may be required to register as dealers pursuant
to state law.

How to Redeem Shares of the Fund

All or any part of a shareholder's investment may be
converted into cash, without penalty or charge, by redeeming
shares in any one of the methods discussed below on any day
the New York Stock Exchange (the "Exchange") is open for
trading. Regardless of the method of redemption, payment for
the shareholder's redeemed shares will be sent within seven
days after receipt of the redemption request in proper form,
except that the Fund may delay the mailing of the redemption
check, or a portion thereof, until the clearance of the
check used to purchase fund shares, which may take up to 15
days or more. Although the use of a certified or cashier's
check will generally reduce this delay, shares purchased
with such instruments will also be held pending clearance.
Shares purchased by federal funds wire are available for
immediate redemption. Shareholders are requested to provide
a telephone number(s) where they may be reached during
business hours, or in the evening if preferred. Investor
Services' ability to contact a shareholder promptly when
necessary will speed the processing of the redemption.

Shares may be redeemed in any of the following ways:

1. By Check

The Fund will supply redemption drafts (which are similar to
checks and are referred to as checks throughout this
Prospectus) to shareholders who have requested them on the
Shareholder Application. The election of the check
redemption procedure does not create a checking account or
other bank account relationship between a shareholder and
the Fund or any bank. These checks are drawn through the
Fund's custodian, Bank of America NT & SA (the "Custodian"
or "Bank"). Shareholders will generally not be able to
convert a check drawn on the Fund account into a certified
or cashier's check by presentation at the Fund's Custodian.
The shareholder may make checks payable to the order of any
person in any amount not less than $100. There is no charge
to the shareholder for this check redemption procedure.

When such a check is presented for payment, the Fund will
redeem a sufficient number of full and fractional shares in
the shareholder's account to cover the amount of the check.
This enables the shareholder to continue earning daily
income dividends until the check has cleared. Shares will be
redeemed at their net asset value next determined after
receipt of a check which does not exceed the collected
balance of the account. Only shareholders having accounts in
which no share certificates have been issued will be
permitted to redeem shares by check.

Because the Fund is not a bank, no assurance can be given
that stop payment orders on checks written by shareholders
will be effective. The Fund, however, will use its best
efforts to see that such orders are carried out.

Shareholders will be subject to the right of the Bank to
return unpaid checks in amounts exceeding the collected
balance of their account at the time the check is presented
for payment. Checks should not be used to close a Fund
account because when the check is written, the shareholder
will not know the exact total value of the account on the
day the check clears. The Bank reserves the right to
terminate this service at any time upon notice to
shareholders.

2. By Telephone

A shareholder may redeem shares by telephoning the Fund at 1-
800/632-2301. Payment of redemption requests of $1,000 or
less (once per business day) will be sent by mail to the
shareholder's address as reflected on the Fund's records.
For payments over $1,000, the shareholder must complete the
"Wire Redemptions Privilege" section of the Shareholder
Application. Proceeds will then be wired directly to the
commercial bank or brokerage firm designated by the
shareholder. Wires will not be sent for redemption requests
of $1,000 or less. Shareholders may have redemption proceeds
of over $1,000, up to $50,000 per day per Fund account, sent
directly to their address of record by filing a completed
Franklin Templeton Telephone Redemption Authorization
Agreement (the "Agreement") included with this Prospectus.
Information may be obtained by writing to the Fund or
Investor Services at the address shown on the cover or by
calling the number above. The Fund and Investor Services
will employ reasonable procedures to confirm that
instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described
under "Telephone Transactions - Verification Procedures."

Telephone redemption requests received before 3:00 p.m.
Pacific time on any business day will be processed that same
day. The redemption check will be sent within seven days,
made payable to all the registered owners on the account,
and will be sent only to the address of record. Wire
payments will be transmitted the next business day following
receipt prior to 3:00 p.m. Pacific time of a request for
redemption in proper form. Shareholders may wish to allow
for longer processing time if they want to assure that
redemption proceeds will be available at a specific time for
a specific transaction. Shareholders may be able to have
redemption proceeds wired to an escrow account the same day,
provided that the request is received prior to 9:00 a.m.
Pacific time.

Redemption instructions must include the shareholder's name
and account number and be called to the Fund. No shares for
which share certificates have been issued may be redeemed by
telephone instructions. Redemption requests by telephone
will not be accepted within 30 days following an address
change by telephone. In that case, a shareholder should
follow the other redemption procedures set forth in this
Prospectus. Institutional accounts which wish to execute
redemptions in excess of $50,000 must complete an
Institutional Telephone Privileges Agreement which is
available from Franklin's Institutional Services Department
by telephoning 1-800/321-8563.

During periods of drastic economic or market changes, it is
possible that the telephone redemption privilege may be
difficult to implement. In this event, shareholders should
follow the other redemption procedures discussed in this
section. The telephone redemption privilege may be modified
or discontinued by the Fund at any time upon 60 days' notice
to shareholders.

3. By Mail

A shareholder may redeem all or a portion of the shares
owned by sending a letter to Investor Services, at the
address shown on the back cover of this Prospectus,
requesting redemption and surrendering share certificates if
any have been issued.

Important Things to Remember When Redeeming Shares

Written requests for redemption must be signed by all
registered owners.

Where shares to be redeemed are represented by share
certificates, the request for redemption must be accompanied
by the share certificate and a share assignment form signed
by the registered shareholders exactly as the account is
registered, with the signature(s) guaranteed as referenced
below. Shareholders are advised, for their own protection,
to send the share certificate and assignment form in
separate envelopes if they are being mailed in for
redemption.

To be considered in proper form, signature(s) must be
guaranteed if the redemption request involves any of the
following:

(1)  the proceeds of the redemption are over $50,000;

(2)  the proceeds (in any amount) are to be paid to someone
other than the registered owner(s) of the account;

(3)  the proceeds (in any amount) are to be sent to any
address other than the shareholder's address of record,
preauthorized bank account or brokerage firm account;

(4)  share certificates, if the redemption proceeds are in
excess of $50,000; or

(5)  the Fund or Investor Services believes that a signature
guarantee would protect against potential claims based on
the transfer instructions, including, for example, when (a)
the current address of one or more joint owners of an
account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to the Fund, (c)
the Fund has been notified of an adverse claim, (d) the
instructions received by the Fund are given by an agent, not
the actual registered owner, (e) the Fund determines that
joint owners who are married to each other are separated or
may be the subject of divorce proceedings, or (f) the
authority of a representative of a corporation, partnership,
association, or other entity has not been established to the
satisfaction of the Fund.

Signature(s) must be guaranteed by an "eligible guarantor
institution" as defined under Rule 17Ad-15 under the
Securities Exchange Act of 1934. Generally, eligible
guarantor institutions include (1) national or state banks,
savings associations, savings and loan associations, trust
companies, savings banks, industrial loan companies and
credit unions; (2) national securities exchanges, registered
securities associations and clearing agencies; (3)
securities dealers which are members of a national
securities exchange or a clearing agency or which have
minimum net capital of $100,000; or (4) institutions that
participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature guarantee
medallion program. A notarized signature will not be
sufficient for the request to be in proper form.

Liquidation requests of corporate, partnership, trust and
custodianship accounts, and accounts under court
jurisdiction require the following documentation to be in
proper form:

Corporation - (1) Signature guaranteed letter of instruction
from the authorized officer(s) of the corporation and (2) a
corporate resolution.

Partnership - (1) Signature guaranteed letter of instruction
from a general partner and (2) pertinent pages from the
partnership agreement identifying the general partners or a
certification for a partnership agreement.

Trust - (1) Signature guaranteed letter of instruction from
the trustee(s) and (2) a copy of the pertinent pages of the
trust document listing the trustee(s) or a Certification for
Trust if the trustee(s) is not listed on the account
registration.

Custodial - Signature guaranteed letter of instruction from
the custodian.

Accounts under court jurisdiction - Check court documents
and the applicable state law since these accounts have
varying requirements, depending upon the state of residence.

For any information required about a proposed liquidation, a
shareholder may call Franklin's Shareholder Services
Department or the securities dealer may call Franklin's
Dealer Services Department.

Written requests for redemption, all share certificates, and
all certificate assignment forms should be sent to the Fund
or Investor Services at the address shown on the back cover
of this Prospectus.

Payment for written requests for redemption will be sent
within seven days after receipt of the request in proper
form. Redemptions will be made in cash at the net asset
value per share next determined after receipt by the Fund of
a redemption request in proper form, including all share
certificates, assignments, signature guarantees and other
documentation as may be required by Investor Services. The
amount received upon redemption may be more or less than the
shareholder's original investment. Redemptions may be
suspended under certain limited circumstances pursuant to
rules adopted by the SEC.

Wiring of redemption proceeds is a special service made
available to shareholders whenever possible. The offer of
this service, however, does not bind the Fund to meet any
redemption request by wire or in less than the seven day
period prescribed by law. Neither the Fund nor its agents
shall be liable to any shareholder or other person for a
redemption payment by wire which for any reason may not be
processed as described in this section.

Contingent Deferred Sales Charge

The Fund does not impose either a front-end sales charge or
a contingent deferred sales charge. If, however, the shares
redeemed were shares acquired by exchange from another of
the Franklin Templeton Funds which would have assessed a
contingent deferred sales charge upon redemption, such
charge will be made by the Fund, as described below. The 12-
month contingency period will be tolled (or stopped) for the
period such shares are exchanged into and held in the Fund.

In certain Franklin Templeton Funds, in order to recover
commissions paid to securities dealers on investments of $1
million or more, a contingent deferred sales charge of 1%
applies to certain redemptions made by those investors
within 12 months of the calendar month after such
investments. The charge is 1% of the lesser of the value of
the shares redeemed (exclusive of reinvested dividends and
capital gain distributions) or the total cost of such
shares, and is retained by Distributors. In determining if a
charge applies, shares not subject to a contingent deferred
sales charge are deemed to be redeemed first, in the
following order: (i) shares representing amounts
attributable to capital appreciation; (ii) shares purchased
with reinvested dividends and capital gain distributions;
and (iii) other shares held longer than 12 months; and
followed by any shares held less than 12 months, on a "first
in, first out" basis.

Requests for redemptions for a specified dollar amount,
unless otherwise specified, will result in additional shares
being redeemed to cover any applicable contingent deferred
sales charge while requests for redemption of a specific
number of shares will result in the applicable contingent
deferred sales charge being deducted from the total dollar
amount redeemed.

Other Programs and Privileges
Available to Fund Shareholders

Certain of the programs and privileges described in this
section may not be available directly from the Fund to
shareholders whose shares are held, of record, by a
financial institution or in a "street name" account, or
networked account through National Securities Clearing
Corporation ("NSCC") (see the section captioned "Account
Registrations" in this Prospectus).

Share Certificates

Shares for an initial investment, as well as subsequent
investments, including the reinvestment of dividends and any
capital gain distributions, are generally credited to an
account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining
shares in uncertificated form (also known as "plan balance")
minimizes the risk of loss or theft of a share certificate.
A lost, stolen or destroyed certificate cannot be replaced
without obtaining a sufficient indemnity bond. The cost of
such a bond, which is generally borne by the shareholder,
can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if
requested in writing by the shareholder or by the
shareholder's securities dealer.

Confirmations

A confirmation statement will be sent to each shareholder
monthly to reflect the daily dividends reinvested, as well
as after each transaction which affects the shareholder's
account, except a redemption effected by check. This
statement will also show the total number of Fund shares
owned by the shareholder, including the number of shares in
"plan balance" for the account of the shareholder.

Systematic Withdrawal Plan

A shareholder may establish a Systematic Withdrawal Plan and
receive regular periodic payments from the shareholder's
account, provided that the net asset value of the shares
held by the shareholder is at least $5,000. There are no
service charges for establishing or maintaining a Systematic
Withdrawal Plan. The minimum amount which the shareholder
may withdraw is $50 per transaction, although this is merely
the minimum amount allowed under the plan and should not be
mistaken for a recommended amount. The plan may be
established on a monthly, quarterly, semiannual or annual
basis.

Sufficient shares of the Fund will be liquidated (generally
on the first business day of the month in which the
distribution is scheduled) at net asset value to meet the
specified withdrawals with payments generally received by
the shareholder three to five days after the date of
liquidation. By completing the "Special Payment Instructions
for Dividends" section of the Shareholder Application
included with this Prospectus, a shareholder may direct the
selected withdrawals to another fund in the Franklin Group
of Funds or the Templeton Group, to another person, or
directly to a checking account. If the bank at which the
account is maintained is a member of the Automated Clearing
House, the payments may be made automatically by electronic
funds transfer. If this last option is requested, the
shareholder should allow at least 15 days for initial
processing. Withdrawals which may be paid in the interim
will be sent to the address of record. Liquidation of shares
may deplete the investment, and withdrawal payments cannot
be considered as actual yield or income since part of such
payments may be a return of capital. If the withdrawal
amount exceeds the total plan balance, the account will be
closed and the remaining balance will be sent to the
shareholder.

A Systematic Withdrawal Plan may be terminated on written
notice by the shareholder or the Fund, and it will terminate
automatically if all shares are liquidated or withdrawn from
the account, or upon the Fund's receipt of notification of
the death or incapacity of the shareholder. Shareholders may
change the amount (but not below the specified minimum) and
schedule of withdrawal payments, or suspend one such
payment, by giving written notice to Investor Services at
least seven business days prior to the end of the month
preceding a scheduled payment. Share certificates may not be
issued while a Systematic Withdrawal Plan is in effect.

Multiple Accounts for Fiduciaries

Special procedures have been designed for banks and other
institutions wishing to open multiple accounts in the Fund.
Further information is included in the Trust's SAI.

Rights of Accumulation

The cost or current value (whichever is higher) of the
shares in the Fund will be included in determining the sales
charge discount to which an investor may be entitled when
purchasing shares in one or more of the funds in the
Franklin Group of Funds(Registered Trademark) and the
Templeton Group of Funds which are sold with a sales charge.
Included for these aggregation purposes are (a) the mutual
funds in the Franklin Group of Funds, except Franklin
Valuemark Funds and Franklin Government Securities Trust
(the "Franklin Funds"), (b) other investment products
underwritten by Distributors or its affiliates (although
certain investments may not have the same schedule of sales
charges and/or may not be subject to reduction) and (c) the
U.S. mutual funds in the Templeton Group of Funds except
Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund
(the "Templeton Funds"). (Franklin Funds and Templeton Funds
are collectively referred to as the "Franklin Templeton
Funds.")

Purchases of Fund shares will also be included toward the
completion of a Letter of Intent with respect to any of the
funds in the Franklin Templeton Funds which are sold with a
sales charge.

To assist shareholders in obtaining additional information
regarding these programs, a list of telephone numbers is
included under "How to Get Information Regarding an
Investment in the Fund."

Institutional Accounts

There may be additional methods of purchasing, redeeming or
exchanging shares of the Fund available to institutional
accounts. For further information, contact Franklin's
Institutional Services Department at 1-800/321-8563.

Exchange Privilege

The Franklin Group of Funds(Registered Trademark) and the
Templeton Group consist of a number of investment companies
with various investment objectives and policies. The shares
of most of these investment companies are offered to the
public with a sales charge. If a shareholder's investment
objective or outlook for the securities markets changes,
Fund shares may be exchanged for shares of any of the other
investment companies in the Franklin Group of Funds or the
Templeton Group which are eligible for sale in the
shareholder's state of residence and in conformity with such
fund's stated eligibility requirements and investment
minimums. Investors should review the prospectus of the fund
they wish to exchange from and the fund they wish to
exchange into for all specific requirements or limitations
on exercising the exchange privilege, for example, minimum
holding periods or applicable sales charges. Exchanges may
be made in any of the following ways:

Exchanges By Mail

Send written instructions signed by all account owners and
accompanied by any outstanding share certificates properly
endorsed. The transaction will be effective upon receipt of
the written instructions together with any outstanding share
certificates.

Exchanges By Telephone

Shareholders, or their investment representative of record,
if any, may exchange shares of the Fund by telephone by
calling Investor Services at 1-800/632-2301 or the automated
Franklin TeleFACTS(Registered Trademark) system (day or
night) at 1-800/247-1753. If the shareholder does not wish
this privilege extended to a particular account, the Fund or
Investor Services should be notified.

The telephone exchange privilege allows a shareholder to
effect exchanges from the Fund into an identically
registered account in one of the other available funds in
the Franklin Group of Funds or the Templeton Group. The
telephone exchange privilege is available only for
uncertificated shares or those which have previously been
deposited in the shareholder's account. The Fund and
Investor Services will employ reasonable procedures to
confirm that instructions communicated by telephone are
genuine. Please refer to "Telephone Transactions -
Verification Procedures."

During periods of drastic economic or market changes, it is
possible that the telephone exchange privilege may be
difficult to implement and the TeleFACTS option may not be
available. In this event, shareholders should follow the
other exchange procedures discussed in this section,
including the procedures for processing exchanges through
securities dealers.

Exchanges Through Securities Dealers

As is the case with all purchases of the Fund's shares,
Investor Services will accept exchange orders by telephone
or by other means of electronic transmission from securities
dealers who execute a dealer or similar agreement with
Distributors. See also "Exchanges By Telephone" above. Such
a dealer-ordered exchange will be effective only for
uncertificated shares on deposit in the shareholder's
account or for which certificates have previously been
deposited. A securities dealer may charge a fee for handling
an exchange.

Additional Information Regarding Exchanges

Shares of the Fund acquired other than pursuant to the
exchange privilege or the reinvestment of dividends with
respect to such shares, may be exchanged at the offering
price of one of the other funds in the Franklin Group of
Funds or the Templeton Group. Such offering price includes
the applicable sales charge of the fund into which the
shares are being exchanged. Exchanges will be effected at
the respective net asset values or offering prices of the
funds involved at the close of business on the day on which
the request is received in proper form.

There are differences among the many funds in the Franklin
Group of Funds and the Templeton Group. Before making an
exchange, a shareholder should obtain and review a current
prospectus of the fund into which the shareholder wishes to
transfer.

The exchange privilege may be modified or discontinued by
the Fund at any time upon 60 days' written notice to
shareholders.

The Fund currently does not accept investments from Timing
Accounts.

Telephone Transactions

Shareholders of the Fund and their investment representative
of record, if any, may be able to execute various
transactions by calling Investor Services at 1-800/632-2301.

All shareholders will be able to: (i) effect a change in
address, (ii) change a dividend option, (iii) transfer Fund
shares in one account to another identically registered
account in the Fund, and (iv) exchange Fund shares as
described in this Prospectus by telephone. In addition,
shareholders who complete and file an Agreement as described
under "How to Redeem Shares of the Fund - By Telephone" will
be able to redeem shares of the Fund.

Verification Procedures

The Fund and Investor Services will employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine. These will include: recording all
telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or
account information requested by the telephone service agent
at the time of the call for the purpose of establishing the
caller's identification, and sending a confirmation
statement on redemptions to the address of record each time
account activity is initiated by telephone. So long as the
Fund and Investor Services follow instructions communicated
by telephone which were reasonably believed to be genuine at
the time of their receipt, neither they nor their affiliates
will be liable for any loss to the shareholder caused by an
unauthorized transaction. The Fund and Investor Services may
be liable for any losses due to unauthorized or fraudulent
instructions only if such reasonable procedures are not
followed. Shareholders are, of course, under no obligation
to apply for or accept telephone transaction privileges. In
any instance where the Fund or Investor Services is not
reasonably satisfied that instructions received by telephone
are genuine, the requested transaction will not be executed,
and neither the Fund nor Investor Services will be liable
for any losses which may occur because of a delay in
implementing a transaction.

General

During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be
difficult to execute because of heavy telephone volume. In
such situations, shareholders may wish to contact their
investment representative for assistance, or to send written
instructions to the Fund as detailed elsewhere in this
Prospectus.

Neither the Fund nor Investor Services will be liable for
any losses resulting from the inability of a shareholder to
execute a telephone transaction.

The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written
notice to shareholders.

Valuation of Fund Shares

The net asset value of the shares of the Fund is determined
by the Fund at 3:00 p.m. Pacific time each day that the
Exchange is open for business. The net asset value per share
is calculated by adding the value of all portfolio holdings
and other assets, deducting the Fund's liabilities, and
dividing the result by the number of Fund shares
outstanding.

The valuation of the Fund's portfolio securities is based
upon their amortized cost value, which does not take into
account unrealized capital gain or loss. This involves
valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. The Fund's use
of amortized cost which facilitates the maintenance of the
Fund's per share net asset value of $1.00 is permitted by
Rule 2a-7. Further information is included under
"Determination of Net Asset Value" in the SAI.

How to Get Information
Regarding an Investment in the Fund

Any questions or communications regarding a shareholder's
account should be directed to Investor Services at the
address shown on the back cover of this Prospectus.

From a touch-tone phone, shareholders may access an
automated system (day or night) which offers the following
features. By calling the Franklin TeleFACTS(Registered
Trademark) system at 1-800/247-1753, shareholders may obtain
current price, yield or other performance information
specific to a Franklin fund; process an exchange into an
identically registered Franklin account; obtain account
information and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit
slips. Share prices and account information specific to a
Templeton fund may also be accessed on TeleFACTS by Franklin
shareholders.  Information about the Fund may be accessed by
entering Fund Code 31 followed by the # sign, when requested
to do so by the automated operator. The system's automated
operator will prompt the caller with easy to follow step-by-
step instructions from the main menu. Other features may be
added in the future.

To assist shareholders and securities dealers wishing to
speak directly with a representative, the following is a
list of the various Franklin departments, telephone numbers
and hours of operation to call. The same numbers may be used
when calling from a rotary phone:

                                         Hours of Operation
                                         (Pacific Time)
Department Name       Telephone No.      (Monday through Friday)
                                         
Shareholder Services  1-800/632-2301     6:00 a.m. to 5:00 p.m.
Dealer Services       1-800/524-4040     6:00 a.m. to 5:00 p.m.
Fund Information      1-800/DIAL BEN     6:00 a.m. to 8:00 p.m.
                                         8:30 a.m. to 5:00 p.m.
                                         (Saturday)
Retirement Plans      1-800/527-2020     6:00 a.m. to 5:00 p.m.
TDD (hearing          1-800/851-0637     6:00 a.m. to 5:00 p.m.
impaired)

In order to ensure that the highest quality of service is
being provided, telephone calls placed to or by
representatives in Franklin's service departments may be
accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.

Performance

Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's
performance, including quotations of its current, effective,
taxable equivalent, and taxable equivalent effective yields.

Current yield, as prescribed by the SEC, is an annualized
percentage rate which reflects the change in value of a
hypothetical account based on the income received from the
Fund during a seven-day period. It is computed by
determining the net change, excluding capital changes, in
the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period. A
hypothetical charge reflecting deductions from shareholder
accounts for management fees or shareholder services fees,
for example, is subtracted from the value of the account at
the end of the period, and the difference is divided by the
value of the account at the beginning of the base period to
obtain the base period return. The result is then
annualized. Effective yield is computed in the same manner
except that the annualization of the return for the seven-
day period reflects the results of compounding (that is, the
effect of reinvesting dividends paid on both the original
share and those acquired from the reinvestment of such
dividends). Tax equivalent yield demonstrates the yield from
a taxable investment necessary to produce an after-tax yield
equivalent to that of a fund which invests in tax-exempt
obligations. It is computed by dividing the tax-exempt
portion of a fund's yield (calculated as indicated) by one
minus a stated income tax rate and adding the product to the
taxable portion (if any) of the fund's yield.

Tax equivalent effective yield demonstrates the effective
yield from a taxable investment necessary to produce an
after-tax effective yield equivalent to that of a fund which
invests in tax-exempt obligations. It is computed in the
same manner as is a fund's tax equivalent yield, except that
it is based on the tax exempt portion of a fund's effective,
rather than its current, yield. The figure is calculated by
dividing the tax-exempt portion of a fund's effective yield
by one minus a stated income tax rate and adding the product
to the taxable portion (if any) of a fund's effective yield.

In each case, performance figures are based upon past
performance and will reflect all recurring charges against
Fund income. Such quotations will reflect the value of any
additional shares purchased with dividends from the original
share and any dividends declared on both the original share
and such additional shares. The investment results of the
Fund, like all other investment companies, will fluctuate
over time; thus, performance figures should not be
considered to represent what an investment may earn in the
future or what the Fund's performance may be in any future
period.

General Information

Reports to Shareholders

The Fund's fiscal year ends December 31. Annual Reports
containing audited financial statements of the Trust,
including the auditor's report, and Semi-Annual Reports
containing unaudited financial statements are automatically
sent to shareholders. Copies may be obtained by investors or
shareholders, without charge, upon request to the Trust at
the telephone number or address set forth on the cover page
of this Prospectus.

Additional information on Fund performance is included in
the Trust's Annual Report to Shareholders and the SAI.

Organization

The Trust was organized as a Massachusetts business trust on
July 17, 1986. The Agreement and Declaration of Trust
permits the trustees to issue an unlimited number of full
and fractional shares of beneficial interest without par
value, which may be issued in any number of series or
classes thereof. Shares issued will be fully paid and non-
assessable and will have no preemptive, conversion, or
sinking rights. Shares of each series have equal and
exclusive rights as to dividends and distributions declared
by such series and the net assets of such series upon
liquidation or dissolution. The Board of Trustees may, from
time to time, issue other series or funds, the assets and
liabilities of which will likewise be separate and distinct
from any other fund.

Voting Rights

Shares of each series have equal rights as to voting and
vote separately as to issues affecting that series or the
Trust unless otherwise permitted by the 1940 Act. Shares of
the Fund have noncumulative voting rights which means that
in all elections of trustees, the holders of more than 50%
of the shares voting can elect 100% of the trustees if they
choose to do so and, in such event, the holders of the
remaining shares voting will not be able to elect any person
or persons to the Board of Trustees.

The Trust does not intend to hold annual shareholders'
meetings. The Trust may, however, hold a special meeting for
such purposes as changing fundamental investment
restrictions, approving a new management agreement or any
other matters which are required to be acted on by
shareholders under the 1940 Act. A meeting may also be
called by a majority of the Board of Trustees or by
shareholders holding at least ten percent of the shares
entitled to vote at the meeting. Shareholders may receive
assistance in communicating with other shareholders in
connection with the election or removal of trustees, such as
that provided in Section 16(c) of the 1940 Act.

Redemptions by the Fund

The Fund reserves the right to redeem, at net asset value,
shares of any shareholder whose account has a value of less
than one-half of the required minimum investment, but only
where the value of such account has been reduced by the
shareholder's prior voluntary redemption of shares and has
been inactive (except for the reinvestment of distributions)
for a period of at least six months, provided advance notice
is given to the shareholder. More information is included in
the SAI.

Other Information

Distribution or redemption checks sent to shareholders do
not earn interest or any other income during the time such
checks remain uncashed and neither the Fund nor its
affiliates will be liable for any loss to the shareholder
caused by the shareholder's failure to cash such check(s).

"Cash" payments to or from the Fund may be made by check,
draft or wire. The Fund has no facility to receive, or pay
out, cash in the form of currency.

Shares of the Fund may or may not constitute a legal
investment for investors whose investment authority is
restricted by applicable law or regulation. SUCH INVESTORS
SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER
AND TO WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL
INVESTMENTS FOR THEM. Municipal investors considering
investment of proceeds of bond offerings into the Fund
should consult with expert counsel to determine the effect,
if any, of various payments made by the Fund or its
investment manager on arbitrage rebate calculations.

Account Registrations

An account registration should reflect the investor's
intentions as to ownership.

Accounts should not be registered in the name of a minor,
either as sole or co-owner of the account. Transfer or
redemption for such an account may require court action to
obtain release of the funds until the minor reaches the
legal age of majority. The account should be registered in
the name of one "Adult" as custodian for the benefit of the
"Minor" under the Uniform Transfer or Gifts to Minors Act.

A trust designation such as "trustee" or "in trust for"
should only be used if the account is being established
pursuant to a legal, valid trust document. Use of such a
designation in the absence of a legal trust document may
cause difficulties and require court action for transfer or
redemption of the funds.

Shares, whether in certificate form or not, registered as
joint tenants or "Jt Ten" shall mean "as joint tenants with
rights of survivorship" and not "as tenants in common."

Except as indicated, a shareholder may transfer an account
in the Fund carried in "street" or "nominee" name by the
shareholder's securities dealer to a comparably registered
Fund account maintained by another securities dealer. Both
the delivering and receiving securities dealers must have
executed dealer or similar agreements on file with
Distributors. Unless such agreement has been executed and is
on file with Distributors, the Fund will not process the
transfer and will so inform the shareholder's delivering
securities dealer. To effect the transfer, a shareholder
should instruct the securities dealer to transfer the
account to a receiving securities dealer, and sign any
documents required by the securities dealer(s) to evidence
consent to the transfer. Under current procedures, the
account transfer may be processed by the delivering
securities dealer and the Fund after the Fund receives
authorization in proper form from the shareholder's
delivering securities dealer. In the future it may be
possible to effect such transfers electronically through the
services of the NSCC.

The Fund may conclusively accept instructions from an owner
or the owner's nominee listed in publicly available nominee
lists, regardless of whether the account was initially
registered in the name of or by the owner, the nominee, or
both. If a securities dealer or other representative is of
record on an investor's account, the investor will be deemed
to have authorized the use of electronic instructions on the
account, including, without limitation, those initiated
through the services of the NSCC, to have adopted as
instruction and signature any such electronic instructions
received by the Fund and the Shareholder Services Agent and
to have authorized them to execute the instructions without
further inquiry. At the present time, such services which
are available, or which are anticipated to be made available
in the near future, include the NSCC's "Networking,"
"Fund/SERV," and "ACATS" systems.

Any questions regarding an intended registration should be
answered by the securities dealer handling the investment,
or by calling Franklin's Fund Information Department.

Important Notice Regarding
Taxpayer IRS Certifications

Pursuant to the Code and U.S. Treasury regulations, the Fund
may be required to report to the IRS any taxable dividend,
capital gain distribution, or other reportable payment and
withhold 31% of any such payments made to individuals and
other non-exempt shareholders who have not provided a
correct taxpayer identification number ("TIN") and made
certain required certifications that appear in the
Shareholder Application. A shareholder may also be subject
to backup withholding if the IRS or a securities dealer
notifies the Fund that the TIN furnished by the shareholder
is incorrect or that the shareholder is subject to backup
withholding for previous under-reporting of interest or
dividend income.

The Fund reserves the right to (1) refuse to open an account
for any person failing to provide a TIN along with the
required certifications and (2) close an account by
redeeming its shares in full at the then-current net asset
value upon receipt of notice from the IRS that the TIN
certified as correct by the shareholder is in fact incorrect
or upon the failure of a shareholder who has completed an
"awaiting TIN" certification to provide the Fund with a
certified TIN within 60 days after opening the account.

Risk Factors in New York

Since the Fund primarily invests in New York Municipal
Securities, there are certain specific factors and
considerations concerning the issuers of these securities
which may affect the credit and market risk of the municipal
securities to be purchased by the Fund. The following
information is based primarily upon information derived from
public documents relating to securities offerings of issuers
of New York Municipal Securities, from independent municipal
credit reports and historically reliable sources, but has
not been independently verified by the Fund.

The primary purpose of investing in a portfolio of New York
Municipal Securities is the special tax treatment accorded
New York resident individual investors. Payment of interest
and preservation of principal, however, is dependent upon
the continuing ability of the New York issuers and/or
obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors
should be aware that certain substantial issuers of New York
Municipal Securities (including issuers whose obligations
may be acquired by the Fund) have experienced financial
difficulties in recent years. These difficulties have at
times jeopardized the credit standing and impaired the
borrowing abilities of other New York issuers and have
generally contributed to higher interest rates and lower
market prices for their debt obligations. A recurrence of
the financial difficulties previously experienced by such
issuers could result in defaults or declines in the market
values of their existing obligations and, possibly, in the
obligations of other issuers of New York Municipal
Securities.

Although no issuers of New York Municipal Securities were in
default with respect to the payment of their debt
obligations, to the knowledge of the investment manager as
of the date of filing of this Prospectus with the SEC, the
occurrence of any such default could adversely affect the
market values and marketability of all New York Municipal
Securities and, consequently, the net asset value of the
Fund's portfolio. Some of the significant financial
considerations relating to the Fund's investments in New
York Municipal Securities are summarized in the SAI.

Investors should consider the greater risk of the Fund's
concentration in New York Municipal Securities versus the
safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios
of New York issues with those of more diversified
portfolios, including out-of-state issues, before making an
investment decision. The Fund's investment manager believes,
however, that by maintaining the Fund's investment portfolio
in liquid, short-term, high quality investments, including
variable and floating rate demand instruments that have high
quality credit support from banks, insurance companies or
other financial institutions, the Fund is largely insulated
from the credit risks that may exist on long-term New York
Municipal Securities. The SAI contains a further description
of risks under "Appendix A - Risk Factors Affecting New York
Municipal Securities."

Franklin New York Intermediate-Term Tax-Free Income Fund
Franklin New York Tax-Free Trust
PROSPECTUS  May 1, 1995
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777  1-800/DIAL BEN

The Franklin New York Intermediate-Term Tax-Free Income Fund
(the "Fund") is one of three non-diversified series of the
Franklin New York Tax-Free Trust (the "Trust"), an open-end
management investment company. The Fund offers individual
investors, corporations and other institutions a convenient
way to invest in a professionally managed portfolio of
municipal securities, primarily issued by the state of New
York and its political subdivisions. The Fund's investment
goal is to provide investors with as high a level of income
exempt from federal income taxes and New York State and New
York City personal income taxes as is consistent with
prudent investment management and the preservation of
shareholders' capital. The Fund intends to invest primarily
in a portfolio of investment grade obligations with a dollar
weighted average portfolio maturity of more than three years
but not more than ten years. There can be no assurance that
the Fund's objective will be achieved.

This Prospectus is intended to set forth in a clear and
concise manner information about the Trust and the Fund that
a prospective investor should know before investing. After
reading the Prospectus, it should be retained for future
reference; it contains information about the purchase and
sale of shares and other items which a prospective investor
will find useful to have.

Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any bank; further, such shares
are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
Shares of the Fund involve investment risks, including the
possible loss of principal.

A Statement of Additional Information ("SAI") concerning the
Trust, dated May 1, 1995, as may be amended from time to
time, provides a further discussion of certain areas in this
Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by
reference. A copy is available without charge from the Fund
or the Fund's principal underwriter, Franklin/Templeton
Distributors, Inc. ("Distributors"), at the address or
telephone number shown above.

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 the
underwriter.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Contents                                          Page

Expense Table

Financial Highlights

About the Trust

Investment Objective and
Policies of the Fund

Management of the Fund

Distributions to Shareholders

Taxation of the Fund
and Its Shareholders

How to Buy Shares of the Fund

Other Programs and Privileges
Available to Fund Shareholders

Exchange Privilege

How to Sell Shares of the Fund

Telephone Transactions

Valuation of Fund Shares

How to Get Information Regarding
an Investment in the Fund

Performance

General Information

Account Registrations

Important Notice Regarding
Taxpayer IRS Certifications

Portfolio Operations

Risk Factors in New York

Expense Table

The purpose of this table is to assist an investor in
understanding the various costs and expenses that a
shareholder will bear directly or indirectly in connection
with an investment in the Fund. These figures are based on
aggregate operating expenses of the Fund, before fee waivers
and expense reductions, for the fiscal year ended December
31, 1994.

Shareholder Transaction Expenses

Maximum Sales Charge Imposed on  
Purchases (as a percentage of    
offering price)                  2.25%
Deferred Sales Charge            NONE*
                                 
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management Fees                  0.63%**
12b-1 Fees                       0.10%***
Other Expenses:                  
  Reports to Shareholders        0.02%
  Shareholder Servicing Costs    0.02%
  Other                          0.08%
Total Other Expenses             0.12%
Total Fund Operating Expenses    0.85%**

*Investments of $1 million or more are not subject to a
front-end sales charge; however, a contingent deferred sales
charge of 1% is imposed on certain redemptions within 12
months of the calendar month following such investments. See
"How to Sell Shares of the Fund - Contingent Deferred Sales
Charge."

**Represents the amount that would have been payable to the
investment manager, absent a fee reduction by the investment
manager. The investment manager, however, agreed in advance
to waive its management fees and to assume responsibility
for making payments to offset certain operating expenses
otherwise payable by the Fund. With this reduction, the Fund
paid no management fees and total operating expenses
represented .05% of the average net assets of the Fund. This
arrangement may be terminated by the investment manager at
any time.

***During the fiscal year ended December 31, 1994,
Distributors agreed in advance to limit the maximum amount
charged under the Fund's distribution plan to 0.05%. For the
fiscal year ending December 31, 1995, the Fund may incur the
maximum 0.10% allowed under its distribution plan. See "Plan
of Distribution." Consistent with National Association of
Securities Dealers, Inc.'s rules, it is possible that 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 charges
permitted under those same rules.

Investors should be aware that the above table is not
intended to reflect in precise detail the fees and expenses
associated with an individual's own investment in the Fund.
Rather, the table has been provided only to assist investors
in gaining a more complete understanding of fees, charges
and expenses. For a more detailed discussion of these
matters, investors should refer to the appropriate sections
of this Prospectus.

Example

As required by SEC regulations, the following example
illustrates the expenses, including the front-end sales
charge, that apply to a $1,000 investment in the Fund over
various time periods assuming (1) a 5% annual rate of return
and (2) redemption at the end of each time period.

One year        Three years      Five years      Ten years
$31             $49              $69             $125

This example is based on the aggregate annual operating
expenses, before fee waivers and expense reductions, shown
above and should not be considered a representation of past
or future expenses, which may be more or less than those
shown. The operating expenses are borne by the Fund and only
indirectly by shareholders as a result of their investment
in the Fund. (See "Management of the Fund" for a description
of the Fund's expenses.) In addition, federal regulations
require the example to assume an annual return of 5%, but
the Fund's actual return may be more or less than 5%.

Financial Highlights

Set forth below is a table containing financial highlights
for a share of the Fund outstanding throughout the period
September 21, 1992 (effective date of registration) to
December 31, 1992 and for the two fiscal years ended
December 31, 1994. The information for the period ended
December 31, 1992 and for the two fiscal years in the period
ended December 31, 1994 has been audited by Coopers &
Lybrand L.L.P., independent auditors, whose audit report
appears in the Trust's Annual Report dated December 31,
1994. See the discussion "Reports to Shareholders" under
"General Information."

<TABLE>
<CAPTION>

                                            PER SHARE OPERATING PERFORMANCE++
- ---------------------------------------------------------------------------------------------------------------------------
                NET ASSET                       NET REALIZED                    DISTRIBUTIONS      NET ASSET
   YEAR           VALUE             NET         & UNREALIZED      TOTAL FROM      FROM NET           VALUE
   ENDED        BEGINNING       INVESTMENT        GAINS ON        INVESTMENT     INVESTMENT         AT END          TOTAL
DECEMBER 31      OF YEAR          INCOME         SECURITIES       OPERATIONS       INCOME           OF YEAR        RETURN++
- ---------------------------------------------------------------------------------------------------------------------------
<S>               <C>              <C>             <C>              <C>            <C>               <C>            <C>
1992*             $10.00           $.090           $.135            $ .225         $(.015)           $10.21          2.25%
1993               10.21            .480            .536             1.016          (.546)            10.68         10.18
1994               10.68            .550           (1.104)           (.554)         (.526)             9.60         (5.42)      
</TABLE>

<TABLE>
<CAPTION>

                       RATIOS/SUPPLEMENTAL DATA                   
- ------------------------------------------------------------------------   
                NET ASSETS      RATIO OF        RATIO OF                   
   YEAR           AT END        EXPENSES       NET INCOME      PORTFOLIO   
   ENDED          OF YEAR      TO AVERAGE      TO AVERAGE      TURNOVER    
DECEMBER 31     (IN 000'S)     NET ASSETS+     NET ASSETS         RATE     
- ------------------------------------------------------------------------   
<S>              <C>                <C>          <C>             <C>       
1992*            $ 3,459            -%           4.41%**         20.80%    
1993              31,162            -            4.96            30.95     
1994              35,166            0.05         5.57           188.38
</TABLE>




*For the period September 21, 1992 (effective date of
registration) to December 31, 1992.
**Annualized
+Total return measures the change in value of an investment
over the periods indicated. It does not include the maximum
front-end sales charge, and assumes reinvestment of
dividends and capital gains, if any, at net asset value.
++During the periods indicated, the investment manager
agreed in advance to waive its management fees and to assume
responsibility for making payments to offset certain
operating expenses otherwise payable by the Fund. Had such
action not been taken, the ratio of operating expenses to
average net assets for the periods ended December 31, 1992,
1993 and 1994 would have been: 1.76%, .73% and .80%.

About the Trust

The Trust is an open-end management investment company, or
mutual fund, organized as a Massachusetts business trust in
July 1986 and registered with the SEC under the Investment
Company Act of 1940 (the "1940 Act"). The Trust currently
consists of three series, each of which issues a separate
series of the Trust's shares and maintains a totally
separate investment portfolio. This Prospectus relates only
to the Franklin New York Intermediate-Term Tax-Free Income
Fund.

Shares of the Fund may be purchased (minimum investment of
$100 initially and $25 thereafter) at the current public
offering price, which is equal to the Fund's net asset value
(see "Valuation of Fund Shares") plus a sales charge not
exceeding 2.25% of the offering price. See "How to Buy
Shares of the Fund."

Investment Objective and Policies of the Fund

The Fund seeks to provide investors with as high a level of
income exempt from federal income taxes and New York State
and New York City personal income taxes as is consistent
with prudent investment management and the preservation of
shareholders' capital. The objective is a fundamental policy
of the Fund and may not be changed without shareholder
approval. The Fund intends to invest primarily in a
portfolio of investment grade obligations with a dollar
weighted average portfolio maturity of more than three years
but not more than ten years. As with any investment, there
is no assurance that the Fund's objective will be achieved.

Under normal market conditions, the Fund attempts to invest
100% and, as a matter of fundamental policy, will invest at
least 80% of its total assets in debt obligations issued by
or on behalf of the state of New York or any state,
territory or possession of the United States, the District
of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions, the interest
on which is exempt from regular federal income tax. It is
possible, although not anticipated, that up to 20% of the
Fund's net assets could be in municipal securities subject
to the alternative minimum tax and/or in taxable
obligations.

The Fund may invest, without percentage limitations, in
securities having, at the time of purchase, one of the four
highest ratings of Moody's Investors Service ("Moody's")
(Aaa, Aa, A, Baa), Standard & Poor's Corporation ("S&P")
(AAA, AA, A, BBB), or Fitch Investors Service, Inc.
("Fitch") (AAA, AA, A, BBB), or in securities which are not
rated, provided that, in the opinion of the Fund's
investment manager, such securities are comparable in
quality to those within the four highest ratings. These are
considered to be "investment grade" securities, although
bonds rated in the fourth highest ratings level (Baa by
Moody's) are regarded as having an adequate capacity to pay
principal and interest but with greater vulnerability to
adverse economic conditions and as having some speculative
characteristics. In the event the rating of an issue held in
the Fund's portfolio is lowered by the rating services, such
change will be considered by the Fund in its evaluation of
the overall investment merits of that security but such
change will not necessarily result in an automatic sale of
the security. For a description of municipal securities
ratings, see "Appendix B - Description of Municipal
Securities Ratings" in the SAI.

In addition, under normal market conditions, the Fund will
invest at least 65% of its total assets in municipal
securities and obligations issued by or on behalf of the
state of New York and its local governments, municipalities,
authorities, agencies and political subdivisions, and those
of certain other governmental issuers, such as the
Commonwealth of Puerto Rico, which pay income exempt from
regular federal, New York State and New York City personal
income taxes ("New York Municipal Securities"). Dividends
paid by the Fund which are derived from interest on tax-
exempt obligations that are not New York Municipal
Securities will be exempt from regular federal income tax,
but will be subject to New York State and New York City
personal income taxes. It is possible, although not
anticipated, that up to 35% of the Fund's net assets could
be in municipal securities from a state other than New York.

For temporary defensive purposes only, the Fund may invest
(i) more than 20% of its assets (which could be up to 100%)
in fixed-income obligations the interest on which is subject
to regular federal income tax, and (ii) more than 35% of the
value of its net assets (which could be up to 100%) in
instruments the interest on which is exempt from regular
federal income taxes but not New York State and New York
City personal income taxes. Any such temporary taxable
investments will be limited to obligations issued or
guaranteed by the full faith and credit of the U.S.
government or commercial paper rated A-1 by S&P.

The Fund may borrow from banks for temporary or emergency
purposes and pledge up to 5% of its total assets therefore.
Although the Fund does not currently intend to do so,
consistent with procedures approved by the Board of Trustees
and subject to the following conditions, the Fund may lend
its portfolio securities to qualified securities dealers or
other institutional investors, provided that such loans do
not exceed 10% of the value of the Fund's total assets at
the time of the most recent loan.

The Fund may purchase or sell securities without regard to
the length of time the security has been held, and the
frequency of portfolio transactions (the turnover rate) will
vary from year to year, depending on market conditions. The
Fund's annual portfolio turnover rate for the fiscal years
ended December 31, 1993 and 1994 was 30.95% and 188.38%. The
higher portfolio turnover rate for the fiscal year ended
December 31, 1994 was due to a repositioning of the Fund for
defensive purposes. High portfolio turnover increases
transaction costs which may be paid by the Fund.

It is the policy of the Fund that restricted securities and
other illiquid securities (securities that cannot be
disposed of within seven days in the normal course of
business at approximately the amount at which the Fund has
valued the securities) may not constitute, at the time of
purchase, more than 10% of the value of the total net assets
of the Fund.

Municipal Securities

The term "municipal securities," as used in this Prospectus,
means obligations issued by or on behalf of the state of New
York or 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 regular 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 bond 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 obtain funding for privately
operated facilities. Further information on the maturity and
funding classifications of municipal securities is included
in the SAI.

It is possible, from time to time, that the Fund 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, industrial
development bonds, transportation bonds, or pollution
control revenue bonds. In such 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 need 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
markets and of the municipal securities market, 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,
but are subject to greater price fluctuation due to changes
in interest rates, tax laws and other general market
factors. 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 pay principal and interest obligations.

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" (including those for housing and
student loans) issued after August 7, 1986, while still tax-
exempt, constitutes a preference item for taxpayers in
determining the federal alternative minimum tax under the
Internal Revenue Code of 1986, as amended (the "Code"), and
under the income tax provisions of some states. This
interest could subject a shareholder to, or increase the
shareholder's liability under, the federal and state
alternative minimum tax, depending on the shareholder's tax
situation. 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." In states with a corporate franchise tax,
distributions of the Fund may also be fully taxable to
corporate shareholders under their state franchise tax
systems. Consistent with the Fund's investment objective,
the Fund may acquire such private activity bonds if, in the
investment manager's opinion, such bonds represent the most
attractive investment opportunity then available to the
Fund. As of December 31, 1994, the Fund derived 0.01% of its
income from bonds, the interest on which constitutes a
preference item subject to the federal alternative minimum
tax for certain investors.

The Fund may purchase 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 obligations, which amount may be more or
less than the amount the Fund paid for such obligation.
Frequently, VRDNs are secured by letters of credit or other
credit support arrangements. Because of the demand feature,
the prices of VRDNs may be higher and the yields lower than
they otherwise would be for obligations without a demand
feature. The Fund will limit its purchase of municipal
securities that are floating rate and variable rate
obligations to those meeting the quality standards set forth
in this Prospectus.

The Fund may purchase and sell municipal securities on a
"when-issued" and "delayed delivery" basis. These
transactions are subject to market fluctuation, and the
value at delivery may be more or less than the purchase
price. Although the Fund will generally purchase municipal
securities on a when-issued basis with the intention of
acquiring such 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, 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 the Fund's
portfolio consistent with its investment objective and
policies and not for the purpose of investment leverage.

The Fund may also 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. For example, COPs may be
created when long-term lease revenue bonds are issued by a
governmental corporation to pay for the acquisition of
property or facilities which 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 may 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 must
contain a "nonappropriation" or "abatement" clause. A
nonappropriation clause provides that, while the
municipality will use its best efforts to make lease
payments, the municipality may terminate the lease without
penalty if the municipality's appropriating body does not
allocate the necessary funds. Local administrations, being
faced with increasingly tight budgets, therefore 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. In most cases,
however, the private sector value of the property will be
less than the amount the government lessee was paying.

While the risk of nonappropriation is inherent to COPs
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 to be of comparable quality. Criteria
considered by the rating agencies and the investment manager
in assessing such risk include the issuing municipality's
credit rating, evaluation of 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 of Trustees reviews the COPs held in the Fund's
portfolio to assure that they constitute liquid investments
based on various factors reviewed by the investment manager
and monitored by the Board of Trustees. Such factors include
(a) the credit quality of such 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
quality comparable to the rating 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 COPs, as of December 31, 1994, the Fund held 19.53% of
its net assets in COPs and other municipal leases.

The Fund may purchase and hold callable municipal bonds
which contain a provision in the indenture permitting the
issuer to redeem the bonds prior to their maturity dates at
a specified price which typically reflects a premium over
the bonds' original issue price. These bonds generally have
call protection (that is, a period of time during which the
bonds may not be called) which usually lasts for five to ten
years, after which time such 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 such 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 such bonds were redeemed.
Notwithstanding the call feature, any such investment would
still be subject to the policy whereby the Fund is required
to maintain a dollar weighted average portfolio maturity
between three and ten years.

Investment Risk Considerations

While an investment in the Fund is not without risk, certain
policies are followed in managing the Fund which may help to
reduce the investor's risk. There are two categories of
risks to which a Fund is subject: credit risk and market
risk. Credit risk is a function of the ability of an issuer
of a municipal security to maintain 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 economic and
interest rate conditions generally affecting the market as a
whole. A municipal security's maturity length also affects
its price. As with other debt instruments, the price of the
securities in which the Fund invests are likely to decrease
in times of rising interest rates. Conversely, when rates
fall, the value of the Fund's debt instruments may rise.
Price changes of securities held by the Fund have a direct
impact on the net asset value per share of the Fund. Since
the Fund primarily invests in New York Municipal Securities,
there are certain specific factors and considerations
concerning New York which may affect the credit and market
risk of the municipal securities that the Fund may purchase.
See "Risk Factors in New York" for a discussion of these
factors.

As a non-diversified investment company, the Fund is not
subject to any statutory restriction under the 1940 Act with
respect to the concentration of its investments in the
assets of one or more issuers. This concentration may
present greater risks than in the case of a diversified
company. (See the SAI for the diversification requirements
the Fund intends to meet in order to qualify as a regulated
investment company under the Code.)

The Fund is subject to a number of additional investment
restrictions, some of which may be changed only with the
approval of shareholders, which limit its activities to some
extent. For a list of these restrictions and more
information concerning the policies discussed herein, please
see the SAI.

How Shareholders Participate in the Results of the Fund's
Activities

The assets of the Fund are invested in portfolio securities.
If the securities owned by the Fund increase in value, the
value of the shares of the Fund which the shareholder owns
will increase. If the securities owned by the Fund decrease
in value, the value of the shareholder's shares will also
decline. In this way, shareholders participate in any change
in the value of the securities owned by the Fund.

In addition to the factors which affect the value of
individual securities, as described in the preceding
sections, a shareholder may anticipate that the value of
Fund shares will fluctuate with movements in the broader
bond markets as well. In particular, changes in interest
rates will affect the value of the Fund's portfolio and thus
its share price. Increased interest rates, which frequently
accompany higher inflation and/or a growing economy, are
likely to have a negative effect on the value of Fund
shares. History reflects both increases and decreases in the
prevailing rate of interest and these may reoccur
unpredictably in the future.

Management of the Fund

The Board of Trustees has the primary responsibility for the
overall management of the Trust and for electing the
officers of the Trust who are responsible for administering
its day-to-day operations.

Franklin Advisers, Inc. ("Advisers" or "Manager") serves as
the Fund's investment manager. Advisers is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Resources"), a
publicly owned holding company, the principal shareholders
of which are Charles B. Johnson and Rupert H. Johnson, Jr.,
who own approximately 20% and 16%, respectively, of
Resources' outstanding shares. Resources is engaged in
various aspects of the financial services industry through
its various subsidiaries (the "Franklin Templeton Group").
Advisers acts as investment manager or administrator to 33
U.S. registered investment companies (111 separate series)
with aggregate assets of over $74 billion, approximately $40
billion of which are in the municipal securities market.

Pursuant to a management agreement, the Manager supervises
and implements the Fund's investment activities and provides
certain administrative services and facilities which are
necessary to conduct the Fund's business.

During the fiscal year ended December 31, 1994, fees
totaling 0.63% of the average net assets of the Fund would
have accrued to Advisers. Total operating expenses,
including management fees, would have represented 0.80% of
the average net assets of the Fund. Pursuant to an agreement
by Advisers to limit its fees, the Fund paid no management
fees and paid operating expenses totaling 0.05% of the
average net assets of the Fund.

It is not anticipated that the Fund will incur a significant
amount of brokerage expenses because municipal securities
are generally traded on a "net" basis, that is, in principal
transactions without the addition or deduction of brokerage
commissions or transfer taxes. In the event that the Fund
does participate in transactions involving brokerage
commissions, it is the Manager's responsibility to select
brokers through whom such transactions will be effected. The
Manager will try to obtain the best execution on all such
transactions. If it is felt that more than one broker is
able to provide the best execution, the Manager will
consider the furnishing of quotations and of other market
services, research, statistical and other data for the
Manager and its affiliates, as well as the sale of shares of
the Fund, as factors in selecting a broker. Further
information is included under "The Trust's Policies
Regarding Brokers Used on Portfolio Transactions" in the
SAI.

Shareholder accounting and many of the clerical functions
for the Fund are performed by Franklin/Templeton Investor
Services, Inc. ("Investor Services" or "Shareholder Services
Agent"), in its capacity as transfer agent and dividend-
paying agent. Investor Services is a wholly-owned subsidiary
of Resources.

Plan of Distribution

The Fund has adopted a distribution plan pursuant to Rule
12b-1 under the 1940 Act (the "Plan"). Under the Plan, the
Fund may reimburse Distributors or others for all expenses
incurred by Distributors or others in the promotion and
distribution of the Fund's shares. Such expenses may
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 Distributors'
overhead expenses attributable to the distribution of Fund
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 on behalf of
the Fund, Distributors or its affiliates. The maximum amount
which the Fund may pay to Distributors or others for such
distribution expenses is 0.10% per annum of the average
daily net assets of the Fund, payable on a quarterly basis.
All expenses of distribution and marketing in excess of
0.10% per annum will be borne by Distributors, or others who
have incurred them, without reimbursement from the Fund. The
Plan also covers any payments to or by the Fund, Advisers,
Distributors, or other parties on behalf of the Fund,
Advisers or Distributors, to the extent such payments are
deemed to be for the financing of any activity primarily
intended to result in the sale of shares issued by the Fund
within the context of Rule 12b-1. The payments under the
Plan are included in the maximum operating expenses which
may be borne by the Fund. For more information, please see
the SAI.

Distributions to Shareholders

There are two types of distributions which the Fund may make
to its shareholders:

1. Income dividends. The Fund receives income 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 net capital
loss carryovers) may generally be made twice each year. One
distribution may be made in December to reflect any net
short-term and net long-term capital gains realized by the
Fund as of October 31 of such year. Any net short-term and
net long-term capital gains realized by the Fund during the
remainder of the fiscal year may be distributed following
the end of the 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 its distributions for operational or
other reasons.

Distribution Date

Although subject to change by the Board of Trustees without
prior notice to or approval by shareholders, the Fund's
current policy is to declare income dividends daily and pay
them monthly on or about the last business day of that
month. The amount of income dividend payments by the Fund is
dependent upon the amount of net income received by the Fund
from its portfolio holdings, is not guaranteed and is
subject to the discretion of the Board of Trustees. The Fund
does not pay "interest" or guarantee any fixed rate of
return on an investment in its shares.

Dividend Reinvestment

Unless requested otherwise, income dividends and capital
gain distributions, if any, will be automatically reinvested
in the shareholder's account in the form of additional
shares, valued at the closing net asset value (without sales
charge) on the dividend reinvestment date. Shareholders have
the right to change their election with respect to the
receipt of distributions by notifying the Fund, but any such
change will be effective only as to distributions for which
the reinvestment date is seven or more business days after
the Fund has been notified. See the SAI for more
information.

Many of the Fund's shareholders receive their distributions
in the form of additional shares. This is a convenient way
to accumulate additional shares and maintain or increase the
shareholder's earnings base. Of course, any shares so
acquired remain at market risk.

Distributions in Cash

A shareholder may elect to receive income dividends, or both
income dividends and capital gain distributions, in cash. By
completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application
included with this Prospectus, a shareholder may direct the
selected distributions to another fund in the Franklin Group
of Funds(Registered Trademark) or the Templeton Group, to
another person, or directly to a checking account. If the
bank at which the account is maintained is a member of the
Automated Clearing House, the payments may be made
automatically by electronic funds transfer. If this last
option is requested, the shareholder should allow at least
15 days for initial processing. Dividends which may be paid
in the interim will be sent to the address of record.
Additional information regarding automated fund transfers
may be obtained from Franklin's Shareholder Services
Department. Dividend and capital gain distributions are
eligible for investment in another fund in the Franklin
Group of Funds or the Templeton Group at net asset value.
See "Purchases at Net Asset Value" under "How to Buy Shares
of the Fund."

Taxation of the Fund and Its Shareholders

The following discussion reflects some of the tax
considerations that affect mutual funds and their
shareholders. Additional information on tax matters relating
to the Fund and its shareholders is included in the section
entitled "Additional Information Regarding Distributions and
Taxation" in the SAI.

Each series of the Trust is treated as a separate entity for
federal income tax purposes. The Fund intends to continue to
qualify for treatment 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 its shareholders. Such exempt-interest
dividends are derived from interest income exempt from
regular federal income tax, and are not subject to regular
federal income tax for Fund shareholders. In addition, to
the extent that exempt-interest dividends are derived from
interest on obligations of New York and its political
subdivisions, from interest on direct obligations of the
federal government, or from interest on U.S. territorial
obligations (including Puerto Rico, the U.S. Virgin Islands
or Guam), they will be exempt from New York State and New
York City personal income taxes. For corporate taxpayers
subject to the New York State franchise tax, however, 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), 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
the shareholder has elected to receive them in cash or in
additional shares.

From time to time, the Fund may purchase 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 a de minimis amount. For such
obligations purchased after April 30, 1993, a portion of the
gain (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
by the Fund of such ordinary income to its shareholders will
be subject to regular income tax in the hands of Fund
shareholders. In any fiscal year, the Fund may elect not to
distribute to its shareholders its taxable ordinary income
and, instead, to 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 a
shareholder has owned Fund shares and regardless of whether
such distributions are received in cash or in additional
shares.

Redemptions and exchanges of Fund shares are taxable events
on which a shareholder may realize a gain or loss. Any loss
incurred on the 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.

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 December 31, 1994 qualified for this
deduction and it is not anticipated that any of the current
year's dividends will so qualify.

The Fund will inform shareholders 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
them 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 interest income that is a tax preference item
under the alternative minimum tax. Shareholders who have not
held shares of the Fund for a full calendar year 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 their investment in the Fund.

Exempt-interest dividends of the Fund, although exempt from
regular federal income tax in the hands of a shareholder,
are includible in the tax base for determining the extent to
which a shareholder's social security or railroad retirement
benefits will be subject to federal income tax. Shareholders
are required to disclose the receipt of tax-exempt interest
on their federal income tax returns.

Interest on indebtedness incurred (directly or indirectly)
by shareholders to purchase or carry Fund shares will not be
deductible for federal income tax purposes.

The foregoing description relates solely to federal income
tax law and to New York State and New York City personal
income tax treatment to the extent indicated. Shareholders
should consult their tax advisors with respect to the
applicability of other state and local income tax laws to
distributions and redemption proceeds received from the
Fund. Corporate, individual and trust shareholders should
contact their tax advisors to determine the impact of Fund
dividends and capital gain distributions under the
alternative minimum tax that may be applicable to a
shareholder's particular tax situation.

Shareholders who are not U.S. persons for purposes of
federal income taxation should consult with their financial
or tax advisors regarding the applicability of U.S.
withholding or other taxes on distributions received by them
from the Fund and the application of foreign tax laws to
these distributions.

How to Buy Shares of the Fund

Shares of the Fund are continuously offered through
securities dealers which execute an agreement with
Distributors, the principal underwriter of the Fund's
shares. The use of the term "securities dealer" shall
include other financial institutions which, pursuant to an
agreement with Distributors (directly or through
affiliates), handle customer orders and accounts with the
Fund. Such reference, however, is for convenience only and
does not indicate a legal conclusion of capacity. The
minimum initial investment is $100 and subsequent
investments must be $25 or more. These minimums may be
waived when the shares are purchased through plans
established at Franklin. The Fund and Distributors reserve
the right to refuse any order for the purchase of shares.
The Fund currently does not permit investment by market
timing or allocation services ("Timing Accounts"), which
generally include accounts administered so as to redeem or
purchase shares based upon certain predetermined market
indicators.

Purchase Price of Fund Shares

Shares of the Fund are offered at the public offering price,
which is the net asset value per share plus a sales charge,
next computed (1) after the shareholder's securities dealer
receives the order which is promptly transmitted to the Fund
or (2) after receipt of an order by mail from the
shareholder directly in proper form (which generally means a
completed Shareholder Application accompanied by a
negotiable check). The sales charge is a variable percentage
of the offering price depending upon the amount of the sale.
The offering price will be calculated to two decimal places
using standard rounding criteria. A description of the
method of calculating net asset value per share is included
under the caption "Valuation of Fund Shares."

Set forth below is a table of total sales charges or
underwriting commissions and dealer concessions.

                         Total Sales Charge
Size of                                        Dealer Concession
Transaction   As a Percentage  As a Percentage As a Percentage of
at Offering   of Offering      of Net Amount   Offering
Price         Price            Invested        Price*,***
                                               
Less than     2.25%            2.30            2.00%
$100,000
$100,000 but  1.75%            1.78            1.50%
less than
250,000
$250,000 but  1.25%            1.26            1.00%
less than
500,000
$500,000 but  1.00%            1.01            0.85%
less than
1,000,000
$1,000,000    none             none            (see below)**
or more

*Financial institutions or their affiliated brokers may
receive an agency transaction fee in the percentages set
forth above.
**The following commissions will be paid by Distributors,
out of its own resources, to securities dealers who initiate
and are responsible for purchases of $1 million or more:
0.75% on sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million, plus
0.50% on sales of $3 million but less than $50 million, plus
0.25% on sales of $50 million but less than $100 million,
plus 0.15% on sales of $100 million or more. Dealer
concession breakpoints are reset every 12 months for
purposes of additional purchases.
***At the discretion of Distributors, all sales charges may
at times be allowed to the securities dealer. If 90% or more
of the sales commission is allowed, such securities dealer
may be deemed an underwriter as that term is defined in the
Securities Act of 1933, as amended.

No front-end sales charge applies on investments of $1
million or more, but a contingent deferred sales charge of
1% is imposed on certain redemptions of all or a portion of
an investment of $1 million or more within 12 months of the
calendar month following such investment. See "How to Sell
Shares of the Fund - Contingent Deferred Sales Charge."

The size of a transaction which determines the applicable
sales charge on the purchase of Fund shares is determined by
adding the amount of the shareholder's current purchase plus
the cost or current value (whichever is higher) of a
shareholder's existing investment in one or more of the
funds in the Franklin Group of Funds(Registered Trademark)
and the Templeton Group of Funds. Included for these
aggregation purposes are (a) the mutual funds in the
Franklin Group of Funds except Franklin Valuemark Funds and
Franklin Government Securities Trust (the "Franklin Funds"),
(b) other investment products underwritten by Distributors
or its affiliates (although certain investments may not have
the same schedule of sales charges and/or may not be subject
to reduction)  and (c) the U.S. mutual funds in the
Templeton Group of Funds except Templeton Capital
Accumulator Fund, Inc., Templeton Variable Annuity Fund, and
Templeton Variable Products Series Fund (the "Templeton
Funds").  (Franklin Funds and Templeton Funds are
collectively referred to as the "Franklin Templeton Funds.")
Sales charge reductions based upon aggregate holdings of
(a), (b) and (c) above ("Franklin Templeton Investments")
may be effective only after notification to Distributors
that the investment qualifies for a discount.

Distributors, or one of its affiliates, may make payments,
out of its own resources, of up to 1% of the amount
purchased to securities dealers who initiate and are
responsible for purchases made at net asset value by certain
trust companies and trust departments of banks. See
"Description of Special Net Asset Value Purchases" and the
SAI.

Distributors or one of its affiliates, out of its own
resources, may also provide additional compensation to
dealers in connection with sales of shares of the Fund and
other funds in the Franklin Templeton Funds. Compensation
may include financial assistance to securities dealers in
connection with conferences, sales or training programs for
their employees, seminars for the public, advertising, sales
campaigns and/or shareholder services and programs regarding
the Franklin Templeton Funds and other dealer-sponsored
programs or events. In some instances, this compensation may
be made available only to certain securities dealers whose
representatives have sold or are expected to sell
significant amounts of shares of the Franklin Templeton
Funds. Compensation may include payment for travel expenses,
including lodging, incurred in connection with trips taken
by invited registered representatives and members of their
families to locations within or outside of the United States
for meetings or seminars of a business nature. Dealers may
not use sales of the Fund's shares to qualify for this
compensation to the extent such may be prohibited by the
laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the
aforementioned additional compensation is paid for by the
Fund or its shareholders.

Certain officers and trustees of the Trust are also
affiliated with Distributors. A detailed description is
included in the SAI.

Quantity Discounts in Sales Charges

Shares may be purchased under a variety of plans which
provide for a reduced sales charge. To be certain to obtain
the reduction of the sales charge, the investor or the
securities dealer should notify Distributors at the time of
each purchase of shares which qualifies for the reduction.
In determining whether a purchase qualifies for any of the
discounts, investments in any Franklin Templeton Investments
may be combined with those of the investor's spouse and
children under the age of 21. In addition, the aggregate
investments of a trustee or other fiduciary account (for an
account under exclusive investment authority) may be
considered in determining whether a reduced sales charge is
available, even though there may be a number of
beneficiaries of the account.

In addition, an investment in the Fund may qualify for a
reduction in the sales charge under the following programs:

1. Rights of Accumulation. The cost or current value
(whichever is higher) of existing investments in the
Franklin Templeton Investments may be combined with the
amount of the current purchase in determining the sales
charge to be paid.

2. Letter of Intent. An investor may immediately qualify for
a reduced sales charge on a purchase of shares of the Fund
by completing the Letter of Intent section of the
Shareholder Application (the "Letter of Intent" or
"Letter"). By completing the Letter, the investor expresses
an intention to invest, during the next 13 months, a
specified amount which, if made at one time, would qualify
for a reduced sales charge, grants to Distributors a
security interest in the reserved shares and irrevocably
appoints Distributors as attorney-in-fact with full power of
substitution to surrender for redemption any or all shares
for the purpose of paying any additional sales charge due.
Purchases under the Letter will conform with the
requirements of Rule 22d-1 under the 1940 Act. The investor
or the investor's securities dealer must inform Investor
Services or Distributors that this Letter is in effect each
time a purchase is made.

An investor acknowledges and agrees to the following
provisions by completing the Letter of Intent section of the
Shareholder Application: Five percent (5%) of the amount of
the total intended purchase will be reserved in shares of
the Fund, registered in the investor's name, to assure that
the full applicable sales charge will be paid if the
intended purchase is not completed. The reserved shares will
be included in the total shares owned as reflected on
periodic statements and income and capital gain
distributions on the reserved shares will be paid as
directed by the investor. The reserved shares will not be
available for disposal by the investor until the Letter of
Intent has been completed or the higher sales charge paid.
For more information, see "Additional Information Regarding
Trust Shares" in the SAI.

Group Purchases

An individual who is a member of a qualified group may also
purchase shares of the Fund at the reduced sales charge
applicable to the group as a whole. The sales charge is
based upon the aggregate dollar value of shares previously
purchased and still owned by the group, plus the amount of
the current purchase. For example, if members of the group
had previously invested and still held $80,000 of Fund
shares and now were investing $25,000, the sales charge
would be 1.75%. Information concerning the current sales
charge applicable to a group may be obtained by contacting
Distributors.

A "qualified group" is one which (i) has been in existence
for more than six months, (ii) has a purpose other than
acquiring Fund shares at a discount and (iii) satisfies
uniform criteria which enable Distributors to realize
economies of scale in its costs of distributing shares. A
qualified group must have more than 10 members, be available
to arrange for group meetings between representatives of the
Fund or Distributors and the members, agree to include sales
and other materials related to the Fund in its publications
and mailings to members at reduced or no cost to
Distributors, and seek to arrange for payroll deduction or
other bulk transmission of investments to the Fund.

If an investor selects a payroll deduction plan, subsequent
investments will be automatic and will continue until such
time as the investor notifies the Fund and the investor's
employer to discontinue further investments. Due to the
varying procedures used to prepare, process and forward the
payroll deduction information to the Fund, there may be a
delay between the time of the payroll deduction and the time
the money reaches the Fund. The investment in the Fund will
be made at the offering price per share determined on the
day that both the check and payroll deduction data are
received in required form by the Fund.

Purchases at Net Asset Value

Shares of the Fund may be purchased without the imposition
of either a front-end sales charge ("net asset value") or
contingent deferred sales charge by (1) officers, directors,
trustees and full-time employees of the Trust, any of the
Franklin Templeton Funds, or of the Franklin Templeton
Group, and by their spouses and family members, including
subsequent payments made by such parties after cessation of
employment; (2) companies exchanging shares or selling
assets pursuant to a merger, acquisition or exchange offer;
(3) registered securities dealers and their affiliates, for
their investment account only; and (4) registered personnel
and employees of securities dealers and by their spouses and
family members, in accordance with the internal policies and
procedures of the employing securities dealer.

Shares of the Fund may be purchased at net asset value by
persons who have redeemed, within the previous 120 days,
their shares of the Fund or another of the Franklin
Templeton Funds which were purchased with a front-end sales
charge or assessed a contingent deferred sales charge on
redemption. An investor may reinvest an amount not exceeding
the redemption proceeds. While credit will be given for any
contingent deferred sales charge paid on the shares redeemed
and subsequently repurchased, a new contingency period will
begin. Shares of the Fund redeemed in connection with an
exchange into another fund (see "Exchange Privilege") are
not considered "redeemed" for this privilege. In order to
exercise this privilege, a written order for the purchase of
shares of the Fund must be received by the Fund or the
Fund's Shareholder Services Agent within 120 days after the
redemption. The 120 days, however, do not begin to run on
redemption proceeds placed immediately after redemption in a
Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset
value may also be handled by a securities dealer or other
financial institution, who may charge the shareholder a fee
for this service. The redemption is a taxable transaction
but reinvestment without a sales charge may affect the
amount of gain or loss recognized and the tax basis of the
shares reinvested. If there has been a loss on the
redemption, the loss may be disallowed if a reinvestment in
the same fund is made within a 30-day period. Information
regarding the possible tax consequences of such a
reinvestment is included in the tax section of this
Prospectus and the SAI.

Dividends and capital gains received in cash by the
shareholder may also be used to purchase shares of the Fund
or another of the Franklin Templeton Funds at net asset
value and without the imposition of a contingent deferred
sales charge within 120 days of the payment date of such
distribution. To exercise this privilege, a written request
to reinvest the distribution must accompany the purchase
order. Additional information may be obtained from
Shareholder Services at 1-800/632-2301. See "Distributions
in Cash " under "Distributions to Shareholders."

Shares of the Fund may be purchased at net asset value and
without the imposition of a contingent deferred sales charge
by investors who have, within the past 60 days, redeemed an
investment in a mutual fund which is not part of the
Franklin Templeton Funds, which charged the investor a
contingent deferred sales charge upon redemption and which
has an investment objective similar to that of the Fund.

Shares of the Fund may be purchased at net asset value and
without the imposition of a contingent deferred sales charge
by broker-dealers who have entered into a supplemental
agreement with Distributors, or by registered investment
advisers affiliated with such broker-dealers, on behalf of
their clients who are participating in a comprehensive fee
program (sometimes known as a wrap fee program).

Shares of the Fund may also be purchased at net asset value
and without the imposition of a contingent deferred sales
charge by any state, county, or city, or any
instrumentality, department, authority or agency thereof
which has determined that the Fund is a legally permissible
investment and which is prohibited by applicable investment
laws from paying a sales charge or commission in connection
with the purchase of shares of any registered management
investment company ("an eligible governmental authority").
SUCH INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO
DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF THE FUND
CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal investors
considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the
effect, if any, of various payments made by the Fund or its
investment manager on arbitrage rebate calculations. If an
investment by an eligible governmental authority at net
asset value is made through a securities dealer who has
executed a dealer agreement with Distributors, Distributors
or one of its affiliates may make a payment, out of its own
resources, to such securities dealer in an amount not to
exceed 0.25% of the amount invested. Contact Franklin's
Institutional Sales Department for additional information.

Description of Special Net Asset Value Purchases

Shares of the Fund may be purchased at net asset value and
without the imposition of a contingent deferred sales charge
by trust companies and bank trust departments for funds over
which they exercise exclusive discretionary investment
authority and which are held in a fiduciary, agency,
advisory, custodial or similar capacity. Such purchases are
subject to minimum requirements with respect to amount of
purchase, which may be established by Distributors.
Currently, those criteria require that the amount invested
or to be invested during the subsequent 13-month period in
the Fund or any of the Franklin Templeton Investments must
total at least $1,000,000. Orders for such accounts will be
accepted 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 such order.

Refer to the SAI for further information.

General

Securities laws of states in which the Fund's shares are
offered for sale may differ from the interpretations of
federal law, and banks and financial institutions selling
Fund shares may be required to register as dealers pursuant
to state law.

Other Programs and Privileges
Available to Fund Shareholders

Certain of the programs and privileges described in this
section may not be available directly from the Fund to
shareholders whose shares are held, of record, by a
financial institution or in a "street name" account or
networked account through the National Securities Clearing
Corporation ("NSCC") (see the section captioned "Account
Registrations" in this Prospectus).

Share Certificates

Shares for an initial investment, as well as subsequent
investments, including the reinvestment of dividends and
capital gain distributions, are generally credited to an
account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining
shares in uncertificated form (also known as "plan balance")
minimizes the risk of loss or theft of a share certificate.
A lost, stolen or destroyed certificate cannot be replaced
without obtaining a sufficient indemnity bond. The cost of
such a bond, which is generally borne by the shareholder,
can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if
requested in writing by the shareholder or by the securities
dealer.

Confirmations

A confirmation statement will be sent to each shareholder
quarterly to reflect the dividends reinvested during that
period and after each other transaction which affects the
shareholder's account. This statement will also show the
total number of shares owned by the shareholder, including
the number of shares in "plan balance" for the account of
the shareholder.

Automatic Investment Plan

Under the Automatic Investment Plan, a shareholder may be
able to arrange to make additional purchases of shares
automatically on a monthly basis by electronic funds
transfer from a checking account, if the bank which
maintains the account is a member of the Automated Clearing
House, or by preauthorized checks drawn on the shareholder's
bank account. A shareholder may, of course, terminate the
program at any time. The Automatic Investment Plan
Application included with this Prospectus contains the
requirements applicable to this program. In addition,
shareholders may obtain more information concerning this
program from their securities dealer or from Distributors.

The market value of the Fund's shares is subject to
fluctuation. Before undertaking any plan for systematic
investment, the investor should keep in mind that such a
program does not assure a profit or protect against a loss.

Systematic Withdrawal Plan

A shareholder may establish a Systematic Withdrawal Plan and
receive regular periodic payments from the account, provided
that the net asset value of the shares held by the
shareholder is at least $5,000. There are no service charges
for establishing or maintaining a Systematic Withdrawal
Plan. The minimum amount which the shareholder may withdraw
is $50 per withdrawal transaction, although this is merely
the minimum amount allowed under the plan and should not be
mistaken for a recommended amount. The plan may be
established on a monthly, quarterly, semiannual or annual
basis. If the shareholder establishes a plan, any capital
gain distributions and income dividends paid by the Fund
will be reinvested for the shareholder's account in
additional shares at net asset value. Payments will then be
made from the liquidation of shares at net asset value on
the day of the transaction (which is generally the first
business day of the month in which the payment is scheduled)
with payment generally received by the shareholder three to
five days after the date of liquidation. By completing the
"Special Payment Instructions for Distributions" section of
the Shareholder Application included with this Prospectus, a
shareholder may direct the selected withdrawals to another
of the Franklin Templeton Funds, to another person, or
directly to a checking account. If the bank at which the
account is maintained is a member of the Automated Clearing
House, the payments may be made automatically by electronic
funds transfer. If this last option is requested, the
shareholder should allow at least 15 days for initial
processing. Withdrawals which may be paid in the interim
will be sent to the address of record. Liquidation of shares
may reduce or possibly exhaust the shares in the
shareholder's account, to the extent withdrawals exceed
shares earned through dividends and distributions,
particularly in the event of a market decline. If the
withdrawal amount exceeds the total plan balance, the
account will be closed and the remaining balance will be
sent to the shareholder. As with other redemptions, a
liquidation to make a withdrawal payment is a sale for
federal income tax purposes. Because the amount withdrawn
under the plan may be more than the shareholder's actual
yield or income, part of the payment may be a return of the
shareholder's investment.

The maintenance of a Systematic Withdrawal Plan concurrently
with purchases of additional shares of the Fund would be
disadvantageous because of the sales charge on the
additional purchases. The shareholder should ordinarily not
make additional investments of less than $5,000 or three
times the annual withdrawals under the plan during the time
such a plan is in effect. A Systematic Withdrawal Plan may
be terminated on written notice by the shareholder or the
Fund, and it will terminate automatically if all shares are
liquidated or withdrawn from the account, or upon the Fund's
receipt of notification of the death or incapacity of the
shareholder. Shareholders may change the amount (but not
below the specified minimum) and schedule of withdrawal
payments, or suspend one such payment, by giving written
notice to Investor Services at least seven business days
prior to the end of the month preceding a scheduled payment.
Share certificates may not be issued while a Systematic
Withdrawal Plan is in effect.

Institutional Accounts

There may be additional methods of purchasing, redeeming or
exchanging shares of the Fund available to institutional
accounts. For further information, contact Franklin's
Institutional Services Department at 1-800/321-8563.

Exchange Privilege

The Franklin Templeton Funds consist of a number of mutual
funds with various investment objectives and policies. The
shares of most of these mutual funds are offered to the
public with a sales charge. If a shareholder's investment
objective or outlook for the securities markets changes,
Fund shares may be exchanged for shares of other Franklin
Templeton Funds which are eligible for sale in the
shareholder's state of residence and in conformity with such
fund's stated eligibility requirements and investment
minimums. Investors should review the prospectus of the fund
they wish to exchange from and the fund they wish to
exchange into for all specific requirements or limitations
on exercising the exchange privilege, for example, minimum
holding periods or applicable sales charges. Exchanges may
be made in any of the following ways:

Exchanges By Mail

Send written instructions signed by all account owners and
accompanied by any outstanding share certificates properly
endorsed. The transaction will be effective upon receipt of
the written instructions together with any outstanding share
certificates.

Exchanges By Telephone

Shareholders, or their investment representative of record,
if any, may exchange shares of the Fund by telephone by
calling Investor Services at 1-800/632-2301 or the automated
Franklin TeleFACTS(Registered Trademark) system (day or
night) at 1-800/247-1753. If the shareholder does not wish
this privilege extended to a particular account, the Fund or
Investor Services should be notified.

The telephone exchange privilege allows a shareholder to
effect exchanges from the Fund into an identically
registered account in one of the other available Franklin
Templeton Funds. The telephone exchange privilege is
available only for uncertificated shares or those which have
previously been deposited in the shareholder's account. The
Fund and Investor Services will employ reasonable procedures
to confirm that instructions communicated by telephone are
genuine. Please refer to "Telephone Transactions -
Verification Procedures."

During periods of drastic economic or market changes, it is
possible that the telephone exchange privilege may be
difficult to implement and the TeleFACTS option may not be
available. In this event, shareholders should follow the
other exchange procedures discussed in this section,
including the procedures for processing exchanges through
securities dealers.

Exchanges Through Securities Dealers

As is the case with all purchases and redemptions of the
Fund's shares, Investor Services will accept exchange orders
by telephone or by other means of electronic transmission
from securities dealers who execute a dealer or similar
agreement with Distributors. See also "Exchanges By
Telephone" above. Such a dealer-ordered exchange will be
effective only for uncertificated shares on deposit in the
shareholder's account or for which certificates have
previously been deposited. A securities dealer may charge a
fee for handling an exchange.

Additional Information Regarding Exchanges

A contingent deferred sales charge will not be imposed on
exchanges. If, however, the exchanged shares were subject to
a contingent deferred sales charge in the original fund
purchased, and shares are subsequently redeemed within the
contingency period, a contingent deferred sales charge will
be imposed. The contingency period will be tolled (or
stopped) for the period such shares are exchanged into and
held in a Franklin or Templeton money market fund. See also
"How to Sell Shares of the Fund - Contingent Deferred Sales
Charge."

Exchanges are made on the basis of the net asset values of
the funds involved, except as set forth below. Exchanges of
shares of the Fund which were purchased without a sales
charge will be charged a sales charge in accordance with the
terms of the prospectus of the fund being purchased, unless
the investment on which no sales charge was paid was
transferred in from a fund on which the investor paid a
sales charge. Exchanges of shares of the Fund which were
purchased with a lower sales charge to a fund which has a
higher sales charge will be charged the difference, unless
the shares were held in the Fund for at least six months
prior to executing the exchange. When an investor requests
the exchange of the total value of the Fund account, accrued
but unpaid income dividends and capital gain distributions
will be reinvested in the Fund at the net asset value on the
date of the exchange, and then the entire share balance will
be exchanged into the new fund in accordance with the
procedures set forth above. Because the exchange is
considered a redemption and purchase of shares, the
shareholder may realize a gain or loss for federal income
tax purposes. Backup withholding and information reporting
may also apply. Information regarding the possible tax
consequences of such an exchange is included in the tax
section in this Prospectus and in the SAI.

There are differences among the Franklin Templeton Funds.
Before making an exchange, a shareholder should obtain and
review a current prospectus of the fund into which the
shareholder wishes to transfer.

If a substantial portion of the Fund's shareholders should,
within a short period, elect to redeem their shares of the
Fund pursuant to the exchange privilege, the Fund might have
to liquidate 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
should occur, it is the general policy of the Fund to
initially invest this money in short-term, tax-exempt
municipal securities, unless it is felt that attractive
investment opportunities consistent with the Fund's
investment objective exist immediately. Subsequently, this
money will be withdrawn from such 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 exchange privilege may be modified or discontinued by
the Fund at any time upon 60 days' written notice to
shareholders.

The Fund currently will not accept investments from Timing
Accounts.

How to Sell Shares of the Fund

A shareholder may at any time liquidate shares owned and
receive from the Fund the value of the shares. Shares may be
redeemed in any of the following ways:

Redemptions By Mail

Send a written request, signed by all registered owners, to
Investor Services, at the address shown on the back cover of
this Prospectus, and any share certificates which have been
issued for the shares being redeemed, properly endorsed and
in order for transfer. The shareholder will then receive
from the Fund the value of the shares based upon the net
asset value per share next computed after the written
request in proper form is received by Investor Services.
Redemption requests received after the time at which the net
asset value is calculated, after the scheduled close of the
New York Stock Exchange (the "Exchange"), (generally 1:00
p.m. Pacific time) on each day that the Exchange is open for
business will receive the price calculated on the following
business day. Shareholders are requested to provide a
telephone number(s) where they may be reached during
business hours, or in the evening if preferred. Investor
Services' ability to contact a shareholder promptly when
necessary will speed the processing of the redemption.

To be considered in proper form, signatures must be
guaranteed if the redemption request involves any of the
following:

(1)  the proceeds of the redemption are over $50,000;

(2)  the proceeds (in any amount) are to be paid to someone
other than the registered owner(s) of the account;

(3)  the proceeds (in any amount) are to be sent to any
address other than the shareholder's address of record,
preauthorized bank account or brokerage firm account;

(4)  share certificates, if the redemption proceeds are in
excess of $50,000; or

(5)  the Fund or Investor Services believes that a signature
guarantee would protect against potential claims based on
the transfer instructions, including, for example, when (a)
the current address of one or more joint owners of an
account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to the Fund, (c)
the Fund has been notified of an adverse claim, (d) the
instructions received by the Fund are given by an agent, not
the actual registered owner, (e) the Fund determines that
joint owners who are married to each other are separated or
may be the subject of divorce proceedings, or (f) the
authority of a representative of a corporation, partnership,
association, or other entity has not been established to the
satisfaction of the Fund.

Signatures must be guaranteed by an "eligible guarantor
institution" as defined under Rule 17Ad-15 under the
Securities Exchange Act of 1934. Generally, eligible
guarantor institutions include (1) national or state banks,
savings associations, savings and loan associations, trust
companies, savings banks, industrial loan companies and
credit unions; (2) national securities exchanges, registered
securities associations and clearing agencies; (3)
securities dealers which are members of a national
securities exchange or a clearing agency or which have
minimum net capital of $100,000; or (4) institutions that
participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature guarantee
medallion program. A notarized signature will not be
sufficient for the request to be in proper form.

Where shares to be redeemed are represented by share
certificates, the request for redemption must be accompanied
by the share certificate and a share assignment form signed
by the registered shareholders exactly as the account is
registered, with the signatures guaranteed as referenced
above. Shareholders are advised, for their own protection,
to send the share certificate and assignment form in
separate envelopes if they are being mailed in for
redemption.

Liquidation requests of corporate, partnership, trust and
custodianship accounts, and accounts under court
jurisdiction require the following documentation to be in
proper form:

Corporation - (1) Signature guaranteed letter of instruction
from the authorized officers of the corporation and (2) a
corporate resolution.

Partnership - (1) Signature guaranteed letter of instruction
from a general partner and (2) pertinent pages from the
partnership agreement identifying the general partners or a
certification for a partnership agreement.

Trust - (1) Signature guaranteed letter of instruction from
the trustees and (2) a copy of the pertinent pages of the
trust document listing the trustees or a Certification for
Trust if the trustees are not listed on the account
registration.

Custodial (other than a retirement account) - Signature
guaranteed letter of instruction from the custodian.

Accounts under court jurisdiction - Check court documents
and the applicable state law since these accounts have
varying requirements, depending upon the state of residence.

Payment for redeemed shares will be sent to the shareholder
within seven days after receipt of the request in proper
form.

Redemptions By Telephone

Shareholders who complete the Franklin Templeton Telephone
Redemption Authorization Agreement (the "Agreement"),
included with this Prospectus, may redeem shares of the Fund
by telephone. Information may be obtained by writing to the
Fund or Investor Services at the address shown on the cover
or by calling 1-800/632-2301. The Fund and Investor Services
will employ reasonable procedures to confirm that
instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described
under "Telephone Transactions - Verification Procedures."

For shareholder accounts with a completed Agreement on file,
redemptions of uncertificated shares or shares which have
previously been deposited with the Fund or Investor Services
may be made for up to $50,000 per day per Fund account.
Telephone redemption requests received before the scheduled
close of the Exchange on any business day will be processed
that same day. The redemption check will be sent within
seven days, made payable to all the registered owners on the
account, and will be sent only to the address of record.
Redemption requests by telephone will not be accepted within
30 days following an address change by telephone. In that
case, a shareholder should follow the other redemption
procedures set forth in this Prospectus. Institutional
accounts (certain corporations, bank trust departments and
government entities which qualify to purchase shares at net
asset value pursuant to the terms of this Prospectus) which
wish to execute redemptions in excess of $50,000 must
complete an Institutional Telephone Privileges Agreement
which is available from Franklin's Institutional Services
Department by telephoning 1-800/321-8563.

Redeeming Shares Through Securities Dealers

The Fund will accept redemption orders by telephone or other
means of electronic transmission from securities dealers who
have entered into a dealer or similar agreement with
Distributors. This is known as a repurchase. The only
difference between a normal redemption and a repurchase is
that if the shareholder redeems shares through a securities
dealer, the redemption price will be the net asset value
next calculated after the shareholder's securities dealer
receives the order which is promptly transmitted to the
Fund, rather than on the day the Fund receives the
shareholder's written request in proper form. These
documents, as described in the preceding section, are
required even if the shareholder's securities dealer has
placed the repurchase order. After receipt of a repurchase
order from the securities dealer, the Fund will still
require a signed letter of instruction and all other
documents set forth above. A shareholder's letter should
reference the Fund, the account number, the fact that the
repurchase was ordered by a securities dealer and the
securities dealer's name. Details of the dealer-ordered
trade, such as trade date, confirmation number, and the
amount of shares or dollars, will help speed processing of
the redemption. The seven-day period within which the
proceeds of the shareholder's redemption will be sent will
begin when the Fund receives all documents required to
complete ("settle") the repurchase in proper form. The
redemption proceeds will not earn dividends or interest
during the time between receipt of the securities dealer's
repurchase order and the date the redemption is processed
upon receipt of all documents necessary to settle the
repurchase. Thus, it is in a shareholder's best interest to
have the required documentation completed and forwarded to
the Fund as soon as possible. The shareholder's securities
dealer may charge a fee for handling the order. The SAI
contains more information on the redemption of shares.

Contingent Deferred Sales Charge

In order to recover commissions paid to securities dealers
on investments of $1 million or more, a contingent deferred
sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months of
the calendar month following their purchase. The charge is
1% of the lesser of the value of the shares redeemed
(exclusive of reinvested dividends and capital gain
distributions) or the total cost of such shares, and is
retained by Distributors. In determining if a charge
applies, shares not subject to a contingent deferred sales
charge are deemed to be redeemed first, in the following
order: (i) shares representing amounts attributable to
capital appreciation of those shares held less than 12
months; (ii) shares purchased with reinvested dividends and
capital gain distributions; and (iii) other shares held
longer than 12 months; and followed by any shares held less
than 12 months, on a "first in, first out" basis.

The contingent deferred sales charge is waived for:
exchanges; any account fees; redemptions through a
Systematic Withdrawal Plan set up prior to February 1, 1995
and for Systematic Withdrawal Plans set up thereafter,
redemptions of up to 1% monthly of an account's net asset
value (3% quarterly, 6% semiannually or 12% annually);
redemptions initiated by the Fund due to a shareholder's
account falling below the minimum specified account size;
and redemptions following the death of the shareholder or
the beneficial owner.

Requests for redemptions for a specified dollar amount,
unless otherwise specified, will result in additional shares
being redeemed to cover any applicable contingent deferred
sales charge while requests for redemption of a specific
number of shares will result in the applicable contingent
deferred sales charge being deducted from the total dollar
amount redeemed.

Additional Information Regarding Redemptions

The Fund may delay the mailing of the redemption check, or a
portion thereof, until the clearance of the check used to
purchase Fund shares, which may take up to 15 days or more.
Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these
checks will also be held pending clearance. Shares purchased
by federal funds wire are available for immediate
redemption. In addition, the right of redemption may be
suspended or the date of payment postponed if the Exchange
is closed (other than customary closing) or upon the
determination of the SEC that trading on the Exchange is
restricted or an emergency exists, or if the SEC permits it,
by order, for the protection of shareholders. Of course, the
amount received may be more or less than the amount invested
by the shareholder, depending on fluctuations in the market
value of securities owned by the Fund.

Other

For any information required about a proposed liquidation, a
shareholder may call Franklin's Shareholder Services
Department or the securities dealer may call Franklin's
Dealer Services Department.

Telephone Transactions

Shareholders of the Fund and their investment representative
of record, if any, may be able to execute various
transactions by calling Investor Services at 1-800/632-2301.

All shareholders will be able to: (i) effect a change in
address, (ii) change a dividend option, (iii) transfer Fund
shares in one account to another identically registered
account in the Fund, and (iv) exchange Fund shares as
described in this Prospectus by telephone. In addition,
shareholders who complete and file the Agreement as
described under "How to Sell Shares of the Fund -
Redemptions By Telephone" will be able to redeem shares of
the Fund.

Verification Procedures

The Fund and Investor Services will employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine. These will include: recording all
telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or
account information requested by the telephone service agent
at the time of the call for the purpose of establishing the
caller's identification, and sending a confirmation
statement on redemptions to the address of record each time
account activity is initiated by telephone. So long as the
Fund and Investor Services follow instructions communicated
by telephone which were reasonably believed to be genuine at
the time of their receipt, neither they nor their affiliates
will be liable for any loss to the shareholder caused by an
unauthorized transaction. The Fund and Investor Services may
be liable for any losses due to unauthorized or fraudulent
instructions only if such reasonable procedures are not
followed. Shareholders are, of course, under no obligation
to apply for or accept telephone transaction privileges. In
any instance where the Fund or Investor Services is not
reasonably satisfied that instructions received by telephone
are genuine, the requested transaction will not be executed,
and neither the Fund nor Investor Services will be liable
for any losses which may occur because of a delay in
implementing a transaction.

General

During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be
difficult to execute because of heavy telephone volume. In
such situations, shareholders may wish to contact their
investment representative for assistance, or to send written
instructions to the Fund as detailed elsewhere in this
Prospectus.

Neither the Fund nor Investor Services will be liable for
any losses resulting from the inability of a shareholder to
execute a telephone transaction.

The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written
notice to shareholders.

Valuation of Fund Shares

The net asset value per share of the Fund is determined as
of the scheduled close of the Exchange (generally 1:00 p.m.
Pacific time) each day that the Exchange is open for
trading. Many newspapers carry daily quotations of the prior
trading day's closing "bid" (net asset value) and "ask"
(offering price, which includes the maximum front-end sales
charge of the Fund).

The net asset value per share of the Fund is determined in
the following manner: The aggregate of all liabilities,
accrued expenses and taxes and any necessary reserves, is
deducted from the aggregate gross value of all assets, and
the difference is divided by the number of shares of the
Fund outstanding at the time. 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. Portfolio securities for which market quotations
are readily available are valued within the range of the
most recent bid and ask prices as obtained from one or more
dealers that make markets in the securities. Portfolio
securities which 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 the
Manager. 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 of Trustees. With
the approval of trustees, the Fund may utilize a pricing
service, bank or securities dealer to perform any of the
above described functions.

How to Get Information Regarding an Investment in the Fund

Any questions or communications regarding a shareholder's
account should be directed to Investor Services at the
address shown on the back cover of this Prospectus.

From a touch-tone phone, shareholders may access an
automated system (day or night) which offers the following
features. By calling the Franklin TeleFACTS(Registered
Trademark) system at 1-800/247-1753, shareholders may obtain
current price, yield or other performance information
specific to a Franklin fund; process an exchange into an
identically registered Franklin account; obtain account
information and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit
slips. Share prices and account information specific to a
Templeton fund may also be accessed on TeleFACTS by Franklin
shareholders. Information about the Fund may be accessed by
entering Fund Code 53 followed by the # sign, when requested
to do so by the automated operator. The system's automated
operator will prompt the caller with easy to follow step-by-
step instructions from the main menu. Other features may be
added in the future.

To assist shareholders and securities dealers wishing to
speak directly with a representative, the following is a
list of the various Franklin departments, telephone numbers
and hours of operation to call. The same numbers may be used
when calling from a rotary phone:
                                          
                                          Hours of Operation
                                          (Pacific Time)
Department Name        Telephone No.      (Monday through Friday)
Shareholder Services   1-800/632-2301     6:00 a.m. to 5:00 p.m.
Dealer Services        1-800/524-4040     6:00 a.m. to 5:00 p.m.
Fund Information       1-800/DIAL BEN     6:00 a.m. to 8:00 p.m.,
                                          8:30 a.m. to 5:00 p.m.
                                          (Saturday)
Retirement Plans       1-800/527-2020     6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637     6:00 a.m. to 5:00 p.m.

In order to ensure that the highest quality of service is
being provided, telephone calls placed to or by
representatives in Franklin's service departments may be
accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.

Performance

Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's
performance, including current yield, tax equivalent yield,
various expressions of total return, current distribution
rate and taxable equivalent distribution rate. They may
occasionally cite statistics to reflect the Fund's
volatility or risk.

Average annual total return figures, as prescribed by the
SEC, represent the average annual percentage change in value
of $1,000 invested at the maximum public offering price
(offering price includes sales charge) for one-, five- and
ten-year periods, or portion thereof, to the extent
applicable, through the end of the most recent calendar
quarter, assuming reinvestment of all distributions. The
Fund may also furnish total return quotations for other
periods or based on investments at various sales charge
levels or at net asset value. For such purposes, total
return equals the total of all income and capital gain paid
to shareholders, assuming reinvestment of all distributions,
plus (or minus) the change in the value of the original
investment, expressed as a percentage of the purchase price.

Current yield reflects the income per share earned by the
Fund's portfolio investments. It is calculated by dividing
the Fund's net investment income per share during a recent
30-day period by the maximum public offering price on the
last day of that period and annualizing the result. Tax
equivalent yield demonstrates the yield from a taxable
investment necessary to produce an after-tax yield
equivalent to that of a fund which invests in tax-exempt
obligations. It is computed by dividing the tax-exempt
portion of a fund's yield (calculated as indicated) by one
minus a stated income tax rate and adding the product to the
taxable portion (if any) of the fund's yield.

Current yield and tax equivalent yield which are calculated
according to a formula prescribed by the SEC (see the SAI)
are not indicative of the dividends or distributions which
were or will be paid to the Fund's shareholders. Dividends
or distributions paid to shareholders are reflected in the
current distribution rate or taxable equivalent distribution
rate, which may be quoted to shareholders. The current
distribution rate is computed by dividing the total amount
of dividends per share paid by the Fund during the past 12
months by a current maximum offering price. A taxable
equivalent distribution rate demonstrates the taxable
distribution rate necessary to produce an after tax
distribution rate equivalent to the Fund's distribution rate
(calculated as indicated above). Under certain
circumstances, such as when there has been a change in the
amount of dividend payout or a fundamental change in
investment policies, it might be appropriate to annualize
the dividends paid during the period such policies were in
effect, rather than using the dividends during the past 12
months. The current distribution rate differs from the
current yield computation because it may include
distributions to shareholders from sources other than
dividends and interest, such as short-term capital gain, and
is calculated over a different period of time.

In each case, performance figures are based upon past
performance, reflect all recurring charges against Fund
income and will assume the payment of the maximum sales
charge on the purchase of shares. When there has been a
change in the sales charge structure, the historical
performance figures will be restated to reflect the new
rate. The investment results of the Fund, like all other
investment companies, will fluctuate over time; thus,
performance figures should not be considered to represent
what an investment may earn in the future or what the Fund's
yield, tax equivalent yield, distribution rate, taxable
equivalent distribution rate or total return may be in any
future period.

General Information

Reports to Shareholders

The Fund's fiscal year ends December 31. Annual reports
containing audited financial statements of the Trust,
including the auditors' report, and semiannual reports
containing unaudited financial statements are automatically
sent to shareholders. Copies may be obtained by investors or
shareholders, without charge, upon request to the Trust at
the telephone number or address set forth on the cover page
of this Prospectus.

Additional information on Fund performance is included in
the Trust's Annual Report to Shareholders and the SAI.

Organization

The Trust was organized as a Massachusetts business trust on
July 17, 1986. The Agreement and Declaration of Trust
permits the trustees to issue an unlimited number of full
and fractional shares of beneficial interest without par
value, which may be issued in any number of series or
classes thereof. Shares issued will be fully paid and non-
assessable and will have no preemptive, conversion, or
sinking rights. Shares of each series have equal and
exclusive rights as to dividends and distributions as
declared by such series and the net assets of such series
upon liquidation or dissolution. The Board of Trustees may
from time to time issue other series of the Trust, the
assets and liabilities of which will be separate and
distinct from any other series.

Voting Rights

Shares of each series have equal rights as to voting and
vote separately as to issues affecting that series or the
Trust unless otherwise permitted by the 1940 Act. Voting
rights are noncumulative, so that in any election of
trustees the holders of more than 50% of the shares voting
can elect 100% of the trustees, if they choose to do so, and
in such event, the holders of the remaining shares voting
will not be able to elect any person or persons to the Board
of Trustees. The Trust does not intend to hold annual
shareholders' meetings. The Trust may, however, hold a
special shareholders' meeting for such purposes as changing
fundamental investment restrictions, approving a new
management agreement or any other matters which are required
to be acted on by shareholders under the 1940 Act. A meeting
may also be called by the trustees in their discretion or by
shareholders holding at least ten percent of the outstanding
shares of the Fund. Shareholders will receive assistance in
communicating with other shareholders in connection with the
election or removal of trustees, such as that provided in
Section 16(c) of the 1940 Act.

Redemptions by the Fund

The Fund reserves the right to redeem, at net asset value,
shares of any shareholder whose account has a value of less
than $50, but only where the value of such account has been
reduced by the shareholder's prior voluntary redemption of
shares and has been inactive (except for the reinvestment of
distributions) for a period of at least six months, provided
advance notice is given to the shareholder. More information
is included in the SAI.

Other Information

Distribution or redemption checks sent to shareholders do
not earn interest or any other income during the time such
checks remain uncashed and neither the Fund nor its
affiliates will be liable for any loss to the shareholder
caused by the shareholder's failure to cash such checks.

"Cash" payments to or from the Fund may be made by check,
draft or wire. The Fund has no facility to receive, or pay
out, cash in the form of currency.

Account Registrations

An account registration should reflect the investor's
intentions as to ownership. Where there are two co-owners on
the account, the account will be registered as "Owner 1" and
"Owner 2"; the "or" designation is not used except for money
market fund accounts. If co-owners wish to have the ability
to redeem or convert on the signature of only one owner, a
limited power of attorney may be used.

Accounts should not be registered in the name of a minor,
either as sole or co-owner of the account. Transfer or
redemption for such an account may require court action to
obtain release of the funds until the minor reaches the
legal age of majority. The account should be registered in
the name of one "Adult" as custodian for the benefit of the
"Minor" under the Uniform Transfer or Gifts to Minors Act.

A trust designation such as "trustee" or "in trust for"
should only be used if the account is being established
pursuant to a legal, valid trust document. Use of such a
designation in the absence of a legal trust document may
cause difficulties and require court action for transfer or
redemption of the funds.

Shares, whether in certificate form or not, registered as
joint tenants or "Jt Ten" shall mean "as joint tenants with
rights of survivorship" and not "as tenants in common."

Except as indicated, a shareholder may transfer an account
in the Fund carried in "street" or "nominee" name by the
shareholder's securities dealer to a comparably registered
Fund account maintained by another securities dealer. Both
the delivering and receiving securities dealers must have
executed dealer agreements on file with Distributors. Unless
a dealer agreement has been executed and is on file with
Distributors, the Fund will not process the transfer and
will so inform the shareholder's delivering securities
dealer. To effect the transfer, a shareholder should
instruct the securities dealer to transfer the account to a
receiving securities dealer and sign any documents required
by the securities dealers to evidence consent to the
transfer. Under current procedures, the account transfer may
be processed by the delivering securities dealer and the
Fund after the Fund receives authorization in proper form
from the shareholder's delivering securities dealer. In the
future it may be possible to effect such transfers
electronically through the services of the NSCC.

The Fund may conclusively accept instructions from an owner
or the owner's nominee listed in publicly available nominee
lists, regardless of whether the account was initially
registered in the name of or by the owner, the nominee, or
both. If a securities dealer or other representative is of
record on an investor's account, the investor will be deemed
to have authorized the use of electronic instructions on the
account, including, without limitation, those initiated
through the services of the NSCC, to have adopted as
instruction and signature any such electronic instructions
received by the Fund and the Shareholder Services Agent, and
to have authorized them to execute the instructions without
further inquiry. At the present time, such services which
are available, or which are anticipated to be made available
in the near future, include the NSCC's "Networking,"
"Fund/SERV," and "ACATS" systems.

Any questions regarding an intended registration should be
answered by the securities dealer handling the investment,
or by calling Franklin's Fund Information Department.

Important Notice Regarding
Taxpayer IRS Certifications

Pursuant to the Code and U.S. Treasury regulations, the Fund
may be required to report to the Internal Revenue Service
("IRS") any taxable dividend, capital gain distribution, or
other reportable payment (including share redemption
proceeds) and withhold 31% of any such payments made to
individuals and other non-exempt shareholders who have not
provided a correct taxpayer identification number ("TIN")
and made certain required certifications that appear in the
Shareholder Application. A shareholder may also be subject
to backup withholding if the IRS or a securities dealer
notifies the Fund that the number furnished by the
shareholder is incorrect or that the shareholder is subject
to backup withholding for previous under-reporting of
interest or dividend income.

The Fund reserves the right to (1) refuse to open an account
for any person failing to provide a TIN along with the
required certifications and (2) close an account by
redeeming its shares in full at the then-current net asset
value upon receipt of notice from the IRS that the TIN
certified as correct by the shareholder is in fact incorrect
or upon the failure of a shareholder who has completed an
"awaiting TIN" certification to provide the Fund with a
certified TIN within 60 days after opening the account.

Portfolio Operations

The following persons are primarily responsible for the day-
to-day management of the Fund's portfolio: Mr. Kenny since
1994 and Mr. Pinkham and Ms. Wong since 1992.

Thomas Kenny
Senior Vice President and Portfolio Manager
Franklin Advisers, Inc.

Mr. Kenny joined Franklin in 1986 and is the director of
Franklin's municipal bond department. He received a Bachelor
of Arts degree in Business and Economics from the University
of California at Santa Barbara and a Master of Science
degree in Finance from Golden Gate University. He is a
member of several municipal securities industry-related
committees and associations.

John Pinkham
Vice President and Portfolio Manager
Franklin Advisers, Inc.

Mr. Pinkham has a Bachelor of Science degree in Business
from Columbia University and has been in the municipal
securities industry since 1956. He is a member of the
Financial Analysts Federation. He joined Advisers in 1985.

Stella Wong
Portfolio Manager
Franklin Advisers, Inc.

Ms. Wong holds a Bachelor of Science degree in Business
Administration from San Francisco State University and a
Master's degree in Financial Planning from Golden Gate
University. She is a member of several industry related
committees and associations. She joined Advisers in 1986.

Risk Factors in New York

Since the Fund primarily invests in New York Municipal
Securities, there are certain specific factors and
considerations concerning New York State and New York City
which may affect the credit and market risk of the municipal
securities that the Fund may purchase. The following
information is based primarily upon information derived from
public documents relating to securities offerings of issuers
of New York Municipal Securities, from independent municipal
credit reports and historically reliable sources, but has
not been independently verified by the Fund.

The primary purpose of investing in a portfolio of New York
Municipal Securities is the special tax treatment accorded
New York resident individual investors. Payment of interest
and preservation of principal, however, is dependent upon
the continuing ability of the New York issuers and/or
obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors
should be aware that certain substantial issuers of New York
Municipal Securities (including issuers whose obligations
may be acquired by the Fund) have experienced financial
difficulties in recent years. These difficulties have at
times jeopardized the credit standing and impaired the
borrowing abilities of other New York issuers and have
generally contributed to higher interest rates and lower
market prices for their debt obligations. A recurrence of
the financial difficulties previously experienced by such
issuers could result in defaults or declines in the market
values of their existing obligations and, possibly, in the
obligations of other issuers of New York Municipal
Securities.

As of the date of the filing of this Prospectus with the
SEC, no issuers of New York Municipal Securities were, to
the knowledge of the investment manager, in default with
respect to the payment of their debt obligations. The
occurrence of any such default, however, could adversely
affect the market values and marketability of all New York
Municipal Securities and, consequently, the net asset value
of the Fund's portfolio. Some of the significant financial
considerations relating to the Fund's investments in New
York Municipal Securities are summarized in the SAI.

Investors should consider the greater risk of the Fund's
concentration in New York Municipal Securities versus the
safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios
of New York issues with those of more diversified
portfolios, including out-of-state issues, before making an
investment decision. The Fund's investment manager believes,
however, that by maintaining the Fund's investment portfolio
in New York Municipal Securities which are rated investment
grade, the Fund is largely insulated from the credit risks
that may exist on long-term New York Municipal Securities.
The SAI contains a further description under "Appendix A -
Risk Factors Affecting New York Municipal Securities."


Franklin New York Insured Tax-Free Income Fund
Franklin New York Tax-Free Trust
PROSPECTUS  May 1, 1995
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777  1-800/DIAL BEN

The Franklin New York Insured Tax-Free Income Fund (the
"Fund") is one of three non-diversified series of the
Franklin New York Tax-Free Trust (the "Trust"), an open-end
management investment company. The Fund offers individual
investors, corporations and other institutions a convenient
way to invest in a professionally managed portfolio of
municipal securities, primarily issued by the state of New
York and its political subdivisions. The Fund's investment
goal is to provide investors with as high a level of income
exempt from federal income taxes and New York State and New
York City personal income taxes as is consistent with
prudent investment management and the preservation of
shareholders' capital.

The Fund invests in New York municipal securities which are
covered by insurance policies providing for the scheduled
payment of principal and interest in the event of non-
payment by the issuer, in securities backed by the full
faith and credit of the U.S. government, in municipal
securities secured by such U.S. government obligations, and
in short-term obligations of issuers with the highest
ratings from Moody's Investors Service ("Moody's"), Standard
& Poor's Corporation ("S&P") or Fitch Investors Service,
Inc. ("Fitch"). All insured securities not insured by the
issuer will be insured by a qualified municipal bond
insurer. An investment in the Fund is not insured by the
U.S. government or the state of New York.

This Prospectus is intended to set forth in a clear and
concise manner information about the Trust and the Fund that
a prospective investor should know before investing. After
reading the Prospectus, it should be retained for future
reference; it contains information about the purchase and
sale of shares and other items which a prospective investor
will find useful to have.

As of May 1, 1995, the Fund offers two classes to its
investors: Franklin New York Insured Tax-Free Income Fund -
Class I ("Class I") and Franklin New York Insured Tax-Free
Income Fund - Class II ("Class II"). Investors can choose
between Class I shares, which generally bear a higher front-
end sales charge and lower ongoing Rule 12b-1 distribution
fees ("Rule 12b-1 fees"), and Class II shares, which
generally have a lower front-end sales charge and higher
ongoing Rule 12b-1 fees. Investors should consider the
differences between the two classes, including the impact of
sales charges and distribution fees, in choosing the more
suitable class given their anticipated investment amount and
time horizon. See "How to Buy Shares of the Fund -
Alternative Purchase Arrangements."

Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any bank; further, such shares
are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
Shares of the Fund involve investment risks, including the
possible loss of principal.

A Statement of Additional Information ("SAI") concerning the
Trust dated May 1, 1995, as may be amended from time to
time, provides a further discussion of certain areas in this
Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by
reference. A copy is available without charge from the Fund
or the Fund's principal underwriter, Franklin/Templeton
Distributors, Inc. ("Distributors"), at the address or
telephone number shown above.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION 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 the
underwriter.

Contents                                    Page

Expense Table

Financial Highlights

About the Trust

Investment Objective
and Policies of the Fund

Insurance

Management of the Fund

Distributions to Shareholders

Taxation of the Fund
and Its Shareholders

How to Buy Shares of the Fund

Other Programs and Privileges
Available to Fund Shareholders

Exchange Privilege

How to Sell Shares of the Fund

Telephone Transactions

Valuation of Fund Shares

How to Get Information Regarding
an Investment in the Fund

Performance

General Information

Account Registrations

Important Notice Regarding
Taxpayer IRS Certifications

Portfolio Operations

Risk Factors in New York

Expense Table

The purpose of this table is to assist an investor in
understanding the various costs and expenses that a
shareholder will bear directly or indirectly in connection
with an investment in the Fund. The figures for both classes
of shares are based on aggregate operating expenses of the
Class I shares, before fee waivers and expense reductions,
for the fiscal year ended December 31, 1994.

                                 Class I          Class II
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on                  
Purchases
(as a percentage of offering     4.25%           1.00%^
price)
Deferred Sales Charge            NONE+           1.00%++

Annual Fund Operating Expenses
(as a percentage of average net assets)

Management Fees                  0.55%*           0.55%*
12b-1 Fees                       0.07%**          0.65%**
Other Expenses:                                   
  Reports to Shareholders        0.04%            0.04%
  Shareholder Servicing Costs    0.02%            0.02%
  Other                          0.05%            0.05%
                                                  
Total Other Expenses             0.11%            0.11%
Total Fund Operating Expenses    0.73%*           1.31%*

^Although Class II has a lower front-end sales charge than
Class I, over time the higher Rule 12b-1 fees for Class II
may cause shareholders to pay more for Class II shares than
for Class I shares. Given the maximum front-end sales charge
and the rate of Rule 12b-1 fees of each class, it is
estimated that this will take less than six years for
shareholders who maintain total shares valued at less than
$100,000 in the Franklin Templeton Funds. Shareholders with
larger investments in the Franklin Templeton Funds will
reach the crossover point more quickly.

+Class I investments of $1 million or more are not subject
to a front-end sales charge; however, a contingent deferred
sales charge of 1%, which has not been reflected in the
Example below, is generally imposed on certain redemptions
within a "contingency period" of 12 months of the calendar
month following such investments. See "How to Sell Shares of
the Fund - Contingent Deferred Sales Charge."

++Class II shares redeemed within a "contingency period" of
18 months of the calendar month following such investments
are subject to a 1% contingent deferred sales charge. See
"How to Sell Shares of the Fund - Contingent Deferred Sales
Charge."

*Represents the amount that would have been payable to the
investment manager, absent a fee reduction by the investment
manager. The investment manager, however, agreed in advance
to waive a portion of its management fees and to assume
responsibility for making payments to offset certain
operating expenses otherwise payable by the Fund. With this
reduction, management fees represented 0.41% and total
operating expenses for Class I and Class II represented
0.59% and 1.17%, respectively, of the average net assets of
the Fund. This arrangement may be terminated by the
investment manager at any time.

**Rule 12b-1 fees for Class I are annualized. Actual Rule
12b-1 fees incurred by Class I for the eight months ended
December 31, 1994 were 0.05%. Rule 12b-1 fees for Class II
are based on the maximum amount allowed under Class II's
plan of distribution. Consistent with National Association
of Securities Dealers, Inc.'s rules, it is possible that 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 charges
permitted under those same rules. See "Plans of
Distribution" under "Management of the Fund" in this
Prospectus.

Investors should be aware that the above table is not
intended to reflect in precise detail the fees and expenses
associated with an individual's own investment in the Fund.
Rather, the table has been provided only to assist investors
in gaining a more complete understanding of fees, charges
and expenses. For a more detailed discussion of these
matters, investors should refer to the appropriate sections
of this Prospectus.

Example

As required by SEC regulations, the following example
illustrates the expenses, including the maximum front-end
sales charge and applicable contingent deferred sales
charge, that apply to a $1,000 investment in the Fund over
various time periods assuming (1) a 5% annual rate of return
and (2) redemption at the end of each time period.

              One year    Three years   Five years  Ten years
Class I       $50         $65           $81         $129
Class II      $33         $51           $81         $166

This example is based on the aggregate annual operating
expenses, before fee waivers or expense reductions, shown
above and should not be considered a representation of past
or future expenses, which may be more or less than those
shown. The operating expenses are borne by the Fund and only
indirectly by shareholders as a result of their investment
in the Fund. In addition, federal securities regulations
require the example to assume an annual return of 5%, but
the Fund's actual return may be more or less than 5%.

Financial Highlights

Set forth below is a table containing financial highlights
for a share of Class I of the Fund outstanding throughout
the period May 1, 1991 (effective date of registration) to
December 31, 1991 and for the three fiscal years ended
December 31, 1992, 1993 and 1994. The information for the
period May 1, 1991 to December 31, 1991 and each of the
three fiscal years in the period ended December 31, 1994 has
been audited by Coopers & Lybrand L.L.P., independent
auditors, whose audit report appears in the financial
statements in the Trust's Annual Report to Shareholders
dated December 31, 1994. Information regarding Class II
shares will be included in this table after they have been
offered to the public for a reasonable period of time. See
the discussion "Reports to Shareholders" under "General
Information."

<TABLE>
<CAPTION>
                                          Per Share Operating Performance++
- --------------------------------------------------------------------------------------------------------------------
                Net Asset                   Net Realized                    Distributions     Net Asset              
   Year           Value          Net        & Unrealized     Total From       From Net         Value                 
  Ended         Beginning    Investment       Gains on       Investment      Investment        at End        Total   
December 31      of Year       Income        Securities      Operations        Income         of  Year      Return++ 
- --------------------------------------------------------------------------------------------------------------------
<S>              <C>            <C>             <C>            <C>             <C>             <C>           <C>     
1991*            $10.00         $.247           $.433          $0.680          $(.220)         $10.46         6.75%   
1992              10.46          .620            .369            .989           (.649)          10.80         9.49    
1993              10.80          .600            .880           1.480           (.600)          11.68        13.79    
1994              11.68          .590           (1.525)         (.935)          (.585)          10.16        (8.19)  


</TABLE>

<TABLE>
<CAPTION>
                      Ratios/Supplemental Data
- --------------------------------------------------------------------
               Net Assets      Ratio of       Ratio of                        
   Year         at End         Expenses      Net Income    Portfolio     
  Ended         of Year       to Average     to Average    Turnover      
December 31    (in 000's)     Net Assets+    Net Assets      Rate        
- --------------------------------------------------------------------     
<S>            <C>               <C>           <C>          <C>          
1991*          $ 37,904          .12%**        5.69%**      21.12%       
1992            149,054          .33           5.80          3.39        
1993            263,647          .50           5.28          5.38
1994            225,061          .56           5.48         25.66        
</TABLE>




*For the period May 1, 1991 (effective date of registration)
to December 31, 1991.
**Annualized.
+Total return measures the change in value of an investment
over the periods indicated. It does not include the maximum
front-end sales charge and assumes reinvestment of dividends
at the offering price and capital gains, if any, at net
asset value. Effective May 1, 1994, with the implementation
of the Rule 12b-1 distribution plan, the sales charge on
reinvested dividends was eliminated.
++During the periods indicated, Franklin Advisers, Inc., the
investment manager, agreed in advance to waive a portion of
its management fees and to assume responsibility for making
payments to offset certain operating expenses otherwise
payable by the Fund. Had such action not been taken, the
ratio of operating expenses to average net assets for the
periods ended December 31, 1991, 1992, 1993 and 1994 would
have been: .84%, .74%, .65% and .71%.

About the Trust

The Trust is an open-end management investment company, or
mutual fund, organized as a Massachusetts business trust in
July 1986 and registered with the SEC under the Investment
Company Act of 1940 (the "1940 Act"). The Trust currently
consists of three series, each of which issues a separate
series of the Trust's shares and maintains a totally
separate investment portfolio. This Prospectus relates only
to the Franklin New York Insured Tax-Free Income Fund. The
Fund has two classes of shares of beneficial interest:
Franklin New York Insured Tax-Free Income Fund - Class I and
Franklin New York Insured Tax-Free Income Fund - Class II.
All Fund shares outstanding before May 1, 1995, have been
redesignated as Class I shares, and will retain their
previous rights and privileges, except for legally required
modifications to shareholder voting procedures, as discussed
in "General Information - Voting Rights."

Shares of the Fund may be purchased (minimum investment of
$100 initially and $25 thereafter) at the current public
offering price. The current public offering price of the
Class I shares is equal to the net asset value (see
"Valuation of Fund Shares") plus a variable sales charge not
exceeding 4.25% of the offering price depending upon the
amount invested. The current public offering price of the
Class II shares is equal to the net asset value plus a sales
charge of 1.0% of the amount invested. (See "How to Buy
Shares of the Fund.")

Investment Objective and Policies of the Fund

The Fund seeks to provide investors with as high a level of
income exempt from federal income taxes and from the
personal income taxes of New York State and New York City as
is consistent with prudent investment management and the
preservation of shareholders' capital. There is, of course,
no assurance that the Fund's objective will be achieved. The
Fund's investment objective is a fundamental policy of the
Fund and may not be changed without the approval of a
majority of the Fund's outstanding shares.

Under normal market conditions, the Fund attempts to invest
100%, and as a matter of fundamental policy will invest at
least 80%, of its total assets in debt obligations issued by
or on behalf of the state of New York or any state,
territory or possession of the United States, the District
of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions, the interest
on which is exempt from regular federal income tax. It is
possible, although not anticipated, that up to 20% of the
Fund's net assets could be in municipal securities subject
to the alternative minimum tax and/or in taxable
obligations.

Under normal circumstances, at least 65% of the Fund's total
assets will be invested in insured municipal securities.
Although an insurer's quality standards are independently
determined and may vary from time to time, insured municipal
securities which carry a rating at the date of purchase are
generally in the three highest ratings of S&P (AAA, AA, and
A), Moody's (Aaa, Aa, and A) or Fitch (AAA, AA, and A).
Pending investment in longer-term municipal securities, the
Fund also may invest up to 35% of its total net assets in
short-term, tax-exempt instruments, without obtaining
insurance, provided such instruments carry an A-1, SP-1 or F-
1 short-term rating by Moody's, S&P or Fitch, respectively,
or will have a long-term rating of Aaa, or equivalent, by
Moody's, S&P or Fitch. For a description of such ratings,
see  "Appendix B - Description of Municipal Securities
Ratings" in the SAI. An insurer may also insure municipal
securities which are unrated or have lower S&P ratings or
which meet its own insurance standards. The Fund may also
invest in municipal securities secured by an escrow or trust
account of U.S. government securities, except for temporary
short-term investments carrying the highest rating by
Moody's, S&P or Fitch. (See "Insurance.")

In addition, under normal market conditions, the Fund will
invest at least 65% of its total assets in municipal
securities and obligations issued by or on behalf of the
state of New York and its local governments, municipalities,
authorities, agencies and political subdivisions, and those
of certain other governmental issuers, such as the
Commonwealth of Puerto Rico, which pay income exempt from
regular federal, New York State and New York City personal
income taxes ("New York Municipal Securities"). Dividends
paid by the Fund which are derived from interest on tax-
exempt obligations that are not New York Municipal
Securities will be exempt from regular federal income tax,
but will be subject to New York State and New York City
personal income taxes. It is possible, although not
anticipated, that up to 35% of the Fund's net assets could
be in municipal securities from a state other than New York.

For temporary defensive purposes only, the Fund may invest
(i) more than 20% of its assets (which could be up to 100%)
in fixed-income obligations the interest on which is subject
to regular federal income tax, and (ii) more than 35% of the
value of its net assets (which could be up to 100%) in
instruments the interest on which is exempt from regular
federal income taxes but not New York State and New York
City personal income taxes. Any such temporary taxable
investments will be limited to obligations issued or
guaranteed by the full faith and credit of the U.S.
government or in commercial paper rated A-1 by S&P or P-1 by
Moody's.

The Fund may borrow from banks for temporary or emergency
purposes and pledge up to 5% of its total assets therefore.
Although the Fund does not currently intend to do so, the
Fund may lend its portfolio securities to qualified
securities dealers or other institutional investors,
provided that such loans do not exceed 10% of the value of
the Fund's total assets at the time of the most recent loan.

It is the policy of the Fund that restricted securities and
other illiquid securities (securities that cannot be
disposed of within  seven days in the normal course of
business at approximately the amount at which the Fund has
valued the securities) may not constitute, at the time of
purchase, more than 10% of the value of the total net assets
of the Fund.

Municipal Securities

The term "municipal securities," as used in this Prospectus,
means obligations issued by or on behalf of the state of New
York or 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 regular 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 bond 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. Further information on the maturity and
funding classifications of municipal securities is included
in the SAI.

The Fund has no restrictions on the maturity of municipal
securities in which it may invest. Accordingly, the Fund
will seek to invest in municipal securities with maturities
which, in the judgment of the Fund and its investment
manager, will provide a high level of current income
consistent with prudent investment. The investment manager
will also consider current market conditions and the cost of
the insurance obtainable on such securities.

It is possible, from time to time, that the Fund 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, industrial
development revenue bonds, transportation bonds, or
pollution control revenue bonds. In such 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 need 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
markets and of the municipal securities market, 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,
but are subject to greater price fluctuation due to changes
in interest rates, tax laws and other general market
factors. 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 pay principal and interest obligations.
Although the cost of insurance on the Fund's portfolio will
reduce the Fund's yield, one of the objectives of such
insurance is to obtain a higher yield than would be
available if all securities in the Fund's portfolio were
rated "AAA" by S&P without the benefit of any insurance.

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 (including those for housing and
student loans) issued after August 7, 1986, while still tax-
exempt, constitutes a preference item for taxpayers in
determining the federal alternative minimum tax under the
Internal Revenue Code of 1986, as amended (the "Code"), and
under the income tax provisions of some states. This
interest could subject a shareholder to, or increase the
shareholder's liability under, the federal and state
alternative minimum tax, depending on the shareholder's tax
situation. 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. In states with a corporate franchise tax,
distributions of the Fund may also be fully taxable to
corporate shareholders under their state franchise tax
systems. Consistent with the Fund's investment objective,
the Fund may acquire such private activity bonds if, in the
investment manager's opinion, such bonds represent the most
attractive investment opportunity then available to the
Fund. As of December 31, 1994, the Fund derived 10.97% of
its income from bonds, the interest on which constitutes  a
preference item subject to the federal alternative minimum
tax for certain investors.

The Fund may purchase 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, which amount may be more or
less than the amount the Fund paid for such obligation.
Frequently, VRDNs are secured by letters of credit or other
credit support arrangements. Because of the demand feature,
the prices of VRDNs may be higher and the yields lower than
they otherwise would be for obligations without a demand
feature. The Fund will limit its purchase of municipal
securities that are floating rate and variable rate
obligations to those meeting the quality standards set forth
in this Prospectus.

The Fund may purchase and sell municipal securities on a
"when-issued" and "delayed delivery" basis. These
transactions are subject to market fluctuation, and the
value at delivery may be more or less than the purchase
price. Although the Fund will generally purchase municipal
securities on a when-issued basis with the intention of
acquiring such 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, 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 the Fund's
portfolio consistent with its investment objective and
policies and not for the purpose of investment leverage.

The Fund may also 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. For example, COPs may be
created when long-term lease revenue bonds are issued by a
governmental corporation to pay for the acquisition of
property or facilities which 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 may 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 must
contain a "nonappropriation" or "abatement" clause. A
nonappropriation clause provides that, while the
municipality will use its best efforts to make lease
payments, the municipality may terminate the lease without
penalty if the municipality's appropriating body does not
allocate the necessary funds. Local administrations, being
faced with increasingly tight budgets, therefore 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. In most cases,
however, the private sector value of the property may be
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 insured COPs.

Investment Risk Considerations

While an investment in the Fund is not without risk, certain
policies are followed in managing the Fund which may help to
reduce the investor's risk. There are two categories of
risks to which the Fund is subject: credit risk and market
risk. Credit risk is a function of the ability of an issuer
of a municipal security to maintain 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. The Fund attempts to minimize credit risk by
maintaining the insurance coverage discussed below. Market
risk is the risk of price fluctuation of a municipal
security caused by changes in economic and interest rate
conditions generally affecting the market as a whole. A
municipal security's maturity length also affects its price.
As with other debt instruments, the price of the securities
in which the Fund invests are likely to decrease in times of
rising interest rates. Conversely, when rates fall, the
value of the Fund's debt instruments may rise. Price changes
of securities held by the Fund have a direct impact on the
net asset value per share of the Fund. The insurance does
not guarantee the market value of the municipal securities
and, except as indicated in this Prospectus, has no effect
on the net asset value, redemption price, or dividends paid
by the Fund.

Since the Fund primarily invests in New York Municipal
Securities, there are certain specific factors and
considerations concerning New York which may affect the
credit and market risk of municipal securities that the Fund
may purchase. See "Risk Factors in New York" for a
discussion of these factors.

As a non-diversified investment company, the Fund is not
subject to any statutory restriction under the 1940 Act with
respect to the concentration of its investments in the
assets of one or more issuers. This concentration may
present greater risks than in the case of a diversified
company. (See the SAI for the diversification requirements
the Fund intends to meet in order to qualify as a regulated
investment company under the Code.)

The Fund is subject to a number of additional investment
restrictions, some of which may be changed only with the
approval of shareholders, which limit its activities to some
extent. For a list of these restrictions and more
information concerning the policies discussed herein, please
see the SAI.

How Shareholders Participate in the Results of the Fund's
Activities

The assets of the Fund are invested in portfolio securities.
If the securities owned by the Fund increase in value, the
value of the shares of the Fund which the shareholder owns
will increase. If the securities owned by the Fund decrease
in value, the value of the shareholder's shares will also
decline. In this way, shareholders participate in any change
in the value of the securities owned by the Fund.

In addition to the factors which affect the value of
individual securities, as described in the preceding
sections, a shareholder may anticipate that the value of
Fund shares will fluctuate with movements in the broader
bond markets as well. In particular, changes in interest
rates will affect the value of the Fund's portfolio and thus
its share price. Increased interest rates, which frequently
accompany higher inflation and/or a growing economy, are
likely to have a negative effect on the value of Fund
shares. History reflects both increases and decreases in the
prevailing rate of interest and these may reoccur
unpredictably in the future.

Insurance

Except as indicated, each insured municipal security in the
Fund's portfolio will be covered by either a "New Issue
Insurance Policy," a "Portfolio Insurance Policy" issued by
a qualified municipal bond insurer, or a "Secondary
Insurance Policy."

Any of the policies discussed herein are intended to insure
the scheduled payment of all principal and interest on each
municipal security (rather than the Fund itself) when due.
The insurance of principal refers to the face or par value
of each security and is not affected by the price paid
therefor by the Fund or the market value thereof. Each
municipal security is secured by an insurance policy from
one of several qualified insurance companies which allows
the investment manager to diversify among credit
enhancements. The Fund will acquire municipal securities
secured by an insurance policy only where the claims paying
ability of the insurer thereof is rated "AAA" or the
equivalent by S&P, Moody's or Fitch.

New Issue Insurance Policy

New Issue Insurance Policies, if any, have been obtained by
the respective issuers of the municipal securities and all
premiums for such securities have been paid in advance by
such issuers. Such policies are non-cancelable and will
continue in force so long as the municipal securities are
outstanding and the respective insurers remain in business.
Since New Issue Insurance Policies remain in effect as long
as the securities are outstanding, the insurance may have an
effect on the resale value of securities in the Fund's
portfolio. Therefore, New Issue Insurance Policies may be
considered to represent an element of market value with
regard to municipal securities thus insured, but the exact
effect, if any, of this insurance on such market value
cannot be estimated. As stated earlier, the Fund will
acquire portfolio securities subject to New Issue Insurance
Policies only where the claims paying ability of the insurer
thereof is rated "AAA" or the equivalent by S&P, Moody's or
Fitch.

In determining whether to insure any municipal security, the
insurer has applied its own standards, which are not
necessarily the same as the criteria used in regard to the
selection of securities by the investment manager. No
contract to purchase an insured municipal security is
entered into without either permanent insurance in place or
an irrevocable commitment to insure the municipal security
by a qualified insurer.

Portfolio Insurance Policy

The Portfolio Insurance Policy to be obtained by the Fund
from a qualified municipal bond insurer will be effective
only so long as the Fund is in existence, the insurer is
still in business and meeting its obligations, and the
municipal securities described in the policy continue to be
held by the Fund. In the event of a sale of any municipal
security by the Fund or payment thereof prior to maturity,
the Portfolio Insurance Policy terminates as to such
municipal security.

The Portfolio Insurance Policy to be obtained by the Fund
may also be canceled for failure to pay the premium.
Nonpayment of premiums on such policy obtained by the Fund
will, under certain circumstances, result in the
cancellation of the Portfolio Insurance Policy and will also
permit the insurer to take action against the Fund to
recover premium payments due. Premium rates for each issue
of securities covered by the Portfolio Insurance Policy may
not be changed regardless of the issuer's ability or
willingness to pay. The insurance premiums are payable
monthly by the Fund and are adjusted for purchases and sales
of covered securities during the month. The insurer cannot
cancel coverage already in force with respect to municipal
securities owned by the Fund and covered by the Portfolio
Insurance Policy, except for nonpayment of premiums. In the
event that a portfolio holding which has been covered by a
Portfolio Insurance Policy is pre-refunded and irrevocably
secured by a U.S. government security, the insurance is no
longer required. Any security for which insurance is
canceled, other than as provided herein, will be sold by the
Fund as promptly thereafter as possible.

The premium on the Fund's Portfolio Insurance Policy is an
item of expense and will be reflected in the Fund's average
annual expenses. The average annual premium rate for the
Portfolio Insurance Policy is determined by dividing the
amount of the Fund's annual Portfolio Insurance Policy
premium by the face amount of the insured bonds in its
investment portfolio covered by that policy. Premiums are
paid from the Fund's assets and reduce the current yield on
its portfolio by the amount thereof. When the Fund purchases
a Secondary Insurance Policy (see below), the single premium
is added to the cost basis of the municipal security and is
not considered an item of expense of the Fund.

The Fund may also own, without insurance coverage, municipal
securities for which an escrow or trust account has been
established pursuant to the documents creating the municipal
security and containing sufficient U.S. government
securities backed by the government's full faith and credit
pledge in order to ensure the payment of principal and
interest on such bonds.

Secondary Insurance Policy

The Fund may at any time purchase from the provider of a
Portfolio Insurance Policy a permanent Secondary Insurance
Policy on any municipal security so insured and held by the
Fund. The coverage and obligation of the Fund to pay monthly
premiums under a Portfolio Insurance Policy would cease with
the purchase by the Fund of a Secondary Insurance Policy on
such security.

By purchasing a Secondary Insurance Policy, the Fund would,
upon payment of a single premium, obtain similar insurance
against nonpayment of scheduled principal and interest for
the remaining term of the security. Such insurance coverage
will be noncancellable and will continue in force so long as
the securities so insured are outstanding. One of the
purposes of acquiring such a policy would be to enable the
Fund to sell the portfolio security to a third party as a
AAA-rated or equivalent insured security at a market price
higher than what otherwise might be obtainable if the
security was sold without the insurance coverage. (Such
rating is not automatic, however, and must specifically be
requested from Moody's, S&P or Fitch for each bond.) Such a
policy would likely be purchased if, in the opinion of the
investment manager, the market value or net proceeds of a
sale by the Fund would exceed the current value of the
security (without insurance) plus the cost of the policy.
Any difference between the excess of a security's market
value as a AAA-rated or equivalent security over its market
value without such rating, including the single premium cost
thereof, would inure to the Fund in determining the net
capital gain or loss realized by the Fund upon the sale of
the portfolio security. The Fund may purchase insurance
under a Secondary Insurance Policy in lieu of a Portfolio
Insurance Policy at any time, regardless of the effect of
market value on the underlying municipal security, if the
investment manager believes such insurance would best serve
the Fund's interests in meeting its objective and policies.

Since under the original agreement to provide a temporary
insurance policy the Fund has the right to purchase a
permanent Secondary Insurance Policy even if the security is
currently in default as to any payments by the issuer, the
Fund would have the opportunity to sell such security rather
than be obligated to hold the security in its portfolio in
order to continue in force the applicable Portfolio
Insurance Policy, as discussed below.

Because coverage under the Portfolio Insurance Policy
terminates upon sale of a security from the Fund's
portfolio, such insurance does not have an effect on the
resale value of the securities. Therefore, the Fund may
retain any municipal securities insured under a Portfolio
Insurance Policy which are in default or in significant risk
of default, and place a value on the insurance which will be
equal to the difference between the market value of the
defaulted security and the market value of similar
securities which are not in default. (See "Valuation of Fund
Shares.") Because of this policy, the Fund's investment
manager may be unable to manage the Fund's portfolio to the
extent that it holds defaulted securities, which may limit
its ability in certain circumstances to purchase other
municipal securities. While a defaulted municipal security
is held in the Fund's portfolio, the Fund continues to pay
the insurance premium thereon but also collects interest
payments from the insurer and retains the right to collect
the full amount of principal from the insurer when the
security comes due. This would not be applicable if the Fund
elected to purchase the Secondary Insurance Policy discussed
above in lieu of the Portfolio Insurance Policy.

Municipal Bond Insurer

A "qualified municipal bond insurer" refers to companies
whose charter limits their risk assumption to insurance of
financial obligations only. This precludes assumption of
other types of risk, such as life, medical, fire and
casualty, auto and home insurance. The bond insurance
industry is a regulated industry. All bond insurers must be
licensed in each state in order to write financial
guaranties in that jurisdiction. Regulations vary from state
to state. Most regulators, however, require minimum
standards of solvency and limitations on leverage and
investment of assets. New York State, which is one of the
most active regulators, requires a minimum capital base of
$72.5 million for a new primary bond insurer. Regulators
also place restrictions on the amount an insurer can
guarantee in relation to the insurer's capital base. Neither
the Fund nor its investment manager make any representations
as to the ability of any insurance company to meet its
obligation to the Fund if called upon to do so. The SAI
contains more information on municipal bond insurers.
Currently, there are no bonds in the Fund's portfolio on
which an insurer is paying the principal or interest
otherwise payable by the issuer of the Fund's portfolio
obligations.

Management of the Fund

The Board of Trustees has the primary responsibility for the
overall management of the Trust and for electing the
officers of the Trust who are responsible for administering
its day-to-day operations.

The trustees have carefully reviewed the multiclass
structure to ensure that no material conflict exists between
the two classes of shares. Although the Board of Trustees
does not expect to encounter material conflicts in the
future, the trustees will continue to monitor the Fund and
will take appropriate action to resolve such conflicts if
any should later arise.

In developing the multiclass structure, the Fund has
retained the authority to establish additional classes of
shares. It is the Fund's present intention to offer only two
classes of shares, but new classes may be offered in the
future.

Franklin Advisers, Inc. ("Advisers" or "Manager") serves as
the Fund's investment manager. Advisers is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Resources"), a
publicly owned holding company, the principal shareholders
of which are Charles B. Johnson and Rupert H. Johnson, Jr.,
who own approximately 20% and 16%, respectively, of
Resources' outstanding shares. Resources is engaged in
various aspects of the financial services industry through
its various subsidiaries (the "Franklin Templeton Group").
Advisers acts as investment manager or administrator to 33
U.S. registered investment companies (111 separate series)
with aggregate assets of over $74 billion, approximately $40
billion of which are in the municipal securities market.

Pursuant to a management agreement, the Manager supervises
and implements the Fund's investment activities and provides
certain administrative services and facilities which are
necessary to conduct the Fund's business.

During the fiscal year ended December 31, 1994, fees
totaling 0.55% of the average net assets of the Fund would
have accrued to Advisers. Total operating expenses of Class
I shares of the Fund, including management fees, would have
represented 0.71% of the average net assets of such class.
Pursuant to an agreement by Advisers to limit its fees, the
Fund paid management fees totaling 0.40% of the average net
assets of the Fund and operating expenses totaling 0.56% of
the average net assets of Class I shares of the Fund.

It is not anticipated that the Fund will incur a significant
amount of brokerage expenses because municipal securities
are generally traded on a "net" basis, that is, in principal
transactions without the addition or deduction of brokerage
commissions or transfer taxes. In the event that the Fund
does participate in transactions involving brokerage
commissions, it is the Manager's responsibility to select
brokers through whom such transactions will be effected. The
Manager will try to obtain the best execution on all such
transactions. If it is felt that more than one broker is
able to provide the best execution, the Manager will
consider the furnishing of quotations and of other market
services, research, statistical and other data for the
Manager and its affiliates, as well as the sale of shares of
the Fund, as factors in selecting a broker. Further
information is included under "The Trust's Policies
Regarding Brokers Used on Portfolio Transactions" in the
SAI.

Shareholder accounting and many of the clerical functions
for the Fund are performed by Franklin/Templeton Investor
Services, Inc. ("Investor Services" or "Shareholder Services
Agent"), in its capacity as transfer agent and dividend-
paying agent. Investor Services is a wholly-owned subsidiary
of Resources.

Plans of Distribution

A separate plan of distribution has been approved and
adopted for each class ("Class I Plan" and "Class II Plan,"
respectively, or "Plans") pursuant to Rule 12b-1 under the
1940 Act. The Rule 12b-1 fees charged to each class will be
based solely on the distribution and servicing fees
attributable to that particular class. Any portion of fees
remaining from either plan after distribution to securities
dealers of up to the maximum amount permitted under each
plan may be used by the class to reimburse Distributors for
routine ongoing promotion and distribution expenses incurred
with respect to such class. Such expenses may 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 Distributors' overhead
expenses attributable to the distribution of Fund shares, as
well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a
servicing agreement with the Fund, Distributors or its
affiliates.

The maximum amount which the Fund may pay to Distributors or
others under the Class I Plan for such distribution expenses
is 0.10% per annum of Class I's average daily net assets,
payable on a quarterly basis. All expenses of distribution
and marketing in excess of 0.10% per annum will be borne by
Distributors, or others who have incurred them, without
reimbursement from the Fund.

Under the Class II Plan, the maximum amount which the Fund
is permitted to pay to Distributors or others for
distribution and related expenses is 0.50% per annum of
Class II's average daily net assets, payable quarterly. All
expenses of distribution, marketing and related services
over that amount will be borne by Distributors or others who
have incurred them, without reimbursement by the Fund. In
addition, the Class II Plan provides for an additional
payment by the Fund of up to 0.15% per annum of Class II's
average daily net assets as a servicing fee, payable
quarterly. This fee will be used to pay securities dealers
or others for, among other things, assisting in establishing
and maintaining customer accounts and records; assisting
with purchase and redemption requests; receiving and
answering correspondence; monitoring dividend payments from
the Fund on behalf of customers, or similar activities
related to furnishing personal services and/or maintaining
shareholder accounts.

During the first year after the purchase of Class II shares,
Distributors will keep a portion of the plan fees assessed
on Class II shares to partially recoup fees Distributors
pays to securities dealers. Distributors, or its affiliates,
may pay, from its own resources, a commission of up to 1% of
the amount invested to securities dealers who initiate and
are responsible for purchases of Class II shares.

Both Plans also cover any payments to or by the Fund,
Advisers, Distributors, or other parties on behalf of the
Fund, Advisers or Distributors, to the extent such payments
are deemed to be for the financing of any activity primarily
intended to result in the sale of shares issued by the Fund
within the context of Rule 12b-1. The payments under the
Plans are included in the maximum operating expenses which
may be borne by each class of the Fund.

For more information, including a discussion of the Board of
Trustees' policies with regard to the amount of each plan's
fees, please see the SAI.

Distributions to Shareholders

There are two types of distributions which the Fund may make
to its shareholders:

1. Income dividends. The Fund receives income 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 net capital
loss carryovers) may generally be made twice each year. One
distribution may be made in December to reflect any net
short-term and net long-term capital gains realized by the
Fund as of October 31 of such year. Any net short-term and
net long-term capital gains realized by the Fund during the
remainder of the fiscal year may be distributed following
the end of the 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.

Distributions To Each Class of Shares

According to the requirements of the Code, dividends and
capital gains will be calculated and distributed in the same
manner for Class I and Class II shares. The per share amount
of any income dividends will generally differ only to the
extent that each class is subject to different Rule 12b-1
fees.

Distribution Date

Although subject to change by the Board of Trustees without
prior notice to or approval by shareholders, the Fund's
current policy is to declare income dividends daily and pay
them monthly on or about the last business day of that
month. The amount of income dividend payments by the Fund is
dependent upon the amount of net income received by the Fund
from its portfolio holdings, is not guaranteed and is
subject to the discretion of the Board of Trustees. The Fund
does not pay "interest" or guarantee any fixed rate of
return on an investment in its shares. Payment of dividends
by the Fund is not insured.

Dividend Reinvestment

Unless otherwise requested, income dividends and capital
gain distributions, if any, will be automatically reinvested
in the shareholder's account in the form of additional
shares, valued at the closing net asset value (without a
sales charge) on the dividend reinvestment date. Dividend
and capital gain distributions are only eligible for
reinvestment at net asset value in the same class of shares
of the Fund or the same class of another of the Franklin
Templeton Funds. Shareholders have the right to change their
election with respect to the receipt of distributions by
notifying the Fund, but any such change will be effective
only as to distributions for which the reinvestment date is
seven or more business days after the Fund has been
notified. See "Purchases at Net Asset Value" under "How to
Buy Shares of the Fund" and the SAI for more information.

Many of the Fund's shareholders receive their distributions
in the form of additional shares. This is a convenient way
to accumulate additional shares and maintain or increase the
shareholder's earnings base. Of course, any shares so
acquired remain at market risk.

Distributions in Cash

A shareholder may elect to receive income dividends, or both
income dividends and capital gain distributions, in cash. By
completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application
included with this Prospectus, a shareholder may direct the
selected distributions to the same class of another fund in
the Franklin Templeton Funds, to another person, or directly
to a checking account. If the bank at which the account is
maintained is a member of the Automated Clearing House, the
payments may be made automatically by electronic funds
transfer. If this last option is requested, the shareholder
should allow at least 15 days for initial processing.
Dividends which may be paid in the interim will be sent to
the address of record. Additional information regarding
automated fund transfers may be obtained from Franklin's
Shareholder Services Department.

Taxation of the Fund and Its Shareholders

The following discussion reflects some of the tax
considerations that affect mutual funds and their
shareholders. Additional information on tax matters relating
to the Fund and its shareholders is included in the section
entitled, "Additional Information Regarding Distributions
and Taxation" in the SAI.

Each series of the Trust is treated as a separate entity for
federal income tax purposes. The Fund intends to continue to
qualify for treatment 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 its shareholders. Such exempt-interest
dividends are derived from interest income exempt from
regular federal income tax and are not subject to regular
federal income tax for Fund shareholders. In addition, to
the extent that exempt-interest dividends are derived from
interest on obligations of New York and its political
subdivisions, from interest on direct obligations of the
federal government, or from interest on U.S. territorial
obligations (including Puerto Rico, the U.S. Virgin Islands
or Guam), they will be exempt from New York State and New
York City personal income taxes. For corporate taxpayers
subject to the New York State franchise tax, however, 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), from
ordinary income derived from the sale or disposition of
bonds purchased with market discount after April 30, 1993,
or from the excess of net short-term capital gain over net
long-term capital loss, they are treated as ordinary income
whether the shareholder has elected to receive them in cash
or in additional shares.

From time to time, the Fund may purchase 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 a de minimis. For such
obligations purchased after April 30, 1993, a portion of the
gain (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
by the Fund of such ordinary income to its shareholders will
be subject to regular income tax in the hands of Fund
shareholders. In any fiscal year, the Fund may elect not to
distribute to its shareholders its taxable ordinary income
and, instead, to 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.

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 a
shareholder has owned Fund shares and regardless of whether
such distributions are received in cash or in additional
shares.

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.

Redemptions and exchanges of Fund shares are taxable events
on which a shareholder may realize a gain or loss. Any loss
incurred on the 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.

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 December 31, 1994, qualified for this
deduction and it is not anticipated that any of the current
year's dividends will so qualify.

The Fund will inform shareholders 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
them 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 interest income that is a tax preference item
under the alternative minimum tax. Shareholders who have not
held shares of the Fund for a full calendar year 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 their investment in the Fund.

Exempt-interest dividends of the Fund, although exempt from
regular federal income tax in the hands of a shareholder,
are includible in the tax base for determining the extent to
which a shareholder's social security or railroad retirement
benefits will be subject to federal income tax. Shareholders
are required to disclose the receipt of tax-exempt interest
on their federal income tax returns.

Interest on indebtedness incurred (directly or indirectly)
by shareholders to purchase or carry Fund shares will not be
deductible for federal income tax purposes.

The foregoing description relates solely to federal income
tax law and to New York State and New York City personal
income tax treatment to the extent indicated. Shareholders
should consult their tax advisors with respect to the
applicability of other state and local income tax laws to
distributions and redemption proceeds received from the
Fund. Corporate, individual and trust shareholders should
contact their tax advisors to determine the impact of Fund
dividends and capital gain distributions under the
alternative minimum tax that may be applicable to a
shareholder's particular tax situation.

Shareholders who are not U.S. persons for purposes of
federal income taxation should consult with their financial
or tax advisors regarding the applicability of U.S.
withholding or other taxes on distributions received by them
from the Fund and the application of foreign tax laws to
these distributions.

How to Buy Shares of the Fund

Shares of the Fund are continuously offered through
securities dealers which execute an agreement with
Distributors, the principal underwriter of the Fund's
shares. The use of the term "securities dealer" shall
include other financial institutions which, pursuant to an
agreement with Distributors (directly or through
affiliates), handle customer orders and accounts with the
Fund. Such reference, however, is for convenience only and
does not indicate a legal conclusion of capacity. The
minimum initial investment is $100 and subsequent
investments must be $25 or more. These minimums may be
waived when the shares are purchased through plans
established by the Franklin Templeton Group. The Fund and
Distributors reserve the right to refuse any order for the
purchase of shares. The Fund currently does not permit
investment by market timing or allocation services ("Timing
Accounts"), which generally include accounts administered so
as to redeem or purchase shares based upon certain
predetermined market indicators.

Alternative Purchase Arrangements

The difference between Class I and Class II shares lies
primarily in their front-end and contingent deferred sales
charges and Rule 12b-1 fees as described below.

Class I. All Fund shares outstanding before the
implementation of the multiclass structure have been
redesignated as Class I shares, and will retain their
previous rights and privileges. Class I shares are generally
subject to a variable sales charge upon purchase and not
subject to any sales charge upon redemption. Class I shares
are subject to Rule 12b-1 fees of up to an annual maximum of
0.10% of average daily net assets of such shares. With this
multiclass structure, Class I shares have higher front-end
sales charges than Class II shares and comparatively lower
Rule 12b-1 fees. Class I shares may be purchased at a
reduced front-end sales charge or at net asset value if
certain conditions are met. In most circumstances,
contingent deferred sales charges will not be assessed
against redemptions of Class I shares. See "Management of
the Fund," and "How to Sell Shares of the Fund" for more
information.

Class II.  The current public offering price of Class II
shares is equal to the net asset value plus a front-end
sales charge of 1.0% of the amount invested. Class II shares
are also subject to a contingent deferred sales charge of
1.0% if shares are redeemed within 18 months of the calendar
month following purchase. In addition, Class II shares are
subject to Rule 12b-1 fees of up to a maximum of .65% of
average daily net assets of such shares. Class II shares
have lower front-end sales charges than Class I shares and
comparatively higher Rule 12b-1 fees.  See "Contingent
Deferred Sales Charge" under "How to Sell Shares of the
Fund".

Purchases of Class II shares are limited to purchases below
$1 million. Any purchase of $1 million or more will
automatically be invested in Class I shares, since that is
more beneficial to investors. Such purchases, however, may
be subject to a contingent deferred sales charge. Investors
may exceed $1 million in Class II shares by cumulative
purchases over a period of time. Investors who intend to
make investments exceeding $1 million, however, should
consider purchasing Class I shares through a Letter of
Intent instead of purchasing Class II shares.

Deciding Which Class To Purchase

Investors should carefully evaluate their anticipated
investment amount and time horizon prior to determining
which class of shares to purchase.  Generally, an investor
who expects to invest less than $100,000 in the Franklin
Templeton Funds and who expects to make substantial
redemptions within approximately six years or less of
investment should consider purchasing Class II shares. The
higher annual Rule 12b-1 fees on the Class II shares,
however, will result in slightly higher operating expenses
and lower income dividends for Class II shares, which will
accumulate over time to outweigh the difference in front-end
sales charges. For this reason, Class I shares may be more
attractive to long-term investors even if no sales charge
reductions are available to them.

Investors who qualify to purchase Class I shares at reduced
sales charges definitely should consider purchasing Class I
shares, especially if they intend to hold their shares
approximately six years or more. Investors who qualify to
purchase Class I shares at reduced sales charges but who
intend to hold their shares less than approximately six
years should evaluate whether it is more economical to
purchase Class I shares through a Letter of Intent or under
Rights of Accumulation or other means, rather than
purchasing Class II shares. Investors investing $1 million
or more in a single payment and other investors who qualify
to purchase Class I shares at net asset value will be
precluded from purchasing Class II shares.

Each class represents the same interest in the investment
portfolio of the Fund and has the same rights, except that
each class has a different sales charge, bears the separate
expenses of its Rule 12b-1 distribution plan, and has
exclusive voting rights with respect to such plan. The two
classes also have separate exchange privileges.

Purchase Price of Fund Shares

Shares of both classes of the Fund are offered at their
respective public offering prices, which are determined by
adding the net asset value per share plus a front-end sales
charge, next computed (1) after the shareholder's securities
dealer receives the order which is promptly transmitted to
the Fund or (2) after receipt of an order by mail from the
shareholder directly in proper form (which generally means a
completed Shareholder Application accompanied by a
negotiable check).

Class I. The sales charge for Class I shares is a variable
percentage of the offering price depending upon the amount
of the sale. The offering price will be calculated to two
decimal places using standard rounding criteria. A
description of the method of calculating net asset value per
share is included under the caption "Valuation of Fund
Shares."

Set forth below is a table of total front-end sales charges
or underwriting commissions and dealer concessions for Class
I shares.

                               Total Sales Charge
                                     As a         Dealer
                        As a         Percentage   Concession As
                        Percentage   of Net       a Percentage
Size of Transaction at  of Offering  Amount       of Offering
Offering Price          Price        Invested     Price*,***
Less than $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         (see below)**

*Financial institutions or their affiliated brokers may
receive an agency transaction fee in the percentages set
forth above.
**The following commissions will be paid by Distributors,
out of its own resources, to securities dealers who initiate
and are responsible for purchases of $1 million or more:
0.75% on sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million, plus
0.50% on sales of $3 million but less than $50 million, plus
0.25% on sales of $50 million but less than $100 million,
plus 0.15% on sales of $100 million or more. Dealer
concession breakpoints are reset every 12 months for
purposes of additional purchases.
***At the discretion of Distributors, all sales charges may
at times be allowed to the securities dealer. If 90% or more
of the sales commission is allowed, such securities dealer
may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933, as amended.

No front-end sales charge applies on investments of $1
million or more, but a contingent deferred sales charge of
1% is imposed on certain redemptions of all or a portion of
investments of $1 million within the contingency period. See
"How to Sell Shares of the Fund - Contingent Deferred Sales
Charge."

The size of a transaction which determines the applicable
sales charge on the purchase of Class I shares is determined
by adding the amount of the shareholder's current purchase
plus the cost or current value (whichever is higher) of a
shareholder's existing investment in one or more of the
funds in the Franklin Group of Funds(Registered Trademark)
and the Templeton Group of Funds. Included for these
aggregation purposes are (a) the mutual funds in the
Franklin Group of Funds except Franklin Valuemark Funds and
Franklin Government Securities Trust (the "Franklin Funds"),
(b) other investment products underwritten by Distributors
or its affiliates (although certain investments may not have
the same schedule of sales charges and/or may not be subject
to reduction),  and (c) 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 (the "Templeton
Funds"). (Franklin Funds and Templeton Funds are
collectively referred to as the "Franklin Templeton Funds.")
Sales charge reductions based upon aggregate holdings of
(a), (b) and (c) above ("Franklin Templeton Investments")
may be effective only after notification to Distributors
that the investment qualifies for a discount.

Other Payments to Securities Dealers - Class I.
Distributors, or one of its affiliates, may make payments,
out of its own resources, of up to 1% of the amount
purchased to securities dealers who initiate and are
responsible for purchases made at net asset value by certain
trust companies and trust departments of banks. See
"Description of Special Net Asset Value Purchases" and the
SAI.

Class II. Unlike Class I shares, the front-end sales charge
and dealer concessions for Class II shares do not vary
depending on the amount of purchase. See table below:

                        Total Sales Charge
Size of        As a            As  a          Dealer
Transaction    Percentage of  Percentage of   Concession As
at Offering    Net Offering   Net Amount      a Percentage
Price          Price          Invested        of Offering
                                              Price*
                              
any amount     1.00%           1.01%          1.00%
(less than $1                                 
million)

*Distributors, or one of its affiliates, may make additional
payments to securities dealers, from its own resources, of
up to 1% of the amount invested. During the first year
following a purchase of Class II shares, Distributors will
keep a portion of the Rule 12b-1 fees assessed to those
shares to partially recoup fees Distributors pays to
securities dealers.

Class II shares redeemed within 18 months of their purchase
will be assessed a contingent deferred sales charge of 1.0%
on the lesser of the then-current net asset value or the net
asset value of such shares at the time of purchase, unless
such charge is waived as described under "How to Sell Shares
of the Fund - Contingent Deferred Sales Charge."

Distributors, or one of its affiliates, out of its own
resources, may also provide additional compensation to
securities dealers in connection with sales of shares of the
Franklin Templeton Funds. Compensation may include financial
assistance to securities dealers in connection with
conferences, sales or training programs for their employees,
seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more of
the Franklin Templeton Funds and other dealer-sponsored
programs or events. In some instances, this compensation may
be made available only to certain securities dealers whose
representatives have sold or are expected to sell
significant amounts of shares of the Franklin Templeton
Funds. Compensation may include payment for travel expenses,
including lodging, incurred in connection with trips taken
by invited registered representatives and members of their
families to locations within or outside of the United States
for meetings or seminars of a business nature. Securities
dealers may not use sales of the Fund's shares to qualify
for this compensation to the extent such may be prohibited
by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. None
of the aforementioned additional compensation is paid for by
the Fund or its shareholders.

Additional terms concerning the offering of the Fund's
shares are included in the SAI.

Certain officers and trustees of the Trust are also
affiliated with Distributors. A detailed description is
included in the SAI.

Quantity Discounts in Sales Charges - Class I Shares Only

Class I shares may be purchased under a variety of plans
which provide for a reduced sales charge. To be certain to
obtain the reduction of the sales charge, the investor or
the securities dealer should notify Distributors at the time
of each purchase of shares which qualifies for the
reduction. In determining whether a purchase qualifies for a
discount, an investment in any of the Franklin Templeton
Investments may be combined with those of the investor's
spouse and children under the age of 21. In addition, the
aggregate investments of a trustee or other fiduciary
account (for an account under exclusive investment
authority) may be considered in determining whether a
reduced sales charge is available, even though there may be
a number of beneficiaries of the account. The value of Class
II shares owned by the investor may also be included for
this purpose.

In addition, an investment in Class I shares may qualify for
a reduction in the sales charge under the following
programs:

1. Rights of Accumulation. The cost or current value
(whichever is higher) of existing investments in the
Franklin Templeton Investments may be combined with the
amount of the current purchase in determining the sales
charge to be paid.

2. Letter of Intent. An investor may immediately qualify for
a reduced sales charge on a purchase of Class I shares by
completing the Letter of Intent section of the Shareholder
Application (the "Letter of Intent" or "Letter"). By
completing the Letter, the investor expresses an intention
to invest during the next 13 months a specified amount
which, if made at one time, would qualify for a reduced
sales charge, grants to Distributors a security interest in
the reserved shares and irrevocably appoints Distributors as
attorney-in-fact with full power of substitution to
surrender for redemption any or all shares for the purpose
of paying any additional sales charge due. Purchases under
the Letter will conform with the requirements of Rule 22d-1
under the 1940 Act. The investor or the investor's
securities dealer must inform Investor Services or
Distributors that this Letter is in effect each time a
purchase is made.

An investor acknowledges and agrees to the following
provisions by completing the Letter of Intent section of the
Shareholder Application: Five percent (5%) of the amount of
the total intended purchase will be reserved in Class I
shares, registered in the investor's name, to assure that
the full applicable sales charge will be paid if the
intended purchase is not completed. The reserved shares will
be included in the total shares owned as reflected on
periodic statements and income and capital gain
distributions on the reserved shares will be paid as
directed by the investor. The reserved shares will not be
available for disposal by the investor until the Letter of
Intent has been completed or the higher sales charge paid.
For more information, see "Additional Information Regarding
Trust Shares" in the SAI.

Although the sales charges on Class II shares cannot be
reduced through these programs, the value of Class II shares
owned by the investor may be included in determining a
reduced sales charge to be paid on Class I shares pursuant
to the Letter of Intent and Rights of Accumulation programs.

Group Purchases of Class I Shares

An individual who is a member of a qualified group may also
purchase Class I shares of the Fund at the reduced sales
charge applicable to the group as a whole. The sales charge
is based upon the aggregate dollar value of shares
previously purchased and still owned by the members of the
group, plus the amount of the current purchase. For example,
if members of the group had previously invested and still
held $80,000 of Fund shares and now were investing $25,000,
the sales charge would be 3.50%. As stated above, no front-
end sales charge applies on investments of $1 million or
more by individuals or groups, but a contingent deferred
sales charge of 1% is imposed on certain redemptions within
12 months of the calendar month of the purchase. Information
concerning the current sales charge applicable to a group
may be obtained by contacting Distributors.

A "qualified group" is one which (i) has been in existence
for more than six months, (ii) has a purpose other than
acquiring Fund shares at a discount, and (iii) satisfies
uniform criteria which enable Distributors to realize
economies of scale in its costs of distributing shares. A
qualified group must have more than 10 members, be available
to arrange for group meetings between representatives of the
Fund or Distributors and the members, agree to include sales
and other materials related to the Fund in its publications
and mailings to members at reduced or no cost to
Distributors, and seek to arrange for payroll deduction or
other bulk transmission of investments to the Fund.

If an investor selects a payroll deduction plan, subsequent
investments will be automatic and will continue until such
time as the investor notifies the Fund and the investor's
employer to discontinue further investments. Due to the
varying procedures used to prepare, process and forward the
payroll deduction information to the Fund, there may be a
delay between the time of the payroll deduction and the time
the money reaches the Fund. The investment in the Fund will
be made at the offering price per share determined on the
day that both the check and payroll deduction data are
received in required form by the Fund.

Purchases at Net Asset Value

Class I shares may be purchased without the imposition of a
front-end sales charge ("net asset value") or a contingent
deferred sales charge by (1) officers, trustees, directors
and full-time employees of the Trust, any of the Franklin
Templeton Funds, or of the Franklin Templeton Group, and by
their spouses and family members, including any subsequent
payments made by such parties after cessation of employment;
(2) companies exchanging shares or selling assets pursuant
to a merger, acquisition or exchange offer; (3) registered
securities dealers and their affiliates, for their
investment account only; and (4) registered personnel and
employees of securities dealers and by their spouses and
family members, in accordance with the internal policies and
procedures of the employing securities dealer.

For either Class I or Class II, the same class of shares of
the Fund may be purchased at net asset value by persons who
have redeemed, within the previous 120 days, their shares of
the Fund or another of the Franklin Templeton Funds which
were purchased with a front-end sales charge or assessed a
contingent deferred sales charge on redemption. If a
different class of shares is purchased, the full front-end
sales charge must be paid at the time of purchase of the new
shares. An investor may reinvest an amount not exceeding the
redemption proceeds. While credit will be given for any
contingent deferred sales charge paid on the shares redeemed
and subsequently repurchased, a new contingency period will
begin. Shares of the Fund redeemed in connection with an
exchange into another fund (see "Exchange Privilege") are
not considered "redeemed" for this privilege. In order to
exercise this privilege, a written order for the purchase of
shares of the Fund must be received by the Fund or the
Fund's Shareholder Services Agent within 120 days after the
redemption. The 120 days, however, do not begin to run on
redemption proceeds placed immediately after redemption in a
Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset
value may also be handled by a securities dealer or other
financial institution, who may charge the shareholder a fee
for this service. The redemption is a taxable transaction
but reinvestment without a sales charge may affect the
amount of gain or loss recognized and the tax basis of the
shares reinvested. If there has been a loss on the
redemption, the loss may be disallowed if a reinvestment in
the same fund is made within a 30-day period. Information
regarding the possible tax consequences of such a
reinvestment is included in the tax section of this
Prospectus and the SAI.

For either Class I or Class II, the same class of shares of
the Fund or of another of the Franklin Templeton Funds may
be purchased at net asset value and without a contingent
deferred sales charge by persons who have received dividends
and capital gains distributions in cash from investments in
that class of shares of the Fund within 120 days of the
payment date of such distribution. To exercise this
privilege, a written request to reinvest the distribution
must accompany the purchase order. Additional information
may be obtained from Shareholder Services at 1-800/632-2301.
See "Distributions to Shareholders."

Class I shares may be purchased at net asset value and
without the imposition of a contingent deferred sales charge
by investors who have, within the past 60 days, redeemed an
investment in a mutual fund which is not part of the
Franklin Templeton Funds and which charged the investor a
contingent deferred sales charge upon redemption and which
has an investment objective similar to that of the Fund.

Class I shares may be purchased at net asset value and
without the imposition of a contingent deferred sales charge
by broker-dealers who have entered into a supplemental
agreement with Distributors, or by registered investment
advisors affiliated with such broker-dealers, on behalf of
their clients who are participating in a comprehensive fee
program (sometimes known as a wrap fee program).

Class I shares may also be purchased at net asset value and
without the imposition of a contingent deferred sales charge
by any state, county, or city, or any instrumentality,
department, authority or agency thereof which has determined
that the Fund is a legally permissible investment and which
is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase
of shares of any registered management investment company
(an "eligible governmental authority"). SUCH INVESTORS
SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER
AND TO WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL
INVESTMENTS FOR THEM. Municipal investors considering
investment of proceeds of bond offerings into the Fund
should consult with expert counsel to determine the effect,
if any, of various payments made by the Fund or its
investment manager on arbitrage rebate calculations. If an
investment by an eligible governmental authority at net
asset value is made through a securities dealer who has
executed a dealer agreement with Distributors, Distributors
or one of its affiliates may make a payment, out of its own
resources, to such securities dealer in an amount not to
exceed 0.25% of the amount invested. Contact Franklin's
Institutional Sales Department for additional information.

Description of Special Net Asset Value Purchases

Class I shares may be purchased at net asset value and
without the imposition of a contingent deferred sales charge
by trust companies and bank trust departments for funds over
which they exercise exclusive discretionary investment
authority and which are held in a fiduciary, agency,
advisory, custodial or similar capacity. Such purchases are
subject to minimum requirements with respect to amount of
purchase, which may be established by Distributors.
Currently, those criteria require that the amount invested
or to be invested during the subsequent 13-month period in
this Fund or any of the Franklin Templeton Investments must
total at least $1,000,000. Orders for such accounts will be
accepted 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 such order.

Refer to the SAI for further information regarding net asset
value purchases of Class I shares.

Purchasing Class I and Class II Shares

When placing purchase orders, investors should clearly
indicate which class of shares they intend to purchase. A
purchase order that fails to specify a class will
automatically be invested in Class I shares. Purchases of $1
million or more in a single payment will be invested in
Class I shares. There are no conversion features attached to
either class of shares.

Investors who qualify to purchase Class I shares at net
asset value should purchase Class I rather than Class II
shares. See the section "Purchases at Net Asset Value" and
"Description of Special Net Asset Value Purchases" above for
a discussion of when shares may be purchased at net asset
value.

General

Securities laws of states in which the Fund's shares are
offered for sale may differ from the interpretations of
federal law, and banks and financial institutions selling
Fund shares may be required to register as dealers pursuant
to state law.

Other Programs and Privileges
Available to Fund Shareholders

Certain of the programs and privileges described in this
section may not be available directly from the Fund to
shareholders whose shares are held, of record, by a
financial institution or in a "street name" account or
networked account through the National Securities Clearing
Corporation ("NSCC") (see the section captioned "Account
Registrations" in this Prospectus).

Share Certificates

Shares for an initial investment, as well as subsequent
investments, including the reinvestment of dividends and
capital gain distributions, are generally credited to an
account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining
shares in uncertificated form (also known as "plan balance")
minimizes the risk of loss or theft of a share certificate.
A lost, stolen or destroyed certificate cannot be replaced
without obtaining a sufficient indemnity bond. The cost of
such a bond, which is generally borne by the shareholder,
can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if
requested in writing by the shareholder or by the securities
dealer.

Confirmations

A confirmation statement will be sent to each shareholder
quarterly to reflect the dividends reinvested during that
period and after each other transaction which affects the
shareholder's account. This statement will also show the
total number of shares owned by the shareholder, including
the number of shares in plan balance for the account of the
shareholder.

Automatic Investment Plan

Under the Automatic Investment Plan, a shareholder may be
able to arrange to make additional purchases of shares
automatically on a monthly basis by electronic funds
transfer from a checking account, if the bank which
maintains the account is a member of the Automated Clearing
House, or by preauthorized checks drawn on the shareholder's
bank account. A shareholder may, of course, terminate the
program at any time. The Automatic Investment Plan
Application included with this Prospectus contains the
requirements applicable to this program. In addition,
shareholders may obtain more information concerning this
program from their securities dealer or from Distributors.

The market value of each class of the Fund's shares is
subject to fluctuation. Before undertaking any plan for
systematic investment, the investor should keep in mind that
such a program does not assure a profit or protect against a
loss.

Systematic Withdrawal Plan

A shareholder may establish a Systematic Withdrawal Plan and
receive regular periodic payments from the account, provided
that the net asset value of the shares held by the
shareholder is at least $5,000. There are no service charges
for establishing or maintaining a Systematic Withdrawal
Plan. The minimum amount which the shareholder may withdraw
is $50 per withdrawal transaction, although this is merely
the minimum amount allowed under the plan and should not be
mistaken for a recommended amount. The plan may be
established on a monthly, quarterly, semiannual or annual
basis. If the shareholder establishes a plan, any capital
gain distributions and income dividends paid by the Fund
will be reinvested for the shareholder's account in
additional shares at net asset value. Payments will then be
made from the liquidation of shares at net asset value on
the day of the transaction (which is generally the first
business day of the month in which the payment is scheduled)
with payment generally received by the shareholder three to
five days after the date of liquidation. By completing the
"Special Payment Instructions for Distributions" section of
the Shareholder Application included with this Prospectus, a
shareholder may direct the selected withdrawals to another
of the Franklin Templeton Funds, to another person, or
directly to a checking account. If the bank at which the
account is maintained is a member of the Automated Clearing
House, the payments may be made automatically by electronic
funds transfer. If this last option is requested, the
shareholder should allow at least 15 days for initial
processing. Payments which may be paid in the interim will
be sent to the address of record. Liquidation of shares may
reduce or possibly exhaust the shares in the shareholder's
account, to the extent withdrawals exceed shares earned
through dividends and distributions, particularly in the
event of a market decline. If the withdrawal amount exceeds
the total plan balance, the account will be closed and the
remaining balance will be sent to the shareholder. As with
other redemptions, a liquidation to make a withdrawal
payment is a sale for federal income tax purposes. Because
the amount withdrawn under the plan may be more than the
shareholder's actual yield or income, part of the payment
may be a return of the shareholder's investment.

The maintenance of a Systematic Withdrawal Plan concurrently
with purchases of additional shares of the Fund would be
disadvantageous because of the sales charge on the
additional purchases. Also, redemptions of Class I shares
and Class II shares may be subject to a contingent deferred
sales charge if the shares are redeemed within 12 months
(Class I shares) or 18 months (Class II shares) of the
calendar month of the original purchase date. The
shareholder should ordinarily not make additional
investments of less than $5,000 or three times the annual
withdrawals under the plan during the time such a plan is in
effect.

With respect to Class I shares, the contingent deferred
sales charge is waived for redemptions through a Systematic
Withdrawal Plan set up prior to February 1, 1995.  With
respect to Systematic Withdrawal Plans set up on or after
February 1, 1995, the applicable contingent deferred sales
charge is waived for Class I and Class II share redemptions
of up to 1% monthly of an account's net asset value (12%
annually, 6% semiannually, 3% quarterly).  For example, if a
Class I account maintained an annual balance of $1,000,000,
only $120,000 could be withdrawn through a once-yearly
Systematic Withdrawal Plan free of charge; any amount over
that $120,000 would be assessed a 1% (or applicable)
contingent deferred sales charge. Likewise, if a Class II
account maintained an annual balance of $10,000, only $1,200
could be withdrawn through a once-yearly Systematic
Withdrawal Plan free of charge.

A Systematic Withdrawal Plan may be terminated on written
notice by the shareholder or the Fund, and it will terminate
automatically if all shares are liquidated or withdrawn from
the account, or upon the Fund's receipt of notification of
the death or incapacity of the shareholder. Shareholders may
change the amount (but not below the specified minimum) and
schedule of withdrawal payments, or suspend one such
payment, by giving written notice to Investor Services at
least seven business days prior to the end of the month
preceding a scheduled payment. Share certificates may not be
issued while a Systematic Withdrawal Plan is in effect.


Institutional Accounts

There may be additional methods of purchasing, redeeming or
exchanging shares of the Fund available to institutional
accounts. For further information, contact Franklin's
Institutional Services Department at 1-800/321-8563.

Exchange Privilege

The Franklin Templeton Funds consist of a number of mutual
funds with various investment objectives and policies. The
shares of most of these mutual funds are offered to the
public with a sales charge. If a shareholder's investment
objective or outlook for the securities markets changes, the
Fund shares may be exchanged for the same class of shares of
other Franklin Templeton Funds which are eligible for sale
in the shareholder's state of residence and in conformity
with such fund's stated eligibility requirements and
investment minimums. Some funds, however, may not offer
Class II shares. Class I shares may be exchanged for Class I
shares of any Franklin Templeton Funds. Class II shares may
be exchanged for Class II shares of any Franklin Templeton
Funds. No exchanges between different classes of shares will
be allowed. A contingent deferred sales charge will not be
imposed on exchanges. If, however, the exchanged shares were
subject to a contingent deferred sales charge in the
original fund purchased and shares are subsequently redeemed
within 12 months (Class I shares) or 18 months (Class II
shares) of the calendar month of the original purchase date,
a contingent deferred sales charge will be imposed.
Investors should review the prospectus of the fund they wish
to exchange from and the fund they wish to exchange into for
all specific requirements or limitations on exercising the
exchange privilege, for example, minimum holding periods or
applicable sales charges.

Exchanges may be made in any of the following ways:

Exchanges By Mail

Send written instructions signed by all account owners and
accompanied by any outstanding share certificates properly
endorsed. The transaction will be effective upon receipt of
the written instructions together with any outstanding share
certificates.

Exchanges By Telephone

Shareholders, or their investment representative of record,
if any, may exchange shares of the Fund by telephone by
calling Investor Services at 1-800/632-2301 or the automated
Franklin TeleFACTS(Registered Trademark) system (day or
night) at 1-800/247-1753. If the shareholder does not wish
this privilege extended to a particular account, the Fund or
Investor Services should be notified.

The telephone exchange privilege allows a shareholder to
effect exchanges from the Fund into an identically
registered account of the same class of shares in one of the
other available Franklin Templeton Funds. The telephone
exchange privilege is available only for uncertificated
shares or those which have previously been deposited in the
shareholder's account. The Fund and Investor Services will
employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Please refer to
"Telephone Transactions - Verification Procedures."

During periods of drastic economic or market changes, it is
possible that the telephone exchange privilege may be
difficult to implement and the TeleFACTS option may not be
available. In this event, shareholders should follow the
other exchange procedures discussed in this section,
including the procedures for processing exchanges through
securities dealers.

Exchanges Through Securities Dealers

As is the case with all purchases and redemptions of the
Fund's shares, Investor Services will accept exchange orders
from securities dealers who execute a dealer or similar
agreement with Distributors. See also "Exchanges By
Telephone" above. Such a dealer-ordered exchange will be
effective only for uncertificated shares on deposit in the
shareholder's account or for which certificates have
previously been deposited. A securities dealer may charge a
fee for handling an exchange.

Additional Information Regarding Exchanges

Exchanges of the same class of shares are made on the basis
of the net asset values of the class involved, except as set
forth below. Exchanges of shares of a class which were
originally purchased without a sales charge will be charged
a sales charge in accordance with the terms of the
prospectus of the fund and the class of shares being
purchased, unless the original investment on which no sales
charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of Class I shares of
the Fund which were purchased with a lower sales charge into
a fund which has a higher sales charge will be charged the
difference in sales charges, unless the shares were held in
the Fund for at least six months prior to executing the
exchange.

When an investor requests the exchange of the total value of
the Fund account, accrued but unpaid income dividends and
capital gain distributions will be reinvested in the Fund at
the net asset value on the date of the exchange, and then
the entire share balance will be exchanged into the new fund
in accordance with the procedures set forth above. Because
the exchange is considered a redemption and purchase of
shares, the shareholder may realize a gain or loss for
federal income tax purposes. Backup withholding and
information reporting may also apply. Information regarding
the possible tax consequences of such an exchange is
included in the tax section in this Prospectus and in the
SAI.

There are differences among the many Franklin Templeton
Funds. Before making an exchange, a shareholder should
obtain and review a current prospectus of the fund into
which the shareholder wishes to transfer.

If a substantial portion of the Fund's shareholders should,
within a short period, elect to redeem their shares of the
Fund pursuant to the exchange privilege, the Fund might have
to liquidate 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
should occur, it is the general policy of the Fund to
initially invest this money in short-term, tax-exempt
municipal securities, unless it is felt that attractive
investment opportunities consistent with the Fund's
investment objective exist immediately. Subsequently, this
money will be withdrawn from such 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 exchange privilege may be modified or discontinued by
the Fund at any time upon 60 days' written notice to
shareholders.

The Fund currently will not accept investments from Timing
Accounts.

Exchanges of Class I Shares

The contingency period of Class I shares will be tolled (or
stopped) for the period such shares are exchanged into and
held in a Franklin or Templeton money market fund. If a
Class I account has shares subject to a contingent deferred
sales charge, Class I shares will be exchanged into the new
account on a "first-in, first-out" basis. See also "How to
Sell Shares of the Fund - Contingent Deferred Sales Charge."

Exchanges of Class II Shares

When an account is composed of Class II shares subject to
the contingent deferred sales charge, and Class II shares
that are not, the shares will be transferred proportionately
into the new fund. Shares received from reinvestment of
dividends and capital gains are referred to as "free
shares," shares which were originally subject to a
contingent deferred sales charge but to which the contingent
deferred sales charge no longer applies are called "matured
shares," and shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable shares." CDSC
liable shares held for different periods of time are
considered different types of CDSC liable shares. For
instance, if a shareholder has $1,000 in free shares, $2,000
in matured shares, and $3,000 in CDSC liable shares, and the
shareholder exchanges $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. Similarly, if CDSC liable
shares have been purchased at different periods, a
proportionate amount will be taken from shares held for each
period. If, for example, a shareholder holds $1,000 in
shares bought 3 months ago, $1,000 bought 6 months ago, and
$1,000 bought 9 months ago, and the shareholder exchanges
$1,500 into the new fund, $500 from each of these shares
will be deemed exchanged into the new fund.

The only money market fund exchange option available to
Class II shareholders is the Franklin Templeton Money Fund
II ("Money Fund II"), a series of the Franklin Templeton
Money Fund Trust. No drafts (checks) may be written on Money
Fund II accounts, nor may shareholders purchase shares of
Money Fund II directly. Class II shares exchanged for shares
of Money Fund II will continue to age and a contingent
deferred sales charge will be assessed if CDSC liable shares
are redeemed.  No other money market funds are available for
Class II shareholders for exchange purposes.  Class I shares
may be exchanged for shares of any of the money market funds
in the Franklin Templeton Funds except Money Fund II.  Draft
writing privileges and direct purchases are allowed on these
other money market funds as described in their respective
prospectuses.

To the extent shares are exchanged proportionately, as
opposed to another method, such as first-in first-out, or
free-shares followed by CDSC liable shares, the exchanged
shares may, in some instances, be CDSC liable even though a
redemption of such shares, as discussed elsewhere herein,
may no longer be subject to a CDSC. The proportional method
is believed by management to more closely meet and reflect
the expectations of Class II shareholders in the event
shares are redeemed during the contingency period. For
federal income tax purposes, the cost basis of shares
redeemed or exchanged is determined under the Code without
regard to the method of transferring shares chosen by the
Fund.

Transfers

Transfers between identically registered accounts in the
same fund and class are treated as non-monetary and non-
taxable events, and are not subject to a contingent deferred
sales charge. The transferred shares will continue to age
from the date of original purchase.  Like exchanges, Class
II shares will be moved proportionately from each type of
shares in the original account.

Conversion Rights

It is not presently anticipated that Class II shares will be
convertible to Class I shares. A shareholder may, however,
sell his or her Class II shares and use the proceeds to
purchase Class I shares, subject to all applicable sales
charges.

How to Sell Shares of the Fund

A shareholder may at any time liquidate shares owned and
receive from the Fund the value of the shares. Shares may be
redeemed in any of the following ways:

Redemptions By Mail

Send a written request, signed by all registered owners, to
Investor Services, at the address shown on the back cover of
this Prospectus, and any share certificates which have been
issued for the shares being redeemed, properly endorsed and
in order for transfer. The shareholder will then receive
from the Fund the value of the class of shares redeemed
based upon the net asset value per share (less a contingent
deferred sales charge, if applicable) next computed after
the written request in proper form is received by Investor
Services. Redemption requests received after the time at
which the net asset value is calculated (at the close of the
New York Stock Exchange ("Exchange"), which is generally
1:00 p.m. Pacific time) each day that the Exchange is open
for business will receive the price calculated on the
following business day. Shareholders are requested to
provide a telephone number(s) where they may be reached
during business hours, or in the evening if preferred.
Investor Services' ability to contact a shareholder promptly
when necessary will speed the processing of the redemption.

To be considered in proper form, signatures must be
guaranteed if the redemption request involves any of the
following:

(1)  the proceeds of the redemption are over $50,000;

(2)  the proceeds (in any amount) are to be paid to someone
other than the registered owner(s) of the account;

(3)  the proceeds (in any amount) are to be sent to any
address other than the shareholder's address of record,
preauthorized bank account or brokerage firm account;

(4)  share certificates, if the redemption proceeds are in
excess of $50,000; or

(5)  the Fund or Investor Services believes that a signature
guarantee would protect against potential claims based on
the transfer instructions, including, for example, when (a)
the current address of one or more joint owners of an
account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to the Fund, (c)
the Fund has been notified of an adverse claim, (d) the
instructions received by the Fund are given by an agent, not
the actual registered owner, (e) the Fund determines that
joint owners who are married to each other are separated or
may be the subject of divorce proceedings, or (f) the
authority of a representative of a corporation, partnership,
association, or other entity has not been established to the
satisfaction of the Fund.

Signatures must be guaranteed by an "eligible guarantor
institution" as defined under Rule 17Ad-15 under the
Securities Exchange Act of 1934. Generally, eligible
guarantor institutions include (1) national or state banks,
savings associations, savings and loan associations, trust
companies, savings banks, industrial loan companies and
credit unions; (2) national securities exchanges, registered
securities associations and clearing agencies; (3)
securities dealers which are members of a national
securities exchange or a clearing agency or which have
minimum net capital of $100,000; or (4) institutions that
participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature guarantee
medallion program. A notarized signature will not be
sufficient for the request to be in proper form.

Where shares to be redeemed are represented by share
certificates, the request for redemption must be accompanied
by the share certificate and a share assignment form signed
by the registered shareholders exactly as the account is
registered, with the signature(s) guaranteed as referenced
above. Shareholders are advised, for their own protection,
to send the share certificate and assignment form in
separate envelopes if they are being mailed in for
redemption.

Liquidation requests of corporate, partnership, trust and
custodianship accounts, and accounts under court
jurisdiction require the following documentation to be in
proper form:

Corporation - (1) Signature guaranteed letter of instruction
from the authorized officer(s) of the corporation and (2) a
corporate resolution.

Partnership - (1) Signature guaranteed letter of instruction
from a general partner and (2) pertinent pages from the
partnership agreement identifying the general partners or a
certification for a partnership agreement.

Trust - (1) Signature guaranteed letter of instruction from
the trustee(s) and (2) a copy of the pertinent pages of the
trust document listing the trustee(s) or a Certification for
Trust if the trustee(s) are not listed on the account
registration.

Custodial - Signature guaranteed letter of instruction from
the custodian.

Accounts under court jurisdiction - Check court documents
and the applicable state law since these accounts have
varying requirements, depending upon the state of residence.

Payment for redeemed shares will be sent to the shareholder
within seven days after receipt of the request in proper
form.

Redemptions By Telephone

Shareholders who complete the Franklin Templeton Telephone
Redemption Authorization Agreement (the "Agreement"),
included with this Prospectus, may redeem shares of the Fund
by telephone. Information may also be obtained by writing to
the Fund or Investor Services at the address shown on the
cover or by calling 1-800/632-2301. The Fund and Investor
Services will employ reasonable procedures to confirm that
instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described
under "Telephone Transactions - Verification Procedures."

For shareholder accounts with the completed Agreement on
file, redemptions of uncertificated shares or shares which
have previously been deposited with the Fund or Investor
Services may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the
close of the Exchange (generally 1:00 p.m. Pacific time) on
any business day will be processed that same day. The
redemption check will be sent within seven days, made
payable to all the registered owners on the account, and
will be sent only to the address of record. Redemption
requests by telephone will not be accepted within 30 days
following an address change by telephone. In that case, a
shareholder should follow the other redemption procedures
set forth in this Prospectus. Institutional accounts
(certain corporations, bank trust departments and government
entities which qualify to purchase shares at net asset value
pursuant to the terms of this Prospectus) which wish to
execute redemptions in excess of $50,000 must complete an
Institutional Telephone Privileges Agreement which is
available from Franklin's Institutional Services Department
by telephoning 1-800/321-8563.

Redeeming Shares Through Securities Dealers

The Fund will accept redemption orders from securities
dealers who have entered into an agreement with
Distributors. This is known as a repurchase. The only
difference between a normal redemption and a repurchase is
that if the shareholder redeems shares through a securities
dealer, the redemption price will be the net asset value
next calculated after the shareholder's securities dealer
receives the order which is promptly transmitted to the
Fund, rather than on the day the Fund receives the
shareholder's written request in proper form. The documents,
as described in the preceding section, are required even if
the shareholder's securities dealer has placed the
repurchase order. After receipt of a repurchase order from
the securities dealer, the Fund will still require a signed
letter of instruction and all other documents set forth
above. A shareholder's letter should reference the Fund and
the class, the account number, the fact that the repurchase
was ordered by a securities dealer and the securities
dealer's name. Details of the dealer-ordered trade, such as
trade date, confirmation number, and the amount of shares or
dollars, will help speed processing of the redemption. The
seven-day period within which the proceeds of the
shareholder's redemption will be sent will begin when the
Fund receives all documents required to complete ("settle")
the repurchase in proper form. The redemption proceeds will
not earn dividends or interest during the time between
receipt of the securities dealer's repurchase order and the
date the redemption is processed upon receipt of all
documents necessary to settle the repurchase. Thus, it is in
a shareholder's best interest to have the required
documentation completed and forwarded to the Fund as soon as
possible. The shareholder's securities dealer may charge a
fee for handling the order. The SAI contains more
information on the redemption of shares.

Contingent Deferred Sales Charge

Class I. In order to recover commissions paid to securities
dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months of
the calendar month following their purchase. The charge is
1% of the lesser of the net asset value of the shares
redeemed (exclusive of reinvested dividends and capital gain
distributions) or the total cost of such shares at the time
of purchase, and is retained by Distributors. The contingent
deferred sales charge is waived in certain instances. See
"Purchases at Net Asset Value" under "How to Buy Shares of
the Fund."

Class II. Class II shares redeemed within the contingency
period of 18 months of the calendar month following their
purchase will be assessed a contingent deferred sales
charge, unless one of the exceptions described below
applies. The charge is 1% of the lesser of the value of the
shares redeemed (exclusive of reinvested dividends and
capital gain distributions) or the net asset value at the
time of purchase of such shares, and is retained by
Distributors. The contingent deferred sales charge is waived
in certain instances. See below.

Class I and Class II. In determining if a contingent
deferred sales charge applies, shares not subject to a
contingent deferred sales charge are deemed to be redeemed
first, in the following order: (i) Shares representing
amounts attributable to capital appreciation of those shares
held less than the contingency period (12 months in the case
of Class I shares and 18 months in the case of Class II
shares); (ii) shares purchased with reinvested dividends and
capital gain distributions; and (iii) other shares held
longer than the contingency period; and followed by any
shares held less than the contingency period, on a "first
in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in
redemption proceeds or an adjustment to the cost basis of
the shares redeemed.

The contingent deferred sales charge on each class of shares
is waived, as applicable, for: exchanges; any account fees;
redemptions through a Systematic Withdrawal Plan set up for
shares prior to February 1, 1995, and for Systematic
Withdrawal Plans set up thereafter, redemptions of up to 1%
monthly of an account's net asset value (3% quarterly, 6%
semiannually or 12% annually); redemptions initiated by the
Fund due to a shareholder's account falling below the
minimum specified account size; and redemptions following
the death of the shareholder or the beneficial owner.

All investments made during a calendar month, regardless of
when during the month the investment occurred, will age one
month on the last day of that month and each subsequent
month.

Requests for redemptions for a specified dollar amount will
result in additional shares being redeemed to cover any
applicable contingent deferred sales charge, while requests
for redemption of a specific number of shares will result in
the applicable contingent deferred sales charge being
deducted from the total dollar amount redeemed.

Additional Information Regarding Redemptions

The Fund may delay the mailing of the redemption check, or a
portion thereof, until the clearance of the check used to
purchase Fund shares, which may take up to 15 days or more.
Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these
checks will also be held pending clearance. Shares purchased
by federal funds wire are available for immediate
redemption. In addition, the right of redemption may be
suspended or the date of payment postponed if the Exchange
is closed (other than customary closing) or upon the
determination of the SEC that trading on the Exchange is
restricted or an emergency exists, or if the SEC permits it,
by order, for the protection of shareholders. Of course, the
amount received may be more or less than the amount invested
by the shareholder, depending on fluctuations in the market
value of securities owned by the Fund.

Other

For any information required about a proposed liquidation, a
shareholder may call Franklin's Shareholder Services
Department or the securities dealer may call Franklin's
Dealer Services Department.

Telephone Transactions

Shareholders of the Fund and their investment representative
of record, if any, may be able to execute various
transactions by calling Investor Services at 1-800/632-2301.

All shareholders will be able to: (i) effect a change in
address, (ii) change a dividend option, (iii) transfer Fund
shares in one account to another identically registered
account in the Fund, and (iv) exchange Fund shares as
described in this Prospectus by telephone. In addition,
shareholders who complete and file an Agreement as described
under "How to Sell Shares of the Fund - Redemptions By
Telephone" will be able to redeem shares of the Fund.

Verification Procedures

The Fund and Investor Services will employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine. These will include: recording all
telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or
account information requested by the telephone service agent
at the time of the call for the purpose of establishing the
caller's identification, and sending a confirmation
statement on redemptions to the address of record each time
account activity is initiated by telephone. So long as the
Fund and Investor Services follow instructions communicated
by telephone which were reasonably believed to be genuine at
the time of their receipt, neither they nor their affiliates
will be liable for any loss to the shareholder caused by an
unauthorized transaction. The Fund and Investor Services may
be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not
followed. Shareholders are, of course, under no obligation
to apply for or accept telephone transaction privileges. In
any instance where the Fund or Investor Services is not
reasonably satisfied that instructions received by telephone
are genuine, the requested transaction will not be executed,
and neither the Fund nor Investor Services will be liable
for any losses which may occur because of a delay in
implementing a transaction.

General

During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be
difficult to execute because of heavy telephone volume. In
such situations, shareholders may wish to contact their
investment representative for assistance, or to send written
instructions to the Fund as detailed elsewhere in this
Prospectus.

Neither the Fund nor Investor Services will be liable for
any losses resulting from the inability of a shareholder to
execute a telephone transaction.

The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written
notice to shareholders.

Valuation of Fund Shares

The net asset value per share of each class of the Fund is
determined as of the close of the Exchange (generally 1:00
p.m. Pacific time) each day that the Exchange is open for
trading. Many newspapers carry daily quotations of the prior
trading day's closing "bid" (net asset value) and "ask"
(offering price, which includes the maximum sales charge of
each class of shares of the Fund).

The net asset value per share for each class of the Fund is
determined in the following manner: The aggregate of all
liabilities is deducted from the aggregate gross value of
all assets, and the difference is divided by the number of
shares of the respective class of the Fund outstanding at
the time. For the purpose of determining the aggregate net
assets of each class of the Fund, cash and receivables are
valued at their realizable amounts. Interest is recorded as
accrued. Portfolio securities for which market quotations
are readily available are valued within the range of the
most recent bid and ask prices as obtained from one or more
dealers that make markets in the securities. Portfolio
securities which 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 the
Manager. 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 of Trustees. With
the approval of trustees, the Fund may utilize a pricing
service, bank or securities dealer to perform any of the
above described functions.

Each of the Fund's classes will bear, pro rata, all of the
common expenses of the Fund. The net asset value of all
outstanding shares of each class of the Fund will be
computed on a pro rata basis for each outstanding share
based on the proportionate participation in the Fund
represented by the value of shares of such classes, except
that the Class I and Class II shares will bear the Rule 12b-
1 expenses payable under their respective plans. Due to the
specific distribution expenses and other costs that will be
allocable to each class, the dividends paid to each class of
the Fund may vary.

How to Get Information Regarding an Investment in the Fund

Any questions or communications regarding a shareholder's
account should be directed to Investor Services at the
address shown on the back cover of this Prospectus.

From a touch-tone phone, Franklin and Templeton shareholders
may access an automated system (day or night) which offers
the following features.

By calling the Franklin TeleFACTS(Registered Trademark)
system, Class I shareholders may obtain current price, yield
or other performance information specific to a Franklin
fund; process an exchange into an identically registered
Franklin account; obtain account information and request
duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips.

By calling the Templeton Star Service, shareholders may
obtain current price and yield information specific to a
Templeton fund, regardless of class, or Franklin class II
shares; obtain account information, request duplicate
confirmation or year-end statements and money fund checks,
if applicable.

Share prices and account information specific to Templeton
class I or II shares and Franklin class II shares may also
be accessed on TeleFACTS by Franklin class I and class II
shareholders.

The TeleFACTS system is accessible by calling 1-800/247-
1753. The Star Service is accessible by calling 1-800/654-
0123. Franklin Class I and Class II share codes for the
Fund, which will be needed to access system information, are
181 and 281, respectively. The system's automated operator
will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added
in the future.

To assist shareholders and securities dealers wishing to
speak directly with a representative, the following is a
list of the various Franklin departments, telephone numbers
and hours of operation to call. The same numbers may be used
when calling from a rotary phone:

                                          Hours of Operation
                                          (Pacific Time)
Department Name        Telephone No.      (Monday through Friday)
                                          
Shareholder Services   1-800/632-2301     6:00 a.m. to 5:00 p.m.
Dealer Services        1-800/524-4040     6:00 a.m. to 5:00 p.m.
Fund Information       1-800/DIAL BEN     6:00 a.m. to 8:00 p.m.
                                          8:30 a.m. to 5:00 p.m.
                                          (Saturday)
Retirement Plans       1-800/527-2020     6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637     6:00 a.m. to 5:00 p.m.

In order to ensure that the highest quality of service is
being provided, telephone calls placed to or by
representatives in Franklin's service departments may be
accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.

Performance

Advertisements, sales literature and communications to
shareholders may contain various measures of a class'
performance, including current yield, tax equivalent yield,
various expressions of total return, current distribution
rate and taxable equivalent distribution rate. They may
occasionally cite statistics to reflect the Fund's
volatility or risk.

Average annual total return figures, as prescribed by the
SEC, represent the average annual percentage change in value
of $1,000 invested at the maximum public offering price
(offering price includes sales charge) for one-, five- and
ten-year periods, or portion thereof, to the extent
applicable, through the end of the most recent calendar
quarter, assuming reinvestment of all distributions. The
Fund may also furnish total return quotations for each class
for other periods or based on investments at various sales
charge levels or at net asset value. For such purposes,
total return equals the total of all income and capital gain
paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of
the original investment, expressed as a percentage of the
purchase price.

Current yield for each class reflects the income per share
earned by the Fund's portfolio investments. It is calculated
for each class by dividing that class' net investment income
per share during a recent 30-day period by the maximum
public offering price for that class of shares on the last
day of that period and annualizing the result. Tax
equivalent yield demonstrates the yield from a taxable
investment necessary to produce an after-tax yield
equivalent to that of a fund which invests in tax-exempt
obligations. It is computed by dividing the tax-exempt
portion of a fund's yield (calculated as indicated) by one
minus a stated income tax rate and adding the product to the
taxable portion (if any) of the fund's yield.

Current yield and tax equivalent yield for each class, which
are calculated according to a formula prescribed by the SEC
(see the SAI), are not indicative of the dividends or
distributions which were or will be paid to the Fund's
shareholders. Dividends or distributions paid to
shareholders of a class are reflected in the current
distribution rate or taxable equivalent distribution rate,
which may be quoted to shareholders. The current
distribution rate is computed by dividing the total amount
of dividends per share paid by a class during the past 12
months by a current maximum offering price for that class of
shares. A taxable equivalent distribution rate demonstrates
the taxable distribution rate necessary to produce an after
tax distribution rate equivalent to a class' distribution
rate (calculated as indicated above). Under certain
circumstances, such as when there has been a change in the
amount of dividend payout or a fundamental change in
investment policies, it might be appropriate to annualize
the dividends paid during the period such policies were in
effect, rather than using the dividends during the past 12
months. The current distribution rate differs from the
current yield computation because it may include
distributions to shareholders from sources other than
dividends and interest, such as short-term capital gain, and
is calculated over a different period of time.

In each case, performance figures are based upon past
performance, reflect all recurring charges against a class'
income and will assume the payment of the maximum sales
charge on the purchase of that class of shares. When there
has been a change in the sales charge structure, the
historical performance figures will be restated to reflect
the new rate. The investment results of each class, like all
other investment companies, will fluctuate over time; thus,
performance figures should not be considered to represent
what an investment may earn in the future or what a class'
yield, tax equivalent yield, distribution rate, taxable
equivalent distribution rate or total return may be in any
future period.

Because Class II shares were not offered prior to May 1,
1995, no performance data is available for these shares.
After a sufficient period of time has passed, Class II
performance data will be available.

General Information

Reports to Shareholders

The Fund's fiscal year ends December 31. Annual Reports
containing audited financial statements of the Trust,
including the auditor's report, and Semi-Annual Reports
containing unaudited financial statements are automatically
sent to shareholders. Copies may be obtained, without
charge, upon request to the Trust at the telephone number or
address set forth on the cover page of this Prospectus.

Additional information on Fund performance is included in
the Fund's Annual Report to Shareholders and the SAI.

Organization

The Trust was organized as a Massachusetts business trust on
July 17, 1986. The Agreement and Declaration of Trust
permits the trustees to issue an unlimited number of full
and fractional shares of beneficial interest without par
value, which may be issued in any number of series or
classes thereof. Shares issued will be fully paid and non-
assessable and will have no preemptive, conversion, or
sinking rights. Shares of each series have equal and
exclusive rights as to the net assets of such series upon
liquidation or dissolution.

The Board of Trustees may from time to time issue other
series of the Trust, the assets and liabilities of which
will likewise be separate and distinct from any other
series. In addition, each series may offer its shares in one
or more classes, depending on the distribution or other
options offered by each such class.

Voting Rights

Voting rights are noncumulative, so that in any election of
trustees the holders of more than 50% of the shares voting
can elect 100% of the trustees, if they choose to do so and,
in such event, the holders of the remaining shares voting
will not be able to elect any person or persons to the Board
of Trustees. The Trust does not intend to hold annual
shareholders' meetings. The Trust may, however, hold a
special shareholders' meeting for such purposes as changing
fundamental investment restrictions, approving a new
management agreement or any other matters which are required
to be acted on by shareholders under the 1940 Act. A meeting
may also be called by the trustees in their discretion or by
shareholders holding at least ten percent of the outstanding
shares of the Trust. Shareholders will receive assistance in
communicating with other shareholders in connection with the
election or removal of trustees, such as that provided in
Section 16(c) of the 1940 Act.

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 a certain class of the Fund's shares, however,
only shareholders of that class will be entitled to vote.
Therefore, each class of shares 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, or the rules adopted thereunder. For instance, if a
change to the Rule 12b-1 plan relating to Class I shares
requires shareholder approval, only shareholders of Class I
may vote on the change to the Rule 12b-1 plan affecting that
class.  Similarly, if a change to the Rule 12b-1 plan
relating to Class II shares requires approval, only
shareholders of Class II may vote on changes to such plan.
On the other hand, if there is a proposed change to the
investment objective of the Fund, this affects all
shareholders, regardless of which class of shares they hold
and, therefore, each share has the same voting rights.

Redemptions by the Fund

The Fund reserves the right to redeem, at net asset value,
shares of any shareholder whose account has a value of less
than $50, but only where the value of such account has been
reduced by the shareholder's prior voluntary redemption of
shares and has been inactive (except for the reinvestment of
distributions) for a period of at least six months, provided
advance notice is given to the shareholder. More information
is included in the SAI.

Other Information

Distribution or redemption checks sent to shareholders do
not earn interest or any other income during the time such
checks remain uncashed and neither the Fund nor its
affiliates will be liable for any loss to the shareholder
caused by the shareholder's failure to cash such checks.

"Cash" payments to or from the Fund may be made by check,
draft or wire. The Fund has no facility to receive, or pay
out, cash in the form of currency.

Account Registrations

An account registration should reflect the investor's
intentions as to ownership. Where there are two co-owners on
the account, the account will be registered as "Owner 1" and
"Owner 2"; the "or" designation is not used except for money
market fund accounts. If co-owners wish to have the ability
to redeem or convert on the signature of only one owner, a
limited power of attorney may be used.

Accounts should not be registered in the name of a minor,
either as sole or co-owner of the account. Transfer or
redemption for such an account may require court action to
obtain release of the funds until the minor reaches the
legal age of majority. The account should be registered in
the name of one "Adult" as custodian for the benefit of the
"Minor" under the Uniform Transfer or Gifts to Minors Act.

A trust designation such as "trustee" or "in trust for"
should only be used if the account is being established
pursuant to a legal, valid trust document. Use of such a
designation in the absence of a legal trust document may
cause difficulties and require court action for transfer or
redemption of the funds.

Shares, whether in certificate form or not, registered as
joint tenants or "Jt Ten" shall mean "as joint tenants with
rights of survivorship" and not "as tenants in common."

Except as indicated, a shareholder may transfer an account
in the Fund carried in "street" or "nominee" name by the
shareholder's securities dealer to a comparably registered
Fund account maintained by another securities dealer. Both
the delivering and receiving securities dealers must have
executed dealer agreements on file with Distributors. Unless
a dealer agreement has been executed and is on file with
Distributors, the Fund will not process the transfer and
will so inform the shareholder's delivering securities
dealer. To effect the transfer, a shareholder should
instruct the securities dealer to transfer the account to a
receiving securities dealer and sign any documents required
by the securities dealers to evidence consent to the
transfer. Under current procedures, the account transfer may
be processed by the delivering securities dealer and the
Fund after the Fund receives authorization in proper form
from the shareholder's delivering securities dealer. In the
future it may be possible to effect such transfers
electronically through the services of the NSCC.

The Fund may conclusively accept instructions from an owner
or the owner's nominee listed in publicly available nominee
lists, regardless of whether the account was initially
registered in the name of or by the owner, the nominee, or
both. If a securities dealer or other representative is of
record on an investor's account, the investor will be deemed
to have authorized the use of electronic instructions on the
account, including, without limitation, those initiated
through the services of the NSCC, to have adopted as
instruction and signature any such electronic instructions
received by the Fund and the Shareholder Services Agent, and
to have authorized them to execute the instructions without
further inquiry. At the present time, such services which
are available include the NSCC's "Networking," "Fund/SERV,"
and "ACATS" systems.

Any questions regarding an intended registration should be
answered by the securities dealer handling the investment,
or by calling Franklin's Fund Information Department.

Important Notice Regarding
Taxpayer IRS Certifications

Pursuant to the Code and U.S. Treasury regulations, the Fund
may be required to report to the Internal Revenue Service
("IRS") any taxable dividend, capital gain distribution, or
other reportable payment (including share redemption
proceeds) and withhold 31% of any such payments made to
individuals and other non-exempt shareholders who have not
provided a correct taxpayer identification number ("TIN")
and made certain required certifications that appear in the
Shareholder Application. A shareholder may also be subject
to backup withholding if the IRS or a securities dealer
notifies the Fund that the number furnished by the
shareholder is incorrect or that the shareholder is subject
to backup withholding for previous under-reporting of
interest or dividend income.

The Fund reserves the right to (1) refuse to open an account
for any person failing to provide a TIN along with the
required certifications and (2) close an account by
redeeming its shares in full at the then current net asset
value upon receipt of notice from the IRS that the TIN
certified as correct by the shareholder is in fact incorrect
or upon the failure of a shareholder who has completed an
"awaiting TIN" certification to provide the Fund with a
certified TIN within 60 days after opening the account.

Portfolio Operations

The following persons are primarily responsible for the day-
to-day management of the Fund's portfolio: Donald Duerson
and Andrew Jennings, Sr. since inception and Thomas Kenny
since 1994.

Donald Duerson
Vice President
Franklin Advisers, Inc.

Mr. Duerson has a Bachelor of Science degree in Business and
Public Administration from the University of Arizona, and
has experience in the securities industry dating back to
1956. He is a member of industry-related committees and
associations. He joined Advisers in 1986.

Andrew Jennings, Sr.
Vice President
Franklin Advisers, Inc.

Mr. Jennings attended Villanova University in Philadelphia
and has been in the securities industry for over 33 years.
From 1985 to 1990, Mr. Jennings was First Vice President and
Manager of the Municipal Institutional Bond Department at
Dean Witter Reynolds, Inc. He is a member of several
municipal securities industry-related committees and
associations.

Thomas Kenny
Senior Vice President
Franklin Advisers, Inc.

Mr. Kenny is the director of Franklin's municipal bond
department. He joined Franklin in 1986. He received a
Bachelor of Arts degree in Business and Economics from the
University of California at Santa Barbara and Master of
Science degree in Finance from Golden Gate University. He is
a member of several municipal securities industry-related
committees and associations.

Risk Factors in New York

Since the Fund primarily invests in New York Municipal
Securities, there are certain specific factors and
considerations concerning New York State and New York City
which may affect the credit and market risk of the municipal
securities that the Fund may purchase. The following
information is based primarily upon information derived from
public documents relating to securities offerings of issuers
of New York Municipal Securities, from independent municipal
credit reports and historically reliable sources, but has
not been independently verified by the Fund.

The primary purpose of investing in a portfolio of New York
Municipal Securities is the special tax treatment accorded
New York resident individual investors. Payment of interest
and preservation of principal, however, is dependent upon
the continuing ability of New York issuers and/or obligors
of state, municipal and public authority debt obligations to
meet their obligations thereunder. Investors should be aware
that certain substantial issuers of New York Municipal
Securities (including issuers whose obligations may be
acquired by the Fund) have experienced financial
difficulties in recent years. These difficulties have at
times jeopardized the credit standing and impaired the
borrowing abilities of other New York issuers and have
generally contributed to higher interest rates and lower
market prices for their debt obligations. A recurrence of
the financial difficulties previously experienced by such
issuers could result in defaults or declines in the market
values of their existing obligations and, possibly, in the
obligations of other issuers of New York Municipal
Securities.

As of the date of filing of this Prospectus with the SEC, no
issuers of New York Municipal Securities were, to the
knowledge of the investment manager, in default with respect
to the payment of their debt obligations. The occurrence of
any such default, however, could adversely affect the market
values and marketability of all New York Municipal
Securities and, consequently, the net asset value of the
Fund's portfolio. Some of the significant financial
considerations relating to the Fund's investments in New
York Municipal Securities are summarized in the SAI.

Investors should consider the greater risk of the Fund's
concentration in New York Municipal Securities versus the
safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios
of New York issues with those of more diversified
portfolios, including out-of-state issues, before making an
investment decision. The Fund's investment manager believes,
however, that by maintaining the Fund's investment portfolio
in New York Municipal Securities which are covered by
insurance policies providing for the scheduled payment of
principal and interest in the event of non-payment by the
issuer as discussed elsewhere in this Prospectus, the Fund
is largely insulated from the credit risks that may exist on
long-term New York Municipal Securities. The SAI contains a
further description under "Appendix A - Risk Factors
Affecting New York Municipal Securities."

FRANKLIN NEW YORK TAX-FREE TRUST
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1995
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777  1-800/DIAL BEN

Franklin New York Tax-Free Trust (the "Trust") is an open-
end management investment company consisting of three non-
diversified series: Franklin New York Insured Tax-Free
Income Fund (the "Insured Fund"), Franklin New York Tax-
Exempt Money Fund (the "Money Fund"), and Franklin New York
Intermediate-Term Tax-Free Income Fund (the "Intermediate-
Term Fund"). The series may separately or collectively be
referred to hereafter as the  "Fund," "Funds" or
individually by the policy included as part of its name.

Each Fund intends to concentrate its investments in New York
municipal securities and seeks to provide investors with as
high a level of income exempt from federal and New York
State and New York City personal income taxes as is
consistent with prudent investment management, while seeking
preservation of shareholders' capital. The Money Fund also
seeks liquidity in its investments.

The Insured Fund invests in New York municipal securities
which are covered by insurance guaranteeing the scheduled
payment of principal and interest, in securities backed by
the full faith and credit of the U.S. government, in
municipal securities secured by such U.S. government
obligations and in short-term obligations of issuers with
the highest ratings from Moody's Investors Service
("Moody's"), Standard & Poor's Corporation ("S&P") or Fitch
Investors Service, Inc. ("Fitch"). All insured securities
not insured through the issuer will be insured by a
qualified municipal bond insurer.

The Money Fund is a no-load money market fund offering
investors a convenient way to invest in a professionally
managed portfolio of high quality, short-term New York
municipal securities. The Money Fund attempts to maintain a
stable net asset value of $1.00 per share and offers
shareholders the convenience of redemption drafts (similar
to checks) as one of the means of redeeming their shares.

The Intermediate-Term Fund seeks to accomplish its objective
by investing primarily in a portfolio of investment grade
obligations with a dollar-weighted average portfolio
maturity of more than three years but not more than ten
years.

Separate prospectuses for the Funds, dated May 1, 1995, as
may be amended from time to time, provide the basic
information an investor should know before investing in any
Fund of the Trust and may be obtained without charge from
the Trust or from the Trust's principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors"), at
the address shown above.

As explained in the Insured Fund's Prospectus, the Insured
Fund offers two classes of shares to its investors
("multiclass"): Franklin New York Insured Tax-Free Income
Fund - Class I ("Class I") and Franklin New York Insured Tax-
Free Income Fund - Class II ("Class II"). The new multiclass
structure allows investors to choose, among other features,
the differing upfront sales charges and ongoing distribution
fees ("Rule 12b-1 fees") on their investments in the Insured
Fund.

This Statement of Additional Information ("SAI") is not a
prospectus. It contains information in addition to and in
more detail than set forth in the Prospectuses. This SAI is
intended to provide investors with additional information
regarding the activities and operations of the Trust and
each Fund and should be read in conjunction with the Funds'
Prospectuses.

Contents                                   Page

About the Trust

Each Fund's Investment
Objectives and Policies

Description of Municipal
and Other Securities

Insurance (Insured Fund Only)

Investment Restrictions

Officers and Trustees

Investment Advisory
and Other Services

The Trust's Policies Regarding
Brokers Used on Portfolio Transactions

Additional Information Regarding
Trust Shares

Additional Information Regarding
Distributions and Taxation

The Trust's Underwriter

General Information

Miscellaneous Information

Appendices

Financial Statements

About The Trust

The Trust is an open-end management investment company,
commonly called a "mutual fund," and registered with the
Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "1940 Act"). The Trust
was organized as a Massachusetts business trust in July
1986. The Trust issues its shares of beneficial interest
with no par value in three series, each of which maintains a
totally separate investment portfolio.

Each Fund's Investment Objectives and Policies

As noted in the Prospectuses, each Fund seeks to provide
investors with as high a level of income exempt from federal
income taxes and from the personal income taxes of New York
State and New York City as is consistent with prudent
investment management, while seeking the preservation of
shareholders' capital. The Money Fund also seeks liquidity
in its investments. The Intermediate-Term Fund  seeks to
accomplish its objective by investing primarily in a
portfolio of investment grade obligations with a dollar-
weighted average portfolio maturity of more than three years
but not more than ten years.

As described in each Prospectus, under normal market
conditions, each Fund will attempt to invest 100% and, as a
matter of fundamental policy, will invest at least 80% of
the value of its net assets in securities the interest on
which is exempt from federal income taxes, including the
alternative minimum tax, and, under normal circumstances,
will invest at least 65% of its net assets in securities the
interest on which is exempt from the personal income taxes
of New York State and New York City. Thus, it is possible,
although not anticipated, that up to 20% of each Fund's net
assets could be invested in municipal securities subject to
the alternative minimum tax and/or in taxable obligations
and up to 35% of each Fund's net assets could be in
municipal securities from a state other than New York.

Although each Fund seeks to invest all of its assets in a
manner designed to accomplish its objective, there may be
times when market conditions limit the availability of
appropriate municipal securities or, in the investment
manager's opinion, there exist uncertain economic, market,
political or legal conditions which may jeopardize the value
of municipal securities. For temporary defensive purposes
only, when the investment manager believes that market
conditions, such as rising interest rates or other adverse
factors, would cause serious erosion of portfolio value,
each Fund may invest more than 20%, and up to 100%, of the
value of its net assets in fixed-income obligations, the
interest on which is subject to federal income tax, and each
Fund may invest more than 35%, and up to 100%, of its net
assets in instruments the interest on which is exempt from
federal income taxes only. For the Money Fund, temporary
investments not in municipal securities will be limited to
U.S. government securities, commercial paper rated in the
highest grade by either Moody's or S&P (Prime-1 or A-1,
respectively), or in obligations of U.S. banks with assets
of $1 billion or more. See "Appendix B - Description of
Municipal Securities Ratings" at the end of this SAI for
more information concerning ratings.

As required by Rule 2a-7 under the 1940 Act, the Money Fund
will limit its investments to those U.S. dollar denominated
instruments which the Board of Trustees of the Trust
determines present minimal credit risk and which are, as
required by the federal securities laws, rated in one of the
two highest rating categories (within which there may be sub-
categories or gradations indicating relative standing) as
determined by nationally recognized statistical rating
agencies, or which are unrated and of comparable quality,
with remaining maturities of 397 calendar days or less. The
Money Fund will maintain a dollar weighted average maturity
of the securities in its portfolio of 90 days or less. The
maturities of variable or floating rate demand instruments
held by the Money Fund will be deemed to be the longer of
the demand period or the period remaining until the next
interest rate adjustment, although the stated maturities may
be in excess of one year. These procedures are not
fundamental policies of the Money Fund.

Generally, all of the instruments held by the Money Fund are
offered on the basis of a quoted yield to maturity, and the
price of the security is adjusted so that, relative to the
stated rate of interest, it will return the quoted rate to
the purchaser. The maturities of these instruments held by
the Money Fund at the time of issuance will generally range
between three months and one year.

Each Fund is non-diversified and thus not subject to any
statutory restriction under the 1940 Act with respect to the
concentration of its assets in one or relatively few
issuers. This concentration may present greater risks than
in the case of a diversified fund. Each Fund, however,
intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and, therefore, will be restricted in
that, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets must be
represented by cash, government securities, and other
securities limited in respect of any one issuer to not more
than 5% of the value of the total assets of the Fund. In
addition, at the close of each quarter of its taxable year,
not more than 25% of each Fund's total assets may be
invested in securities of one issuer, other than government
securities. These limitations are not fundamental policies
and may be revised to the extent applicable federal income
tax requirements are revised.

Each Fund may invest 25% or more of its net assets in
securities that are related in such a way that an economic,
business or political development or change affecting one
security would also affect the other securities, including,
for example, securities the interest upon which is paid from
revenues of similar type projects, or securities the issuers
of which are located in the same geographic area.

The investment objective and fundamental policies of each
Fund, as set forth above, may not be changed without the
approval of a majority of the respective Fund's outstanding
shares.

Description of Municipal and Other Securities

The Prospectuses describe the general categories and nature
of municipal securities. Discussed below are the major
attributes of the various municipal and other securities in
which each Fund may invest.

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 are issued in expectation of
other kinds of revenue, such as federal revenues available
under the Federal Revenue Sharing Program. They, also, are
usually general obligations of the issuer.

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 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 typically represents a short-
term obligation (270 days or less) issued by a municipality
to meet working capital needs.

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, 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 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 which may be used to
make principal and interest payments on the issuer's
obligations. Some authorities are provided further security
in the form of a state's assurance (although without
obligation) to make up deficiencies in the debt service
reserve fund.

Industrial Development Bonds which pay tax-exempt interest
are in most cases revenue bonds and are issued by or on
behalf of public authorities to raise money to finance
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 facility's user to
meet its financial obligations and the pledge, if any, of
the real and personal property so financed as security for
such payments.

When-Issued Purchases. Municipal bonds are frequently
offered on a "when-issued" basis. When so offered, the
price, which is generally expressed in yield terms, is fixed
at the time the commitment to purchase is made, but delivery
and payment for the when-issued securities take place at a
later date. During the period between purchase and
settlement, no payment is made by a Fund to the issuer and
no interest accrues to a Fund. To the extent that assets of
a Fund are held in cash pending the settlement of a purchase
of securities, the Fund would earn no income; however, it is
each Fund's intention to be fully invested to the extent
practicable and subject to the policies stated above. While
when-issued securities may be sold prior to the settlement
date, each Fund intends to purchase such securities with the
purpose of actually acquiring them, unless a sale appears
desirable for investment reasons. At the time a 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. Each
Fund believes that its net asset value or income will not be
adversely affected by its purchase of municipal bonds on a
when-issued basis. Each Fund will establish a segregated
account in which it will maintain cash and marketable
securities equal in value to commitments for when-issued
securities.

Callable Bonds. There are municipal bonds which are issued
with provisions which prevent them from being called,
typically for periods of 5 to 10 years. During times of
generally declining interest rates, if the call-protection
on callable bonds expires, there is an increased likelihood
that a number of such bonds may, in fact, be called away by
the issuers. Based on a number of factors, including certain
portfolio management strategies used by the Funds'
investment manager, each Fund believes it has reduced the
risk of adverse impact on net asset value based on calls of
callable bonds. The investment manager may dispose of such
bonds in the years prior to their call dates, if the
investment manager believes such bonds are at their maximum
premium potential. In pricing such bonds in each Fund's
portfolio, each callable bond is marked-to-market daily
based on the bond's call date. Thus, the call of some or all
of a Fund's callable bonds may have an impact on such Fund's
net asset value. In light of each Fund's pricing policies
and because each Fund follows certain amortization
procedures required by the Internal Revenue Service ("IRS"),
a Fund is not expected to suffer any material adverse impact
related to the value at which a Fund has carried the bonds
in connection with calls of bonds purchased at a premium.
Notwithstanding such policies, however, the reinvestment of
the proceeds of any called bond may be in bonds which pay a
higher or lower rate of return than the called bonds; and,
as with any investment strategy, there is no guarantee that
a call may not have a more substantial impact than
anticipated or that each Fund's objective will be achieved.

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, Moody's or Fitch.

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. The Insured Fund's and the
Intermediate-Term Fund's investment in zero coupon and
delayed interest bonds may cause such Funds 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 recognizes 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, zeros
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, the Insured Fund and the Intermediate-Term
Fund may be required to dispose of portfolio securities that
they otherwise would have continued to hold or to use cash
flows from other sources such as the sale of Fund shares.

Convertible and Step Coupon Bonds. The Insured Fund and the
Intermediate-Term Fund may invest a portion of their assets
in convertible and step coupon bonds. The convertible bonds
which such Funds may purchase are zero coupon securities
until a predetermined date, at which time they convert to a
specified coupon security. The coupon on step coupon bonds
changes periodically during the life of the security based
upon predetermined dates chosen at the time of issuance
and/or the occurrence in the future of a specified event,
such as a change in rating by a nationally recognized
statistical rating organization.

Variable or Floating Rate Demand Notes ("VRDNs") are tax-
exempt obligations which contain a floating or variable
interest rate and a right of demand, which may be
unconditional, to receive payment of the unpaid principal
balance plus accrued interest upon a short notice period
(generally up to 30 days) prior to specified dates, either
from the issuer or by drawing on a bank letter of credit, a
guarantee or insurance issued with respect to such
instrument. The interest rates are adjustable at intervals
ranging from daily up to monthly, and are calculated to
maintain the market value of the VRDN at approximately its
par value upon the adjustment date.

The Money Fund will purchase variable or floating rate
demand instruments in accordance with procedures prescribed
by its Board of Trustees to minimize credit risks. Any VRDN
purchased by the Money Fund must be of high quality, as
determined by the Board of Trustees, with respect to both
its long-term and short-term aspects, except that where
credit support for the instrument is provided even in the
event of default on the underlying security, the Money Fund
may rely only on the high quality character of the short-
term aspect of the demand instrument, i.e., the demand
feature. A VRDN which is unrated must have high quality
characteristics, similar to those that are rated, in
accordance with policies and guidelines determined by the
Board of Trustees. If the quality of any VRDN falls below
the high quality level required by the Board of Trustees and
the rules adopted by the SEC, the Money Fund must dispose of
the instrument within a reasonable period of time by
exercising the demand feature or by selling the VRDN in the
secondary market, whichever is believed by the investment
manager to be in the best interests of the Money Fund and
its shareholders.

Certificates of Participation. Each Fund may also invest in
municipal lease obligations primarily through Certificates
of Participation ("COPs"). COPs are distinguishable from
municipal debt in that the lease which is the subject of the
transaction typically contains a "nonappropriation" or
"abatement" clause. A nonappropriation clause provides that,
while the municipality will use its best efforts to make
lease payments, the municipality may terminate the lease
without penalty if the municipality's appropriating body
does not allocate the necessary funds.

While the risk of nonappropriation is inherent to COP
financing, each Fund believes that this risk is mitigated by
its policy of investing only in COPs rated within the four
highest rating categories, in the case of the Intermediate-
Term Fund, or, in the case of the Money Fund, the two
highest rating categories, of Moody's, S&P or Fitch, or in
unrated COPs believed to be of comparable quality and, with
respect to the Insured Fund, only in insured COPs. For the
Intermediate-Term Fund and the Money Fund, criteria
considered by the rating agencies and the investment manager
in assessing such risk include the issuing municipality's
credit rating, the essentiality of the leased property to
the municipality and the term of the lease compared to the
useful life of the leased property. The Board of Trustees
has determined that COPs held in each Fund's portfolio
constitute liquid investments based on various factors
reviewed by the investment manager and monitored by the
Board of Trustees. Such factors include (a) the credit
quality of such securities and the extent to which they are
rated; (b) the size of the municipal securities market for a
Fund, both in general and with respect to COPs; and (c) the
extent to which the type of COPs held by a Fund trade on the
same basis and with the same degree of dealer participation
as other municipal bonds of comparable credit rating or
quality. There is no limit as to the amount of assets which
a Fund may invest in COPs.

U.S. Government Obligations which may be owned by a Fund 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 refers to promissory notes issued by
corporations in order to finance their short-term credit
needs.

Certificates of Deposit are certificates 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 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. The Money Fund may engage in
repurchase transactions, in which the Fund purchases a U.S.
government security subject to resale to a bank or dealer at
an agreed-upon price and date. The transaction requires the
collateralization of the seller's obligation by the transfer
of securities with an initial market value, including
accrued interest, equal to at least 102% of the dollar
amount invested by the Fund in each agreement, with the
value of the underlying security marked-to- market daily to
maintain coverage of at least 100%. A default by the seller
might cause the Money Fund to experience a loss or delay in
the liquidation of the collateral securing the repurchase
agreement. The Money Fund might also incur disposition costs
in liquidating the collateral. The Money Fund, however,
intends to enter into repurchase agreements only with
government securities dealers recognized by the Federal
Reserve Board or with member banks of the Federal Reserve
System. Under the 1940 Act, a repurchase agreement is deemed
to be the loan of money by the Fund to the seller,
collateralized by the underlying security. The U.S.
government security subject to resale (the collateral) will
be held pursuant to a written agreement and the Fund's
custodian will take title to, or actual delivery of, the
security. The period of these repurchase agreements will
usually be short, from overnight to one week, and at no time
will the Money Fund invest in repurchase agreements with a
term of more than one year. The securities which are subject
to repurchase agreements, however, may have maturity dates
in excess of one year from the effective date of the
repurchase agreement. The Money Fund may not enter into a
repurchase agreement with more than seven days to maturity
if, as a result, more than 10% of the market value of the
Fund's total assets would be invested in such repurchase
agreements.

Lending Portfolio Securities. Consistent with procedures
approved by the Board of Trustees and subject to the
following conditions, each Fund may lend its portfolio
securities to qualified securities dealers or other
institutional investors, provided that such loans do not
exceed 10% of the value of the Fund's total assets at the
time of the most recent loan. The borrower must deposit with
the Funds' custodian collateral with an initial market value
of at least 102% of the initial market value of the
securities loaned, including any accrued interest, with the
value of the collateral and loaned securities marked-to-
market daily to maintain collateral coverage of at least
102%. Such collateral shall consist of cash. The lending of
securities is a common practice in the securities industry.
Each Fund may engage in security loan arrangements with the
primary objective of increasing such Fund's income either
through investing the cash collateral in short-term interest
bearing obligations or by receiving a loan premium from the
borrower. Under the securities loan agreement, a Fund
continues to be entitled to all dividends or interest on any
loaned securities. As with any extension of credit, there
are risks of delay in recovery and loss of rights in the
collateral should the borrower of the security fail
financially. While such securities are on loan, the borrower
will pay a Fund any income accruing thereon, and such Fund
may invest the cash collateral in portfolio securities,
thereby earning additional income. Each Fund will not lend
its portfolio securities if such loans are not permitted by
the laws or regulations of any state in which its shares are
qualified for sale. Loans are typically subject to
termination by a Fund in the normal settlement time or by
the borrower on one day's notice. Borrowed securities must
be returned when the loan is terminated. Any gain or loss in
the market price of the borrowed securities which occurs
during the term of the loan inures to the lending Fund and
its shareholders. A Fund may pay reasonable finders',
borrowers', administrative and custodial fees in connection
with a loan of its securities.

Income derived by a Fund from securities lending
transactions, repurchase transactions, and investments in
commercial paper, bankers' acceptances and certificates of
deposit will be taxable for federal and New York City and
New York State personal income tax purposes when distributed
to shareholders. Income derived by a Fund from interest on
direct obligations of the U.S. government will be taxable
for federal income tax purposes when distributed to
shareholders. If a Fund, however, meets the requirements of
New York State law and properly designates such
distributions, they will be excludable from income for New
York State personal income tax purposes.

There may, of course, be other types of municipal securities
that become available which are similar to the foregoing
described municipal securities, in which each Fund may also
invest, to the extent such investments would be consistent
with the foregoing objectives and policies.

Timing of Securities Transactions

The Intermediate-Term Fund and the Insured Fund may purchase
or sell securities without regard to the length of time the
security has been held, and the frequency of portfolio
transactions (the turnover rate) will vary from year to
year, depending on market conditions. While short-term
trading increases portfolio turnover, the execution costs
for municipal bonds are substantially less than for
equivalent dollar values of equity securities. Portfolio
turnover rates for the Intermediate-Term Fund and the
Insured Fund are in the Financial Highlights table in their
respective prospectuses. Because the Money Fund purchases
securities with maturities of less than 397 days, securities
which are excluded in making such a calculation, it does not
have, nor is it expected to have, any reportable turnover.

Insurance (Insured Fund Only)

Except for certain temporary short-term investments or U.S.
government guaranteed securities, the investment in
municipal securities by the Insured Fund is covered by
insurance guaranteeing the scheduled payment of principal
and interest thereon. Depending on market conditions, and
under current portfolio insurance restrictions, it is
expected that New York municipal securities will comprise a
major portion of the portfolio of the Insured Fund.

As described in its Prospectus, the Insured Fund will
receive payments of insurance for any installment of
interest and principal due for payment but which shall be
unpaid by reason of nonpayment by the issuer. The term "due
for payment", in reference to the principal of a security,
means its stated maturity date or the date on which it shall
have been called for mandatory sinking fund redemption and
does not refer to any earlier date on which payment is due
by reason of a call for redemption (other than by mandatory
sinking fund redemption), acceleration or other advancement
of maturity; when referring to interest on a security, the
term means the stated date for payment of interest. When,
however, the interest on the security shall have been
determined, as provided in the underlying documentation
relating to such security, to be subject to federal income
taxation, due for payment, when referring to the principal
of such security, also means the date on which it has been
called for mandatory redemption as a result of such
determination of taxability; when referring to interest on
such security, the term means the accrued interest at the
rate provided in such documentation to the date on which it
has been called for such mandatory redemption, together with
any applicable redemption premium. The insurance feature
insures the scheduled payment of interest and principal and
does not guarantee the market value of the insured municipal
securities nor the value of the shares of the Insured Fund.

As stated in the Insured Fund's Prospectus, each insured
municipal security in the Insured Fund's portfolio will be
covered by either a "New Issue Insurance Policy" obtained by
the issuer of the security at the time of its original
issuance or a "Secondary Insurance Policy" or a "Portfolio
Insurance Policy" issued by a qualified municipal bond
insurer.

Under the provisions of the Portfolio Insurance Policy, the
insurer unconditionally and irrevocably agrees to pay to the
appointed trustee or its successor and its agent (the
"Trustee") that portion of the principal of and interest on
the securities which shall become due for payment but shall
be unpaid by reason of nonpayment by the issuer. The insurer
will make such payments to the Trustee on the date such
principal or interest becomes due for payment or on the
business day next following the day on which the insurer
shall have received notice of nonpayment, whichever is
later. The Trustee will disburse to the Insured Fund the
face amount of principal and interest which is then due for
payment but is unpaid by reason of nonpayment by the issuer,
but only upon receipt by the Trustee of (i) evidence of the
Insured Fund's right to receive payment of the principal or
interest due for payment and (ii) evidence, including any
appropriate instruments of assignment, that all of the
rights to payment of such principal or interest due for
payment shall thereupon vest in the insurer. Upon such
disbursement, the insurer shall become the owner of the
security, appurtenant coupon or right to payment of
principal or interest on such security and shall be fully
subrogated to all of the Insured Fund's rights thereunder,
including the right to payment thereof.

Bond insurers are often referred to as "monolines" in that
they only write financial guarantees, as opposed to
"multiline" insurers who write several different types of
insurance policies, such as life, auto and home insurance,
and are exposed to many types of risk. Additionally, bond
insurers are not exposed to "run risk" (which occurs when
too many policyholders rush to cash in their policies),
because they only guarantee payment when due. Also, in order
to maintain triple-A status by recognized national
securities rating agencies (which is required by the Insured
Fund), the bond insurers invest their assets mainly in high
quality municipal and corporate bonds rated double-A or
better and U.S. government obligations.

Neither the Insured Fund nor its investment manager make any
representations as to the ability of any insurance company
to meet its obligation to the Insured Fund if called upon to
do so.

Investment Restrictions

The Trust has adopted the following restrictions as
additional fundamental policies of each Fund, which means
that such restrictions may not be changed without the
approval of a majority of the outstanding voting securities
of that Fund. Under the 1940 Act, a "vote of a majority of
the outstanding voting securities" of the Trust or of a
particular Fund means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Trust or
of such Fund, or (2) 67% or more of the shares of the Trust
or of such Fund present at a shareholders meeting if more
than 50% of the outstanding shares of the Trust or of such
Fund are represented at the meeting in person or by proxy. A
Fund may not:

1. Borrow money or mortgage or pledge any of its assets,
except that borrowings (and a pledge of assets thereof) for
temporary or emergency purposes may be made from banks in
any amount up to 5% of the total asset value. Secured
temporary borrowings may take the form of a reverse
repurchase agreement, pursuant to which each Fund would sell
portfolio securities for cash and simultaneously agree to
repurchase them at a specified date for the same amount of
cash plus an interest component.

2. Buy any securities on margin or sell any securities
short, except that it may use such short-term credits as are
necessary for the clearance of transactions.

3. Make loans, except through the purchase of debt
securities which are customarily purchased by institutional
investors, including the municipal securities described
above, 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 a
Fund from loaning portfolio securities to broker-dealers or
other institutional investors if at least 102% cash
collateral is pledged and maintained by the borrower;
provided such portfolio security loans may not be made if,
as a result, the aggregate of such loans exceeds 10% of the
value of a 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 a 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 securities from or sell to the Trust's officers
and trustees, or any firm of which any officer or trustee is
a member, as principal, or retain securities of any issuer
if, to the knowledge of the Trust, one or more of the
Trust's officers, trustees, or investment adviser own
beneficially more than one-half 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,
and provided that this limitation shall not prohibit the
purchase of municipal and other debt securities secured by
real estate or interests therein.

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, except that each Fund may purchase,
hold, and dispose of puts on municipal securities in
accordance with its investment policies.

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 that the Intermediate-
Term Fund may invest in shares of one or more money market
funds managed by Franklin Advisers, Inc., to the extent
permitted by exemptions granted under the 1940 Act, and
except to the extent the Insured 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 Insured 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. Invest more than 10% of its assets in securities, in the
case of the Money Fund, with legal or contractual
restrictions on resale.

12. Invest more than 25% of its 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.

In addition to these fundamental policies, it is the policy
of the Money Fund not to purchase securities of any issuer
having a record, together with predecessors, of less than
three years' continuous operation if, immediately after such
purchase, more than 10% of the Money Fund's assets taken at
market value would be invested in such securities; except
that the Money Fund may invest up to 20% of its assets in
the securities of municipal issuers which have been in
continuous operation for less than three years. It is not
the policy of the Intermediate-Term Fund to invest in real
estate limited partnerships or in interests (other than
publicly traded securities) in oil, gas, or other mineral
leases, exploration or development.

Officers and Trustees

The Board of Trustees has the responsibility for the overall
management of the Trust, including general supervision and
review of its investment activities. The trustees, in turn,
elect the officers of the Trust who are responsible for
administering day-to-day operations of the Trust. The
affiliations of the officers and trustees and their
principal occupations for the past five years are listed
below. Trustees who are deemed to be "interested persons" of
the Trust, as defined in the 1940 Act, are indicated by an
asterisk (*).

Name, Address  Positions and Offices Principal Occupations
and Age  with the Trust  During Past Five Years

Frank H. Abbott, III (74)
1045 Sansome St.
San Francisco, CA 94111

Trustee

President and Director, Abbott Corporation (an investment
company); and director, trustee or managing general partner,
as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.

Harris J. Ashton (62)
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 54 of the investment
companies in the Franklin Templeton Group of Funds.

S. Joseph Fortunato (62)
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 56 of the
investment companies in the Franklin Templeton Group of
Funds.

David W. Garbellano (80)
111 New Montgomery St., #402
San Francisco, CA 94105

Trustee

Private Investor; Assistant Secretary/Treasurer and
Director, Berkeley Science Corporation (a venture capital
company); and director, trustee or managing general partner,
as the case may be, of 29 of the investment companies in the
Franklin Group of Funds.

*Charles B. Johnson (62)
777 Mariners Island Blvd.
San Mateo, CA 94404

Chairman of the Board 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 55 of the
investment companies in the Franklin Templeton Group of
Funds.

*Rupert H. Johnson, Jr. (54)
777 Mariners Island Blvd.
San Mateo, CA 94404

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 42 of the investment companies in the
Franklin Templeton Group of Funds.

Frank W. T. LaHaye (66)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014

Trustee

General Partner, Peregrine Associates and Miller & LaHaye,
which are General Partners of Peregrine Ventures and
Peregrine Ventures II (venture capital firms); Chairman of
the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or
trustee, as the case may be, of 25 of the investment
companies in the Franklin Group of Funds.

*William J. Lippman (70)
One Parker Plaza
Fort Lee, NJ 07024

Trustee

Senior Vice President, Franklin Resources, Inc., Franklin
Advisers, Inc., Franklin Templeton Distributors, Inc. and
Franklin Management, Inc.; officer and/or director or
trustee of six of the investment companies in the Franklin
Group of Funds.

Gordon S. Macklin (66)
8212 Burning Tree Road
Bethesda, MD 20817

Trustee

Chairman, White River Corporation (information services);
Director, Fund American Enterprises Holdings, Inc., Martin
Marietta Corporation, MCI Communications Corporation,
MedImmune, Inc. (biotechnology), Infovest Corporation
(information services), and Fusion Systems Corporation
(industrial technology); and director, trustee or managing
general partner, as the case may be, of 51 of the investment
companies in the Franklin Templeton Group of Funds; formerly
Chairman, Hambrecht and Quist Group; formerly Director, H &
Q Healthcare Investors; and formerly President, National
Association of Securities Dealers, Inc.

Harmon E. Burns (50)
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 41 of the investment companies in the Franklin
Templeton Group of Funds.

Kenneth V. Domingues (62)
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 36 of the
investment companies in the Franklin Group of Funds.

Martin L. Flanagan (34)
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
of 60 of the investment companies in the Franklin Templeton
Group of Funds.

Deborah R. Gatzek (46)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President and Secretary

Senior Vice President - Legal, Franklin Resources, Inc. and
Franklin Templeton Distributors, Inc.; Vice President,
Franklin Advisers, Inc. and officer of 36 of the investment
companies in the Franklin Group of Funds.

Thomas J. Kenny (32)
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 (56)
777 Mariners Island Blvd.
San Mateo, CA 94404

Treasurer and Principal Accounting Officer

Employee of Franklin Advisers, Inc.; and officer of 36 of
the investment companies in the Franklin Group of Funds.

Edward V. McVey (57)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President

Senior Vice President/National Sales Manager, Franklin
Templeton Distributors, Inc.; and officer of 31 of the
investment companies in the Franklin Group of Funds.

Richard C. Stoker (57)
11615 Spring Ridge Rd.
Potomac, Maryland 20854

Vice President

Senior Vice President, Franklin Templeton Distributors,
Inc.; Vice President, Franklin Management, Inc.; and officer
of four of the funds in the Franklin Group of Funds.

Trustees not affiliated with the investment manager
("nonaffiliated trustees") are currently paid fees of $50
per month plus $50 per meeting attended. During the fiscal
year ended December 31, 1994, fees totaling $7,250 were paid
to nonaffiliated trustees of the Trust. As indicated above,
certain of the trustees and officers hold positions with
other companies in the Franklin Group of Funds(Registered
Trademark) and the Templeton Funds ("Franklin Templeton
Funds"). The following table shows the fees paid by the
Trust to its nonaffiliated trustees and the total fees paid
to such trustees by the Trust and other Franklin Templeton
Funds for which they serve as directors, trustees or
managing general partners.

                                                      Total
                                                      Compensation from
                       Aggregate     Number of        Franklin
                       Compensation  Franklin         Templeton
Name                   from Trust *  Templeton Funds  Funds,
                                     Boards on Which  including
                                     Each Serves      the Trust*
Frank H. Abbott, III   $1,250        30                $176,870
Harris J. Ashton       $1,200        54                $319,925
S. Joseph Fortunato    $1,200        56                $336,065
David Garbellano       $1,200        29                $153,300
Frank W.T. LaHaye      $1,200        25                $150,817
Gordon Macklin         $1,200        51                $303,685

*For the year ended December 31, 1994.

Nonaffiliated trustees are also reimbursed for expenses
incurred in connection with attending Board meetings, paid
pro rata by each Franklin Templeton Fund for which they
serve as directors, trustees or managing general partners.
No officer or trustee received any other compensation
directly from the Trust. As of April 3, 1995, the trustees
and officers, as a group, owned of record and beneficially
approximately 8,333 shares or less than 1% of the total
outstanding shares of the Money Fund. The trustees and
officers did not own of record or beneficially any
outstanding shares of the Insured Fund or Intermediate-Term
Fund. In addition, many of the Trust's trustees own shares
in various of the other funds in the Franklin Group of Funds
and the Templeton Group of Funds. Certain officers or
trustees who are shareholders of Franklin Resources, Inc.
may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr.
are brothers.

From time to time, the number of shares of each Fund 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.
To the best knowledge of the Trust, no other person holds
beneficially or of record more than 5% of a Fund's
outstanding shares.

Investment Advisory and  Other Services

The investment manager of the Trust is Franklin Advisers,
Inc. ("Advisers" or "Manager"). Advisers is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Resources"), a
publicly owned holding company whose shares are listed on
the New York Stock Exchange (the "Exchange"). Resources owns
several other subsidiaries which are involved in investment
management and shareholder services. The Manager and other
subsidiary companies of Resources currently manage over $118
billion in assets for more than 3.8 million shareholders.
The preceding table indicates those officers and trustees
who are also affiliated persons of Distributors and
Advisers.

Pursuant to separate management agreements, the Manager
provides investment research and portfolio management
services, including the selection of securities for each
Fund to purchase, hold or sell and the selection of brokers
through whom each Fund's portfolio transactions are
executed. The Manager's extensive research activities
include, as appropriate, traveling to meet with issuers and
to review project sites. The Manager's activities are
subject to the review and supervision of the Trust's Board
of Trustees to whom the Manager renders periodic reports of
each Fund's investment activities. The Manager, at its own
expense, furnishes the Trust with office space and office
furnishings, facilities and equipment required for managing
the business affairs of the Trust; maintains all internal
bookkeeping, clerical, secretarial and administrative
personnel and services; and provides certain telephone and
other mechanical services. The Manager is covered by
fidelity insurance on its officers, directors and employees
for the protection of the Trust. The Trust bears all of its
expenses not assumed by the Manager.

See the Statement of Operations in the financial statements
included in the Trust's Annual Report to Shareholders dated
December 31, 1994, for additional details of these expenses.

Pursuant to management agreements with the Intermediate-Term
and Insured Funds, each Fund is obligated to pay the Manager
a fee computed at the close of business on the last business
day of each month equal to a monthly rate of 5/96 of 1%
(approximately 5/8 of 1% per year) for the first $100
million of average monthly net assets of the Fund; 1/24 of
1% (approximately 1/2 of 1% per year) of average monthly net
assets of the Fund in excess of $100 million up to $250
million; and 9/240 of 1% (approximately 45/100 of 1% per
year) of average monthly net assets of the Fund in excess of
$250 million. Each class of the Insured Fund will pay its
share of the fee as determined by the proportion of the
Insured Fund that it represents. Pursuant to its management
agreement with the Manager, the Money Fund pays a daily fee
(payable at the request of the Manager) computed at the rate
of 1/584 of 1% (approximately 5/8 of 1% per year) of the
average daily net assets of the Fund for the first $100
million; plus 1/730 of 1% (approximately 1/2 of 1% per year)
of average daily net assets over $100 million up to $250
million; and 1/811 of 1% (approximately 45/100 of 1% per
year) of average daily net assets in excess of $250 million.

The Manager has limited its management fees and has assumed
responsibility for making payments, if necessary, to offset
certain operating expenses otherwise payable by each Fund.
This action by the Manager to limit its management fees and
to assume responsibility for payment of the expenses related
to the operations of each Fund may be terminated by the
Manager at any time. The management agreement specifies that
the management fee will be reduced to the extent necessary
to comply with the most stringent limits on the expenses
which may be borne by a Fund as prescribed by any state in
which a Fund's shares are offered for sale. The most
stringent current limit requires the Manager to reduce or
eliminate its fee to the extent that aggregate operating
expenses of a Fund (excluding interest, taxes, brokerage
commissions and extraordinary expenses such as litigation
costs) would otherwise exceed in any fiscal year 2.5% of the
first $30 million of average net assets of a Fund, 2% of the
next $70 million of average net assets of a Fund, and 1.5%
of average net assets of a Fund in excess of $100 million.
Expense reductions have not been necessary based on state
requirements.

The tables below set forth the management fees each Fund was
contractually obligated to pay the Manager and the
management fees actually paid by each Fund, for the fiscal
years ended December 31, 1992, 1993, and 1994.

Fiscal Year Ended December 31, 1994:

                      Contractual           Management
                      Management            Fees Paid
                      Fees                  By the Fund
                                            
Money Fund            $  369,023            $171,416
Insured Fund          $1,349,257            $992,613
Intermediate-Term     $  234,273            $  -0-
Fund

Fiscal Year Ended December 31, 1993:

                      Contractual           Management
                      Management            Fees Paid
                      Fees                  By the Fund
                                            
Money Fund            $  319,118            $142,460
Insured Fund          $1,185,510            $868,888
Intermediate-Term     $  106,935               -0-
Fund

Fiscal Year Ended December 31, 1992:

                      Contractual           Management
                      Management            Fees Paid
                      Fees                  By the Fund
                                            
Money Fund            $392,002              $245,983
Insured Fund          $605,593              $215,749
Intermediate-Term     $  5,283                 -0-
Fund*

*For the period from September 21, 1992 (commencement of
operations) to December 31, 1992.

The management agreement for the Money Fund is in effect
until February 29, 1996 and the management agreements for
the Intermediate-Term and Insured Funds are in effect until
March 31, 1996. Thereafter, they may continue in effect for
successive annual periods, provided such continuance is
specifically approved at least annually by a vote of the
Trust's Board of Trustees or by a vote of the holders of a
majority of the respective Fund's outstanding voting
securities, and in either event by a majority vote of the
Trust's trustees who are not parties to the management
agreements or interested persons of any such party (other
than as trustees of the Trust), cast in person at a meeting
called for that purpose. The management agreements as to the
Insured Fund and the Intermediate-Term Fund may be
terminated without penalty at any time by such Funds or by
the Manager on 30 days' written notice and, as to the Money
Fund, on 60 days' written notice, and will automatically
terminate in the event of their assignment, as defined in
the 1940 Act.

Franklin/Templeton Investor Services, Inc. ("Investor
Services" or "Shareholder Services Agent"), a wholly-owned
subsidiary of Resources, is the shareholder servicing agent
for the Trust and acts as the Trust's transfer agent and
dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account.

Bank of America NT & SA, 555 California Street, 4th Floor,
San Francisco, California 94104, acts as custodian of the
securities and other assets of the Trust. 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.

Coopers & Lybrand L.L.P., 333 Market Street, San Francisco,
California 94105, are the Trust's independent auditors.
During the fiscal year ended December 31, 1994, their
auditing services consisted of rendering an opinion on the
financial statements of the Trust included in the Trust's
Annual Report to Shareholders dated December 31, 1994.

The Trust's Policies Regarding Brokers
Used on Portfolio Transactions

Since most purchases made by the Funds are principal
transactions at net prices, the Funds incur little or no
brokerage costs. Each Fund deals directly with the selling
or purchasing 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 utilizing the services of a broker. Purchases of
portfolio securities from underwriters include a commission
or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and
ask price. As a general rule, the Funds do not purchase
bonds in underwritings where they are not given any choice,
or only limited choice, in the designation of dealers to
receive the commission. Each 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 rendered by such 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 allocations 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, the Manager and its
affiliates may use this research and data in their
investment advisory capacities with other clients. Provided
that the Trust's officers are satisfied that the best
execution is obtained, the sale of a Fund's shares may also
be considered as a factor in the selection of broker-dealers
to execute a Fund's portfolio transactions.

If purchases or sales of securities of a Fund and one or
more other investment companies or clients supervised by the
Manager are considered at or about the same time,
transactions in such securities will be allocated among the
several investment companies and clients in a manner deemed
equitable to all by the Manager, taking into account the
respective sizes of the funds and the amount of securities
to be purchased or sold. It is recognized that in some cases
this procedure could possibly have a detrimental effect on
the price or volume of the security so far as a 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 a Fund.

During the fiscal years ended December 31, 1992, 1993 and
1994, the Funds paid no brokerage commissions. As of
December 31, 1994, the Funds did not own securities of their
regular broker-dealers.

Additional Information Regarding Trust Shares

All checks, drafts, wires and other payment mediums used for
purchasing or redeeming shares of the Trust must be
denominated in U.S. dollars. The Trust reserves the right,
in its sole discretion, to either (a) reject any order for
the purchase or sale of shares denominated in any other
currency, or (b) honor the transaction or make adjustments
to a shareholder's account for the transaction as of a date
and with a foreign currency exchange factor determined by
the drawee bank.

In connection with exchanges, (see the Prospectuses
"Exchange Privilege"), it should be noted that since the
proceeds from the sale of shares of an investment company
generally are not available until the fifth business day
following the redemption, the fund into which a Fund's
shareholders are seeking to exchange reserve the right to
delay issuing shares pursuant to an exchange until said
fifth business day. The redemption of shares of a Fund to
complete an exchange for shares of any of the investment
companies will be effected at the close of business on the
day the request for exchange is received in proper form at
the net asset value then effective.

A Fund may impose a $10 charge for each returned item,
against any shareholder account which, in connection with
the purchase of a Fund's shares, submits a check or a draft
which is returned unpaid to such Fund.

Shares are eligible to receive dividends beginning on the
first business day following settlement of the purchase
transaction, through the date on which a Fund writes a check
or sends a wire on redemption transactions.

Dividend checks which are returned to a Fund marked "unable
to forward" by the postal service will be deemed to be a
request by the shareholder to change the dividend option and
the proceeds will be reinvested in additional shares at the
respective Fund's net asset value until new instructions are
received.

The Trust may deduct from a shareholder's account the costs
of its efforts to locate a shareholder if mail is returned
as undeliverable or the Trust is otherwise unable to locate
the shareholder or verify the current mailing address. These
costs may include a percentage of the account when a search
company charges a percentage fee in exchange for its
location services.

Under agreements with certain banks in Taiwan, Republic of
China, the Insured Fund's and the Intermediate-Term Fund's
shares are available to such banks' discretionary trust
funds at net asset value. The banks may charge service fees
to their customers who participate in the discretionary
trusts. Pursuant to agreements, a portion of such service
fees may be paid to Distributors, or an affiliate of
Distributors, to help defray expenses of maintaining a
service office in Taiwan, including expenses related to
local literature fulfillment and communication facilities.

Shares of the Intermediate-Term Fund and Class I shares of
the Insured Fund may be offered to investors in Taiwan
through securities firms known locally as Securities
Investment Consulting Enterprises. In conformity with local
business practices in Taiwan, shares of either Fund will be
offered with the following schedule of sales charges:

Size of Purchase - in U.S. dollars      Sales Charge
Up to $100,000                          3%
$100,000 to $1,000,000                  2%
Over $1,000,000                         1%

Purchases and Redemptions through Securities Dealers

Orders for the purchase of shares of the Insured Fund and
the Intermediate-Term Fund received in proper form prior to
the scheduled closing time of the Exchange (generally 1:00
p.m. Pacific time or 4:00 p.m. Eastern time) any business
day that the Exchange is open for trading and promptly
transmitted to the respective Fund will be based upon the
public offering price determined that day. Purchase orders
received by securities dealers or other financial
institutions after the closing of the Exchange will be
effected at the respective Fund's public offering price on
the day it is next calculated. The use of the term
"securities dealer" herein shall include other financial
institutions which, pursuant to an agreement with
Distributors (directly or through affiliates), handle
customer orders and accounts with the Funds. Such reference,
however, is for convenience only and does not indicate a
legal conclusion of capacity.

Orders for the redemption of shares are effected at net
asset value subject to the same conditions concerning time
of receipt in proper form. It is the securities dealer's
responsibility to transmit the order in a timely fashion and
any loss to the customer resulting from failure to do so
must be settled between the customer and the securities
dealer.

Effectiveness of Purchase Orders (Money Fund)

The purchase price for shares of the Money Fund is the net
asset value of such shares next determined after receipt and
acceptance of a purchase order in proper form. Many of the
types of instruments in which the Money Fund invests must be
paid for in federal funds, which are monies held by the
custodian on deposit at the Federal Reserve Bank of San
Francisco and elsewhere. Therefore, the monies paid by an
investor for shares of the Money Fund generally cannot be
invested by the Money Fund until they are converted into and
are available to the Money Fund in federal funds, which may
take up to two days. In such cases, purchases by investors
may not be considered in proper form and effective until
such conversion and availability. In the event the Money
Fund is able to make investments immediately (within one
business day), however, it may accept a purchase order with
payment other than in federal funds; in such event, shares
of the Money Fund will be purchased at the net asset value
next determined after receipt of the order and payment. Once
shares of the Money Fund are purchased, they begin earning
income immediately, and income dividends will start being
credited to the investor's account on the day following the
effective date of purchase and continue through the day all
shares in the account are redeemed.

Payments transmitted by wire and received by the custodian
and reported by the custodian to the Money Fund prior to
3:00 p.m. Pacific time (6:00 p.m. Eastern time) on any
business day are normally effective on the same day as
received. Wire payments received or reported by the
custodian to the Money Fund after that time will normally be
effective on the next business day. Payments transmitted by
check or other negotiable bank draft will normally be
effective within two business days for checks drawn on a
member bank of the Federal Reserve System and longer for
most other checks.

Special Net Asset Value Purchases (Intermediate-Term Fund
and Class I Shares of the Insured Fund)

As discussed in the Prospectuses for the Intermediate-Term
Fund and the Insured Fund under "How to Buy Shares of the
Fund - Description of Special Net Asset Value Purchases,"
certain categories of investors may purchase shares of the
Intermediate-Term Fund and Class I shares of the Insured
Fund without a front-end sales charge ("net asset value") or
a contingent deferred sales charge. Distributors or one of
its affiliates may make payments, out of its own resources,
to securities dealers who initiate and are responsible for
such purchases. Distributors may make these payments in the
form of contingent advance payments, which may be recovered
from the securities dealer, or set off against other
payments due the securities dealer, in the event of investor
redemptions made within 12 months of the calendar month
following purchase. Other conditions may apply. All terms
and conditions may be imposed by an agreement between
Distributors, or its affiliates, and the securities dealer.
For purchases made at net asset value by certain trust
companies and trust departments of banks, Distributors or
one of its affiliates, out of its own resources, may pay up
to 1% of the amount invested.

Letter of Intent (Intermediate-Term Fund and Class I Shares
of the Insured Fund)

An investor may qualify for a reduced sales charge on the
purchase of shares of the Intermediate-Term Fund and Class I
shares of the Insured Fund, as described in their
Prospectuses. At any time within 90 days after the first
investment which the investor wants to qualify for a reduced
sales charge, a signed Shareholder Application, with the
Letter of Intent section completed, may be filed with the
respective Fund. After the Letter of Intent is filed, each
additional investment will be entitled to the sales charge
applicable to the level of investment indicated on the
Letter of Intent. Sales charge reductions based upon
purchases in more than one of the Franklin Templeton Funds
will be effective only after notification to Distributors
that the investment qualifies for a discount. The
shareholder's holdings in the Franklin Templeton Funds,
including Class II shares, acquired more than 90 days before
the Letter of Intent is filed will be counted towards
completion of the Letter of Intent but will not be entitled
to a retroactive downward adjustment in the sales charge.
Any redemptions made by the shareholder during the 13-month
period will be subtracted from the amount of the purchases
for purposes of determining whether the terms of the Letter
of Intent have been completed. If the Letter of Intent is
not completed within the 13-month period, there will be an
upward adjustment of the sales charge, depending upon the
amount actually purchased (less redemptions) during the
period. An investor who executes a Letter of Intent prior to
a change in the sales charge structure for the Insured Fund
or the Intermediate-Term Fund will be entitled to complete
the Letter of Intent at the lower of the new sales charge
structure or the sales charge structure in effect at the
time the Letter of Intent was filed with the respective
Fund.

As mentioned in the Prospectuses of the Insured Fund and the
Intermediate-Term Fund, five percent (5%) of the amount of
the total intended purchase will be reserved in shares of
the respective Fund registered in the investor's name. If
the total purchases, less redemptions, equal the amount
specified under the Letter of Intent, the reserved shares
will be deposited to an account in the name of the investor
or delivered to the investor or the investor's order. If the
total purchases, less redemptions, exceed the amount
specified under the Letter of Intent and is an amount which
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 of Intent (to reflect such further quantity
discount) on purchases made within 90 days before and on
those made after filing the Letter of Intent. 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 of Intent, the investor
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 which would have applied to the
aggregate purchases if the total of such purchases had been
made at a single time. The shareholder will receive a
written notification from Distributors requesting the
remittance. Upon such remittance, the reserved shares held
for the investor's account will be deposited to an account
in the name of the investor or delivered to the investor or
to the investor's order. If within 20 days after written
request such difference in sales charge is not paid, the
redemption of an appropriate number of reserved shares to
realize such difference will be made. In the event of a
total redemption of the account prior to fulfillment of the
Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption, and the
balance will be forwarded to the investor.

Redemptions in Kind

Each 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 applicable
Fund's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the
SEC. In the case of requests for redemption in excess of
such amounts, the Board of Trustees reserves the right to
make payments in whole or in part in securities or other
assets of the Fund from which the shareholder is redeeming,
in case of an emergency, or if the payment of such a
redemption in cash would be detrimental to the existing
shareholders of such Fund. In such circumstances, the
securities distributed would be valued at the price used to
compute the Fund's net assets. Should a Fund do so, a
shareholder may incur brokerage fees in converting the
securities to cash. The Funds do not intend to redeem
illiquid securities in kind; however, should it happen,
shareholders may not be able to timely recover their
investment and may also incur brokerage costs in selling
such securities.

Redemptions by the Funds

Due to the relatively high cost of handling small
investments, each Fund reserves the right to redeem,
involuntarily, at net asset value, the shares of any
shareholder whose account has a value of less than one-half
of the initial minimum investment required for that
shareholder, but only where the value of such account has
been reduced by the shareholder's prior voluntary redemption
of shares. Until further notice, it is the present policy of
each Fund not to exercise this right with respect to any
shareholder whose account has a value of $50 or more with
respect to the Intermediate-Term Fund and the Insured Fund
and $250 or more with respect to the Money Fund. In any
event, before a Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder
that the value of the shares in the account is less than the
minimum amount and allow the shareholder 30 days to make an
additional investment in an amount which will increase the
value of the account to at least $100 in the case of the
Intermediate-Term Fund and the Insured Fund and $500 in the
case of the Money Fund.

Calculation of Net Asset Value

As noted in the Prospectuses, each Fund and each class of
the Insured Fund generally calculates net asset value as of
the scheduled close of the Exchange (generally 1:00 p.m.
Pacific time for the Intermediate-Term Fund and each class
of the Insured Fund and 3:00 p.m. Pacific time for the Money
Fund). As of the date of this SAI, the Trust 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.

Each Fund's portfolio securities are valued as stated in
their Prospectuses. Generally, trading in corporate bonds,
U.S. government securities and money market instruments is
substantially completed each day at various times prior to
the close of the Exchange. The values of such securities
used in computing the net asset value of each Fund's shares
are determined as of such times. Occasionally, events
affecting the values of such securities may occur between
the times at which they are determined and 1:00 p.m. or 3:00
p.m. Pacific time, as the case may be, which will not be
reflected in the computation of a Fund's net asset value. If
events materially affecting the value of such securities
occur during such period, then these securities will be
valued at their fair value as determined in good faith by
the Board of Trustees.

The valuation of the Money Fund's portfolio securities
(including any securities held in a separate account
maintained for when-issued securities) is based upon their
amortized cost, which does not take into account unrealized
capital gains or losses. This involves valuing an instrument
at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in
calculation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the
price the Money Fund would receive if it sold the
instrument. During periods of declining interest rates, the
daily yield on shares of the Money Fund computed as
described above may tend to be higher than a like
computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and
estimates of market prices for all of its portfolio
instruments. Thus, if the use of amortized cost by the Money
Fund resulted in a lower aggregate portfolio value on a
particular day, a prospective investor in the Money Fund
would be able to obtain a somewhat higher yield than would
result from investment in a fund utilizing solely market
values, and existing investors in the Money Fund would
receive less investment income. The converse would apply in
a period of rising interest rates.

The Money Fund's use of amortized cost, which facilitates
the maintenance of the Money Fund's per share net asset
value of $1.00, is permitted by a rule adopted by the SEC.
Pursuant to this rule, the Money Fund must adhere to certain
conditions. The Money Fund must maintain a dollar-weighted
average portfolio maturity of 90 days or less, only purchase
instruments having remaining maturities of 397 calendar days
or less, and invest only in those U.S. dollar-denominated
instruments that the Board of Trustees determines present
minimal credit risks and which are, as required by the
federal securities laws, rated in one of the two highest
rating categories as determined by nationally recognized
statistical rating agencies, instruments deemed comparable
in quality to such rated instruments, or instruments the
issuers of which, with respect to an outstanding issue of
short-term debt that is comparable in priority and
protection, have received a rating within the two highest
categories of a nationally recognized statistical rating
agency. As discussed in the Money Fund's Prospectus,
securities subject to floating or variable interest rates
with demand features in compliance with applicable rules of
the SEC may have stated maturities in excess of one year.
The trustees have agreed to establish procedures designed to
stabilize, to the extent reasonably possible, the Money
Fund's price per share, as computed for the purpose of sales
and redemptions, at $1.00. Such procedures will include
review of the Money Fund's portfolio holdings by the
trustees, at such intervals as they may deem appropriate, to
determine whether the Money Fund's net asset value
calculated by using available market quotations deviates
from $1.00 per share based on amortized cost. The extent of
any deviation will be examined by the trustees. If such
deviation exceeds 1/2 of 1%, the trustees will promptly
consider what action, if any, will be initiated. In the
event the trustees determine that a deviation exists which
may result in material dilution or other unfair results to
investors or existing shareholders, they will take such
corrective action as they regard as necessary and
appropriate, which may include the sale of portfolio
instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding
dividends, redemptions of shares in kind, or establishing a
net asset value per share by using available market
quotations.

Reports to Shareholders

The Trust sends annual and semi-annual reports to its
shareholders regarding each Fund's performance and portfolio
holdings. Shareholders who would like to receive an interim
quarterly report may phone Fund Information at 1-800 DIAL
BEN.

Special Services

Investor Services may charge separate fees to shareholders
of the Money Fund, to be negotiated directly with such
shareholders, for providing special services in connection
with their accounts, such as processing a large number of
checks each month. Such fees for special services to such
shareholders will not increase the expenses borne by the
Money Fund.

As noted in the Money Fund's Prospectus, special procedures
have been designed for banks and other institutions wishing
to open multiple accounts in the Money Fund. The institution
may open a single master account by filing one application
form with the Money Fund, signed by personnel authorized to
act for the institution. Individual sub-accounts may be
opened at the time the master account is filed by listing
them or they may be added at a later date by written advice
or by filing forms supplied by the Trust. These sub-accounts
may be established by the institution with registration
either by name or number. The investment minimums applicable
to the Money Fund are applicable to each sub-account. The
Trust will provide each institution with a written
confirmation for each transaction in a sub-account and
arrangements may be made at no additional charge for the
transmittal of duplicate confirmations to the beneficial
owner of the sub-account.

Further, the Trust will provide to each institution, on a
quarterly basis, or more frequently as requested, a
statement which will set forth each sub-account's share
balance, income earned for the period, income earned for the
year to date, and the total current market value of the
account.

The Trust and Institutional Services Division of
Distributors provides specialized services, including
recordkeeping, for institutional investors of each Fund. The
cost of these services is not borne by the Funds.

Investor Services may pay certain financial institutions
which maintain omnibus accounts with the Trust on behalf of
numerous beneficial owners for recordkeeping operations
performed with respect to such beneficial owners. For each
beneficial owner in the omnibus account, the Funds may
reimburse Investor Services an amount not to exceed the per
account fee which the Trust normally pays Investor Services.
Such financial institutions may also charge a fee for their
services directly to their clients.

Additional Information Regarding Distributions and Taxation

Distributions

In order to maintain a $1.00 net asset value per share, the
Money Fund may make distributions and distribution
adjustments from realized gains and losses on the sale of
portfolio securities or from unrealized appreciation or
depreciation in the value of portfolio securities. This may
result in under or over distributions of investment company
taxable income.

Shareholders of the Money Fund who so request may have their
dividends paid out monthly in cash. The shares reinvested
and credited to their account during the month will be
redeemed as of the close of business on the last bank
business day of the month and the proceeds will be paid to
them in cash. If a shareholder withdrew the entire amount in
an account at any time during the month, all dividends
accrued with respect to the account during the month to the
time of withdrawal would be paid in the same manner and at
the same time as the proceeds of withdrawal. Each Money Fund
shareholder will receive a monthly summary of the account,
including information as to dividends reinvested or paid.

The Board of Trustees reserves the right to revise the above
dividend policy or postpone the payment of dividends, if
warranted in its judgment, due to unusual circumstances such
as a large expense, loss or unexpected fluctuation in net
assets.

Additional Information Regarding Taxation

As stated in the Prospectuses, each Fund has elected to be
treated as a regulated investment company under Subchapter M
of the Code. The trustees reserve the right not to maintain
the qualification of a Fund as a regulated investment
company if they determine such course of action to be
beneficial to shareholders. In such case, such Fund will be
subject to federal and possibly state corporate taxes on its
taxable income and gains, to the alternative minimum tax on
its tax-exempt income, and distributions (including 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 Funds and
received by the shareholder on December 31 of the calendar
year in which they are declared. Each 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.

The Money Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio
securities. Because the Money Fund's portfolio under normal
circumstances is composed of short-term securities, however,
the Fund does not expect to realize any long-term capital
gains or losses. Distributions by each Fund derived from net
short-term and net long-term capital gains (after taking
into account any net capital loss carryovers) may generally
be made twice each year. One distribution may be made in
December to reflect the net short-term and net long-term
capital gains realized by a Fund as of October 31 of such
year. Any net short-term and net long-term capital gains
realized by a Fund during the remainder of the fiscal year
may be distributed following the end of the fiscal year.
These distributions, when made, will generally be fully
taxable to a Fund's shareholders. Each Fund may make only
one distribution derived from net short-term and net long-
term capital gains in any year or adjust the timing of its
distributions for operational or other reasons.

Redemptions and exchanges of Fund shares are taxable
transactions for federal and state income tax purposes. For
most shareholders subject to taxation, gain or loss will be
recognized in an amount equal to the difference between the
shareholder's basis in the shares and the amount realized
from the transaction, subject to the rules described below.
If such shares are a capital asset in the hands of the
shareholder, gain or loss will be capital gain or loss and
will be long-term for federal income tax purposes if the
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
Funds 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.

All or a portion of the sales charge incurred in purchasing
shares of a Fund will not be included in the federal tax
basis of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss
upon the sale of such shares) if the sales proceeds are
reinvested in the Fund or in another fund in the Franklin
Templeton Group and a sales charge that 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. Shareholders should consult
with their tax advisors concerning the tax rules applicable
to the redemption or exchange of fund shares.

Any loss realized upon the redemption of shares within six
months from the date of their purchase will be treated as a
long-term capital loss to the extent of amounts treated as
distributions of net long-term capital gain during such six-
month period and will be disallowed to the extent of exempt-
interest dividends paid with respect to such shares.

Many states grant tax-free status to dividends paid to
shareholders of mutual funds from interest income earned by
a 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 any of the Funds to invest in such obligations, each Fund
is authorized to so invest for temporary or defensive
purposes. To the extent that such investments are made, each
Fund will provide shareholders with the percentage of any
dividends paid which may qualify for such tax-free treatment
at the end of each calendar year. Shareholders should then
consult with their own tax advisors 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 a Fund.

Persons who are defined in the Code as "substantial users"
(or related persons) of facilities financed by private
activity bonds should consult with their tax advisors before
purchasing shares of a Fund.

Shareholders who are not U.S. persons for purposes of
federal income taxation should consult with their financial
or tax advisors regarding the applicability of U.S.
withholding or other taxes on distributions received by them
from the Funds and the application of foreign tax laws to
these distributions.

The Trust's Underwriter

Distributors acts as principal underwriter in a continuous
public offering for shares of the Funds, including both
classes of shares of the Insured Fund, pursuant to separate
agreements with the Funds. The underwriting agreements are
in effect until February 29, 1996 (Money Fund) and March 31,
1996 (Intermediate-Term Fund and Insured Fund) and will
continue in effect for successive annual periods, provided
that their continuance is specifically approved at least
annually by a vote of the Trust's Board of Trustees, or by a
vote of the holders of a majority of the Trust's outstanding
voting securities, and in either event by a majority vote of
the Trust's trustees who are not parties to the underwriting
agreements or interested persons of any such party (other
than as trustees of the Trust), cast in person at a meeting
called for that purpose. The underwriting agreements
terminate automatically in the event of their assignment and
may be terminated by either party on 90 days' written
notice.

Distributors pays the expenses of distribution of the Funds'
shares, including advertising expenses and the costs of
printing sales material and prospectuses used to offer
shares to the public. Each 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.

In connection with the offering of the Intermediate-Term
Fund's shares and the Class I shares of the Insured Fund,
aggregate underwriting commissions received by Distributors
and the amounts retained by Distributors after allowances to
dealers for the fiscal years ended December 31, 1992, 1993,
and 1994, were as follows:

Fiscal Year ended December 31, 1994

                           Total           
                           Commissions     Amount
Fund                       Received        Retained
Insured Fund               $1,248,174      $56,758
Intermediate-Term Fund     $  206,123      $25,515

Fiscal Year ended December 31, 1993

                           Total           
                           Commissions     Amount
Fund                       Received        Retained
Insured Fund               $3,782,172      $81,946
Intermediate-Term Fund     $ 406,861       $41,280

Fiscal year ended December 31, 1992

                            Total           
                            Commissions     Amount
Fund                        Received        Retained
Insured Fund                $3,871,611      $37,129
Intermediate-Term Fund*     $   14,791      $ 2,020

*For the period from September 21, 1992 (commencement of
operations) to December 31, 1992.

Distributors may be entitled to reimbursement under the
distribution plans of the Intermediate-Term Fund and the
Class I shares of the Insured Fund, as discussed below.
Except as noted, Distributors received no other compensation
from the Trust for acting as underwriter.

Distribution Plans (Intermediate-Term Fund and Insured Fund)

Each class of the Insured Fund has adopted a distribution
plan ("Class I Plan" and "Class II Plan", respectively)
pursuant to Rule 12b-1 under the 1940 Act. The Intermediate-
Term Fund has also adopted a distribution plan pursuant to
Rule 12b-1 (the "Intermediate-Term Plan"). The distribution
plans for each Fund and class may be collectively referred
to as the "Plans". Pursuant to the Class I Plan and the
Intermediate-Term Plan, each Fund may pay up to a maximum of
0.10% per annum (0.10 of 1%) of its average daily net assets
for expenses incurred in the promotion and distribution of
its shares.

Class I Plan and Intermediate-Term Plan. In implementing the
Class I Plan and the Intermediate-Term Plan, the Board of
Trustees has determined that the annual fees payable
thereunder will be equal to the sum of: (i) the amount
obtained by multiplying 0.10% by the average daily net
assets represented by shares of the Intermediate-Term  Fund
or Class I shares of the Insured Fund that were acquired by
investors on or after May 1, 1994 ("New Assets"), and (ii)
the amount obtained by multiplying 0.05% by the average
daily net assets represented by shares of such Funds and
class that were acquired before May 1, 1994 ("Old Assets").
Such fees will be paid to the current securities dealer of
record on the shareholder's account. In addition, until such
time as the maximum payment of 0.10% is reached on a yearly
basis, up to an additional 0.02% will be paid to
Distributors under the Class I Plan and the Intermediate-
Term Plan. The payments to be made to Distributors will be
used by Distributors to defray other marketing expenses that
have been incurred in accordance with the Class I Plan and
the Intermediate-Term Plan, such as advertising.

The fee relating to the Class I Plan and the Intermediate-
Term Plan is an expense of Class I as a whole and is a Fund
expense of the Intermediate-Term Fund, so that all
shareholders, regardless of when they purchased their
shares, will bear Rule 12b-1 expenses at the same rate. That
rate initially will be at least 0.07% (0.05% plus 0.02%) of
such Fund's or class' average daily net assets and, as Class
I shares and Intermediate-Term Fund shares are sold on or
after May 1, 1994, will increase over time. Thus, as the
proportion of Intermediate-Term Fund shares and Class I
shares of the Insured Fund purchased on or after May 1, 1994
increases in relation to outstanding shares of such Fund or
class, the expenses attributable to payments under the Class
I Plan or the Intermediate-Term 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 and the Intermediate-Term
Plan, such Plans permit the Trust's trustees to allow the
Intermediate-Term Fund and the Insured Fund to pay a full
0.10% on all assets at any time. The approval of the Trust's
Board of Trustees would be required to change the
calculation of the payments to be made under the
Intermediate-Term Plan and the Class I Plan.

Pursuant to the Intermediate-Term Plan and the Class I Plan,
Distributors or others will be entitled to be reimbursed
each quarter (up to the maximum as stated above) for actual
expenses incurred in the distribution and promotion of the
Intermediate-Term Fund's shares and the Class I shares of
the Insured Fund, 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 such Fund's or 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 Intermediate-Term Fund or the Insured
Fund, Distributors, or its affiliates.

For the fiscal year ended December 31, 1994, the total
amounts paid by the Intermediate-Term Fund and Class I of
the Insured Fund pursuant to their respective Plans were
$18,688 and $117,222, respectively, which were used for the
following purposes.

                                    Intermediate-   Insured
                                    Term Fund       Fund -
                                                    Class I
Advertising                         -0-             $23,444
Printing and mailing of                             
prospectuses to other than current                  
shareholders                        -0-             $ 5,861
Payments to underwriters            -0-             $ 3,517
Payments to brokers or dealers      $18,688         $84,400

The Class I Plan and the Intermediate-Term Plan do not
permit unreimbursed expenses incurred in a particular year
to be carried over to or reimbursed in subsequent years.

The Class II Plan. Under the Class II Plan, the Insured Fund
is permitted to pay to Distributors or others annual
distribution fees, payable quarterly, of 0.50% of Class II's
average daily net assets, in order to compensate
Distributors or others for providing distribution and
related services and bearing certain expenses of the Class.
All expenses of distribution and marketing over that amount
will be borne by Distributors, or others who have incurred
them, without reimbursement by the Insured Fund. In addition
to this amount, under the Class II Plan, the Insured Fund
shall pay 0.15% per annum, payable quarterly, of the Class'
average daily net assets as a servicing fee. This fee will
be used to pay dealers or others for, among other things,
assisting in establishing and maintaining customer accounts
and records; assisting with purchase and redemption
requests; receiving and answering correspondence; monitoring
dividend payments from the Insured Fund on behalf of
customers, and similar activities related to furnishing
personal services and maintaining shareholder accounts.
Distributors may pay the securities dealer, from its own
resources, a commission of up to 1% of the amount invested.

In General. In addition to the payments to which
Distributors or others are entitled under the Plans, the
Plans also provide that to the extent the Intermediate-Term
Fund or the Insured Fund, the Manager or Distributors or
other parties on behalf of such Funds, the Manager 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 of such Funds, including shares
of each class of the Insured Fund, within the context of
Rule 12b-1 under the 1940 Act, then such payments shall be
deemed to have been made pursuant to the Plans.

In no event shall the aggregate asset-based sales charges
which include payments made under the Plans, plus any other
payments deemed to be made pursuant to the Plans, 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. The terms and provisions
of the Plans relating to required reports, term, and
approval are consistent with Rule 12b-1.

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 to the extent that applicable
federal law prohibits certain banks from engaging in the
distribution of mutual fund shares. Such banking
institutions, however, are permitted to receive fees under
the Plans for administrative servicing or for agency
transactions. If a bank were prohibited from providing such
services, its customers who are shareholders would be
permitted to remain shareholders of the Intermediate-Term
Fund and the Insured Fund and alternate means for continuing
the servicing of such shareholders would be sought. In such
an event, changes in the services provided might occur and
such shareholders might no longer be able to avail
themselves of any automatic investment or other services
then being provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences
as a result of any of these changes. Securities laws of
states in which such Funds' shares are offered for sale may
differ from the interpretations of federal law expressed
herein, and banks and financial institutions selling shares
of such Funds may be required to register as dealers
pursuant to state law.

The Plans have been approved by the shareholders of each
Fund, and by the trustees of the Trust, including those
trustees who are not interested persons, as defined in the
1940 Act. The Class II Plan became effective on May 1, 1995.
The Plans are effective through March 31, 1996 and renewable
annually by a vote of the Trust's Board of Trustees,
including a majority vote of the trustees who are non-
interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plans,
cast in person at a meeting called for that purpose. It is
also required that the selection and nomination of such
trustees be done by the non-interested trustees. The Plans
and any related agreement may be terminated at any time,
without any penalty, by vote of a majority of the non-
interested trustees on not more than 60 days' written
notice, by Distributors on not more than 60 days' written
notice, by any act that constitutes an assignment of the
management agreement with the Manager or, with respect to
the Intermediate-Term Fund, the underwriting agreement with
Distributors, or by vote of a majority of the respective
Fund's outstanding shares. 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 respective
Fund's and class' outstanding shares, and all material
amendments to the Plans or any related agreements shall be
approved by a vote of the non-interested trustees, cast in
person at a meeting called for the purpose of voting on any
such amendment.

Distributors is required to report in writing to the Board
of Trustees 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 of Trustees with such other
information as may reasonably be requested in order to
enable the Board of Trustees to make an informed
determination of whether the Plans should be continued.

General Information

Performance

As noted in the Prospectuses, each Fund and each class of
the Insured Fund  may from time to time quote various
performance figures to illustrate their past performance.
The Funds, including each class of the Insured Fund, may
occasionally cite statistics to reflect their volatility or
risk.

INTERMEDIATE-TERM AND INSURED FUNDS

Performance quotations by investment companies are subject
to rules adopted by the SEC. These rules require the use of
standardized performance quotations or, alternatively, that
every non-standardized performance quotation furnished by a
Fund or class be accompanied by certain standardized
performance information computed as required by the SEC.
Current yield and average annual compounded total return
quotations used by a Fund or class are based on the
standardized methods of computing performance mandated by
the SEC. An explanation of those and other methods used by
the Intermediate-Term Fund and the classes of the Insured
Fund to compute or express performance follows.

Total Return

The average annual total return is determined by finding the
average annual compounded rates of return over one-, five-
and ten-year periods, or fractional portion thereof, 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 order and income dividends and capital gains
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 in the
sales charge structure, historical performance information
will be restated to reflect the maximum front-end sales
charge currently in effect.

In considering the quotations of total return by each Fund
and class, investors should remember 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 an investor's
investment in a Fund. The actual performance of an
investment will be affected less by this charge the longer
an investor retains the investment in a Fund. The average
annual compounded rates of return for the Intermediate-Term
Fund and Class I of the Insured Fund for the indicated
periods ended on December 31, 1994, were as follows:

Fund Name                  One Year          From Inception
Insured Fund - Class I      -12.04%          4.49%
Intermediate-Term Fund      - 7.46%          1.80%

These figures were calculated according to the SEC formula:
      n
P(1+T)  = 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 (or fractional portion thereof).

As discussed in their Prospectuses, the Intermediate-Term
Fund and each class of the Insured Fund may quote total
rates of return in addition to their average annual total
return. Such quotations are computed in the same manner as a
Fund's or a class' average annual compounded rate, except
that such quotations will be based on each Fund's or class'
actual return for a specified period rather than on its
average return over one-, five- and ten-year periods. The
total rates of return for the Intermediate-Term Fund and
Class I of the Insured Fund for the indicated periods ended
on December 31, 1994, were as follows:
                                             
Fund Name                  One Year          From Inception
Insured Fund - Class I     -12.04%           17.50%
Intermediate-Term Fund     - 7.46%            4.15%

Yield

Current yield reflects the income per share earned by a
Fund's portfolio investments.

Current yield for the Intermediate-Term Fund and each class
of the Insured Fund is determined by dividing the net
investment income per share earned by such Fund or class
during a 30-day base period by the 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 a Fund or class during the
base period. The yield for the Intermediate-Term Fund and
Class I of the Insured Fund for the 30-day period ended on
December 31, 1994, was 6.11% and 5.80%, respectively.

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

Tax Equivalent Yield

The Intermediate-Term Fund and each class of the Insured
Fund may also quote a tax equivalent yield which
demonstrates the taxable yield necessary to produce an after-
tax yield equivalent to that of a fund which invests in tax-
exempt obligations. Such yield is computed by dividing that
portion of the yield of a Fund or class (computed as
indicated above) which is tax-exempt by one minus the
highest applicable combined federal, New York State and New
York City income tax rate (and adding the product to that
portion of the yield of a Fund or class that is not tax-
exempt, if any). The tax equivalent yield for Class I of the
Insured Fund and the Intermediate-Term Fund for the 30-day
period ended on December 31, 1994, was 10.92% and 11.50%,
respectively.

As of the date of this SAI, the federal income tax rate and
the combined New York state and local income tax rate upon
which each Fund's tax equivalent yield quotations are based
were 39.6% and 12.00%, respectively. From time to time, as
any changes to such rates become effective, tax equivalent
yield quotations advertised by a Fund or class will be
updated to reflect such changes. The Funds expect updates
may be necessary as tax rates are changed by federal, state
and local governments. The advantage of tax-free
investments, such as the Funds, will be enhanced by any tax
rate increases. Therefore, the details of specific tax
increases may be used in sales material for the Funds.

Current Distribution Rate

Current yield and tax 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 a
Fund's or a class' shareholders. Amounts paid to
shareholders are reflected in the quoted current
distribution rate or taxable equivalent distribution rate.
The current distribution rate is computed by dividing the
total amount of dividends per share paid by a Fund or class
during the past 12 months by a current maximum offering
price. A taxable equivalent distribution rate demonstrates
the taxable distribution rate equivalent to a Fund's or a
class' current distribution rate (calculated as indicated
above). The advertised taxable equivalent distribution rate
will reflect the most current federal and New York State and
New York City tax rates available to a Fund. Under certain
circumstances, such as when there has been a change in the
amount of dividend payout or a fundamental change in
investment policies, it might be appropriate to annualize
the dividends paid over the period such policies were in
effect, rather than using the dividends during the past 12
months. The current distribution rate differs from the
current yield computation because it may include
distributions to shareholders from sources other than
dividends and interest, such as short-term capital gains,
and is calculated over a different period of time.

Volatility

Occasionally, statistics may be used to specify Fund
volatility or risk. Measures of volatility or risk are
generally used to compare a Fund's net asset value or
performance relative to a market index. One 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 premise is that greater volatility connotes greater risk
undertaken in achieving performance.

Other Performance Quotations

With respect to those categories of investors who are
permitted to purchase shares of the Intermediate-Term Fund
or Class I shares of the Insured Fund at net asset value,
sales literature pertaining to such Fund or class may quote
a "Current Distribution Rate for Net Asset Value
Investments." This rate is computed by adding the income
dividends paid by a Fund or class during the last 12 months
and dividing that sum by a current net asset value. Figures
for yield, total return and other measures of performance
for net asset value investments may also be quoted. These
will be derived as described elsewhere in this SAI with the
substitution of net asset value for public offering price.

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.

A Fund may include in its advertising or sales material
information relating to investment objectives and
performance results of funds and classes belonging to the
Templeton Group of Funds. Resources is the parent company of
the advisers and underwriter of both the Franklin Group of
Funds and Templeton Group of Funds.

Comparisons

To help investors better evaluate how an investment in the
Insured Fund and the Intermediate-Term Fund might satisfy
their investment objective, advertisements and other
materials regarding such Funds may discuss various measures
of Fund and 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. Such
comparisons may include, but are not limited to, the
following examples:

a) Merrill Lynch New York Municipal Bond Index - based upon
yields from revenue and general obligation bonds weighted in
accordance with their respective importance to the New York
municipal market.

b) Lehman Brothers Municipal Bond Index (LMBI) or its
component indices - LMBI measures yield, price and total
return for the municipal bond market.

c) Bond Buyer's 20-Bond Index - an index of municipal bond
yields based upon yields of 20 general obligation bonds
maturing in 20 years.

d) Bond Buyer's 40-Bond Index - an index of municipal bond
yields based upon yields of 40 revenue bonds maturing in 30
years.

e) Salomon Brothers Broad Bond Index or its component
indices - the Broad Index measures yield, price, and total
return for Treasury, Agency, Corporate, and Mortgage bonds.

f) Lehman Brothers Aggregate Bond Index or its component
indices - the Aggregate Bond Index measures yield, price and
total return for Treasury, Agency, Corporate, Mortgage, and
Yankee bonds.

g) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed
Income Fund Performance Analysis, and Lipper - Mutual Fund
Yield Survey - 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 sales
charges.

h) Historical data supplied by the research departments of
First Boston Corporation, the J. P. Morgan companies,
Salomon Brothers, Merrill Lynch, Pierce, Fenner & Smith,
Lehman Brothers and Bloomberg, L.P.

i) Financial publications: The Wall Street Journal, Business
Week, Financial World, Forbes, Fortune, and Money magazines
- - provide performance statistics over specified time
periods.

From time to time, advertisements or information for a Fund
may include a discussion of certain attributes or benefits
to be derived by an investment in the Fund. Such
advertisements or information may include symbols,
headlines, or other material which highlight or summarize
the information discussed in more detail in the
communication.

Advertisements or information may also compare a Fund's or a
class' performance to the return on certificates of deposit
or other investments. Investors should be aware, however,
that an investment in a Fund involves the risk of
fluctuation of principal value, a risk generally not present
in an investment in a certificate of deposit issued by a
bank. For example, as the general level of interest rates
rise, the value of a Fund's fixed-income investments, as
well as the value of its shares which are based upon the
value of such portfolio investments, can be expected to
decrease. Conversely, when interest rates decrease, the
value of a Fund's shares can be expected to increase.
Certificates of deposit are frequently insured by an agency
of the U.S. government. An investment in each Fund is not
insured by any federal, state or private entity.

In assessing such comparisons of performance, an investor
should keep in mind that the composition of the investments
in the reported indices and averages is not identical to a
Fund's portfolio, that the indices and averages are
generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the
formula used by a Fund to calculate its figures. In
addition, there can be no assurance that a Fund will
continue this performance as compared to such other
averages.

MONEY FUND

Current Yield

Current yield reflects the interest income per share earned
by the Money Fund's portfolio investments.

Current yield is computed by determining the net change,
excluding capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and
dividing the difference by the value of the account at the
beginning of the base period to obtain the base period
return, and then annualizing the result by multiplying the
base period return by (365/7).

The yield for the Money Fund for the seven-day period ended
on December 31, 1994, was 4.01%.

Effective Yield

Effective yield is computed in the same manner, except that
the annualization of the return for the seven-day period
reflects the results of compounding by adding one to the
base period return, raising the sum to a power equal to 365
divided by seven, and subtracting one from the result.

Effective yield for the Money Fund for the seven-day period
ended on December 31, 1994, was 4.09%.

This figure was obtained using the SEC formula:

Effective Yield = [(Base Period Return + 1)365/7]-1

Tax Equivalent Yield

The Money Fund may also quote a tax equivalent yield and a
tax equivalent effective yield, which demonstrate the
taxable yield necessary to produce an after-tax yield
equivalent to that of a fund which invests in tax-exempt
obligations. Such yields are computed by dividing that
portion of the yield of the Money Fund (computed as
indicated above) which is tax-exempt by one minus the
highest combined federal and state income tax rate and
adding the product to that portion of the yield of the Money
Fund that is not tax-exempt. The tax equivalent yield based
on the current yield of the Money Fund for the seven-day
period ended on December 31, 1994, was 7.55%. The tax
equivalent effective yield based on the effective yield of
the Money Fund for the seven-day period ended on December
31, 1994, was 7.70%. The advertised tax-equivalent yield
will reflect the most current federal and New York City and
New York State tax rates available to the Money Fund.

The tax rate discussion under "Tax Equivalent Yield" with
respect to the Insured Fund and the Intermediate-Term Fund
applies as well to advertisements of tax equivalent yield by
the Money Fund.

Comparisons

To help investors better evaluate how an investment in the
Money Fund might satisfy their investment objective,
advertisements and other materials regarding the Money Fund
may discuss various measures of Fund 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. Such
comparisons may include, but are not limited to, the
following examples:

a) IBC/Donoghue's Money Fund Report(Registered Trademark) -
Industry averages for seven-day annualized and compounded
yields of taxable, tax-free and government money funds.

b) Bank Rate Monitor - A weekly publication which reports
various bank investments such as CD rates, average savings
account rates and average loan rates.

c) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed
Income Fund Performance Analysis, and Lipper - Mutual Fund
Yield Survey  - 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.

d) Salomon Brothers Bond Market Roundup - A weekly
publication which reviews yield spread changes in the major
sectors of the money, government agency, futures, options,
mortgage, corporate, Yankee, Eurodollar, municipal, and
preferred stock markets. It also summarizes changes in
banking statistics and reserve aggregates.

e) Inflation as measured by the Consumer Price Index,
published by the U.S. Bureau of Labor Statistics.

f) Standard & Poor's Bond Indices - measures yield and price
of corporate, municipal, and government bonds.

g) Financial Publications: The Wall Street Journal, Business
Week, Changing Times, Financial World, Forbes, and Money
magazine.

h) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk,
total return and average rate of return (average annual
compounded growth rate) over specified time periods for the
mutual fund industry.

i) Lehman Brothers Aggregate Bond Index or its component
indices - the Aggregate Bond Index measures yield, price,
and total return for Treasury, Agency, Corporate, and
Mortgage bonds.

j) Lehman Brothers Municipal Bond Index or its component
indices - measures yield, price and total return for
municipal bonds.

In assessing such comparisons of performance, an investor
should keep in mind that the composition of the investments
in the reported indices and averages is not identical to the
Money Fund's portfolio, that the indices and averages are
generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the
formula used by the Money Fund to calculate its figures. In
addition, there can be no assurance that the Money Fund will
continue this performance as compared to such other
averages.

Other Features and Benefits

ALL FUNDS

Franklin is a leader in the tax-free mutual fund industry,
currently offering 42 tax-free funds, including 33 funds
free from both federal and state personal income taxes, and
managing more than $40 billion in municipal bond assets for
over half a million investors.

Under current tax laws, municipal securities remain one of
the few investments offering the potential for tax-free
income. In 1995, taxes could cost as much as $47 on every
$100 earned from a fully taxable investment (based on the
maximum combined 39.6% federal tax rate and the highest
state tax rate of 12% for 1995.) Franklin tax-free funds,
however, offer tax relief through a professionally managed
portfolio of tax-free securities selected based on their
yield, quality and maturity. An investment in a Franklin tax-
free fund can provide an investor with the potential to earn
income free of federal taxes and, depending on the fund,
state and local taxes as well, while supporting state and
local public projects. Franklin tax-free funds may also
provide tax-free compounding, when dividends are reinvested.
An investment in Franklin's tax-free funds can grow more
rapidly than similar taxable investments.

Municipal securities are generally considered to be
creditworthy, second in quality only to securities issued or
guaranteed by the United States government and its agencies.
The market price of such securities, however, may fluctuate.
This fluctuation will have a direct impact on the net asset
value of an investment in a Fund.

Currently, there are more mutual funds than there are stocks
listed on the Exchange. While many of them have similar
investment objectives, no two are exactly alike. As noted in
the Prospectuses, shares of a Fund are generally sold
through securities dealers or other financial institutions.
Investment representatives of such securities dealers or
financial institutions are experienced professionals who can
offer advice on the type of investment suitable to an
investor's unique goals and needs, as well as the types of
risks associated with such investment.

Each Fund may help investors achieve various investment
goals such as accumulating money for retirement, saving for
a down payment on a home, college costs and/or other long-
term goals. The Franklin College Costs Planner may assist an
investor 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.) The Franklin
Retirement Planning Guide leads an investor through the
steps to start a retirement savings program. Of course, an
investment in the Trust cannot guarantee that such goals
will be met.

Miscellaneous Information

Each Fund is a member of the Franklin Templeton Group, one
of the largest mutual fund organizations in the United
States 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 47 years and now services more than 2.4
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 $118 billion
in assets under management for more than 3.8 million
shareholder accounts and offers 112 U.S.-based mutual funds.
The Fund may identify itself by its NASDAQ or CUSIP number.

The Dalbar Surveys, Inc. broker/dealer survey has ranked
Franklin number one in service quality for five of the past
seven years.

According to Research and Ratings Review, Volume II, dated
February 28, 1994, Franklin's municipal research team ranked
number 2 out of 1,000 investment advisory firms surveyed by
TMS Holdings, Inc. As of November 14, 1994, this ranking was
unchanged.

From time to time, advertisements or sales material issued
by a 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 amount of time,
on an annual basis, the average taxpayer works to satisfy
his or her tax obligations to the federal, state and local
taxing authorities.

Access persons of the Franklin Templeton Group, as defined
in SEC Rule 17(j) under the 1940 Act, who are employees of
Resources or its subsidiaries, are permitted to engage in
personal securities transactions subject to the following
general restrictions and procedures: (1) the trade must
receive advance clearance from a compliance officer and must
be completed within 24 hours after this clearance; (2)
copies of all brokerage confirmations must be sent to the
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; (3) in addition
to items (1) and (2), access persons involved in preparing
and making investment decisions must file annual reports of
their securities holdings each January and also 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.

The portfolio insurance of the Insured Fund may affect the
value of the Insured Fund's shares under certain
circumstances. As discussed in the Insured Fund's
Prospectus, unless a Secondary Market Insurance Policy is
purchased with respect to the portfolio security, the
Insured Fund intends to hold any defaulted securities or
securities for which there is a significant risk of default
in its portfolio until the default has been cured or the
principal and interest are paid by the issuer or the
insurer. In such circumstances, the Board of Trustees has
instructed the Manager to consider in its evaluation of
these securities the value of the insurance for the interest
and principal payments, as well as the market value of the
portfolio securities, the market value of securities of
similar issuers whose securities carry similar interest
rates, and the discounted present value of the interest and
principal payments to be received from the insurance
company. Absent any unusual or unforeseen circumstances as a
result of the Portfolio Insurance Policy, the Manager would
likely recommend that the Insured Fund value the defaulted
securities, or securities for which there is a significant
risk of default, at the same price as securities of a
similar nature which are not in default. A defaulted
security covered by a Secondary Market Policy would be
valued at market.

The shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable as
partners for its obligations. The Trust's Declaration of
Trust, however, contains an express disclaimer of
shareholder liability for acts or obligations of the Trust.
The Declaration of Trust also provides for indemnification
and reimbursement of expenses out of Trust assets for any
shareholder held personally liable for obligations of the
Trust. The Declaration of Trust provides that the Trust
shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the
Trust and satisfy any judgment thereon. All such rights are
limited to the assets of the Fund of which a shareholder
holds shares. The Declaration of Trust further provides that
the Trust may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the
protection of the Trust, its shareholders, trustees,
officers, employees and agents to cover possible tort and
other liabilities. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability
is limited to circumstances in which both inadequate
insurance exists and the Trust itself is unable to meet its
obligations.

Ownership and Authority Disputes

In the event of disputes involving multiple claims of
ownership or authority to control a shareholder's account, a
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.

Appendices

Appendix A - Risk Factors Affecting New York Municipal
Securities

The following information as to certain New York State
("State") and New York City ("City") risk factors is given
to investors in view of the policy of each Fund of
concentrating its investments in New York issuers. The
information provided constitutes only a brief discussion,
does not purport to be a complete description and is based
on information from sources believed by the Trust to be
reliable, including official statements relating to
securities offerings of the state of New York and municipal
issuers, and periodic publications by national ratings
organizations. Such information, however, has not been
independently verified by the Trust.

New York State. Constitutional challenges to State laws have
limited the amount of taxes which political subdivisions can
impose on real property. 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. Additional court actions have been brought
against the State, certain agencies and municipalities
relating to financing, the amount of real estate tax, and
the use of tax revenues which could affect the ability of
the State or its political subdivisions to pay their
obligations, require extraordinary appropriations or
expenditure reductions, or both, and which could have a
material adverse effect upon the financial condition of the
State and various of its agencies and subdivisions.

A substantial principal amount of bonds issued by various
State agencies and authorities are either guaranteed by the
State or supported by the State through lease-purchase
arrangements, or other contractual or moral obligation
provisions. Moral obligation commitments by the State impose
no immediate financial obligations on the State and 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 defaults
on such obligations. If a default were to occur, it would
likely have a significant adverse impact on the market price
of obligations of the State and its authorities and
agencies. In recent years, the State has had to appropriate
large amounts of funds to enable State agencies to meet
their financial obligations and, in some cases, prevent
default. Additional assistance is expected to be required in
current and future fiscal years since certain localities and
authorities continue to experience financial difficulties.

To the extent State agencies and local governments require
State assistance to meet their financial obligations, the
ability of the state of New York to meet its own obligations
as they become due or to obtain additional financing could
be adversely effected. This financial situation could result
not only in defaults of State and agency obligations but
also impairment of the marketability of securities issued by
the State, its agencies and local governments.

Beginning in 1989, as a result of the recession which
affected the entire nation, the state of New York
experienced the largest and longest contraction in its labor
force since the 1930s, with a loss of more than 500,000 jobs
between mid-1989 and mid-1993. The State's economy has begun
to recover, although at a slower pace than that of the
nation as a whole. The State's employment is not projected
to reach prerecession levels until the end of 1998, with
average growth of 1.4% per year. Much of the State's
projected increase in employment levels is expected to come
from growth in the State's service and trade sectors, which
currently account for approximately 31.1% and 20.0%,
respectively, of the State's total employment. The State's
manufacturing sector, which currently represents close to
13% of the State's total employment, is expected to continue
to decline at an annual rate of 1.6%.

New York is the second most populated state in the nation.
The State's per capita income exceeds the national average
by 18.3%, although real income growth is projected to lag
behind the nation by 0.5%. Debt levels are considered high
both on a per capita basis and as a percentage of income and
continue to rise. Debt service currently represents 5.6% of
general fund tax receipts. Servicing this debt will continue
to impose a burden on the State.

The State's fiscal 1995 midyear financial report showed
signs of continued improvement in the State's financial
performance. The State's fiscal 1995 financial plan is
estimated to result in a general fund operating surplus of
$87 million, before a budgeted transfer of $265 million to
the State's contingency reserve account. Unlike prior years,
the projected surplus is due mainly to spending cuts rather
than tax increases. The majority of the State's estimated
$281 million reduction in spending is due to savings in
social services and assistance programs.

Current projections for fiscal year 1996 show a $5 billion
budget deficit. Much of this deficit is expected to be
reduced by continued cuts in spending for social service
programs.

New York City. In 1975, New York City suffered several
financial crises which impaired and continue to impair the
borrowing ability of both the City and the State. In that
year, the City lost access to public credit markets. The
City was not able to sell short-term or long-term notes to
the public until 1979 and 1981, respectively. To help New
York City out of its financial difficulties, the State
Legislature created the Municipal Assistance Corporation
("MAC") in 1975. MAC has the authority to issue bonds and
notes and pay or lend the proceeds to the City. MAC also has
the authority to exchange its obligations for City
obligations. MAC bonds are payable out of certain State
sales and use taxes imposed by the City, State stock
transfer taxes and per capita State aid to the City. The
State is not, however, obligated to continue these taxes, to
continue appropriating revenues from these taxes, nor to
continue the appropriation of per capita State aid to pay
MAC obligations. MAC does not have taxing powers, and its
bonds are not obligations enforceable against either the
City or the State.

Since 1975, the City's financial condition has been subject
to oversight and review by the New York State Financial
Control Board (the "FCB"), and since 1978 its financial
statements have been audited by independent accounting
firms. To be eligible for guarantees and assistance, the
City was annually required to submit to the FCB 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 FCB'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 FCB for its review. In the event of a
year-end operating deficit greater than $100 million, the
FCB has the authority to assume a significant degree of
control over the City's finances, which includes the ability
to approve or disapprove contracts and the City's four-year
financial plan.

On January 17, 1995, S&P placed the City's general
obligation bonds on CreditWatch with negative implications,
as a result of the City's plan to shift $120 million of
current debt costs to future years through the refunding of
such debt. This action results from an estimated $650
million budget gap for the current fiscal year. The ratings
of the City's short-term notes and insured issues are not
affected.

Projections for the City's fiscal year 1996 estimate a
budget deficit of $2 billion, most of which is due to
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 healthcare entitlements, and
cuts in City services and personnel.

Both the State and City face potential economic problems
which could seriously affect their ability to meet their
financial obligations. The economic problems of New York
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 limits the ability of
the State and City to impose higher taxes in the event of
future difficulties.

Appendix B - Description of Municipal Securities Ratings

Municipal Bonds

Moody's

Aaa - Municipal bonds which are 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 by an
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 which are rated Aa are judged to be of
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 as in Aaa securities or
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 than in Aaa
securities.

A - Municipal bonds which are rated A possess many favorable
investment attributes and are to be considered as 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 which are rated Baa are considered
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 which are rated Ba are judged to have
predominantly speculative elements and 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 which are 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 which are 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.

Ca: Municipal bonds which are rated Ca represent obligations
which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.

C: Municipal bonds which are rated C are the lowest-rated
class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real
investment standing.

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
completion of construction or elimination of basis
condition.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through B in its
municipal bond ratings. The modifier 1 indicates that the
security ranks in the higher end of its generic rating
category. The modifier 2 indicates a mid-range ranking; and
modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.

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 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 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: Municipal 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.

C: This rating is reserved for income bonds on which no
interest is being paid.

D: Debt rated D is in default, and payment of interest
and/or repayment of principal is in arrears.

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 bonds: 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 bonds: 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 bonds: 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 bonds: 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 therefore impair
timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for
bonds with higher ratings.

Municipal Notes

Moody's

Moody's ratings for state, municipal and other short-term
obligations are designated Moody's Investment Grade ("MIG").
This distinction is in recognition of the differences
between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of
the first importance in long-term borrowing risk are of
lesser importance in the short run. Symbols used will be as
follows:

MIG-1: Notes are of the best quality and enjoy strong
protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both.

MIG-2: Notes are of high quality, with margins of protection
ample, although not so large as in the preceding group.

MIG-3: Notes are of favorable quality, with all security
elements accounted for, but lacking the undeniable strength
of the preceding grades. Market access for refinancing, in
particular, is likely to be less well established.

MIG-4: Notes are of adequate quality, carrying specific
risk, but having protection and not distinctly or
predominantly speculative.

S&P

Until June 29, 1984, S&P used the same rating symbols for
notes and bonds. After June 29, 1984, for new municipal note
issues due in three years or less, the ratings below usually
will be assigned. Notes maturing beyond three years will
most likely receive a bond rating of the type recited above.

SP-1: Issues carrying this designation have a very strong or
strong capacity to pay principal and interest. Issues
determined to possess overwhelming safety characteristics
will be given a "plus" (+) designation.

SP-2: Issues carrying this designation have a satisfactory
capacity to pay principal and interest.

Commercial Paper

Moody's

Moody's Commercial Paper ratings, which are also applicable
to municipal paper investments permitted to be made by the
Trust, are opinions of the ability of issuers to repay
punctually their promissory obligations not having an
original maturity in excess of nine months. Moody's employs
the following designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated
issuers:

P-1 (Prime-1): Superior capacity for repayment.

P-2 (Prime-2): Strong capacity for repayment.

S&P

S&P's ratings are a current assessment of the likelihood of
timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D"
for the lowest. Issues within the "A" category are
delineated with the numbers 1, 2, and 3 to indicate the
relative degree of safety, as follows:

A-1: This designation indicates the degree of safety
regarding timely payment is very strong. A plus (+)
designation indicates an even stronger likelihood of timely
payment.

A-2: Capacity for timely payment on issues with this
designation is strong. The relative degree of safety,
however, is not as overwhelming as for issues designated A-
1.

A-3: Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat
more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher
designations.

Fitch's Short-term and Commercial Paper Ratings

Fitch's short-term ratings apply to debt obligations that
are payable on demand or have original maturities of
generally up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal
and investment notes. The short-term rating places greater
emphasis than a long-term rating on the existence of
liquidity necessary to meet the issuer's obligations in a
timely manner.

F-1+: Exceptionally strong credit quality. Regarded as
having the strongest degree of assurance for timely payment.

F-1: Very strong credit quality. Reflects an assurance of
timely payment only slightly less in degree than issues
rated F-1+.

F-2: Good credit quality. A satisfactory degree of assurance
for timely payment, but the margin of safety is not as great
as for issues assigned F-1+ and F-1 ratings.

F-3: Fair credit quality. Have characteristics suggesting
that the degree of assurance for timely payment is adequate;
however, near-term adverse changes could cause these
securities to be rated below investment grade.

F-5: Weak credit quality. Have characteristics suggesting a
minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and
economic conditions.

D: Default. Actual or imminent payment default.

LOC: The symbol LOC indicates that the rating is based on a
letter of credit issued by a commercial bank.

Financial Statements

The financial statements contained in the Trust's Annual
Report to Shareholders dated December 31, 1994, are
incorporated herein by reference.



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