FRANKLIN NEW YORK TAX FREE TRUST, 485BPOS, 2000-04-27

FRANKLIN NEW YORK TAX FREE TRUST
485BPOS, 2000-04-27

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As filed with the Securities and Exchange Commission on April 27, 2000

File Nos.
33-7785
811-4787

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.

Post-Effective Amendment No. 18 (X)

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 19 (X)

FRANKLIN NEW YORK TAX-FREE TRUST
(Exact Name of Registrant as Specified in Charter)

777 MARINERS ISLAND BOULEVARD, SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (650) 312-2000

MURRAY L. SIMPSON, 777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Name and Address of Agent for Service of Process)

Approximate Date of Proposed Public Offering:

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a) (ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485

If appropriate, check the following box:

[ ] This Post-Effective amendment designates a new effective date for a
previously filed Post-Effective amendment.

Prospectus

FRANKLIN NEW YORK TAX-FREE TRUST

INVESTMENT STRATEGY TAX-FREE INCOME

Franklin New York Insured Tax-Free Income Fund - Class A & C

Franklin New York Intermediate-Term
Tax-Free Income Fund - Class A

Franklin New York Tax-Exempt Money Fund - Class A

MAY 1, 2000

[Insert Franklin Templeton Ben Head]

The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

CONTENTS

THE FUNDS

[Begin callout]
INFORMATION ABOUT EACH FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]

[insert page #] Franklin New York Insured Tax-Free Income Fund

[insert page #] Franklin New York Intermediate-Term Tax-Free Income Fund

[insert page #] Franklin New York Tax-Exempt Money Fund

YOUR ACCOUNT

[Begin callout]
INFORMATION ABOUT SALES CHARGES, ACCOUNT TRANSACTIONS AND SERVICES
[End callout]

[insert page #] Sales Charges

[insert page #] Buying Shares

[insert page #] Investor Services

[insert page #] Selling Shares

[insert page #] Account Policies

[insert page #] Questions

FOR MORE INFORMATION

[Begin callout]
WHERE TO LEARN MORE ABOUT EACH FUND
[End callout]

Back Cover

FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND

[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES

GOAL 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.

MAIN INVESTMENT STRATEGIES Under normal market conditions, the fund invests
mainly in New York municipal securities whose interest is free from federal
income taxes, including the federal alternative minimum tax, and from New
York State and New York City personal income taxes. Although the fund tries
to invest all of its assets in tax-free securities, it is possible, although
not anticipated, that up to 20% of its assets may be in securities that pay
taxable interest, including interest that may be subject to the federal
alternative minimum tax.

[Begin callout]
MUNICIPAL SECURITIES are issued by state and local governments, their
agencies and authorities, as well as by the District of Columbia and U.S.
territories and possessions, to borrow money for various public and private
projects. The issuer pays a fixed, floating or variable rate of interest, and
must repay the amount borrowed (the principal) at maturity.
[End callout]

The fund invests at least 65% of its total assets in insured municipal
securities, and under normal circumstances tries to invest more than 65% in
insured securities. Insured municipal securities are covered by insurance
policies that guarantee the timely payment of principal and interest.
Generally, the fund buys insured municipal securities only if they are
covered by policies issued by AAA-rated municipal bond insurers. There are
currently four municipal bond insurers with a AAA rating. The fund pays
insurance premiums either directly or indirectly, which increases the credit
safety of its insured investments, but decreases its yield.

The fund may invest the balance of its assets in the following types of
securities: (i) uninsured municipal securities secured by an escrow or trust
account containing direct U.S. government obligations; (ii) securities rated
in one of the top three ratings by U.S. nationally recognized rating services
(or comparable unrated securities), which may include uninsured securities
and insured securities covered by policies issued by insurers with a rating
below AAA but not below A; or (iii) uninsured, short-term, tax-exempt
securities rated in the top rating, pending investment in longer-term
municipal securities. The fund may invest only up to 20% of its total assets
in the type of securities described in (ii) above.

The fund may invest in municipal lease obligations, which generally are
issued to finance the purchase of public property. The property is leased to
a state or local government and the lease payments are used to pay the
interest on the obligations. These differ from other municipal securities
because the money to make the lease payments must be set aside each year or
the lease can be cancelled without penalty. If this happens, investors who
own the obligations may not be paid.

The fund also may invest up to 35% of its assets in municipal securities
issued by U.S. territories.

The manager selects securities that it believes will provide the best balance
between risk and return within the fund's range of allowable investments and
typically uses a buy and hold strategy. This means it holds securities in the
fund's portfolio for income purposes, rather than trading securities for
capital gains, although the manager may sell a security at any time if it
believes it could help the fund meet its goal. The manager also may consider
the cost of insurance when selecting securities for the fund.

TEMPORARY INVESTMENTS When the manager believes market or economic
conditions are unusual or unfavorable for investors, the manager may invest
up to 100% of the fund's assets in a temporary defensive manner or hold a
substantial portion of the fund's portfolio in cash. Temporary defensive
investments generally may include securities that pay taxable interest. The
manager also may invest in these types of securities or hold cash when
securities meeting the fund's investment criteria are unavailable or to
maintain liquidity. In these circumstances, the fund may be unable to achieve
its investment goal.

IT IS IMPORTANT TO NOTE THAT INSURANCE DOES NOT GUARANTEE THE MARKET VALUE OF
AN INSURED SECURITY, OR THE FUND'S SHARE PRICE OR DISTRIBUTIONS, AND SHARES
OF THE FUND ARE NOT INSURED.

[Insert graphic of chart with line going up and down] MAIN RISKS

INCOME Since the fund can only distribute what it earns, the fund's
distributions to shareholders may decline when interest rates fall.

CREDIT An issuer may be unable to make interest payments and repay principal.
Changes in an issuer's financial strength or in a security's credit rating
may affect a security's value and, thus, impact fund performance.

Many of the fund's portfolio securities are supported by credit enhancements,
which may be provided by either U.S. or foreign entities. These securities
have the credit risk of the entity providing the credit support. A change in
the credit rating of any one or more of the municipal bond insurers that
insure securities in the fund's portfolio may affect the value of the
securities they insure, the fund's share price and fund performance. Credit
support provided by a foreign entity may be less certain because of the
possibility of adverse foreign economic, political or legal developments that
may affect the ability of that entity to meet its obligations.

[Begin callout]
Because interest rates and municipal security prices fluctuate, the amount of
the fund's distributions, the fund's yield, and the value of your investment
in the fund will go up and down. This means you could lose money over short
or even extended periods.
[End callout]

INTEREST RATE When interest rates rise, municipal security prices fall. The
opposite is also true: municipal security prices rise when interest rates
fall. In general, securities with longer maturities are more sensitive to
these price changes.

CALL A security may be prepaid (called) before maturity. An issuer is more
likely to call its securities when interest rates are falling, because the
issuer can issue new securities with lower interest payments. If a security
is called, the fund may have to replace it with a lower-yielding security. At
any time, the fund may have a large amount of its assets invested in
municipal securities subject to call risk, including escrow-secured or
defeased bonds. A call of some or all of these securities may lower the
fund's income and yield and its distributions to shareholders.

MARKET A security's value may be reduced by market activity or the results of
supply and demand. This is a basic risk associated with all securities. When
there are more sellers than buyers, prices tend to fall. Likewise, when there
are more buyers than sellers, prices tend to rise.

The fund may invest more than 25% of its assets in municipal securities that
finance similar types of projects, such as hospitals, housing, industrial
development, transportation or pollution control. A change that affects one
project, such as proposed legislation on the financing of the project, a
shortage of the materials needed for the project, or a declining need for the
project, would likely affect all similar projects, thereby increasing market
risk.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS Municipal securities may be
issued on a when-issued or delayed delivery basis, where payment and delivery
take place at a future date. Since the market price of the security may
fluctuate during the time before payment and delivery, the fund assumes the
risk that the value of the security at delivery may be more or less than the
purchase price.

DIVERSIFICATION The fund is a non-diversified fund. It may invest a greater
portion of its assets in the municipal securities of one issuer than a
diversified fund. The fund may be more sensitive to economic, business,
political or other changes affecting similar issuers or securities, which may
result in greater fluctuation in the value of the fund's shares. The fund,
however, intends to meet certain tax diversification requirements.

NEW YORK Since the fund invests heavily in New York municipal securities,
events in New York are likely to affect the fund's investments and its
performance. These events may include economic or political policy changes,
tax base erosion, state constitutional limits on tax increases, budget
deficits and other financial difficulties, and changes in the credit ratings
assigned to New York's municipal issuers. New York's economy and finances may
be especially vulnerable to changes in the performance of the financial
services sector, which historically has been volatile.

A negative change in any one of these or other areas could affect the ability
of New York's municipal issuers to meet their obligations. Both New York
State and New York City have experienced financial difficulties in the past.
It is important to remember that economic, budget and other conditions within
New York are unpredictable and can change at any time. The fund may involve
more risk than an investment in a fund that does not focus on securities of a
single state.

U.S. TERRITORIES As with New York municipal securities, events in any of the
territories where the fund is invested may affect the fund's investments and
its performance.

More detailed information about the fund, its policies and risks can be found
in the fund's Statement of Additional Information (SAI).

[Begin callout]
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency of the U.S.
government. Mutual fund shares involve investment risks, including the
possible loss of principal.
[End callout]

[Insert graphic of a bull and a bear] PERFORMANCE

This bar chart and table show the volatility of the fund's returns, which is
one indicator of the risks of investing in the fund. The bar chart shows
changes in the fund's returns from year to year over the past eight calendar
years. The table shows how the fund's average annual total returns compare to
those of a broad-based securities market index. Of course, past performance
cannot predict or guarantee future results.

CLASS A ANNUAL TOTAL RETURNS 1

[Insert bar graph]

9.75% 14.02% -8.14% 18.46% 4.30% 8.75% 5.94% -3.31%
92 93 94 95 96 97 98 99
YEAR

[Begin callout]
BEST QUARTER:
Q1 '95
8.70%

WORST QUARTER:
Q1 '94
- -6.85%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
SINCE
INCEPTION
1 YEAR 5 YEARS (5/1/91)
- ------------------------------------------------------------------
Franklin New York Insured
Tax-Free Income Fund - Class A 2 -7.42% 5.68% 5.71%
Lehman Brothers Municipal Bond -2.06% 6.91% 6.68%
Index 3

SINCE
INCEPTION
1 YEAR (5/1/95)
- ------------------------------------------------------------------
Franklin New York Insured
Tax-Free Income Fund - Class C 2 -5.75% 4.51%
Lehman Brothers Municipal Bond Index 3 -2.06% 5.83%

1. Figures do not reflect sales charges. If they did, returns would be lower.
As of March 31, 2000, the fund's year-to-date return was 2.87% for Class A.
2. Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains. May
1, 1994, Class A implemented a Rule 12b-1 plan, which affects subsequent
performance.
3. Source: Standard & Poor's Micropal. The unmanaged Lehman Brothers
Municipal Bond Index includes investment grade bonds issued within the last
five years as part of a deal of over $50 million and with a maturity of at
least two years. It includes reinvested interest. One cannot invest directly
in an index, nor is an index representative of the fund's portfolio.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

CLASS A CLASS C
- ---------------------------------------------------------
Maximum sales charge (load) as a
percentage of offering price 4.25% 1.99%
Load imposed on purchases 4.25% 1.00%
Maximum deferred sales charge None 1 0.99% 2
(load)
Exchange fee None None

Please see "Sales Charges" on page 34 for an explanation of how and when
these sales charges apply.

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)

CLASS A CLASS C
- ---------------------------------------------------------
Management fees 0.54% 0.54%
Distribution and service (12b-1) 0.09% 0.64%
fees
Other expenses 0.09% 0.09%
--------------------
Total annual fund operating expenses 0.72% 1.27%
====================

1. Except for investments of $1 million or more (see page 34).
2. This is equivalent to a charge of 1% based on net asset value.

EXAMPLE

This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year; and
o The fund's operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------
If you sell your shares at
the end of the period:
CLASS A $495 1 $645 $809 $1,281
CLASS C $327 $499 $790 $1,619
If you do not sell your
shares:
CLASS C $228 $499 $790 $1,619

1. Assumes a contingent deferred sales charge (CDSC) will not apply.

[Insert graphic of briefcase] MANAGEMENT

Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the fund's investment manager. Together, Advisers and its
affiliates manage over $229 billion in assets.

The team responsible for the fund's management is:

SHEILA AMOROSO, SENIOR Vice President OF Advisers
Ms. Amoroso has been an analyst or portfolio manager of the fund since its
inception. She is the co-Director of Franklin's Municipal Bond Department.
She joined the Franklin Templeton Group in 1986.

JAMES PATRICK CONN, VICE PRESIDENT OF Advisers
Mr. Conn has been an analyst or portfolio manager of the fund since 1999. He
joined the Franklin Templeton Group in 1996. Previously, he was a portfolio
manager with California Investment Trust.

JOHN POMEROY, VICE PRESIDENT of Advisers
Mr. Pomeroy has been an analyst or portfolio manager of the fund since its
inception. He joined the Franklin Templeton Group in 1986.

The fund pays Advisers a fee for managing the fund's assets. For the fiscal
year ended December 31, 1999, the fund paid 0.54% of its average net assets
to the manager for its services.

[Insert graphic of dollar
signs and stacks of coins] DISTRIBUTIONS AND TAXES

INCOME AND CAPITAL GAINS DISTRIBUTIONS The fund declares dividends daily from
its net investment income and pays them monthly on or about the 20th day of
the month. Your account may begin to receive dividends on the day after we
receive your investment and will continue to receive dividends through the
day we receive a request to sell your shares. Capital gains, if any, may be
distributed twice a year. The amount of these distributions will vary and
there is no guarantee the fund will pay dividends.

Please keep in mind that if you invest in the fund shortly before the fund
deducts a capital gains distribution from its net asset value, you will
receive some of your investment back in the form of a taxable distribution.

TAX CONSIDERATIONS Fund distributions will consist primarily of
exempt-interest dividends from interest earned on municipal securities. In
general, exempt-interest dividends are exempt from federal income tax. The
fund, however, may invest a portion of its assets in securities that pay
income that is not tax-exempt. Fund distributions from such income are
taxable to you as ordinary income. Any capital gains the fund distributes are
taxable to you as long-term capital gains no matter how long you have owned
your shares. Distributions of ordinary income or capital gains are taxable
whether you reinvest your distributions in additional fund shares or receive
them in cash.

[Begin callout]
BACKUP WITHHOLDING
By law, the fund must withhold 31% of your taxable distributions and
redemption proceeds if you do not provide your correct social security or
taxpayer identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the fund to do so.
[End callout]

Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.

When you sell your shares of the fund, you may have a capital gain or loss.
For tax purposes, an exchange of your fund shares for shares of a different
Franklin Templeton Fund is the same as a sale.

Exempt-interest dividends are taken into account when determining the taxable
portion of your social security or railroad retirement benefits. The fund may
invest a portion of its assets in private activity bonds. The income from
these bonds is a preference item when determining your alternative minimum
tax.

Exempt-interest dividends from interest earned on municipal securities of the
state of New York, or its political subdivisions, generally are exempt from
New York's personal income tax. Investments in municipal securities of other
states generally do not qualify for tax-free treatment in New York.

Distributions of ordinary income and capital gains, and gains from the sale
or exchange of your fund shares generally will be subject to state and local
taxes. Non-U.S. investors may be subject to U.S. withholding and estate tax.
You should consult your tax advisor about the federal, state, local or
foreign tax consequences of your investment in the fund.

[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS

This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.

CLASS A YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------
1999 2 1998 1997 1996 1995
- ----------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value, beginning of 11.71 11.66 11.29 11.41 10.16
year --------------------------------------
Net investment income .56 .57 .58 .59 .59
Net realized and unrealized (.94) .11 .38 (.12) 1.25
gains (losses) --------------------------------------
Total from investment (.38) .68 .96 .47 1.84
operations
--------------------------------------
Distributions from net (.56) (.57) 3 (.59) (.59) (.59)
investment income
Distributions from net - 4 (.06) - - -
realized
gains
--------------------------------------
Total distributions (.56) (.63) (.59) (.59) (.59)
--------------------------------------
Net asset value, end of year 10.77 11.71 11.66 11.29 11.41
======================================
Total return (%) 1 (3.31) 5.94 8.77 4.30 18.46

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 242,067 270,435 260,990 261,068 256,171
1,000)
Ratios to average net assets:
(%)
Expenses .72 .72 .71 .65 .65
Expenses excluding waiver
and payments by affiliate .72 .72 .71 .70 .73
Net investment income 4.96 4.84 5.09 5.25 5.38
Portfolio turnover rate (%) 15.23 12.05 26.85 15.09 22.99

CLASS C
- ------------------------------------------------------------------------
1999 2 1998 1997 1996 2 1995 7
- ------------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value, beginning of 11.82 11.75 11.37 11.46 10.85
year --------------------------------------
Net investment income .49 .48 .52 .53 .36
Net realized and unrealized (.94) .16 .38 (.10) .59
gains (losses) --------------------------------------
Total from investment (.45) .64 .90 .43 .95
operations ---------------------------------------
Distributions from net (.49) (.51) 5(.52) (.52) (.34)
investment income
Distributions from net - 4 (.06) - - -
realized gains --------------------------------------
Total distributions (.49) (.57) (.52) (.52) (.34)
--------------------------------------
Net asset value, end of year 10.88 11.82 11.75 11.37 11.46
======================================
Total return (%) 1 (3.87) 5.55 8.17 3.87 8.92
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 12,309 9,450 5,601 4,137 696
1,000)
Ratios to average net assets:
(%)
Expenses 1.27 1.28 1.27 1.22 1.23 6
Expenses excluding waiver
and payments by affiliate 1.27 1.28 1.27 1.27 1.30 6
Net investment income 4.42 4.27 4.63 4.69 4.74 6
Portfolio turnover rate (%) 15.23 12.05 26.85 15.09 22.99

1. Total return does not include sales charges, and is not annualized.
2. Based on average shares outstanding.
3. Includes distributions in excess of net investment income in the amount of
$.003.
4. The fund distributed capital gains in the amount of $.004.
5. Includes distributions in excess of net investment income in the amount of
$.002.
6. Annualized.
7. For the period May 1, 1995 (effective date) to December 31, 1995.

FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND

[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES

MAIN INVESTMENT STRATEGIES Under normal market conditions, the fund invests
mainly in investment grade, New York municipal securities whose interest is
free from federal income taxes, including the federal alternative minimum
tax, and from New York State and New York City personal income taxes.
Although the fund tries to invest all of its assets in tax-free securities,
it is possible, although not anticipated, that up to 20% of its assets may be
in securities that pay taxable interest, including interest that may be
subject to the federal alternative minimum tax.

The fund maintains a dollar-weighted average portfolio maturity of three to
10 years and only buys securities rated in the top four ratings by U.S.
nationally recognized rating services (or comparable unrated securities).

The fund also may invest up to 35% of its assets in municipal securities
issued by U.S. territories.

[Insert graphic of chart with line going up and down] MAIN RISKS

INCOME Since the fund can only distribute what it earns, the fund's
distributions to shareholders may decline when interest rates fall.

Many of the fund's portfolio securities may be supported by credit
enhancements, which may be provided by either U.S. or foreign entities. These
securities have the credit risk of the entity providing the credit support.
To the extent the fund holds insured securities, a change in the credit
rating of any one or more of the municipal bond insurers that insure
securities in the fund's portfolio may affect the value of the securities
they insure, the fund's share price and fund performance. Credit support
provided by a foreign entity may be less certain because of the possibility
of adverse foreign economic, political or legal developments that may affect
the ability of that entity to meet its obligations.

U.S. TERRITORIES As with New York municipal securities, events in any of the
territories where the fund is invested may affect the fund's investments and
its performance.

More detailed information about the fund, its policies and risks can be found
in the fund's Statement of Additional Information (SAI).

[Insert graphic of a bull and a bear] PERFORMANCE

This bar chart and table show the volatility of the fund's returns, which is
one indicator of the risks of investing in the fund. The bar chart shows
changes in the fund's returns from year to year over the past seven calendar
years. The table shows how the fund's average annual total returns compare to
those of a broad-based securities market index. Of course, past performance
cannot predict or guarantee future results.

ANNUAL TOTAL RETURNS 1

[Insert bar graph]

10.18% -5.29% 14.31% 4.38% 8.89% 6.63% -1.69%
93 94 95 96 97 98 99
YEAR

[Begin callout]
BEST QUARTER:
Q1 '95
5.16%

WORST QUARTER:
Q1 '94
- -4.90%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
SINCE
INCEPTION
1 YEAR 5 YEARS (9/21/92)
- -------------------------------------------------------------------
Franklin New York Intermediate-Term
Tax-Free Income Fund 2 -3.92% 5.89% 4.94%
Lehman Brothers 10-Year Municipal Bond -1.25% 7.12% 6.19%
Index 3

1. Figures do not reflect sales charges. If they did, returns would be lower.
As of March 31, 2000, the fund's year-to-date return was 2.20%.
2. Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains.
3. Source: Standard & Poor's Micropal. The unmanaged Lehman Brothers 10-Year
Municipal Bond Index includes investment grade bonds issued within the last
five years as part of a deal of over $50 million and with a maturity of at
least 10 years. It includes reinvested interest. One cannot invest directly
in an index, nor is an index representative of the fund's portfolio.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR
INVESTMENT)

Maximum sales charge (load) as a percentage of offering 2.25%
price
Load imposed on purchases 2.25%
Maximum deferred sales charge (load) None 1
Exchange fee None

Please see "Sales Charges" on page 34 for an explanation of how and when
these sales charges apply.

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM
FUND ASSETS)

Management fees 2 0.62%
Distribution and service (12b-1) fees 0.10%
Other expenses 0.10%
-----
Total annual fund operating expenses2 0.82%
=====

1. Except for investments of $1 million or more (see page 34).
2. For the fiscal year ended December 31, 1999, the manager had agreed in
advance to limit its management fees. With this reduction, management fees
were 0.25% and total annual fund operating expenses were 0.45%. The manager
may end this arrangement at any time upon notice to the fund's Board of
Trustees.

EXAMPLE

This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------
$307 1 $481 $670 $1,216

1. Assumes a contingent deferred sales charge (CDSC) will not apply.

[Insert graphic of briefcase] MANAGEMENT

Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the fund's investment manager. Together, Advisers and its
affiliates manage over $229 billion in assets.

The team responsible for the fund's management is:

JOHN POMEROY, VICE PRESIDENT of Advisers
Mr. Pomeroy has been an analyst or portfolio manager of the fund since its
inception. He joined the Franklin Templeton Group in 1986.

The fund pays Advisers a fee for managing the fund's assets. For the fiscal
year ended December 31, 1999, management fees, before any advance waiver,
were 0.62% of the fund's average net assets. Under an agreement by the
manager to limit its fees, the fund paid 0.25% of its average net assets to
the manager for its services. The manager may end this arrangement at any
time upon notice to the fund's Board of Trustees.

[Insert graphic of dollar signs and stacks of coins]
DISTRIBUTIONS AND TAXES

When you sell your shares of the fund, you may have a capital gain or loss.
For tax purposes, an exchange of your fund shares for shares of a different
Franklin Templeton Fund is the same as a sale.

[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS

This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.

CLASS A YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------
1999 2 1998 1997 1996 1995
- -------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value, beginning of 10.77 10.62 10.28 10.40 9.60
year -----------------------------------
Net investment income .52 .51 .54 .56 .55
Net realized and unrealized (.70) .18 .35 (.12) .80
gains (losses) -----------------------------------
Total from investment (.18) .69 .89 .44 1.35
operations -----------------------------------
Distributions from net (.51) (.54) (.55) (.56) (.55)
investment income -----------------------------------
Net asset value, end of year 10.08 10.77 10.62 10.28 10.40
===================================
Total return (%) (1.69) 6.63 8.89 4.38 14.31

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 66,941 80,689 58,916 44,822 43,229
1,000)
Ratios to average net assets:
(%)
Expenses .45 .45 .45 .37 .33
Expenses excluding waiver and
payments by affiliate .82 .83 .82 .83 .83
Net investment income 4.95 4.81 5.26 5.47 5.51
Portfolio turnover rate (%) 17.98 10.46 6.87 24.67 24.68

1. Total return does not include sales charges.
2. Based on average shares outstanding.

FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND

[Insert graphic of bullseye and arrows] GOALS AND STRATEGIES

GOALS 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, the preservation of shareholders' capital, and liquidity in its
investments. The fund also tries to maintain a stable $1 share price.

MAIN INVESTMENT STRATEGIES Under normal market conditions, the fund invests
mainly in high-quality, short-term, New York municipal securities whose
interest is free from federal income taxes, including the federal alternative
minimum tax, and from New York State and New York City personal income taxes.
Although the fund tries to invest all of its assets in tax-free securities,
it is possible, although not anticipated, that up to 20% of its assets may be
in securities that pay taxable interest, including interest that may be
subject to the federal alternative minimum tax.

The fund maintains a dollar-weighted average portfolio maturity of 90 days or
less and only buys securities:

o with remaining maturities of 397 days or less, and
o that the manager determines present minimal credit risks and are rated
in the top two ratings by U.S. nationally recognized rating services (or
comparable unrated securities).

The fund may invest in variable and floating rate securities, whose interest
rates change either at specific intervals or whenever a benchmark rate
changes. While this feature helps protect against a decline in the security's
market price when interest rates rise, it lowers the fund's income when
interest rates fall.

The fund also may invest up to 35% of its assets in municipal securities
issued by U.S. territories.

[Insert graphic of chart with line going up and down] MAIN RISKS

INCOME Since the fund can only distribute what it earns, the fund's
distributions to shareholders may decline when interest rates fall. Because
the fund limits its investments to high-quality, short-term securities, its
portfolio generally will earn lower yields than a portfolio with
lower-quality, longer-term securities subject to more risk.

CREDIT An issuer may be unable to make interest payments and repay principal.
Changes in an issuer's financial strength or in a security's credit rating
may affect a security's value.

Many of the fund's portfolio securities may be supported by credit
enhancements, which may be provided by either U.S. or foreign entities. These
securities have the credit risk of the entity providing the credit support.
To the extent the fund holds insured securities, a change in the credit
rating of any one or more of the municipal bond insurers that insure
securities in the fund's portfolio may affect the value of the securities
they insure and fund performance. Credit support provided by a foreign entity
may be less certain because of the possibility of adverse foreign economic,
political or legal developments that may affect the ability of that entity to
meet its obligations. The fund's ability to maintain a stable share price may
depend on these credit supports, which are not backed by federal deposit
insurance.

DIVERSIFICATION The fund is a non-diversified fund. It may invest a greater
portion of its assets in the municipal securities of one issuer than a
diversified fund. The fund may be more sensitive to economic, business,
political or other changes affecting similar issuers or securities. The fund,
however, intends to meet certain tax and federal securities law
diversification requirements.

U.S. TERRITORIES As with New York municipal securities, events in any of the
territories where the fund is invested may affect the fund's investments and
its performance.

More detailed information about the fund, its policies and risks can be found
in the fund's Statement of Additional Information (SAI).

[Begin callout]
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency of the U.S.
government. Although the fund tries to maintain a $1 share price, it is
possible to lose money by investing in the fund.
[End callout]

[Insert graphic of a bull and a bear] PERFORMANCE

This bar chart and table show the volatility of the fund's returns, which is
one indicator of the risks of investing in the fund. The bar chart shows
changes in the fund's returns from year to year over the past 10 calendar
years. The table shows the fund's average annual total returns. Of course,
past performance cannot predict or guarantee future results.

ANNUAL TOTAL RETURNS 1

[Insert bar graph]

5.13% 3.63% 2.10% 1.68% 2.12% 3.15% 2.79% 3.02% 2.79% 2.56%
90 91 92 93 94 95 96 97 98 99
YEAR
[Begin callout]
BEST QUARTER:
Q1 '90
1.31%

WORST QUARTER:
Q1 '93
0.38%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999

1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------
Franklin New York Tax-Exempt Money Fund 2.56% 2.86% 2.89%

1. As of March 31, 2000, the fund's year-to-date return was 0.71%.
All fund performance assumes reinvestment of dividends.

To obtain the fund's current yield information, please call 1-800/DIAL BEN(R).

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR
INVESTMENT)

Maximum sales charge (load) on purchases None
Exchange fee None

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM
FUND ASSETS)

Management fees1 0.62%
Other expenses 0.21%
------
Total annual fund operating expenses 1 0.83%
======

1. For the fiscal year ended December 31, 1999, the manager had agreed in
advance to limit its management fees. With this reduction, management fees
were 0.39% and total annual fund operating expenses were 0.60%. The manager
may end this arrangement at any time upon notice to the fund's Board of
Trustees.

EXAMPLE

This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------
$85 $265 $460 $1,025

[Insert graphic of briefcase] MANAGEMENT

Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the fund's investment manager. Together, Advisers and its
affiliates manage over $229 billion in assets.

The team responsible for the fund's management is:

SHEILA AMOROSO, SENIOR Vice President OF Advisers
Ms. Amoroso has been an analyst or portfolio manager of the fund since 1987.
She is the co-Director of Franklin's Municipal Bond Department. She joined
the Franklin Templeton Group in 1986.

CARRIE HIGGINS, VICE PRESIDENT of Advisers
Ms. Higgins has been an analyst or portfolio manager of the fund since 1992.
She joined the Franklin Templeton Group in 1990.

JOHN POMEROY, VICE PRESIDENT of Advisers
Mr. Pomeroy has been an analyst or portfolio manager of the fund since 1989.
He joined the Franklin Templeton Group in 1986.

The fund pays Advisers a fee for managing the fund's assets. For the fiscal
year ended December 31, 1999, management fees, before any advance waiver,
were 0.62% of the fund's average daily net assets. Under an agreement by the
manager to limit its fees, the fund paid 0.39% of its average daily net
assets to the manager for its services. The manager may end this arrangement
at any time upon notice to the fund's Board of Trustees.

[Insert graphic of dollar signs and stacks of coins]
DISTRIBUTIONS AND TAXES

INCOME DISTRIBUTIONS The fund typically pays income dividends each day that
its net asset value is calculated. Your account may begin to receive
dividends on the day after we receive your investment and will continue to
receive dividends through the day we receive a request to sell your shares.
The amount of these dividends will vary and there is no guarantee the fund
will pay dividends.

TAX CONSIDERATIONS Fund distributions will consist primarily of
exempt-interest dividends from interest earned on municipal securities. In
general, exempt-interest dividends are exempt from federal income tax. The
fund, however, may invest a portion of its assets in securities that pay
income that is not tax-exempt. Fund distributions from such income are
taxable to you as ordinary income. Distributions of ordinary income are
taxable whether you reinvest your distributions in additional fund shares or
receive them in cash.

For tax purposes, an exchange of your fund shares for shares of a different
Franklin Templeton Fund is the same as a sale. Because the fund expects to
maintain a stable $1 share price, you should not have any gain or loss if you
sell your fund shares.

Distributions of ordinary income generally will be subject to state and local
taxes. Non-U.S. investors may be subject to U.S. withholding and estate tax.
You should consult your tax advisor about the federal, state, local or
foreign tax consequences of your investment in the fund.

[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS

This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.

YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------
PER SHARE DATA ($)
Net asset value, beginning 1.00 1.00 1.00 1.00 1.00
of year ----------------------------------
Net investment income .03 .03 .03 .03 .03
Distributions from net (.03) (.03) (.03) (.03) (.03)
investment income ----------------------------------
Net asset value, end of year 1.00 1.00 1.00 1.00 1.00
==================================
Total return (%) 2.56 2.79 3.01 2.79 3.11

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ 69,164 57,878 63,720 59,178 61,079
x 1,000)
Ratios to average net
assets: (%)
Expenses .60 .60 .60 .60 .60
Expenses excluding waiver
and
payments by affiliate .83 .83 .81 .86 .85
Net investment income 2.54 2.75 2.97 2.75 3.06

YOUR ACCOUNT

[Insert graphic of percentage sign] SALES CHARGES

You may buy shares of the Money Fund without a sales charge. Shares of the
Insured and Intermediate Funds are sold with a sales charge. The rest of this
section describes the sales charges that apply to the Insured and
Intermediate Funds and does not apply to the Money Fund.

Each class of the Insured Fund has its own sales charge and expense
structure, allowing you to choose the class that best meets your situation.
Your investment representative can help you decide. The Intermediate Fund
only offers Class A shares.

CLASS A CLASS C (INSURED FUND ONLY)
- ----------------------------------------------------------------------

o Initial sales charge of 4.25% o Initial sales charge of 1%
or less (Insured Fund) or 2.25%
or less (Intermediate Fund)

o Deferred sales charge of 1% on o Deferred sales charge of 1%
purchases of $1 million or more on shares you sell within 18
sold within 12 months months

o Lower annual expenses than o Higher annual expenses than
Class C due to lower Class A due to higher
distribution fees distribution fees.

SALES CHARGES - CLASS A
THE SALES CHARGE
MAKES UP THIS % OF WHICH EQUALS THIS %
WHEN YOU INVEST THIS AMOUNT THE OFFERING PRICE OF YOUR NET INVESTMENT
- ------------------------------------------------------------------------
INSURED FUND
Under $100,000 4.25 4.44
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 2.50 2.56
$500,000 but under $1 2.00 2.04
million

INTERMEDIATE FUND
Under $100,000 2.25 2.30
$100,000 but under $250,000 1.75 1.78
$250,000 but under $500,000 1.25 1.26
$500,000 but under $1 1.00 1.01
million

INVESTMENTS OF $1 MILLION OR MORE If you invest $1 million or more, either as
a lump sum or through our cumulative quantity discount or letter of intent
programs (see page 36), you can buy Class A shares without an initial sales
charge. However, there is a 1% contingent deferred sales charge (CDSC) on any
shares you sell within 12 months of purchase. The way we calculate the CDSC
is the same for each class (please see page 44).

DISTRIBUTION AND SERVICE (12B-1) FEES Class A of both the Insured and
Intermediate Funds has a distribution plan, sometimes known as a Rule 12b-1
plan, that allows each fund to pay distribution fees of up to 0.10% per year
to those who sell and distribute Class A shares and provide other services to
shareholders. Because these fees are paid out of Class A's assets on an
on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

SALES CHARGES - CLASS C

THE SALES CHARGE
MAKES UP THIS % OF WHICH EQUALS THIS %
WHEN YOU INVEST THIS THE OFFERING PRICE OF YOUR NET INVESTMENT
AMOUNT
- --------------------------------------------------------------------
Under $1 million 1.00 1.01

WE PLACE ANY INVESTMENT OF $1 MILLION OR MORE IN CLASS A SHARES, SINCE THERE
IS NO INITIAL SALES CHARGE AND CLASS A'S ANNUAL EXPENSES ARE LOWER.

CDSC There is a 1% contingent deferred sales charge (CDSC) on any Class C
shares you sell within 18 months of purchase. The way we calculate the CDSC
is the same for each class (please see below).

DISTRIBUTION AND SERVICE (12B-1) FEES Class C has a distribution plan,
sometimes known as a Rule 12b-1 plan, that allows the fund to pay
distribution and other fees of up to 0.65% per year for the sale of Class C
shares and for services provided to shareholders. Because these fees are paid
out of Class C's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.

CONTINGENT DEFERRED SALES CHARGE (CDSC) - CLASS A & C

The CDSC for each class is based on the current value of the shares being
sold or their net asset value when purchased, whichever is less. There is no
CDSC on shares you acquire by reinvesting your dividends or capital gains
distributions.

[Begin callout]
The HOLDING PERIOD FOR THE CDSC begins on the day you buy your shares. Your
shares will age one month on that same date the next month and each following
month.

For example, if you buy shares on the 18th of the month, they will age one
month on the 18th day of the next month and each following month.
[End callout]

To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that are not subject to
a CDSC. If there are not enough of these to meet your request, we will sell
the shares in the order they were purchased. We will use this same method if
you exchange your shares into another Franklin Templeton Fund (please see
page 41 for exchange information).

SALES CHARGE REDUCTIONS AND WAIVERS

If you qualify for any of the sales charge reductions or waivers below,
please let us know at the time you make your investment to help ensure you
receive the lower sales charge.

QUANTITY DISCOUNTS We offer several ways for you to combine your purchases in
the Franklin Templeton Funds to take advantage of the lower sales charges for
large purchases of Class A shares.

[Begin callout]
The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Templeton Variable Insurance
Products Trust, and Templeton Capital Accumulator Fund, Inc.
[End callout]

o CUMULATIVE QUANTITY DISCOUNT - lets you combine all of your shares in the
Franklin Templeton Funds for purposes of calculating the sales charge. You
also may combine the shares of your spouse, and your children or
grandchildren, if they are under the age of 21. Certain company and
retirement plan accounts also may be included.

o LETTER OF INTENT (LOI) - expresses your intent to buy a stated dollar
amount of shares over a 13-month period and lets you receive the same sales
charge as if all shares had been purchased at one time. We will reserve a
portion of your shares to cover any additional sales charge that may apply
if you do not buy the amount stated in your LOI.

TO SIGN UP FOR THESE PROGRAMS, COMPLETE THE APPROPRIATE SECTION
OF YOUR ACCOUNT APPLICATION.

REINSTATEMENT PRIVILEGE If you sell shares of a Franklin Templeton Fund, you
may reinvest some or all of the proceeds within 365 days without an initial
sales charge. The proceeds must be reinvested within the same share class,
except proceeds from the sale of Class B shares will be reinvested in Class A
shares.

If you paid a CDSC when you sold your Class A or C shares, we will credit
your account with the amount of the CDSC paid but a new CDSC will apply. For
Class B shares reinvested in Class A, a new CDSC will not apply, although
your account will not be credited with the amount of any CDSC paid when you
sold your Class B shares.

Proceeds immediately placed in a Franklin Bank Certificate of Deposit (CD)
also may be reinvested without an initial sales charge if you reinvest them
within 365 days from the date the CD matures, including any rollover.

This privilege does not apply to shares you buy and sell under our exchange
program. Shares purchased with the proceeds from a money fund may be subject
to a sales charge.

SALES CHARGE WAIVERS Class A shares may be purchased without an initial
sales charge or CDSC by various individuals and institutions or by investors
who reinvest certain distributions and proceeds within 365 days. Certain
investors also may buy Class C shares without an initial sales charge. The
CDSC for each class may be waived for certain redemptions and distributions.
If you would like information about available sales charge waivers, call your
investment representative or call Shareholder Services at 1-800/632-2301. A
list of available sales charge waivers also may be found in the Statement of
Additional Information (SAI).

GROUP INVESTMENT PROGRAM Allows established groups of 11 or more investors to
invest as a group. For sales charge purposes, the group's investments are
added together. There are certain other requirements and the group must have
a purpose other than buying fund shares at a discount.

[Insert graphic of a paper with lines
and someone writing] BUYING SHARES

MINIMUM INVESTMENTS
- --------------------------------------------------------------------
INITIAL ADDITIONAL
- --------------------------------------------------------------------
Regular accounts $1,000 $50
- --------------------------------------------------------------------
Automatic Investment Plans $50 $50
- --------------------------------------------------------------------
UGMA/UTMA accounts $100 $50
- --------------------------------------------------------------------
Broker-dealer sponsored wrap account programs $250 $50
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Full-time employees, officers, trustees and $100 $50
directors of Franklin Templeton entities, and
their immediate family members
- --------------------------------------------------------------------

PLEASE NOTE THAT YOU MAY ONLY BUY SHARES OF A FUND ELIGIBLE FOR SALE IN YOUR
STATE OR JURISDICTION.

Certain Franklin Templeton Funds, like the Insured Fund, offer multiple share
classes not offered by the Intermediate Fund or the Money Fund. Please note
that for selling or exchanging your shares, or for other purposes, shares of
the Intermediate Fund and the Money Fund are considered Class A shares.

Many of the Money Fund's investments must be paid for in federal funds, which
are monies held by the fund's custodian on deposit at the Federal Reserve
Bank of San Francisco and elsewhere. The fund generally cannot invest money
it receives from you until it is available to the fund in federal funds,
which may take up to two days. Until then, your purchase may not be
considered in proper form. If the fund is able to make investments within one
business day, it may accept your order with payment in other than federal
funds.

ACCOUNT APPLICATION If you are opening a new account, please complete and
sign the enclosed account application. For the Insured Fund, make sure you
indicate the share class you have chosen. If you do not indicate a class, we
will place your purchase in Class A shares. To save time, you can sign up now
for services you may want on your account by completing the appropriate
sections of the application (see the next page).

BUYING SHARES
- ----------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------

[Insert graphic of Contact your Contact your
hands shaking] investment investment
representative representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- ----------------------------------------------------------------------

[Insert graphic of Make your check Make your check
envelope] payable to the fund. payable to the fund.
For the Money Fund, Include your account
BY MAIL you also may send a number on the check.
Federal Reserve Draft
or negotiable bank Fill out the deposit
draft. Instruments slip from your
drawn on other mutual account statement.
funds may not be For the Money Fund,
accepted. you also may use the
deposit slip from
Mail the check or your checkbook. If
draft and your signed you do not have a
application to slip, include a note
Investor Services. with your name, the
fund name, and your
account number.

Mail the check and
deposit slip or note
to Investor Services.
- ----------------------------------------------------------------------

[Insert graphic of Call to receive a Call to receive a
three lightning bolts] wire control number wire control number
and wire instructions. and wire instructions
BY WIRE
Wire the funds and To make a same day
1-800/632-2301 mail your signed wire investment in
(or 1-650/312-2000 application to the Insured or
collect) Investor Services. Intermediate Fund,
Please include the please call us by
wire control number 1:00 p.m. Pacific
or your new account time and make sure
number on the your wire arrives by
application. 3:00 p.m. To make a
same day wire
To make a same day investment in the
wire investment in Money Fund, please
the Insured or make sure we receive
Intermediate Fund, your order by 3:00
please call us by p.m. Pacific time.
1:00 p.m. Pacific
time and make sure
your wire arrives by
3:00 p.m. To make a
same day wire
investment in the
Money Fund, please
make sure we receive
your order by 3:00
p.m. Pacific time.
- ----------------------------------------------------------------------

[Insert graphic of two Call Shareholder Call Shareholder
arrows pointing in Services at the Services at the
opposite directions] number below, or send number below or our
signed written automated TeleFACTS
BY EXCHANGE instructions. The system, or send
TeleFACTS system signed written
TeleFACTS(R) cannot be used to instructions.
1-800/247-1753 open a new account.
(around-the-clock (Please see page 41
access) (Please see page 41 for information on
for information on exchanges.)
exchanges.)
- ----------------------------------------------------------------------

FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)

[Insert graphic of person with a headset] INVESTOR SERVICES

AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest
in the fund by automatically transferring money from your checking or savings
account each month to buy shares. To sign up, complete the appropriate
section of your account application and mail it to Investor Services. If you
are opening a new account, please include the minimum initial investment of
$50 with your application.

AUTOMATIC PAYROLL DEDUCTION You may invest in the fund automatically by
transferring money from your paycheck to the fund by electronic funds
transfer. If you are interested, indicate on your application that you would
like to receive an Automatic Payroll Deduction Program kit.

DISTRIBUTION OPTIONS You may reinvest distributions you receive from the fund
in an existing account in the same share class* of the fund or another
Franklin Templeton Fund. Initial sales charges and CDSCs will not apply if
you reinvest your distributions within 365 days. You can also have your
distributions deposited in a bank account, or mailed by check. Deposits to a
bank account may be made by electronic funds transfer.

Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the same share class of the
fund. For Money Fund shareholders who choose not to reinvest their
distributions, the Money Fund will distribute distributions paid during the
month as directed on the last business day of each month.

*Class C shareholders may reinvest their distributions in Class A shares of
any Franklin Templeton money fund.

TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to information
about your account or any Franklin Templeton Fund. This service is available
from touch-tone phones at 1-800/247-1753. For a free TeleFACTS brochure, call
1-800/DIAL BEN.

CHECK WRITING PRIVILEGES - MONEY FUND You may request redemption drafts
(checks) free of charge on your account application or, for an existing
account, by calling our TeleFACTS system. Check writing privileges allow you
to write checks against your account and are available unless you hold share
certificates.

For security reasons and reasons related to the requirements of check
processing systems, the fund can only accept checks ordered from the fund.
The fund cannot be responsible for any check not ordered from the fund that
is returned unpaid to the payee.

TELEPHONE PRIVILEGES You will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to
sell or exchange your shares and make certain other changes to your account
by phone.

For accounts with more than one registered owner, telephone privileges also
allow the fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For
all other transactions and changes, all registered owners must sign the
instructions.

As long as we take certain measures to verify telephone requests, we will not
be responsible for any losses that may occur from unauthorized requests. Of
course, you can decline telephone exchange or redemption privileges on your
account application.

EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton
Funds within the same class*. For the Insured and Intermediate Funds, you can
exchange shares generally without paying any additional sales charges. If you
exchange shares held for less than six months, however, you may be charged
the difference between the initial sales charge of the two funds you are
exchanging between if the difference is more than 0.25%. If you exchange
shares from a money fund, a sales charge may apply no matter how long you
have held the shares, unless you acquired your money fund shares by exchange
or through the reinvestment of dividends, or you otherwise qualify to buy
shares without an initial sales charge.

[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase
of another. In general, the same policies that apply to purchases and sales
apply to exchanges, including minimum investment amounts. Exchanges also have
the same tax consequences as ordinary sales and purchases.
[End callout]

Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee. Any CDSC
will continue to be calculated from the date of your initial investment and
will not be charged at the time of the exchange. The purchase price for
determining a CDSC on exchanged shares will be the price you paid for the
original shares. If you exchange shares subject to a CDSC into a Class A
money fund, the time your shares are held in the money fund will not count
towards the CDSC holding period.

Frequent exchanges can interfere with fund management or operations and drive
up costs for all shareholders. To protect shareholders, there are limits on
the number and amount of exchanges you may make (please see "Market Timers"
on page 47).

*Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange into
Class A without any sales charge. Advisor Class shareholders of another
Franklin Templeton Fund also may exchange into Class A without any sales
charge. Advisor Class shareholders who exchange their shares for Class A
shares and later decide they would like to exchange into another fund that
offers Advisor Class may do so.

SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. A CDSC may apply to
withdrawals that exceed certain amounts. Certain terms and minimums apply. To
sign up, complete the appropriate section of your application.

[Insert graphic of a certificate] SELLING SHARES

You can sell your shares at any time. Please keep in mind that a contingent
deferred sales charge (CDSC) may apply.

SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone or with a simple letter. Sometimes, however, to protect
you and the fund we will need written instructions signed by all registered
owners, with a signature guarantee for each owner, if:

[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can
obtain a signature guarantee at most banks and securities dealers.

A notary public CANNOT provide a signature guarantee.
[End callout]

o you are selling more than $100,000 worth of shares
o you want your proceeds paid to someone who is not a registered owner
o you want to send your proceeds somewhere other than the address of record,
or preauthorized bank or brokerage firm account

We also may require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the
fund against potential claims based on the instructions received.

SELLING SHARES BY CHECK - MONEY FUND For accounts with check writing
privileges, you may make checks payable to any person and for any amount of
$100 or more. Since you will not know the exact amount in your account on the
day a check clears, a check should not be used to close your account.

When a check is presented for payment, we will redeem an equivalent number of
shares in your account to cover the amount of the check. The shares will be
redeemed at the net asset value next determined after we receive the check,
as long as the check does not exceed the collected balance in your account.
If a check is presented for payment that exceeds the collected balance in
your account, the bank may return the check unpaid.

The checks are drawn through Bank of America, N.A. Bank of America may end
this service at any time upon notice to you. You generally will not be able
to convert a check drawn on your fund account into a certified or cashier's
check by presenting it at the bank. Since the fund is not a bank, the fund
cannot assure that a stop payment order you write will be effective. The fund
will use its best efforts, however, to see that these orders are carried out.

SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with
a check or draft, we may delay sending you the proceeds until your check or
draft has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.

REDEMPTION PROCEEDS Your redemption check will be sent within seven days
after we receive your request in proper form. We are not able to receive or
pay out cash in the form of currency. Redemption proceeds may be delayed if
we have not yet received your signed account application.

CONTINGENT DEFERRED SALES CHARGE (CDSC) Most Franklin Templeton Funds impose
a 1% CDSC on certain investments of Class A shares sold within 12 months of
purchase. While the Money Fund generally does not have a CDSC, it will impose
one if you sell shares exchanged into the Money Fund from another Franklin
Templeton Fund and those shares would have been assessed a CDSC in the other
fund. Please keep in mind that the time the shares are held in the Money Fund
does not count towards the CDSC holding period.

The CDSC is based on the current value of the shares being sold or their net
asset value when purchased, whichever is less. To keep your CDSC as low as
possible, each time you place a request to sell shares we will first sell any
shares in your account that are not subject to a CDSC. If there are not
enough of these to meet your request, we will sell the shares in the order
they were purchased.

For information on the CDSC that may apply when you sell shares of the
Insured or Intermediate Funds, please see "Sales Charges" on page 34.

SELLING SHARES
- ----------------------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- ----------------------------------------------------------------------
[Insert graphic of hands Contact your investment representative
shaking]

THROUGH YOUR INVESTMENT
REPRESENTATIVE
- ----------------------------------------------------------------------
[Insert graphic of Send written instructions and endorsed
envelope] share certificates (if you hold share
certificates) to Investor Services.
BY MAIL Corporate, partnership or trust accounts
may need to send additional documents.

Specify the fund, the account number and
the dollar value or number of shares you
wish to sell. Be sure to include all
necessary signatures and any additional
documents, as well as signature guarantees
if required.

A check will be mailed to the name(s) and
address on the account, or otherwise
according to your written instructions.
- ----------------------------------------------------------------------
[Insert graphic of phone] As long as your transaction is for
$100,000 or less, you do not hold share
BY PHONE certificates and you have not changed your
address by phone within the last 15 days,
1-800/632-2301 you can sell your shares by phone.

A check will be mailed to the name(s) and
address on the account. Written
instructions, with a signature guarantee,
are required to send the check to another
address or to make it payable to another
person.
- ----------------------------------------------------------------------
[Insert graphic of three You can call or write to have redemption
lightning bolts] proceeds sent to a bank account. See the
policies above for selling shares by mail
BY ELECTRONIC FUNDS or phone.
TRANSFER (ACH)
Before requesting to have redemption
proceeds sent to a bank account, please
make sure we have your bank account
information on file. If we do not have
this information, you will need to send
written instructions with your bank's name
and address, a voided check or savings
account deposit slip, and a signature
guarantee if the ownership of the bank and
fund accounts is different.

If we receive your request in proper form
by 1:00 p.m. Pacific time for the Insured
and Intermediate Funds, or 3:00 p.m.
Pacific time for the Money Fund, proceeds
sent by ACH generally will be available
within two to three business days.
- ----------------------------------------------------------------------
[Insert graphic of two Obtain a current prospectus for the fund
arrows pointing in you are considering.
opposite directions]
Call Shareholder Services at the number
BY EXCHANGE below or our automated TeleFACTS system,
or send signed written instructions. See
TeleFACTS(R) the policies above for selling shares by
1-800/247-1753 mail or phone.
(around-the-clock access)
If you hold share certificates, you will
need to return them to the fund before
your exchange can be processed.
- ----------------------------------------------------------------------

[Insert graphic of paper and pen] ACCOUNT POLICIES

CALCULATING SHARE PRICE The Money Fund calculates its net asset value per
share (NAV) at 3:00 p.m. Pacific time, each day the New York Stock Exchange
is open, by dividing its net assets by the number of shares outstanding. The
fund's assets are generally valued at their amortized cost.

[Begin callout]
When you buy shares, you pay the offering price. The offering price is the
NAV plus any applicable sales charge.

When you sell shares, you receive the NAV minus any applicable contingent
deferred sales charge (CDSC).
[End callout]

The Insured and Intermediate Funds calculate their NAV each business day at
the close of trading on the New York Stock Exchange (normally 1:00 p.m.
Pacific time). Each class's NAV is calculated by dividing its net assets by
the number of its shares outstanding.

The assets of the Insured and Intermediate Funds are generally valued at
their market value. If market prices are unavailable, or if an event occurs
after the close of the trading market that materially affects the values,
assets may be valued at their fair value.

Requests to buy and sell shares are processed at the NAV next calculated
after we receive your request in proper form.

ACCOUNTS WITH LOW BALANCES If the value of your account falls below $250 ($50
for employee and UGMA/UTMA accounts) because you sell some of your shares, we
may mail you a notice asking you to bring the account back up to its
applicable minimum investment amount. If you choose not to do so within 30
days, we may close your account and mail the proceeds to the address of
record. You will not be charged a CDSC if your account is closed for this
reason.

STATEMENTS AND REPORTS For the Insured and Intermediate Funds, you will
receive quarterly account statements that show all your account transactions
during the quarter. For the Money Fund, you will receive monthly account
statements that show all your account transactions during the month. For each
fund, you also will receive written notification after each transaction
affecting your account (except for distributions and transactions made
through automatic investment or withdrawal programs, and, in the case of the
Money Fund, shares sold by check, which will be reported on your quarterly or
monthly statement, as applicable). You also will receive the fund's financial
reports every six months. To reduce fund expenses, we try to identify related
shareholders in a household and send only one copy of the financial reports.
If you need additional copies, please call 1-800/DIAL BEN.

If there is a dealer or other investment representative of record on your
account, he or she also will receive copies of all notifications and
statements and other information about your account directly from the fund.

STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have
an agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.

JOINT ACCOUNTS Unless you specify a different registration, accounts with two
or more owners are registered as "joint tenants with rights of survivorship"
(shown as "Jt Ten" on your account statement). To make any ownership changes
to a joint account, all owners must agree in writing, regardless of the law
in your state.

MARKET TIMERS The funds do not allow investments by market timers. You will
be considered a market timer if you have (i) requested an exchange out of the
fund within two weeks of an earlier exchange request, or (ii) exchanged
shares out of the fund more than twice in a calendar quarter, or (iii)
exchanged shares equal to at least $5 million, or more than 1% of the fund's
net assets, or (iv) otherwise seem to follow a timing pattern. Shares under
common ownership or control are combined for these limits.

ADDITIONAL POLICIES Please note that the fund maintains additional policies
and reserves certain rights, including:

o The fund may refuse any order to buy shares, including any purchase under
the exchange privilege.
o At any time, the fund may change its investment minimums or waive or lower
its minimums for certain purchases.
o The fund may modify or discontinue the exchange privilege on 60 days'
notice.
o In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws.
o For redemptions over a certain amount, the fund reserves the right to make
payments in securities or other assets of the fund, in the case of an
emergency or if the payment by check, wire or electronic funds transfer
would be harmful to existing shareholders.
o To permit investors to obtain the current price, dealers are responsible
for transmitting all orders to the fund promptly.
o If you buy shares with a check or draft that is returned to the fund
unpaid, the fund may impose a $10 charge against your account for each
returned item.
o When you buy shares of the Money Fund, it does not create a checking or
other bank account relationship with the fund or any bank.

DEALER COMPENSATION Qualifying dealers who sell fund shares may receive sales
commissions and other payments. These are paid by Franklin Templeton
Distributors, Inc. (Distributors) from sales charges, distribution and
service (12b-1) fees and its other resources.

INSURED FUND CLASS A CLASS C
- -------------------------------------------------------------------
COMMISSION (%) - 2.00
Investment under $100,000 4.00 -
$100,000 but under $250,000 3.25 -
$250,000 but under $500,000 2.25 -
$500,000 but under $1 million 1.85 -
$1 million or more up to 0.75 1 -
12B-1 FEE TO DEALER 0.10 0.65 2

INTERMEDIATE FUND
- --------------------------------------------------------------------
COMMISSION (%) -
Investment under $100,000 2.00
$100,000 but under $250,000 1.50
$250,000 but under $500,000 1.00
$500,000 but under $1 million 0.85
$1 million or more up to 0.75 1
12B-1 FEE TO DEALER 0.10

A dealer commission of up to 1% may be paid on Class C NAV purchases. A
dealer commission of up to 0.25% may be paid on Class A NAV purchases by
certain trust companies and bank trust departments, eligible governmental
authorities, and broker-dealers or others on behalf of clients participating
in comprehensive fee programs.

1. During the first year after purchase, dealers may not be eligible to
receive the 12b-1 fee.
2. Dealers may be eligible to receive up to 0.15% during the first year after
purchase and may be eligible to receive the full 12b-1 fee starting in the
13th month.

[Insert graphic of question mark] QUESTIONS

If you have any questions about the fund or your account, you can write to us
at P.O. Box 997151, Sacramento, CA 95899-9983. You also can call us at one of
the following numbers. For your protection and to help ensure we provide you
with quality service, all calls may be monitored or recorded.

HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
- --------------------------------------------------------------------
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
6:30 a.m. to 2:30 p.m. (Saturday)
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Advisor Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.

FOR MORE INFORMATION

You can learn more about each fund in the following documents:

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS

Includes a discussion of recent market conditions and fund strategies,
financial statements, detailed performance information, portfolio holdings
and the auditor's report.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

Contains more information about each fund, its investments and policies. It
is incorporated by reference (is legally a part of this prospectus).

For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.

FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklintempleton.com

You also can obtain information about each fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-202/942-8090) or the EDGAR
Database on the SEC's Internet site at http://www.sec.gov. You can obtain
copies of this information, after paying a duplicating fee, by writing to the
SEC's Public Reference Section, Washington, D.C. 20549-0102 or by electronic
request at the following E-mail address: [email protected].

Investment Company Act file #811-4787 NYT P 05/00

FRANKLIN NEW YORK
TAX-FREE TRUST
FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND - CLASS A & C
FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND - CLASS A
FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND - CLASS A

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000

[Insert Franklin Templeton Ben Head]

P.O. BOX 997151, SACRAMENTO, CA 95899-9983 1-800/DIAL BEN(R)

This Statement of Additional Information (SAI) is not a prospectus. It
contains information in addition to the information in the funds' prospectus.
The funds' prospectus, dated May 1, 2000, which we may amend from time to
time, contains the basic information you should know before investing in the
funds. You should read this SAI together with the funds' prospectus.

The audited financial statements and auditor's report in the funds' Annual
Report to Shareholders, for the fiscal year ended December 31, 1999, are
incorporated by reference (are legally a part of this SAI).

For a free copy of the current prospectus or annual report, contact your
investment representative or call
1-800/DIAL BEN (1-800/342-5236).

CONTENTS

Goals and Strategies
Risks
Officers and Trustees
Management and Other Services
Portfolio Transactions
Distributions and Taxes
Organization, Voting Rights and Principal Holders
Buying and Selling Shares
Pricing Shares
The Underwriter
Performance
Miscellaneous Information
Description of Ratings

- -------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
o ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK;
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

GOALS AND STRATEGIES
- -------------------------------------------------------------------------------

Each 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, and, in the case of the Money
Fund, liquidity in its investments. This goal is fundamental, which means it
may not be changed without shareholder approval. Of course, there is no
assurance that any fund will meet its goal. The Money Fund also tries to
maintain a stable $1 share price.

As a fundamental policy, each fund normally invests at least 80% of its total
assets in securities that pay interest free from federal income taxes,
including the federal alternative minimum tax. As nonfundamental policies,
each fund also normally invests at least 80% of its total assets in
securities that pay interest free from the personal income taxes of New York
State and New York City and at least 65% of its total assets in New York
municipal securities.

Municipal securities issued by New York State or its counties,
municipalities, authorities, agencies, or other subdivisions, as well as
municipal securities issued by U.S. territories such as Guam, Puerto Rico,
the Mariana Islands or the U.S. Virgin Islands, generally pay interest free
from federal income tax and from New York State and New York City personal
income taxes for New York residents.

Each fund tries to invest all of its assets in tax-free municipal securities.
The issuer's bond counsel generally gives the issuer an opinion on the
tax-exempt status of a municipal security when the security is issued.

Below is a description of various types of municipal and other securities
that each fund may buy. Other types of municipal securities may become
available that are similar to those described below and in which each fund
also may invest, if consistent with its investment goal and policies.

TAX ANTICIPATION NOTES are issued to finance short-term working capital needs
of municipalities 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 similar to tax anticipation notes except they
are issued in expectation of the receipt of other kinds of revenue, such as
federal revenues available under the Federal Revenue Sharing Program.

BOND ANTICIPATION NOTES are normally issued to provide interim financing
until long-term financing can be arranged. Proceeds from long-term bond
issues then provide the money for the repayment of the notes.

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 meet longer-term capital needs and generally have maturities
from one to 30 years when issued. They have two principal classifications:
general obligation bonds and revenue bonds.

GENERAL OBLIGATION BONDS. Issuers of general obligation bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads. 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.

REVENUE BONDS. The full faith, credit and taxing power of the issuer do not
secure revenue bonds. Instead, the principal security for a revenue bond
generally is the net revenue derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise tax or other
specific revenue source. Revenue bonds are issued to finance a wide variety
of capital projects, including: electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and
universities; and hospitals. The principal security behind these bonds may
vary. For example, 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 that may be used to make principal and interest
payments. Some authorities have further security in the form of state
assurances (although without obligation) to make up deficiencies in the debt
service reserve fund.

TAX-EXEMPT INDUSTRIAL DEVELOPMENT REVENUE BONDS are issued by or on behalf of
public authorities to finance various privately operated facilities for
business, manufacturing, housing, sports and pollution control, as well as
public facilities such as airports, mass transit systems, ports and parking.
The payment of principal and interest is solely dependent on the ability of
the facility's user to meet its financial obligations and the pledge, if any,
of the facility or other property as security for payment.

VARIABLE OR FLOATING RATE SECURITIES Each fund may invest in variable or
floating rate securities, including variable rate demand notes, which have
interest rates that change either at specific intervals (variable rate), from
daily up to monthly, or whenever a benchmark rate changes (floating rate).
The interest rate adjustments are designed to help stabilize the security's
price. While this feature helps protect against a decline in the security's
market price when interest rates rise, it lowers a fund's income when
interest rates fall. Of course, a fund's income from its variable rate
investments also may increase if interest rates rise.

Variable or floating rate securities may include a demand feature, which may
be unconditional. The demand feature allows the holder to demand prepayment
of the principal amount before maturity, generally on one to 30 days' notice.
The holder receives the principal amount plus any accrued interest either
from the issuer or by drawing on a bank letter of credit, a guarantee or
insurance issued with respect to the security.

The Insured Fund may invest in top rated variable and floating rate
securities and the Intermediate Fund may invest in investment grade variable
and floating rate securities. The Insured and Intermediate Funds generally
use variable or floating rate securities as short-term investments while
waiting for long-term investment opportunities.

The Money Fund is subject to certain rules under federal securities laws on
the quality and maturity of the variable and floating rate securities in
which it may invest, as well as to procedures adopted by its board of
trustees designed to minimize credit risks. The Money Fund may buy certain
types of variable and floating rate securities if they are consistent with
the fund's goal of maintaining a stable $1 share price.

MUNICIPAL LEASE OBLIGATIONS Each fund may invest in municipal lease
obligations, including certificates of participation. Municipal lease
obligations generally finance the purchase of public property. The property
is leased to the state or a local government, and the lease payments are used
to pay the interest on the obligations. Municipal lease obligations differ
from other municipal securities because the lessee's governing body must
appropriate (set aside) the money to make the lease payments each year. If
the money is not appropriated, the issuer or the lessee can end the lease
without penalty. If the lease is cancelled, investors who own the municipal
lease obligations may not be paid. The board of trustees reviews each fund's
municipal lease obligations to try to assure that they are liquid investments
based on various factors reviewed by the fund's manager and monitored by the
board.

Since annual appropriations are required to make lease payments, municipal
lease obligations generally are not subject to constitutional limitations on
the issuance of debt and may allow an issuer to increase government
liabilities beyond constitutional debt limits. When faced with increasingly
tight budgets, local governments have more discretion to curtail lease
payments under a municipal lease obligation than they do to curtail payments
on other municipal securities. If not enough money is appropriated to make
the lease payments, the leased property may be repossessed as security for
holders of the municipal lease obligations. If this happens, there is no
assurance that the property's private sector or re-leasing value will be
enough to make all outstanding payments on the municipal lease obligations or
that the payments will continue to be tax-free.

While cancellation risk is inherent to municipal lease obligations, each fund
believes that this risk may be reduced, although not eliminated, by its
policies on the quality of securities in which it may invest.

CALLABLE BONDS Each fund may invest in callable bonds, which allow the
issuer to repay some or all of the bonds ahead of schedule. If a bond is
called, the fund will receive the principal amount, the accrued interest, and
may receive a small additional payment as a call premium. The manager may
sell a callable bond before its call date if it believes the bond is at its
maximum premium potential. When pricing callable bonds, the call feature is
factored into the price of the bonds and may impact the fund's net asset
value.

An issuer is more likely to call its bonds when interest rates are falling,
because the issuer can issue new bonds with lower interest payments. If a
bond is called, the fund may have to replace it with a lower-yielding
security. A call of some or all of these securities may lower a fund's
income, its yield and its distributions to shareholders. If the fund
originally paid a premium for the bond because it had appreciated in value
from its original issue price, the fund also may not be able to recover the
full amount it paid for the bond. One way for the fund to protect itself from
call risk is to buy bonds with call protection. Call protection is an
assurance that the bond will not be called for a specific time period,
typically five to 10 years from when the bond is issued.

ESCROW-SECURED OR DEFEASED BONDS are created when an issuer refunds, before
maturity, an outstanding bond issue that is not immediately callable (or
pre-refunds), and sets aside funds for redemption of the bonds at a future
date. The issuer uses the proceeds from a new bond issue to buy high grade,
interest bearing debt securities, generally direct obligations of the U.S.
government. These securities are then deposited in an irrevocable escrow
account held by a trustee bank to secure all future payments of principal and
interest on the pre-refunded bond. Escrow-secured bonds often receive a
triple A or equivalent rating.

STRIPPED MUNICIPAL SECURITIES Municipal securities may be sold in "stripped"
form. Stripped municipal securities represent separate ownership of principal
and interest payments on municipal securities.

ZERO-COUPON AND DELAYED INTEREST SECURITIES The Insured and Intermediate
Funds may each invest in zero-coupon and delayed interest securities.
Zero-coupon securities make no periodic interest payments, but 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. The discount varies depending on the
time remaining until maturity, as well as market interest rates, liquidity of
the security, and the issuer's perceived credit quality. The discount, in the
absence of financial difficulties of the issuer, typically decreases as the
final maturity date approaches. If the issuer defaults, the fund may not
receive any return on its investment.

Because zero-coupon securities bear no interest and compound semiannually at
the rate fixed at the time of issuance, their value generally is more
volatile than the value of other fixed-income securities. Since zero-coupon
bondholders do not receive interest payments, zero-coupon securities fall
more dramatically than bonds paying interest on a current basis when interest
rates rise. When interest rates fall, zero-coupon securities rise more
rapidly in value, because the bonds reflect a fixed rate of return.

An investment in zero-coupon and delayed interest securities may cause a fund
to recognize income and make distributions to shareholders before it receives
any cash payments on its investment. To generate cash to satisfy distribution
requirements, a fund may have to sell portfolio securities that it otherwise
would have continued to hold or to use cash flows from other sources such as
the sale of fund shares.

CONVERTIBLE AND STEP COUPON BONDS The Insured and Intermediate Funds may
each invest a portion of their assets in convertible and step coupon bonds.
Convertible bonds 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 on
predetermined dates chosen when the security is issued.

U.S. GOVERNMENT SECURITIES are issued by the U.S. Treasury or by agencies and
instrumentalities of the U.S. government and are backed by the full faith and
credit of the U.S. government. They include Treasury bills, notes and bonds.

COMMERCIAL PAPER is a promissory note issued by a corporation to finance its
short-term credit needs. Each fund may invest in taxable commercial paper
only for temporary defensive purposes.

WHEN-ISSUED TRANSACTIONS Municipal securities 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 buy is made, but
delivery and payment take place at a later date. During the time between
purchase and settlement, no payment is made by the fund to the issuer and no
interest accrues to the fund. If the other party to the transaction fails to
deliver or pay for the security, the fund could miss a favorable price or
yield opportunity, or experience a loss.

When a fund makes the commitment to buy a municipal security on a when-issued
basis, it records the transaction and reflects the value of the security in
the determination of its net asset value. The funds do not believe their net
asset value or income will be negatively affected by their purchase of
municipal securities on a when-issued basis. The funds will not engage in
when-issued transactions for investment leverage purposes.

Although a fund generally will buy municipal securities on a when-issued
basis with the intention of acquiring the securities, it may sell the
securities before the settlement date if the manager considers it advisable.
When a fund is the buyer, it will set aside cash or liquid securities, with
an aggregate value equal to the amount of its purchase commitments, on its
books until payment is made. If assets of a fund are held in cash pending the
settlement of a purchase of securities, the fund will not earn income on
those assets.

ILLIQUID INVESTMENTS Each fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities generally are securities that cannot
be sold within seven days in the normal course of business at approximately
the amount at which the fund has valued them.

REPURCHASE AGREEMENTS The Money Fund may enter into repurchase agreements for
temporary defensive purposes. Under a repurchase agreement, the fund agrees
to buy securities guaranteed as to payment of principal and interest by the
U.S. government or its agencies from a qualified bank or broker-dealer and
then to sell the securities back to the bank or broker-dealer after a short
period of time (generally, less than seven days) at a higher price. The bank
or broker-dealer must transfer to the fund's custodian securities with an
initial market value of at least 102% of the dollar amount invested by the
fund in each repurchase agreement. The manager will monitor the value of such
securities daily to determine that the value equals or exceeds the repurchase
price.

Repurchase agreements may involve risks in the event of default or insolvency
of the bank or broker-dealer, including possible delays or restrictions upon
the fund's ability to sell the underlying securities. The fund will enter
into repurchase agreements only with parties who meet certain
creditworthiness standards, i.e., banks or broker-dealers that the manager
has determined present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase transaction.

To the extent it invests in repurchase agreements, the Money Fund may not
invest in repurchase agreements with a term of more than one year, and
usually would invest in those with terms ranging from overnight to one week.
The securities underlying a repurchase agreement may, however, have maturity
dates longer than one year from the effective date of the repurchase
agreement. The fund may not enter into a repurchase agreement with a term of
more than seven days if, as a result, more than 10% of the fund's net assets
would be invested in such repurchase agreements and other illiquid securities.

DIVERSIFICATION Each fund is a non-diversified fund, although each fund
intends to meet certain diversification requirements for tax purposes.
Generally, to meet federal tax requirements at the close of each quarter, a
fund may not invest more than 25% of its total assets in any one issuer and,
with respect to 50% of total assets, may not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities and may be revised if applicable federal income tax requirements
are revised. The Money Fund also must meet certain diversification
requirements under federal securities laws that are more restrictive than
those required for tax purposes.

TEMPORARY INVESTMENTS When the manager believes market or economic
conditions are unusual or unfavorable for investors, the manager may invest
up to 100% of each fund's assets in a temporary defensive manner or hold a
substantial portion of a fund's portfolio in cash. Unfavorable market or
economic conditions may include excessive volatility or a prolonged general
decline in the securities markets, the securities in which a fund normally
invests, or the economies of New York and territories where each fund
invests.

Temporary defensive investments may include securities that pay taxable
interest, including (i) municipal securities issued by a state or local
government other than New York; (ii) high quality commercial paper; or (iii)
securities issued by or guaranteed by the full faith and credit of the U.S.
government. In addition, each fund may invest all of its assets in municipal
securities issued by a U.S. territory such as Guam, Puerto Rico, the Mariana
Islands or the U.S. Virgin Islands, and the Money Fund may invest in
repurchase agreements and obligations of U.S. banks with assets of $1 billion
or more. The manager also may invest in these types of securities or hold
cash when securities meeting a fund's investment criteria are unavailable or
to maintain liquidity.

SECURITIES TRANSACTIONS The frequency of portfolio transactions, usually
referred to as the portfolio turnover rate, varies for each fund from year to
year, depending on market conditions. While short-term trading increases
portfolio turnover and may increase costs, the execution costs for municipal
securities are substantially less than for equivalent dollar values of equity
securities.

CREDIT QUALITY All things being equal, the lower a security's credit
quality, the higher the risk and the higher the yield the security generally
must pay as compensation to investors for the higher risk.

A security's credit quality depends on the issuer's ability to pay interest
on the security and, ultimately, to repay the principal. Independent rating
agencies, such as Fitch Investors Service Inc. (Fitch), Moody's Investors
Service, Inc. (Moody's), and Standard & Poor's Ratings Group (S&P(R)), often
rate municipal securities based on their opinion of the issuer's credit
quality. Most rating agencies use a descending alphabet scale to rate
long-term securities, and a descending numerical scale to rate short-term
securities. Securities in the top four ratings are "investment grade,"
although securities in the fourth highest rating may have some speculative
features. These ratings are described at the end of this SAI under
"Description of Ratings."

An insurance company, bank or other foreign or domestic entity may provide
credit support for a municipal security and enhance its credit quality. For
example, some municipal securities are insured, which means they are covered
by an insurance policy that guarantees the timely payment of principal and
interest. Other municipal securities may be backed by letters of credit,
guarantees, or escrow or trust accounts that contain securities backed by the
full faith and credit of the U.S. government to secure the payment of
principal and interest.

As discussed in the prospectus, each fund has different limitations on the
credit quality of the securities it may buy. These limitations generally are
applied when a fund makes an investment so that a fund is not required to
sell a security because of a later change in circumstances. In the case of
the Money Fund, however, the fund and its board must follow guidelines under
federal securities laws and act accordingly if the rating on a security in
the fund's portfolio is downgraded. These procedures only apply to changes
between the "major" rating categories, and not to changes in a security's
relative standing within a rating category.

In addition to considering ratings in its selection of each fund's portfolio
securities, the manager may consider, among other things, information about
the financial history and condition of the issuer, 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. Securities that
depend on the credit of the U.S. government are regarded as having a triple A
or equivalent rating.

INSURANCE The Insured Fund invests mainly in insured municipal securities.
The Intermediate and Money Funds also may invest in insured municipal
securities.

Normally, the underlying rating of an insured security is one of the top
three ratings of Fitch, Moody's or S&P. An insurer may insure municipal
securities that are rated below the top three ratings or that are unrated if
the securities otherwise meet the insurer's quality standards.

The Insured Fund will only enter into a contract to buy an insured municipal
security if either permanent insurance or an irrevocable commitment to insure
the municipal security by a qualified municipal bond insurer is in place. The
insurance feature guarantees the scheduled payment of principal and interest,
but does not guarantee (i) the market value of the insured municipal
security, (ii) the value of a fund's shares, or (iii) a fund's distributions.

TYPES OF INSURANCE. There are three types of insurance: new issue, secondary
and portfolio. A new issue insurance policy is purchased by the issuer when
the security is issued. A secondary insurance policy may be purchased by the
fund after a security is issued. With both new issue and secondary policies,
the insurance continues in force for the life of the security and, thus, may
increase the credit rating of the security, as well as its resale value.

The Insured Fund may buy a secondary insurance policy at any time, if the
manager believes the insurance would be in the best interest of the fund. The
fund is likely to buy a secondary insurance policy if, in the manager's
opinion, the fund could sell a security at a price that exceeds the current
value of the security, without insurance, plus the cost of the insurance. The
purchase of a secondary policy, if available, may enable the fund to sell a
defaulted security at a price similar to that of comparable securities that
are not in default. The fund would value a defaulted security covered by a
secondary insurance policy at its market value.

The Insured Fund also may buy a portfolio insurance policy. Unlike new issue
and secondary insurance, which continue in force for the life of the
security, portfolio insurance only covers securities while they are held by
the fund. If the fund sells a security covered by portfolio insurance, the
insurance protection on that security ends and, thus, cannot affect the
resale value of the security. As a result, the fund may continue to hold any
security insured under a portfolio insurance policy that is in default or in
significant risk of default and, absent any unusual or unforeseen
circumstances as a result of the portfolio insurance policy, would likely
value the defaulted security, or security for which there is a significant
risk of default, at the same price as comparable securities that are not in
default. While a defaulted security is held in the fund's portfolio, the fund
continues to pay the insurance premium on the security 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.

The insurance premium the fund pays for a portfolio insurance policy is a
fund expense. The premium is payable monthly and is adjusted for purchases
and sales of covered securities during the month. If the fund fails to pay
its premium, the insurer may take action against the fund to recover any
premium payments that are due. The insurer may not change premium rates for
securities covered by a portfolio insurance policy, regardless of the
security issuer's ability or willingness to meet its obligations.

QUALIFIED MUNICIPAL BOND INSURERS. Insurance policies may be issued by any
one of several qualified municipal bond insurers. The Insured Fund generally
buys insured municipal securities only if they are secured by an insurance
policy issued by an insurer whose claims paying ability is rated triple A or
its equivalent by Fitch, Moody's or S&P. Currently, there are four primary,
triple A rated municipal bond insurers. The fund, however, may invest a
portion of its assets in insured municipal securities covered by policies
issued by insurers with a rating below triple A or its equivalent.

The bond insurance industry is a regulated industry. All bond insurers must
be licensed in each state in order to write financial guarantees 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. Regulators also place restrictions on the amount an
insurer can guarantee in relation to the insurer's capital base. Neither the
funds nor the manager makes any representations as to the ability of any
insurance company to meet its obligation to a fund if called upon to do so.
Currently, to the best of our knowledge, there are no securities in the
funds' portfolios on which an insurer is paying the principal or interest
otherwise payable by the issuer of the bond.

If an insurer is called upon to pay the principal or interest on an insured
security that is due for payment but that has not been paid by the issuer,
the terms of payment would be governed by the provisions of the insurance
policy. After payment, the insurer becomes the owner of the security,
appurtenant coupon, or right to payment of principal or interest on the
security and is fully subrogated to all of the fund's rights with respect to
the security, including the right to payment. The insurer's rights to the
security or to payment of principal or interest are limited, however, to the
amount the insurer has paid.

MATURITY Municipal securities are issued with a specific maturity date - the
date when the issuer must repay the amount borrowed. Maturities typically
range from less than one year (short term) to 30 years (long term). In
general, securities with longer maturities are more sensitive to price
changes, although they may provide higher yields. The Insured Fund has no
restrictions on the maturity of the securities it may buy or on its average
portfolio maturity. The Intermediate Fund may buy securities with any
maturity but must maintain a dollar-weighted average portfolio maturity of
three to 10 years. The Money Fund only buys securities with remaining
maturities of 397 calendar days or less and maintains a dollar-weighted
average portfolio maturity of 90 days or less.

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

INVESTMENT RESTRICTIONS Each fund has adopted the following restrictions as
fundamental policies. This means they may only be changed if the change is
approved by (i) more than 50% of the fund's outstanding shares or (ii) 67% or
more of the fund's shares present at a shareholder meeting if more than 50%
of the fund's outstanding shares are represented at the meeting in person or
by proxy, whichever is less.

Each 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 the 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 the 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 the fund's total assets at the time of the most recent loan.

4. Act as underwriter of securities issued by other persons except insofar as
the fund may be technically deemed an underwriter under the federal securities
laws in connection with the disposition of portfolio securities.

5. Buy the securities of any issuer which would result in owning more than 10%
of the voting securities of such issuer.

6. Buy 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 manager 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 the fund may buy, 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. Buy securities of other investment companies, except in connection with a
merger, consolidation, acquisition, or reorganization, except that the
Intermediate 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 Investment Company Act of 1940, 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.

If a bankruptcy or other extraordinary event occurs concerning a particular
security the fund owns, the fund may receive stock, real estate, or other
investments that the fund would not, or could not, buy. If this happens, the
fund intends to sell such investments as soon as practicable while trying to
maximize the return to shareholders.

Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when a fund makes an investment. In most cases, a fund is
not required to sell a security because circumstances change and the security
no longer meets one or more of the fund's policies or restrictions. If a
percentage restriction or limitation is met at the time of investment, a
later increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities will not be considered a violation of the
restriction or limitation.

RISKS
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NEW YORK Since each fund mainly invests in New York municipal securities, its
performance is closely tied to the ability of issuers of New York municipal
securities to continue to make principal and interest payments on their
securities. The issuers' ability to do this is in turn dependent on economic,
political and other conditions within New York. Below is a discussion of
certain conditions that may affect New York municipal issuers. It is not a
complete analysis of every material fact that may affect the ability of
issuers of New York municipal securities to meet their debt obligations or
the economic or political conditions within New York and is subject to
change. The information below is based on data available to the funds from
historically reliable sources, but the funds have not independently verified
it.

NEW YORK STATE. The ability of New York issuers to continue to make principal
and interest payments is dependent in large part on their ability to raise
revenues, primarily through taxes, and to control spending. Many factors can
affect a state's revenues including the rate of population growth,
unemployment rates, personal income growth, federal aid, and the ability to
attract and keep successful businesses. A number of factors can also affect a
state's spending including the need for infrastructure improvements,
increased costs for education and other services, current debt levels, and
the existence of accumulated budget deficits. The following provides some
information on these and other factors.

New York's economy has improved in recent years, in large part due to strong
growth in the state's financial services sector.
With stronger economic performance, the state has been able to improve its
finances. New York has had four consecutive years of budget surpluses and, in
1998, eliminated its accumulated GAAP general fund deficit. For fiscal years
1997, 1998 and 1999, the state's general fund surpluses totaled $1.9 billion,
$1.6 billion and $1.1 billion, respectively, on a cash basis. Despite its
improvement, however, the state's economic performance has continued to lag
the nation during the recent national economic expansion.

Going forward, estimates have shown that the state's surpluses will be drawn
down over the next two fiscal years if the state does not drastically reduce
spending. The continued implementation of revenue reducing tax cuts along
with increased spending for infrastructure improvements and education could
result in an estimated budget gap of $1.2 billion by 2001, increasing to $5.5
billion by the end of fiscal 2002. These estimates were based on optimistic
economic and revenue assumptions, including that the recent strong
performance of Wall Street and the state's overall financial services sector
will continue. If actual growth in the state's economy and revenues does not
meet these assumptions, the state's future estimated budget gaps could be
much higher. New York's projected budget gaps are unusual among the states,
as most states have projected balanced operations or surpluses, even when
using conservative economic assumptions.

New York's debt burden has continued to be one of the highest among the
states. As of the end of fiscal year 1999, New York ranked fourth with a debt
per capita of $2,032 and there are no signs this will change in the near
term. Unlike many state's that have used recent budget surpluses to finance
capital expenditures on a "pay-as-you-go" basis and reduce their reliance on
debt financing, New York has continued to rely heavily on the issuance of
debt.

Despite recent improvements in New York's economic and financial performance,
its heavy reliance on the financial services sector, projected budget
imbalances, and high debt levels leave the state vulnerable to an economic
slowdown and volatility in its financial services sector.

The state has either guaranteed or supported, through lease-purchase
arrangements or other contractual or moral obligations, a substantial
principal amount of securities issued by various state agencies and
authorities. Moral obligations do not impose immediate financial obligations
on the state and require appropriations by the legislature before any
payments can be made. If the state fails to appropriate necessary amounts or
to take other action to allow authorities and agencies to meet their
obligations, the authorities and agencies could default on their debt
obligations. If a default occurs, it would likely have a significant adverse
impact on the market price of the obligations of both the state and its
various authorities and agencies.

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 or to obtain additional financing could be adversely
affected. This financial situation could result not only in defaults of state
and agency obligations, but could also adversely affect the marketability of
New York municipal securities.

In addition, if constitutional challenges to state laws or other court
actions are brought against the state or its agencies and municipalities
relating to financing, or the amount and use of taxes, these actions could
adversely affect the ability of the state and its political subdivisions to
meet their debt obligations, and may require extraordinary appropriations,
expenditure reductions, or both.

NEW YORK CITY. In 1975, New York City suffered several financial crises. In
that year, the city lost access to public credit markets and was not able to
sell short-term notes until 1979 or long-term notes until 1981. In an effort
to help the city out of its financial difficulties, the state legislature
created the Municipal Assistance Corporation (MAC). MAC has the authority to
issue bonds and notes and to pay or lend the proceeds to New York City, as
well as 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 or to continue appropriating per capita state aid
to pay MAC obligations. MAC does not have taxing powers, and its bonds are
not obligations enforceable against either New York City or New York State.

From 1975 until June 30, 1986, the city's financial condition was subject to
oversight and review by the New York State Financial Control Board (FCB). To
be eligible for guarantees and assistance, the city was required to submit to
the FCB, at least 50 days before the beginning of each fiscal year, a
financial plan for the city and certain agencies covering the four-year
period beginning with the upcoming fiscal year. The four-year financial plans
had to show a balanced budget determined in accordance with generally
accepted accounting principles. On June 30, 1986, some of the FCB's powers
were suspended because the city had satisfied certain statutory conditions.
The powers suspended included the FCB's power to approve or disapprove
certain contracts, long-term and short-term borrowings and the four-year
financial plans. The city, however, is still required to develop four-year
financial plans each year and the FCB continues to have certain review
powers. The FCB must reimpose its full powers if there is the occurrence or a
substantial likelihood and imminence of the occurrence of any one of certain
events including the existence of an operating deficit greater than $100
million, or failure by the city to pay principal of or interest on any of its
notes or bonds when due or payable.

In recent years, the city's overall debt burden has been high and has
approached constitutional general obligation debt limits. At the same time,
the city recently adopted a 10-year, $48 billion capital plan to maintain its
essential infrastructure. To help finance the capital plan and allow the city
to operate under its constitutional debt limit, the state's legislature
created the New York City Transitional Finance Authority in March 1997, which
is authorized to issue additional debt for the city's use. This debt will be
backed primarily by city personal income taxes. Going forward, the city will
need to somehow balance the maintenance of its infrastructure with its
growing debt burden. Debt service costs may reach 11% of expenditures by
2003, compared to 9.4% in 1997. This could reduce the city's future financial
flexibility, especially in the event of an economic downturn or other
financial crisis.

On the positive side, the city ended fiscal 1999 with a surplus of $2.6
billion. Similar to improvements at the state level, the city's improved
financial performance has been due in large part to the strong performance of
the securities industry and overall financial services sector, which may or
may not continue. Despite improved economic performance, budget gaps of
around $1.8 billion annually have been estimated for fiscal years 2001-2003.

As with New York State, New York City's heavy reliance on the financial
services sector, projected budget imbalances, and high debt levels make it
vulnerable to an economic slowdown and volatility in the financial services
sector.

U.S. TERRITORIES Since each fund may invest up to 35% of its assets in
municipal securities issued by U.S. territories, the ability of municipal
issuers in U.S. territories to continue to make principal and interest
payments also may affect a fund's performance. As with New York municipal
issuers, the ability to make these payments is dependent on economic,
political and other conditions. Below is a discussion of certain conditions
within some of the territories where the funds may invest. It is not a
complete analysis of every material fact that may affect the ability of
issuers of U.S. territory municipal securities to meet their debt obligations
or the economic or political conditions within the territories and is subject
to change. It is based on data available to the funds from historically
reliable sources, but it has not been independently verified by the funds.

PUERTO RICO. Puerto Rico's economy has continued to grow, although at a
slower pace than in previous years. Overall employment grew by only 1.1% in
calendar year 1999, compared to 1997. Growth in the private sector, however,
was up 2.5%.

The slowdown has been due, in part, to job losses in the manufacturing sector
and government down-sizing. Puerto Rico has been successful in its efforts to
improve government efficiency which, together with the privatization of the
commonwealth's telephone company and various health facilities, have resulted
in lower government employment. Losses in the government and manufacturing
sectors have been partially offset by gains in the construction, trade and
service areas.

In recent years, Puerto Rico's financial performance has improved. Relatively
strong revenue growth and more aggressive tax collection procedures have
resulted in a $100 million surplus over fiscal years 1997 to 1999 ($50
million on a GAAP basis). General fund cash balances, however, have declined
over this period from more than $500 million in 1995 to $230 million in 1999.
Given Puerto Rico's dependence on income taxes, which have accounted for
two-thirds of total revenue, the commonwealth's relatively low reserves leave
it vulnerable to an economic downturn. Puerto Rico's high debt levels and the
financial effects of the restructuring of Puerto Rico's healthcare system are
other factors that also may put pressure on Puerto Rico's ability to maintain
balanced fiscal operations in future years.

In 1996, a bill was passed that eliminates section 936 of the Internal
Revenue Code. This section has given certain U.S. corporations operating in
Puerto Rico significant tax advantages. These incentives have helped
considerably with Puerto Rico's economic growth, especially with the
development of its manufacturing sector. U.S. firms that have benefited from
these incentives have provided a significant portion of Puerto Rico's
revenues, employment and deposits in local financial institutions. The
section 936 incentives are being phased out over a 10-year period ending in
2006. While Puerto Rico has experienced some job losses in the manufacturing
sector and some U.S. companies have downsized or left, as of March 2000 the
overall adverse effects of the phasing-out of section 936 have been minimal.
Of course, there is no guarantee that this trend will continue.

U.S. VIRGIN ISLANDS. The U.S. Virgin Islands has suffered numerous years of
budget imbalances. Since fiscal 1989, the Virgin Islands has incurred budget
deficits in all but four fiscal years. As of June 30, 1999, the accumulated
deficit was close to $341 million. The Virgin Islands' large public sector
payroll (approximately 64% of general fund expenditures), relatively small
private sector that is dependent on tourism and related services, and heavy
reliance on taxes as a revenue source (close to 97% of all revenues),
together with the effects of three major hurricanes in the past ten years,
have contributed to its financial problems.

In September 1998, the Department of Interior Office of Inspector General
issued an audit report on the Virgin Islands. It noted that while the Virgin
Islands had made improvements in its financial situation, problems remained
in the areas of overall financial management, expenditure control and revenue
collections. To help improve its financial position, the Virgin Islands has
developed a five-year economic recovery plan. Central to this plan is a
reduction in government spending. In June 1999, the governor implemented a
strict hiring freeze and mandated a 5% reduction in personnel expenditures
each year through fiscal 2004, a 50% reduction in overtime expenses, and
various other cost saving initiatives. Since the plan is new, it is not yet
certain whether or to what extent the plan will be successful in helping the
Virgin Islands improve its financial condition.

OFFICERS AND TRUSTEES
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The trust has a board of trustees. The board is responsible for the overall
management of the trust, including general supervision and review of each
fund's investment activities. The board, in turn, elects the officers of the
trust who are responsible for administering the trust's day-to-day
operations. The board also monitors the Insured Fund to ensure no material
conflicts exist among its share classes. While none is expected, the board
will act appropriately to resolve any material conflict that may arise.

The name, age and address of the officers and board members, as well as their
affiliations, positions held with the trust, and principal occupations during
the past five years are shown below.

Frank H. Abbott, III (79)
1045 Sansome Street, San Francisco, CA 94111
TRUSTEE

President and Director, Abbott Corporation (an investment company); director
or trustee, as the case may be, of 28 of the investment companies in the
Franklin Templeton Group of Funds; and FORMERLY, Director, MotherLode Gold
Mines Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food
processing) (until 1996).

Harris J. Ashton (67)
191 Clapboard Ridge Road, Greenwich, CT 06830
TRUSTEE

Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 48 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998).

Robert F. Carlson (72)
2120 Lambeth Way, Carmichael, CA 95608
TRUSTEE

Member and past President, Board of Administration, California Public
Employees Retirement Systems (CALPERS); director or trustee, as the case may
be, of nine of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, member and Chairman of the Board, Sutter Community
Hospitals, member, Corporate Board, Blue Shield of California, and Chief
Counsel, California Department of Transportation.

S. Joseph Fortunato (67)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
TRUSTEE

Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or
trustee, as the case may be, of 50 of the investment companies in the
Franklin Templeton Group of Funds.

*Charles B. Johnson (67)
777 Mariners Island Blvd., San Mateo, CA 94404
CHAIRMAN OF THE BOARD AND TRUSTEE

Chairman of the Board, Chief Executive Officer, Member - Office of the
Chairman and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Investment Advisory Services, Inc.; Chairman of the Board,
Franklin Advisers, Inc.; Vice President, Franklin Templeton Distributors,
Inc.; Director, Franklin/Templeton Investor Services, Inc. and Franklin
Templeton Services, Inc.; officer and/or director or trustee, as the case may
be, of most of the other subsidiaries of Franklin Resources, Inc. and of 49
of the investment companies in the Franklin Templeton Group of Funds.

*Rupert H. Johnson, Jr. (59)
777 Mariners Island Blvd., San Mateo, CA 94404
PRESIDENT AND TRUSTEE

Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Executive Vice President and Director, Franklin Templeton
Distributors, Inc.; Director, Franklin Advisers, Inc., Franklin Investment
Advisory Services, Inc. and Franklin/Templeton Investor Services, Inc.;
Senior Vice President, Franklin Advisory Services, LLC; and officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 52 of the investment companies in the
Franklin Templeton Group of Funds.

Frank W.T. LaHaye (71)
20833 Stevens Creek Blvd., Suite 102, Cupertino, CA 95014
TRUSTEE

Chairman, Peregrine Venture Management Company (venture capital); Director,
The California Center for Land Recycling (redevelopment); director or
trustee, as the case may be, of 28 of the investment companies in the
Franklin Templeton Group of Funds; and FORMERLY, General Partner, Miller &
LaHaye and Peregrine Associates, the general partners of Peregrine Venture
funds.

*William J. Lippman (75)
One Parker Plaza, 9th Floor, Fort Lee, NJ 07024
TRUSTEE

Senior Vice President, Franklin Resources, Inc. and Franklin Management,
Inc.; President, Franklin Advisory Services, LLC; and officer and/or director
or trustee, as the case may be, of six of the investment companies in the
Franklin Templeton Group of Funds.

Gordon S. Macklin (71)
8212 Burning Tree Road, Bethesda, MD 20817
TRUSTEE

Director, Martek Biosciences Corporation, MCI WorldCom, Inc. (information
services), MedImmune, Inc. (biotechnology), Overstock.com (internet
services), White Mountains Insurance Group, Ltd. (holding company) and
Spacehab, Inc. (aerospace services); director or trustee, as the case may be,
of 48 of the investment companies in the Franklin Templeton Group of Funds;
and FORMERLY, Chairman, White River Corporation (financial services) (until
1998) and Hambrecht & Quist Group (investment banking) (until 1992), and
President, National Association of Securities Dealers, Inc. (until 1987).

Sheila Amoroso (40)
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 Templeton Group of Funds.

Harmon E. Burns (55)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Executive Vice President and Director, Franklin Templeton
Distributors, Inc. and Franklin Templeton Services, Inc.; Executive Vice
President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory
Services, Inc. and Franklin/Templeton Investor Services, Inc.; and officer
and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and of 52 of the investment
companies in the Franklin Templeton Group of Funds.

Rafael R. Costas, Jr. (35)
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 Templeton Group of Funds.

Martin L. Flanagan (39)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

President, Member - Office of the President, Chief Financial Officer and
Chief Operating Officer, Franklin Resources, Inc.; Senior Vice President,
Chief Financial Officer and Director, Franklin/Templeton Investor Services,
Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual
Advisers, LLC; Executive Vice President, Chief Financial Officer and
Director, Templeton Worldwide, Inc.; Executive Vice President, Chief
Operating Officer and Director, Templeton Investment Counsel, Inc.; Executive
Vice President and Chief Financial Officer, Franklin Advisers, Inc.; Chief
Financial Officer, Franklin Advisory Services, LLC and Franklin Investment
Advisory Services, Inc.; Director, Franklin Templeton Services, Inc.; officer
and/or director of some of the other subsidiaries of Franklin Resources,
Inc.; and officer and/or director or trustee, as the case may be, of 52 of
the investment companies in the Franklin Templeton Group of Funds.

Deborah R. Gatzek (51)
1840 Gateway Drive, San Mateo, CA 94404
SECRETARY

Partner, Stradley, Ronon, Stevens & Young, LLP; officer of 34 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
Senior Vice President and General Counsel, Franklin Resources, Inc., Senior
Vice President, Franklin Templeton Services, Inc. and Franklin Templeton
Distributors, Inc., Executive Vice President, Franklin Advisers, Inc., Vice
President, Franklin Advisory Services, LLC and Franklin Mutual Advisers, LLC,
and Vice President, Chief Legal Officer and Chief Operating Officer, Franklin
Investment Advisory Services, Inc. (until January 2000).

David Goss (52)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

President, Chief Executive Officer and Director, Franklin Select Realty
Trust, Property Resources, Inc., Property Resources Equity Trust, Franklin
Real Estate Management, Inc. and Franklin Properties, Inc.; officer of some
of the other subsidiaries of Franklin Resources, Inc.; officer of 53 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Director, Franklin Real Estate Income
Fund and Franklin Advantage Real Estate Income Fund (until 1996).

Barbara J. Green (52)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice
President, Templeton Worldwide, Inc. and Templeton Global Investors, Inc.;
officer of some of the other subsidiaries of Franklin Resources, Inc.; officer
of 53 of the investment companies in the Franklin Templeton Group of Funds; and
FORMERLY, Deputy Director, Division of Investment Management, Executive
Assistant and Senior Advisor to the Chairman, Counselor to the Chairman, Special
Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995), Attorney, Rogers & Wells (until 1986), and Judicial Clerk, U.S.
District Court (District of Massachusetts) (until 1979).

Edward V. McVey (62)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Senior Vice President and National Sales Manager, Franklin Templeton
Distributors, Inc.; and officer of 29 of the investment companies in the
Franklin Templeton Group of Funds.

Kimberley Monasterio (36)
777 Mariners Island Blvd., San Mateo, CA 94404
TREASURER AND PRINCIPAL ACCOUNTING OFFICER

Vice President, Franklin Templeton Services, Inc.; and officer of 33 of the
investment companies in the Franklin Templeton Group of Funds.

Murray L. Simpson (62)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Executive Vice President and General Counsel, Franklin Resources, Inc.;
officer and/or director of some of the other subsidiaries of Franklin
Resources, Inc.; officer of 53 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, Chief Executive Officer and Managing
Director, Templeton Franklin Investment Services (Asia) Limited (until
January 2000) and Director, Templeton Asset Management Ltd. (until 1999).

Thomas Walsh (38)
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 Templeton Group of Funds.

*This board member is considered an "interested person" under federal
securities laws.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.

The trust pays noninterested board members $215 per month plus $210 per
meeting attended. Board members who serve on the audit committee of the trust
and other funds in the Franklin Templeton Group of Funds receive a flat fee
of $2,000 per committee meeting attended, a portion of which is allocated to
the trust. Members of a committee are not compensated for any committee
meeting held on the day of a board meeting. Noninterested board members also
may serve as directors or trustees of other funds in the Franklin Templeton
Group of Funds and may receive fees from these funds for their services. The
fees payable to noninterested board members by the trust are subject to
reductions resulting from fee caps limiting the amount of fees payable to
board members who serve on other boards within the Franklin Templeton Group
of Funds. The following table provides the total fees paid to noninterested
board members by the trust and by the Franklin Templeton Group of Funds.

NUMBER OF
BOARDS IN
TOTAL FEES THE FRANKLIN
RECEIVED FROM TEMPLETON
TOTAL FEES THE FRANKLIN GROUP
RECEIVED TEMPLETON OF FUNDS
FROM GROUP ON WHICH
NAME THE TRUST 1 OF FUNDS 1 EACH SERVES 2
- ------------------------------------------------------------------
Frank H. Abbott, III $3,538 $156,060 28
Harris J. Ashton 3,893 363,165 48
Robert F. Carlson 4,890 89,690 9
S. Joseph Fortunato 3,627 363,238 50
Frank W.T. LaHaye 3,538 156,060 28
Gordon S. Macklin 3,893 363,165 48

1. For the year ended December 31, 1999.
2. We base the number of boards on the number of registered investment
companies in the Franklin Templeton Group of Funds. This number does not
include the total number of series or funds within each investment company
for which the board members are responsible. The Franklin Templeton Group of
Funds currently includes 53 registered investment companies, with
approximately 155 U.S. based funds or series.

Noninterested board members are reimbursed for expenses incurred in
connection with attending board meetings, paid pro rata by each fund in the
Franklin Templeton Group of Funds for which they serve as director or
trustee. No officer or board member received any other compensation,
including pension or retirement benefits, directly or indirectly from the
fund or other funds in the Franklin Templeton Group of Funds. Certain
officers or board members who are shareholders of Franklin Resources, Inc.
may be deemed to receive indirect remuneration by virtue of their
participation, if any, in the fees paid to its subsidiaries.

Board members historically have followed a policy of having substantial
investments in one or more of the funds in the Franklin Templeton Group of
Funds, as is consistent with their individual financial goals. In February
1998, this policy was formalized through adoption of a requirement that each
board member invest one-third of fees received for serving as a director or
trustee of a Templeton fund in shares of one or more Templeton funds and
one-third of fees received for serving as a director or trustee of a Franklin
fund in shares of one or more Franklin funds until the value of such
investments equals or exceeds five times the annual fees paid such board
member. Investments in the name of family members or entities controlled by a
board member constitute fund holdings of such board member for purposes of
this policy, and a three year phase-in period applies to such investment
requirements for newly elected board members. In implementing such policy, a
board member's fund holdings existing on February 27, 1998, are valued as of
such date with subsequent investments valued at cost.

MANAGEMENT AND OTHER SERVICES
- -------------------------------------------------------------------------------

MANAGER AND SERVICES PROVIDED Each fund's manager is Franklin Advisers, Inc.
The manager is a wholly owned subsidiary of Franklin Resources, Inc.
(Resources), a publicly owned company engaged in the financial services
industry through its subsidiaries. Charles B. Johnson and Rupert H. Johnson,
Jr. are the principal shareholders of Resources.

The manager provides investment research and portfolio management services,
and selects the securities for each fund to buy, hold or sell. The manager's
extensive research activities include, as appropriate, traveling to meet with
issuers and to review project sites. The manager also selects the brokers who
execute the funds' portfolio transactions. The manager provides periodic
reports to the board, which reviews and supervises the manager's investment
activities. To protect the funds, the manager and its officers, directors and
employees are covered by fidelity insurance.

The manager and its affiliates manage numerous other investment companies and
accounts. The manager may give advice and take action with respect to any of
the other funds it manages, or for its own account, that may differ from
action taken by the manager on behalf of each fund. Similarly, with respect
to each fund, the manager is not obligated to recommend, buy or sell, or to
refrain from recommending, buying or selling any security that the manager
and access persons, as defined by applicable federal securities laws, may buy
or sell for its or their own account or for the accounts of any other fund.
The manager is not obligated to refrain from investing in securities held by
the funds or other funds it manages.

The funds, their manager and principal underwriter have each adopted a code
of ethics, as required by federal securities laws. Under the code of ethics,
employees who are designated as access persons may engage in personal
securities transactions, including transactions involving securities that are
being considered for a fund or that are currently held by a fund, subject to
certain general restrictions and procedures. The personal securities
transactions of access persons of the funds, their manager and principal
underwriter will be governed by the code of ethics. The code of ethics is on
file with, and available from, the U.S. Securities and Exchange Commission
(SEC).

MANAGEMENT FEES The Insured and Intermediate Funds each pay the manager a fee
equal to a monthly rate of:

o 5/96 of 1% (approximately 5/8 of 1% per year) of the value of net assets up
to and including $100 million; and
o 1/24 of 1% (approximately 1/2 of 1% per year) of the value of net assets
over $100 million and not over $250 million; and
o 9/240 of 1% (approximately 45/100 of 1% per year) of the value of net
assets in excess of $250 million.

The fee is computed at the close of business on the last business day of each
month according to the terms of the management agreement. Each class of the
Insured Fund's shares pays its proportionate share of the fee.

The Money Fund pays the manager a fee equal to a daily rate of:

o 1/584 of 1% of the value of net assets up to and including $100 million; and
o 1/730 of 1% of the value of net assets over $100 million up to and
including $250 million; and
o 1/811 of 1% of the value of net assets in excess of $250 million.

The fee is payable at the request of the manager according to the terms of
the management agreement.

For the last three fiscal years ended December 31, the funds paid the
following management fees:
MANAGEMENT FEES PAID ($)
1999 1998 1997
- -----------------------------------------------------------
Insured Fund 1,456,859 1,482,054 1,433,123
Intermediate Fund1 193,487 164,966 132,873
Money Fund2 242,200 240,349 261,796

1. For the fiscal years ended December 31, 1999, 1998 and 1997, management
fees, before any advance waiver, totaled $472,120, $420,910 and $317,251,
respectively. Under an agreement by the manager to limit its fees, the
Intermediate Fund paid the management fees shown.
2. For the fiscal years ended December 31, 1999, 1998 and 1997, management
fees, before any advance waiver, totaled $378,583, $376,567 and $389,114,
respectively. Under an agreement by the manager to limit its fees, the Money
Fund paid the management fees shown.

ADMINISTRATOR AND SERVICES PROVIDED Franklin Templeton Services, Inc. (FT
Services) has an agreement with the manager to provide certain administrative
services and facilities for each fund. FT Services is wholly owned by
Resources and is an affiliate of the funds' manager and principal underwriter.

The administrative services FT Services provides include preparing and
maintaining books, records, and tax and financial reports, and monitoring
compliance with regulatory requirements.

ADMINISTRATION FEES The manager pays FT Services a monthly fee equal to an
annual rate of:

o 0.15% of each fund's average daily net assets up to $200 million;
o 0.135% of average daily net assets over $200 million up to $700 million;
o 0.10% of average daily net assets over $700 million up to $1.2 billion; and
o 0.075% of average daily net assets over $1.2 billion.

During the last three fiscal years ended December 31, the manager paid FT
Services the following administration fees:

ADMINISTRATION FEES PAID ($)
1999 1998 1997
- -------------------------------------------------------------
Insured Fund 392,810 398,776 384,599
Intermediate Fund 113,891 99,949 75,401
Money Fund 90,834 90,400 93,354

SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor
Services, Inc. (Investor Services) is each fund's shareholder servicing agent
and acts as each fund's transfer agent and dividend-paying agent. Investor
Services is located at 777 Mariners Island Blvd., San Mateo, CA 94404. Please
send all correspondence to Investor Services to P.O. Box 997151, Sacramento,
CA 95899-9983.

For its services, Investor Services receives a fixed fee per account. Each
fund also will reimburse Investor Services for certain out-of-pocket
expenses, which may include payments by Investor Services to entities,
including affiliated entities, that provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the
fund. The amount of reimbursements for these services per benefit plan
participant fund account per year will not exceed the per account fee payable
by the fund to Investor Services in connection with maintaining shareholder
accounts.

CUSTODIAN Bank of New York, Mutual Funds Division, 90 Washington Street, New
York, NY 10286, acts as custodian of each fund's securities and other assets.

AUDITOR PricewaterhouseCoopers LLP, 333 Market Street, San Francisco, CA
94105, is the funds' independent auditor. The auditor gives an opinion on the
financial statements included in the trust's Annual Report to Shareholders
and reviews the trust's registration statement filed with the SEC.

PORTFOLIO TRANSACTIONS
- -------------------------------------------------------------------------------

Since most purchases 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 buying principal or market maker without incurring charges for
the services of a broker on its behalf, unless it is determined that a better
price or execution may be obtained by using the services of a broker.
Purchases of portfolio securities from underwriters will include a commission
or concession paid by the issuer to the underwriter, and purchases from
dealers will include a spread between the bid and ask prices. As a general
rule, the funds do not buy securities in underwritings where they are given
no choice, or only limited choice, in the designation of dealers to receive
the commission. The funds seek to obtain prompt execution of orders at the
most favorable net price. Transactions may be directed to dealers in return
for research and statistical information, as well as for special services
provided by the dealers in the execution of orders.

It is not possible to place a dollar value on the special executions or on
the research services the manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions to
obtain additional research services allows the manager to supplement its own
research and analysis activities and to receive the views and information of
individuals and research staffs 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.
If the funds' officers are satisfied that the best execution is obtained, the
sale of fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, also may be considered a factor in the selection of
broker-dealers to execute the funds' portfolio transactions.

If purchases or sales of securities of the funds and one or more other
investment companies or clients supervised by the manager are considered at
or about the same time, transactions in these securities will be allocated
among the several investment companies and clients in a manner deemed
equitable to all by the manager, taking into account the respective sizes of
the funds and the amount of securities to be purchased or sold. In some cases
this procedure could have a detrimental effect on the price or volume of the
security so far as the funds are concerned. In other cases it is possible
that the ability to participate in volume transactions may improve execution
and reduce transaction costs to the funds.

During the fiscal years ended December 31, 1999, 1998 and 1997, the funds did
not pay any brokerage commissions.

As of December 31, 1999, the funds did not own securities of their regular
broker-dealers.

DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------

The Insured Fund calculates dividends and capital gains the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the distribution and service (Rule 12b-1)
fees of each class. Distributions are subject to approval by the board. The
funds do not pay "interest" or guarantee any fixed rate of return on an
investment in their shares.

DISTRIBUTIONS OF NET INVESTMENT INCOME Each fund receives income generally
in the form of interest on its investments. This income, less expenses
incurred in the operation of the fund, constitutes the fund's net investment
income from which dividends may be paid to you.

The Money Fund typically pays dividends from its daily net income each day
that its net asset value is calculated. The Money Fund's daily net income
includes accrued interest and any original issue or acquisition 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 $1 share price), less the
estimated expenses of the fund.
By meeting certain requirements of the Internal Revenue Code, the funds have
qualified and continue to qualify to pay exempt-interest dividends to you.
These dividends are derived from interest income exempt from regular federal
income tax, and are not subject to regular federal income tax when they are
distributed to you. In addition, to the extent that exempt-interest dividends
are derived from interest on obligations of New York or its political
subdivisions, or from interest on qualifying U.S. territorial obligations
(including qualifying obligations of Puerto Rico, the U.S. Virgin Islands or
Guam), they also may be exempt from New York's personal income taxes. New
York generally does not grant tax-free treatment to interest on state and
municipal securities of other states.

The funds may earn taxable income from many sources, including on any
temporary investments, the discount from stripped obligations or their
coupons, income from securities loans or other taxable transactions, or
ordinary income derived from the sale of market discount bonds. Any
distributions by a fund from such income will be taxable to you as ordinary
income, whether you receive them in cash or in additional shares.

DISTRIBUTIONS OF CAPITAL GAINS The funds may derive capital gains and losses
in connection with sales or other dispositions of their portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be
taxable to you as long-term capital gain, regardless of how long you have
held your shares in a fund. Any net capital gains realized by a fund
generally will be distributed once each year, and may be distributed more
frequently, if necessary, to reduce or eliminate excise or income taxes on
the funds. Because the Money Fund is a money fund, it does not anticipate
realizing any long-term capital gains.

MAINTAINING A $1 SHARE PRICE - MONEY FUND Gains and losses on the sale of
portfolio securities and unrealized appreciation or depreciation in the value
of these securities may require the Money Fund to adjust distributions to
maintain its $1 share price. These procedures may result in under- or
over-distributions by the fund of its net investment income.

INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The funds will inform you
of the amount of your ordinary income dividends and capital gains
distributions at the time they are paid, and will advise you of their tax
status for federal income tax purposes shortly after the close of each
calendar year, including the portion of the distributions that on average
comprise taxable income or interest income that is a tax preference item
under the alternative minimum tax. If you have not held fund shares for a
full year, a fund may designate and distribute to you, as taxable, tax-exempt
or tax preference income, a percentage of income that is not equal to the
actual amount of such income earned during the period of your investment in
the fund.

ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY Each fund has elected
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code, has qualified as such for its most recent fiscal year,
and intends to so qualify during the current fiscal year. As regulated
investment companies, the funds generally pay no federal income tax on the
income and gains they distribute to you. The board reserves the right not to
maintain the qualification of a fund as a regulated investment company if it
determines such course of action to be beneficial to shareholders. In such
case, a fund will be subject to federal, and possibly state, corporate taxes
on its taxable income and gains, and distributions to you will be taxed as
ordinary dividend income to the extent of the fund's earnings and profits.

EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the
Internal Revenue Code requires each fund to distribute to you by December 31
of each year, at a minimum, the following amounts: 98% of its taxable
ordinary income earned during the calendar year; 98% of its capital gain net
income earned during the twelve month period ending October 31; and 100% of
any undistributed amounts from the prior year. Each fund intends to declare
and pay these distributions in December (or to pay them in January, in which
case you must treat them as received in December) but can give no assurances
that its distributions will be sufficient to eliminate all taxes.

REDEMPTION OF FUND SHARES Redemptions (including redemptions in kind) and
exchanges of fund shares are taxable transactions for federal and state
income tax purposes. If you redeem your fund shares, or exchange your fund
shares for shares of a different Franklin Templeton Fund, the IRS will
require that you report any gain or loss on your redemption or exchange. If
you hold your shares as a capital asset, the gain or loss that you realize
will be capital gain or loss and will be long-term or short-term, generally
depending on how long you hold your shares.

Beginning after the year 2005 (2000 for certain shareholders), gains from the
sale of fund shares held for more than five years may be subject to a reduced
tax rate.

Any loss incurred on the redemption or exchange of shares held for six months
or less will be disallowed to the extent of any exempt-interest dividends
distributed to you with respect to your fund shares and any remaining loss
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by a fund on those shares. All or a portion
of any loss that you realize upon the redemption of your fund shares will be
disallowed to the extent that you buy other shares in a fund (through
reinvestment of dividends or otherwise) within 30 days before or after your
share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you buy.

Because the Money Fund tries to maintain a stable $1 share price, however,
you should not expect to realize any capital gain or loss on the sale or
exchange of your Money Fund shares.

DEFERRAL OF BASIS If you redeem some or all of your shares in a fund, and
then reinvest the sales proceeds in the fund or in another Franklin Templeton
Fund within 90 days of buying the original shares, the sales charge that
would otherwise apply to your reinvestment may be reduced or eliminated. The
IRS will require you to report any gain or loss on the redemption of your
original shares in a fund. In doing so, all or a portion of the sales charge
that you paid for your original shares in a fund will be excluded from your
tax basis in the shares sold (for the purpose of determining gain or loss
upon the sale of such shares). The portion of the sales charge excluded will
equal the amount that the sales charge is reduced on your reinvestment. Any
portion of the sales charge excluded from your tax basis in the shares sold
will be added to the tax basis of the shares you acquire from your
reinvestment. Because shares of the Money Fund may be purchased without a
sales charge, this deferral of basis rule should not apply to the sale of
Money Fund shares.

DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because each fund's income is
derived primarily from interest rather than dividends, generally none of its
distributions will be eligible for the corporate dividends-received
deduction.

INVESTMENT IN COMPLEX SECURITIES The funds may invest in complex securities.
These investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by a fund are
treated as ordinary income or capital gain, accelerate the recognition of
income to a fund (possibly causing a fund to sell securities to raise the
cash for necessary distributions) and/or defer a fund's ability to recognize
losses. These rules may affect the amount, timing or character of the income
distributed to you by a fund.

TREATMENT OF PRIVATE ACTIVITY BOND INTEREST Interest on certain private
activity bonds, while exempt from regular federal income tax, is a preference
item for taxpayers when determining their alternative minimum tax under the
Internal Revenue Code and under the income tax provisions of several states.
Private activity bond interest could subject you to or increase your
liability under federal and state alternative minimum taxes, depending on
your individual or corporate tax position. Persons who are defined in the
Internal Revenue Code as substantial users (or persons related to such users)
of facilities financed by private activity bonds should consult with their
tax advisors before buying fund shares.

ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
- -------------------------------------------------------------------------------

Each fund is a series of Franklin New York Tax-Free Trust, an open-end
management investment company, commonly called a mutual fund. The trust was
organized as a Massachusetts business trust in July 1986, and is registered
with the SEC.

As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations.
The Agreement and Declaration of Trust, however, contains an express
disclaimer of shareholder liability for acts or obligations of the fund. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of the fund's assets if you are held personally liable for
obligations of the fund. The Declaration of Trust provides that the fund
shall, upon request, assume the defense of any claim made against you for any
act or obligation of the fund and satisfy any judgment thereon. All such
rights are limited to the assets of the fund. The Declaration of Trust
further provides that the fund may maintain appropriate insurance (for
example, fidelity bonding and errors and omissions insurance) for the
protection of the fund, its shareholders, trustees, officers, employees and
agents to cover possible tort and other liabilities. Furthermore, the
activities of the fund as an investment company, as distinguished from an
operating company, would not likely give rise to liabilities in excess of the
fund's total assets. Thus, the risk that you would incur financial loss on
account of shareholder liability is limited to the unlikely circumstance in
which both inadequate insurance exists and the fund itself is unable to meet
its obligations.

Certain funds in the Franklin Templeton Funds offer multiple classes of
shares. The different classes have proportionate interests in the same
portfolio of investment securities. They differ, however, primarily in their
sales charge structures and Rule 12b-1 plans.

The Insured Fund currently offers two classes of shares, Class A and Class C.
The full title of each class is:

o Franklin New York Insured Tax-Free Income Fund - Class A

o Franklin New York Insured Tax-Free Income Fund - Class C

The Intermediate Fund and the Money Fund each offer only one share class.
Because the Intermediate Fund's sales charge structure and Rule 12b-1 plan
are similar to those of Class A shares, shares of the fund are considered
Class A shares for redemption, exchange and other purposes. Shares of the
Money Fund also are considered Class A shares for redemption, exchange and
other purposes.

The funds may offer additional classes of shares in the future.

Shares of each class of the Insured Fund represent proportionate interests in
the fund's assets. On matters that affect the fund as a whole, each class has
the same voting and other rights and preferences as any other class. On
matters that affect only one class, only shareholders of that class may vote.
Each class votes separately on matters affecting only that class, or
expressly required to be voted on separately by state or federal law. Shares
of each class of a series have the same voting and other rights and
preferences as the other classes and series of the trust for matters that
affect the trust as a whole. Additional series may be offered in the future.

The trust has noncumulative voting rights. For board member elections, this
gives holders of more than 50% of the shares voting the ability to elect all
of the members of the board. If this happens, holders of the remaining shares
voting will not be able to elect anyone to the board.

The trust does not intend to hold annual shareholder meetings. The trust or a
series of the trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may be called by the board to consider the
removal of a board member if requested in writing by shareholders holding at
least 10% of the outstanding shares. In certain circumstances, we are
required to help you communicate with other shareholders about the removal of
a board member. A special meeting also may be called by the board in its
discretion.

From time to time, the number of fund shares held in the "street name"
accounts of various securities dealers for the benefit of their clients or in
centralized securities depositories may exceed 5% of the total shares
outstanding. To the best knowledge of the fund, no other person holds
beneficially or of record more than 5% of the outstanding shares of any class.

As of April 3, 2000, the officers and board members, as a group, owned of
record and beneficially less than 1% of the outstanding shares of each fund
and class. The board members may own shares in other funds in the Franklin
Templeton Group of Funds.

BUYING AND SELLING SHARES
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The fund continuously offers its shares through securities dealers who have
an agreement with Franklin Templeton Distributors, Inc. (Distributors). A
securities dealer includes any financial institution that, either directly or
through affiliates, has an agreement with Distributors to handle customer
orders and accounts with the fund. This reference is for convenience only and
does not indicate a legal conclusion of capacity. Banks and financial
institutions that sell shares of the fund may be required by state law to
register as securities dealers.

For investors outside the U.S., the offering of fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the fund should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to
obtain information on the rules applicable to these transactions.

All checks, drafts, wires and other payment mediums used to buy or sell
shares of the funds must be denominated in U.S. dollars. We may, in our sole
discretion, either (a) reject any order to buy or sell shares denominated in
any other currency or (b) honor the transaction or make adjustments to your
account for the transaction as of a date and with a foreign currency exchange
factor determined by the drawee bank. All checks, drafts, wires and other
payment mediums used to buy or sell Money Fund shares must be drawn on a U.S.
bank, and are accepted subject to collection at full face value. Checks drawn
in U.S. funds on foreign banks will not be credited to your account and
dividends will not begin to accrue until the proceeds are collected, which
may take a long period of time. We may deduct any applicable banking charges
imposed by a` bank from your account.

The offering of fund shares may be suspended at any time and resumed at any
time thereafter.

INITIAL SALES CHARGES The maximum initial sales charge for the Insured Fund
is 4.25% for Class A and 1% for Class C. The maximum initial sales charge for
the Intermediate Fund is 2.25%. There is no initial sales charge for the
Money Fund.

The initial sales charge for Class A shares may be reduced for certain large
purchases, as described in the prospectus. We offer several ways for you to
combine your purchases in the Franklin Templeton Funds to take advantage of
the lower sales charges for large purchases. The Franklin Templeton Funds
include the U.S. registered mutual funds in the Franklin Group of Funds(R) and
the Templeton Group of Funds except Franklin Templeton Variable Insurance
Products Trust and Templeton Capital Accumulator Fund, Inc.

CUMULATIVE QUANTITY DISCOUNT. For purposes of calculating the sales charge on
Class A shares, you may combine the amount of your current purchase with the
cost or current value, whichever is higher, of your existing shares in the
Franklin Templeton Funds. You also may combine the shares of your spouse,
children under the age of 21 or grandchildren under the age of 21. If you are
the sole owner of a company, you also may add any company accounts, including
retirement plan accounts.

LETTER OF INTENT (LOI). You may buy shares of the Intermediate Fund and Class
A shares of the Insured Fund at a reduced sales charge by completing the
letter of intent section of your account application. A letter of intent is a
commitment by you to invest a specified dollar amount during a 13 month
period. The amount you agree to invest determines the sales charge you pay.
By completing the letter of intent section of the application, you
acknowledge and agree to the following:

o You authorize Distributors to reserve 5% of your total intended purchase in
Class A shares registered in your name until you fulfill your LOI. Your
periodic statements will include the reserved shares in the total shares
you own, and we will pay or reinvest dividend and capital gain
distributions on the reserved shares according to the distribution option
you have chosen.

o You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.

o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the LOI.

o Although you may exchange your shares, you may not sell reserved shares
until you complete the LOI or pay the higher sales charge.

After you file your LOI with the fund, you may buy Class A shares at the
sales charge applicable to the amount specified in your LOI. Sales charge
reductions based on purchases in more than one Franklin Templeton Fund will
be effective only after notification to Distributors that the investment
qualifies for a discount. Any Class A purchases you made within 90 days
before you filed your LOI also may qualify for a retroactive reduction in the
sales charge. If you file your LOI with the fund before a change in the
fund's sales charge, you may complete the LOI at the lower of the new sales
charge or the sales charge in effect when the LOI was filed.

Your holdings in the Franklin Templeton Funds acquired more than 90 days
before you filed your LOI will be counted towards the completion of the LOI,
but they will not be entitled to a retroactive reduction in the sales charge.
Any redemptions you make during the 13 month period will be subtracted from
the amount of the purchases for purposes of determining whether the terms of
the LOI have been completed.

If the terms of your LOI are met, the reserved shares will be deposited to an
account in your name or delivered to you or as you direct. If the amount of
your total purchases, less redemptions, is more than the amount specified in
your LOI and is an amount that would qualify for a further sales charge
reduction, a retroactive price adjustment will be made by Distributors and
the securities dealer through whom purchases were made. The price adjustment
will be made on purchases made within 90 days before and on those made after
you filed your LOI and will be applied towards the purchase of additional
shares at the offering price applicable to a single purchase or the dollar
amount of the total purchases.

If the amount of your total purchases, less redemptions, is less than the
amount specified in your LOI, the sales charge will be adjusted upward,
depending on the actual amount purchased (less redemptions) during the
period. You will need to send Distributors an amount equal to the difference
in the actual dollar amount of sales charge paid and the amount of sales
charge that would have applied to the total purchases if the total of the
purchases had been made at one time. Upon payment of this amount, the
reserved shares held for your account will be deposited to an account in your
name or delivered to you or as you direct. If within 20 days after written
request the difference in sales charge is not paid, we will redeem an
appropriate number of reserved shares to realize the difference. If you
redeem the total amount in your account before you fulfill your LOI, we will
deduct the additional sales charge due from the sale proceeds and forward the
balance to you.

GROUP PURCHASES. If you are a member of a qualified group, you may buy Class
A shares at a reduced sales charge that applies to the group as a whole. The
sales charge is based on the combined dollar value of the group members'
existing investments, plus the amount of the current purchase.

A qualified group is one that:

o Was formed at least six months ago,

o Has a purpose other than buying fund shares at a discount,

o Has more than 10 members,

o Can arrange for meetings between our representatives and group members,

o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,

o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the fund, and

o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.

WAIVERS FOR INVESTMENTS FROM CERTAIN PAYMENTS. Class A shares may be
purchased without an initial sales charge or contingent deferred sales charge
(CDSC) by investors who reinvest within 365 days:

o Dividend and capital gain distributions from any Franklin Templeton Fund.
The distributions generally must be reinvested in the same share class.
Certain exceptions apply, however, to Class C shareholders who chose to
reinvest their distributions in Class A shares of the fund before November
17, 1997, and to Advisor Class or Class Z shareholders of a Franklin
Templeton Fund who may reinvest their distributions in the fund's Class A
shares. This waiver category also applies to Class C shares.

o Annuity payments received under either an annuity option or from death
benefit proceeds, if the annuity contract offers as an investment option
the Franklin Templeton Variable Insurance Products Trust. You should
contact your tax advisor for information on any tax consequences that may
apply.

o Redemption proceeds from a repurchase of shares of Franklin Floating Rate
Trust, if the shares were continuously held for at least 12 months.

If you immediately placed your redemption proceeds in a Franklin Bank CD or
a Franklin Templeton money fund, you may reinvest them as described above.
The proceeds must be reinvested within 365 days from the date the CD
matures, including any rollover, or the date you redeem your money fund
shares.

o Redemption proceeds from the sale of Class A shares of any of the Templeton
Global Strategy Funds if you are a qualified investor.

If you paid a CDSC when you redeemed your Class A shares from a Templeton
Global Strategy Fund, a new CDSC will apply to your purchase of fund shares
and the CDSC holding period will begin again. We will, however, credit your
fund account with additional shares based on the CDSC you previously paid
and the amount of the redemption proceeds that you reinvest.

If you immediately placed your redemption proceeds in a Franklin Templeton
money fund, you may reinvest them as described above. The proceeds must be
reinvested within 365 days from the date they are redeemed from the money
fund.

WAIVERS FOR CERTAIN INVESTORS. Class A shares also may be purchased without
an initial sales charge or CDSC by various individuals and institutions due
to anticipated economies in sales efforts and expenses, including:

o Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held
in a fiduciary, agency, advisory, custodial or similar capacity and over
which the trust companies and bank trust departments or other plan
fiduciaries or participants, in the case of certain retirement plans, have
full or shared investment discretion. We may accept orders for these
accounts by telephone or other means of electronic data transfer directly
from the bank or trust company, with payment by federal funds received by
the close of business on the next business day following the order.
Effective June 1, 2000, the requirement to agree to invest at least $1
million in Franklin Templeton Funds over a 13 month period will no longer
apply.

o Any state or local government or any instrumentality, department, authority
or agency thereof that has determined the fund is a legally permissible
investment and that can only buy fund shares without paying sales charges.
Please consult your legal and investment advisors to determine if an
investment in the fund is permissible and suitable for you and the effect,
if any, of payments by the fund on arbitrage rebate calculations.

o Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs

o Qualified registered investment advisors who buy through a broker-dealer or
service agent who has entered into an agreement with Distributors

o Registered securities dealers and their affiliates, for their investment
accounts only

o Current employees of securities dealers and their affiliates and their
family members, as allowed by the internal policies of their employer

o Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies

o Any investor who is currently a Class Z shareholder of Franklin Mutual
Series Fund Inc. (Mutual Series), or who is a former Mutual Series Class Z
shareholder who had an account in any Mutual Series fund on October 31,
1996, or who sold his or her shares of Mutual Series Class Z within the
past 365 days

o Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer

o Accounts managed by the Franklin Templeton Group

o Certain unit investment trusts and their holders reinvesting distributions
from the trusts

In addition, Class C shares may be purchased without an initial sales charge
by any investor who buys Class C shares through an omnibus account with
Merrill Lynch Pierce Fenner & Smith, Inc. A CDSC may apply, however, if the
shares are sold within 18 months of purchase.

SALES IN TAIWAN. Under agreements with certain banks in Taiwan, Republic of
China, shares of the Insured and Intermediate Funds are available to these
banks' trust accounts without a sales charge. The banks may charge service
fees to their customers who participate in the trusts. A portion of these
service fees may be paid to Distributors or one of its affiliates to help
defray expenses of maintaining a service office in Taiwan, including expenses
related to local literature fulfillment and communication facilities.

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

SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE (%)
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Under $30,000 3.0
$30,000 but less than $100,000 2.0
$100,000 but less than $400,000 1.0
$400,000 or more 0

DEALER COMPENSATION Securities dealers may at times receive the entire sales
charge on shares of the Insured and Intermediate Funds. A securities dealer
who receives 90% or more of the sales charge may be deemed an underwriter
under the Securities Act of 1933, as amended. Financial institutions or their
affiliated brokers may receive an agency transaction fee in the percentages
indicated in the dealer compensation table in the funds' prospectus.

Distributors may pay the following commissions, out of its own resources, to
securities dealers who initiate and are responsible for purchases of shares
of the Intermediate Fund or Class A shares of the Insured Fund of $1 million
or more: 0.75% on sales of $1 million to $2 million, plus 0.60% on sales over
$2 million to $3 million, plus 0.50% on sales over $3 million to $50 million,
plus 0.25% on sales over $50 million to $100 million, plus 0.15% on sales
over $100 million.

These breakpoints are reset every 12 months for purposes of additional
purchases.

In addition to the payments above, Distributors and/or its affiliates may
provide financial support to securities dealers that sell shares of the
Franklin Templeton Group of Funds. This support is based primarily on the
amount of sales of fund shares and/or total assets with the Franklin
Templeton Group of Funds. The amount of support may be affected by: total
sales; net sales; levels of redemptions; the proportion of a securities
dealer's sales and marketing efforts in the Franklin Templeton Group of
Funds; a securities dealer's support of, and participation in, Distributors'
marketing programs; a securities dealer's compensation programs for its
registered representatives; and the extent of a securities dealer's marketing
programs relating to the Franklin Templeton Group of Funds. Financial support
to securities dealers may be made by payments from Distributors' resources,
from Distributors' retention of underwriting concessions and, in the case of
funds that have Rule 12b-1 plans, from payments to Distributors under such
plans. In addition, certain securities dealers may receive brokerage
commissions generated by fund portfolio transactions in accordance with the
rules of the National Association of Securities Dealers, Inc.

Distributors routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Franklin
Templeton Funds and are afforded the opportunity to speak with portfolio
managers. Invitation to these meetings is not conditioned on selling a
specific number of shares. Those who have shown an interest in the Franklin
Templeton Funds, however, are more likely to be considered. To the extent
permitted by their firm's policies and procedures, registered
representatives' expenses in attending these meetings may be covered by
Distributors.

CONTINGENT DEFERRED SALES CHARGE (CDSC) If you invest $1 million or more in
shares of the Intermediate Fund or Class A shares of the Insured Fund, either
as a lump sum or through our cumulative quantity discount or letter of intent
programs, a CDSC may apply on any shares you sell within 12 months of
purchase. For Class C shares of the Insured Fund, a CDSC may apply if you
sell your shares within 18 months of purchase. The CDSC is 1% of the value of
the shares sold or the net asset value at the time of purchase, whichever is
less.

CDSC WAIVERS. The CDSC for any share class generally will be waived for:

o Account fees

o Redemptions of Class A shares by investors who purchased $1 million or more
without an initial sales charge if the securities dealer of record waived
its commission in connection with the purchase

o Redemptions by the fund when an account falls below the minimum required
account size

o Redemptions following the death of the shareholder or beneficial owner

o Redemptions through a systematic withdrawal plan set up before February 1,
1995

o Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, up to 1% monthly, 3% quarterly, 6% semiannually or 12%
annually of your account's net asset value depending on the frequency of
your plan

EXCHANGE PRIVILEGE If you request the exchange of the total value of your
Insured or Intermediate Fund account, accrued but unpaid income dividends and
capital gain distributions will be reinvested in the fund at net asset value
on the date of the exchange, and then the entire share balance will be
exchanged into the new fund. Backup withholding and information reporting may
apply.

If a substantial number of shareholders should, within a short period, sell
their fund shares under the exchange privilege, the fund might have to sell
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the
exchange privilege may result in periodic large inflows of money. If this
occurs, it is the Insured and Intermediate Funds' general policy to initially
invest this money in short-term, tax-exempt municipal securities, unless it
is believed that attractive investment opportunities consistent with the
funds' investment goals exist immediately. This money will then be withdrawn
from the short-term, tax-exempt municipal securities and invested in
portfolio securities in as orderly a manner as is possible when attractive
investment opportunities arise.

The proceeds from the sale of shares of an investment company generally are
not available until the seventh day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange
until that seventh day. The sale of fund shares to complete an exchange will
be effected at net asset value at the close of business on the day the
request for exchange is received in proper form.

SYSTEMATIC WITHDRAWAL PLAN Our systematic withdrawal plan allows you to sell
your shares and receive regular payments from your account on a monthly,
quarterly, semiannual or annual basis. The value of your account must be at
least $5,000 and the minimum payment amount for each withdrawal must be at
least $50. There are no service charges for establishing or maintaining a
systematic withdrawal plan.

Each month in which a payment is scheduled, we will redeem an equivalent
amount of shares in your account, generally on the 25th day of the month. If
the 25th falls on a weekend or holiday, we will process the redemption on the
next business day. Beginning June 1, 2000, you may request to change the
processing date to the 1st, 5th, 10th, 15th or 20th of the month. For plans
set up on or after June 1, 2000, we will process redemptions on the day of
the month you have indicated on your account application or, if no day is
indicated, on the 20th day of the month (or next business day). When you sell
your shares under a systematic withdrawal plan, it is a taxable transaction.

To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan in
the Insured or Intermediate Fund if you plan to buy shares on a regular
basis. Shares sold under the plan also may be subject to a CDSC.

Redeeming shares through a systematic withdrawal plan may reduce or exhaust
the shares in your account if payments exceed distributions received from the
fund. This is especially likely to occur if there is a market decline. If a
withdrawal amount exceeds the value of your account, your account will be
closed and the remaining balance in your account will be sent to you. Because
the amount withdrawn under the plan may be more than your actual yield or
income, part of the payment may be a return of your investment.

You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us by
mail or by phone at least seven business days before the end of the month
preceding a scheduled payment. The funds may discontinue a systematic
withdrawal plan by notifying you in writing and will automatically
discontinue a systematic withdrawal plan if all shares in your account are
withdrawn or if the funds receive notification of the shareholder's death or
incapacity.

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 fund's net assets at the beginning of the 90-day period. This
commitment is irrevocable without the prior approval of the U.S. Securities
and Exchange Commission (SEC). In the case of redemption requests in excess
of these amounts, the board reserves the right to make payments in whole or
in part in securities or other assets of the fund, in case of an emergency,
or if the payment of such a redemption in cash would be detrimental to the
existing shareholders of the fund. In these circumstances, the securities
distributed would be valued at the price used to compute the fund's net
assets and you may incur brokerage fees in converting the securities to cash.
The fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.

SHARE CERTIFICATES We will credit your shares to your fund account. We do not
issue share certificates unless you specifically request them. This
eliminates the costly problem of replacing lost, stolen or destroyed
certificates. If a certificate is lost, stolen or destroyed, you may have to
pay an insurance premium of up to 2% of the value of the certificate to
replace it.

All purchases of Money Fund shares will be credited to you, in full and
fractional fund shares (rounded to the nearest 1/100 of a share), in an
account maintained for you by the fund's transfer agent. No share
certificates will be issued for fractional shares at any time. No
certificates will be issued to you if you have elected to redeem shares by
check or by preauthorized bank or brokerage firm account methods.

Any outstanding share certificates must be returned to the fund if you want
to sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do
this either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.

GENERAL INFORMATION If dividend checks are returned to the funds marked
"unable to forward" by the postal service, we will consider this a request by
you to change your dividend option to reinvest all distributions. The
proceeds will be reinvested in additional shares at net asset value until we
receive new instructions.

Distribution or redemption checks sent to you do not earn interest or any
other income during the time the checks remain uncashed. Neither the funds
nor their affiliates will be liable for any loss caused by your failure to
cash such checks. The funds are not responsible for tracking down uncashed
checks, unless a check is returned as undeliverable.

In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional efforts to
find you from your account. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for its
location services.

Sending redemption proceeds by wire or electronic funds transfer (ACH) is a
special service that we make available whenever possible. By offering this
service to you, the funds are not bound to meet any redemption request in
less than the seven day period prescribed by law. Neither the funds nor their
agents shall be liable to you or any other person if, for any reason, a
redemption request by wire or ACH is not processed as described in the
prospectus.

Franklin Templeton Investor Services, Inc. (Investor Services) may pay
certain financial institutions that maintain omnibus accounts with the funds
on behalf of numerous beneficial owners for recordkeeping operations
performed with respect to such owners. For each beneficial owner in the
omnibus account, the funds may reimburse Investor Services an amount not to
exceed the per account fee that the funds normally pay Investor Services.
These financial institutions also may charge a fee for their services
directly to their clients.

Investor Services may charge you separate fees, negotiated directly with you,
for providing special services in connection with your Money Fund account,
such as processing a large number of checks each month. Fees for special
services will not increase the fund's expenses.

There are special procedures for banks and other institutions that wish to
open multiple accounts in the Money Fund. An institution may open a single
master account by filing one application form with the fund, signed by
personnel authorized to act for the institution. Individual sub-accounts may
be opened when the master account is opened by listing them on the
application, or by providing instructions to the fund at a later date. These
sub-accounts may be registered either by name or number. The fund's
investment minimums apply to each sub-account. The fund will send
confirmation and account statements for the sub-accounts to the institution.

If you buy or sell shares through your securities dealer, we use the net
asset value next calculated after your securities dealer receives your
request, which is promptly transmitted to the fund. If you sell shares
through your securities dealer, it is your dealer's responsibility to
transmit the order to the fund in a timely fashion. Your redemption proceeds
will not earn interest between the time we receive the order from your dealer
and the time we receive any required documents. Any loss to you resulting
from your dealer's failure to transmit your redemption order to the fund in a
timely fashion must be settled between you and your securities dealer.

Certain shareholder servicing agents may be authorized to accept your
transaction request.

For institutional accounts, there may be additional methods of buying or
selling fund shares than those described in this SAI or in the prospectus.

In the event of disputes involving multiple claims of ownership or authority
to control your account, each 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,
before 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.

PRICING SHARES
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When you buy shares, you pay the offering price. The offering price is the
net asset value (NAV) per share plus any applicable sales charge, calculated
to two decimal places using standard rounding criteria. When you sell shares,
you receive the NAV minus any applicable CDSC.

The value of a mutual fund is determined by deducting the fund's liabilities
from the total assets of the portfolio. The net asset value per share is
determined by dividing the net asset value of the fund by the number of
shares outstanding.

The Insured Fund and each class and the Intermediate Fund calculates their
NAV per share each business day at the close of trading on the New York Stock
Exchange (normally 1:00 p.m. Pacific time). The Money Fund calculates its NAV
per share each business day at 3:00 p.m. Pacific time. The funds do not
calculate their NAV on days the New York Stock Exchange (NYSE) is closed for
trading, which include New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

INSURED AND INTERMEDIATE FUNDS When determining its NAV, each fund values
cash and receivables at their realizable amounts, and records interest as
accrued. Each fund values over-the-counter portfolio securities within the
range of the most recent quoted bid and ask prices. If portfolio securities
trade both in the over-the-counter market and on a stock exchange, each fund
values them 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. In the absence
of a sale or reported bid and ask prices, information with respect to bond
and note transactions, quotations from bond dealers, market transactions in
comparable securities, and various relationships between securities are used
to determine the value of municipal securities.

Generally, trading in U.S. government securities and money market instruments
is substantially completed each day at various times before the close of the
NYSE. The value of these securities used in computing the NAV is determined
as of such times. Occasionally, events affecting the values of these
securities may occur between the times at which they are determined and the
close of the NYSE that will not be reflected in the computation of the NAV.
If events materially affecting the values of these securities occur during
this period, the securities will be valued at their fair value as determined
in good faith by the board.

Other securities for which market quotations are readily available are valued
at the current market price, which may be obtained from a pricing service,
based on a variety of factors including recent trades, institutional size
trading in similar types of securities (considering yield, risk and maturity)
and/or developments related to specific issues. Securities and other assets
for which market prices are not readily available are valued at fair value as
determined following procedures approved by the board. With the approval of
the board, each fund may use a pricing service, bank or securities dealer to
perform any of the above described functions.

MONEY FUND The valuation of the Money Fund's portfolio securities, including
any securities set aside on the fund's books for when-issued securities, is
based on the amortized cost of the securities, which does not take into
account unrealized capital gains or losses. This method 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
fund would receive if it sold the instrument. During periods of declining
interest rates, the daily yield on shares of the fund computed as described
above may tend to be higher than a like computation made by a fund with
identical investments but using 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 fund resulted in a lower aggregate
portfolio value on a particular day, a prospective investor in the fund would
be able to obtain a somewhat higher yield than would result from an
investment in a fund using only market values, and existing investors in the
fund would receive less investment income. The opposite would be true in a
period of rising interest rates. The fund's use of amortized cost, which
helps the fund maintain a $1 share price, is permitted by a rule adopted by
the U.S. Securities and Exchange Commission (SEC).

The board has established procedures designed to stabilize, to the extent
reasonably possible, the fund's price per share at $1, as computed for the
purpose of sales and redemptions. These procedures include a review of the
fund's holdings by the board, at such intervals as it may deem appropriate,
to determine if the fund's net asset value calculated by using available
market quotations deviates from $1 per share based on amortized cost. The
extent of any deviation will be examined by the board. If a deviation exceeds
1/2 of 1%, the board will promptly consider what action, if any, will be
initiated. If the board determines that a deviation exists that may result in
material dilution or other unfair results to investors or existing
shareholders, it will take corrective action that it regards as necessary and
appropriate, which may include selling portfolio instruments before maturity
to realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends, redeeming shares in kind, or establishing a net asset
value per share by using available market quotations.

THE UNDERWRITER
- -------------------------------------------------------------------------------

Franklin Templeton Distributors, Inc. (Distributors) acts as the principal
underwriter in the continuous public offering of each fund's shares.
Distributors is located at 777 Mariners Island Blvd., San Mateo, CA 94404.

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

The table below shows the aggregate underwriting commissions Distributors
received in connection with the offering of the funds' shares, the net
underwriting discounts and commissions Distributors retained after allowances
to dealers, and the amounts Distributors received in connection with
redemptions or repurchases of shares for the last three fiscal years ended
December 31:

AMOUNT
RECEIVED IN
CONNECTION
WITH
TOTAL AMOUNT REDEMPTIONS
COMMISSIONS RETAINED BY AND
RECEIVED DISTRIBUTORS REPURCHASES
($) ($) ($)
- --------------------------------------------------------------------
1999
Insured Fund 464,988 29,007 5,852
Intermediate Fund 154,253 16,753 33,626
Money Fund 0 0 0

1998
Insured Fund 678,360 42,034 4,871
Intermediate Fund 162,565 22,481 1,171
Money Fund 0 0 0

1997
Insured Fund 575,735 36,079 6,625
Intermediate Fund 163,157 21,084 0
Money Fund 0 0 0

Distributors may be entitled to reimbursement under the Rule 12b-1 plans, as
discussed below. Except as noted, Distributors received no other compensation
from the funds for acting as underwriter.

DISTRIBUTION AND SERVICE (12B-1) FEES The board has adopted a separate plan
pursuant to Rule 12b-1 for the Intermediate Fund and each class of the
Insured Fund. Although the plans differ in some ways for each class, each
plan is designed to benefit the fund and its shareholders. The plans are
expected to, among other things, increase advertising of the fund, encourage
sales of the fund and service to its shareholders, and increase or maintain
assets of the fund so that certain fixed expenses may be spread over a
broader asset base, resulting in lower per share expense ratios. In addition,
a positive cash flow into the fund is useful in managing the fund because the
manager has more flexibility in taking advantage of new investment
opportunities and handling shareholder redemptions.

Under each plan, the funds pay Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class. These
expenses also may include service fees paid to securities dealers or others
who have executed a servicing agreement with the funds, Distributors or its
affiliates who provide service or account maintenance to shareholders
(service fees); the expenses of printing prospectuses and reports used for
sales purposes, and of preparing and distributing sales literature and
advertisements; and a prorated portion of Distributors' overhead expenses
related to these activities. Together, these expenses, including the service
fees, are "eligible expenses." The distribution and service (12b-1) fees
charged to each class are based only on the fees attributable to that
particular class.

THE CLASS A PLANS. The Insured and Intermediate Funds may each pay up to
0.10% per year of Class A's average daily net assets. The Class A plans are
reimbursement plans. They allow each fund to reimburse Distributors for
eligible expenses that Distributors has shown it has incurred. Each fund will
not reimburse more than the maximum amount allowed under the plan. Any
unreimbursed expenses from one year may not be carried over to or reimbursed
in later years.

For the fiscal year ended December 31, 1999, the amounts paid by each fund
pursuant to the plans were:

INSURED INTERMEDIATE
FUND FUND
- ---------------------------------------------------------
($)
Advertising 8,713 3,201
Printing and mailing 18,909 1,558
prospectuses
other than to current
shareholders
Payments to underwriters 3,935 2,823
Payments to broker-dealers 190,802 65,311
Other 20,845 5,126
------------------------
Total 243,204 78,019
========================

THE CLASS C PLANS. The Insured Fund pays Distributors up to 0.65% per year of
the class's average daily net assets, out of which 0.15% may be used for
service fees. The Class C plan also may be used to pay Distributors for
advancing commissions to securities dealers with respect to the initial sale
of Class C shares.

The Class C plan is a compensation plan. It allows the fund to pay a fee to
Distributors that may be more than the eligible expenses Distributors has
incurred at the time of the payment. Distributors must, however, demonstrate
to the board that it has spent or has immediate plans to spend the amount
received on eligible expenses. The fund will not pay more than the maximum
amount allowed under the plan.

Under the Class C plan, the amounts paid by the fund pursuant to the plan for
the fiscal year ended December 31, 1999, were:

($)
- ----------------------------------------------
Advertising 731
Printing and mailing 821
prospectuses
other than to current
shareholders
Payments to underwriters 1,226
Payments to broker-dealers 63,940
Other 2,739
------------
Total 69,457
============

THE CLASS A AND C PLANS. In addition to the payments that Distributors or
others are entitled to under each plan, each plan also provides that to the
extent the fund, the manager or Distributors or other parties on behalf of
the fund, the manager or Distributors make payments that are deemed to be for
the financing of any activity primarily intended to result in the sale of
fund shares within the context of Rule 12b-1 under the Investment Company Act
of 1940, as amended, then such payments shall be deemed to have been made
pursuant to the plan.

To the extent fees are for distribution or marketing functions, as
distinguished from administrative servicing or agency transactions, certain
banks may not participate in the plans because of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banks, however, are allowed to receive fees under the plans for
administrative servicing or for agency transactions.

Distributors must provide written reports to the board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, and furnish the board with such other information as the board
may reasonably request to enable it to make an informed determination of
whether the plans should be continued.

Each plan has been approved according to the provisions of Rule 12b-1. The
terms and provisions of each plan also are consistent with Rule 12b-1.
- -------------------------------------------------------------------------------

PERFORMANCE

Performance quotations are subject to SEC rules. These rules require the use
of standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by a fund be accompanied by
certain standardized performance information computed as required by the SEC.
Average annual total return and current yield quotations used by the funds,
and effective yield quotations used by the Money Fund, are based on the
standardized methods of computing performance mandated by the SEC.
Performance figures reflect Rule 12b-1 fees from the date of the plan's
implementation. An explanation of these and other methods used by the funds
to compute or express performance follows. Regardless of the method used,
past performance does not guarantee future results, and is an indication of
the return to shareholders only for the limited historical period used.

INSURED AND INTERMEDIATE FUNDS

AVERAGE ANNUAL TOTAL RETURN Average annual total return is determined by
finding the average annual rates of return over the periods indicated below
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes the maximum initial sales charge is
deducted from the initial $1,000 purchase, and income dividends and capital
gain distributions are reinvested at net asset value. The quotation assumes
the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. If a change is made to the
sales charge structure, historical performance information will be restated
to reflect the maximum initial sales charge currently in effect.

When considering the average annual total return quotations, you should keep
in mind that the maximum initial sales charge reflected in each quotation is
a one time fee charged on all direct purchases, which will have its greatest
impact during the early stages of your investment. This charge will affect
actual performance less the longer you retain your investment in the fund.
The average annual total returns for the indicated periods ended December 31,
1999, were:

SINCE
INCEPTION
1 YEAR 5 YEARS (5/1/91)
(%) (%) (%)
- ---------------------------------------------------------------
Insured Fund - Class A -7.42 5.68 5.71

SINCE
INCEPTION
1 YEAR (5/1/95)
(%) (%)
- ------------------------------------------------------------------
Insured Fund - Class C -5.75 - 4.51

SINCE
INCEPTION
1 YEAR 5 YEARS (9/21/92)
(%) (%) (%)
- ------------------------------------------------------------------
Intermediate Fund -3.92 5.89 4.94

The following SEC formula was used to calculate these figures:

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 each period at the end of each period

CUMULATIVE TOTAL RETURN Like average annual total return, cumulative total
return assumes the maximum initial sales charge is deducted from the initial
$1,000 purchase, income dividends and capital gain distributions are
reinvested at net asset value, the account was completely redeemed at the end
of each period and the deduction of all applicable charges and fees.
Cumulative total return, however, is based on the actual return for a
specified period rather than on the average return over the periods indicated
above. The cumulative total returns for the indicated periods ended December
31, 1999, were:

SINCE
INCEPTION
1 YEAR 5 YEARS (%) (5/1/91) (%)
(%)
- ----------------------------------------------------------------
Insured Fund - Class A -7.42 31.79 61.90

SINCE
INCEPTION
1 YEAR (5/1/95) (%)
(%)
- ----------------------------------------------------------------
Insured Fund - Class C -5.75 - 22.91

SINCE
INCEPTION
1 YEAR 5 YEARS (%) (9/21/92)
(%) (%)
- ----------------------------------------------------------------
Intermediate Fund -3.92 33.14 42.05

CURRENT YIELD Current yield shows the income per share earned by a fund. It
is calculated by dividing the net investment income per share earned during a
30-day base period by the applicable maximum offering price per share on the
last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders of a class during the
base period. The yields for the 30-day period ended December 31, 1999, were:

CLASS A (%) CLASS C
(%)
- ------------------------------------------------------------
Insured Fund 4.58 4.19
Intermediate Fund 4.73 -

The following SEC formula was used to calculate these figures:

6
Yield = 2 [(a-b + 1) - 1]
----
cd
where:

a = interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the period

TAXABLE-EQUIVALENT YIELD Each fund also may quote a taxable-equivalent yield
that shows the before-tax yield that would have to be earned from a taxable
investment to equal the yield. Taxable-equivalent yield is computed by
dividing the portion of the yield that is tax-exempt by one minus the highest
applicable combined federal, state and city income tax rate and adding the
product to the portion of the yield that is not tax-exempt, if any. The
taxable-equivalent yields for the 30-day period ended December 31, 1999, were:

CLASS A (%) CLASS C (%)
- ------------------------------------------------------------
Insured Fund 8.45 7.73
Intermediate Fund 8.72 -

CURRENT DISTRIBUTION RATE Current yield and taxable-equivalent yield, which
are calculated according to a formula prescribed by the SEC, are not
indicative of the amounts that were or will be paid to shareholders. Amounts
paid to shareholders are reflected in the quoted current distribution rate or
taxable-equivalent distribution rate. The current distribution rate is
usually computed by annualizing the dividends paid per share by a class
during a certain period and dividing that amount by the current maximum
offering price. The current distribution rate differs from the current yield
computation because it may include distributions to shareholders from sources
other than interest, if any, and is calculated over a different period of
time. The current distribution rates for the 30-day period ended December 31,
1999, were:

CLASS A (%) CLASS C (%)
- --------------------------------------------------------------
Insured Fund 5.01 4.60
Intermediate Fund 5.12 -

A taxable-equivalent distribution rate shows the taxable distribution rate
equivalent to the current distribution rate. The advertised
taxable-equivalent distribution rate will reflect the most current federal,
state and city tax rates available to the fund. The taxable-equivalent
distribution rates for the 30-day period ended December 31, 1999, were:

CLASS A (%) CLASS C (%)
- --------------------------------------------------------------
Insured Fund 9.24 8.48
Intermediate Fund 9.44 -

VOLATILITY Occasionally statistics may be used to show a fund's volatility or
risk. Measures of volatility or risk are generally used to compare a fund's
net asset value or performance to a market index. One measure of volatility
is beta. Beta is the volatility of a fund relative to the total market, as
represented by an index considered representative of the types of securities
in which the fund invests. A beta of more than 1.00 indicates volatility
greater than the market and a beta of less than 1.00 indicates volatility
less than the market. Another measure of volatility or risk is standard
deviation. Standard deviation is used to measure variability of net asset
value or total return around an average over a specified period of time. The
idea is that greater volatility means greater risk undertaken in achieving
performance.

MONEY FUND

The average annual total returns for the indicated periods ended December 31,
1999, were:

1 YEAR (%) 5 YEARS (%) 10 YEARS
(%)
- ---------------------------------------------------------------
2.56 2.86 2.89

The following SEC formula was used to calculate these figures:

n
P(1+T) = ERV

where:

CURRENT YIELD Current yield shows the income per share earned by the fund. It
is calculated by determining the net change, excluding capital changes, in
the value of a hypothetical pre-existing account with 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. The result is then annualized by multiplying the base period
return by 365/7. The current yield for the seven day period ended December
31, 1999, was 3.77%.

EFFECTIVE YIELD The fund's effective yield is calculated in the same manner
as its current yield, except the annualization of the return for the seven
day period reflects the results of compounding. The effective yield for the
seven day period ended December 31, 1999, was 3.84%.

The following SEC formula was used to calculate this figure:

Effective yield = [(Base period return + 1)365/7] - 1

TAXABLE-EQUIVALENT YIELD The Money Fund also may quote a taxable-equivalent
yield and a taxable-equivalent effective yield that show the before-tax yield
that would have to be earned from a taxable investment to equal the fund's
yield. These yields are computed by dividing the portion of the yield that is
tax-exempt by one minus the highest applicable combined federal, state and
city income tax rate and adding the product to the portion of the yield that
is not tax-exempt, if any. The taxable-equivalent yield based on the fund's
current yield for the seven day period ended December 31, 1999, was 6.95%.
The taxable-equivalent effective yield based on the fund's effective yield
for the seven day period ended December 31, 1999, was 7.08%.

ALL FUNDS

As of December 31, 1999, the combined federal, state and city income tax rate
upon which the taxable-equivalent yield quotations were based was 45.77%.
From time to time, as any changes to the rate become effective,
taxable-equivalent yield quotations advertised by the funds will be updated
to reflect these changes. The funds expect updates may be necessary as tax
rates are changed by federal, state and city governments. The advantage of
tax-free investments, like 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.

OTHER PERFORMANCE QUOTATIONS The Insured and Intermediate Funds also may
quote the performance of shares without a sales charge. Sales literature and
advertising may quote a cumulative total return, average annual total return
and other measures of performance with the substitution of net asset value
for the public offering price.

Each fund may include in its advertising or sales material information
relating to investment goals and performance results of funds belonging to
the Franklin Templeton Group of Funds. Franklin Resources, Inc. is the parent
company of the advisors and underwriter of the Franklin Templeton Group of
Funds.

COMPARISONS To help you better evaluate how an investment in the funds may
satisfy your investment goal, advertisements and other materials about the
funds may discuss certain measures of fund performance as reported by various
financial publications. Materials also may compare performance (as calculated
above) to performance as reported by other investments, indices, and
averages. These comparisons may include, but are not limited to, the
following examples:

o 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.

o Salomon Smith Barney Broad Bond Index or its component indices - measures
yield, price and total return for Treasury, agency, corporate and mortgage
bonds.

o Lehman Brothers Aggregate Bond Index or its component indices - measures
yield, price and total return for Treasury, agency, corporate, mortgage
and Yankee bonds.

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

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

o Bond Buyer 40 Index - an index composed of the yield to maturity of 40
bonds. The index attempts to track the new-issue market as closely as
possible, so it changes bonds twice a month, adding all new bonds that
meet certain requirements and deleting an equivalent number according to
their secondary market trading activity. As a result, the average par call
date, average maturity date, and average coupon rate can and have changed
over time. The average maturity generally has been about 29-30 years.

o Financial publications: The WALL STREET JOURNAL, and BUSINESS WEEK,
FINANCIAL WORLD, FORBES, FORTUNE, and MONEY magazines - provide
performance statistics over specified time periods.

o Salomon Smith Barney Composite High Yield Index or its component indices -
measures yield, price and total return for the Long-Term High-Yield Index,
Intermediate-Term High-Yield Index and Long-Term Utility High-Yield Index.

o Historical data supplied by the research departments of CS First Boston
Corporation, the J.P. Morgan(R) companies, Salomon Smith Barney Inc.,
Merrill Lynch, Lehman Brothers(R) and Bloomberg(R) L.P.

o Morningstar - information published by Morningstar, Inc., including
Morningstar proprietary mutual fund ratings. The ratings reflect
Morningstar's assessment of the historical risk-adjusted performance of a
fund over specified time periods relative to other funds within its
category.

o 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.

o IBC Money Fund Report(R) - industry averages for seven day annualized and
compounded yields of taxable, tax-free and government money funds.

o Bank Rate Monitor - a weekly publication that reports various bank
investments such as CD rates, average savings account rates and average
loan rates.

o Salomon Smith Barney Bond Market Roundup - a weekly publication that
reviews yield spread changes in the major sectors of the money, government
agency, futures, options, mortgage, corporate, Yankee, Eurodollar,
municipal, and preferred stock markets and summarizes changes in banking
statistics and reserve aggregates.

o Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change, over time,
in the price of goods and services in major expenditure groups.

o Standard & Poor's(R) Bond Indices - measure yield and price of corporate,
municipal, and government bonds.

o 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.

From time to time, advertisements or information for each fund may include a
discussion of certain attributes or benefits to be derived from an investment
in the fund. The advertisements or information may include symbols,
headlines, or other material that highlights or summarizes the information
discussed in more detail in the communication.

Advertisements or sales material issued by each fund also may discuss or be
based upon information in a recent issue of the Special Report on Tax Freedom
Day published by the Tax Foundation, a Washington, D.C. based nonprofit
research and public education organization. The report illustrates, among
other things, the annual amount of time the average taxpayer works to satisfy
his or her tax obligations to the federal, state and local taxing authorities.

Advertisements or information also may compare the fund's performance to the
return on certificates of deposit (CDs) or other investments. You should be
aware, however, that an investment in the fund involves the risk of
fluctuation of principal value, a risk generally not present in an investment
in a CD issued by a bank. CDs are frequently insured by an agency of the U.S.
government. An investment in the fund is not insured by any federal, state or
private entity.

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

MISCELLANEOUS INFORMATION
- -------------------------------------------------------------------------------

The funds may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you in
determining how much money must be invested on a monthly basis 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 you through
the steps to start a retirement savings program. Of course, an investment in
the funds cannot guarantee that these goals will be met.

The funds are members of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin is one of
the oldest mutual fund organizations and now services approximately 3 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, a pioneer in international investing. The Mutual
Series team, known for its value-driven approach to domestic equity
investing, became part of the organization four years later. Together, the
Franklin Templeton Group has over $229 billion in assets under management for
more than 5 million U.S. based mutual fund shareholder and other accounts.
The Franklin Templeton Group of Funds offers 103 U.S. based open-end
investment companies to the public. Each fund may identify itself by its
Nasdaq symbol or CUSIP number.

Franklin is a leader in the tax-free mutual fund industry and manages more
than $44 billion in municipal security assets for over three quarters of a
million investors. According to Research and Ratings Review, Franklin had one
of the largest staffs of municipal securities analysts in the industry, as of
June 14, 1999.

Under current tax laws, municipal securities remain one of the few
investments offering the potential for tax-free income. In 2000, taxes could
cost almost $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 2000). 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 you 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 also may 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 U.S. government and
its agencies. The market price of municipal securities, however, may
fluctuate. This fluctuation will have a direct impact on the net asset value
of the fund's shares.

Currently, there are more mutual funds than there are stocks listed on the
New York Stock Exchange. While many of them have similar investment goals, no
two are exactly alike. Shares of the fund are generally sold through
securities dealers, whose investment representatives are experienced
professionals who can offer advice on the type of investments suitable to
your unique goals and needs, as well as the risks associated with such
investments.

DESCRIPTION OF RATINGS
- -------------------------------------------------------------------------------

MUNICIPAL BOND RATINGS

MOODY'S INVESTORS SERVICE, INC. (MOODY'S)

INVESTMENT GRADE

Aaa: Municipal bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa: Municipal bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large, fluctuation of protective elements may be of
greater amplitude, or there may be other elements present that make the
long-term risks appear somewhat larger.

A: Municipal bonds rated A possess many favorable investment attributes and
are considered upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.

Baa: Municipal bonds rated Baa are considered medium-grade obligations. 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. These bonds lack outstanding investment characteristics
and, in fact, have speculative characteristics as well.

BELOW INVESTMENT GRADE

Ba: Municipal bonds rated Ba are judged to have predominantly speculative
elements and their future cannot be considered well assured. Often the
protection of interest and principal payments may be very moderate and,
thereby, not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Municipal bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Municipal bonds rated Caa are of poor standing. These issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Ca: Municipal bonds rated Ca represent obligations that are speculative to a
high degree. These issues are often in default or have other marked
shortcomings.

C: Municipal bonds 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 that
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes probable credit
stature upon the completion of construction or the elimination of the basis
of the condition.

STANDARD & POOR'S RATINGS GROUP (S&P(R))

INVESTMENT GRADE

AAA: Municipal bonds rated AAA are the highest-grade obligations. They
possess the ultimate degree of protection as to principal and interest. In
the market, they move with interest rates and, hence, provide the maximum
safety on all counts.

AA: Municipal bonds rated AA also qualify as high-grade obligations, and in
the majority of instances differ from AAA issues only in a small degree.
Here, too, prices move with the long-term money market.

A: Municipal bonds rated A are regarded as upper medium-grade. They have
considerable investment strength but are not entirely free from adverse
effects of changes in economic and trade conditions. Interest and principal
are regarded as safe. They predominantly reflect money rates in their market
behavior but also, to some extent, economic conditions.

BBB: Municipal 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.

BELOW INVESTMENT GRADE

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 these bonds will likely have some quality and
protective characteristics, they 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.

Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

FITCH INVESTORS SERVICE, INC. (FITCH)

INVESTMENT GRADE

AAA: Municipal bonds rated AAA are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal that is unlikely to be affected by
reasonably foreseeable events.

AA: Municipal bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong although not quite as strong as bonds rated AAA and
not significantly vulnerable to foreseeable future developments.

A: Municipal bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

BBB: Municipal bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered 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.

BELOW INVESTMENT GRADE

BB: Municipal bonds rated BB are considered speculative. The obligor's
ability to pay interest and repay principal may be affected over time by
adverse economic changes. Business and financial alternatives can be
identified, however, that could assist the obligor in satisfying its debt
service requirements.

B: Municipal bonds rated B are considered highly speculative. While bonds in
this class are currently meeting debt service requirements, the probability
of continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.

CCC: Municipal bonds rated CCC have certain identifiable characteristics
which, if not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.

CC: Municipal bonds rated CC are minimally protected. Default in payment of
interest and/or principal seems probable over time.

C: Municipal bonds rated C are in imminent default in the payment of interest
or principal.

DDD, DD and D: Municipal bonds rated DDD, DD and D are in default on interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery while D represents the lowest potential for recovery.

Plus (+) or minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus or minus signs
are not used with the AAA, DDD, DD or D categories.

MUNICIPAL NOTE RATINGS

MOODY'S

Moody's ratings for state, municipal and other short-term obligations will be
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; 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 enjoying 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 will usually 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.

SHORT-TERM DEBT & COMMERCIAL PAPER RATINGS

MOODY'S

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted. Moody's commercial
paper ratings, which are also applicable to municipal paper investments, 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 for both short-term debt and commercial
paper, 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

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. Reflect 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.

FRANKLIN NEW YORK TAX-FREE TRUST
FRANKLIN NEW YORK TAX-FREE TRUST
FILE NOS. 33-7785 &
811-4787

FORM N-1A
PART C
OTHER INFORMATION

ITEM 23. EXHIBITS

The following exhibits are incorporated by reference to the previously
filed document indicated below, except as noted:

(a) Agreement and Declaration of Trust

(i) Agreement and Declaration of Trust dated July 17, 1986
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(ii) Certificate of Amendment of Agreement and Declaration of Trust
dated January 22, 1991
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(iii)Certificate of Amendment of Agreement and Declaration of Trust
dated March 21, 1995
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(b) By-Laws

(i) By-Laws
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(ii) Amendment to By-Laws dated January 18, 1994

Not Applicable

(d) Investment Advisory Contracts

(i) Management Agreement between Registrant, on behalf of Franklin
New York Tax-Exempt Money Fund and Franklin Advisers, Inc.
dated October 10, 1986
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(ii) Management Agreement between Registrant, on behalf of Franklin
New York Insured Tax-Free Income Fund and Franklin Advisers,
Inc. dated April 23, 1991
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(iii) Management Agreement between Registrant, on behalf of Franklin
New York Intermediate-Term Tax-Free Income Fund and Franklin
Advisers, Inc. dated March 19, 1998
Filing: Post-Effective Amendment No. 17 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1999

(iv) Amendment dated August 1, 1995 to Management Agreement between
Registrant, on behalf of Franklin New York Tax-Exempt Money
Fund and Franklin Advisers, Inc. dated October 10, 1986
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: August 29, 1996

(v) Amendment dated August 1, 1995 to Management Agreement between
Registrant, on behalf of Franklin New York Insured Tax-Free
Income Fund and Franklin Advisers, Inc. dated April 23, 1991
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: August 29, 1996

(e) Underwriting Contracts

(i) Amended and Restated Distribution Agreement between
Registrant, on behalf of all Series except Franklin New York
Tax-Exempt Money Fund and Franklin/Templeton Distributors,
Inc. dated May 16, 1995
Filing: Post-Effective Amendment No. 13 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1996

(ii) Amended and Restated Distribution Agreement between
Registrant, on behalf of Franklin New York Tax-Exempt Money
Fund and Franklin/Templeton Distributors, Inc. dated March 29,
1995
Filing: Post-Effective Amendment No. 13 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1996

(iii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc. and Securities Dealers
Filing: Post-Effective Amendment No. 17 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1999

(iv) Amendment of Amended and Restated Distribution Agreement dated
January 12, 1999

(v) Amendment of Amended and Restated Distribution Agreement For
New York Tax-Exempt Money Fund Series ONLY dated January 12,
1999

(f) Bonus or Profit Sharing Contracts

Not Applicable

(g) Custodian Agreements

(i) Master Custody Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 17 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1999

(ii) Terminal Link Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 17 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1999

(iii) Amendment dated May 7, 1997 to Master Custody Agreement
between the Registrant and Bank of New York dated February 16,
1996
Filing: Post-Effective Amendment No. 16 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: February 23, 1998

(iv) Amendment dated February 27, 1998 to the Master Custody
Agreement between the Registrant and Bank of New York dated
February 16, 1996
Filing: Post-Effective Amendment No. 17 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1999

(v) Amendment dated March 21, 2000, to Exhibit A of the Master
Custody Agreement between Registrant and Bank of New York
dated February 16, 1996

(h) Other Material Contracts

(i) Subcontract for Fund Administrative Services dated October 1,
1996 and Amendment thereto dated December 1, 1998 between
Franklin Advisers, Inc. and Franklin Templeton Services, Inc.
Filing: Post-Effective Amendment No. 17 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1999

(i) Legal Opinion

(i) Opinion and Consent of Counsel dated February 5, 1999
Filing: Post-Effective Amendment No. 17 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1999

(j) Other Opinions

(i) Consent of Independent Auditors

(k) Omitted Financial Statements

Not Applicable

(l) Initial Capital Agreements

Not Applicable

(m) Rule 12b-1 Plan

(i) Distribution Plan pursuant to Rule 12b-1 between Registrant,
on behalf of Franklin New York Insured Tax-Free Income Fund
and Franklin/Templeton Distributors, Inc. dated May 1, 1994
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(ii) Amended and Restated Distribution Plan pursuant to Rule 12b-1
between Registrant, on behalf of Franklin New York
Intermediate-Term Tax-Free Income Fund and Franklin/Templeton
Distributors, Inc. dated July 1, 1993
Filing: Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: April 25, 1995

(iii) Distribution Plan pursuant to Rule 12b-1 between Registrant,
on behalf of Franklin New York Insured Tax-Free Income Fund -
Class II and Franklin/Templeton Distributors, Inc. dated March
30, 1995
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: August 29, 1996

(o) Rule 18f-3 Plan

(i) Multiple Class Plan dated October 19, 1995
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: August 29, 1996

(p) Power of Attorney

(i) Power of Attorney dated March 21, 2000

(ii) Certificate of Secretary dated March 21, 2000

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None

ITEM 25. INDEMNIFICATION

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

a) Franklin Advisers, Inc., and Franklin Investment Advisory Services, Inc.

The officers and directors of the Registrant's manager also serve as officers
and/or directors for (1) the manager's corporate parent, Franklin Resources,
Inc., and/or (2) other investment companies in the Franklin Templeton Group
of Funds(R). In addition, Mr. Charles B. Johnson was formerly a director of
General Host Corporation. For additional information please see Part B and
Schedules A and D of Form ADV of Franklin Advisers, Inc. (SEC File 801-26292)
and Franklin Investment Advisory Services, Inc. (SEC File 801-52152),
incorporated herein by reference, which sets forth the officers and directors
of Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.
and information as to any business, profession, vocation or employment of a
substantial nature engaged in by those officers and directors during the past
two years.

ITEM 27. PRINCIPAL UNDERWRITERS

a) Franklin/Templeton Distributors, Inc., (Distributors) also acts as
principal underwriter of shares of:

Franklin Asset Allocation Fund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Floating Rate Trust
Franklin Gold and Precious Metals Fund
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Municipal Securities Trust
Franklin Mutual Series Fund Inc.
Franklin New York Tax-Free Income Fund
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Franklin Templeton Variable Insurance Products Trust
(formerly Franklin Valuemark Funds)
Institutional Fiduciary Trust

Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Variable Products Series Fund

b) The information required by this Item 29 with respect to each director
and officer of Distributors is incorporated by reference to Part B of this
N-1A and Schedule A of Form BD filed by Distributors with the Securities and
Exchange Commission pursuant to the Securities Act of 1934 (SEC File No.
8-5889).

c) Not Applicable. Registrant's principal underwriter is an affiliated
person of an affiliated person of the Registrant.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

The accounts, books or other documents required to be maintained by Section
31 (a) of the Investment Company Act of 1940 are kept by the Trust or its
shareholder services agent, Franklin/Templeton Investor Services, Inc., both
of whose address is 777 Mariners Island Blvd., San Mateo, CA 94404.

ITEM 29. MANAGEMENT SERVICES

There are no management-related service contracts not discussed in Part A or
Part B.

ITEM 30. UNDERTAKINGS

Not Applicable

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of San Mateo and the State of
California, on the 26th day of April, 2000.

FRANKLIN NEW YORK TAX-FREE TRUST
(Registrant)

By: RUPERT H. JOHNSON, JR.*
Rupert H. Johnson, Jr.
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

RUPERT H. JOHNSON, JR.* Principal Executive Officer and
Rupert H. Johnson, Jr. Trustee
Dated: April 26, 2000

MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: April 26, 2000

KIMBERLEY H. MONASTERIO* Principal Accounting Officer
Kimberley H. Monasterio Dated: April 26, 2000

FRANK H. ABBOTT, III* Trustee
- ---------------------
Frank H. Abbott, III Dated: April 26, 2000

HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: April 26, 2000

ROBERT F. CARLSON* Trustee
Robert F. Carlson Dated: April 26, 2000

S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: April 26, 2000

CHARLES B. JOHNSON* Trustee
Charles B. Johnson Dated: April 26, 2000

FRANK W.T. LAHAYE* Trustee
Frank W.T. LaHaye Dated: April 26, 2000

WILLIAM J. LIPPMAN* Trustee
William J. Lippman Dated: April 26, 2000

GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: April 26, 2000

*By: /S/ DAVID P. GOSS
David P. Goss, Attorney-in-Fact
(Pursuant to a Power of Attorney filed herewith)

FRANKLIN NEW YORK TAX-FREE TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX

EXHIBIT NO. DESCRIPTION LOCATION

EX-99.(a)(i) Agreement and Declaration of *
Trust dated July 17, 1986

EX-99.(a)(ii) Certificate of Amendment of *
Agreement and Declaration of
Trust dated January 22, 1991

EX-99.(a)(iii) Certificate of Amendment of *
Agreement and Declaration of
Trust dated March 21, 1995

EX-99.(b)(i) By-Laws *

EX-99.(d)(i) Management Agreement between *
Registrant, on behalf of Franklin
New York Tax-Exempt Money Fund
and Franklin Advisers, Inc. dated
October 10, 1986

EX-99.(d)(ii) Management Agreement between *
Registrant, on behalf of Franklin
New York Insured Tax-Free Income
Fund and Franklin Advisers, Inc.
dated April 23, 1991

EX-99.(d)(iii) Management Agreement between *
Registrant, on behalf of
Franklin New York Intermediate-
Term Tax-Free Income Fund and
Franklin Advisers, Inc. dated
March 19, 1998

EX-99.(d)(iv) Amendment dated August 1, 1995 *
to Management Agreement
between Registrant, on behalf of
Franklin New York Tax-Exempt
Money Fund and Franklin Advisers,
Inc. dated October 10, 1986

EX-99.(d)(v) Amendment dated August 1, 1995 *
to Management Agreement
between Registrant, on behalf of
Franklin New York Insured
Tax-Free Income Fund and Franklin
Advisers, Inc. dated April 23,
1991

EX-99.(e)(i) Amended and Restated Distribution *
Agreement between Registrant, on
behalf of all Series except
Franklin New York Tax-Exempt
Money Fund and Franklin/Templeton
Distributors, Inc. dated May 16,
1995

EX-99.(e)(ii) Amended and Restated Distribution *
Agreement between Registrant, on
behalf of Franklin New York
Tax-Exempt Money Fund and
Franklin/Templeton Distributors,
Inc. dated March 29, 1995

EX-99.(e)(iii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors,
Inc. and Securities Dealers

EX-99.(e)(iv) Amendment of Amended and Restated Attached
Distribution Agreement dated
January 12, 1999

EX-99.(e)(v) Amendment of Amended and Restated Attached
Distribution Agreement For New York
Tax-Exempt Money Fund Series ONLY
dated January 12, 1999

EX-99.(g)(i) Master Custody Agreement between *
Registrant and Bank of New York
dated February 16, 1996

EX-99.(g)(ii) Terminal Link Agreement between *
Registrant and Bank of New York
dated February 16, 1996

EX-99.(g)(iii) Amendment dated May 7, 1997 to *
Master Custody Agreement between
the Registrant and Bank of New York
dated February 16, 1996

EX-99.(g)(iv) Amendment dated February 27, 1998 *
to the Master Custody Agreement
between the Registrant and Bank of
New York dated February 16, 1996

EX-99.(g)(v) Amendment dated March 21, 2000, to Attached
Exhibit A of the Master Custody
Agreement between Registrant and
Bank of New York dated February 16,
1996

EX-99.(h)(i) Subcontract for Fund *
Administrative Services dated
October 1, 1996 and Amendment
thereto dated December 1, 1998
between Franklin Advisers, Inc.
and Franklin Templeton Services,
Inc.

EX-99.(i)(i) Opinion and Consent of Counsel *
dated February 5, 1999

EX-99.(j)(i) Consent of Independent Auditors Attached

EX-99.(m)(i) Distribution Plan pursuant to Rule *
12b-1 between Registrant, on
behalf of Franklin New York
Insured Tax-Free Income Fund and
Franklin/Templeton Distributors,
Inc. dated May 1, 1994

EX-99.(m)(ii) Amended and Restated Distribution *
Plan pursuant to Rule 12b-1
between Registrant, on behalf of
Franklin New York Intermediate-Term
Tax-Free Income Fund and
Franklin/Templeton Distributors,
Inc. dated July 1, 1993

EX-99.(m)(iii) Distribution Plan pursuant to Rule *
12b-1 between Registrant, on
behalf of Franklin New York
Insured Tax-Free Income Fund -
Class II and Franklin/Templeton
Distributors, Inc. dated
March 30, 1995

EX-99.(o)(i) Multiple Class Plan dated *
October 19, 1995

EX-99.(p)(i) Power of Attorney dated March 21, Attached
2000

EX-99.(p)(ii) Certificate of Secretary dated Attached
March 21, 2000

*Incorporated by reference

FRANKLIN NEW YORK TAX-FREE TRUST
777 Mariners Island Blvd.
San Mateo, California 94404

Franklin/Templeton Distributors, Inc
777 Mariners Island Blvd.
San Mateo, CA 94404

Re: Amendment of Amended and Restated Distribution Agreement

Gentlemen:

We (the "Fund") are a corporation or business trust operating as an open-end
management investment company or "mutual fund," which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") and whose shares
are registered under the Securities Act of 1933, as amended (the "1933
Act"). You have informed us that your company is registered as a
broker-dealer under the provisions of the Securities Exchange Act of 1934, as
amended (the "1934 Act") and that your company is a member of the National
Association of Securities Dealers, Inc.

This agreement is an amendment (the "Amendment") of the Amended and Restated
Distribution Agreement (the "Agreement") currently in effect between you and
us. As used herein all capitalized terms herein have the meanings set forth
in the Agreement. We have been authorized to execute and deliver the
Amendment to you by a resolution of our Board passed at a meeting at which a
majority of Board members, including a majority who are not otherwise
interested persons of the Fund and who are not interested persons of our
investment adviser, its related organizations or of you or your related
organizations, were present and voted in favor of such resolution approving
the Amendment.

To the extent that any provision of the Amendment conflicts with any
provision of the Agreement, the Amendment provision supersedes the Agreement
provision. The Agreement and the Amendment together constitute the entire
agreement between the parties hereto and supersede all prior oral or written
agreements between the parties hereto.

Section 4. entitled "Compensation" is amended by adding the following
sentences at the end of Subsection 4.B:

The compensation provided in the Class B Distribution Plan
applicable to Class B Shares (the "Class B Plan") is divided into a
distribution fee and a service fee, each of which fees is in
compensation for different services to be rendered to the Fund.
Subject to the termination provisions in the Class B Plan, the
distribution fee with respect to the sale of a Class B Share shall
be earned when such Class B Share is sold and shall be payable from
time to time as provided in the Class B Plan. The distribution fee
payable to you as provided in the Class B Plan shall be payable
without offset, defense or counterclaim (it being understood by the
parties hereto that nothing in this sentence shall be deemed a
waiver by the Fund of any claim the Fund may have against you).
You may direct the Fund to cause our custodian to pay such
distribution fee to Lightning Finance Company Limited ("LFL") or
other persons providing funds to you to cover expenses referred to
in Section 2(a) of the Class B Plan and to cause our custodian to
pay the service fee to you for payment to dealers or others or
directly to others to cover expenses referred to in Section 2(b) of
the Class B Plan.

We understand that you intend to assign your right to receive
certain distribution fees with respect to Class B Shares to LFL in
exchange for funds that you will use to cover expenses referred to
in Section 2(a) of the Class B Plan. In recognition that we will
benefit from your arrangement with LFL, we agree that, in addition
to the provisions of Section 7 (iii) of the Class B Plan, we will
not pay to any person or entity, other than LFL, any such assigned
distribution fees related to Class B Shares sold by you prior to
the termination of either the Agreement or the Class B Plan. We
agree that the preceding sentence shall survive termination of the
Agreement.

Section 4. entitled "Compensation" is amended by adding the following
Subsection 4.C. after Subsection 4.B.:

C. With respect to the sales commission on the redemption of
Shares of each series and class of the Fund as provided in
Subsection 4.A. above, we will cause our shareholder services agent
(the "Transfer Agent") to withhold from redemption proceeds payable
to holders of the Shares all contingent deferred sales charges
properly payable by such holders in accordance with the terms of
our then current prospectuses and statements of additional
information (each such sales charge, a "CDSC"). Upon receipt of an
order for redemption, the Transfer Agent shall direct our custodian
to transfer such redemption proceeds to a general trust account.
We shall then cause the Transfer Agent to pay over to you or your
assigns from the general trust account such CDSCs properly payable
by such holders as promptly as possible after the settlement date
for each such redemption of Shares. CDSCs shall be payable without
offset, defense or counterclaim (it being understood that nothing
in this sentence shall be deemed a waiver by us of any claim we may
have against you.) You may direct that the CDSCs payable to you be
paid to any other person.

Section 11. entitled "Conduct of Business" is amended by replacing the
reference in the second paragraph to "Rules of Fair Practice" with a
reference to the "Conduct Rules".

Section 16. entitled "Miscellaneous" is amended in the first paragraph by
changing the first letter of each of the words in each of the terms in
quotations marks, except "Parent," to the lower case and giving to the term
"assignment" the meaning as set forth only in the 1940 Act and the Rules and
Regulations thereunder (and not as set forth in the 1933 Act and the Rules
and Regulations thereunder.)

If the foregoing meets with your approval, please acknowledge your acceptance
by signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.

Very truly yours,

FRANKLIN NEW YORK TAX-FREE TRUST

By: /s/ D.R. GATZEK
Deborah R. Gatzek
Vice President & Secretary

Accepted:

Franklin/Templeton Distributors, Inc.

By:/s/ H.E. BURNS
Harmon E. Burns
Executive Vice President

Dated: January 12, 1999

FRANKLIN NEW YORK TAX-FREE TRUST
777 Mariners Island Blvd.
San Mateo, California 94404

Franklin/Templeton Distributors, Inc
777 Mariners Island Blvd.
San Mateo, CA 94404

Re: Amendment of Amended and Restated Distribution Agreement
For New York Tax-Exempt Money Fund Series ONLY

Gentlemen:

Section 4. entitled "Compensation" is amended by adding the following
sentences at the end of Subsection 4.B:

Section 4. entitled "Compensation" is amended by adding the following
Subsection 4.C. after Subsection 4.B.:

Section 11. entitled "Conduct of Business" is amended by replacing the
reference in the second paragraph to "Rules of Fair Practice" with a
reference to the "Conduct Rules".

If the foregoing meets with your approval, please acknowledge your acceptance
by signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.

Very truly yours,

FRANKLIN NEW YORK TAX-FREE TRUST

By:/s/ D.R. GATZEK
Deborah R. Gatzek
Vice President & Secretary

Accepted:

Franklin/Templeton Distributors, Inc.

By:/s/ H.E. BURNS
Harmon E. Burns
Executive Vice President

Dated: January 12, 1999

MASTER CUSTODY AGREEMENT

EXHIBIT A

<TABLE>
<CAPTION>
The following is a list of the Investment Companies and their respective Series for which the Custodian shall serve under the
Master Custody Agreement dated as of February 16, 1996.

Franklin Asset Allocation Fund Delaware Business Trust

Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.

Franklin California Tax-Free Trust Massachusetts Business Franklin California Insured Tax-Free Income Fund
Trust Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund

Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series

Franklin Equity Fund California Corporation

Franklin Federal Money Fund California Corporation

Franklin Federal Tax- Free Income Fund California Corporation

- -------------------------------------------- ---------------------------- ---------------------------------------------------------

Franklin High Income Trust Delaware Business Trust AGE High Income Fund

Franklin Investors Securities Trust Massachusetts Business Franklin Global Government Income Fund
Trust Franklin Short-Intermediate U.S. Govt Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin Equity Income Fund
Franklin Bond Fund

Franklin Managed Trust Delaware Business Trust Franklin Rising Dividends Fund

Franklin Money Fund California Corporation

Franklin Municipal Securities Trust Delaware Business Trust Franklin California High Yield Municipal Fund
Franklin Tennessee Municipal Bond Fund

Franklin Mutual Series Fund Inc. Maryland Corporation Mutual Shares Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Discovery Fund
Mutual European Fund
Mutual Financial Services Fund

- -------------------------------------------- ---------------------------- ---------------------------------------------------------

Franklin New York Tax-Free Trust Massachusetts Business Franklin New York Tax-Exempt Money Fund
Trust Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund

Franklin Real Estate Securities Trust Delaware Business Trust Franklin Real Estate Securities Fund

Franklin Strategic Mortgage Portfolio Delaware Business Trust

Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin U.S. Long-Short Fund
Franklin Large Cap Growth Fund
Franklin Aggressive Growth Fund
Franklin Small Cap Growth Fund II
Franklin Technology Fund

Franklin Tax-Exempt Money Fund California Corporation

- -------------------------------------------- ---------------------------- ---------------------------------------------------------

- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
<S> <C> <C>
Franklin Tax-Free Trust Massachusetts Business Franklin Massachusetts Insured Tax-Free Income Fund
Trust Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income
Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund

- -------------------------------------------- ---------------------------- ---------------------------------------------------------

Franklin Templeton Global Trust Delaware Business Trust Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund

Franklin Templeton International Trust Delaware Business Trust Templeton Pacific Growth Fund
Templeton Foreign Smaller Companies Fund

Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund

Franklin Value Investors Trust Massachusetts Business Franklin Balance Sheet Investment Fund
Trust Franklin MicroCap Value Fund
Franklin Value Fund

Franklin Templeton Variable Insurance Massachusetts Business Franklin Money Market Fund
Products Trust Trust Franklin Growth and Income Fund
Franklin Natural Resources Securities Fund
Franklin Real Estate Fund
Franklin Global Communications Securities Fund
Franklin High Income Fund
Templeton Global Income Securities Fund
Franklin Income Securities Fund
Franklin U.S. Government Fund
Franklin Zero Coupon Fund - 2000
Franklin Zero Coupon Fund - 2005
Franklin Zero Coupon Fund - 2010
Franklin Rising Dividends Securities Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------

- -------------------------------------------- ---------------------------- ---------------------------------------------------------
<S> <C> <C>
Institutional Fiduciary Trust Massachusetts Business Money Market Portfolio
Trust Franklin U.S. Government Securities Money Market
Portfolio
Franklin Cash Reserves Fund

The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market Portfolio

Templeton Variable Products Series Fund Franklin Growth Investments Fund
Mutual Shares Investments Fund
Mutual Discovery Investments Fund
Franklin Small Cap Investments Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------

CLOSED END FUNDS:

Franklin Multi-Income Trust Massachusetts Business
Trust

Franklin Universal Trust Massachusetts Business
Trust

Franklin Floating Rate Trust Delaware Business Trust

- -------------------------------------------- ---------------------------- ---------------------------------------------------------

REVISED: 3/21/00
</TABLE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Post-Effective Amendment No. 18
to the Registration Statement of Franklin New York Tax-Free Trust on Form N-1A,
File No. 33-7785 of our report dated February 3, 2000, on our audit of the
financial statements and financial highlights of Franklin New York Tax-Free
Trust, which report is included in the Annual Report to Shareholders for the
year ended December 31, 1999, filed with the Securities and Exchange Commission
pursuant to section 30(d) of the Investment Company Act of 1940, which is
incorporated by reference in the Registration Statement. We also consent to the
reference to our firm under the captions "Financial Highlights" and "Auditor."

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

San Francisco, California
April 26, 2000

POWER OF ATTORNEY

The undersigned officers and trustees of FRANKLIN NEW YORK TAX-FREE
TRUST (the "Registrant") hereby appoint MARK H. PLAFKER, HARMON E. BURNS,
DEBORAH R. GATZEK, KAREN L. SKIDMORE, LEIANN NUZUM, Murray L. Simpson,
Barbara J. Green and David P. Goss (with full power to each of them to act
alone) his/her attorney-in-fact and agent, in all capacities, to execute,
deliver and file in the names of the undersigned, any and all instruments
that said attorneys and agents may deem necessary or advisable to enable the
Registrant to comply with or register any security issued by the Registrant
under the Securities Act of 1933, as amended, and/or the Investment Company
Act of 1940, as amended, and the rules, regulations and interpretations
thereunder, including but not limited to, any registration statement,
including any and all pre- and post-effective amendments thereto, any other
document to be filed with the U.S. Securities and Exchange Commission and any
and all documents required to be filed with respect thereto with any other
regulatory authority. Each of the undersigned grants to each of said
attorneys, full authority to do every act necessary to be done in order to
effectuate the same as fully, to all intents and purposes, as he/she could do
if personally present, thereby ratifying all that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue hereof.

This Power of Attorney may be executed in one or more counterparts, each
of which shall be deemed to be an original, and all of which shall be deemed
to be a single document.

The undersigned officers and trustees hereby execute this Power of
Attorney as of the 21st day of March, 2000.

/s/ RUPERT H. JOHNSON, JR. /s/ FRANK H. ABBOTT, III
Rupert H. Johnson, Jr., Frank H. Abbott, III,
Principal Executive Officer and Trustee Trustee

/s/ HARRIS J. ASHTON /s/ ROBERT F. CARLSON
Harris J. Ashton, Robert F. Carlson,
Trustee Trustee

/s/ S. JOSEPH FORTUNATO /s/ CHARLES B. JOHNSON
S. Joseph Fortunato, Charles B. Johnson,
Trustee Trustee

/s/ FRANK W.T. LAHAYE /s/ WILLIAM J. LIPPMAN
Frank W.T. LaHaye, William J. Lippman,
Trustee Trustee

/s/ GORDON S. MACKLIN /s/ MARTIN L. FLANAGAN
Gordon S. Macklin, Martin L. Flanagan,
Trustee Principal Financial Officer

/s/ KIMBERLEY H. MONASTERIO
Kimberley H. Monasterio,
Principal Accounting Officer

CERTIFICATE OF SECRETARY

I, David P. Goss, certify that I am Assistant Secretary of FRANKLIN NEW YORK
TAX-FREE TRUST (the "Trust").

As Assistant Secretary of the Trust, I further certify that the following
resolution was adopted by a majority of the Trustees of the Trust present at
a meeting held at 777 Mariners Island Boulevard, San Mateo, California
94404, on March 21, 2000.

RESOLVED, that a Power of Attorney, substantially in the form of
the Power of Attorney presented to this Board, appointing Harmon E.
Burns, Deborah R. Gatzek, Mark H. Plafker, Karen L. Skidmore,
Leiann Nuzum, Murray L. Simpson, Barbara J. Green and David P. Goss
as attorneys-in-fact for the purpose of filing documents with the
Securities and Exchange Commission, be executed by each Trustee and
designated officer.

I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.

/S/ DAVID P. GOSS
Dated: MARCH 21, 2000 David P. Goss
Assistant Secretary