UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-03479
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FRANKLIN NEW YORK TAX-FREE INCOME FUND
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(Exact name of registrant as specified in charter)

ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 05/31
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Date of reporting period: 11/30/04
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

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NOVEMBER 30, 2004
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER TAX-FREE INCOME
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?

FRANKLIN NEW YORK Eligible shareholders can
TAX-FREE INCOME FUND sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS

FRANKLIN o Templeton o Mutual Series

FRANKLIN TEMPLETON INVESTMENTS

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager structure
combines the specialized expertise of three
world-class investment management groups--Franklin,
Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and staying
true to the unique investment disciplines that
underlie its success.

FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with research offices in over 25 countries, they
offer investors the broadest global reach in the
industry.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.

TRUE DIVERSIFICATION Because our management groups work independently and
adhere to distinctly different investment approaches,
Franklin, Templeton and Mutual Series funds typically
have a low overlap of securities. That's why our
funds can be used to build truly diversified
portfolios covering every major asset class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable account services that have helped us
become one of the most trusted names in financial
services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the semiannual report

CONTENTS

SHAREHOLDER LETTER ........................................................ 1

SPECIAL FEATURE:

Understanding Your
Tax-Free Income Fund ...................................................... 4

SEMIANNUAL REPORT

Franklin New York Tax-Free
Income Fund ............................................................... 7

Performance Summary ....................................................... 12

Your Fund's Expenses ...................................................... 15

Financial Highlights and
Statement of Investments .................................................. 17

Financial Statements ...................................................... 34

Notes to Financial Statements ............................................. 38

Shareholder Information ................................................... 46

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SHAREHOLDER LETTER

Dear Shareholder:

During the six-month period ended November 30, 2004, the U.S. economy continued
to grow, although somewhat slower than at the beginning of 2004. Growth was
supported by low interest rates, benign inflation, improving economic data and
positive corporate earnings reports. Counterbalancing these positive factors
were record-high oil prices and concerns about U.S. budget deficits and their
potential long-term effects on interest rates and economic growth.

U.S. bond markets surprisingly posted steady returns when many analysts expected
rates to rise and hurt bonds' performance. At the beginning of the period, the
10-year Treasury yield was 4.66%. During the six-month period, it hit a high of
4.89% as many forecast higher long-term rates because of inflation fears and the
Federal Reserve Board's (Fed's) "measured pace" of raising short-term rates. The
Fed did raise the federal funds target rate a quarter percentage point (0.25%)
in June, August, September and November, and the market expected yet another
hike in December. However, rising oil prices tempered expectations for strong
growth and growth-driven inflation, and the yield on the 10-year Treasury
declined to 4.36% at period-end.

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EDELIVERY DETAILS

Log in at franklintempleton.com and click on eDelivery. Shareholders who are
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accounts are eligible for eDelivery.

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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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Not part of the semiannual report | 1

We continue to believe that inflation still remains relatively tame and that in
the near future there is little reason to fear the high inflation and high
interest rates we experienced in the 1970s and 1980s. Long-term interest rates
are largely driven by the market's expectation of inflation. As the economy
keeps improving, it is reasonable to expect prices for goods and services to
rise. Productivity is still strong by historical standards and there is a
perceived slack in the economy that might allow it to grow without exerting
large inflationary pressures. While we do agree with most market observers who
think rates might be too low given the fundamentals, we do not believe that
inflation or interest rates should rise rapidly. The economic environment
appears relatively stable, and we expect rates to gradually reach levels typical
of this environment. At the same time, we remain mindful of potential
inflationary risks posed by the U.S. budget and trade deficits and their effect
on the value of the U.S. dollar versus other currencies. A sustained dollar
decline would make import prices higher for American consumers, which would
contribute to higher inflation, but no one can tell the extent to which the
dollar might fall and how effectively the government can reduce the deficits.

At period-end, oil was trading at approximately $49 a barrel, substantially
higher than six months ago. Although there is much discussion about the point at
which the price of oil can trigger a recession or stagflation, there is no
definite consensus. However, recent supply and demand conditions made it hard to
anticipate future oil price movements and what effect, if any, they could have
on our economy. We believe that, at recent levels, the price of oil is likely to
have a minor, lagging negative effect on economic growth. We also believe that
increased oil prices alone will not lead to higher overall inflation.

At times of such uncertainty, we continue to recommend investors consult their
financial advisors and review their portfolios to design a strategy and
portfolio allocation that meet their individual needs, goals and risk tolerance.
Municipal bonds provide tax-free income and diversification from equities.
Despite periods of volatility, municipal bonds have a solid long-term record of
performance, driven mostly by their income component.

2 | Not part of the semiannual report

In the enclosed semiannual report for Franklin New York Tax-Free Income Fund,
the portfolio manager discusses municipal bond market conditions, investment
decisions and Fund performance during the period. You can also find specific
performance data and financial information about your Fund. Please remember that
all securities markets fluctuate, as do mutual fund share prices.

If you would like more frequent updates, FRANKLINTEMPLETON.COM provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, read timely commentary
from portfolio managers, and find helpful financial planning tools. We hope you
will take advantage of these online services.

We appreciate your confidence in us and encourage you to contact us when you
have questions about your Franklin Templeton tax-free investment.

Sincerely,

/s/ Charles B. Johnson

Charles B. Johnson
Chairman
Franklin New York Tax-Free Income Fund

/s/ Sheila Amoroso

Sheila Amoroso

/s/ Rafael R. Costas Jr.

Rafael R. Costas Jr.

Senior Vice Presidents and Co-Directors
Franklin Municipal Bond Department

THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF NOVEMBER 30, 2004. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT HAVE BEEN OBTAINED FROM SOURCES
CONSIDERED RELIABLE.

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STATEMENT ON CURRENT
INDUSTRY ISSUES
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In our efforts to fulfill our ongoing commitment to provide you with timely and
accurate information, we have prepared a statement on current industry issues as
they pertain to Franklin Resources, Inc., and our subsidiary companies (Franklin
Templeton Investments). You can find the most updated "Statement on Current
Industry Issues" and a detailed Q&A at franklintempleton.com, or call us at
1-800/632-2301.
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Not part of the semiannual report | 3

SPECIAL FEATURE

UNDERSTANDING YOUR TAX-FREE INCOME FUND --
WHAT CAUSES DIVIDENDS AND FUND PRICES TO FLUCTUATE

DID YOU EVER WONDER WHY YOUR TAX-FREE INCOME FUND SHARE PRICE FLUCTUATES? OR WHY
THE DIVIDENDS YOU RECEIVE FROM YOUR TAX-FREE INCOME FUND AREN'T ALWAYS THE SAME?
AT FRANKLIN TEMPLETON INVESTMENTS, MAXIMIZING TAX-FREE INCOME AND PRESERVING OUR
SHAREHOLDERS' CAPITAL ARE OUR TOP PRIORITIES. EVEN SO, CHANGES IN THE ECONOMY
AND INTEREST RATES CAN HAVE AN IMPACT ON YOUR FUND'S SHARE PRICE AND DIVIDENDS.

BELOW, YOU'LL FIND ANSWERS TO COMMONLY ASKED QUESTIONS ABOUT THE RELATIONSHIP
BETWEEN MUNICIPAL BONDS AND INTEREST RATES. UNDERSTANDING WHAT AFFECTS YOUR
TAX-FREE INCOME FUND MAY HELP YOU BECOME A MORE EFFECTIVE INVESTOR.

Q. WHAT IS THE DIFFERENCE BETWEEN SHORT- AND LONG-TERM INTEREST RATES?

A. The Federal Reserve Board controls the Federal funds target rate (Fed
funds rate), which in turn influences the market for shorter-term
securities. The Fed closely monitors the economy and has the power to
raise or lower the Fed funds rate in order to keep inflation in check or
to help stimulate the economy. The Fed funds rate is the rate that banks
charge other banks for overnight loans.

Long-term interest rates, as represented by yields of the 10-year or
30-year Treasury bond, are market-driven and tend to move in anticipation
of changes in the economy and inflation.

Q. WHAT CAUSES INTEREST RATES TO RISE AND FALL?

A. Interest rate trends are primarily determined by economic factors such as
inflation, the strength of the U.S. dollar and the pace of economic
growth. For example, strong economic growth can lead to inflation. If the
Fed becomes concerned about inflation, it may attempt to cool the economy
by raising the Fed funds rate, as it did in summer 2004. On the other
hand, if the economy slows down, the Fed may lower the Fed funds rate to
stimulate economic growth, as we witnessed from January 2001 to June 2003.
Over the summer of 2003 and again in spring 2004, long-term interest rates
rose from historic lows in response to indications of the beginning of an
economic recovery.

[GRAPHIC Q&A]

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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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4 | Not part of the semiannual report

Q. HOW DO CHANGES IN INTEREST RATES AFFECT BOND PRICES?

A. Typically, bond prices move in the opposite direction of interest rates.
So, when interest rates rise, bond prices fall, and conversely, when rates
decline, bond prices tend to rise in value.

When rates go up, newly issued bonds, with their new, higher yields become
more attractive than comparable existing bonds with lower yields. So,
investors who want to sell their existing bonds have to reduce their
prices to make them equally attractive.

[GRAPHIC OMITTED]

Generally, tax-free income fund portfolios comprising municipal bonds with
longer maturities are more sensitive to changes in long-term interest
rates than portfolios with shorter-term municipal bonds. Similarly funds
with shorter-term municipal bonds are typically more influenced by
short-term rate changes than funds with longer-term municipal bonds.

But, while tax-free income fund prices will fluctuate with interest rate
changes, it's important to remember that price movement is only part of
the picture. As a tax-free income fund investor, you also receive monthly
tax-free income(1), which has historically been the largest component of
total return for municipal bonds.(2) Total return includes price movement
(capital appreciation or depreciation) and income. And since bonds
generally pay interest whether prices move up or down, the interest from
municipal bonds can help cushion a fund's overall total return, especially
when rates are rising.

Q. HOW DO INTEREST RATES AFFECT MY TAX-FREE DIVIDENDS?

A. When interest rates decline, municipal bond issuers often "call" or redeem
existing higher-yielding bonds and replace them with new, lower-yielding
bonds to reduce the amount of interest they pay on the debt. As funds then
have to reinvest proceeds from the called bonds into new lower-yielding
bonds, their investment earnings decline, and the dividends paid out to
shareholders also decline.

(1) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.

(2) Source: Lehman Brothers Municipal Bond Index, 9/30/04. Total return
includes compounded income and capital appreciation over the 20-year
period ending 9/30/04. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

[GRAPHIC Q&A]

Not part of the semiannual report | 5

Higher interest rates may lead to higher dividends. When interest rates
rise, fewer bonds are called and fund managers may have the opportunity to
invest in new, higher-yielding bonds. As a result, the funds' investment
earnings can increase, and they are able to pay out higher dividends to
shareholders over time.

Q. WHAT IS THE BENEFIT OF FRANKLIN'S INVESTMENT APPROACH WHEN INTEREST RATES
ARE VOLATILE?

A. Since 1977, Franklin has consistently adhered to a strategy of investing
for high, current, tax-free income while working to preserve shareholders'
capital.(1)

Our straightforward, "plain-vanilla" approach to investing means we do not
use leverage or invest in speculative derivatives or futures, which could
increase the level of risk for our fund portfolios, especially when
interest rates are volatile. Similarly, we do not try to time the market
and predict interest rate movements. Instead, we carefully select bonds
for our fund portfolios that we believe should provide a high level of
stable income until maturity.

We generally invest in current coupon securities to maximize tax-free
income. Over time, as we invest in different interest rate climates, the
portfolios become well diversified with a broad range of securities. As a
result of this strategy, we own many older securities with higher coupons,
which are generally less sensitive to interest rate movements and help to
provide stability to our fund portfolios.

Our tax-free income fund investment strategy cannot eliminate interest
rate risk, but it can help to reduce this risk.

Q. HOW DO STATE BUDGET DEFICITS AND CREDIT RATING DOWNGRADES AFFECT MY
TAX-FREE INCOME FUND?

A. Many states have been facing budget challenges, as the recent economic
slowdown has had an impact on virtually every tax-related revenue source.
As finances for state governments have deteriorated, independent rating
agencies have downgraded debt ratings or issued negative outlooks for some
states' general obligation debt. Rating downgrades may lead to increased
price volatility for certain fund holdings over the short term. However,
over the long term, because of our income-focused strategy, lower-rated
bonds may also present an attractive investment opportunity. Lower ratings
on state debt can translate into higher yields paid to bondholders and
potentially higher dividends to shareholders over time.

Q. WHAT ARE THE KEY BENEFITS OF INVESTING IN TAX-FREE INCOME FUNDS?

A. It's important to remember the reasons to own tax-free income funds don't
change when market conditions change. For long-term investors seeking
monthly, tax-free income and portfolio diversification, we believe
tax-free income funds are an attractive investment option. At Franklin, we
will continue to serve our shareholders by seeking to provide a high level
of tax-free income consistent with prudent investment management and the
preservation of shareholders' capital.

[GRAPHIC Q&A]

[LOGO]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS

6 | Not part of the semiannual report

SEMIANNUAL REPORT

FRANKLIN NEW YORK TAX-FREE INCOME FUND

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin New York Tax-Free Income Fund
seeks to provide high, current income exempt from federal, New York state and
New York City personal income taxes consistent with prudent management and
preservation of capital by investing at least 80% of its total assets in
securities that may pay interest free from such taxes.(1)

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CREDIT QUALITY BREAKDOWN*
Based on Total Long-Term Investments as of 11/30/04**

[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]

AAA ............................ 51.7%
AA ............................. 29.8%
A .............................. 9.1%
BBB ............................ 2.5%
Not Rated by S&P ............... 6.9%

* Standard & Poor's (S&P) is the primary independent rating agency; Moody's
is the secondary rating agency. Securities not rated by an independent
rating agency are assigned comparable internal ratings. Ratings for
securities not rated by S&P are in the table below.

** Does not include short-term investments and other net assets.

RATINGS MOODY'S INTERNAL
AAA or Aaa 1.3% 0.0%
AA or Aa 1.3% 0.0%
A 1.2% 0.0%
BBB or Baa 0.5% 2.3%
Below Investment Grade 0.1% 0.2%
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Total 4.4% 2.5%

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(1) For investors subject to alternative minimum tax, a small portion of this
income may be taxable. Distributions of capital gains are generally
taxable.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 21.

Semiannual Report | 7

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PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
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We are pleased to bring you Franklin New York Tax-Free Income Fund's semiannual
report for the period ended November 30, 2004.

PERFORMANCE OVERVIEW

Because bond yield and price move in opposite directions, as yields fell bond
prices rose for the six-month reporting period. The Fund's Class A share price,
as measured by net asset value, increased from $11.64 on May 31, 2004, to $11.83
on November 30, 2004. The Fund's Class A shares paid dividends totaling 27.00
cents per share for the same period. The Performance Summary beginning on page
12 shows that at the end of this reporting period the Fund's Class A shares'
distribution rate was 4.37%, based on an annualization of November's 4.50 cent
($0.0450) per share dividend and the maximum offering price of $12.36 on
November 30, 2004. An investor in the 2004 maximum combined federal and New York
state and City personal income tax bracket of 42.90% would need to earn a
distribution rate of 7.65% from a taxable investment to match the Fund's Class A
tax-free distribution rate. For the Fund's Class B, C and Advisor shares'
performance, please see the Performance Summary.

STATE UPDATE

New York's economic and financial positions appeared to be recovering from the
pressures of recession. The state benefited from unanticipated federal aid and
temporary tax increases, with evidence of the recovery in the form of a small
surplus expected for fiscal year 2003-2004 and significant proposed reductions
in coming years' budget gaps. Recovery extended into the deep and diversified
economic base, but in particular, improvement in the state's securities industry
played a critical role in this upswing. Manufacturing activity continued to
rebound, aided by improvement in business spending, a replacement cycle for
aging equipment and low interest rates. Overall wages and income were forecast
to increase at respective rates of 5.1% and 5.0% in 2004.(2) The 2004 projected
0.8% employment increase is an improvement from 2003's 0.4% decline.(2)

Improved debt management in capital planning and debt policies supported the
recovery, with debt ratios now within the range of other states. Debt service
costs were manageable at 8.1% of consolidated general and debt service fund
expenditures.(2) The benefits of fiscal conservatism and resolve practiced in
recent years left the Empire State more prepared and better able to cope with
current stresses than in the past.

(2) Source: Standard & Poor's, "Summary: New York State; Tax Secured, General
Obligation," RATINGSDIRECT, 4/6/04.

8 | Semiannual Report

The legislature approved measures implementing temporary tax increases after a
difficult budget process and the efforts paid off -- New York successfully
positioned itself for a favorable fiscal-year close. Revenues from personal
income tax increased 14% from last year, while those from user taxes and fees
increased 5.7% and business taxes rose 9.2% largely due to the stronger
economy.(3)

In November 2004, independent credit rating agency Moody's Investors Service
upgraded New York's debt to A1 from A2 with a positive outlook.(4) The upgrade
reflected a recovery in the state's economy, tax revenues and liquidity
position, indicating that the worst of the recent period of fiscal stress has
ended. Additionally, independent credit rating agency Standard & Poor's (S&P)
revised its outlook for New York's AA rating upward, to stable from negative, in
September 2004.(5) S&P believed the state was likely to continue to achieve
budget balance, albeit narrow and difficult, and that economic fundamentals will
help reduce out-year budget gaps.

MUNICIPAL BOND MARKET OVERVIEW

Municipal bonds performed well during the six-month reporting period as interest
rates generally declined while the financial markets had to digest a
presidential election, federal funds target rate increases, record high oil
prices, mixed economic releases and the continued war on terrorism. Municipal
and Treasury bond yields moved downward: 10- and 30-year Treasury bond yields
declined 30 and 35 basis points (100 basis points equal one percent) and 10- and
30-year AAA municipal bond yields, as indicated by Municipal Market Data,
declined 27 and 23 basis points.(6) As yields fell, bond prices rose and the
Lehman Brothers Municipal Bond Index returned 4.30% for the period under
review.(7)

Municipal bonds were able to record positive results even though the Federal
Reserve Board (Fed) systematically raised the short-term federal funds target
rate. Responding to strong second quarter 2004 growth in gross domestic product
and employment, the Fed began raising short-term rates in June. After four
successive 25 basis-point hikes during the reporting period, the federal funds
target rate rose from 1.00% to 2.00%. Facing uncertainty over increasing oil

(3) Source: Standard & Poor's, "Public Finance Report Card: The U.S. States,"
RATINGSDIRECT, 4/12/04.

(4) This does not indicate Moody's rating of the Fund.

(5) This does not indicate S&P's rating of the Fund.

(6) Source: Thomson Financial.

(7) Source: Lehman Brothers Inc. The Lehman Brothers Municipal Bond Index is a
market value-weighted index engineered for the long-term tax-exempt bond
market. All bonds included have a minimum credit rating of at least Baa.
They must have an outstanding par value of at least $5 million and be
issued as part of a transaction of at least $50 million. The bonds must be
dated after 12/31/90, and must be at least one year from their maturity
date. Remarketed issues, taxable municipal bonds, bonds with floating
rates and derivatives are excluded from the index. The index has four main
bond sectors: general obligation, revenue, insured and prerefunded.

Semiannual Report | 9

PORTFOLIO BREAKDOWN
11/30/04

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% OF TOTAL
LONG-TERM INVESTMENTS
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Prerefunded 29.2%
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Transportation 15.4%
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Subject to Government Appropriations 15.4%
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Utilities 9.8%
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Tax-Supported 9.7%
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Hospital & Health Care 5.1%
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Higher Education 4.9%
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General Obligation 4.6%
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Other Revenue 4.1%
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Housing 1.8%
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prices, the Fed restated at its November meeting, "With underlying inflation
expected to be relatively low, the Committee believes that policy accommodation
can be removed at a pace that is likely to be measured."(8) At the same time,
employment and economic growth numbers generally did not meet market
expectations during the third quarter. Consequently, bond markets rose and
brought intermediate- and long-term yields lower so that the yield curve, which
illustrates bond yields from short to long maturities, flattened somewhat during
the reporting period.

It appears that new-issue volume for municipal bonds will be relatively large
for the calendar year. From January through November 2004, municipalities issued
more than $325 billion in new debt as overall interest rate levels remained
low.(9) Although this figure was down almost 8% from the same period in 2003 (a
record year), 2004 is the third successive year of more than $300 billion
dollars in new issuance.(9) Demand for municipal bonds remained strong as
investors sought to reinvest proceeds from a combination of coupon payments,
maturities and bond calls. During the reporting period, municipal bonds
continued to offer attractive yields relative to comparable taxable fixed income
securities, which also assisted in boosting demand from relative value investors
who looked for opportunities in the taxable and tax-exempt markets.

INVESTMENT STRATEGY

We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain our exposure to higher coupon securities. We
generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. As we invest
throughout different interest rate environments, our portfolios become well
diversified with a broad range of coupons, calls and maturities. This broad
diversification may help mitigate interest rate risk. We generally stay fully
invested to maximize income distribution.

(8) Source: Federal Reserve. PRESS RELEASE, 11/10/04.

(9) Source: THE BOND BUYER.

10 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
6/1/04-11/30/04

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DIVIDEND PER SHARE
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MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
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June 4.50 cents 3.97 cents 3.97 cents 4.58 cents
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July 4.50 cents 3.97 cents 3.97 cents 4.59 cents
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August 4.50 cents 3.97 cents 3.97 cents 4.59 cents
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September 4.50 cents 3.95 cents 3.95 cents 4.58 cents
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October 4.50 cents 3.95 cents 3.95 cents 4.59 cents
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November 4.50 cents 3.95 cents 3.95 cents 4.59 cents
================================================================================
TOTAL 27.00 CENTS 23.76 CENTS 23.76 CENTS 27.52 CENTS
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* All Fund distributions will vary depending upon current market
conditions, and past distributions are not indicative of future trends.

MANAGER'S DISCUSSION

Declining long-term interest rates, diminishing but still significant New York
municipal bond supply, and investor demand for the high relative after-tax
returns offered by municipal bonds contributed to the Fund's performance. The
mixture of our value-oriented philosophy of investing primarily for income, an
ample supply of municipal bonds, and a relatively steep yield curve favored the
use of longer-term bonds. Consequently, we sought to remain fully invested in
bonds that ranged from 15 to 30 years in maturity with good call features. We
intend to maintain our conservative, buy-and-hold investment strategy as we
attempt to provide shareholders with high, current, tax-free income.

Thank you for your continued participation in Franklin New York Tax-Free Income
Fund. We look forward to serving your future investment needs.

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF NOVEMBER 30, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.

Semiannual Report | 11

PERFORMANCE SUMMARY AS OF 11/30/04

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes due on
Fund dividends, capital gain distributions, if any, or any realized gains on the
sale of Fund shares. Total return reflects the Fund's dividend income, capital
gain distributions, if any, and any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- ----------------------------------------------------------------------------------------------------
CLASS A CHANGE 11/30/04 5/31/04
- ----------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$0.19 $11.83 $11.64
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/04-11/30/04)
- ----------------------------------------------------------------------------------------------------
Dividend Income $0.2700
- ----------------------------------------------------------------------------------------------------
CLASS B CHANGE 11/30/04 5/31/04
- ----------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.19 $11.80 $11.61
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/04-11/30/04)
- ----------------------------------------------------------------------------------------------------
Dividend Income $0.2376
- ----------------------------------------------------------------------------------------------------
CLASS C CHANGE 11/30/04 5/31/04
- ----------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.19 $11.82 $11.63
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/04-11/30/04)
- ----------------------------------------------------------------------------------------------------
Dividend Income $0.2376
- ----------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 11/30/04 5/31/04
- ----------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.19 $11.83 $11.64
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/04-11/30/04)
- ----------------------------------------------------------------------------------------------------
Dividend Income $0.2752
- ----------------------------------------------------------------------------------------------------

12 | Semiannual Report

PERFORMANCE SUMMARY (CONTINUED)

PERFORMANCE

CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES
CHARGES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE MAXIMUM SALES CHARGES.

- ---------------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------------------

Cumulative Total Return(1) +3.99% +3.61% +35.28% +88.53%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) -0.45% -0.79% +5.32% +6.08%
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/04)(3) -0.19% +5.76% +5.97%
- ---------------------------------------------------------------------------------------------------------------
Distribution Rate(4) 4.37%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 7.65%
- ---------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 3.18%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(5) 5.57%
- ---------------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return(1) +3.72% +2.96% +31.53% +28.77%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) -0.28% -1.00% +5.31% +4.23%
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/04)(3) -0.41% +5.77% +4.39%
- ---------------------------------------------------------------------------------------------------------------
Distribution Rate(4) 4.02%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 7.04%
- ---------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 2.76%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(5) 4.83%
- ---------------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return(1) +3.71% +3.04% +31.45% +65.55%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +2.71% +2.05% +5.62% +5.40%
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/04)(3) +2.57% +6.07% +5.49%
- ---------------------------------------------------------------------------------------------------------------
Distribution Rate(4) 4.01%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 7.02%
- ---------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 2.76%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(5) 4.83%
- ---------------------------------------------------------------------------------------------------------------
ADVISOR CLASS(7) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return(1) +4.04% +3.70% +35.64% +89.02%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +4.04% +3.70% +6.29% +6.57%
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/04)(3) +4.23% +6.74% +6.46%
- ---------------------------------------------------------------------------------------------------------------
Distribution Rate(4) 4.66%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 8.16%
- ---------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 3.47%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(5) 6.08%
- ---------------------------------------------------------------------------------------------------------------

PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | 13

PERFORMANCE SUMMARY (CONTINUED)

ENDNOTES

MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS;
THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET
CONDITIONS. BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION FROM INTEREST RATES. SINCE THE FUND CONCENTRATES ITS
INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC
AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A
shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.

(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.

(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes any current,
applicable, maximum sales charge. Six-month return has not been
annualized.

(3) In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

(4) Distribution rate is based on an annualization of the respective class's
November dividend and the maximum offering price (NAV for Classes B, C and
Advisor) per share on 11/30/04.

(5) Taxable equivalent distribution rate and yield assume the published rates
as of 5/28/04 for the maximum combined federal and New York state and City
personal income tax bracket of 42.90%, based on the federal income tax
rate of 35.00%.

(6) Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 11/30/04.

(7) Effective 10/1/01, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 10/1/01, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 9/30/01, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 10/1/01
(commencement of sales), the cumulative and average annual total returns
of Advisor Class shares were +17.59% and +5.25%.

14 | Semiannual Report

YOUR FUND'S EXPENSES

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.

The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.

ACTUAL FUND EXPENSES

The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.

You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.

Semiannual Report | 15

YOUR FUND'S EXPENSES (CONTINUED)

PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.

- -----------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 5/31/04 VALUE 11/30/04 PERIOD* 5/31/04-11/30/04
- -----------------------------------------------------------------------------------------------------------

Actual $1,000 $1,039.90 $3.12
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.01 $3.09
- -----------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,037.20 $5.98
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.92
- -----------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,037.10 $5.97
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.92
- -----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,040.40 $2.66
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.46 $2.64
- -----------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio for each class (A:
0.61%; B: 1.17%; C: 1.17%; and Advisor: 0.52%), multiplied by the average
account value over the period, multiplied by 183/365 to reflect the
one-half year period.

16 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS

-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2004 YEAR ENDED MAY 31,
CLASS A (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period $ 11.64 $ 12.22 $ 11.65 $ 11.62 $ 11.06 $ 11.91
-----------------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) .......... .27 .55 .57 .59 .62 .64

Net realized and unrealized
gains (losses) .................. .19 (.58) .57 .04 .57 (.79)
-----------------------------------------------------------------------------------------
Total from investment operations ... .46 (.03) 1.14 .63 1.19 (.15)
-----------------------------------------------------------------------------------------

Less distributions from:

Net investment income ............. (.27) (.55) (.57) (.60) (.63) (.63)

Net realized gains ................ -- -- -- -- -- (.07)
-----------------------------------------------------------------------------------------
Total distributions ................ (.27) (.55) (.57) (.60) (.63) (.70)
-----------------------------------------------------------------------------------------
Redemption fees .................... --(c) -- -- -- -- --
-----------------------------------------------------------------------------------------
Net asset value, end of period ..... $ 11.83 $ 11.64 $ 12.22 $ 11.65 $ 11.62 $ 11.06
=========================================================================================

Total return(b) .................... 3.99% (.27)% 10.06% 5.55% 10.97% (1.24)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .. $ 4,458,971 $ 4,429,312 $ 4,828,889 $ 4,609,318 $ 4,483,909 $ 4,219,849

Ratio to average net assets:

Expenses .......................... .61%(d) .60% .60% .59% .60% .60%

Net investment income ............. 4.55%(d) 4.62% 4.81% 5.09% 5.39% 5.64%

Portfolio turnover rate ............ 8.09% 10.35% 13.44% 9.57% 7.83% 24.61%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.

(d) Annualized.

Semiannual Report | See notes to financial statements. | 17

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2004 YEAR ENDED MAY 31,
CLASS B (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period $ 11.61 $ 12.20 $ 11.63 $ 11.61 $ 11.04 $ 11.89

Income from investment operations:

Net investment income(a) .......... .24 .48 .50 .53 .55 .57

Net realized and unrealized gains
(losses) ......................... .19 (.59) .57 .03 .58 (.78)
-----------------------------------------------------------------------------------------
Total from investment operations ... .43 (.11) 1.07 .56 1.13 (.21)
-----------------------------------------------------------------------------------------
Less distributions from:

Net investment income.............. (.24) (.48) (.50) (.54) (.56) (.57)

Net realized gains................. -- -- -- -- -- (.07)
-----------------------------------------------------------------------------------------
Total distributions................. (.24) (.48) (.50) (.54) (.56) (.64)
-----------------------------------------------------------------------------------------
Redemption fees .................... --(c) -- -- -- -- --
-----------------------------------------------------------------------------------------
Net asset value, end of period ..... $ 11.80 $ 11.61 $ 12.20 $ 11.63 $ 11.61 $ 11.04
=========================================================================================

Total return(b) .................... 3.72% (.91)% 9.46% 4.88% 10.46% (1.80)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .. $ 231,712 $ 231,664 $ 233,767 $ 160,194 $ 87,697 $ 40,874

Ratio to average net assets:

Expenses .......................... 1.17%(d) 1.16% 1.17% 1.16% 1.16% 1.17%

Net investment income ............. 3.99%(d) 4.06% 4.24% 4.53% 4.80% 5.08%

Portfolio turnover rate ............ 8.09% 10.35% 13.44% 9.57% 7.83% 24.61%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

18 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2004 YEAR ENDED MAY 31,
CLASS C (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period $ 11.63 $ 12.22 $ 11.64 $ 11.62 $ 11.06 $ 11.91
-----------------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) .......... .24 .48 .50 .53 .55 .57

Net realized and unrealized gains
(losses) ......................... .19 (.59) .58 .03 .57 (.78)
-----------------------------------------------------------------------------------------
Total from investment operations.... .43 (.11) 1.08 .56 1.12 (.21)
-----------------------------------------------------------------------------------------
Less distributions from:

Net investment income ............. (.24) (.48) (.50) (.54) (.56) (.57)

Net realized gains ................ -- -- -- -- -- (.07)
-----------------------------------------------------------------------------------------
Total distributions ................ (.24) (.48) (.50) (.54) (.56) (.64)
-----------------------------------------------------------------------------------------
Redemption fees .................... --(c) -- -- -- -- --
-----------------------------------------------------------------------------------------
Net asset value, end of period ..... $ 11.82 $ 11.63 $ 12.22 $ 11.64 $ 11.62 $ 11.06
=========================================================================================

Total return(b) .................... 3.71% (.91)% 9.55% 4.86% 10.35% (1.80)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .. $ 234,551 $ 231,051 $ 242,965 $ 188,642 $ 146,824 $ 119,302

Ratio to average net assets:

Expenses .......................... 1.17%(d) 1.16% 1.17% 1.16% 1.16% 1.17%

Net investment income ............. 3.99%(d) 4.06% 4.24% 4.53% 4.82% 5.07%

Portfolio turnover rate ............ 8.09% 10.35% 13.44% 9.57% 7.83% 24.61%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

Semiannual Report | See notes to financial statements. | 19

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2004 YEAR ENDED MAY 31,
ADVISOR CLASS (UNAUDITED) 2004 2003 2002(e)
-----------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period $ 11.64 $ 12.23 $ 11.65 $ 11.68
-----------------------------------------------------------------
Income from investment operations:

Net investment income(a) .28 .56 .58 .40

Net realized and unrealized gains
(losses) .......................... .19 (.59) .58 (.08)
-----------------------------------------------------------------
Total from investment operations ... .47 (.03) 1.16 .32
-----------------------------------------------------------------
Less distributions from net
investment income ................. (.28) (.56) (.58) (.35)
-----------------------------------------------------------------
Redemption fees .................... --(c) -- -- --
-----------------------------------------------------------------
Net asset value, end of period ..... $ 11.83 $ 11.64 $ 12.23 $ 11.65
=================================================================

Total return(b) .................... 4.04% (.26)% 10.24% 2.80%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .. $ 24,877 $ 22,470 $ 18,278 $ 14,054

Ratios to average net assets:

Expenses .......................... .52%(d) .51% .52% .51%(e)

Net investment income ............. 4.64%(d) 4.71% 4.89% 5.16%(e)

Portfolio turnover rate ............ 8.09% 10.35% 13.44% 9.57%

(a) Based on average daily shares outstanding.

(b) Total return is not annualized for periods less than one year.

(d) Annualized.

(e) For the period October 1, 2001 (effective date) to May 31, 2002.

20 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED)

- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS 98.7%
BONDS 96.8%
Albany Housing Authority Limited Obligation Revenue, Refunding, 6.25%, 10/01/12 ............ $ 5,250,000 $ 5,490,660
Albany IDA Civic Facility Revenue,
Albany Medical Center Project, 6.00%, 5/01/19 .......................................... 1,270,000 1,273,937
Albany Medical Center Project, 6.00%, 5/01/29 .......................................... 1,460,000 1,414,506
St. Rose Project, Series A, AMBAC Insured, 5.375%, 7/01/31 ............................. 2,750,000 2,899,352
Albany Parking Authority Revenue,
Refunding, Series A, 5.625%, 7/15/25 ................................................... 1,000,000 1,059,910
Series A, 5.625%, 7/15/20 .............................................................. 1,250,000 1,347,125
Amherst IDA Civic Facility Revenue, University of Buffalo Foundation
Faculty-Student Housing Corp.,
Series A, AMBAC Insured, 5.125%, 8/01/20 ............................................... 1,410,000 1,524,407
Series A, AMBAC Insured, 5.25%, 8/01/31 ................................................ 5,055,000 5,261,547
Series B, AMBAC Insured, 5.625%, 8/01/20 ............................................... 1,690,000 1,875,731
Series B, AMBAC Insured, 5.75%, 8/01/25 ................................................ 3,050,000 3,361,649
Series B, AMBAC Insured, 5.75%, 8/01/30 ................................................ 3,440,000 3,758,510
Series B, AMBAC Insured, 5.25%, 8/01/31 ................................................ 1,000,000 1,040,860
Battery Park City Authority Revenue, Series A, 5.00%,
11/01/24 ............................................................................... 9,000,000 9,373,950
11/01/25 ............................................................................... 12,000,000 12,435,960
11/01/26 ............................................................................... 14,250,000 14,704,432
Bethany Retirement Home Inc. Mortgage Loan Revenue, FHA Insured, 7.50%, 2/01/34 ............ 8,160,000 8,379,504
Clinton County COP, Correctional Facilities Project, 8.125%, 8/01/17 ....................... 5,020,000 6,299,397
Dutchess County IDA Civic Facility Revenue, Vassar College Project, 5.35%, 9/01/40 ......... 16,000,000 16,766,400
Franklin County COP, Court House Redevelopment Project, 8.125%, 8/01/06 .................... 2,085,000 2,136,270
Geneva IDA, Civic Facilities Revenue, Colleges of the Seneca Project, AMBAC Insured,
5.00%, 9/01/21 ......................................................................... 2,835,000 2,979,613
5.125%, 9/01/31 ........................................................................ 5,045,000 5,175,867
Hamilton Elderly Housing Corp. Mortgage Revenue, Hamilton Apartments Project,
11.25%, 1/01/15 .......................................................................... 1,085,000 1,108,089
Ilion Elderly Housing Corp. Mortgage Revenue, 7.25%, 7/01/09 ............................... 1,055,000 1,076,533
Long Island Power Authority Electric System Revenue,
General, Refunding, Series A, 5.75%, 12/01/24 .......................................... 15,000,000 16,405,050
General, Refunding, Series A, AMBAC Insured, 5.25%, 12/01/26 ........................... 5,000,000 5,206,500
General, Refunding, Series A, FSA Insured, 5.00%, 12/01/18 ............................. 10,000,000 10,707,600
General, Refunding, Series A, FSA Insured, 5.125%, 12/01/22 ............................ 28,210,000 29,760,704
General, Refunding, Series A, MBIA Insured, 5.75%, 12/01/24 ............................ 15,060,000 16,570,518
General, Refunding, Series A, MBIA Insured, 5.25%, 12/01/26 ............................ 9,000,000 9,371,700
Series A, AMBAC Insured, 5.00%, 9/01/29 ................................................ 24,000,000 24,312,480
Series A, AMBAC Insured, 5.00%, 9/01/34 ................................................ 20,670,000 20,843,008
Madison County IDA Civic Facility Revenue, College University Project, Series B,
5.00%, 7/01/33 ........................................................................... 2,000,000 2,020,760
Middleburg Central School District GO, FGIC Insured,
4.60%, 8/15/17 ......................................................................... 1,045,000 1,086,037
4.625%, 8/15/18 ........................................................................ 1,155,000 1,197,631
4.625%, 8/15/19 ........................................................................ 1,210,000 1,249,906
4.75%, 8/15/20 ......................................................................... 1,270,000 1,315,682
4.75%, 8/15/21 ......................................................................... 1,330,000 1,372,321

Semiannual Report | 21

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Monroe County IDAR Civic Facilities, De Paul Community Facilities, 6.50%, 2/01/24 .......... $ 1,285,000 $ 1,302,579
Monroe County Water Authority Water Revenue,
5.15%, 8/01/22 ......................................................................... 1,000,000 1,059,610
5.25%, 8/01/36 ......................................................................... 2,250,000 2,319,930
MTA Commuter Facilities Revenue,
Series 8, Pre-Refunded, 5.50%, 7/01/21 ................................................. 5,000,000 5,751,300
Series A, FGIC Insured, Pre-Refunded, 5.25%, 7/01/28 ................................... 8,655,000 9,705,198
Series A, MBIA Insured, Pre-Refunded, 5.625%, 7/01/27 .................................. 10,000,000 11,093,600
Series A, Pre-Refunded, 6.00%, 7/01/24 ................................................. 5,575,000 6,364,699
Series A, Pre-Refunded, 5.25%, 7/01/28 ................................................. 18,300,000 20,520,522
Series A, Pre-Refunded, 6.125%, 7/01/29 ................................................ 9,625,000 11,039,875
Series C-1, FGIC Insured, Pre-Refunded, 5.375%, 7/01/27 ................................ 19,100,000 21,294,590
Series R, Pre-Refunded, 5.50%, 7/01/17 ................................................. 2,000,000 2,314,600
MTA Dedicated Tax Fund Revenue,
Refunding, Series A, 5.00%, 11/15/30 ................................................... 25,000,000 25,113,250
Series A, FGIC Insured, 5.00%, 11/15/31 ................................................ 39,685,000 40,101,692
Series A, FGIC Insured, Pre-Refunded, 6.00%, 4/01/30 ................................... 27,260,000 31,373,534
Series A, FSA Insured, 5.00%, 11/15/28 ................................................. 41,575,000 42,393,196
Series A, FSA Insured, 5.00%, 11/15/32 ................................................. 61,100,000 61,777,599
Series A, FSA Insured, Pre-Refunded, 5.00%, 4/01/29 .................................... 25,800,000 28,698,630
Series A, MBIA Insured, Pre-Refunded, 5.25%, 4/01/26 ................................... 20,500,000 22,878,820
MTA Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 11/15/25 ..................................... 22,010,000 22,663,917
Refunding, Series A, FGIC Insured, 5.25%, 11/15/31 ..................................... 34,000,000 35,296,080
Refunding, Series A, FSA Insured, 5.00%, 11/15/30 ...................................... 78,130,000 79,098,812
Refunding, Series A, MBIA Insured, 5.125%, 11/15/31 .................................... 15,000,000 15,398,400
Refunding, Series E, 5.25%, 11/15/31 ................................................... 15,000,000 15,401,400
Refunding, Series U, FGIC Insured, 5.125%, 11/15/31 .................................... 5,000,000 5,132,800
Series A, FGIC Insured, 5.00%, 11/15/32 ................................................ 10,355,000 10,481,435
Series B, 5.25%, 11/15/32 .............................................................. 28,720,000 29,545,413
MTA Service Contract Revenue,
Refunding, Series A, 5.125%, 1/01/29 ................................................... 6,000,000 6,095,760
Refunding, Series A, AMBAC Insured, 5.25%, 7/01/31 ..................................... 50,000,000 51,831,000
Refunding, Series A, FGIC Insured, 5.00%, 7/01/25 ...................................... 12,760,000 13,124,043
Series B, 5.375%, 1/01/30 .............................................................. 50,000,000 51,870,500
Series B, MBIA Insured, 5.00%, 1/01/31 ................................................. 22,290,000 22,541,208
MTA Transit Facilities Revenue, Series A,
FSA Insured, Pre-Refunded, 6.10%, 7/01/21 .............................................. 15,000,000 16,216,350
FSA Insured, Pre-Refunded, 5.50%, 7/01/22 .............................................. 16,170,000 17,923,313
MBIA Insured, Pre-Refunded, 5.625%, 7/01/25 ............................................ 8,000,000 8,785,680
Pre-Refunded, 6.00%, 7/01/24 ........................................................... 7,000,000 7,991,550
Pre-Refunded, 5.625%, 7/01/27 .......................................................... 14,440,000 16,067,244
Pre-Refunded, 6.125%, 7/01/29 .......................................................... 11,595,000 13,299,465
Nassau County Tobacco Settlement Corp. Revenue, Asset-Backed, Series A,
6.50%, 7/15/27 ........................................................................... 15,000,000 15,416,550
Nassau Health Care Corp. Health System Revenue, Nassau County Guaranteed, FSA Insured,
Pre-Refunded, 5.75%, 8/01/29 ............................................................. 36,040,000 41,390,138

22 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York City GO,
Fiscal 2003, Series I, 5.00%, 3/01/29 .................................................. $ 10,000,000 $ 10,019,300
Fiscal 2003, Series I, 5.00%, 3/01/30 .................................................. 14,785,000 14,803,629
Refunding, Series A, 5.50%, 5/15/24 .................................................... 10,000,000 10,606,500
Refunding, Series A, FSA Insured, 6.00%, 5/15/30 ....................................... 6,250,000 7,017,812
Refunding, Series H, 6.125%, 8/01/25 ................................................... 4,835,000 5,225,620
Series A, Pre-Refunded, 6.25%, 8/01/17 ................................................. 2,675,000 2,891,648
Series A-1, Pre-Refunded, 6.625%, 8/01/25 .............................................. 17,000,000 17,678,640
Series B, 7.00%, 2/01/18 ............................................................... 25,000 25,104
Series B, Pre-Refunded, 6.00%, 8/15/26 ................................................. 915,000 987,505
Series C, 7.00%, 2/01/12 ............................................................... 705,000 710,457
Series C, FSA Insured, 5.125%, 3/15/25 ................................................. 6,500,000 6,769,945
Series D, 8.00%, 8/01/17 ............................................................... 5,000 5,047
Series D, 7.50%, 2/01/18 ............................................................... 5,000 5,022
Series D, 5.125%, 8/01/19 .............................................................. 1,985,000 2,081,213
Series D, 5.25%, 8/01/21 ............................................................... 14,500,000 15,139,740
Series D, 5.25%, 10/15/23 .............................................................. 5,000,000 5,256,500
Series D, 5.50%, 6/01/24 ............................................................... 23,945,000 25,532,314
Series D, 5.00%, 10/15/29 .............................................................. 5,000,000 5,010,350
Series D, FGIC Insured, 5.25%, 8/01/21 ................................................. 5,355,000 5,750,145
Series F, 5.875%, 8/01/24 .............................................................. 3,635,000 3,837,142
Series F, 5.30%, 1/15/26 ............................................................... 45,000,000 46,956,600
Series F, Pre-Refunded, 5.875%, 8/01/24 ................................................ 3,365,000 3,617,072
Series F, Pre-Refunded, 6.625%, 2/15/25 ................................................ 11,240,000 11,458,618
Series G, 6.00%, 10/15/26 .............................................................. 7,350,000 7,925,799
Series G, Pre-Refunded, 6.00%, 10/15/26 ................................................ 2,550,000 2,837,869
Series H, 7.20%, 2/01/15 ............................................................... 5,000 5,021
Series H, FSA Insured, 5.375%, 8/01/27 ................................................. 8,510,000 8,874,483
Series H, MBIA Insured, 5.125%, 8/01/25 ................................................ 4,000,000 4,130,960
Series H, Pre-Refunded, 6.125%, 8/01/25 ................................................ 165,000 182,747
Series I, 6.25%, 4/15/27 ............................................................... 2,250,000 2,444,287
Series I, Pre-Refunded, 6.25%, 4/15/27 ................................................. 7,250,000 7,992,110
Series K, Pre-Refunded, 6.25%, 4/01/26 ................................................. 9,000,000 9,623,700
New York City IDA Civic Facility Revenue,
College of New Rochelle, 5.80%, 9/01/26 ................................................ 1,500,000 1,577,040
Institute of International Education Inc. Project, 5.25%, 9/01/21 ...................... 1,530,000 1,622,488
Institute of International Education Inc. Project, 5.25%, 9/01/31 ...................... 5,235,000 5,402,415
New York University Project, AMBAC Insured, 5.00%, 7/01/31 ............................. 18,000,000 18,180,000
Staten Island University Hospital Project, Series A, 6.375%, 7/01/31 ................... 3,980,000 3,787,089
New York City Municipal Water Finance Authority Revenue, Series B, 5.00%, 6/15/26 .......... 25,000,000 25,516,000
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Refunding, Series B, 6.10%, 6/15/31 .................................................... 11,005,000 12,625,376
Refunding, Series B, 6.00%, 6/15/33 .................................................... 6,040,000 6,899,069
Refunding, Series E, MBIA Insured, 5.125%, 6/15/31 ..................................... 34,175,000 35,043,387
Series A, 5.75%, 6/15/30 ............................................................... 41,190,000 44,762,821
Series A, FGIC Insured, 5.75%, 6/15/31 ................................................. 19,315,000 21,023,991
Series A, FGIC Insured, 5.50%, 6/15/32 ................................................. 11,655,000 12,400,687

Semiannual Report | 23

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York City Municipal Water Finance Authority Water and Sewer System Revenue, (cont.)
Series A, FGIC Insured, 5.25%, 6/15/33 ................................................. $ 7,000,000 $ 7,218,260
Series B, 5.75%, 6/15/26 ............................................................... 24,455,000 26,491,612
Series B, FGIC Insured, 5.125%, 6/15/30 ................................................ 12,500,000 12,674,875
Series B, MBIA Insured, 5.50%, 6/15/27 ................................................. 32,620,000 34,947,111
Series B, Pre-Refunded, 6.10%, 6/15/31 ................................................. 3,995,000 4,653,696
Series B, Pre-Refunded, 6.00%, 6/15/33 ................................................. 10,260,000 11,899,753
New York City Transitional Finance Authority Revenue,
Future Tax Secured, 2004, Series C, 5.00%, 5/01/26 ..................................... 3,675,000 3,739,276
Future Tax Secured, 2004, Series C, Pre-Refunded, 5.00%, 5/01/26 ....................... 5,000 5,471
Future Tax Secured, Refunding, Series B, AMBAC Insured, 5.00%, 5/01/30 ................. 3,000,000 3,037,020
Future Tax Secured, Refunding, Series B, MBIA Insured, 5.00%, 8/01/32 .................. 15,000,000 15,177,750
Future Tax Secured, Refunding, Series C, 5.50%, 11/01/24 ............................... 16,800,000 18,150,216
Future Tax Secured, Series A, 5.125%, 8/15/21 .......................................... 6,120,000 6,395,645
Future Tax Secured, Series A, 5.00%, 8/15/27 ........................................... 770,000 779,586
Future Tax Secured, Series A, 5.25%, 5/01/31 ........................................... 26,545,000 27,358,870
Future Tax Secured, Series A, 5.25%, 8/01/31 ........................................... 30,605,000 31,701,271
Future Tax Secured, Series A, FGIC Insured, 5.00%, 5/01/28 ............................. 16,065,000 16,328,466
Future Tax Secured, Series A, Pre-Refunded, 5.125%, 8/15/21 ............................ 8,815,000 9,541,574
Future Tax Secured, Series A, Pre-Refunded, 5.625%, 2/15/26 ............................ 20,000,000 22,763,600
Future Tax Secured, Series A, Pre-Refunded, 5.00%, 8/15/27 ............................. 6,145,000 6,609,316
Future Tax Secured, Series A, Pre-Refunded, 6.00%, 8/15/29 ............................. 29,000,000 33,465,710
Future Tax Secured, Series A, Pre-Refunded, 5.25%, 5/01/31 ............................. 460,000 514,538
Future Tax Secured, Series B, 5.00%, 5/01/30 ........................................... 7,520,000 7,578,280
Future Tax Secured, Series B, Pre-Refunded, 6.00%, 11/15/29 ............................ 15,000,000 17,366,100
Future Tax Secured, Series C, 5.50%, 5/01/25 ........................................... 5,515,000 5,913,404
Future Tax Secured, Series C, 5.00%, 5/01/29 ........................................... 5,215,000 5,254,582
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 5/01/25 ............................. 4,485,000 5,053,776
Future Tax Secured, Series C, Pre-Refunded, 5.00%, 5/01/26 ............................. 320,000 350,147
Future Tax Secured, Series C, Pre-Refunded, 5.00%, 5/01/29 ............................. 8,655,000 9,573,382
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 11/01/29 ............................ 13,660,000 15,462,574
Future Tax Secured, Series D, 5.00%, 2/01/27 ........................................... 62,025,000 63,060,197
Future Tax Secured, Series E, 5.00%, 2/01/25 ........................................... 5,000,000 5,117,400
Future Tax Secured, Series E, 5.00%, 2/01/27 ........................................... 10,000,000 10,166,900
Future Tax Secured, Series E, 5.00%, 2/01/33 ........................................... 18,035,000 18,153,851
Series C, MBIA Insured, 5.00%, 5/01/29 ................................................. 1,365,000 1,381,353
Series C, MBIA Insured, Pre-Refunded, 5.00%, 5/01/29 ................................... 2,270,000 2,515,864
New York City Transportation Authority MTA Triborough COP, Series A, AMBAC Insured,
Pre-Refunded, 5.25%, 1/01/29 ............................................................. 79,840,000 89,247,547
New York City Trust Cultural Resources Revenue,
Museum of Modern Art 2001, Series D, AMBAC Insured, 5.125%, 7/01/31 .................... 15,500,000 15,895,405
Wildlife Conservation Society, FGIC Insured, 5.00%, 2/01/34 ............................ 10,500,000 10,622,430
New York IDA Parking Facility Revenue, Royal Charter Presbyterian,
FSA Insured, 5.25%, 12/15/32 ............................................................. 1,525,000 1,577,048
New York State Appropriated Tobacco Corp. Revenue, Asset-Backed, Series A-1,
AMBAC Insured, 5.25%, 6/01/21 ............................................................ 18,000,000 19,179,720

24 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York State Commissioner of General Services Revenue, People of the State of New York,
Certificate of Lease Assignment,
5.70%, 3/01/29 ......................................................................... $ 68,249,817 $ 69,887,131
5.75%, 3/01/29 ......................................................................... 35,323,278 36,250,867
New York State COP, Hanson Redevelopment Project, 8.375%, 5/01/08 .......................... 11,300,000 12,182,982
New York State Dormitory Authority Lease Revenue,
Court Facilities, 6.00%, 5/15/39 ....................................................... 58,245,000 62,735,107
Court Facilities, Series A, 5.375%, 5/15/23 ............................................ 4,000,000 4,240,760
Refunding, Series A, FGIC Insured, 5.00%, 7/01/33 ...................................... 11,000,000 11,121,880
State University Dormitory Facilities, 5.00%, 7/01/32 .................................. 5,500,000 6,083,385
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.50%, 7/01/27 ...... 2,000,000 2,272,120
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.10%, 7/01/31 ...... 7,700,000 8,566,250
State University Dormitory Facilities, Series A, 6.00%, 7/01/30 ........................ 5,750,000 6,675,232
State University Dormitory Facilities, Series B, MBIA Insured, 5.125%, 7/01/28 ......... 1,365,000 1,403,670
State University Dormitory Facilities, Series B, MBIA Insured, Pre-Refunded,
5.125%, 7/01/28 ....................................................................... 3,435,000 3,823,327
State University Dormitory Facilities, Series C, MBIA Insured, 5.50%, 7/01/19 .......... 2,410,000 2,639,167
State University Dormitory Facilities, Series C, MBIA Insured, Pre-Refunded,
5.50%, 7/01/19 ........................................................................ 2,680,000 3,025,988
State University Dormitory Facilities, Series C, MBIA Insured, Pre-Refunded,
5.50%, 7/01/29 ........................................................................ 9,250,000 10,444,175
New York State Dormitory Authority Revenue,
FGIC Insured, 5.125%, 5/15/31 .......................................................... 45,000,000 50,578,200
FHA, Insured Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.125%, 2/01/22 .......... 4,000,000 4,226,600
FHA, Insured Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.00%, 2/01/31 ........... 5,500,000 5,562,425
Insured, Fordham University, FGIC Insured, 5.00%, 7/01/27 .............................. 6,020,000 6,145,336
Insured, Fordham University, FGIC Insured, 5.00%, 7/01/32 .............................. 7,735,000 7,817,300
School District Financing Program, Series A, MBIA Insured, 5.00%, 4/01/31 .............. 9,500,000 9,609,725
State University Educational Facilities, 5.125%, 5/15/21 ............................... 12,090,000 12,430,575
State University Educational Facilities, Pre-Refunded, 5.125%, 5/15/21 ................. 2,910,000 3,198,847
Teachers College, MBIA Insured, 5.00%, 7/01/22 ......................................... 2,885,000 3,008,651
Teachers College, MBIA Insured, 5.00%, 7/01/32 ......................................... 6,000,000 6,063,840
Upstate Community Colleges, Series A, 5.00%, 7/01/27 ................................... 3,720,000 3,769,067
Upstate Community Colleges, Series A, 5.00%, 7/01/31 ................................... 7,365,000 7,395,270
New York State Dormitory Authority Revenues,
Bishop Henry B. Hucles Nursing Home, 6.00%, 7/01/24 .................................... 2,545,000 2,661,001
Buena Vida Nursing Home, Series A, 5.25%, 7/01/28 ...................................... 4,730,000 4,842,196
City University System Consolidated, Fourth General, Series A, FGIC Insured,
Pre-Refunded, 5.25%, 7/01/30 .......................................................... 20,705,000 23,069,511
City University System Consolidated, Fourth, Series A, 5.25%, 7/01/31 .................. 1,270,000 1,295,400
City University System Consolidated, Fourth, Series A, Pre-Refunded, 5.25%, 7/01/31 .... 10,730,000 12,031,978
City University System Consolidated, FSA Insured, Pre-Refunded, 5.375%, 7/01/24 ........ 5,000,000 5,533,200
City University System Consolidated, Second General, Series A, Pre-Refunded,
6.00%, 7/01/17 ........................................................................ 10,215,000 10,652,202
City University System Consolidated, Series 1, FGIC Insured, Pre-Refunded,
5.375%, 7/01/24 ....................................................................... 14,300,000 15,824,952
City University System Consolidated, Series 1, MBIA Insured, Pre-Refunded,
5.125%, 7/01/27 ....................................................................... 6,680,000 7,343,057

Semiannual Report | 25

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York State Dormitory Authority Revenues, (cont.)
City University System Consolidated, Series C, 7.50%, 7/01/10 .......................... $ 14,900,000 $ 16,892,428
City University System Consolidated, Series D, ETM, 7.00%, 7/01/09 ..................... 2,535,000 2,797,449
City University System Consolidated, Third General, Series 1, FSA Insured, Pre-Refunded,
5.50%, 7/01/29 ........................................................................ 38,375,000 43,329,212
City University System Consolidated, Third General, Series 2, Pre-Refunded,
6.20%, 7/01/22 ........................................................................ 28,555,000 30,891,085
City University System Consolidated, Third General, Series 2, Pre-Refunded,
6.00%, 7/01/26 ........................................................................ 6,020,000 6,493,955
City University System Consolidated, Third General, Series A, Pre-Refunded,
6.00%, 7/01/16 ........................................................................ 23,185,000 24,177,318
City University System Consolidated, Third, Refunding, Series 1, FGIC Insured,
5.25%, 7/01/25 ........................................................................ 4,100,000 4,291,183
City University System, Third General Residence, Series 2, Pre-Refunded, 6.00%, 7/01/20 13,000,000 14,034,150
Concord Nursing Home Inc., 6.50%, 7/01/29 .............................................. 2,500,000 2,718,500
Department of Health, Pre-Refunded, 6.625%, 7/01/15 .................................... 5,355,000 5,603,311
Department of Health, Rosewell Park Cancer Center, Pre-Refunded, 6.625%, 7/01/24 ....... 9,175,000 9,600,445
Fashion Institute of Technology Student Housing Corp., FGIC Insured, 5.00%, 7/01/29 .... 9,700,000 9,862,087
Fashion Institute of Technology Student Housing Corp., FGIC Insured, 5.125%, 7/01/34 ... 15,000,000 15,405,000
Fordham University, Refunding, MBIA Insured, 5.00%, 7/01/28 ............................ 5,000,000 5,149,300
Good Samaritan Hospital Medical Center, Series A, MBIA Insured, 5.50%, 7/01/24 ......... 5,000,000 5,350,250
Interfaith Medical Center, Series D, 5.40%, 2/15/28 .................................... 14,000,000 14,459,480
Ithaca College, AMBAC Insured, 5.25%, 7/01/26 .......................................... 2,000,000 2,071,400
Long Island University, 5.125%, 9/01/23 ................................................ 1,800,000 1,859,400
Long Island University, 5.25%, 9/01/28 ................................................. 1,500,000 1,547,100
Long Island University, Pre-Refunded, 6.25%, 9/01/23 ................................... 5,495,000 5,773,926
Mental Health Facilities Improvement, Series B, 5.00%, 2/15/28 ......................... 9,195,000 9,234,722
Mental Health Facilities Improvement, Series B, 5.00%, 2/15/33 ......................... 35,000,000 34,997,550
Mental Health Services Facilities Improvement, Series B, MBIA Insured, 6.00%, 2/15/25 .. 640,000 709,331
Mental Health Services Facilities Improvement, Series B, MBIA Insured, 6.00%, 2/15/30 .. 565,000 621,997
Mental Health Services Facilities Improvement, Series B, MBIA Insured, 5.25%, 8/15/31 .. 6,025,000 6,206,172
Mental Health Services Facilities Improvement, Series B, MBIA Insured, Pre-Refunded,
6.00%, 2/15/25 ........................................................................ 5,460,000 6,265,623
Mental Health Services Facilities Improvement, Series B, MBIA Insured, Pre-Refunded,
6.00%, 2/15/30 ........................................................................ 4,300,000 4,934,465
Mental Health Services Facilities Improvement, Series B, MBIA Insured, Pre-Refunded,
5.25%, 8/15/31 ........................................................................ 3,975,000 4,452,556
Mental Health Services Facilities Improvement, Series D, FSA Insured, 5.50%, 2/15/21 ... 120,000 130,104
Mental Health Services Facilities Improvement, Series D, FSA Insured, 5.50%, 8/15/21 ... 250,000 271,050
Mental Health Services Facilities Improvement, Series D, FSA Insured, 5.25%, 8/15/30 ... 540,000 554,391
Mental Health Services Facilities Improvement, Series D, FSA Insured, Pre-Refunded,
5.50%, 2/15/21 ........................................................................ 1,015,000 1,146,422
Mental Health Services Facilities Improvement, Series D, FSA Insured, Pre-Refunded,
5.50%, 8/15/21 ........................................................................ 2,065,000 2,332,376
Mental Health Services Facilities Improvement, Series D, FSA Insured, Pre-Refunded,
5.25%, 8/15/30 ........................................................................ 4,460,000 4,979,501
Mental Health Services Facilities Improvement, Series D, MBIA Insured, 5.00%, 8/15/17 .. 22,985,000 24,111,035

26 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York State Dormitory Authority Revenues, (cont.)
Mental Health Services Facilities Improvement, Series D, MBIA Insured, Pre-Refunded,
5.00%, 8/15/17 ........................................................................ $ 15,000 $ 16,482
Mental Health Services, Refunding, Series A, 5.75%, 2/15/27 ............................ 300,000 314,415
Mental Health Services, Series A, 5.75%, 8/15/22 ....................................... 35,000 37,208
Mental Health Services, Series A, Pre-Refunded, 5.75%, 8/15/22 ......................... 1,355,000 1,483,535
Mental Health Services, Series A, Pre-Refunded, 5.75%, 2/15/27 ......................... 9,070,000 9,930,380
Mental Health, Pre-Refunded, 6.00%, 8/15/21 ............................................ 1,600,000 1,760,304
Mental Health, Refunding, Series D, 6.00%, 8/15/21 ..................................... 185,000 200,311
Mental Health, Series B, 5.75%, 8/15/12 ................................................ 2,140,000 2,317,320
Mental Health, Series B, Pre-Refunded, 5.75%, 8/15/12 .................................. 25,000 27,343
(a) Montefiore Hospital, FGIC Insured, 5.00%, 8/01/29 ...................................... 6,000,000 6,056,760
New School University, MBIA Insured, 5.00%, 7/01/31 .................................... 2,500,000 2,525,000
New York Hospital Medical Center, AMBAC Insured, 5.60%, 2/15/39 ........................ 4,900,000 5,195,372
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/26 ........................... 3,500,000 3,576,580
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/31 ........................... 5,000,000 5,050,000
New York University, Series A, FGIC Insured, 5.00%, 7/01/34 ............................ 15,200,000 15,407,328
North Shore L.I. Jewish Group, 5.50%, 5/01/33 .......................................... 2,500,000 2,591,800
Nursing Home, Arden Hill, FHA Insured, Pre-Refunded, 5.85%, 8/01/26 .................... 4,280,000 4,662,846
Nursing Home, Center for Nursing, FHA Insured, 5.55%, 8/01/37 .......................... 8,435,000 8,761,688
Nursing Home, St. John's Health Care Corp., Refunding, FHA Insured, 6.25%, 2/01/36 ..... 31,670,000 33,318,740
Nursing Home, Wesley Garden, FHA Insured, 6.125%, 8/01/35 .............................. 2,000,000 2,130,400
Pace University, Refunding, MBIA Insured, 5.75%, 7/01/26 ............................... 2,000,000 2,144,980
Rockefeller University, Series A1, 5.00%, 7/01/32 ...................................... 11,500,000 11,680,780
Second Hospital, St. Clare's Hospital, Series B, 5.40%, 2/15/25 ........................ 6,500,000 6,716,320
Skidmore College, FGIC Insured, 5.00%, 7/01/33 ......................................... 6,565,000 6,644,502
St. Agnes Hospital, Series A, 5.40%, 2/15/25 ........................................... 2,000,000 2,000,000
St. Francis Hospital, Series A, MBIA Insured, 5.50%, 7/01/29 ........................... 1,000,000 1,056,300
St. Johns University, MBIA Insured, 5.25%, 7/01/25 ..................................... 5,770,000 6,003,223
St. Johns University, Series A, MBIA Insured, 5.25%, 7/01/25 ........................... 5,310,000 5,597,961
St. Lukes Home Residential Health, Series A, FHA Insured, 6.375%, 8/01/35 .............. 5,200,000 5,403,788
State Rehabilitation Association, Series A, AMBAC Insured, 5.00%, 7/01/23 .............. 1,725,000 1,794,466
State University Adult Facility, Series B, Pre-Refunded, 5.375%, 5/15/23 ............... 9,500,000 10,702,130
State University Educational Facilities, Refunding, 5.00%, 5/15/17 ..................... 3,600,000 3,718,656
The Highlands Living, FHA Insured, 6.60%, 2/01/34 ...................................... 3,365,000 3,452,322
Upstate Community Colleges, Series A, 5.00%, 7/01/19 ................................... 7,230,000 7,491,437
Upstate Community Colleges, Series A, 5.00%, 7/01/28 ................................... 25,675,000 25,831,104
Upstate Community Colleges, Series A, Pre-Refunded, 6.00%, 7/01/22 ..................... 7,000,000 7,785,820
Upstate Community Colleges, Series A, Pre-Refunded, 6.125%, 7/01/27 .................... 11,845,000 13,211,676
W.K. Nursing Home Corp., FHA Insured, 6.05%, 2/01/26 ................................... 6,800,000 7,196,372
Yeshiva University, AMBAC Insured, 5.125%, 7/01/29 ..................................... 13,260,000 13,679,812
Yeshiva University, AMBAC Insured, 5.125%, 7/01/34 ..................................... 23,510,000 24,144,770
New York State Energy Research and Development Authority Electric Facilities Revenue,
Consolidated Edison Project, Refunding, Series A, 6.10%, 8/15/20 ......................... 11,820,000 12,272,942
New York State Energy Research and Development Authority PCR,
Niagara Mohawk Power Project, Refunding, Series A, AMBAC Insured, 5.15%, 11/01/25 ........ 20,000,000 20,562,800
New York State Environmental Facilities Corp. PCR, State Water, Series E, 6.875%, 6/15/14 .. 1,190,000 1,210,468

Semiannual Report | 27

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York State Environmental Facilities Corp. State Clean Water and Drinking Revenue,
Revolving Funds,
Pooled Financing, Series B, 5.25%, 5/15/31 ............................................. $ 9,595,000 $ 9,928,618
Series C, 5.25%, 6/15/31 ............................................................... 37,600,000 38,922,016
New York State HFA State Personal Income Tax Revenue, Economic Development and Housing,
Series A,
5.125%, 9/15/28 ........................................................................ 12,425,000 12,705,929
5.00%, 3/15/33 ......................................................................... 7,000,000 7,046,690
New York State HFA, Service Contract Obligation Revenue,
Series A, 6.50%, 3/15/24 ............................................................... 330,000 338,276
Series A, 6.50%, 3/15/25 ............................................................... 860,000 904,049
Series A, 6.00%, 3/15/26 ............................................................... 970,000 1,035,165
Series A, Pre-Refunded, 6.375%, 9/15/15 ................................................ 4,430,000 4,920,179
Series A, Pre-Refunded, 6.50%, 3/15/25 ................................................. 10,410,000 10,979,427
Series A, Pre-Refunded, 6.00%, 3/15/26 ................................................. 15,755,000 17,127,891
Series A-2003, 6.375%, 9/15/15 ......................................................... 30,000 31,510
Series A-2003, Pre-Refunded, 6.375%, 9/15/15 ........................................... 540,000 569,014
Series C, 6.30%, 3/15/22 ............................................................... 1,950,000 1,956,747
Series C, 5.50%, 3/15/25 ............................................................... 17,015,000 17,669,397
New York State HFAR,
Children's Rescue Fund Housing, Series A, 7.625%, 5/01/18 .............................. 4,715,000 4,730,465
Health Facilities of New York City, Refunding, Series A, 6.00%, 11/01/08 ............... 2,400,000 2,540,088
Health Facilities of New York City, Series A, 6.00%, 5/01/07 ........................... 11,200,000 11,908,624
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.10%, 11/01/15 ............ 22,910,000 24,079,097
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.125%, 11/01/20 ........... 28,445,000 29,977,901
MFH, Second Mortgage Program, Series E, 6.75%, 8/15/25 ................................. 2,815,000 2,820,630
MFM Housing, Refunding, Series A, FHA Insured, 7.00%, 8/15/22 .......................... 2,295,000 2,299,728
MFM Housing, Refunding, Series C, FHA Insured, 6.45%, 8/15/14 .......................... 810,000 811,507
MFM, Refunding, Series B, AMBAC Insured, 6.35%, 8/15/23 ................................ 7,000,000 7,159,740
MFM, Refunding, Series C, FHA Insured, 6.50%, 8/15/24 .................................. 5,535,000 5,546,900
MFM, Second Mortgage Program, Series D, 6.25%, 8/15/23 ................................. 2,500,000 2,504,875
MFM, Series B, AMBAC Insured, 6.25%, 8/15/14 ........................................... 525,000 534,712
New York State Local Government Assistance Corp. Revenue,
Refunding, Series B, MBIA Insured, 4.875%, 4/01/20 ..................................... 4,080,000 4,201,298
Series A, 6.00%, 4/01/24 ............................................................... 11,200,000 11,574,192
New York State Medical Care Facilities Finance Agency Revenue,
Hospital and Nursing Home, Mortgage Revenue, Refunding, Series B, FHA Insured,
6.25%, 2/15/25 ......................................................................... 2,635,000 2,745,723
Hospital and Nursing Home, Mortgage Revenue, Refunding, Series B, FHA Insured,
6.25%, 2/15/35 ........................................................................ 4,745,000 4,945,429
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.30%, 8/15/23 ..... 9,000,000 9,086,040
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.25%, 2/15/27 ..... 12,235,000 12,472,726
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.375%, 8/15/33 .... 7,940,000 8,017,018
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.50%, 2/15/34 ..... 5,280,000 5,399,962
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, Pre-Refunded,
6.20%, 2/15/28 ........................................................................ 26,910,000 27,660,789
Hospital and Nursing Home, Mortgage Revenue, Series C, FHA Insured, 6.20%, 8/15/23 ..... 21,540,000 22,674,081
Hospital Mortgage, Series A, AMBAC Insured, Pre-Refunded, 6.80%, 8/15/24 ............... 3,200,000 3,295,232

28 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York State Medical Care Facilities Finance Agency Revenue,(cont.)
Hospital Mortgage, Series A, AMBAC Insured, Pre-Refunded, 6.50%, 8/15/29 ............... $ 5,125,000 $ 5,274,445
Hospital Mortgage, Series A, AMBAC Insured, Pre-Refunded, 6.90%, 8/15/34 ............... 31,210,000 32,144,740
Mortgage Revenue Project, Series A, FHA Insured, 6.50%, 2/15/35 ........................ 3,515,000 3,613,315
Mortgage Revenue Project, Series B, FHA Insured, 6.15%, 2/15/35 ........................ 2,200,000 2,256,496
Mortgage Revenue Project, Series C, FHA Insured, 6.375%, 8/15/29 ....................... 9,675,000 9,917,746
Mortgage Revenue Project, Series D, FHA Insured, 6.20%, 2/15/35 ........................ 6,250,000 6,508,688
Mortgage Revenue Project, Series E, FHA Insured, 6.375%, 2/15/35 ....................... 13,200,000 13,769,844
Mortgage Revenue Project, Series F, FHA Insured, Pre-Refunded, 6.30%, 8/15/25 .......... 16,400,000 17,214,260
Mortgage Revenue Project, Series F, FHA Insured, Pre-Refunded, 6.375%, 8/15/34 ......... 21,050,000 22,105,868
Second Mortgage, Health Care Project Revenue, Series B, 6.35%, 11/01/14 ................ 1,315,000 1,318,564
Secured Hospital Revenue, Series A, 6.25%, 2/15/24 ..................................... 16,770,000 17,095,841
Security Mortgage Program Revenue, Adult Day Care, 6.375%, 11/15/20 .................... 18,930,000 19,814,599
Series A, FHA Insured, 7.45%, 8/15/31 .................................................. 4,660,000 4,669,879
Series A, FHA Insured, Pre-Refunded, 6.125%, 2/15/15 ................................... 840,000 895,835
Series A, FHA Insured, Pre-Refunded, 6.125%, 2/15/15 ................................... 5,140,000 5,274,925
New York State Mortgage Agency Revenue, Homeowners Mortgage, Series 61,
5.90%, 4/01/27 ........................................................................... 4,040,000 4,145,484
New York State Municipal Bond Bank Agency School Purpose Revenue, Series C,
5.25%, 6/01/21 ......................................................................... 5,110,000 5,426,258
5.25%, 12/01/21 ........................................................................ 8,025,000 8,521,667
5.25%, 6/01/22 ......................................................................... 3,400,000 3,593,120
5.25%, 12/01/22 ........................................................................ 5,000,000 5,284,000
5.00%, 6/01/23 ......................................................................... 5,925,000 6,044,152
5.00%, 12/01/23 ........................................................................ 3,000,000 3,060,330
New York State Municipal Bond Bank Agency Special Program Revenue, Buffalo, Series A,
AMBAC Insured, 5.25%, 5/15/31 ............................................................ 4,145,000 4,277,474
New York State Power Authority Revenue, Series A, 5.25%,
11/15/30 ............................................................................... 2,000,000 2,074,320
11/15/40 ............................................................................... 9,000,000 9,254,070
New York State Thruway Authority Revenue, State Personal Income Tax, Transportation,
Series A, 5.00%, 3/15/22 ................................................................. 14,270,000 14,860,921
New York State Thruway Authority Service Contract Revenue, Local Highway and Bridge,
AMBAC Insured, Pre-Refunded, 5.375%, 4/01/19 ........................................... 10,555,000 11,915,012
Pre-Refunded, 6.25%, 4/01/14 ........................................................... 23,970,000 24,790,253
Pre-Refunded, 5.75%, 4/01/19 ........................................................... 30,000,000 34,111,500
New York State Tollway Authority General Revenue,
Refunding, Series E, FGIC Insured, 5.00%, 1/01/25 ...................................... 6,500,000 6,651,775
Series D, 5.25%, 1/01/21 ............................................................... 41,675,000 44,184,252
Series D, 5.375%, 1/01/27 .............................................................. 10,975,000 11,382,502
New York State Tollway Authority Highway and Bridge Trust Fund Revenue,
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/19 ..................................... 20,000,000 21,128,200
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/20 ..................................... 18,835,000 19,848,700
Series A, FGIC Insured, 5.00%, 4/01/17 ................................................. 9,000,000 9,448,020
Series A, FGIC Insured, 5.00%, 4/01/20 ................................................. 2,500,000 2,629,725
Series A, FGIC Insured, 5.00%, 4/01/21 ................................................. 2,500,000 2,613,650
Series B, MBIA Insured, 4.75%, 4/01/18 ................................................. 12,465,000 12,957,617
Series B, MBIA Insured, 4.875%, 4/01/19 ................................................ 10,290,000 10,729,074

Semiannual Report | 29

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
New York State Tollway Authority Highway and Bridge Trust Fund Revenue, (cont.)
Series B, MBIA Insured, 4.90%, 4/01/20 ................................................. $ 10,000,000 $ 10,399,200
Series B-1, FGIC Insured, 5.75%, 4/01/15 ............................................... 2,000,000 2,244,920
Series B-1, FGIC Insured, 5.75%, 4/01/16 ............................................... 2,000,000 2,242,840
New York State Urban Development Corp. Revenue,
Cornell Center Project, 6.00%, 1/01/14 ................................................. 4,075,000 4,089,181
Correctional Capital Facilities, Series 7, Pre-Refunded, 5.70%, 1/01/16 ................ 3,000,000 3,269,400
Correctional Capital Facilities, Series 7, Pre-Refunded, 5.70%, 1/01/27 ................ 10,000,000 10,898,000
Correctional Facilities Service Contract, Series A, Pre-Refunded, 5.00%, 1/01/28 ....... 14,000,000 15,337,980
Correctional Facilities Service Contract, Series B, Pre-Refunded, 5.00%, 1/01/25 ....... 21,055,000 23,187,240
Correctional Facilities Service Contract, Series C, AMBAC Insured, Pre-Refunded,
6.00%, 1/01/29 ........................................................................ 34,135,000 38,904,342
Correctional Facilities Service Contract, Series D, FSA Insured, Pre-Refunded,
5.25%, 1/01/30 ........................................................................ 10,000,000 11,159,000
Correctional, Series A, MBIA Insured, 5.00%, 1/01/18 ................................... 8,775,000 9,228,931
Correctional, Series A, MBIA Insured, Pre-Refunded, 5.00%, 1/01/18 ..................... 3,225,000 3,533,213
Onondaga County Convention Project, Refunding, 6.25%, 1/01/20 .......................... 28,325,000 29,873,528
Personal Income Tax, Series C-1, 5.00%, 3/15/25 ........................................ 3,225,000 3,310,559
Personal Income Tax, Series C-1, FGIC Insured, 5.00%, 3/15/28 .......................... 4,900,000 4,999,568
Personal Income Tax, State Facilities, Series A, 5.25%, 3/15/32 ........................ 20,000,000 20,546,200
State Personal Income Tax, Series B Empire State, 5.125%, 3/15/29 ...................... 9,000,000 9,184,950
State Personal Income Tax, Series B Empire State, MBIA Insured, 5.00%, 3/15/33 ......... 11,010,000 11,128,247
Youth Facilities, Pre-Refunded, 6.00%, 4/01/15 ......................................... 8,500,000 8,783,985
Niagara Falls City School District COP, High School Facilities, 5.375%, 6/15/28 ............ 5,000,000 5,106,500
Niagara Falls Public Water Authority Revenue, Series A, MBIA Insured, 5.00%, 7/15/34 ....... 9,000,000 9,099,990
Oneida-Herkimer Solid Waste Management Authority Solid Waste System Revenue, Refunding,
6.65%, 4/01/05 ......................................................................... 1,115,000 1,130,008
6.75%, 4/01/14 ......................................................................... 655,000 663,849
Otsego County IDA Civic Facility Revenue, Hartwick College Project, Series A, Pre-Refunded,
5.50%, 7/01/19 ........................................................................... 3,400,000 3,823,266
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue, Series Y,
5.50%, 7/01/36 ........................................................................... 10,000,000 10,615,800
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Series A, 5.00%, 7/01/38 ............................................................... 12,000,000 12,028,440
Series Y, 5.00%, 7/01/36 ............................................................... 4,000,000 4,017,320
Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Series A,
MBIA Insured, Pre-Refunded, 5.00%, 8/01/31 ............................................... 4,000,000 4,431,200
Rensselaer Municipal Leasing Corp. Leasehold Mortgage Revenue, Rensselaer County
Nursing Home, Series A, 6.90%, 6/01/24 ................................................. 10,000,000 10,180,300
Series B, 6.90%, 6/01/24 ............................................................... 3,345,000 3,405,310
Sachem Central School District Holbrook GO, Series B, MBIA Insured, 5.00%,
10/15/27 ............................................................................... 3,885,000 3,996,888
10/15/28 ............................................................................... 2,000,000 2,053,200
(a) Sales Tax Asset Receivable Corp. Revenue, Series A, AMBAC Insured, 5.00%, 10/15/32 ......... 98,975,000 100,432,902
St. Lawrence County IDA Civic Facility Revenue, Clarkson University Project, Series A,
5.50%, 7/01/29 ........................................................................... 6,000,000 6,251,460
Suffolk County Judicial Facilities Agency Service Agreement Revenue,
John P. Cohalan Complex, AMBAC Insured, 5.00%, 4/15/16 ................................... 2,720,000 2,878,848

30 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Syracuse IDA Civic Facility Revenue, Crouse Health Hospital Inc., Project A,
5.25%, 1/01/16 ......................................................................... $ 4,000,000 $ 3,149,040
5.375%, 1/01/23 ........................................................................ 4,760,000 3,492,650
Tompkins County IDAR Civic Facility, Cornell University, Pre-Refunded, 5.75%, 7/01/30 ...... 7,510,000 8,622,682
Triborough Bridge and Tunnel Authority Revenues,
General Purpose, Refunding, Series A, 5.00%, 1/01/27 ................................... 34,500,000 35,011,980
General Purpose, Refunding, Series A, 5.00%, 1/01/32 ................................... 40,450,000 40,687,846
General Purpose, Refunding, Series B, 5.125%, 11/15/29 ................................. 17,175,000 17,528,462
General Purpose, Refunding, Series B, 5.00%, 11/15/32 .................................. 10,000,000 10,064,900
General Purpose, Refunding, Series B, MBIA Insured, 5.00%, 11/15/27 .................... 10,000,000 10,216,800
General Purpose, Series A, 5.125%, 1/01/31 ............................................. 24,310,000 24,720,110
General Purpose, Series A, FGIC Insured, 5.00%, 1/01/32 ................................ 14,215,000 14,357,861
General Purpose, Series B, MBIA Insured, Pre-Refunded, 5.20%, 1/01/27 .................. 4,110,000 4,554,086
General Purpose, Series B, Pre-Refunded, 5.20%, 1/01/27 ................................ 15,000,000 16,620,750
General Purpose, Series B, Pre-Refunded, 5.50%, 1/01/30 ................................ 32,185,000 35,909,126
Refunding, MBIA Insured, 5.00%, 11/15/26 ............................................... 10,000,000 10,256,900
Refunding, MBIA Insured, 5.00%, 11/15/32 ............................................... 22,875,000 23,128,684
Series A, MBIA Insured, 5.00%, 1/01/32 ................................................. 24,000,000 24,241,200
Subordinate Bonds, AMBAC Insured, 5.00%, 11/15/28 ...................................... 15,000,000 15,325,350
TSASC Inc. New York Revenue, Tobacco Flexible Amortization Bonds, Series 1, 6.25%,
7/15/27 ................................................................................ 35,000,000 35,194,250
7/15/34 ................................................................................ 40,000,000 40,316,000
United Nations Development Corp. Revenue, senior lien, Refunding, Series A, 5.25%,
7/01/23 ................................................................................ 2,500,000 2,578,600
7/01/25 ................................................................................ 2,000,000 2,054,160
Utica IDA Civic Facility Revenue, Munson-Williams-Proctor Institute,
5.40%, 7/15/30 ......................................................................... 1,000,000 1,052,170
Series A, 5.50%, 7/15/29 ............................................................... 9,915,000 10,470,637
Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%,
10/01/15 ............................................................................... 2,500,000 2,634,975
10/01/18 ............................................................................... 2,500,000 2,608,825
Warren and Washington IDA Civic Facility Revenue, Series A, FSA Insured, 5.00%, 12/01/27 ... 8,115,000 8,250,196
Westchester Tobacco Asset Securitization Corp. Revenue, Capital Appreciation,
6.75%, 7/15/29 ........................................................................... 15,000,000 15,432,750
Yonkers GO, Series A, 9.20%, 2/01/05 ....................................................... 1,095,000 1,107,023
-------------
TOTAL BONDS (COST $4,504,985,111)........................................................... 4,791,290,679
-------------
ZERO COUPON BONDS 1.9%
MTA Service Contract Revenue,
Commuter Facilities, Refunding, Series 7, 7/01/10 ...................................... 7,500,000 6,227,925
Commuter Facilities, Refunding, Series 7, 7/01/11 ...................................... 7,590,000 5,986,764
Commuter Facilities, Refunding, Series 7, 7/01/13 ...................................... 2,065,000 1,481,390
Transit Facilities, Refunding, Series 7, 7/01/09 ....................................... 13,125,000 11,431,875
Transit Facilities, Refunding, Series 7, 7/01/10 ....................................... 9,000,000 7,473,510
Transit Facilities, Refunding, Series 7, 7/01/12 ....................................... 15,380,000 11,562,992
Transit Facilities, Refunding, Series 7, 7/01/13 ....................................... 7,935,000 5,692,410

Semiannual Report | 31

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS (CONT.)
New York City GO,
Capital Appreciation, Series A-2, 8/01/10 .............................................. $ 2,690,000 $ 2,171,287
Citysavers, Series B, 8/01/09 .......................................................... 8,875,000 7,542,774
Citysavers, Series B, 6/01/12 .......................................................... 1,030,000 814,462
Citysavers, Series B, 12/01/12 ......................................................... 1,030,000 794,213
Citysavers, Series B, 6/01/13 .......................................................... 1,030,000 774,004
Citysavers, Series B, 12/01/13 ......................................................... 1,030,000 753,867
Citysavers, Series B, 6/01/14 .......................................................... 1,030,000 733,824
Citysavers, Series B, 12/01/14 ......................................................... 1,030,000 714,593
Citysavers, Series B, 6/01/15 .......................................................... 1,030,000 691,964
Citysavers, Series B, 12/01/15 ......................................................... 1,030,000 676,638
Citysavers, Series B, 6/01/16 .......................................................... 1,030,000 654,998
Citysavers, Series B, 12/01/16 ......................................................... 1,030,000 640,207
Citysavers, Series B, 6/01/17 .......................................................... 1,030,000 618,917
Citysavers, Series B, 12/01/17 ......................................................... 1,030,000 604,672
Citysavers, Series B, 6/01/18 .......................................................... 1,030,000 584,566
Citysavers, Series B, 12/01/18 ......................................................... 1,005,000 557,041
Citysavers, Series B, 6/01/19 .......................................................... 1,030,000 553,604
Citysavers, Series B, 12/01/19 ......................................................... 1,030,000 540,523
Citysavers, Series B, 6/01/20 .......................................................... 10,000,000 4,730,500
Orangetown Housing Authority Housing Facilities Revenue, Senior Housing Center Project,
Refunding, MBIA Insured, 4/01/30 ......................................................... 21,170,000 5,450,005
Triborough Bridge and Tunnel Authority Revenue, Convention Center Project, Series E,
1/01/12 .................................................................................. 21,625,000 16,158,417
---------------
TOTAL ZERO COUPON BONDS (COST $78,779,647).................................................. 96,617,942
---------------
TOTAL LONG TERM INVESTMENTS (COST $4,583,764,758)........................................... 4,887,908,621
---------------
SHORT TERM INVESTMENTS .2%

(b) Jay Street Development Corp. Certificates Facility Lease Revenue, Jay Street Project,
Series A-4, Daily VRDN and Put, 1.64%, 5/01/22 ........................................... 100,000 100,000
(b) Long Island Power Authority Electric System Revenue, Sub Series 2, Daily VRDN and Put,
1.64%, 5/01/33 ........................................................................... 10,000,000 10,000,000
---------------
TOTAL SHORT TERM INVESTMENTS (COST $10,100,000)............................................. 10,100,000
---------------
TOTAL INVESTMENTS (COST $4,593,864,758) 98.9%............................................... 4,898,008,621
OTHER ASSETS, LESS LIABILITIES 1.1%......................................................... 52,103,198
---------------
NET ASSETS 100.0%........................................................................... $ 4,950,111,819
===============

See glossary of terms on page 33.

(a) See Note 1b regarding securities purchased on a delayed delivery basis.

(b) Variable rate demand notes (VRDNs) are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates.

32 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2004 (UNAUDITED) (CONTINUED)

GLOSSARY OF TERMS

AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFH - Multi-Family Housing
MFM - Multi-Family Mortgage
MTA - Metropolitan Transit Authority
PCR - Pollution Control Revenue
PFAR - Public Financing Authority Revenue
VRDN - Variable Rate Demand Notes

Semiannual Report | 33

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
November 30, 2004 (unaudited)

Assets:
Investments in securities:
Cost ................................................... $ 4,593,864,758
================
Value .................................................. 4,898,008,621
Cash ..................................................... 18,029
Receivables:
Investment securities sold ............................. 7,734,269
Capital shares sold .................................... 2,937,060
Interest ............................................... 71,603,095
----------------
Total assets ........................................ 4,980,301,074
----------------

Liabilities:
Payables:
Investment securities purchased ........................ 21,493,140
Capital shares redeemed ................................ 5,586,077
Affiliates ............................................. 2,938,042
Distributions to shareholders .......................... 4,513
Other liabilities ........................................ 167,483
----------------
Total liabilities ................................... 30,189,255
----------------
Net assets, at value ........................................ $ 4,950,111,819
================
Net assets consist of:
Undistributed net investment income ...................... $ 2,730,945
Net unrealized appreciation (depreciation) ............... 304,143,863
Accumulated net realized gain (loss) ..................... (10,817,993)
Capital shares ........................................... 4,654,055,004
----------------
Net assets, at value ........................................ $ 4,950,111,819
================

34 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
November 30, 2004 (unaudited)

CLASS A:
Net assets, at value ....................................... $ 4,458,971,393
===============
Shares outstanding ......................................... 377,023,758
===============
Net asset value per share(a) ............................... 11.83
===============
Maximum offering price per share
(net asset value per share / 95.75%) ...................... 12.36
===============

CLASS B:
Net assets, at value ....................................... $ 231,712,453
===============
Shares outstanding ......................................... 19,631,707
===============
Net asset value and maximum offering price per share(a) .... 11.80
===============

CLASS C:
Net assets, at value ....................................... $ 234,551,415
===============
Shares outstanding ......................................... 19,843,387
===============
Net asset value and maximum offering price per share(a) .... 11.82
===============

ADVISOR CLASS:
Net assets, at value ....................................... $ 24,876,558
===============
Shares outstanding ......................................... 2,102,551
===============
Net asset value and maximum offering price per share(a) .... 11.83
===============

(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.

Semiannual Report | See notes to financial statements. | 35

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended November 30, 2004 (unaudited)

Investment income:
Interest ................................................... $ 127,752,088
---------------
Expenses:
Management fees (Note 3) ................................... 11,269,974
Distribution fees (Note 3)
Class A ................................................... 1,941,894
Class B ................................................... 751,222
Class C ................................................... 754,521
Transfer agent fees (Note 3) ............................... 1,113,589
Custodian fees ............................................. 36,314
Reports to shareholders .................................... 61,563
Registration and filing fees ............................... 26,754
Professional fees .......................................... 61,564
Trustees' fees and expenses ................................ 48,816
Other ...................................................... 161,223
---------------
Total expenses ........................................ 16,227,434
---------------
Net investment income ............................... 111,524,654
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from Investments ................. 8,045,507
Net change in unrealized appreciation
(depreciation) on investments ............................ 72,366,613
---------------
Net realized and unrealized gain (loss) ..................... 80,412,120
---------------
Net increase (decrease) in net assets
resulting from operations .................................. $ 191,936,774
===============

36 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended November 30, 2004 (unaudited)
and the year ended May 31, 2004

-------------------------------------------
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 2004 MAY 31, 2004
-------------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ...................... $ 111,524,654 $ 234,683,169
Net realized gain (loss) from investments .. 8,045,507 6,798,177
Net change in unrealized appreciation
(depreciation) on investments ............. 72,366,613 (262,029,310)
-------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............. 191,936,774 (20,547,964)
Distributions to shareholders from:
Net investment income:
Class A ................................... (102,186,692) (213,303,897)
Class B ................................... (4,692,764) (9,557,046)
Class C ................................... (4,678,982) (9,727,464)
Advisor Class ............................. (509,216) (918,996)
-------------------------------------------
Total distributions to shareholders ......... (112,067,654) (233,507,403)
Capital share transactions: (Note 2)
Class A ................................... (42,441,815) (170,296,090)
Class B ................................... (3,682,450) 9,572,486
Class C ................................... (198,575) 94,846
Advisor Class ............................. 2,067,799 5,281,645
-------------------------------------------
Total capital share transactions ............ (44,255,041) (155,347,113)
Redemption fees ............................. 289 --
-------------------------------------------
Net increase (decrease) in net assets .. 35,614,368 (409,402,480)
Net assets
Beginning of period ......................... 4,914,497,451 5,323,899,931
-------------------------------------------
End of period ............................... $ 4,950,111,819 $ 4,914,497,451
===========================================
Undistributed net investment income
included in net assets:
End of period ............................... $ 2,730,945 $ 3,273,945
===========================================

Semiannual Report | See notes to financial statements. | 37

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin New York Tax-Free Income Fund (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company.
The Fund seeks to provide investors with as high a level of income exempt from
federal, New York state and New York City income taxes as is consistent with
prudent investing, while seeking preservation of shareholders' capital. The
following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

Tax-free bonds generally trade in the over-the-counter market. The Fund utilizes
independent pricing services to perform any of the pricing functions under
procedures approved by the Board of Trustees. Tax-free bonds may be valued by
the pricing services using matrix pricing which considers such factors as prices
of comparable quality issues, yield, maturity, coupon, and credit ratings. If
events occur that materially affect the values of securities after the prices
are determined, but prior to 4:00 p.m. Eastern time or the close of trading on
the NYSE, whichever is earlier, or if market quotations are deemed not readily
available or reliable, the securities will be valued at fair value as determined
following procedures approved by the Board of Trustees.

B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS

The Fund may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.

C. INCOME TAXES

No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under Sub Chapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.

D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Distributions to shareholders are recorded on the ex-dividend date.

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.

38 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.

F. REDEMPTION FEES

Effective June 1, 2004, redemptions and exchanges of Fund shares held five
trading days or less may be subject to the Fund's redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid-in capital as noted in the Statements of Changes in Net Assets.

G. GUARANTEES AND INDEMNIFICATIONS

Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Fund offers four classes of shares: Class A, Class B, Class C and Advisor
Class. Each class of shares differs by its initial sales load, contingent
deferred sales charges, distribution fees, voting rights on matters affecting a
single class and its exchange privilege.

At November 30, 2004, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:

----------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 2004 MAY 31, 2004
----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------

CLASS A SHARES:
Shares sold ..................... 10,968,311 $ 129,128,922 22,908,833 $ 272,883,264
Shares issued in reinvestment of
distributions .................. 5,048,991 59,242,934 10,190,598 121,248,982
Shares redeemed ................. (19,636,856) (230,813,671) (47,486,868) (564,428,336)
----------------------------------------------------------------
Net increase (decrease) ......... (3,619,554) $ (42,441,815) (14,387,437) $(170,296,090)
================================================================

Semiannual Report | 39

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

CLASS B SHARES:
Shares sold .................... 799,316 $ 9,399,213 3,077,811 $ 36,652,099
Shares issued in reinvestment of
distributions ................. 267,234 3,130,021 540,157 6,416,144
Shares redeemed ................ (1,381,750) (16,211,684) (2,829,226) (33,495,757)
----------------------------------------------------------------
Net increase (decrease) ........ (315,200) $ (3,682,450) 788,742 $ 9,572,486
================================================================
CLASS C SHARES:
Shares sold .................... 1,367,440 $ 16,143,837 3,848,641 $ 45,978,578
Shares issued in reinvestment of
distributions ................. 265,423 3,114,256 548,293 6,523,046
Shares redeemed ................ (1,655,501) (19,456,668) (4,415,573) (52,406,778)
----------------------------------------------------------------
Net increase (decrease) ........ (22,638) $ (198,575) (18,639) $ 94,846
================================================================
ADVISOR CLASS SHARES:
Shares sold .................... 567,951 $ 6,731,004 817,351 $ 9,819,515
Shares issued in reinvestment of
distributions ................. 1,516 17,863 3,451 41,210
Shares redeemed ................ (397,196) (4,681,068) (385,284) (4,579,080)
----------------------------------------------------------------
Net increase (decrease) ........ 172,271 $ 2,067,799 435,518 $ 5,281,645
================================================================

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers or directors of the
following entities:

- ----------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ----------------------------------------------------------------------------------------

Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, LLC (Investor Services) Transfer agent

A. MANAGEMENT FEES

The Fund pays an investment management fee to Advisers based on the month-end
net assets of the Fund as follows:

- ---------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- ---------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% Over $250 million, up to and including $10 billion

Fees are further reduced on net assets over $10 billion.

40 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

B. ADMINISTRATIVE FEES

Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.

C. DISTRIBUTION FEES

The Fund reimburses Distributors up to .10%, .65%, and .65% per year of its
average daily net assets of Class A, Class B, and Class C, respectively, for
costs incurred in marketing the Fund's shares under a Rule 12b-1 plan. Under the
Class A distribution plan, costs exceeding the maximum for the current plan year
cannot be reimbursed in subsequent periods.

D. SALES CHARGES/UNDERWRITING AGREEMENTS

Distributors has advised the Fund of the following commission transactions
related to the sale of the Fund's shares for the period:

Sales charges received................................ $382,484
Contingent deferred sales charges retained............ $201,578

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $1,113,589, of which $758,782 was paid to
Investor Services.

F. OTHER AFFILIATED TRANSACTIONS

Included in professional fees are legal fees of $9,800 that were paid to a law
firm in which a partner is an officer of the Fund.

4. INCOME TAXES

At May 31, 2004, the Fund had tax basis capital losses which may be carried over
to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:

2008 ................................................ $ 3,039,740
2009 ................................................ 14,143,946
-----------
$17,183,686
===========

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of bond discounts and premiums.

Net realized gains differ for financial statement and tax purposes primarily due
to differing treatments of wash sales and bond discounts and premiums.

Semiannual Report | 41

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES (CONTINUED)

At November 30, 2004, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes was as follows:

Cost of investments .................................. $4,592,908,078
===============
Unrealized appreciation .............................. $ 310,148,875
Unrealized depreciation .............................. (5,048,332)
---------------
Net unrealized appreciation (depreciation) ........... $ 305,100,543
===============

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended November 30, 2004 aggregated $392,958,291 and $451,990,744,
respectively.

6. REGULATORY MATTERS

GOVERNMENTAL INVESTIGATIONS AND SETTLEMENTS

A. INVESTIGATIONS

As part of various investigations by the Securities and Exchange Commission
("SEC"), the U.S. Attorney for the Northern District of California, the New York
Attorney General, the California Attorney General, the U.S. Attorney for the
District of Massachusetts, the Securities Division of the Office of the
Secretary of the Commonwealth of Massachusetts, the Florida Department of
Financial Services and the Commissioner of Securities, the West Virginia
Attorney General, the Vermont Department of Banking, Insurance, Securities, and
Health Care Administration and the National Association of Securities Dealers,
Inc. ("NASD") relating to certain practices in the mutual fund industry,
including late trading, market timing and market support payments to securities
dealers who sell fund shares, Franklin Resources, Inc. and certain of its
subsidiaries (as used in this section, together, the "Company"), as well as
certain current or former executives and employees of the Company received
requests for information and/or subpoenas to testify or produce documents. The
Company and its current employees provided documents and information in response
to those requests and subpoenas. In addition, the Company responded, and in one
instance, is currently responding to requests for similar kinds of information
from regulatory authorities in some of the foreign countries where the Company
conducts its global asset management business.

B. SETTLEMENTS

On August 2, 2004, Franklin Resources, Inc., announced that its subsidiary,
Franklin Advisers, Inc. reached an agreement with the SEC that resolved the
issues resulting from the SEC's investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of

42 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. REGULATORY MATTERS (CONTINUED)

GOVERNMENTAL INVESTIGATIONS AND SETTLEMENTS (CONTINUED)

B. SETTLEMENTS (CONTINUED)

third parties that ended in 2000 and those that were the subject of the first
Massachusetts administrative complaint described below.

Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The SEC Order also requires Franklin Advisers, Inc. to, among
other things, enhance and periodically review compliance policies and
procedures.

On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to the administrative complaint filed on February 4,
2004. The administrative complaint concerned one instance of market timing that
was also a subject of the August 2, 2004 settlement that Franklin Advisers, Inc.
reached with the SEC, as described above.

Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statement of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.

On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources Inc.'s Form 8-K filing (in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing") failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.

On November 17, 2004, Franklin Resources, Inc. announced that Franklin/Templeton
Distributors, Inc. ("FTDI") reached an agreement with the California Attorney
General's Office ("CAGO"), resolving the issues resulting from the CAGO's
investigation concerning sales and marketing support payments. The Company
believes that the settlement of the CAGO matter is

Semiannual Report | 43

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. REGULATORY MATTERS (CONTINUED)

GOVERNMENTAL INVESTIGATIONS AND SETTLEMENTS (CONTINUED)

B. SETTLEMENTS (CONTINUED)

in the best interest of the Company and its fund shareholders. Under the terms
of the settlement, FTDI neither admitted nor denied the allegations in the
CAGO's complaint and agreed to pay $2 million to the State of California as a
civil penalty, $14 million to Franklin Templeton funds and $2 million to the
CAGO for its investigative costs.

On December 13, 2004, Franklin Resources, Inc. announced that FTDI and Franklin
Advisers, Inc. reached an agreement with the SEC, resolving the issues resulting
from the SEC's investigation concerning marketing support payments to securities
dealers who sell fund shares. In connection with that agreement, the SEC issued
an "Order Instituting Administrative and Cease-and-Desist Proceedings, Making
Findings, and Imposing Remedial Sanctions Pursuant to Sections 203(e) and 203(k)
of the Investment Advisers Act of 1940, Sections 9(b) and 9(f) of the Investment
Company Act of 1940, and Section 15(b) of the Securities Exchange Act of 1934"
(the "Order").

The Company believes that the settlement of this matter is in the best interest
of the Company and its fund shareholders. Under the terms of the Order, in which
FTDI and Franklin Advisers, Inc. neither admitted nor denied the findings
contained therein, they agreed to pay the funds a penalty of $20 million and
disgorgement of $1 (one dollar). FTDI and Franklin Advisers, Inc. also agreed to
implement certain measures and undertakings relating to marketing support
payments to broker-dealers for the promotion or sale of fund shares, including
making additional disclosures in the funds' Prospectuses and Statements of
Additional Information. The Order further requires the appointment of an
independent distribution consultant, at the Company's expense, who shall develop
a plan for the distribution of the penalty and disgorgement to the funds.

OTHER LEGAL PROCEEDINGS

The Trust, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Various subsidiaries of Franklin
Resources, Inc., as well as certain funds managed by those subsidiaries, have
also been named in multiple lawsuits filed in state courts in Illinois.
Specifically, the lawsuits claim breach of duty with respect to alleged
arrangements to permit market timing and/or late trading activity, or breach of
duty with respect to the valuation of the portfolio securities of certain funds
managed by Franklin Resources, Inc. subsidiaries, resulting in alleged market
timing activity. The majority of these lawsuits duplicate, in whole or in part,
the allegations asserted in the Massachusetts administrative complaint described
above. The lawsuits are styled as class actions, or derivative actions on behalf
of either the named funds or Franklin Resources, Inc.

44 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS (CONTINUED)

In addition, the Company, as well as certain current and former officers,
employees, and directors have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees. These lawsuits are styled
as class actions and derivative actions brought on behalf of certain funds.

The Company's management strongly believes that the claims made in each of the
lawsuits are without merit and intends to vigorously defend against them. The
Company cannot predict with certainty, however, the eventual outcome of the
remaining governmental investigations or private lawsuits, nor whether they will
have a material negative impact on the Company. Public trust and confidence are
critical to the Company's business and any material loss of investor and/or
client confidence could result in a significant decline in assets under
management by the Company, which would have an adverse effect on future
financial results. If the Company finds that it bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate. The
Company is committed to taking all appropriate actions to protect the interests
of the funds' shareholders.

Semiannual Report | 45

FRANKLIN NEW YORK TAX-FREE INCOME FUND

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

46 | SEMIANNUAL REPORT

This page intentionally left blank.

LITERATURE REQUEST

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF
SERVICE, WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR
SERVICE DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR
BEEPING TONE.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL

Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)

VALUE

Franklin Balance Sheet
Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund

BLEND

Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund(4)

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund(5)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust(3)
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund(5),(6)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund

TAX-FREE INCOME(7)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(8)

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund

STATE-SPECIFIC

Alabama
Arizona
California(9)
Colorado
Connecticut
Florida(9)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(8)
Michigan(8)
Minnesota(8)
Missouri
New Jersey
New York(9)
North Carolina
Ohio(8)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust(10)

(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

(2) The fund is only open to existing shareholders and select retirement
plans.

(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.

(4) Upon reaching approximately $350 million in assets, the fund intends to
close to all investors.

(5) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

(6) Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and
strategy remained the same.

(7) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.

(8) Portfolio of insured municipal securities.

(9) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).

(10) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

11/04 Not part of the semiannual report

[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

|_| WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?

Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN NEW YORK
TAX-FREE INCOME FUND

INVESTMENT MANAGER

Franklin Advisers, Inc.

DISTRIBUTOR

Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES

1-800/632-2301

Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

115 S2004 01/05

ITEM 2. CODE OF ETHICS.

(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial experts are Edith E. Holiday and Harris J.
Ashton and they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.

ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 11. EXHIBITS.

(A) Code of Ethics

(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN NEW YORK TAX-FREE INCOME FUND

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 20, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 20, 2005

By /s/Galen G. Vetter
Chief Financial Officer
Date January 20, 2005