UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, 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: 5/31
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Date of reporting period: 5/31/06
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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MAY 31, 2006
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ANNUAL REPORT AND SHAREHOLDER LETTER TAX-FREE INCOME
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN NEW YORK
TAX-FREE INCOME FUND Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
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 offices in over 25 countries,
Templeton offers investors a truly global
perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why our
funds can be used to build truly diversified
allocation plans 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, accurate and personal service
that has 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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[GRAPHIC OMITTED]
Not part of the annual report
Contents
SHAREHOLDER LETTER ........................................................ 1
SPECIAL FEATURE:
Understanding Interest Rates .............................................. 4
ANNUAL REPORT
Franklin New York Tax-Free Income Fund .................................... 7
Performance Summary ....................................................... 13
Your Fund's Expenses ...................................................... 18
Financial Highlights and Statement of Investments ......................... 20
Financial Statements ...................................................... 38
Notes to Financial Statements ............................................. 42
Report of Independent Registered Public Accounting Firm ................... 49
Tax Designation ........................................................... 50
Board Members and Officers ................................................ 51
Shareholder Information ................................................... 56
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Annual 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 as high a level of income exempt from federal, New York state
and New York City personal income taxes as is consistent with prudent management
and preservation of capital by investing at least 80% of its total assets in
securities that pay interest free from such taxes. 1
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CREDIT QUALITY BREAKDOWN*
Based on Total Long-Term Investments as of 5/31/06**
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
AAA .............................. 64.0%
AA ............................... 23.7%
A ................................ 4.9%
BBB .............................. 1.4%
Not Rated by S&P ................. 6.0%
*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 1.4% 0.1%
AA or Aa 0.3% --
A 1.1% --
BBB or Baa 0.5% 2.3%
Below Investment Grade 0.1% 0.2%
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Total 3.4% 2.6%
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This annual report for Franklin New York Tax-Free Income Fund covers the fiscal
year ended May 31, 2006.
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 24.
Annual Report | 7
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PERFORMANCE DATA 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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DIVIDEND DISTRIBUTIONS 2
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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 4.35 cents 3.81 cents 3.80 cents 4.44 cents
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July 4.35 cents 3.81 cents 3.80 cents 4.44 cents
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August 4.35 cents 3.81 cents 3.80 cents 4.44 cents
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September 4.35 cents 3.78 cents 3.79 cents 4.43 cents
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October 4.35 cents 3.78 cents 3.79 cents 4.44 cents
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November 4.30 cents 3.73 cents 3.74 cents 4.39 cents
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December 4.30 cents 3.75 cents 3.75 cents 4.39 cents
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January 4.30 cents 3.75 cents 3.75 cents 4.39 cents
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February 4.30 cents 3.75 cents 3.75 cents 4.39 cents
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March 4.30 cents 3.75 cents 3.75 cents 4.38 cents
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April 4.30 cents 3.75 cents 3.75 cents 4.38 cents
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May 4.30 cents 3.75 cents 3.75 cents 4.38 cents
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TOTAL 51.85 CENTS 45.22 CENTS 45.22 CENTS 52.89 CENTS
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PERFORMANCE OVERVIEW
The Fund's Class A share price, as measured by net asset value, decreased from
$12.01 on May 31, 2005, to $11.72 on May 31, 2006. The Fund's Class A shares
paid dividends totaling 51.85 cents per share for the same period. 2 The
Performance Summary beginning on page 13 shows that at the end of this reporting
period the Fund's Class A shares' distribution rate was 4.22%, based on an
annualization of the 4.30 cent per share May dividend and the maximum offering
price of $12.24 on May 31, 2006. An investor in the 2006 maximum combined
effective federal and New York state and City personal income tax bracket of
41.53% would need to earn a distribution rate of 7.22% 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.
The Fund was subject to bond calls during the period under review as many
municipal bond issuers sought to take advantage of lower interest rates and
exercised call options on their outstanding higher coupon bonds issued several
years ago. In general, we were limited to reinvesting the proceeds from these
bond calls as well as from cash inflows at current, lower interest rates, which
tended to reduce the Fund's income and cause dividend distributions to decline
slightly, as shown in the dividend distributions table.
2. All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.
8 | Annual Report
STATE UPDATE
New York's economy appeared headed toward full recovery, led by New York City,
Long Island and the Hudson Valley area economies, with growth supplemented by
rebounding healthy profits and bonuses in the finance and insurance industries.
The securities markets and real estate in the City and downstate areas also
contributed to the state's economic growth. Recent gains were not consistent
across the state, however, and many upstate urban centers remained strained.
Additionally, manufacturing continued to lag. Although New York's employment
growth typically trails the nation's, as of May 2006, the state's 4.6%
unemployment rate was on par with the national rate. 3
The 2005-2006 fiscal year budget, adopted on time despite a history of difficult
budget passage, indicated improvement for the state's overall budget process.
The budget reflected a small surplus and reduced gaps for the coming year.
Despite efforts to achieve stability, however, recent reforms will not likely
eliminate the ongoing severe expense pressure faced by the state annually.
Furthermore, per-capita debt levels, although within range of other northeast
states, continued to be problematic.
Independent credit rating agency Standard & Poor's rated New York's debt AA with
a stable outlook. 4 The rating and outlook reflected the state's deep and
diversified economic base, conservative budget management, and improved debt and
capital planning management and policies.
MUNICIPAL BOND MARKET OVERVIEW
For the fiscal year ended May 31, 2006, the municipal bond market performed
comparatively well as the fixed income markets continued to face a tightening
Federal Reserve Board (Fed) policy, volatile oil prices, increased inflation
expectations, concerns about the dollar, mixed economic releases and the
aftermath of Hurricanes Katrina and Rita. In the recent interest rate
environment, municipal bonds, which have domestic tax advantages, outperformed
U.S. Treasury bonds. The Lehman Brothers Municipal Bond Index returned +1.89%
for the period, while the Lehman Brothers U.S. Treasury Index had a -1.39%
return. 5
3. Source: Bureau of Labor Statistics.
4. This does not indicate Standard & Poor's rating of the Fund.
5. Source: Standard & Poor's Micropal. 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 $7 million and be issued as part
of a transaction of at least $75 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. The Lehman Brothers U.S. Treasury
Index includes public obligations of the U.S. Treasury with a remaining maturity
of one year or more. All issues must have at least one year to final maturity
regardless of call features, have at least $250 million par amount outstanding
and be rated investment grade (Baa3 or better). They must also be dollar
denominated, nonconvertible and publicly issued.
Annual Report | 9
During the reporting period, longer-term yields rose, but not as much as
shorter-term yields, which increased as the Fed followed its tightening policy
and raised the federal funds target rate from 3.00% to 5.00%. Demand persisted
from foreign and domestic buyers who continued to buy intermediate- and
longer-term Treasury bonds as they sought relatively higher yield and expected
inflation to remain fairly contained. Over the reporting period, short-term
rates rose more than longer-term rates, which resulted in a flattening of the
yield curve (the spread between yields of short-term and long-term bonds).
Toward the end of December, shorter- and intermediate-term interest rates began
to converge and eventually the Treasury yield curve inverted, meaning short-term
rates grew higher than those on longer-maturity bonds. Over the 12-month
reporting period, 2-year Treasury yields increased 144 basis points (100 basis
points equal one percentage point), while 10-year Treasury yields rose 112 basis
points and 30-year Treasury yields rose 91 basis points. On May 31, 2006, the
2-year Treasury note yielded 5.04%, the 10-year Treasury note yielded 5.12% and
the 30-year Treasury bond yielded 5.21%. The municipal yield curve also
flattened over the reporting period but remained steeper than the Treasury
curve. According to Municipal Market Data, the 2-year municipal note yield rose
83 basis points and the 10-year increased 53 basis points, while the 30-year
municipal yield increased 27 basis points during the period. 6 Consequently,
long-maturity municipal bonds continued to perform comparatively well.
Motivated by a relatively low interest rate environment, along with expectations
that rates might continue to rise, municipal bond issuers actively refunded
higher yielding outstanding debt and accessed the debt market to finance capital
needs. As a result, the municipal bond market had record issuance with more than
$408 billion in new deals nationally for 2005. 7 Refunding deals represented
more than $130 billion. 7 Just as homebuyers seek to lower their mortgage rates,
municipalities tend to borrow more when interest rates are low. So far in 2006,
supply has been lighter than in the first five months of 2005. Demand for
municipal bonds remained strong over the Fund's fiscal year as investors found
municipal bonds' taxable equivalent yields attractive. Healthy demand came from
a wide range of traditional
6. Source: Thomson Financial.
7. Source: THE BOND BUYER.
10 | Annual Report
buyers such as mutual funds, individuals, and property and casualty companies,
and also from nontraditional crossover participants. Crossover buyers typically
invest in taxable securities; however, they will enter the municipal bond market
when municipal valuations are attractive, as they were during the reporting
period. This broad base of buyers and tight bond supply supported the municipal
bond market.
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 portfolio becomes 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.
MANAGER'S DISCUSSION
Franklin New York Tax-Free Income Fund performed relatively well during the 12
months under review, as it benefited from refunding of some higher-coupon bonds.
Consistent with our income-oriented investment philosophy, the Fund tends to own
higher-coupon bonds, which are generally more susceptible to refunding than
lower-coupon bonds. During the period, the Fund's holdings in prerefunded bonds
increased from 33.2% of total long-term investments at the beginning of the
period to 40.7% at period-end, which helped performance.
Demand for the high relative after-tax returns offered by municipal bonds also
contributed to the Fund's performance. We invested mainly in high-quality bonds,
as we believed they offered good relative value.
In line with our conservative investment strategy, we tend to avoid derivative
securities or other exotic investment vehicles designed to leverage the
portfolio. This strategy helped reduce portfolio volatility. During the period,
the Fund had no exposure to leveraged bonds, airline bonds or bonds subject to
PORTFOLIO BREAKDOWN
5/31/06
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% OF TOTAL
LONG-TERM INVESTMENTS*
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Prerefunded 40.7%
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Subject to Government Appropriations 12.2%
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Transportation 11.9%
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Tax-Supported 8.6%
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Utilities 6.9%
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Higher Education 5.5%
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General Obligation 5.1%
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Other Revenue 3.6%
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Hospital & Health Care 3.5%
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Housing 1.4%
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Corporate-Backed 0.6%
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*Does not include short-term investments and other net assets.
Annual Report | 11
alternative minimum tax. At period-end, the Fund had about 0.6% of total
long-term investments in tobacco bonds.
The mixture of our value-oriented philosophy of investing primarily for income,
an ample supply of municipal bonds, and a relatively steep municipal yield curve
compared to Treasuries 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 MAY 31, 2006, 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,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER 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.
12 | Annual Report
Performance Summary as of 5/31/06
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 and graphs do not reflect any taxes
that a shareholder would pay on Fund dividends, capital gain distributions, if
any, or any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CLASS A (SYMBOL: FNYTX) CHANGE 5/31/06 5/31/05
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Net Asset Value (NAV) -$0.29 $11.72 $12.01
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DISTRIBUTIONS (JUNE 2005-MAY 2006)
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Dividend Income $0.5185
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CLASS B (SYMBOL: FTFBX) CHANGE 5/31/06 5/31/05
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Net Asset Value (NAV) -$0.29 $11.70 $11.99
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DISTRIBUTIONS (JUNE 2005-MAY 2006)
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Dividend Income $0.4522
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CLASS C (SYMBOL: FNYIX) CHANGE 5/31/06 5/31/05
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Net Asset Value (NAV) -$0.29 $11.71 $12.00
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DISTRIBUTIONS (JUNE 2005-MAY 2006)
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Dividend Income $0.4522
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ADVISOR CLASS (SYMBOL: FNYAX) CHANGE 5/31/06 5/31/05
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Net Asset Value (NAV) -$0.29 $11.73 $12.02
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DISTRIBUTIONS (JUNE 2005-MAY 2006)
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Dividend Income $0.5289
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Annual Report | 13
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; ADVISOR CLASS: NO SALES CHARGES. CUMULATIVE
TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE
MAXIMUM SALES CHARGES. THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN
SEVEN DAYS OF PURCHASE.
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CLASS A 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +1.95% +27.49% +73.82%
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Average Annual Total Return 2 -2.36% +4.06% +5.23%
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Avg. Ann. Total Return (6/30/06) 3 -3.33% +3.85% +5.09%
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Distribution Rate 4 4.22%
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Taxable Equivalent Distribution Rate 5 7.22%
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30-Day Standardized Yield 6 3.51%
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Taxable Equivalent Yield 5 6.00%
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CLASS B 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return 1 +1.38% +23.94% +35.27%
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Average Annual Total Return 2 -2.52% +4.05% +4.16%
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Avg. Ann. Total Return (6/30/06) 3 -3.59% +3.83% +4.05%
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Distribution Rate 4 3.85%
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Taxable Equivalent Distribution Rate 5 6.58%
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30-Day Standardized Yield 6 3.12%
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Taxable Equivalent Yield 5 5.34%
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CLASS C 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +1.38% +23.89% +64.23%
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Average Annual Total Return 2 +0.40% +4.38% +5.09%
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Avg. Ann. Total Return (6/30/06) 3 -0.61% +4.18% +4.94%
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Distribution Rate 4 3.84%
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Taxable Equivalent Distribution Rate 5 6.57%
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30-Day Standardized Yield 6 3.13%
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Taxable Equivalent Yield 5 5.35%
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ADVISOR CLASS 7 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +2.04% +28.10% +74.65%
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Average Annual Total Return 2 +2.04% +5.08% +5.73%
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Avg. Ann. Total Return (6/30/06) 3 +0.92% +4.85% +5.58%
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Distribution Rate 4 4.48%
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Taxable Equivalent Distribution Rate 5 7.66%
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30-Day Standardized Yield 6 3.78%
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Taxable Equivalent Yield 5 6.47%
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PERFORMANCE DATA 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.
14 | Annual Report
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes any current, applicable, maximum sales charge, Fund expenses,
account fees and reinvested distributions. The unmanaged index includes
reinvestment of any income or distributions. It differs from the Fund in
composition and does not pay management fees or expenses. One cannot invest
directly in an index. The Consumer Price Index (CPI), calculated by the U.S.
Bureau of Labor Statistics, is a commonly used measure of the inflation rate.
CLASS A (6/1/96-5/31/06)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
FRANKLIN NEW YORK TAX-FREE LEHMAN BROTHERS
DATE INCOME FUND - CLASS A MUNICIPAL BOND INDEX 8 CPI 8
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6/1/1996 $9,574 $10,000 $10,000
6/30/1996 $9,673 $10,109 $10,006
7/31/1996 $9,756 $10,200 $10,026
8/31/1996 $9,754 $10,198 $10,045
9/30/1996 $9,896 $10,341 $10,077
10/31/1996 $9,988 $10,458 $10,109
11/30/1996 $10,132 $10,649 $10,128
12/31/1996 $10,108 $10,604 $10,128
1/31/1997 $10,132 $10,624 $10,160
2/28/1997 $10,217 $10,722 $10,192
3/31/1997 $10,124 $10,579 $10,217
4/30/1997 $10,199 $10,667 $10,230
5/31/1997 $10,355 $10,828 $10,223
6/30/1997 $10,439 $10,943 $10,236
7/31/1997 $10,713 $11,246 $10,249
8/31/1997 $10,654 $11,141 $10,268
9/30/1997 $10,777 $11,273 $10,294
10/31/1997 $10,854 $11,346 $10,319
11/30/1997 $10,922 $11,413 $10,313
12/31/1997 $11,070 $11,579 $10,300
1/31/1998 $11,185 $11,698 $10,319
2/28/1998 $11,199 $11,702 $10,338
3/31/1998 $11,241 $11,712 $10,358
4/30/1998 $11,208 $11,659 $10,377
5/31/1998 $11,373 $11,844 $10,396
6/30/1998 $11,434 $11,891 $10,409
7/31/1998 $11,458 $11,920 $10,421
8/31/1998 $11,606 $12,105 $10,434
9/30/1998 $11,735 $12,255 $10,447
10/31/1998 $11,748 $12,255 $10,473
11/30/1998 $11,781 $12,298 $10,473
12/31/1998 $11,799 $12,329 $10,466
1/31/1999 $11,910 $12,476 $10,492
2/28/1999 $11,894 $12,421 $10,504
3/31/1999 $11,926 $12,438 $10,536
4/30/1999 $11,958 $12,469 $10,613
5/31/1999 $11,911 $12,397 $10,613
6/30/1999 $11,763 $12,219 $10,613
7/31/1999 $11,795 $12,263 $10,645
8/31/1999 $11,666 $12,165 $10,670
9/30/1999 $11,659 $12,170 $10,722
10/31/1999 $11,508 $12,038 $10,741
11/30/1999 $11,624 $12,166 $10,747
12/31/1999 $11,529 $12,076 $10,747
1/31/2000 $11,480 $12,023 $10,779
2/29/2000 $11,618 $12,163 $10,843
3/31/2000 $11,874 $12,428 $10,932
4/30/2000 $11,802 $12,355 $10,939
5/31/2000 $11,763 $12,291 $10,951
6/30/2000 $12,032 $12,616 $11,009
7/31/2000 $12,164 $12,792 $11,034
8/31/2000 $12,328 $12,989 $11,034
9/30/2000 $12,287 $12,922 $11,092
10/31/2000 $12,388 $13,063 $11,111
11/30/2000 $12,489 $13,161 $11,117
12/31/2000 $12,766 $13,487 $11,111
1/31/2001 $12,846 $13,620 $11,181
2/28/2001 $12,915 $13,663 $11,226
3/31/2001 $13,027 $13,786 $11,252
4/30/2001 $12,950 $13,637 $11,296
5/31/2001 $13,053 $13,783 $11,347
6/30/2001 $13,144 $13,876 $11,367
7/31/2001 $13,314 $14,081 $11,335
8/31/2001 $13,486 $14,313 $11,335
9/30/2001 $13,407 $14,265 $11,386
10/31/2001 $13,534 $14,435 $11,347
11/30/2001 $13,465 $14,313 $11,328
12/31/2001 $13,360 $14,178 $11,284
1/31/2002 $13,557 $14,424 $11,309
2/28/2002 $13,696 $14,598 $11,354
3/31/2002 $13,496 $14,312 $11,418
4/30/2002 $13,671 $14,591 $11,481
5/31/2002 $13,777 $14,680 $11,481
6/30/2002 $13,894 $14,835 $11,488
7/31/2002 $14,059 $15,026 $11,501
8/31/2002 $14,225 $15,207 $11,539
9/30/2002 $14,535 $15,540 $11,558
10/31/2002 $14,328 $15,282 $11,577
11/30/2002 $14,276 $15,218 $11,577
12/31/2002 $14,577 $15,540 $11,552
1/31/2003 $14,537 $15,500 $11,603
2/28/2003 $14,705 $15,717 $11,692
3/31/2003 $14,725 $15,726 $11,762
4/30/2003 $14,844 $15,830 $11,737
5/31/2003 $15,162 $16,201 $11,718
6/30/2003 $15,108 $16,132 $11,731
7/31/2003 $14,590 $15,568 $11,743
8/31/2003 $14,699 $15,684 $11,788
9/30/2003 $15,059 $16,145 $11,826
10/31/2003 $15,029 $16,063 $11,814
11/30/2003 $15,177 $16,231 $11,782
12/31/2003 $15,286 $16,365 $11,769
1/31/2004 $15,382 $16,459 $11,826
2/29/2004 $15,594 $16,707 $11,890
3/31/2004 $15,548 $16,649 $11,967
4/30/2004 $15,193 $16,254 $12,005
5/31/2004 $15,121 $16,195 $12,075
6/30/2004 $15,154 $16,254 $12,114
7/31/2004 $15,344 $16,468 $12,095
8/31/2004 $15,600 $16,798 $12,101
9/30/2004 $15,712 $16,887 $12,126
10/31/2004 $15,851 $17,033 $12,190
11/30/2004 $15,725 $16,892 $12,197
12/31/2004 $15,931 $17,098 $12,152
1/31/2005 $16,084 $17,258 $12,178
2/28/2005 $16,064 $17,201 $12,248
3/31/2005 $16,002 $17,092 $12,344
4/30/2005 $16,211 $17,362 $12,427
5/31/2005 $16,324 $17,485 $12,414
6/30/2005 $16,438 $17,593 $12,420
7/31/2005 $16,374 $17,514 $12,478
8/31/2005 $16,530 $17,690 $12,542
9/30/2005 $16,425 $17,571 $12,695
10/31/2005 $16,347 $17,465 $12,720
11/30/2005 $16,407 $17,548 $12,618
12/31/2005 $16,536 $17,699 $12,567
1/31/2006 $16,568 $17,747 $12,663
2/28/2006 $16,685 $17,866 $12,688
3/31/2006 $16,591 $17,743 $12,759
4/30/2006 $16,595 $17,737 $12,867
5/31/2006 $16,642 $17,816 $12,931
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------------
CLASS A 5/31/06
- -----------------------------------------------
1-Year -2.36%
- -----------------------------------------------
5-Year +4.06%
- -----------------------------------------------
10-Year +5.23%
- -----------------------------------------------
CLASS B (1/1/99-5/31/06)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
FRANKLIN NEW YORK TAX-FREE LEHMAN BROTHERS
DATE INCOME FUND - CLASS B MUNICIPAL BOND INDEX 8 CPI 8
- --------------------------------------------------------------------------------
1/1/1999 $10,000 $10,000 $10,000
1/31/1999 $10,086 $10,119 $10,024
2/28/1999 $10,067 $10,075 $10,037
3/31/1999 $10,090 $10,089 $10,067
4/30/1999 $10,106 $10,114 $10,140
5/31/1999 $10,062 $10,055 $10,140
6/30/1999 $9,932 $9,911 $10,140
7/31/1999 $9,955 $9,947 $10,171
8/31/1999 $9,841 $9,867 $10,195
9/30/1999 $9,830 $9,871 $10,244
10/31/1999 $9,698 $9,764 $10,262
11/30/1999 $9,790 $9,868 $10,268
12/31/1999 $9,706 $9,794 $10,268
1/31/2000 $9,669 $9,752 $10,299
2/29/2000 $9,781 $9,865 $10,360
3/31/2000 $9,983 $10,081 $10,445
4/30/2000 $9,927 $10,021 $10,451
5/31/2000 $9,880 $9,969 $10,464
6/30/2000 $10,102 $10,233 $10,519
7/31/2000 $10,217 $10,375 $10,543
8/31/2000 $10,350 $10,535 $10,543
9/30/2000 $10,302 $10,481 $10,598
10/31/2000 $10,391 $10,595 $10,616
11/30/2000 $10,462 $10,675 $10,622
12/31/2000 $10,690 $10,939 $10,616
1/31/2001 $10,751 $11,047 $10,683
2/28/2001 $10,804 $11,082 $10,726
3/31/2001 $10,893 $11,182 $10,750
4/30/2001 $10,824 $11,060 $10,793
5/31/2001 $10,914 $11,179 $10,842
6/30/2001 $10,976 $11,254 $10,860
7/31/2001 $11,114 $11,421 $10,830
8/31/2001 $11,252 $11,609 $10,830
9/30/2001 $11,181 $11,570 $10,879
10/31/2001 $11,282 $11,708 $10,842
11/30/2001 $11,219 $11,609 $10,824
12/31/2001 $11,126 $11,499 $10,781
1/31/2002 $11,285 $11,699 $10,805
2/28/2002 $11,396 $11,840 $10,848
3/31/2002 $11,224 $11,608 $10,909
4/30/2002 $11,365 $11,835 $10,970
5/31/2002 $11,447 $11,907 $10,970
6/30/2002 $11,539 $12,033 $10,976
7/31/2002 $11,671 $12,187 $10,988
8/31/2002 $11,803 $12,334 $11,025
9/30/2002 $12,056 $12,604 $11,043
10/31/2002 $11,878 $12,395 $11,062
11/30/2002 $11,829 $12,343 $11,062
12/31/2002 $12,073 $12,604 $11,037
1/31/2003 $12,034 $12,572 $11,086
2/28/2003 $12,168 $12,748 $11,171
3/31/2003 $12,179 $12,755 $11,239
4/30/2003 $12,272 $12,840 $11,214
5/31/2003 $12,530 $13,140 $11,196
6/30/2003 $12,480 $13,084 $11,208
7/31/2003 $12,046 $12,627 $11,220
8/31/2003 $12,130 $12,721 $11,263
9/30/2003 $12,422 $13,095 $11,300
10/31/2003 $12,392 $13,029 $11,287
11/30/2003 $12,508 $13,165 $11,257
12/31/2003 $12,591 $13,274 $11,245
1/31/2004 $12,665 $13,350 $11,300
2/29/2004 $12,823 $13,551 $11,361
3/31/2004 $12,780 $13,503 $11,434
4/30/2004 $12,491 $13,184 $11,470
5/31/2004 $12,416 $13,136 $11,538
6/30/2004 $12,448 $13,184 $11,574
7/31/2004 $12,588 $13,357 $11,556
8/31/2004 $12,803 $13,625 $11,562
9/30/2004 $12,879 $13,697 $11,586
10/31/2004 $12,987 $13,815 $11,647
11/30/2004 $12,877 $13,701 $11,653
12/31/2004 $13,040 $13,868 $11,611
1/31/2005 $13,171 $13,998 $11,635
2/28/2005 $13,137 $13,951 $11,702
3/31/2005 $13,081 $13,863 $11,794
4/30/2005 $13,256 $14,082 $11,873
5/31/2005 $13,343 $14,182 $11,861
6/30/2005 $13,430 $14,270 $11,867
7/31/2005 $13,361 $14,205 $11,922
8/31/2005 $13,482 $14,348 $11,983
9/30/2005 $13,401 $14,252 $12,129
10/31/2005 $13,331 $14,165 $12,154
11/30/2005 $13,362 $14,233 $12,056
12/31/2005 $13,461 $14,356 $12,007
1/31/2006 $13,481 $14,394 $12,099
2/28/2006 $13,582 $14,491 $12,123
3/31/2006 $13,498 $14,391 $12,190
4/30/2006 $13,495 $14,386 $12,294
5/31/2006 $13,527 $14,450 $12,355
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------------
CLASS B 5/31/06
- -----------------------------------------------
1-Year -2.52%
- -----------------------------------------------
5-Year +4.05%
- -----------------------------------------------
Since Inception (1/1/99) +4.16%
- -----------------------------------------------
Annual Report | 15
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------------
CLASS C 5/31/06
- -----------------------------------------------
1-Year +0.40%
- -----------------------------------------------
5-Year +4.38%
- -----------------------------------------------
10-Year +5.09%
- -----------------------------------------------
CLASS C (6/1/96-5/31/06)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
FRANKLIN NEW YORK TAX-FREE LEHMAN BROTHERS
DATE INCOME FUND - CLASS C MUNICIPAL BOND INDEX 8 CPI 8
- --------------------------------------------------------------------------------
6/1/1996 $10,000 $10,000 $10,000
6/30/1996 $10,107 $10,109 $10,006
7/31/1996 $10,180 $10,200 $10,026
8/31/1996 $10,173 $10,198 $10,045
9/30/1996 $10,316 $10,341 $10,077
10/31/1996 $10,407 $10,458 $10,109
11/30/1996 $10,552 $10,649 $10,128
12/31/1996 $10,522 $10,604 $10,128
1/31/1997 $10,542 $10,624 $10,160
2/28/1997 $10,624 $10,722 $10,192
3/31/1997 $10,523 $10,579 $10,217
4/30/1997 $10,605 $10,667 $10,230
5/31/1997 $10,752 $10,828 $10,223
6/30/1997 $10,844 $10,943 $10,236
7/31/1997 $11,123 $11,246 $10,249
8/31/1997 $11,047 $11,141 $10,268
9/30/1997 $11,178 $11,273 $10,294
10/31/1997 $11,244 $11,346 $10,319
11/30/1997 $11,309 $11,413 $10,313
12/31/1997 $11,466 $11,579 $10,300
1/31/1998 $11,570 $11,698 $10,319
2/28/1998 $11,588 $11,702 $10,338
3/31/1998 $11,626 $11,712 $10,358
4/30/1998 $11,587 $11,659 $10,377
5/31/1998 $11,741 $11,844 $10,396
6/30/1998 $11,799 $11,891 $10,409
7/31/1998 $11,828 $11,920 $10,421
8/31/1998 $11,975 $12,105 $10,434
9/30/1998 $12,092 $12,255 $10,447
10/31/1998 $12,109 $12,255 $10,473
11/30/1998 $12,127 $12,298 $10,473
12/31/1998 $12,150 $12,329 $10,466
1/31/1999 $12,258 $12,476 $10,492
2/28/1999 $12,234 $12,421 $10,504
3/31/1999 $12,251 $12,438 $10,536
4/30/1999 $12,289 $12,469 $10,613
5/31/1999 $12,234 $12,397 $10,613
6/30/1999 $12,077 $12,219 $10,613
7/31/1999 $12,105 $12,263 $10,645
8/31/1999 $11,966 $12,165 $10,670
9/30/1999 $11,953 $12,170 $10,722
10/31/1999 $11,793 $12,038 $10,741
11/30/1999 $11,906 $12,166 $10,747
12/31/1999 $11,803 $12,076 $10,747
1/31/2000 $11,747 $12,023 $10,779
2/29/2000 $11,883 $12,163 $10,843
3/31/2000 $12,139 $12,428 $10,932
4/30/2000 $12,060 $12,355 $10,939
5/31/2000 $12,014 $12,291 $10,951
6/30/2000 $12,283 $12,616 $11,009
7/31/2000 $12,412 $12,792 $11,034
8/31/2000 $12,573 $12,989 $11,034
9/30/2000 $12,515 $12,922 $11,092
10/31/2000 $12,623 $13,063 $11,111
11/30/2000 $12,709 $13,161 $11,117
12/31/2000 $12,985 $13,487 $11,111
1/31/2001 $13,071 $13,620 $11,181
2/28/2001 $13,123 $13,663 $11,226
3/31/2001 $13,232 $13,786 $11,252
4/30/2001 $13,159 $13,637 $11,296
5/31/2001 $13,256 $13,783 $11,347
6/30/2001 $13,331 $13,876 $11,367
7/31/2001 $13,499 $14,081 $11,335
8/31/2001 $13,678 $14,313 $11,335
9/30/2001 $13,580 $14,265 $11,386
10/31/2001 $13,714 $14,435 $11,347
11/30/2001 $13,638 $14,313 $11,328
12/31/2001 $13,525 $14,178 $11,284
1/31/2002 $13,717 $14,424 $11,309
2/28/2002 $13,839 $14,598 $11,354
3/31/2002 $13,642 $14,312 $11,418
4/30/2002 $13,813 $14,591 $11,481
5/31/2002 $13,901 $14,680 $11,481
6/30/2002 $14,025 $14,835 $11,488
7/31/2002 $14,173 $15,026 $11,501
8/31/2002 $14,346 $15,207 $11,539
9/30/2002 $14,653 $15,540 $11,558
10/31/2002 $14,438 $15,282 $11,577
11/30/2002 $14,379 $15,218 $11,577
12/31/2002 $14,662 $15,540 $11,552
1/31/2003 $14,627 $15,500 $11,603
2/28/2003 $14,777 $15,717 $11,692
3/31/2003 $14,803 $15,726 $11,762
4/30/2003 $14,916 $15,830 $11,737
5/31/2003 $15,228 $16,201 $11,718
6/30/2003 $15,154 $16,132 $11,731
7/31/2003 $14,641 $15,568 $11,743
8/31/2003 $14,742 $15,684 $11,788
9/30/2003 $15,084 $16,145 $11,826
10/31/2003 $15,060 $16,063 $11,814
11/30/2003 $15,188 $16,231 $11,782
12/31/2003 $15,302 $16,365 $11,769
1/31/2004 $15,391 $16,459 $11,826
2/29/2004 $15,583 $16,707 $11,890
3/31/2004 $15,531 $16,649 $11,967
4/30/2004 $15,182 $16,254 $12,005
5/31/2004 $15,090 $16,195 $12,075
6/30/2004 $15,116 $16,254 $12,114
7/31/2004 $15,298 $16,468 $12,095
8/31/2004 $15,547 $16,798 $12,101
9/30/2004 $15,652 $16,887 $12,126
10/31/2004 $15,783 $17,033 $12,190
11/30/2004 $15,650 $16,892 $12,197
12/31/2004 $15,848 $17,098 $12,152
1/31/2005 $15,993 $17,258 $12,178
2/28/2005 $15,964 $17,201 $12,248
3/31/2005 $15,895 $17,092 $12,344
4/30/2005 $16,108 $17,362 $12,427
5/31/2005 $16,200 $17,485 $12,414
6/30/2005 $16,305 $17,593 $12,420
7/31/2005 $16,235 $17,514 $12,478
8/31/2005 $16,382 $17,690 $12,542
9/30/2005 $16,283 $17,571 $12,695
10/31/2005 $16,198 $17,465 $12,720
11/30/2005 $16,236 $17,548 $12,618
12/31/2005 $16,357 $17,699 $12,567
1/31/2006 $16,381 $17,747 $12,663
2/28/2006 $16,489 $17,866 $12,688
3/31/2006 $16,402 $17,743 $12,759
4/30/2006 $16,398 $17,737 $12,867
5/31/2006 $16,423 $17,816 $12,931
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------------
ADVISOR CLASS 7 5/31/06
- -----------------------------------------------
1-Year +2.04%
- -----------------------------------------------
5-Year +5.08%
- -----------------------------------------------
10-Year +5.73%
- -----------------------------------------------
ADVISOR CLASS (6/1/96-5/31/06) 7
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
FRANKLIN NEW YORK TAX-FREE LEHMAN BROTHERS
DATE INCOME FUND - CLASS ADVISOR MUNICIPAL BOND INDEX 8 CPI 8
- --------------------------------------------------------------------------------
6/1/1996 $10,000 $10,000 $10,000
6/30/1996 $10,103 $10,109 $10,006
7/31/1996 $10,190 $10,200 $10,026
8/31/1996 $10,188 $10,198 $10,045
9/30/1996 $10,337 $10,341 $10,077
10/31/1996 $10,432 $10,458 $10,109
11/30/1996 $10,582 $10,649 $10,128
12/31/1996 $10,558 $10,604 $10,128
1/31/1997 $10,610 $10,624 $10,160
2/28/1997 $10,698 $10,722 $10,192
3/31/1997 $10,602 $10,579 $10,217
4/30/1997 $10,680 $10,667 $10,230
5/31/1997 $10,843 $10,828 $10,223
6/30/1997 $10,932 $10,943 $10,236
7/31/1997 $11,218 $11,246 $10,249
8/31/1997 $11,157 $11,141 $10,268
9/30/1997 $11,284 $11,273 $10,294
10/31/1997 $11,366 $11,346 $10,319
11/30/1997 $11,437 $11,413 $10,313
12/31/1997 $11,591 $11,579 $10,300
1/31/1998 $11,713 $11,698 $10,319
2/28/1998 $11,727 $11,702 $10,338
3/31/1998 $11,771 $11,712 $10,358
4/30/1998 $11,737 $11,659 $10,377
5/31/1998 $11,909 $11,844 $10,396
6/30/1998 $11,973 $11,891 $10,409
7/31/1998 $11,998 $11,920 $10,421
8/31/1998 $12,154 $12,105 $10,434
9/30/1998 $12,288 $12,255 $10,447
10/31/1998 $12,302 $12,255 $10,473
11/30/1998 $12,336 $12,298 $10,473
12/31/1998 $12,355 $12,329 $10,466
1/31/1999 $12,471 $12,476 $10,492
2/28/1999 $12,454 $12,421 $10,504
3/31/1999 $12,488 $12,438 $10,536
4/30/1999 $12,522 $12,469 $10,613
5/31/1999 $12,472 $12,397 $10,613
6/30/1999 $12,317 $12,219 $10,613
7/31/1999 $12,351 $12,263 $10,645
8/31/1999 $12,216 $12,165 $10,670
9/30/1999 $12,209 $12,170 $10,722
10/31/1999 $12,050 $12,038 $10,741
11/30/1999 $12,172 $12,166 $10,747
12/31/1999 $12,072 $12,076 $10,747
1/31/2000 $12,020 $12,023 $10,779
2/29/2000 $12,167 $12,163 $10,843
3/31/2000 $12,433 $12,428 $10,932
4/30/2000 $12,359 $12,355 $10,939
5/31/2000 $12,317 $12,291 $10,951
6/30/2000 $12,600 $12,616 $11,009
7/31/2000 $12,737 $12,792 $11,034
8/31/2000 $12,910 $12,989 $11,034
9/30/2000 $12,866 $12,922 $11,092
10/31/2000 $12,972 $13,063 $11,111
11/30/2000 $13,078 $13,161 $11,117
12/31/2000 $13,368 $13,487 $11,111
1/31/2001 $13,451 $13,620 $11,181
2/28/2001 $13,523 $13,663 $11,226
3/31/2001 $13,641 $13,786 $11,252
4/30/2001 $13,561 $13,637 $11,296
5/31/2001 $13,668 $13,783 $11,347
6/30/2001 $13,764 $13,876 $11,367
7/31/2001 $13,942 $14,081 $11,335
8/31/2001 $14,122 $14,313 $11,335
9/30/2001 $14,038 $14,265 $11,386
10/31/2001 $14,184 $14,435 $11,347
11/30/2001 $14,113 $14,313 $11,328
12/31/2001 $14,004 $14,178 $11,284
1/31/2002 $14,211 $14,424 $11,309
2/28/2002 $14,345 $14,598 $11,354
3/31/2002 $14,149 $14,312 $11,418
4/30/2002 $14,334 $14,591 $11,481
5/31/2002 $14,432 $14,680 $11,481
6/30/2002 $14,557 $14,835 $11,488
7/31/2002 $14,730 $15,026 $11,501
8/31/2002 $14,906 $15,207 $11,539
9/30/2002 $15,231 $15,540 $11,558
10/31/2002 $15,029 $15,282 $11,577
11/30/2002 $14,975 $15,218 $11,577
12/31/2002 $15,278 $15,540 $11,552
1/31/2003 $15,250 $15,500 $11,603
2/28/2003 $15,415 $15,717 $11,692
3/31/2003 $15,450 $15,726 $11,762
4/30/2003 $15,576 $15,830 $11,737
5/31/2003 $15,911 $16,201 $11,718
6/30/2003 $15,842 $16,132 $11,731
7/31/2003 $15,314 $15,568 $11,743
8/31/2003 $15,428 $15,684 $11,788
9/30/2003 $15,795 $16,145 $11,826
10/31/2003 $15,778 $16,063 $11,814
11/30/2003 $15,920 $16,231 $11,782
12/31/2003 $16,048 $16,365 $11,769
1/31/2004 $16,151 $16,459 $11,826
2/29/2004 $16,360 $16,707 $11,890
3/31/2004 $16,315 $16,649 $11,967
4/30/2004 $15,956 $16,254 $12,005
5/31/2004 $15,869 $16,195 $12,075
6/30/2004 $15,918 $16,254 $12,114
7/31/2004 $16,105 $16,468 $12,095
8/31/2004 $16,388 $16,798 $12,101
9/30/2004 $16,494 $16,887 $12,126
10/31/2004 $16,641 $17,033 $12,190
11/30/2004 $16,510 $16,892 $12,197
12/31/2004 $16,727 $17,098 $12,152
1/31/2005 $16,904 $17,258 $12,178
2/28/2005 $16,869 $17,201 $12,248
3/31/2005 $16,805 $17,092 $12,344
4/30/2005 $17,040 $17,362 $12,427
5/31/2005 $17,160 $17,485 $12,414
6/30/2005 $17,282 $17,593 $12,420
7/31/2005 $17,201 $17,514 $12,478
8/31/2005 $17,367 $17,690 $12,542
9/30/2005 $17,272 $17,571 $12,695
10/31/2005 $17,190 $17,465 $12,720
11/30/2005 $17,240 $17,548 $12,618
12/31/2005 $17,378 $17,699 $12,567
1/31/2006 $17,413 $17,747 $12,663
2/28/2006 $17,551 $17,866 $12,688
3/31/2006 $17,453 $17,743 $12,759
4/30/2006 $17,459 $17,737 $12,867
5/31/2006 $17,465 $17,816 $12,931
16 | Annual Report
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 GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST
RATES. THUS, AS THE PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST
RATES, THE FUND'S SHARE PRICE MAY DECLINE. 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.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
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 May
dividend and the maximum offering price (NAV for Classes B, C and Advisor) per
share on 5/31/06.
5. Taxable equivalent distribution rate and yield assume the published rates as
of 12/29/05 for the maximum combined effective federal and New York state and
City personal income tax rate of 41.53%, 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 5/31/06.
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 +24.71% and +4.85%.
8. Source: Standard & Poor's Micropal. 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 $7 million and be issued as part
of a transaction of at least $75 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.
Annual Report | 17
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.
18 | Annual Report
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 12/1/05 VALUE 5/31/06 PERIOD* 12/1/05-5/31/06
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,014.30 $2.96
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.99 $2.97
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,012.40 $5.77
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.79
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,011.50 $5.77
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.79
- ------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,015.60 $2.51
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.44 $2.52
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the annualized expense ratio for each class (A: 0.59%; B:
1.15%; C: 1.15%; and Advisor: 0.50%), multiplied by the average account value
over the period, multiplied by 182/365 to reflect the one-half year period.
Annual Report | 19
Franklin New York Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------
YEAR ENDED MAY 31,
CLASS A 2006 2005 2004 2003 2002
--------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 12.01 $ 11.64 $ 12.22 $ 11.65 $ 11.62
--------------------------------------------------------------------------
Income from investment operations:
Net investment income a .......................... 0.52 0.54 0.55 0.57 0.59
Net realized and unrealized gains (losses) ....... (0.29) 0.37 (0.58) 0.57 0.04
--------------------------------------------------------------------------
Total from investment operations .................. 0.23 0.91 (0.03) 1.14 0.63
--------------------------------------------------------------------------
Less distributions from net investment income ..... (0.52) (0.54) (0.55) (0.57) (0.60)
--------------------------------------------------------------------------
Redemption fees ................................... -- c -- c -- -- --
--------------------------------------------------------------------------
Net asset value, end of year ...................... $ 11.72 $ 12.01 $ 11.64 $ 12.22 $ 11.65
==========================================================================
Total return b .................................... 1.95% 7.95% (0.27)% 10.06% 5.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................... $4,351,378 $4,497,924 $4,429,312 $4,828,889 $4,609,318
Ratio to average net assets:
Expenses ......................................... 0.60% 0.60% 0.60% 0.60% 0.59%
Net investment income ............................ 4.41% 4.50% 4.62% 4.81% 5.09%
Portfolio turnover rate ........................... 9.71% 10.97% 10.35% 13.44% 9.57%
a Based on average daily shares outstanding.
b Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
c Amount is less than $0.01 per share.
20 | See notes to financial statements. | Annual Report
Franklin New York Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
------------------------------------------------------------------
YEAR ENDED MAY 31,
CLASS B 2006 2005 2004 2003 2002
------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 11.99 $ 11.61 $ 12.20 $ 11.63 $ 11.61
------------------------------------------------------------------
Income from investment operations:
Net investment income a ........................... 0.45 0.47 0.48 0.50 0.53
Net realized and unrealized gains (losses) ........ (0.29) 0.38 (0.59) 0.57 0.03
------------------------------------------------------------------
Total from investment operations ................... 0.16 0.85 (0.11) 1.07 0.56
------------------------------------------------------------------
Less distributions from net investment income ...... (0.45) (0.47) (0.48) (0.50) (0.54)
------------------------------------------------------------------
Redemption fees .................................... -- c -- c -- -- --
------------------------------------------------------------------
Net asset value, end of year ....................... $ 11.70 $ 11.99 $ 11.61 $ 12.20 $ 11.63
==================================================================
Total return b ..................................... 1.38% 7.46% (0.91)% 9.46% 4.88%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $207,209 $231,020 $231,664 $233,767 $160,194
Ratio to average net assets:
Expenses .......................................... 1.16% 1.16% 1.16% 1.17% 1.16%
Net investment income ............................. 3.85% 3.94% 4.06% 4.24% 4.53%
Portfolio turnover rate ............................ 9.71% 10.97% 10.35% 13.44% 9.57%
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charges, if
applicable.
c Amount is less than $0.01 per share.
Annual Report | See notes to financial statements. | 21
Franklin New York Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
------------------------------------------------------------------
YEAR ENDED MAY 31,
CLASS C 2006 2005 2004 2003 2002
------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 12.00 $ 11.63 $ 12.22 $ 11.64 $ 11.62
------------------------------------------------------------------
Income from investment operations:
Net investment income a ........................... 0.45 0.47 0.48 0.50 0.53
Net realized and unrealized gains (losses) ........ (0.29) 0.37 (0.59) 0.58 0.03
------------------------------------------------------------------
Total from investment operations ................... 0.16 0.84 (0.11) 1.08 0.56
------------------------------------------------------------------
Less distributions from net investment income ...... (0.45) (0.47) (0.48) (0.50) (0.54)
------------------------------------------------------------------
Redemption fees .................................... -- c -- c -- -- --
------------------------------------------------------------------
Net asset value, end of year ....................... $ 11.71 $ 12.00 $ 11.63 $ 12.22 $ 11.64
==================================================================
Total return b ..................................... 1.38% 7.36% (0.91)% 9.55% 4.86%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $245,444 $235,805 $231,051 $242,965 $188,642
Ratio to average net assets:
Expenses .......................................... 1.16% 1.16% 1.16% 1.17% 1.16%
Net investment income ............................. 3.85% 3.94% 4.06% 4.24% 4.53%
Portfolio turnover rate ............................ 9.71% 10.97% 10.35% 13.44% 9.57%
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charges, if
applicable.
c Amount is less than $0.01 per share.
22 | See notes to financial statements. | Annual Report
Franklin New York Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
------------------------------------------------------------------
YEAR ENDED MAY 31,
ADVISOR CLASS 2006 2005 2004 2003 2002 d
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 12.02 $ 11.64 $ 12.23 $ 11.65 $ 11.68
---------------------------------------------------------------
Income from investment operations:
Net investment income a ........................... 0.53 0.55 0.56 0.58 0.40
Net realized and unrealized gains (losses) ........ (0.29) 0.38 (0.59) 0.58 (0.08)
---------------------------------------------------------------
Total from investment operations ................... 0.24 0.93 (0.03) 1.16 0.32
---------------------------------------------------------------
Less distributions from net investment income ...... (0.53) (0.55) (0.56) (0.58) (0.35)
---------------------------------------------------------------
Redemption fees .................................... -- c -- c -- -- --
---------------------------------------------------------------
Net asset value, end of year ....................... $ 11.73 $ 12.02 $ 11.64 $ 12.23 $ 11.65
===============================================================
Total return b ..................................... 2.04% 8.14% (0.26)% 10.24% 2.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $44,308 $30,487 $22,470 $18,278 $14,054
Ratios to average net assets:
Expenses .......................................... 0.51% 0.51% 0.51% 0.52% 0.51% e
Net investment income ............................. 4.50% 4.59% 4.71% 4.89% 5.16% e
Portfolio turnover rate ............................ 9.71% 10.97% 10.35% 13.44% 9.57%
a Based on average daily shares outstanding.
b Total return is not annualized for period less than one year.
c Amount is less than $0.01 per share.
d For the period October 1, 2001 (effective date) to May 31, 2002.
e Annualized.
Annual Report | See notes to financial statements. | 23
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS 97.4%
NEW YORK 96.7%
Albany Housing Authority Limited Obligation Revenue, Refunding, 6.25%, 10/01/12 ................. $ 5,250,000 $ 5,347,283
Albany IDA Civic Facility Revenue,
Albany Medical Center Project, 6.00%, 5/01/19 ................................................ 1,270,000 1,294,168
Albany Medical Center Project, 6.00%, 5/01/29 ................................................ 1,460,000 1,481,535
St. Rose Project, Series A, AMBAC Insured, 5.375%, 7/01/31 ................................... 2,750,000 2,917,118
Albany Parking Authority Revenue, Refunding, Series A, 5.625%,
7/15/20 ...................................................................................... 1,250,000 1,326,988
7/15/25 ...................................................................................... 1,000,000 1,064,900
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 1,499,662
Series A, AMBAC Insured, 5.25%, 8/01/31 ..................................................... 5,055,000 5,344,601
Series B, AMBAC Insured, 5.625%, 8/01/20 .................................................... 1,690,000 1,825,470
Series B, AMBAC Insured, 5.75%, 8/01/25 ..................................................... 3,050,000 3,307,725
Series B, AMBAC Insured, 5.75%, 8/01/30 ..................................................... 3,440,000 3,723,766
Series B, AMBAC Insured, 5.25%, 8/01/31 ..................................................... 1,000,000 1,057,290
Battery Park City Authority Revenue, Series A, 5.00%,
11/01/24 ..................................................................................... 9,000,000 9,366,660
11/01/25 ..................................................................................... 12,000,000 12,504,240
11/01/26 ..................................................................................... 14,250,000 14,839,665
Bethany Retirement Home Inc. Mortgage Loan Revenue, FHA Insured, 7.50%, 2/01/34 ................. 8,160,000 8,209,368
Clinton County COP, Correctional Facilities Project, 8.125%, 8/01/17 ............................ 4,820,000 5,646,389
Dutchess County IDA Civic Facility Revenue, Vassar College Project, 5.35%, 9/01/40 .............. 16,000,000 16,872,640
Franklin County COP, Court House Redevelopment Project, 8.125%, 8/01/06 ......................... 1,540,000 1,542,233
Geneva IDA Civic Facilities Revenue, Colleges of the Seneca Project, AMBAC Insured,
5.00%, 9/01/21 ............................................................................... 2,835,000 2,953,418
5.125%, 9/01/31 .............................................................................. 5,045,000 5,253,510
Hempstead Town IDA Civic Facility Revenue, Adelphi University Civic Facility, 5.00%,
10/01/30 ..................................................................................... 3,000,000 3,058,020
10/01/35 ..................................................................................... 1,500,000 1,523,355
Ilion Elderly Housing Corp. Mortgage Revenue, 7.25%, 7/01/09 .................................... 870,000 871,549
Liberty Development Corp. Revenue, Goldman Sachs Headquarters, 5.25%, 10/01/35 .................. 25,000,000 27,090,750
Long Island Power Authority Electric System Revenue,
General, Refunding, Series A, FSA Insured, 5.00%, 12/01/18 ................................... 10,000,000 10,306,900
General, Refunding, Series A, FSA Insured, 5.125%, 12/01/22 .................................. 19,040,000 19,603,013
General, Series A, AMBAC Insured, Pre-Refunded, 5.25%, 12/01/26 .............................. 5,000,000 5,204,500
General, Series A, FSA Insured, Pre-Refunded, 5.125%, 12/01/22 ............................... 9,170,000 9,523,228
General, Series A, MBIA Insured, Pre-Refunded, 5.75%, 12/01/24 ............................... 15,060,000 15,819,325
General, Series A, MBIA Insured, Pre-Refunded, 5.25%, 12/01/26 ............................... 9,000,000 9,368,100
General, Series A, Pre-Refunded, 5.75%, 12/01/24 ............................................. 15,000,000 15,756,300
General, Series B, 5.00%, 12/01/35 ........................................................... 5,000,000 5,122,450
Series A, AMBAC Insured, 5.00%, 9/01/29 ...................................................... 24,000,000 24,750,240
Series A, AMBAC Insured, 5.00%, 9/01/34 ...................................................... 20,670,000 21,287,413
Madison County IDA Civic Facility Revenue, Colgate University Project,
Series B, 5.00%, 7/01/33 ....................................................................... 2,000,000 2,045,340
Middleburg Central School District GO, FGIC Insured,
4.60%, 8/15/17 ............................................................................... 1,045,000 1,073,267
4.625%, 8/15/18 .............................................................................. 1,155,000 1,184,637
24 | Annual Report
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
Middleburg Central School District GO, FGIC Insured, (continued)
4.625%, 8/15/19 .............................................................................. $ 1,210,000 $ 1,237,721
4.75%, 8/15/20 ............................................................................... 1,270,000 1,304,887
4.75%, 8/15/21 ............................................................................... 1,330,000 1,365,072
Monroe County IDAR, Civic Facilities, De Paul Community Facilities, 6.50%, 2/01/24 .............. 1,285,000 1,289,703
Monroe County Water Authority Water Revenue,
5.15%, 8/01/22 ............................................................................... 1,000,000 1,048,790
5.25%, 8/01/36 ............................................................................... 2,250,000 2,353,253
Montgomery County IDA Lease Revenue, Hamilton Fulton Montgomery Board of Cooperative
Educational Services Project, Series 2004A, XLCA Insured, 5.00%,
7/01/29 ...................................................................................... 5,710,000 5,862,343
7/01/34 ...................................................................................... 3,000,000 3,084,120
MTA Commuter Facilities Revenue,
Series 8, Pre-Refunded, 5.50%, 7/01/21 ....................................................... 5,000,000 5,509,650
Series A, FGIC Insured, Pre-Refunded, 5.25%, 7/01/28 ......................................... 8,655,000 9,282,401
Series A, MBIA Insured, Pre-Refunded, 5.625%, 7/01/27 ........................................ 10,000,000 10,449,900
Series A, Pre-Refunded, 6.00%, 7/01/24 ....................................................... 5,575,000 5,953,988
Series A, Pre-Refunded, 5.25%, 7/01/28 ....................................................... 18,300,000 19,626,567
Series A, Pre-Refunded, 6.125%, 7/01/29 ...................................................... 9,625,000 10,313,957
Series C-1, FGIC Insured, Pre-Refunded, 5.375%, 7/01/27 ...................................... 19,100,000 20,054,427
Series R, Pre-Refunded, 5.50%, 7/01/17 ....................................................... 2,000,000 2,221,500
MTA Dedicated Tax Fund Revenue,
Refunding, Series A, 5.00%, 11/15/30 ......................................................... 25,000,000 25,565,500
Series A, FGIC Insured, Pre-Refunded, 6.00%, 4/01/30 ......................................... 27,260,000 29,514,402
Series A, FGIC Insured, Pre-Refunded, 5.00%, 11/15/31 ........................................ 39,685,000 42,166,900
Series A, FSA Insured, 5.00%, 11/15/28 ....................................................... 41,575,000 42,913,299
Series A, FSA Insured, 5.00%, 11/15/32 ....................................................... 71,685,000 73,749,528
Series A, FSA Insured, Pre-Refunded, 5.00%, 4/01/29 .......................................... 25,800,000 27,704,040
Series A, MBIA Insured, Pre-Refunded, 5.25%, 4/01/26 ......................................... 20,500,000 21,791,090
MTA Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 11/15/25 ........................................... 22,010,000 22,743,593
Refunding, Series A, FGIC Insured, 5.25%, 11/15/31 ........................................... 34,000,000 35,996,480
Refunding, Series A, FSA Insured, 5.00%, 11/15/30 ............................................ 68,130,000 69,823,712
Refunding, Series A, MBIA Insured, 5.125%, 11/15/31 .......................................... 15,000,000 15,646,800
Refunding, Series E, 5.25%, 11/15/31 ......................................................... 15,000,000 15,657,000
Refunding, Series U, FGIC Insured, 5.125%, 11/15/31 .......................................... 5,000,000 5,215,600
Series A, FGIC Insured, 5.00%, 11/15/32 ...................................................... 10,355,000 10,659,333
Series B, 5.25%, 11/15/32 .................................................................... 28,720,000 30,124,695
Transportation, Series F, 5.00%, 11/15/35 .................................................... 11,000,000 11,207,020
MTA Service Contract Revenue,
Commuter Facilities, Series 7, ETM, zero cpn., 7/01/10 ....................................... 7,500,000 6,405,900
Commuter Facilities, Series 7, ETM, zero cpn., 7/01/11 ....................................... 7,590,000 6,217,956
Commuter Facilities, Series 7, ETM, zero cpn., 7/01/13 ....................................... 2,065,000 1,540,118
Refunding, Series A, 5.125%, 1/01/29 ......................................................... 6,000,000 6,222,900
Refunding, Series A, AMBAC Insured, 5.25%, 7/01/31 ........................................... 50,000,000 52,486,000
Refunding, Series A, FGIC Insured, 5.00%, 7/01/25 ............................................ 12,760,000 13,198,051
Series B, 5.375%, 1/01/30 .................................................................... 50,000,000 52,735,000
Series B, MBIA Insured, 5.00%, 1/01/31 ....................................................... 22,290,000 22,875,781
Annual Report | 25
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
MTA Service Contract Revenue, (continued)
Transit Facilities, Series 7, ETM, zero cpn., 7/01/09 ........................................ $ 13,125,000 $ 11,677,444
Transit Facilities, Series 7, ETM, zero cpn., 7/01/10 ........................................ 9,000,000 7,687,080
Transit Facilities, Series 7, ETM, zero cpn., 7/01/12 ........................................ 15,380,000 12,056,382
Transit Facilities, Series 7, ETM, zero cpn., 7/01/13 ........................................ 7,935,000 5,918,082
MTA Transit Facilities Revenue, Series A,
FSA Insured, Pre-Refunded, 6.10%, 7/01/21 .................................................... 15,000,000 15,326,850
MBIA Insured, Pre-Refunded, 5.625%, 7/01/25 .................................................. 8,000,000 8,286,720
Pre-Refunded, 5.50%, 7/01/22 ................................................................. 16,170,000 16,839,600
Pre-Refunded, 6.00%, 7/01/24 ................................................................. 7,000,000 7,465,360
Pre-Refunded, 5.625%, 7/01/27 ................................................................ 14,440,000 15,073,772
Pre-Refunded, 6.125%, 7/01/29 ................................................................ 11,595,000 12,407,578
Nassau County Tobacco Settlement Corp. Revenue, Asset Backed, Series A, Pre-Refunded,
6.50%, 7/15/27 ................................................................................. 15,000,000 16,338,150
Nassau Health Care Corp. Health System Revenue, Nassau County Guaranteed, FSA Insured,
Pre-Refunded, 5.75%, 8/01/29 ................................................................... 36,040,000 38,872,744
New York City GO,
Citysavers, Series B, zero cpn., 8/01/09 ..................................................... 8,875,000 7,808,136
Citysavers, Series B, zero cpn., 8/01/10 ..................................................... 2,690,000 2,265,115
Citysavers, Series B, zero cpn., 6/01/12 ..................................................... 1,030,000 854,694
Citysavers, Series B, zero cpn., 12/01/12 .................................................... 1,030,000 833,764
Citysavers, Series B, zero cpn., 6/01/13 ..................................................... 1,030,000 813,504
Citysavers, Series B, zero cpn., 12/01/13 .................................................... 1,030,000 793,430
Citysavers, Series B, zero cpn., 6/01/14 ..................................................... 1,030,000 774,766
Citysavers, Series B, zero cpn., 12/01/14 .................................................... 1,030,000 755,752
Citysavers, Series B, zero cpn., 6/01/15 ..................................................... 1,030,000 735,708
Citysavers, Series B, zero cpn., 12/01/15 .................................................... 1,030,000 717,168
Citysavers, Series B, zero cpn., 6/01/16 ..................................................... 1,030,000 699,576
Citysavers, Series B, zero cpn., 12/01/16 .................................................... 1,030,000 682,272
Citysavers, Series B, zero cpn., 6/01/17 ..................................................... 1,030,000 665,277
Citysavers, Series B, zero cpn., 12/01/17 .................................................... 1,030,000 648,581
Citysavers, Series B, zero cpn., 6/01/18 ..................................................... 1,030,000 632,173
Citysavers, Series B, zero cpn., 12/01/18 .................................................... 1,005,000 602,578
Citysavers, Series B, zero cpn., 6/01/19 ..................................................... 1,030,000 601,005
Citysavers, Series B, zero cpn., 12/01/19 .................................................... 1,030,000 587,038
Citysavers, Series B, zero cpn., 6/01/20 ..................................................... 10,000,000 5,164,400
Fiscal 2003, Series I, 5.00%, 3/01/29 ........................................................ 10,000,000 10,170,800
Fiscal 2003, Series I, 5.00%, 3/01/30 ........................................................ 14,785,000 15,029,100
Pre-Refunded, 5.50%, 5/15/24 ................................................................. 8,920,000 9,577,850
Refunding, 5.50%, 5/15/24 .................................................................... 1,080,000 1,145,351
Refunding, Series H, 6.125%, 8/01/25 ......................................................... 285,000 295,135
Series A, FSA Insured, 6.00%, 5/15/30 ........................................................ 1,095,000 1,187,692
Series A, FSA Insured, Pre-Refunded, 6.00%, 5/15/30 .......................................... 5,155,000 5,638,848
Series A, Pre-Refunded, 6.25%, 8/01/17 ....................................................... 2,675,000 2,725,986
Series B, 7.00%, 2/01/18 ..................................................................... 25,000 25,047
Series B, Pre-Refunded, 6.00%, 8/15/26 ....................................................... 915,000 933,026
Series C, 7.00%, 2/01/12 ..................................................................... 705,000 708,560
Series C, FSA Insured, 5.125%, 3/15/25 ....................................................... 6,500,000 6,764,615
26 | Annual Report
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York City GO, (continued)
Series D, 8.00%, 8/01/17 ..................................................................... $ 5,000 $ 5,033
Series D, 7.50%, 2/01/18 ..................................................................... 5,000 5,011
Series D, 5.125%, 8/01/19 .................................................................... 1,985,000 2,058,961
Series D, 5.25%, 8/01/21 ..................................................................... 10,205,000 10,450,430
Series D, 5.25%, 10/15/23 .................................................................... 5,000,000 5,238,850
Series D, 5.50%, 6/01/24 ..................................................................... 23,945,000 25,499,749
Series D, 5.00%, 10/15/29 .................................................................... 5,000,000 5,092,150
Series D, 5.00%, 11/01/34 .................................................................... 5,000,000 5,092,500
Series D, FGIC Insured, 5.25%, 8/01/21 ....................................................... 5,355,000 5,497,871
Series D, Pre-Refunded, 5.25%, 8/01/21 ....................................................... 4,295,000 4,414,530
Series F, 5.875%, 8/01/24 .................................................................... 620,000 631,309
Series F, 5.30%, 1/15/26 ..................................................................... 45,000,000 47,167,650
Series F, Pre-Refunded, 5.875%, 8/01/24 ...................................................... 6,380,000 6,497,902
Series G, Pre-Refunded, 6.00%, 10/15/26 ...................................................... 9,900,000 10,310,652
Series H, 7.20%, 2/01/15 ..................................................................... 5,000 5,010
Series H, FSA Insured, 5.375%, 8/01/27 ....................................................... 8,510,000 8,816,275
Series H, MBIA Insured, 5.125%, 8/01/25 ...................................................... 3,885,000 4,008,232
Series H, MBIA Insured, Pre-Refunded, 5.125%, 8/01/25 ........................................ 115,000 119,690
Series H, Pre-Refunded, 6.125%, 8/01/25 ...................................................... 4,715,000 4,892,473
Series I, Pre-Refunded, 6.25%, 4/15/27 ....................................................... 9,500,000 9,805,615
Series M, 5.00%, 4/01/35 ..................................................................... 10,000,000 10,192,200
New York City IDA Civic Facility Revenue,
College of New Rochelle Project, 5.80%, 9/01/26 .............................................. 1,500,000 1,559,100
Ethical Culture School Project, Series B-1, XLCA Insured, 5.00%, 6/01/35 ..................... 12,820,000 13,213,061
Institute of International Education Inc. Project, 5.25%, 9/01/21 ............................ 1,530,000 1,607,678
Institute of International Education Inc. Project, 5.25%, 9/01/31 ............................ 5,235,000 5,453,247
New York University Project, AMBAC Insured, 5.00%, 7/01/31 ................................... 18,000,000 18,444,420
Staten Island University Hospital Project, Series A, 6.375%, 7/01/31 ......................... 3,975,000 4,041,621
New York City Municipal Finance Authority Water and Sewer System Revenue, Series B,
5.00%, 6/15/36 ................................................................................. 25,000,000 25,714,750
New York City Municipal Water Finance Authority Revenue, Series B, 5.00%, 6/15/26 ............... 25,000,000 25,794,750
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Fiscal, Refunding, Series C, 5.00%, 6/15/35 .................................................. 10,000,000 10,238,800
Refunding, Series B, 6.10%, 6/15/31 .......................................................... 11,005,000 12,032,207
Refunding, Series B, 6.00%, 6/15/33 .......................................................... 6,040,000 6,581,426
Refunding, Series D, 5.00%, 6/15/37 .......................................................... 14,865,000 15,244,801
Refunding, Series E, MBIA Insured, 5.125%, 6/15/31 ........................................... 34,175,000 35,510,559
Series A, FGIC Insured, 5.25%, 6/15/33 ....................................................... 7,000,000 7,300,930
Series A, FGIC Insured, Pre-Refunded, 5.75%, 6/15/31 ......................................... 19,315,000 20,646,383
Series A, FGIC Insured, Pre-Refunded, 5.50%, 6/15/32 ......................................... 11,655,000 12,375,512
Series A, Pre-Refunded, 5.75%, 6/15/30 ....................................................... 41,190,000 44,029,227
Series B, FGIC Insured, 5.125%, 6/15/30 ...................................................... 12,500,000 12,757,500
Series B, MBIA Insured, Pre-Refunded, 5.50%, 6/15/27 ......................................... 32,620,000 33,564,023
Series B, Pre-Refunded, 5.75%, 6/15/26 ....................................................... 24,455,000 25,211,393
Series B, Pre-Refunded, 6.10%, 6/15/31 ....................................................... 3,995,000 4,391,464
Series B, Pre-Refunded, 6.00%, 6/15/33 ....................................................... 10,260,000 11,240,035
Annual Report | 27
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York City Transitional Finance Authority Revenue,
Future Tax Secured Bonds, Series C, MBIA Insured, 5.00%, 5/01/29 ............................. $ 870,000 $ 900,154
Future Tax Secured Bonds, Series C, MBIA Insured, Pre-Refunded, 5.00%, 5/01/29 ............... 495,000 517,844
Future Tax Secured, 2004, Series C, Pre-Refunded, 5.50%, 5/01/25 ............................. 55,000 58,290
Future Tax Secured, 2004, Series C, Pre-Refunded, 5.00%, 5/01/26 ............................. 5,000 5,175
Future Tax Secured, 2005, Series A, Pre-Refunded, 5.125%, 8/15/21 ............................ 6,120,000 6,285,056
Future Tax Secured, 2005, Series B, 5.00%, 5/01/26 ........................................... 2,695,000 2,759,384
Future Tax Secured, 2005, Series B, Pre-Refunded, 5.00%, 5/01/26 ............................. 980,000 1,014,359
Future Tax Secured, 2005, Series C, 5.00%, 5/01/29 ........................................... 3,710,000 3,805,718
Future Tax Secured, 2005, Series C, Pre-Refunded, 5.50%, 5/01/25 ............................. 5,515,000 5,844,852
Future Tax Secured, 2005, Series C, Pre-Refunded, 5.00%, 5/01/29 ............................. 1,505,000 1,574,456
Future Tax Secured, Refunding, Series B, AMBAC Insured, 5.00%, 5/01/30 ....................... 3,000,000 3,087,600
Future Tax Secured, Refunding, Series B, MBIA Insured, 5.00%, 8/01/32 ........................ 15,000,000 15,462,900
Future Tax Secured, Series A, 5.25%, 5/01/31 ................................................. 2,585,000 2,704,091
Future Tax Secured, Series A, 5.25%, 8/01/31 ................................................. 30,605,000 32,281,236
Future Tax Secured, Series A, FGIC Insured, 5.00%, 5/01/28 ................................... 15,805,000 16,197,596
Future Tax Secured, Series A, FGIC Insured, Pre-Refunded, 5.00%, 5/01/28 ..................... 260,000 275,387
Future Tax Secured, Series A, Pre-Refunded, 5.125%, 8/15/21 .................................. 8,815,000 9,052,740
Future Tax Secured, Series A, Pre-Refunded, 5.625%, 2/15/26 .................................. 20,000,000 21,520,200
Future Tax Secured, Series A, Pre-Refunded, 5.00%, 8/15/27 ................................... 6,915,000 7,091,470
Future Tax Secured, Series A, Pre-Refunded, 6.00%, 8/15/29 ................................... 29,000,000 31,302,890
Future Tax Secured, Series A, Pre-Refunded, 5.25%, 5/01/31 ................................... 24,420,000 26,136,971
Future Tax Secured, Series B, 5.00%, 5/01/30 ................................................. 7,520,000 7,752,218
Future Tax Secured, Series B, Pre-Refunded, 6.00%, 11/15/29 .................................. 15,000,000 16,407,900
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 11/01/24 .................................. 16,800,000 18,060,672
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 5/01/25 ................................... 4,430,000 4,694,958
Future Tax Secured, Series C, Pre-Refunded, 5.00%, 5/01/26 ................................... 320,000 331,219
Future Tax Secured, Series C, Pre-Refunded, 5.00%, 5/01/29 ................................... 8,655,000 9,054,428
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 11/01/29 .................................. 13,660,000 14,685,046
Future Tax Secured, Series D, 5.00%, 2/01/27 ................................................. 62,025,000 63,895,674
Future Tax Secured, Series E, 5.00%, 2/01/25 ................................................. 5,000,000 5,165,350
Future Tax Secured, Series E, 5.00%, 2/01/27 ................................................. 10,000,000 10,301,600
Future Tax Secured, Series E, 5.00%, 2/01/33 ................................................. 18,035,000 18,474,693
Series C, MBIA Insured, Pre-Refunded, 5.00%, 5/01/29 ......................................... 2,270,000 2,374,761
New York City Transportation Authority MTA Triborough COP, Series A, AMBAC Insured,
Pre-Refunded, 5.25%, 1/01/29 ................................................................... 79,840,000 84,754,152
New York City Trust Cultural Resources Revenue,
Museum of Modern Art 2001, Series D, AMBAC Insured, 5.125%, 7/01/31 .......................... 15,500,000 16,126,045
Wildlife Conservation Society, FGIC Insured, 5.00%, 2/01/34 .................................. 10,500,000 10,801,980
New York Convention Center Development Corp. Revenue, Hotel Unit Fee Secured,
AMBAC Insured, 5.00%,
11/15/35 ..................................................................................... 10,000,000 10,303,400
11/15/44 ..................................................................................... 23,000,000 23,609,040
New York IDA Parking Facility Revenue, Royal Charter Presbyterian,
FSA Insured, 5.25%, 12/15/32 ................................................................... 1,525,000 1,605,291
New York State Appropriated Tobacco Corp. Revenue, Asset Backed, Series A-1,
AMBAC Insured, 5.25%, 6/01/21 .................................................................. 18,000,000 19,056,060
28 | Annual Report
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Commissioner of General Services Revenue,
People of the State of New York, Certificate of Lease Assessment,
5.70%, 3/01/29 .............................................................................. $ 64,102,268 $ 66,116,361
5.75%, 3/01/29 .............................................................................. 33,984,221 35,109,438
New York State COP, Hanson Redevelopment Project, 8.375%, 5/01/08 ............................... 6,830,000 7,187,414
New York State Dormitory Authority Lease Revenue,
Court Facilities, Pre-Refunded, 6.00%, 5/15/39 ............................................... 58,245,000 63,600,045
Court Facilities, Series A, Pre-Refunded, 5.375%, 5/15/23 .................................... 4,000,000 4,358,360
Refunding, Series A, FGIC Insured, 5.00%, 7/01/33 ............................................ 12,650,000 13,013,687
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.50%, 7/01/27 ............ 2,000,000 2,167,920
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.10%, 7/01/31 ............ 7,700,000 8,205,197
State University Dormitory Facilities, Pre-Refunded, 5.00%, 7/01/32 .......................... 5,500,000 5,854,750
State University Dormitory Facilities, Series A, 6.00%, 7/01/30 .............................. 5,750,000 6,292,742
State University Dormitory Facilities, Series B, MBIA Insured, 5.125%, 7/01/28 ............... 1,365,000 1,435,598
State University Dormitory Facilities, Series B, MBIA Insured, Pre-Refunded,
5.125%, 7/01/28 ............................................................................. 3,435,000 3,612,658
State University Dormitory Facilities, Series C, MBIA Insured, Pre-Refunded,
5.50%, 7/01/19 .............................................................................. 5,090,000 5,408,227
State University Dormitory Facilities, Series C, MBIA Insured, Pre-Refunded,
5.50%, 7/01/29 .............................................................................. 9,250,000 9,828,310
New York State Dormitory Authority Revenue,
FGIC Insured, Pre-Refunded, 5.125%, 5/15/31 .................................................. 45,000,000 48,629,700
Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.125%, 2/01/22 ............................. 4,000,000 4,183,200
Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.00%, 2/01/31 .............................. 5,500,000 5,631,230
School Districts Financing Program, Series A, MBIA Insured, 5.00%, 4/01/31 ................... 9,500,000 9,758,210
State University Educational Facilities, 5.125%, 5/15/21 ..................................... 12,090,000 12,439,885
State University Educational Facilities, Pre-Refunded, 5.125%, 5/15/21 ....................... 2,910,000 3,020,260
Teachers College, MBIA Insured, 5.00%, 7/01/22 ............................................... 2,885,000 2,988,716
Teachers College, MBIA Insured, 5.00%, 7/01/32 ............................................... 6,000,000 6,176,940
Upstate Community Colleges, Series A, 5.00%, 7/01/27 ......................................... 3,720,000 3,838,184
Upstate Community Colleges, Series A, Pre-Refunded, 5.00%, 7/01/31 ........................... 7,365,000 7,875,615
New York State Dormitory Authority Revenues,
Bishop Henry B. Hucles Nursing Home, 6.00%, 7/01/24 .......................................... 2,545,000 2,600,277
Buena Vida Nursing Home, Series A, 5.25%, 7/01/28 ............................................ 4,730,000 4,855,203
City University System Consolidated, Fourth General, Series A, FGIC Insured,
Pre-Refunded, 5.25%, 7/01/30 ................................................................ 20,705,000 21,939,432
City University System Consolidated, Fourth, Series A, Pre-Refunded, 5.25%, 7/01/31 .......... 12,000,000 12,841,200
City University System Consolidated, FSA Insured, Pre-Refunded, 5.375%, 7/01/24 .............. 5,000,000 5,229,650
City University System Consolidated, Series 1, FGIC Insured,
Pre-Refunded, 5.375%, 7/01/24 ............................................................... 14,300,000 14,956,799
City University System Consolidated, Series 1, MBIA Insured,
Pre-Refunded, 5.125%, 7/01/27 ............................................................... 6,680,000 6,961,562
City University System Consolidated, Series C, 7.50%, 7/01/10 ................................ 12,850,000 13,784,195
City University System Consolidated, Series D, ETM, 7.00%, 7/01/09 ........................... 1,870,000 1,958,975
City University System Consolidated, Third General, Series 1, FSA Insured,
Pre-Refunded, 5.50%, 7/01/29 ................................................................ 38,375,000 40,774,205
City University System Consolidated, Third, Refunding, Series 1,
FGIC Insured, 5.25%, 7/01/25 ................................................................ 4,100,000 4,289,748
Annual Report | 29
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Dormitory Authority Revenues, (continued)
City University System, Third General Residence, Series 2, Pre-Refunded, 6.00%, 7/01/20 ...... $ 13,000,000 $ 13,282,360
City University System, Third General Residence, Series 2, Pre-Refunded, 6.00%, 7/01/26 ...... 6,020,000 6,150,574
City University, Third General, Series 2, Pre-Refunded, 6.20%, 7/01/22 ....................... 28,555,000 29,178,356
Concord Nursing Home Inc., 6.50%, 7/01/29 .................................................... 2,500,000 2,693,300
Fashion Institute of Technology Student Housing Corp., FGIC Insured, 5.00%, 7/01/29 .......... 9,700,000 10,031,546
Fashion Institute of Technology Student Housing Corp., FGIC Insured, 5.125%, 7/01/34 ......... 15,000,000 15,690,150
Fordham University, MBIA Insured, Pre-Refunded, 5.00%, 7/01/28 ............................... 4,510,000 4,677,682
Fordham University, Refunding, MBIA Insured, 5.00%, 7/01/28 .................................. 490,000 506,925
Good Samaritan Hospital Medical Center, Series A, MBIA Insured, 5.50%, 7/01/24 ............... 5,000,000 5,270,800
Ithaca College, AMBAC Insured, Pre-Refunded, 5.25%, 7/01/26 .................................. 2,000,000 2,073,500
Long Island University, Refunding, Radian Insured, 5.125%, 9/01/23 ........................... 1,800,000 1,854,396
Long Island University, Refunding, Radian Insured, 5.25%, 9/01/28 ............................ 1,500,000 1,554,705
Mental Health Facilities Improvement, Series B, 5.00%, 2/15/33 ............................... 35,000,000 35,714,350
Mental Health Services Facilities Improvement, Series A, AMBAC Insured, 5.00%, 2/15/30 ....... 5,000,000 5,159,750
Mental Health Services Facilities Improvement, Series B, MBIA Insured, 5.25%, 8/15/31 ........ 4,160,000 4,324,278
Mental Health Services Facilities Improvement, Series B, MBIA Insured,
Pre-Refunded, 6.00%, 2/15/25 ................................................................ 5,460,000 5,897,401
Mental Health Services Facilities Improvement, Series B, MBIA Insured,
Pre-Refunded, 6.00%, 2/15/30 ................................................................ 4,300,000 4,644,473
Mental Health Services Facilities Improvement, Series B, MBIA Insured,
Pre-Refunded, 5.25%, 8/15/31 ................................................................ 3,975,000 4,249,951
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.50%, 2/15/21 ................................................................ 1,015,000 1,086,953
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.50%, 8/15/21 ................................................................ 2,065,000 2,211,388
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.25%, 8/15/30 ................................................................ 4,460,000 4,733,175
Mental Health Services Facilities Improvement, Series D, MBIA Insured, 5.00%, 8/15/17 ........ 22,985,000 23,711,786
Mental Health Services Facilities Improvement, Series D, MBIA Insured,
Pre-Refunded, 5.00%, 8/15/17 ................................................................ 15,000 15,581
Mental Health Services, Series A, Pre-Refunded, 5.75%, 8/15/22 ............................... 1,355,000 1,401,449
Mental Health Services, Series A, Pre-Refunded, 5.75%, 2/15/27 ............................... 9,070,000 9,380,920
Mental Health, Pre-Refunded, 6.00%, 8/15/21 .................................................. 1,600,000 1,657,552
Mental Health, Refunding, Series B, 5.75%, 8/15/12 ........................................... 2,140,000 2,210,791
Mental Health, Series B, Pre-Refunded, 5.75%, 8/15/12 ........................................ 25,000 25,848
Montefiore Hospital, FGIC Insured, 5.00%, 8/01/29 ............................................ 6,000,000 6,178,080
New School University, MBIA Insured, 5.00%, 7/01/31 .......................................... 2,500,000 2,561,725
New York Hospital Medical Center, AMBAC Insured, 5.60%, 2/15/39 .............................. 4,900,000 5,169,745
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/26 ................................. 3,500,000 3,596,040
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/31 ................................. 5,000,000 5,123,450
New York University, Series A, FGIC Insured, 5.00%, 7/01/34 .................................. 15,200,000 15,698,712
Non State Supported Debt, Cornell University, Series A, 5.00%, 7/01/31 ....................... 10,000,000 10,360,000
Non State Supported Debt, Cornell University, Series A, 5.00%, 7/01/35 ....................... 10,500,000 10,843,770
Non State Supported Debt, Fordham University, FGIC Insured, 5.00%, 7/01/27 ................... 2,435,000 2,522,538
Non State Supported Debt, Fordham University, FGIC Insured, 5.00%, 7/01/32 ................... 3,125,000 3,208,781
Non State Supported Debt, Fordham University, FGIC Insured, Pre-Refunded,
5.00%, 7/01/27 .............................................................................. 3,585,000 3,826,235
30 | Annual Report
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Dormitory Authority Revenues, (continued)
Non State Supported Debt, Fordham University, FGIC Insured,
Pre-Refunded, 5.00%, 7/01/32 ................................................................ $ 4,610,000 $ 4,920,207
Non State Supported Debt, Hospital Special Surgery, MBIA Insured, 5.00%, 8/15/29 ............. 7,750,000 8,003,270
Non State Supported Debt, Hospital Special Surgery, MBIA Insured, 5.00%, 8/15/33 ............. 5,200,000 5,347,316
Non State Supported Debt, Montefiore Medical Center, FGIC Insured, 5.00%, 2/01/28 ............ 10,060,000 10,373,067
Non State Supported Debt, School Districts Bond Financing, Refunding, Series C,
MBIA Insured, 5.00%, 4/01/35 ................................................................ 7,525,000 7,740,742
Non State Supported Debt, School Districts Bond Financing, Series B,
MBIA Insured, 5.00%, 10/01/34 ............................................................... 5,000,000 5,176,750
Non State Supported Debt, School Districts Bond Financing, Series C,
MBIA Insured, 5.00%, 4/01/26 ................................................................ 1,500,000 1,557,345
North Shore L.I. Jewish Group, 5.50%, 5/01/33 ................................................ 2,500,000 2,621,175
Nursing Home, Arden Hill, FHA Insured, Pre-Refunded, 5.85%, 8/01/26 .......................... 4,085,000 4,230,916
Nursing Home, Center for Nursing, FHA Insured, 5.55%, 8/01/37 ................................ 8,435,000 8,773,075
Nursing Home, Wesley Garden, FHA Insured, 6.125%, 8/01/35 .................................... 1,930,000 1,976,629
Pace University, MBIA Insured, Pre-Refunded, 5.75%, 7/01/26 .................................. 2,000,000 2,083,920
Rockefeller University, Series A1, 5.00%, 7/01/32 ............................................ 11,500,000 11,826,830
Second Hospital, Interfaith Medical Center, Series D, 5.40%, 2/15/28 ......................... 14,000,000 14,408,660
Second Hospital, St. Clare's Hospital, Series B, 5.40%, 2/15/25 .............................. 6,500,000 6,688,695
Skidmore College, FGIC Insured, 5.00%, 7/01/33 ............................................... 6,565,000 6,798,386
St. Francis Hospital, Series A, MBIA Insured, 5.50%, 7/01/29 ................................. 1,000,000 1,052,670
St. John's University, Refunding, MBIA Insured, 5.25%, 7/01/25 ............................... 5,770,000 5,983,721
St. John's University, Refunding, Series A, MBIA Insured, 5.25%, 7/01/25 ..................... 5,310,000 5,620,157
State Rehabilitation Assn., Series A, AMBAC Insured, 5.00%, 7/01/23 .......................... 1,725,000 1,789,394
State University Adult Facility, Series B, Pre-Refunded, 5.375%, 5/15/23 ..................... 9,500,000 10,175,450
Supported Debt, Mental Health Facilities, Series B, 5.00%, 2/15/28 ........................... 7,690,000 7,886,941
Supported Debt, Mental Health Facilities, Series B, Pre-Refunded, 6.00%, 8/15/21 ............. 160,000 165,755
Supported Debt, Mental Health Facilities, Series B, Pre-Refunded, 5.00%, 2/15/28 ............. 1,505,000 1,600,673
Supported Debt, Mental Health Services Facilities Improvement, Series B,
MBIA Insured, Pre-Refunded, 5.25%, 8/15/31 .................................................. 1,865,000 1,998,553
Supported Debt, Mental Health Services, Refunding, Series A, 5.75%, 2/15/27 .................. 85,000 87,782
Supported Debt, Mental Health Services, Series A, Pre-Refunded, 5.75%, 2/15/27 ............... 215,000 222,370
Supported Debt, Mental Health Services, Series B, MBIA Insured, 6.00%, 2/15/25 ............... 95,000 101,762
Supported Debt, Mental Health Services, Series B, MBIA Insured, 6.00%, 2/15/30 ............... 80,000 85,553
Supported Debt, Mental Health Services, Series B, MBIA Insured,
Pre-Refunded, 6.00%, 2/15/25 ................................................................ 545,000 588,660
Supported Debt, Mental Health Services, Series B, MBIA Insured,
Pre-Refunded, 6.00%, 2/15/30 ................................................................ 485,000 523,853
Supported Debt, Mental Health, Series A, 5.75%, 8/15/22 ...................................... 25,000 25,818
Supported Debt, Mental Health, Series A, Pre-Refunded, 5.75%, 8/15/22 ........................ 10,000 10,343
Supported Debt, Mental Health, Series D, 6.00%, 8/15/21 ...................................... 25,000 25,861
Supported Debt, Mental Health, Series D, FSA Insured, 5.50%, 2/15/21 ......................... 25,000 26,463
Supported Debt, Mental Health, Series D, FSA Insured, 5.50%, 8/15/21 ......................... 45,000 47,633
Supported Debt, Mental Health, Series D, FSA Insured, 5.25%, 8/15/30 ......................... 375,000 391,148
Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded, 5.50%, 2/15/21 ........... 95,000 101,735
Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded, 5.50%, 8/15/21 ........... 205,000 219,532
Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded, 5.25%, 8/15/30 ........... 165,000 175,106
Annual Report | 31
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Dormitory Authority Revenues, (continued)
Supported Debt, State University Educational Facilities, Pre-Refunded, 5.00%, 5/15/17 ........ $ 420,000 $ 434,935
Supported Debt, State University Educational Facilities, Refunding, 5.00%, 5/15/17 ........... 3,180,000 3,268,309
Supported Debt, Upstate Community Colleges, Refunding, Series A, 5.00%, 7/01/19 .............. 4,610,000 4,750,328
Supported Debt, Upstate Community Colleges, Refunding, Series A, 5.00%, 7/01/28 .............. 16,360,000 16,689,490
Supported Debt, Upstate Community Colleges, Series A, Pre-Refunded, 5.00%, 7/01/19 ........... 2,620,000 2,746,074
Supported Debt, Upstate Community Colleges, Series A, Pre-Refunded, 5.00%, 7/01/28 ........... 9,315,000 9,763,238
The Highlands Living, FHA Insured, 6.60%, 2/01/34 ............................................ 3,220,000 3,235,037
Upstate Community Colleges, Series A, Pre-Refunded, 6.00%, 7/01/22 ........................... 7,000,000 7,311,920
Upstate Community Colleges, Series A, Pre-Refunded, 6.125%, 7/01/27 .......................... 11,845,000 12,388,330
W.K. Nursing Home Corp., FHA Insured, 6.05%, 2/01/26 ......................................... 6,800,000 6,962,996
Yeshiva University, AMBAC Insured, 5.125%, 7/01/29 ........................................... 13,260,000 13,925,254
Yeshiva University, AMBAC Insured, 5.125%, 7/01/34 ........................................... 23,510,000 24,591,695
New York State Dormitory Authority State Personal Income Tax Revenue, Education,
Series A, AMBAC Insured, 5.00%, 3/15/34 ........................................................ 10,325,000 10,657,465
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 20,797,000
New York State Environmental Facilities Corp. PCR, State Water, Series E, 6.875%, 6/15/14 ....... 1,190,000 1,191,618
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 10,014,206
Series C, 5.25%, 6/15/31 ..................................................................... 37,600,000 39,268,312
New York State HFA Service Contract Obligation Revenue,
Series A, 6.50%, 3/15/24 ..................................................................... 330,000 332,676
Series A, 6.50%, 3/15/25 ..................................................................... 860,000 875,102
Series A, 6.00%, 3/15/26 ..................................................................... 970,000 994,095
Series A, Pre-Refunded, 6.375%, 9/15/15 ...................................................... 4,430,000 4,583,544
Series A, Pre-Refunded, 6.00%, 3/15/26 ....................................................... 15,755,000 16,173,453
Series A-2003, 6.375%, 9/15/15 ............................................................... 30,000 30,521
Series C, 6.30%, 3/15/22 ..................................................................... 1,950,000 1,953,491
Series C, 5.50%, 3/15/25 ..................................................................... 17,015,000 17,630,092
New York State HFA State Personal Income Tax Revenue,
Economic Development and Housing, Series A,
FGIC Insured, 5.00%, 9/15/34 ................................................................. 9,330,000 9,562,504
Pre-Refunded, 5.125%, 9/15/28 ................................................................ 12,425,000 13,369,176
Pre-Refunded, 5.00%, 3/15/33 ................................................................. 7,000,000 7,480,130
New York State HFAR,
Children's Rescue Fund Housing, Series A, 7.625%, 5/01/18 .................................... 4,380,000 4,395,987
Health Facilities of New York City, Refunding, Series A, 6.00%, 5/01/07 ...................... 11,200,000 11,428,928
Health Facilities of New York City, Refunding, Series A, 6.00%, 11/01/08 ..................... 2,400,000 2,456,832
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.10%, 11/01/15 .................. 20,645,000 21,079,164
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.125%, 11/01/20 ................. 27,800,000 28,413,268
MFM Housing, Refunding, Series A, FHA Insured, 7.00%, 8/15/22 ................................ 495,000 495,604
MFM Housing, Refunding, Series C, FHA Insured, 6.45%, 8/15/14 ................................ 275,000 275,341
MFM, Refunding, Series B, AMBAC Insured, 6.35%, 8/15/23 ...................................... 2,280,000 2,282,941
MFM, Refunding, Series C, FHA Insured, 6.50%, 8/15/24 ........................................ 1,850,000 1,852,313
MFM, Second Mortgage Program, Series D, 6.25%, 8/15/23 ....................................... 2,500,000 2,501,925
MFM, Series B, AMBAC Insured, 6.25%, 8/15/14 ................................................. 90,000 90,120
32 | Annual Report
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Local Government Assistance Corp. Revenue, Refunding, Series B,
MBIA Insured, 4.875%, 4/01/20 .................................................................. $ 4,080,000 $ 4,187,875
New York State Medical Care Facilities Finance Agency Revenue,
Hospital and Nursing Home, Mortgage Revenue, Series C, FHA Insured, 6.20%, 8/15/23 ........... 10,235,000 10,469,177
Hospital and Nursing Home, Series A, FHA Insured, 6.30%, 8/15/23 ............................. 7,200,000 7,218,432
Hospital and Nursing Home, Series A, FHA Insured, 6.375%, 8/15/33 ............................ 5,880,000 5,895,053
Mortgage Revenue Project, Series B, FHA Insured, 6.15%, 2/15/35 .............................. 2,200,000 2,225,102
Mortgage Revenue Project, Series D, FHA Insured, 6.20%, 2/15/35 .............................. 6,250,000 6,343,875
Mortgage Revenue Project, Series E, FHA Insured, 6.375%, 2/15/35 ............................. 13,200,000 13,402,620
Second Mortgage, Health Care Project Revenue, Series B, 6.35%, 11/01/14 ...................... 1,220,000 1,221,928
Security Mortgage, 2006, Series A, 6.375%, 11/15/20 .......................................... 7,090,000 7,241,726
Series A, FHA Insured, 6.125%, 2/15/15 ....................................................... 295,000 298,363
Series A, FHA Insured, Pre-Refunded, 6.125%, 2/15/15 ......................................... 810,000 821,583
New York State Municipal Bond Bank Agency School Purpose Revenue, Series C,
5.25%, 6/01/21 ............................................................................... 5,110,000 5,365,755
5.25%, 12/01/21 .............................................................................. 8,025,000 8,451,288
5.25%, 6/01/22 ............................................................................... 3,400,000 3,574,318
5.25%, 12/01/22 .............................................................................. 5,000,000 5,256,350
5.00%, 6/01/23 ............................................................................... 5,925,000 6,093,803
5.00%, 12/01/23 .............................................................................. 3,000,000 3,085,470
New York State Municipal Bond Bank Agency Special Program Revenue, Buffalo, Series A,
AMBAC Insured, 5.25%, 5/15/31 .................................................................. 4,145,000 4,316,727
New York State Power Authority Revenue, Series A, 5.25%,
11/15/30 ..................................................................................... 2,000,000 2,093,360
11/15/40 ..................................................................................... 9,000,000 9,349,740
New York State Thruway Authority General Revenue,
AMBAC Insured, 5.00%, 1/01/30 ................................................................ 10,000,000 10,352,000
Refunding, Series E, FGIC Insured, 5.00%, 1/01/25 ............................................ 5,500,000 5,632,000
Refunding, Series G, FSA Insured, 5.00%, 1/01/30 ............................................. 10,000,000 10,361,200
Series D, Pre-Refunded, 5.25%, 1/01/21 ....................................................... 41,675,000 42,475,160
Series D, Pre-Refunded, 5.375%, 1/01/27 ...................................................... 10,975,000 11,300,957
Series G, FSA Insured, 5.00%, 1/01/32 ........................................................ 15,000,000 15,507,900
New York State Thruway Authority Highway and Bridge Trust Fund Revenue,
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/19 ........................................... 20,000,000 20,796,600
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/20 ........................................... 18,835,000 19,555,815
Series A, FGIC Insured, Pre-Refunded, 5.00%, 4/01/17 ......................................... 9,000,000 9,406,350
Series A, FGIC Insured, Pre-Refunded, 5.00%, 4/01/20 ......................................... 2,500,000 2,666,575
Series A, FGIC Insured, Pre-Refunded, 5.00%, 4/01/21 ......................................... 2,500,000 2,666,575
Series B-1, FGIC Insured, Pre-Refunded, 5.75%, 4/01/15 ....................................... 2,000,000 2,165,140
Series B-1, FGIC Insured, Pre-Refunded, 5.75%, 4/01/16 ....................................... 2,000,000 2,165,140
New York State Thruway Authority Revenue, State Personal Income Tax, Transportation,
Series A, 5.00%, 3/15/22 ....................................................................... 14,270,000 14,745,762
New York State Thruway Authority Service Contract Revenue, Local Highway and Bridge,
AMBAC Insured, Pre-Refunded, 5.375%, 4/01/19 ................................................. 10,555,000 11,286,567
Pre-Refunded, 5.75%, 4/01/19 ................................................................. 30,000,000 31,952,400
Annual Report | 33
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Urban Development Corp. Revenue,
Correctional Capital Facilities, Series 7, Pre-Refunded, 5.70%, 1/01/16 ...................... $ 3,000,000 $ 3,094,590
Correctional Capital Facilities, Series 7, Pre-Refunded, 5.70%, 1/01/27 ...................... 10,000,000 10,315,300
Correctional Facilities Service Contract, Series A, Pre-Refunded, 5.00%, 1/01/28 ............. 14,000,000 14,563,500
Correctional Facilities Service Contract, Series B, Pre-Refunded, 5.00%, 1/01/25 ............. 21,055,000 21,943,310
Correctional Facilities Service Contract, Series C, AMBAC Insured, Pre-Refunded,
6.00%, 1/01/29 .............................................................................. 34,135,000 36,406,002
Correctional Facilities Service Contract, Series D, FSA Insured, Pre-Refunded,
5.25%, 1/01/30 .............................................................................. 10,000,000 10,659,200
Correctional, Series A, MBIA Insured, Pre-Refunded, 5.00%, 1/01/18 ........................... 12,000,000 12,483,000
FGIC Insured, 5.00%, 3/15/29 ................................................................. 7,000,000 7,227,080
Personal Income Tax, Series C-1, FGIC Insured, Pre-Refunded, 5.00%, 3/15/28 .................. 4,900,000 5,236,091
Personal Income Tax, Series C-1, Pre-Refunded, 5.00%, 3/15/25 ................................ 3,225,000 3,446,203
Personal Income Tax, State Facilities, Series A, Pre-Refunded, 5.25%, 3/15/32 ................ 20,000,000 21,544,200
State Personal Income Tax, Series B Empire State, MBIA Insured, Pre-Refunded,
5.00%, 3/15/33 .............................................................................. 11,010,000 11,765,176
State Personal Income Tax, Series B Empire State, Pre-Refunded, 5.125%, 3/15/29 .............. 9,000,000 9,683,910
Niagara Falls City School District COP, High School Facility, Pre-Refunded, 5.375%, 6/15/28 ..... 5,000,000 5,209,500
Niagara Falls Public Water Authority Revenue, Series A, MBIA Insured, 5.00%, 7/15/34 ............ 9,000,000 9,265,320
Orangetown Housing Authority Housing Facilities Revenue, Senior Housing Center Project,
Refunding, MBIA Insured, zero cpn., 4/01/30 .................................................... 21,170,000 5,638,629
Otsego County IDA Civic Facility Revenue, Hartwick College Project, Series A,
Pre-Refunded, 5.50%, 7/01/19 ................................................................... 3,400,000 3,602,402
Rensselaer Municipal Leasing Corp. Leasehold Mortgage Revenue, Rensselaer County Nursing Home,
Series A, 6.90%, 6/01/24 ..................................................................... 9,755,000 9,850,794
Series B, 6.90%, 6/01/24 ..................................................................... 3,265,000 3,297,062
Sachem Central School District Holbrook GO, Series B, MBIA Insured, 5.00%,
10/15/27 ..................................................................................... 3,885,000 4,025,054
10/15/28 ..................................................................................... 2,000,000 2,068,300
Sales Tax Asset Receivable Corp. Revenue, Series A, AMBAC Insured, 5.00%,
10/15/29 ..................................................................................... 22,500,000 23,370,750
10/15/32 ..................................................................................... 104,975,000 108,741,503
St. Lawrence County IDA Civic Facility Revenue, Clarkson University Project, Series A,
5.50%, 7/01/29 ................................................................................. 6,000,000 6,271,680
Suffolk County Judicial Facilities Agency Service Agreement Revenue, John P. Cohalan Complex,
AMBAC Insured, 5.00%, 4/15/16 .................................................................. 2,720,000 2,841,530
Syracuse IDA Civic Facility Revenue, Crouse Health Hospital Inc., Project A,
5.25%, 1/01/16 ............................................................................... 4,000,000 3,586,960
5.375%, 1/01/23 .............................................................................. 4,760,000 4,032,862
Tompkins County IDAR, Civic Facility, Cornell University, Pre-Refunded, 5.75%, 7/01/30 .......... 7,510,000 8,163,370
Triborough Bridge and Tunnel Authority Revenues,
Convention Center Project, Series E, zero cpn., 1/01/12 ...................................... 21,625,000 17,023,632
General Purpose, Refunding, Series A, 5.00%, 1/01/27 ......................................... 34,500,000 35,477,730
General Purpose, Refunding, Series A, MBIA Insured, 5.00%, 1/01/32 ........................... 3,770,000 3,873,072
General Purpose, Refunding, Series B, 5.125%, 11/15/29 ....................................... 17,175,000 17,945,127
General Purpose, Refunding, Series B, 5.00%, 11/15/32 ........................................ 10,000,000 10,243,000
General Purpose, Refunding, Series B, MBIA Insured, 5.00%, 11/15/27 .......................... 10,000,000 10,361,600
General Purpose, Series A, 5.00%, 1/01/32 .................................................... 6,110,000 6,240,754
34 | Annual Report
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
NEW YORK (CONTINUED)
Triborough Bridge and Tunnel Authority Revenues, (continued)
General Purpose, Series A, FGIC Insured, Pre-Refunded, 5.00%, 1/01/32 ........................ $ 12,245,000 $ 13,007,863
General Purpose, Series A, MBIA Insured, Pre-Refunded, 5.00%, 1/01/32 ........................ 20,230,000 21,490,329
General Purpose, Series A, Pre-Refunded, 5.125%, 1/01/31 ..................................... 24,310,000 25,976,207
General Purpose, Series A, Pre-Refunded, 5.00%, 1/01/32 ...................................... 34,340,000 36,479,382
General Purpose, Series B, MBIA Insured, Pre-Refunded, 5.20%, 1/01/27 ........................ 4,110,000 4,551,291
General Purpose, Series B, Pre-Refunded, 5.20%, 1/01/27 ...................................... 15,000,000 16,610,550
General Purpose, Series B, Pre-Refunded, 5.50%, 1/01/30 ...................................... 32,185,000 36,252,218
Refunding, MBIA Insured, 5.00%, 11/15/26 ..................................................... 10,000,000 10,356,000
Refunding, MBIA Insured, 5.00%, 11/15/32 ..................................................... 22,875,000 23,585,497
Series A, FGIC Insured, 5.00%, 1/01/32 ....................................................... 1,970,000 2,023,860
sub. bond, AMBAC Insured, 5.00%, 11/15/28 .................................................... 15,000,000 15,517,500
TSASC Inc. New York Revenue, Tobacco Flexible Amortization Bonds, Series 1, Pre-Refunded, 6.25%,
7/15/27 ...................................................................................... 35,000,000 37,921,450
7/15/34 ...................................................................................... 40,000,000 43,338,800
United Nations Development Corp. Revenue, senior lien, Refunding, Series A, 5.25%,
7/01/23 ...................................................................................... 2,500,000 2,546,325
7/01/25 ...................................................................................... 2,000,000 2,037,060
Utica IDA Civic Facility Revenue, Munson-Williams-Proctor Institute,
5.40%, 7/15/30 ............................................................................... 1,000,000 1,062,080
Series A, 5.50%, 7/15/29 ..................................................................... 9,915,000 10,484,914
Warren and Washington IDA Civic Facility Revenue, Series A, FSA Insured, 5.00%, 12/01/27 ........ 8,115,000 8,422,721
Westchester Tobacco Asset Securitization Corp. Revenue,
Capital Appreciation, Pre-Refunded, 6.75%, 7/15/29 ........................................... 15,000,000 16,852,050
Refunding, 5.00%, 6/01/26 .................................................................... 2,000,000 1,965,260
Refunding, 5.125%, 6/01/38 ................................................................... 7,000,000 6,875,680
Yonkers GO,
Refunding, Series B, MBIA Insured, 5.00%, 8/01/30 ............................................ 7,710,000 7,972,834
Refunding, Series B, MBIA Insured, 5.00%, 8/01/35 ............................................ 17,130,000 17,649,210
Series A, AMBAC Insured, 5.00%, 9/01/31 ...................................................... 8,740,000 9,058,487
--------------
4,685,535,224
--------------
U. S. TERRITORIES 0.7%
PUERTO RICO 0.6%
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue, Series Y,
5.00%, 7/01/36 ............................................................................... 4,000,000 4,006,120
5.50%, 7/01/36 ............................................................................... 10,000,000 10,569,900
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Refunding, Series A, 5.00%, 7/01/38 ............................................................ 12,000,000 11,999,520
Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Series A,
MBIA Insured, Pre-Refunded, 5.00%, 8/01/31 ..................................................... 4,000,000 4,238,000
--------------
30,813,540
--------------
Annual Report | 35
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. TERRITORIES (CONTINUED)
VIRGIN ISLANDS 0.1%
Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%,
10/01/15 ................................................................................... $ 2,500,000 $ 2,585,875
10/01/18 ................................................................................... 2,500,000 2,582,500
--------------
5,168,375
--------------
TOTAL U.S. TERRITORIES ........................................................................ 35,981,915
--------------
TOTAL BONDS (COST $4,472,614,655) ............................................................. 4,721,517,139
--------------
SHORT TERM INVESTMENTS 1.3%
BONDS 1.3%
NEW JERSEY 0.1%
a New York City Transitional Finance Authority Revenue, New York City Recovery, Series 1,
Sub Series 1C, Daily VRDN and Put, 3.50%, 11/01/22 ........................................... 4,200,000 4,200,000
NEW YORK 1.2%
a Jay Street Development Corp. Courts Facility Lease Revenue,
Jay Street Project, Series A, Daily VRDN and Put, 3.47%, 5/01/22 ........................... 2,185,000 2,185,000
New York City Jay Street Project, Series A-4, Daily VRDN and Put, 3.47%, 5/01/22 ........... 1,045,000 1,045,000
a Long Island Power Authority Electric System Revenue,
Sub Series 2, Daily VRDN and Put, 3.47%, 5/01/33 ........................................... 3,780,000 3,780,000
Sub Series 3B, Daily VRDN and Put, 3.56%, 5/01/33 .......................................... 8,000,000 8,000,000
a MTA Revenue, Transportation, Sub Series G-2, Daily VRDN and Put, 3.50%, 11/01/26 .............. 21,600,000 21,600,000
a New York City GO, Sub Series H-2, Daily VRDN and Put, 3.56%, 1/01/36 .......................... 10,250,000 10,250,000
a New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Fiscal 2003, Refunding, Sub Series C-3, Daily VRDN and Put, 3.47%, 6/15/18 ................. 9,760,000 9,760,000
Series G, FGIC Insured, Daily VRDN and Put, 3.47%, 6/15/24 ................................. 200,000 200,000
a New York City Transitional Finance Authority Revenue, Future Tax Secured, Series C,
Daily VRDN and Put, 3.50%, 5/01/28 ........................................................... 1,500,000 1,500,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $62,520,000) ............................................... 62,520,000
--------------
TOTAL INVESTMENTS (COST $4,535,134,655) 98.7% ................................................. 4,784,037,139
OTHER ASSETS, LESS LIABILITIES 1.3% ........................................................... 64,301,842
--------------
NET ASSETS 100.0% ............................................................................. $4,848,338,981
==============
See Selected Portfolio Abbreviations on page 37.
a 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. The coupon rate shown represents the rate at period end. VRDNs
are valued at cost.
36 | See notes to financial statements. | Annual Report
Franklin New York Tax-Free Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2006
SELECTED PORTFOLIO ABBREVIATIONS
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 Assurance Inc.
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
MFM - Multi-Family Mortgage
MBIA - Municipal Bond Investors Assurance Corp.
MTA - Metropolitan Transit Authority
PCR - Pollution Control Revenue
PFAR - Public Financing Authority Revenue
XLCA - XL Capital Assurance
Annual Report | See notes to financial statements. | 37
Franklin New York Tax-Free Income Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2006
Assets:
Investments in securities:
Cost ....................................................... $4,535,134,655
--------------
Value ...................................................... $4,784,037,139
Cash ........................................................ 28,222
Receivables:
Capital shares sold ........................................ 4,359,889
Interest ................................................... 68,283,152
--------------
Total assets ......................................... 4,856,708,402
--------------
Liabilities:
Payables:
Capital shares redeemed .................................... 5,255,245
Affiliates ................................................. 2,828,799
Accrued expenses and other liabilities ...................... 285,377
--------------
Total liabilities .................................... 8,369,421
--------------
Net assets, at value ............................. $4,848,338,981
==============
Net assets consist of:
Paid-in capital ............................................. $4,596,025,576
Undistributed net investment income ......................... 3,931,276
Net unrealized appreciation (depreciation) .................. 248,902,484
Accumulated net realized gain (loss) ........................ (520,355)
--------------
Net assets, at value ................................. $4,848,338,981
==============
38 | See notes to financial statements. | Annual Report
Franklin New York Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
May 31, 2006
CLASS A:
Net assets, at value ....................................................... $4,351,377,603
==============
Shares outstanding ......................................................... 371,257,718
==============
Net asset value per share a ................................................ $ 11.72
==============
Maximum offering price per share (net asset value per share / 95.75%) ...... $ 12.24
==============
CLASS B:
Net assets, at value ....................................................... $ 207,209,409
==============
Shares outstanding ......................................................... 17,716,637
==============
Net asset value and maximum offering price per share a ..................... $ 11.70
==============
CLASS C:
Net assets, at value ....................................................... $ 245,444,067
==============
Shares outstanding ......................................................... 20,952,787
==============
Net asset value and maximum offering price per share a ..................... $ 11.71
==============
ADVISOR CLASS:
Net assets, at value ....................................................... $ 44,307,902
==============
Shares outstanding ......................................................... 3,778,625
==============
Net asset value and maximum offering price per share a ..................... $ 11.73
==============
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.
Annual Report | See notes to financial statements. | 39
Franklin New York Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended May 31, 2006
Investment income:
Interest ................................................................... $ 246,319,529
-------------
Expenses:
Management fees (Note 3a) .................................................. 22,372,150
Distribution fees (Note 3c)
Class A ................................................................... 3,889,177
Class B ................................................................... 1,427,688
Class C ................................................................... 1,570,157
Transfer agent fees (Note 3e) .............................................. 2,065,722
Custodian fees ............................................................. 69,358
Reports to shareholders .................................................... 144,503
Professional fees (Note 3f) ................................................ 96,859
Trustees' fees and expenses ................................................ 98,058
Other ...................................................................... 197,197
-------------
Total expenses ...................................................... 31,930,869
-------------
Net investment income ............................................ 214,388,660
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ................................. 4,640,502
Net change in unrealized appreciation (depreciation) on investments ....... (126,939,190)
-------------
Net realized and unrealized gain (loss) ..................................... (122,298,688)
-------------
Net increase (decrease) in net assets resulting from operations ............. $ 92,089,972
=============
40 | See notes to financial statements. | Annual Report
Franklin New York Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------
YEAR ENDED MAY 31,
---------------------------------
2006 2005
---------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ..................................................... $ 214,388,660 $ 221,187,771
Net realized gain (loss) from investments ................................. 4,640,502 12,894,854
Net change in unrealized appreciation (depreciation) on investments ....... (126,939,190) 144,064,424
---------------------------------
Net increase (decrease) in net assets resulting from operations ...... 92,089,972 378,147,049
---------------------------------
Distributions to shareholders from:
Net investment income:
Class A ................................................................. (193,369,520) (201,969,159)
Class B ................................................................. (8,446,424) (9,225,878)
Class C ................................................................. (9,189,670) (9,243,050)
Advisor Class ........................................................... (1,531,832) (1,135,781)
---------------------------------
Total distributions to shareholders ........................................ (212,537,446) (221,573,868)
---------------------------------
Capital share transactions: (Note 2)
Class A ................................................................. (38,268,025) (72,585,682)
Class B ................................................................. (18,377,349) (7,935,505)
Class C ................................................................. 15,535,881 (2,588,931)
Advisor Class ........................................................... 14,651,665 7,255,999
---------------------------------
Total capital share transactions ........................................... (26,457,828) (75,854,119)
---------------------------------
Redemption fees ............................................................ 8,598 19,172
---------------------------------
Net increase (decrease) in net assets ................................ (146,896,704) 80,738,234
Net assets
Beginning of year .......................................................... 4,995,235,685 4,914,497,451
---------------------------------
End of year ................................................................ $4,848,338,981 $4,995,235,685
=================================
Undistributed net investment income included in net assets:
End of year ................................................................ $ 3,931,276 $ 2,206,703
=================================
Annual Report | See notes to financial statements. | 41
Franklin New York Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin New York Tax-Free Income Fund (the Trust) is registered under the
Investment Company Act of 1940 (1940 Act) as a diversified, open-end investment
company, consisting of one fund, the Franklin New York Tax-Free Income Fund (the
Fund). 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.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Municipal securities generally trade in the over-the-counter market rather than
on a securities exchange. The Fund may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Fund's pricing services use valuation models or matrix pricing, which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, to determine current value.
The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Trust's Board of
Trustees.
B. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund intends to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute to shareholders substantially all of its income and net realized
gains.
C. 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. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Distributions to shareholders are recorded on the
42 | Annual Report
Franklin New York Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
ex-dividend date and are determined according to income tax regulations (tax
basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with accounting principles generally accepted in
the United States. These differences may be permanent or temporary. Permanent
differences are reclassified among capital accounts to reflect their tax
character. These reclassifications have no impact on net assets or the results
of operations. Temporary differences are not reclassified, as they may reverse
in subsequent periods.
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. Differences in class-level
expenses may result in payment of different per share distributions by class.
D. 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.
E. REDEMPTION FEES
A short term trading redemption fee will be imposed, with some exceptions, on
any Fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the Fund and accounted for as an addition to paid-in
capital.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and directors are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
Annual Report | 43
Franklin New York Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At May 31, 2006, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
-----------------------------------------------------------------
YEAR ENDED MAY 31,
2006 2005
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------
CLASS A SHARES:
Shares sold ............................. 25,080,334 $ 297,153,217 23,312,040 $ 276,349,955
Shares issued in reinvestment of
distributions .......................... 9,620,287 113,898,434 9,958,639 117,575,907
Shares redeemed ......................... (37,933,640) (449,319,676) (39,423,254) (466,511,544)
-----------------------------------------------------------------
Net increase (decrease) ................. (3,233,019) $ (38,268,025) (6,152,575) $ (72,585,682)
=================================================================
CLASS B SHARES:
Shares sold ............................. 121,344 $ 1,434,647 1,159,514 $ 13,699,756
Shares issued in reinvestment of
distributions .......................... 474,757 5,612,998 521,638 6,147,967
Shares redeemed ......................... (2,153,006) (25,424,994) (2,354,517) (27,783,228)
-----------------------------------------------------------------
Net increase (decrease) ................. (1,556,905) $ (18,377,349) (673,365) $ (7,935,505)
=================================================================
CLASS C SHARES:
Shares sold ............................. 3,820,326 $ 45,242,049 2,834,242 $ 33,632,181
Shares issued in reinvestment of
distributions .......................... 512,503 6,066,879 519,836 6,136,558
Shares redeemed ......................... (3,023,098) (35,773,047) (3,577,047) (42,357,670)
-----------------------------------------------------------------
Net increase (decrease) ................. 1,309,731 $ 15,535,881 (222,969) $ (2,588,931)
=================================================================
ADVISOR CLASS SHARES:
Shares sold ............................. 1,640,727 $ 19,387,499 1,113,154 $ 13,240,294
Shares issued in reinvestment of
distributions .......................... 5,332 63,223 5,039 59,723
Shares redeemed ......................... (404,661) (4,799,057) (511,246) (6,044,018)
-----------------------------------------------------------------
Net increase (decrease) ................. 1,241,398 $ 14,651,665 606,947 $ 7,255,999
=================================================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers and/or directors of the following
subsidiaries:
- --------------------------------------------------------------------------------------------
SUBSIDIARY 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
44 | Annual Report
Franklin New York Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
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
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion
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 Trust's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Fund's Class A reimbursement distribution plan, the Fund
reimburses Distributors up to 0.10% per year of Class A's average daily net
assets for costs incurred in connection with the sale and distribution of the
Fund's shares. Under the Class A reimbursement distribution plan, costs
exceeding the maximum for the current plan year cannot be reimbursed in
subsequent periods.
Under the Fund's compensation distribution plans, the Fund pays Distributors for
costs incurred in connection with the sale and distribution of the Fund's shares
up to a certain percentage per year of its average daily net assets of each
class as follows:
Class B ........................................... 0.65%
Class C ........................................... 0.65%
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the year:
Net sales charges received a ...................... $757,147
Contingent deferred sales charges retained ........ $367,490
a Net of commissions paid to unaffiliated broker/dealers
Annual Report | 45
Franklin New York Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
E. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $2,065,722, of which $1,429,200 was
retained by Investor Services.
F. OTHER AFFILIATED TRANSACTIONS
Included in professional fees are legal fees of $28,400 that were paid to a law
firm in which a partner is an officer of the Fund.
4. INCOME TAXES
At May 31, 2006, the Fund had tax basis capital losses of $86,395 expiring on
May 31, 2009, which may be carried over to offset future capital gains, if any.
During the year ended May 31, 2006, the Fund utilized $4,529,166 of capital loss
carryforwards.
The tax character of distributions paid during the years ended May 31, 2006 and
2005, was as follows:
------------------------------
2006 2005
------------------------------
Distributions paid from:
Tax-exempt income .......................... $212,537,446 $221,573,868
At May 31, 2006, the cost of investments, net unrealized appreciation
(depreciation), and undistributed tax exempt income for income tax purposes were
as follows:
Cost of investments .......................................... $4,533,489,452
==============
Unrealized appreciation ...................................... $ 258,606,434
Unrealized depreciation ...................................... (8,058,747)
--------------
Net unrealized appreciation (depreciation) ................... $ 250,547,687
--------------
Distributable earnings - undistributed tax exempt income ..... $ 1,852,114
==============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of bond discounts and premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and bond discounts and
premiums.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
period ended May 31, 2006, aggregated $469,393,806 and $543,282,958,
respectively.
46 | Annual Report
Franklin New York Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CONCENTRATION OF RISK
The Fund invests a large percentage of its total assets in obligations of
issuers within New York. Such concentration may subject the Fund to risks
associated with industrial or regional matters, and economic, political or legal
developments occurring within New York.
7. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.
Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop separate plans for distribution of
the respective settlement monies. The CAGO approved the distribution plan
pertaining to the distribution of the monies owed under the CAGO settlement
agreement, and in March 2005, the disbursement of monies to the relevant funds
in accordance with the terms and conditions of that settlement was completed.
The Fund did not participate in the CAGO Settlement.
On June 23, 2006, the SEC approved the IDC's proposed plan of distribution
arising from the December 13, 2004 SEC Order. Disbursement of the settlement
monies to the designated funds in accordance with the terms and conditions of
the SEC's order and the plan is expected to occur by the end of July 2006, or
shortly thereafter. The Fund did not participate in the December 13, 2004 SEC
Order. The IDC has also completed a proposed Plan of Distribution under the
August 2, 2004 SEC Order resolving the SEC's market timing investigation and has
submitted that plan to the SEC staff, where it is under review. When approved,
disbursements of settlement monies relating to the August 2, 2004 SEC Order will
be made promptly in accordance with the terms and conditions of that order.
Annual Report | 47
Franklin New York Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. REGULATORY MATTERS (CONTINUED)
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.
The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.
48 | Annual Report
Franklin New York Tax-Free Income Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN NEW YORK TAX-FREE INCOME
FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Franklin New York Tax-Free
Income Fund (the "Fund") at May 31, 2006, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 2006 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
July 13, 2006
Annual Report | 49
Franklin New York Tax-Free Income Fund
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(5)(A) of the Internal Revenue Code, the Fund designates
100% of the distributions paid from net investment income as exempt-interest
dividends for the fiscal year ended May 31, 2006. A portion of the Fund's
exempt-interest dividends may be subject to the federal alternative minimum tax.
In January 2007, shareholders will be notified of amounts for use in preparing
their 2006 income tax returns.
50 | Annual Report
Franklin New York Tax-Free Income Fund
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Fund, principal occupation during
the past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1982 141 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (1932) Trustee Since 1982 142 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 1998 137 Director, Hess Corporation (formerly,
One Franklin Parkway Amerada Hess Corporation) (explo-
San Mateo, CA 94403-1906 ration and refining of oil and gas),
H.J. Heinz Company (processed foods
and allied products), RTI International
Metals, Inc. (manufacture and distri-
bution of titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 51
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (1928) Trustee Since 1992 141 Director, Martek Biosciences
One Franklin Parkway Corporation, MedImmune, Inc.
San Mateo, CA 94403-1906 (biotechnology), and Overstock.com
(Internet services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known as
MCI WorldCom, Inc. and WorldCom,
Inc.) (communications services)
(1988-2002), White Mountains
Insurance Group, Ltd. (holding com-
pany) (1987-2004) and Spacehab,
Inc. (aerospace services) (1994-
2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004);
Chairman, White River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and
President, National Association of Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since February 104 Director, Hess Corporation (formerly,
One Franklin Parkway San 2006 Amerada Hess Corporation) (explo-
Mateo, CA 94403-1906 ration and refining of oil and gas) and
Sentient Jet (private jet service); and
FORMERLY, Director, Becton Dickinson
and Company (medical technology),
Cooper Industries, Inc. (electrical prod-
ucts and tools and hardware), Health
Net, Inc. (formerly, Foundation Health)
(integrated managed care), The Hertz
Corporation, Pacific Southwest Airlines,
The RCA Corporation, Unicom (formerly,
Commonwealth Edison), UAL
Corporation (airlines) and White
Mountains Insurance Group, Ltd.
(holding company).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
52 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee, Trustee since 141 None
One Franklin Parkway President and 1982, President
San Mateo, CA 94403-1906 Chief since 1983 and
Investment Chief Executive
Officer - Officer -
Investment Investment
Management Management since
2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee and Since 1983 123 None
One Franklin Parkway Vice President
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
SHEILA AMOROSO (1959) Vice President Since 1999 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (1945) Vice President Since 1987 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
RAFAEL R. COSTAS, JR. (1965) Vice President Since 1999 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 53
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice
Vice President President - AML
- AML Compliance since
Compliance February 2006
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 47 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 31 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the
investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 47 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 47 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
54 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
KAREN L. SKIDMORE (1952) Vice President Vice President Not Applicable Not Applicable
One Franklin Parkway and Secretary since March 2006
San Mateo, CA 94403-1906 and Secretary
since April 2006
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Templeton Funds Annuity Company; and
officer of 31 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice President Since October Not Applicable Not Applicable
One Franklin Parkway 2005
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of 47 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Partner, Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 47 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
THOMAS WALSH (1961) Vice President Since 1999 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested
persons of the Trust under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources, Inc., which
is the parent company of the Fund's adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED EACH OF EDITH E. HOLIDAY AND HARRIS J. ASHTON AS AN AUDIT COMMITTEE
FINANCIAL EXPERT. THE BOARD BELIEVES THAT MS. HOLIDAY AND MR. ASHTON QUALIFY AS
SUCH AN EXPERT IN VIEW OF THEIR BUSINESS BACKGROUND AND EXPERIENCE. MS. HOLIDAY,
WHO CURRENTLY SERVES AS A DIRECTOR AND TRUSTEE OF VARIOUS COMPANIES AND TRUSTS,
INCLUDING H.J. HEINZ COMPANY WHERE SHE IS AUDIT COMMITTEE CHAIRPERSON, IS
CHAIRPERSON OF THE FUND'S AUDIT COMMITTEE, AND FORMERLY SERVED AS ASSISTANT TO
THE PRESIDENT OF THE UNITED STATES AND SECRETARY OF THE CABINET (1990-1993);
GENERAL COUNSEL TO THE UNITED STATES TREASURY DEPARTMENT (1989-1999); AND
ASSISTANT SECRETARY FOR PUBLIC AFFAIRS AND PUBLIC LIAISON-UNITED STATES TREASURY
DEPARTMENT (1988-1989). MR. ASHTON, WHO IS CURRENTLY A DIRECTOR OF BUSINESS AND
NON-PROFIT ORGANIZATIONS, SERVED AS CHIEF EXECUTIVE OFFICER OF GENERAL HOST
CORPORATION, A NEW YORK STOCK EXCHANGE LISTED COMPANY FROM 1967 TO 1998, AND WAS
A DIRECTOR OF RBC HOLDINGS, INC., A BANK HOLDING COMPANY UNTIL 2002. AS A RESULT
OF SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MS.
HOLIDAY AND MR. ASHTON HAVE EACH ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH
PRINCIPLES IN CONNECTION WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES,
AND ANALYZING AND EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND
LEVEL OF COMPLEXITY OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE
FUND, AS WELL AS AN UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR
FINANCIAL REPORTING AND AN UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MS.
HOLIDAY AND MR. ASHTON ARE INDEPENDENT TRUSTEES AS THAT TERM IS DEFINED UNDER
THE APPLICABLE SECURITIES AND EXCHANGE COMMISSION RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 55
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 U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. 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.
56 | Annual Report
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 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 MidCap Value Fund
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
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 4
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 4
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 4
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME 5
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 6
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 Michigan 6
Arizona Minnesota 6
California 7 Missouri
Colorado New Jersey
Connecticut New York 7
Florida 7 North Carolina
Georgia Ohio 7
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts 6 Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products
Trust 8
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. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
5. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
6. Portfolio of insured municipal securities.
7. 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).
8. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
09/05
Not part of the annual report
[LOGO](R)
FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton .com.
See inside for details.
ANNUAL 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 A2006 07/06
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.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), 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.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $73,632 for the fiscal year ended May 31, 2006 and $69,033 for the fiscal
year ended May 31, 2005.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $2,752 for the fiscal year ended May 31, 2006
and $0 for the fiscal year ended May 31, 2005. The services for which these fees
were paid included review of materials provided to the fund Board in connection
with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $173,109 for the fiscal year ended May 31,
2006 and $4,500 for the fiscal year ended May 31, 2005. The services for which
these fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process and the
review of the ICI transfer agent survey.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $175,861 for the fiscal year ended May 31, 2006 and $4,500 for
the fiscal year ended May 31, 2005.
(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
Companies. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. 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 11. 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 12. EXHIBITS.
(a) (1) Code of Ethics
(a) (2) 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) 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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date July 27, 2006
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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date July 27, 2006
By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date July 27, 2006