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

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-03479
-----------

FRANKLIN NEW YORK TAX-FREE INCOME FUND
--------------------------------------
(Exact name of registrant as specified in charter)

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

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-------------------------------------------------------------
(Name and address of agent for service)

Registrant's telephone number, including area code: 650 312-2000
------------

Date of fiscal year end: 5/31
----

Date of reporting period: 11/30/09
--------

ITEM 1. REPORTS TO STOCKHOLDERS.

NOVEMBER 30, 2009 (GRAPHIC)

SEMIANNUAL REPORT
AND SHAREHOLDER LETTER

TAX-FREE INCOME

FRANKLIN
NEW YORK TAX-FREE INCOME FUND

(GRAPHIC)

(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - Templeton - 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.

MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS

(GRAPHIC)

Not part of the semiannual report

Contents

SHAREHOLDER LETTER ........................................................ 1
SEMIANNUAL REPORT
Franklin New York Tax-Free Income Fund .................................... 4
Performance Summary ....................................................... 10
Your Fund's Expenses ...................................................... 13
Financial Highlights and Statement of Investments ......................... 15
Financial Statements ...................................................... 32
Notes to Financial Statements ............................................. 36
Shareholder Information ................................................... 43

Shareholder Letter

Dear Shareholder:

In the third quarter of 2009, U.S. economic activity improved compared with the
previous quarter, while recent economic releases pointed to an easing of the
global recession. Many observers think the recession is already over and the
recovery has started. Although most economists predicted positive U.S. growth
for the second half of 2009, many expected growth would be sluggish as consumers
and the financial system continued to climb out of debt.

The federal funds target rate remained unchanged over the period; however, the
Federal Reserve Board (Fed) was very active. In response to the financial crisis
in 2008, the Fed not only cut the federal funds target rate to a 0% to 0.25%
range, it also employed other strategies to help stem the crisis, resulting in a
substantial increase in its balance sheet. The Fed established various lending
and liquidity facilities and through quantitative easing purchased mortgage
securities and Treasuries, all in an effort to encourage long-term interest
rates to move lower.

Most major financial markets showed signs of recovery, and equity markets staged
a strong rally since March. As financial markets moved off their lows, commodity
prices rebounded. Overall inflation, however, remained tame. Fed Chairman
Bernanke began to prepare markets for the unwinding of the Fed's accommodative
policy and the exit strategy for its lending and liquidity facilities. At this
point, the timing of these actions is uncertain.

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

Not part of the semiannual report | 1

The municipal bond market experienced a healthy rebound in the six-month period
under review; the Barclays Capital (BC) Municipal Bond Index returned +4.75% and
securities with maturities 22 years and longer, which make up a substantial
portion of the Fund's portfolio, returned +7.02%.(1)

Although it looked as if the banking and financial crisis may have turned the
corner and economic recovery was under way, we think a note of caution is
warranted. We believe such areas of the economy as employment, housing, state
and local government budgets, and the finance and banking sector will continue
to face challenges and show signs of pressure for an indefinite period.

We believe it is especially important during uncertain times to keep a clear
head and long-term outlook and to consult with your financial advisor. Your
financial advisor can review your portfolio and help you reassess your needs,
goals and risk tolerance. Investors with discipline and a sound investment plan
may find favorable long-term opportunities when markets decline.

Franklin New York Tax-Free Income Fund's semiannual report goes into greater
detail about municipal bond market conditions during the period. In addition,
you will find performance data, financial information and a discussion from the
portfolio managers. Please remember that all securities markets fluctuate, as do
mutual fund share prices. Municipal bonds provide tax-free income and
diversification from equities. Despite periods of volatility, municipal bonds
have a solid long-term record of performance, driven mostly by their income
component.

(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. Past performance is no guarantee of future results. The
BC Municipal Bond Index is a market value-weighted index engineered for the
long-term tax-exempt bond market. To be included in the index, bonds must
be fixed rate, have at least one year to final maturity and be rated
investment grade (Baa3/BBB- or higher) by at least two of the following
agencies: Moody's, Standard & Poor's or Fitch. The BC Municipal Long Bond
Index is the long (22+ years) component of the BC Municipal Bond Index.

2 | Not part of the semiannual report

Please check our website at franklintempleton.com for special portfolio manager
commentary. Although market conditions are constantly changing, we remain
committed to our disciplined strategy as we manage the Fund, keeping in mind the
trust you have placed in us. We appreciate your confidence and encourage you to
contact us when you have questions about your Franklin Templeton tax-free
investment.

Sincerely,

/s/ Charles B. Johnson

Charles B. Johnson
Chairman, President and Chief Executive Officer - Investment Management
Franklin New York Tax-Free Income Fund

/s/ Sheila Amoroso

Sheila Amoroso

/s/ Rafael R. Costas Jr.

Rafael R. Costas Jr.

Senior Vice Presidents and Co-Directors
Franklin Municipal Bond Department

THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF NOVEMBER 30, 2009. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE.

Not part of the semiannual report | 3

Semiannual Report

Franklin New York Tax-Free Income Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin New York Tax-Free Income Fund
seeks to provide 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 federal and New York state personal
income taxes and at least 65% of its total assets in securities that pay
interest free from New York City personal income taxes.(1)

CREDIT QUALITY BREAKDOWN*
11/30/09

% OF TOTAL
LONG-TERM
RATINGS INVESTMENTS**
- ------- -------------

AAA 35.3%
AA 36.1%
A 17.8%
BBB 3.3%
Below Investment Grade 0.1%
Not Rated by S&P 7.4%

* 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. The letter ratings are
provided to indicate the creditworthiness of the Fund's bond holdings and
generally can range from AAA or Aaa (highest) to Below Investment Grade
(lowest).

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

RATINGS MOODY'S INTERNAL
- ------- ------- --------

AAA or Aaa -- 2.1%
AA or Aa 1.9% 0.3%
A 2.0% 0.3%
BBB or Baa 0.2% 0.4%
Below Investment Grade 0.1% 0.1%
--- ---
Total 4.2% 3.2%

We are pleased to bring you Franklin New York Tax-Free Income Fund's semi-annual
report for the period ended November 30, 2009.

(1.) For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable. To avoid imposition of 28% backup withholding on all Fund
distributions and redemption proceeds, U.S. investors must be properly
certified on Form W-9 and non-U.S. investors on Form W-8BEN.

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 19.

4 | Semiannual Report

PERFORMANCE OVERVIEW

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 (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.

The Fund's Class A share price, as measured by net asset value, increased from
$11.34 on May 31, 2009, to $11.58 on November 30, 2009. The Fund's Class A
shares paid dividends totaling 25.19 cents per share for the reporting
period.(2) The Performance Summary beginning on page 10 shows that at the end of
this reporting period the Fund's Class A shares' distribution rate was 4.06%
based on an annualization of November's 4.09 cent per share dividend and the
maximum offering price of $12.09 on November 30, 2009. An investor in the 2009
maximum combined effective federal and New York State and City personal income
tax bracket of 42.91% would need to earn a distribution rate of 7.11% 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. During the period under review, renewed investor interest
in municipal bonds and limited new-issue supply led to higher municipal bond
prices, which reduced the Fund's income and caused dividends to decline.

STATE UPDATE

New York's broad-based, mature and wealthy economy attracts an educated, global
workforce. However, it is highly cyclical in nature and depends heavily on New
York City, headquarters for the nation's financial activities. The financial
industry, which accounted for 7.9% of state employment in August 2009, has been
hard-hit in the current recession. New York has lost 51,000 jobs so far in this
downturn.(3, 4) Overall, the state's unemployment rate increased from 8.2% in
May 2009 to 8.6% in November 2009.(5) However, job losses in New York have not
been as severe as they have in the nation as a whole where the unemployment rate
was 10.0% in November.(5)

The state announced in its midyear report that it expected a current-year
shortfall of approximately $3 billion, largely due to weaker-than-expected
revenues.(4) New York's above-average dependence on personal income taxes
combined with the loss of highly paid financial jobs significantly affected the
state's finances. Revenue underperformance in the current fiscal year resulted
in projections for a current-year gap and large future-year gaps. New York
forecast a $3.2 billion fiscal year 2010 general fund budget gap.(3) Weaker
revenue projections affected not only the budget balance but also the state's
cash balance. The state's high recurring expenditure demands -- in part due to
generous social services

(2.) All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.

(3.) Source: Standard & Poor's, "New York State; General Obligation,"
RATINGSDIRECT, 11/19/09.

(4.) Source: Moody's Investors Service, "New Issue: Moody's Assigns Aa3 to
Approximately $350 Million New York State General Obligation Refunding
Bonds; Outlook is Stable," 11/19/09.

(5.) Source: Bureau of Labor Statistics.

Semiannual Report | 5

DIVIDEND DISTRIBUTIONS(2)

DIVIDEND PER SHARE
----------------------------------------------------
MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
- ----- ---------- ---------- ---------- -------------

June 4.22 cents 3.69 cents 3.71 cents 4.30 cents
July 4.22 cents 3.69 cents 3.71 cents 4.30 cents
August 4.22 cents 3.69 cents 3.71 cents 4.30 cents
September 4.22 cents 3.69 cents 3.71 cents 4.30 cents
October 4.22 cents 3.69 cents 3.71 cents 4.30 cents
November 4.09 cents 3.56 cents 3.58 cents 4.17 cents

programs -- also contributed to budget issues. Thus, Governor David Patterson
proposed closing the midyear budget gap projection with cuts in nonpersonnel
service, education spending, Medicaid and local government assistance.

Over the past several years, New York's outstanding tax-supported debt has
increased. Near period-end, the state ranked fifth in the nation in terms of net
tax-supported debt per capita and as a percent of personal income.(4) New York's
debt burden increased partly due to a high proportion of deficit-related bonding
and significant additional issuance for capital purposes. New York's general
obligation bonds were rated Aa3 and AA, with stable outlooks, by independent
credit rating agencies Moody's Investors Service and Standard & Poor's.(6) The
ratings and outlooks reflected New York's highly cyclical economy, volatile
finances and above-average debt burden while also recognizing aggressive budget
administration, accumulated budget reserves and solid debt service coverage.

MUNICIPAL BOND MARKET OVERVIEW

During the six-month period ended November 30, 2009, the municipal bond market
posted a +4.75% total return, as measured by the Barclays Capital (BC) Municipal
Bond Index.(7) The municipal bond market posted not only solid absolute
performance but also strong relative performance when compared to the Treasury
market, as the BC U.S. Treasury Index had a +3.25% total return for the
reporting period.(8)

(6.) These do not indicate ratings of the Fund.

(7.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The BC Municipal Bond Index is a market value-weighted
index engineered for the long-term tax-exempt bond market. To be included
in the index, bonds must be fixed rate, have at least one year to final
maturity and be rated investment grade (Baa3/BBB- or higher) by at least
two of the following agencies: Moody's, Standard & Poor's or Fitch.

(8.) Source: (C) 2009 Morningstar. The BC U.S. Treasury Index is the U.S.
Treasury component of the U.S. Government Index and covers public
obligations of the U.S. Treasury with a remaining maturity of one year or
more.

6 | Semiannual Report

Among the many factors that affected municipal bond prices during the six-month
period, confidence over issuers' abilities to repay funds, the purchasing power
of those repaid dollars, and the supply of tax-free municipal bonds had a major
impact on municipal bond prices. Due to a changing economic landscape, rating
downgrades of bond insurers, and reconciliation between corporate and municipal
rating scales, many municipal bonds were re-rated during the period. In the
second and third quarters of 2009, Moody's elevated the rating of 185 state and
local government issues while downgrading 120. Recent positive rating actions
coupled with a long-term default rate for investment-grade municipal bonds of
less than 1% helped remind investors of the asset class's underlying credit
strength.(9) Investor interest also increased for lower investment-grade and
speculative-grade issues during the reporting period, which drove the BC Baa
Municipal Bond Index up 6.82%, compared with the BC Aaa Municipal Bond Index's
+3.55% total return.(10)

Further aiding positive municipal bond performance during the reporting period
was a benign inflationary environment. The Consumer Price Index (CPI) and
Producer Price Index (PPI) reported negative year-over-year changes in each
month during the six months under review. In addition, the Congressional Budget
Office (CBO) forecast CPI would remain below 2% through 2019. Historically, a
low inflation outlook has provided confidence for fixed income investors that
future cash flow from their bond investments will retain purchasing power.
However, the CBO's estimate for temperate inflation did not cause the yield
curve to level off, and the yield difference between short- and long-term
municipal bonds averaged a spread of 434 basis points (100 basis points equal
one percentage point) for the six-month period, as measured by the Securities
Industry and Financial Market Association (SIFMA) Municipal Swap Index and the
Bloomberg Fair Value 30-Year AAA Index.(11) The 10-year average using the same
indexes was 249 basis points.(11) If the CBO's estimate of future inflation is
realized, then buyers of longer term bonds will reap the rewards of attractive
returns over inflation.

Tax-free bond supply also affected municipal bond market performance over the
past six months. Thus far in 2009, tax-exempt bond issuance rose only 1.3%
compared with the same period in 2008.(12) The small number of tax-free

(9.) Source: Standard & Poor's, "U.S. Municipal Ratings Transitions and
Defaults, 1986-2009," RATINGSDIRECT, 3/11/09.

(10.) Source: (C) 2009 Morningstar. The BC Baa Municipal Bond Index is the Baa
credit quality component of the BC Municipal Bond Index. The BC Aaa
Municipal Bond Index is the Aaa credit quality component of the BC
Municipal Bond Index.

(11.) Sources: Thomson Financial; Bloomberg LP. The SIFMA Municipal Swap Index
is a weekly high-grade market index composed of seven-day tax-exempt
variable rate demand notes produced by the Municipal Market Data Group.
Actual issues are selected from Municipal Market Data's database of more
than 10,000 active issues based on several specific criteria. The
Bloomberg Fair Value 30-Year AAA Index is an index derived from data
points on Bloomberg's option-free Fair Market Curve consisting of
municipal general obligation bonds.

(12.) Source: THE BOND BUYER, 11/30/09.

Semiannual Report | 7

PORTFOLIO BREAKDOWN
11/30/09

% OF TOTAL
LONG-TERM
INVESTMENTS*
------------

Transportation 21.7%
Tax-Supported 13.7%
Prerefunded 13.6%
Subject to Government Appropriations 13.4%
Utilities 11.5%
General Obligation 8.2%
Higher Education 7.5%
Other Revenue 3.5%
Hospital & Health Care 3.3%
Housing 1.9%
Corporate-Backed 1.7%

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

offerings left investors with a limited amount of bonds to construct their
portfolios and helped drive municipal bond prices higher. Details of the supply
of tax-exempt offerings during 2009 are noteworthy because the way
municipalities accessed capital markets underwent a structural change. In
February 2009 the American Recovery and Reinvestment Act was signed into law,
allowing municipalities to issue taxable bonds and receive a 35% federal
government subsidy for all coupon payments distributed to investors for the life
of the bonds. This rebate allowed municipalities to borrow significantly below
their after-tax cost in the traditional tax-exempt municipal bond market. We
think these new, subsidized, taxable municipal bonds, known as Build America
Bonds, are likely to suppress future supply of tax-exempt municipal bonds as
long as the government permits their use.

Given the various ratings changes, the relatively steep yield curve, and the
short supply during the reporting period, we looked for opportunities to keep
the Fund's portfolio fully invested in longer term bonds, which helped support
the Fund's dividend distributions. At period-end, we continued to be active in
the market and felt that municipal bonds at current yields represented an
attractive long-term opportunity.

INVESTMENT STRATEGY

We use a consistent, disciplined strategy in an effort to maximize tax-exempt
income for our shareholders by seeking to maintain exposure to higher coupon
securities. We generally employ a buy-and-hold approach and invest in securities
we believe should provide the most relative value in the market. As we invest
during different interest rate environments, our portfolio becomes progressively
more diversified with a broad range of securities. This broad diversification
may help mitigate interest rate risk. We do not use leverage or exotic
derivatives, nor do we use hedging techniques that could add volatility and
contribute to underperformance in adverse markets. We generally stay fully
invested to help maximize income distribution.

MANAGER'S DISCUSSION

Our value-oriented philosophy of investing primarily for income and a positive
sloping municipal yield curve favored the use of longer-term bonds during the
reporting period. Consistent with our strategy, we sought to remain fully
invested in bonds ranging from 20 to 30 years in maturity with good call
features. We sought to take advantage of strong retail demand for highly rated
essential service bonds, and sold some AA-rated and AAA-rated securities that
were purchased in a lower municipal bond interest rate environment. We also

8 | Semiannual Report

sold some of the Fund's highly liquid prerefunded bonds at a premium as
institutional investors provided liquidity for municipal bonds escrowed in
government securities. We used the proceeds to purchase bonds we believed were
trading at very attractive relative values in the current, higher interest rate
environment.

In line with our relative value investment strategy, and to further reduce
volatility, we avoided derivative securities and other exotic investment
vehicles designed to leverage the portfolio. During the period, the Fund had no
exposure to inverse floaters or any other form of leverage. Also, as the
alternative minimum tax (AMT) affects more individuals each year, we held no
bonds subject to AMT to prevent a taxable situation for individuals subject to
AMT.

We intend to maintain our conservative, buy-and-hold investment strategy as we
attempt to provide shareholders with high, current, tax-free income. Thank you
for your continued participation in Franklin New York Tax-Free Income Fund. We
look forward to serving your future investment needs.

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF NOVEMBER 30, 2009, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE 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.

Semiannual Report | 9

Performance Summary as of 11/30/09

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

CLASS A (SYMBOL: FNYTX) CHANGE 11/30/09 5/31/09
- ----------------------- ------ -------- -------

Net Asset Value (NAV) +$0.24 $11.58 $11.34
DISTRIBUTIONS (6/1/09-11/30/09)
Dividend Income $0.2519

CLASS B (SYMBOL: FTFBX) CHANGE 11/30/09 5/31/09
- ----------------------- ------ -------- -------

Net Asset Value (NAV) +$0.23 $11.55 $11.32
DISTRIBUTIONS (6/1/09-11/30/09)
Dividend Income $0.2201

CLASS C (SYMBOL: FNYIX) CHANGE 11/30/09 5/31/09
- ----------------------- ------ -------- -------

Net Asset Value (NAV) +$0.24 $11.57 $11.33
DISTRIBUTIONS (6/1/09-11/30/09)
Dividend Income $0.2213

ADVISOR CLASS (SYMBOL: FNYAX) CHANGE 11/30/09 5/31/09
- ----------------------------- ------ -------- -------

Net Asset Value (NAV) +$0.23 $11.58 $11.35
DISTRIBUTIONS (6/1/09-11/30/09)
Dividend Income $0.2567

10 | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS
INCLUDE MAXIMUM SALES CHARGES. 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.

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

Cumulative Total Return(1) +4.39% +14.72% +22.93% +66.31%
Average Annual Total Return(2) -0.02% +9.86% +3.31% +4.76%
Avg. Ann. Total Return (12/31/09)(3) +8.42% +3.21% +4.94%
Distribution Rate(4) 4.06%
Taxable Equivalent Distribution Rate(5) 7.11%
30-Day Standardized Yield(6) 3.37%
Taxable Equivalent Yield(5) 5.90%
Total Annual Operating Expenses(7) 0.60%

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

Cumulative Total Return(1) +4.01% +14.12% +19.57% +59.18%
Average Annual Total Return(2) +0.01% +10.12% +3.30% +4.76%
Avg. Ann. Total Return (12/31/09)(3) +8.56% +3.20% +4.92%
Distribution Rate(4) 3.70%
Taxable Equivalent Distribution Rate(5) 6.48%
30-Day Standardized Yield(6) 2.97%
Taxable Equivalent Yield(5) 5.20%
Total Annual Operating Expenses(7) 1.16%

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

Cumulative Total Return(1) +4.11% +14.11% +19.58% +57.19%
Average Annual Total Return(2) +3.11% +13.11% +3.64% +4.63%
Avg. Ann. Total Return (12/31/09)(3) +11.57% +3.52% +4.79%
Distribution Rate(4) 3.71%
Taxable Equivalent Distribution Rate(5) 6.50%
30-Day Standardized Yield(6) 2.97%
Taxable Equivalent Yield(5) 5.20%
Total Annual Operating Expenses(7) 1.16%

ADVISOR CLASS(8) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------- ------- ------ ------ -------

Cumulative Total Return(1) +4.34% +14.82% +23.46% +67.47%
Average Annual Total Return(2) +4.34% +14.82% +4.31% +5.29%
Avg. Ann. Total Return (12/31/09)(3) +13.25% +4.20% +5.46%
Distribution Rate(4) 4.32%
Taxable Equivalent Distribution Rate(5) 7.57%
30-Day Standardized Yield(6) 3.62%
Taxable Equivalent Yield(5) 6.34%
Total Annual Operating Expenses(7) 0.51%

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 (800) 342-5236.

Semiannual Report | 11

Performance Summary (CONTINUED)

ENDNOTES

BECAUSE MUNICIPAL BONDS ARE SENSITIVE TO INTEREST RATE MOVEMENTS, 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 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. Six-month return has not been
annualized.

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

(4.) Distribution rate is based on an annualization of the respective class's
November dividend and the maximum offering price (NAV for Classes B, C and
Advisor) per share on 11/30/09.

(5.) Taxable equivalent distribution rate and yield assume the published rates
as of 6/29/09 for the maximum combined effective federal and New York state
and City personal income tax rate of 42.91%, based on the federal income
tax rate of 35.00%.

(6.) The 30-day standardized yield for the 30 days ended 11/30/09 reflects an
estimated yield to maturity (assuming all portfolio securities are held to
maturity). It should be regarded as an estimate of the Fund's rate of
investment income, and it may not equal the Fund's actual income
distribution rate (which reflects the Fund's past dividends paid to
shareholders) or the income reported in the Fund's financial statements.

(7.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.

(8.) 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 +45.18% and +4.67%.

12 | Semiannual Report

Your Fund's Expenses

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

- - Transaction costs, including sales charges (loads) on Fund purchases; and

- - 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 provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.

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

1. Divide your account value by $1,000.

IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."

IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

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

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

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

Semiannual Report | 13

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.
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
VALUE 6/1/09 VALUE 11/30/09 PERIOD* 6/1/09-11/30/09
----------------- -------------- -----------------------

CLASS A
Actual $1,000 $1,043.90 $3.07
Hypothetical (5% return before expenses) $1,000 $1,022.06 $3.04
CLASS B
Actual $1,000 $1,040.10 $5.93
Hypothetical (5% return before expenses) $1,000 $1,019.25 $5.87
CLASS C
Actual $1,000 $1,041.10 $5.94
Hypothetical (5% return before expenses) $1,000 $1,019.25 $5.87
ADVISOR CLASS
Actual $1,000 $1,043.40 $2.61
Hypothetical (5% return before expenses) $1,000 $1,022.51 $2.59

* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.60%; B: 1.16%; C: 1.16%; and Advisor:
0.51%), multiplied by the average account value over the period, multiplied
by 183/365 to reflect the one-half year period.

14 | Semiannual Report

Franklin New York Tax-Free Income Fund

FINANCIAL HIGHLIGHTS

SIX MONTHS ENDED YEAR ENDED MAY 31,
NOVEMBER 30, 2009 ------------------------------------------------------------------
CLASS A (UNAUDITED) 2009 2008 2007 2006 2005
- ------- ----------------- ---------- ---------- ---------- ---------- ----------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of
period ........................... $ 11.34 $ 11.61 $ 11.69 $ 11.72 $ 12.01 $ 11.64
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations(a):
Net investment income(b) ......... 0.25 0.50 0.51 0.51 0.52 0.54
Net realized and unrealized
gains (losses) ................ 0.24 (0.21) (0.06) (0.02) (0.29) 0.37
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .... 0.49 0.29 0.45 0.49 0.23 0.91
---------- ---------- ---------- ---------- ---------- ----------
Less distributions from:
Net investment income ............ (0.25) (0.51) (0.51) (0.51) (0.52) (0.54)
Net realized gains ............... -- (0.05) (0.02) (0.01) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ................. (0.25) (0.56) (0.53) (0.52) (0.52) (0.54)
---------- ---------- ---------- ---------- ---------- ----------
Redemption fees(c) .................. -- --(d) --(d) --(d) --(d) --(d)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ...... $ 11.58 $ 11.34 $ 11.61 $ 11.69 $ 11.72 $ 12.01
========== ========== ========== ========== ========== ==========
Total return(e) ..................... 4.39% 2.72% 3.92% 4.25% 1.95% 7.95%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses ............................ 0.60% 0.60% 0.60% 0.61% 0.60% 0.60%
Net investment income ............... 4.30% 4.53% 4.38% 4.37% 4.41% 4.50%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ... $5,183,481 $4,831,851 $4,701,098 $4,411,763 $4,351,378 $4,497,924
Portfolio turnover rate ............. 8.13% 13.12% 11.88% 5.59% 9.71% 10.97%

(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.

(b) Based on average daily shares outstanding.

(d) Amount rounds to less than $0.01 per share.

(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.

(f) Ratios are annualized for periods less than one year.

The accompanying notes are an integral part of these financial statements.

Semiannual Report | 15

Franklin New York Tax-Free Income Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

SIX MONTHS ENDED YEAR ENDED MAY 31,
NOVEMBER 30, 2009 -----------------------------------------------------------
CLASS B (UNAUDITED) 2009 2008 2007 2006 2005
- ------- ----------------- -------- -------- ------- -------- --------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of
period ........................... $ 11.32 $ 11.58 $ 11.67 $ 11.70 $ 11.99 $ 11.61
------- -------- -------- ------- -------- --------
Income from investment operations(a):
Net investment income(b) ......... 0.21 0.44 0.44 0.45 0.45 0.47
Net realized and unrealized gains
(losses) ...................... 0.24 (0.21) (0.07) (0.02) (0.29) 0.38
------- -------- -------- ------- -------- --------
Total from investment operations .... 0.45 0.23 0.37 0.43 0.16 0.85
------- -------- -------- ------- -------- --------
Less distributions from:
Net investment income ............ (0.22) (0.44) (0.44) (0.45) (0.45) (0.47)
Net realized gains ............... -- (0.05) (0.02) (0.01) -- --
------- -------- -------- ------- -------- --------
Total distributions ................. (0.22) (0.49) (0.46) (0.46) (0.45) (0.47)
------- -------- -------- ------- -------- --------
Redemption fees(c) .................. -- --(d) --(d) --(d) --(d) --(d)
------- -------- -------- ------- -------- --------
Net asset value, end of period ...... $ 11.55 $ 11.32 $ 11.58 $ 11.67 $ 11.70 $ 11.99
======= ======== ======== ======== ======== ========
Total return(e) ..................... 4.01% 2.23% 3.26% 3.67% 1.38% 7.46%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses ............................ 1.16% 1.16% 1.16% 1.17% 1.16% 1.16%
Net investment income ............... 3.74% 3.97% 3.82% 3.81% 3.85% 3.94%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ... $91,080 $112,001 $148,693 $178,205 $207,209 $231,020
Portfolio turnover rate ............. 8.13% 13.12% 11.88% 5.59% 9.71% 10.97%

(b) Based on average daily shares outstanding.

(d) Amount rounds to less than $0.01 per share.

(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.

(f) Ratios are annualized for periods less than one year.

The accompanying notes are an integral part of these financial statements.

16 | Semiannual Report

Franklin New York Tax-Free Income Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

SIX MONTHS ENDED YEAR ENDED MAY 31,
NOVEMBER 30, 2009 ------------------------------------------------------------
CLASS C (UNAUDITED) 2009 2008 2007 2006 2005
- ------- ----------------- -------- -------- -------- -------- --------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of
period ........................... $ 11.33 $ 11.60 $ 11.69 $ 11.71 $ 12.00 $ 11.63
-------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b) ......... 0.22 0.44 0.44 0.45 0.45 0.47
Net realized and unrealized gains
(losses) ...................... 0.24 (0.22) (0.07) (0.01) (0.29) 0.37
-------- -------- -------- -------- -------- --------
Total from investment operations .... 0.46 0.22 0.37 0.44 0.16 0.84
-------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income ............ (0.22) (0.44) (0.44) (0.45) (0.45) (0.47)
Net realized gains ............... -- (0.05) (0.02) (0.01) -- --
-------- -------- -------- -------- -------- --------
Total distributions ................. (0.22) (0.49) (0.46) (0.46) (0.45) (0.47)
-------- -------- -------- -------- -------- --------
Redemption fees(c) .................. -- --(d) --(d) --(d) --(d) --(d)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ...... $ 11.57 $ 11.33 $11.60 $ 11.69 $ 11.71 $ 12.00
======== ======== ======== ======== ======== ========
Total return(e) ..................... 4.11% 2.15% 3.26% 3.76% 1.38% 7.36%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses ............................ 1.16% 1.16% 1.16% 1.17% 1.16% 1.16%
Net investment income ............... 3.74% 3.97% 3.82% 3.81% 3.85% 3.94%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ... $729,383 $535,898 $398,418 $272,837 $245,444 $235,805
Portfolio turnover rate ............. 8.13% 13.12% 11.88% 5.59% 9.71% 10.97%

(b) Based on average daily shares outstanding.

(d) Amount rounds to less than $0.01 per share.

(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.

(f) Ratios are annualized for periods less than one year.

The accompanying notes are an integral part of these financial statements.

Semiannual Report | 17

Franklin New York Tax-Free Income Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

SIX MONTHS ENDED YEAR ENDED MAY 31,
NOVEMBER 30, 2009 -------------------------------------------------------
ADVISOR CLASS (UNAUDITED) 2009 2008 2007 2006 2005
- ------------- ----------------- -------- ------- ------- ------- -------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of
period ........................... $ 11.35 $ 11.61 $ 11.70 $ 11.73 $ 12.02 $ 11.64
-------- -------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b) ......... 0.25 0.51 0.52 0.53 0.53 0.55
Net realized and unrealized gains
(losses) ...................... 0.24 (0.20) (0.07) (0.02) (0.29) 0.38
-------- -------- ------- ------- ------- -------
Total from investment operations .... 0.49 0.31 0.45 0.51 0.24 0.93
-------- -------- ------- ------- ------- -------
Less distributions from:
Net investment income ............ (0.26) (0.52) (0.52) (0.53) (0.53) (0.55)
Net realized gains ............... -- (0.05) (0.02) (0.01) -- --
-------- -------- ------- ------- ------- -------
Total distributions ................. (0.26) (0.57) (0.54) (0.54) (0.53) (0.55)
-------- -------- ------- ------- ------- -------
Redemption fees(c) .................. -- --(d) --(d) --(d) --(d) --(d)
-------- -------- ------- ------- ------- -------
Net asset value, end of period ...... $ 11.58 $ 11.35 $ 11.61 $ 11.70 $ 11.73 $ 12.02
======== ======== ======= ======= ======= =======
Total return(e) ..................... 4.34% 2.90% 3.93% 4.34% 2.04% 8.14%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses ............................ 0.51% 0.51% 0.51% 0.52% 0.51% 0.51%
Net investment income ............... 4.39% 4.62% 4.47% 4.46% 4.50% 4.59%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ... $145,942 $102,034 $84,781 $61,547 $ 44,308 $30,487
Portfolio turnover rate ............. 8.13% 13.12% 11.88% 5.59% 9.71% 10.97%

(b) Based on average daily shares outstanding.

(d) Amount rounds to less than $0.01 per share.

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

(f) Ratios are annualized for periods less than one year.

The accompanying notes are an integral part of these financial statements.

18 | Semiannual Report

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED)

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

MUNICIPAL BONDS 98.2%
NEW YORK 92.7%
Albany Housing Authority Limited Obligation Revenue, Refunding, 6.25%,
10/01/12 .................................................................... $ 3,340,000 $ 3,347,415
Albany IDA Civic Facility Revenue,
Albany Medical Center Project, 6.00%, 5/01/19 ............................... 1,270,000 1,242,289
Albany Medical Center Project, 6.00%, 5/01/29 ............................... 1,460,000 1,304,758
St. Peter's Hospital Project, Series A, 5.25%, 11/15/27 ..................... 5,000,000 4,925,600
St. Peter's Hospital Project, Series A, 5.25%, 11/15/32 ..................... 5,000,000 4,775,300
St. Peter's Hospital Project, Series E, 5.50%, 11/15/27 ..................... 1,135,000 1,143,683
St. Peter's Hospital Project, Series E, 5.25%, 11/15/32 ..................... 1,150,000 1,096,893
St. Rose Project, Series A, AMBAC Insured, Pre-Refunded, 5.375%, 7/01/31 .... 2,750,000 2,988,150
Albany Parking Authority Revenue,
Refunding, Series A, 5.625%, 7/15/20 ........................................ 555,000 602,364
Refunding, Series A, 5.625%, 7/15/25 ........................................ 415,000 450,416
Series A, Pre-Refunded, 5.625%, 7/15/20 ..................................... 695,000 753,957
Series A, Pre-Refunded, 5.625%, 7/15/25 ..................................... 585,000 634,626
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 1,465,526
Series A, AMBAC Insured, 5.25%, 8/01/31 ..................................... 5,055,000 5,131,887
Series B, AMBAC Insured, 5.625%, 8/01/20 .................................... 1,690,000 1,751,550
Series B, AMBAC Insured, 5.75%, 8/01/25 ..................................... 3,050,000 3,157,817
Series B, AMBAC Insured, 5.75%, 8/01/30 ..................................... 3,440,000 3,552,144
Series B, AMBAC Insured, 5.25%, 8/01/31 ..................................... 1,000,000 1,015,210
Battery Park City Authority Revenue, Refunding, Series A, 5.00%,
11/01/24 .................................................................... 9,000,000 9,864,900
11/01/25 .................................................................... 12,000,000 13,068,840
11/01/26 .................................................................... 14,250,000 15,474,930
Clinton County COP, Correctional Facilities Project, 8.125%, 8/01/17 ........... 3,845,000 4,626,804
Dutchess County IDA Civic Facility Revenue, Vassar College Project,
Pre-Refunded, 5.35%, 9/01/40 ................................................ 16,000,000 17,415,360
Geneva IDA Civic Facilities Revenue, Colleges of the Seneca Project, AMBAC
Insured,
5.00%, 9/01/21 .............................................................. 2,835,000 2,944,658
5.125%, 9/01/31 ............................................................. 5,045,000 5,189,085
Hempstead Town IDA Civic Facility Revenue, Adelphi University Civic Facility,
5.00%,
10/01/30 .................................................................... 3,000,000 3,034,560
10/01/35 .................................................................... 1,500,000 1,480,620
Long Island Power Authority Electric System Revenue,
General, Refunding, Series A, 6.00%, 5/01/33 ................................ 42,000,000 46,856,460
General, Refunding, Series B, 5.00%, 12/01/35 ............................... 5,000,000 5,005,450
General, Series A, AMBAC Insured, 5.00%, 9/01/34 ............................ 20,670,000 20,859,544
General, Series C, 5.00%, 9/01/35 ........................................... 16,000,000 16,016,960
Series A, AMBAC Insured, 5.00%, 9/01/29 ..................................... 24,000,000 24,423,840
Series C, BHAC Insured, 5.00%, 9/01/35 ...................................... 5,000,000 5,120,300
Madison County IDA Civic Facility Revenue, Colgate University Project, Series B,
5.00%,
7/01/33 ..................................................................... 2,000,000 2,040,580
Middleburg Central School District GO, FGIC Insured,
4.60%, 8/15/17 .............................................................. 1,045,000 1,065,660
4.625%, 8/15/18 ............................................................. 1,155,000 1,176,252
4.625%, 8/15/19 ............................................................. 1,210,000 1,229,989

Semiannual Report | 19

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
Middleburg Central School District GO, FGIC Insured, (continued)
4.75%, 8/15/20 .............................................................. $ 1,270,000 $ 1,291,438
4.75%, 8/15/21 .............................................................. 1,330,000 1,351,160
Monroe County IDAR, Civic Facilities, De Paul Community Facilities,
6.50%, 2/01/24 .............................................................. 1,285,000 1,316,997
Montgomery County IDA Lease Revenue, Hamilton Fulton Montgomery Board of
Cooperative Educational Services Project, Series A, XLCA Insured, 5.00%,
7/01/29 ..................................................................... 5,710,000 5,180,112
7/01/34 ..................................................................... 3,000,000 2,567,910
MTA Commuter Facilities Revenue,
Series 8, Pre-Refunded, 5.50%, 7/01/21 ...................................... 5,000,000 5,792,600
Series A, FGIC Insured, Pre-Refunded, 5.25%, 7/01/28 ........................ 8,655,000 9,287,421
Series A, Pre-Refunded, 5.25%, 7/01/28 ...................................... 18,300,000 19,682,382
Series R, Pre-Refunded, 5.50%, 7/01/17 ...................................... 2,000,000 2,409,860
MTA Dedicated Tax Fund Revenue,
Refunding, Series A, 5.00%, 11/15/30 ........................................ 25,000,000 25,313,500
Series A, 5.50%, 11/15/39 ................................................... 22,845,000 24,287,205
Series A, FGIC Insured, Pre-Refunded, 6.00%, 4/01/30 ........................ 27,260,000 27,774,941
Series A, FSA Insured, 5.00%, 11/15/28 ...................................... 41,575,000 43,001,022
Series A, FSA Insured, 5.00%, 11/15/32 ...................................... 71,685,000 72,960,276
Series A, FSA Insured, Pre-Refunded, 5.00%, 4/01/29 ......................... 25,800,000 30,055,194
Series A, NATL Insured, 5.00%, 11/15/35 ..................................... 50,430,000 50,634,241
Series A, NATL Insured, Pre-Refunded, 5.25%, 4/01/26 ........................ 20,500,000 21,338,245
Series B, 5.00%, 11/15/34 ................................................... 60,000,000 61,994,400
Series B, NATL Insured, 4.75%, 11/15/26 ..................................... 5,200,000 5,270,512
Series B, NATL Insured, 5.00%, 11/15/31 ..................................... 40,000,000 41,085,200
MTA Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 11/15/25 .......................... 21,510,000 22,290,383
Refunding, Series A, FGIC Insured, 5.25%, 11/15/31 .......................... 34,000,000 34,564,740
Refunding, Series A, FSA Insured, 5.00%, 11/15/30 ........................... 68,130,000 68,629,393
Refunding, Series A, NATL Insured, 5.125%, 11/15/31 ......................... 15,000,000 15,198,000
Refunding, Series E, 5.25%, 11/15/31 ........................................ 15,000,000 15,228,450
Refunding, Series U, FGIC Insured, 5.125%, 11/15/31 ......................... 5,000,000 5,066,000
Series A, 5.00%, 11/15/37 ................................................... 48,000,000 47,570,400
Series A, FGIC Insured, 5.00%, 11/15/32 ..................................... 10,355,000 10,484,127
Series B, 5.125%, 11/15/24 .................................................. 20,000,000 21,105,800
Series B, 5.00%, 11/15/37 ................................................... 25,000,000 24,776,250
Series B, Pre-Refunded, 5.25%, 11/15/32 ..................................... 28,720,000 33,326,688
Transportation, Series A, 5.00%, 11/15/35 ................................... 43,895,000 43,945,040
Transportation, Series C, 6.50%, 11/15/28 ................................... 15,000,000 17,071,200
Transportation, Series F, 5.00%, 11/15/35 ................................... 11,000,000 11,038,940
MTA Service Contract Revenue,
Commuter Facilities, Series 7, ETM, zero cpn., 7/01/10 ...................... 7,500,000 7,468,500
Commuter Facilities, Series 7, ETM, zero cpn., 7/01/11 ...................... 7,590,000 7,472,659
Commuter Facilities, Series 7, ETM, zero cpn., 7/01/13 ...................... 2,065,000 1,958,880
Refunding, Series A, 5.125%, 1/01/29 ........................................ 33,105,000 33,926,004
Refunding, Series A, AMBAC Insured, 5.25%, 7/01/31 .......................... 50,000,000 50,792,000
Refunding, Series A, FGIC Insured, 5.00%, 7/01/25 ........................... 12,760,000 13,167,044
Series B, 5.375%, 1/01/30 ................................................... 50,000,000 51,003,000
Series B, NATL Insured, 5.00%, 1/01/31 ...................................... 22,290,000 22,536,082

20 | Semiannual Report

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
MTA Service Contract Revenue, (continued)
Transit Facilities, Series 7, ETM, zero cpn., 7/01/10 ....................... $ 9,000,000 $ 8,962,200
Transit Facilities, Series 7, ETM, zero cpn., 7/01/12 ....................... 15,380,000 14,893,838
Transit Facilities, Series 7, ETM, zero cpn., 7/01/13 ....................... 7,935,000 7,527,220
Nassau County GO,
General Improvement, Series C, Assured Guaranty, 5.125%, 10/01/35 ........... 27,210,000 28,261,939
General Improvement, Series C, Assured Guaranty, 5.25%, 10/01/39 ............ 28,190,000 29,329,722
Sewer and Storm Water Resources, Series D, Assured Guaranty, 5.25%,
10/01/39 ................................................................. 7,620,000 7,928,077
New York City GO,
Citysavers, Series B, zero cpn., 8/01/10 .................................... 2,690,000 2,682,737
Citysavers, Series B, zero cpn., 6/01/12 .................................... 1,030,000 1,065,154
Citysavers, Series B, zero cpn., 12/01/12 ................................... 1,030,000 1,056,904
Citysavers, Series B, zero cpn., 6/01/13 .................................... 1,030,000 1,038,240
Citysavers, Series B, zero cpn., 12/01/13 ................................... 1,030,000 1,028,723
Citysavers, Series B, zero cpn., 6/01/14 .................................... 1,030,000 1,002,654
Citysavers, Series B, zero cpn., 12/01/14 ................................... 1,030,000 991,653
Citysavers, Series B, zero cpn., 6/01/15 .................................... 1,030,000 960,733
Citysavers, Series B, zero cpn., 12/01/15 ................................... 1,030,000 948,403
Citysavers, Series B, zero cpn., 6/01/16 .................................... 1,030,000 918,410
Citysavers, Series B, zero cpn., 12/01/16 ................................... 1,030,000 905,288
Citysavers, Series B, zero cpn., 6/01/17 .................................... 1,030,000 876,025
Citysavers, Series B, zero cpn., 12/01/17 ................................... 1,030,000 862,450
Citysavers, Series B, zero cpn., 6/01/18 .................................... 1,030,000 834,300
Citysavers, Series B, zero cpn., 12/01/18 ................................... 1,005,000 800,603
Citysavers, Series B, zero cpn., 6/01/19 .................................... 1,030,000 794,254
Citysavers, Series B, zero cpn., 12/01/19 ................................... 1,030,000 780,483
Citysavers, Series B, zero cpn., 6/01/20 .................................... 10,000,000 6,820,300
Fiscal 2003, Series I, 5.00%, 3/01/29 ....................................... 10,000,000 10,206,200
Fiscal 2003, Series I, 5.00%, 3/01/30 ....................................... 14,785,000 15,067,393
Pre-Refunded, 5.50%, 5/15/24 ................................................ 8,920,000 9,220,426
Refunding, 5.50%, 5/15/24 ................................................... 1,080,000 1,100,596
Refunding, Series G, AMBAC Insured, 5.00%, 8/01/22 .......................... 15,000,000 15,844,650
Series A, FSA Insured, 6.00%, 5/15/30 ....................................... 1,095,000 1,118,302
Series A, FSA Insured, Pre-Refunded, 6.00%, 5/15/30 ......................... 5,155,000 5,340,168
Series B, 7.00%, 2/01/18 .................................................... 25,000 25,111
Series C, 7.00%, 2/01/12 .................................................... 705,000 711,599
Series C, FSA Insured, Pre-Refunded, 5.125%, 3/15/25 ........................ 6,335,000 6,980,980
Series D, 8.00%, 8/01/17 .................................................... 5,000 5,050
Series D, 7.50%, 2/01/18 .................................................... 5,000 5,022
Series D, 5.125%, 8/01/19 ................................................... 1,985,000 2,046,674
Series D, 5.50%, 6/01/24 .................................................... 16,160,000 16,921,621
Series D, 5.125%, 12/01/28 .................................................. 5,230,000 5,501,228
Series D, 5.00%, 10/15/29 ................................................... 5,000,000 5,121,400
Series D, 5.00%, 11/01/34 ................................................... 5,000,000 5,080,250
Series D, Pre-Refunded, 5.50%, 6/01/24 ...................................... 7,785,000 8,697,168
Series E, Sub Series E-1, 6.00%, 10/15/23 ................................... 7,000,000 8,161,160
Series E, Sub Series E-1, 6.25%, 10/15/28 ................................... 10,000,000 11,665,100
Series F, 5.30%, 1/15/26 .................................................... 24,070,000 25,027,264
Series F, Pre-Refunded, 5.30%, 1/15/26 ...................................... 20,930,000 23,767,689

Semiannual Report | 21

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York City GO, (continued)
Series H, 7.20%, 2/01/15 .................................................... $ 5,000 $ 5,022
Series H, FSA Insured, 5.375%, 8/01/27 ...................................... 125,000 125,693
Series H, NATL Insured, 5.125%, 8/01/25 ..................................... 900,000 904,833
Series I, Sub Series I-1, 5.375%, 4/01/36 ................................... 17,500,000 18,572,575
Series J, Sub Series J-1, 5.00%, 5/15/33 .................................... 19,500,000 20,031,570
Series J, Sub Series J-1, 5.00%, 5/15/36 .................................... 7,895,000 8,037,663
Series J, Sub Series J-1, AMBAC Insured, 5.00%, 6/01/23 ..................... 20,000,000 21,098,800
Series M, 5.00%, 4/01/35 .................................................... 10,000,000 10,129,900
New York City HDC, MFHR, Series C-1,
5.25%, 11/01/29 ............................................................. 6,110,000 6,283,829
5.50%, 11/01/34 ............................................................. 3,000,000 3,113,640
5.55%, 11/01/39 ............................................................. 3,300,000 3,422,232
5.70%, 11/01/46 ............................................................. 12,500,000 13,007,000
New York City IDA Civic Facility Revenue,
Ethical Culture School Project, Series B-1, XLCA Insured, 5.00%, 6/01/35 .... 7,820,000 6,427,258
Institute of International Education Inc. Project, 5.25%, 9/01/21 ........... 1,530,000 1,567,011
Institute of International Education Inc. Project, 5.25%, 9/01/31 ........... 5,235,000 5,292,794
New York University Project, AMBAC Insured, 5.00%, 7/01/31 .................. 18,000,000 18,186,840
Staten Island University Hospital Project, Series A, 6.375%, 7/01/31 ........ 3,730,000 3,425,707
New York City IDAR,
Queens Baseball Stadium, Pilot, AMBAC Insured, 5.00%, 1/01/39 ............... 8,000,000 7,074,880
Yankee Stadium, Pilot, Assured Guaranty, 7.00%, 3/01/49 ..................... 15,000,000 17,341,950
New York City Municipal Finance Authority Revenue, Series D, FSA Insured, 5.00%,
6/15/38 ..................................................................... 59,000,000 59,752,840
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Fiscal 2004, Refunding, Series C, 5.00%, 6/15/35 ............................ 10,000,000 10,190,500
Fiscal 2008, Refunding, Series A, 5.00%, 6/15/38 ............................ 52,000,000 52,748,280
Refunding, Series A, 5.00%, 6/15/39 ......................................... 34,950,000 35,404,000
Refunding, Series B, 6.10%, 6/15/31 ......................................... 11,005,000 11,423,740
Refunding, Series B, 6.00%, 6/15/33 ......................................... 6,040,000 6,266,621
Refunding, Series B, 5.00%, 6/15/36 ......................................... 26,700,000 27,198,489
Refunding, Series D, 5.00%, 6/15/37 ......................................... 4,865,000 4,932,915
Refunding, Series D, AMBAC Insured, 5.00%, 6/15/39 .......................... 7,900,000 8,002,621
Refunding, Series E, NATL Insured, 5.125%, 6/15/31 .......................... 34,175,000 34,984,606
Second General Resolution, Refunding, Series AA, 5.00%, 6/15/37 ............. 5,000,000 5,059,350
Second General Resolution, Refunding, Series GG-1, 5.00%, 6/15/39 ........... 25,000,000 25,321,250
Second General Resolution, Series AA, 4.75%, 6/15/37 ........................ 40,000,000 39,635,200
Series A, 5.75%, 6/15/40 .................................................... 6,550,000 7,183,123
Series A, FGIC Insured, Pre-Refunded, 5.25%, 6/15/33 ........................ 7,000,000 7,508,340
Series B, 5.00%, 6/15/26 .................................................... 25,000,000 25,528,500
Series B, 5.00%, 6/15/36 .................................................... 25,000,000 25,375,250
Series B, Pre-Refunded, 6.10%, 6/15/31 ...................................... 3,995,000 4,159,834
Series B, Pre-Refunded, 6.00%, 6/15/33 ...................................... 10,260,000 10,677,787
New York City Transitional Finance Authority Building Aid Revenue,
Fiscal 2007, Series S-2, FGIC Insured, 5.00%, 1/15/37 ....................... 22,000,000 21,934,000
Fiscal 2008, Refunding, Series S-1, 5.00%, 1/15/34 .......................... 75,000,000 75,443,250
Fiscal 2009, Series S-1, 5.75%, 7/15/38 ..................................... 30,000,000 32,165,100

22 | Semiannual Report

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York City Transitional Finance Authority Building Aid Revenue, (continued)
Fiscal 2009, Series S-2, 6.00%, 7/15/38 ..................................... $50,000,000 $ 55,042,500
Fiscal 2009, Series S-3, 5.25%, 1/15/39 ..................................... 29,485,000 30,366,012
Fiscal 2009, Series S-4, 5.75%, 1/15/39 ..................................... 30,000,000 32,243,100
Fiscal 2009, Series S-5, 5.25%, 1/15/39 ..................................... 27,000,000 27,806,760
New York City Transitional Finance Authority Revenue,
Future Tax Secured, 2005, Series B, 5.00%, 5/01/26 .......................... 460,000 462,737
Future Tax Secured, 2005, Series C, 5.00%, 5/01/29 .......................... 1,485,000 1,501,053
Future Tax Secured, Refunding, Series B, 5.00%, 5/01/30 ..................... 7,290,000 7,492,225
Future Tax Secured, Refunding, Series B, AMBAC Insured, 5.00%, 5/01/30 ...... 2,900,000 2,980,446
Future Tax Secured, Refunding, Series B, NATL Insured, 5.00%, 8/01/32 ....... 15,000,000 15,315,600
Future Tax Secured, Series A, 5.25%, 8/01/31 ................................ 28,205,000 29,266,636
Future Tax Secured, Series A, 5.00%, 5/01/34 ................................ 20,000,000 20,713,000
Future Tax Secured, Series A, 5.00%, 5/01/38 ................................ 20,000,000 20,497,200
Future Tax Secured, Series A, FGIC Insured, 5.00%, 5/01/28 .................. 15,805,000 16,051,716
Future Tax Secured, Series A, FGIC Insured, Pre-Refunded, 5.00%, 5/01/28 .... 260,000 276,658
Future Tax Secured, Series A, Pre-Refunded, 5.625%, 2/15/26 ................. 20,000,000 20,415,400
Future Tax Secured, Series A, Pre-Refunded, 5.25%, 5/01/31 .................. 460,000 491,091
Future Tax Secured, Series A, Pre-Refunded, 5.25%, 8/01/31 .................. 2,400,000 2,772,312
Future Tax Secured, Series B, AMBAC Insured, Pre-Refunded, 5.00%, 5/01/30 ... 100,000 109,417
Future Tax Secured, Series B, Pre-Refunded, 6.00%, 11/15/29 ................. 15,000,000 15,542,400
Future Tax Secured, Series B, Pre-Refunded, 5.00%, 5/01/30 .................. 230,000 251,659
Future Tax Secured, Series C, NATL Insured, 5.00%, 5/01/29 .................. 335,000 338,585
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 11/01/24 ................. 16,800,000 17,334,912
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 11/01/29 ................. 13,660,000 14,094,934
Future Tax Secured, Series D, 5.00%, 2/01/27 ................................ 62,025,000 64,481,810
Future Tax Secured, Series E, 5.00%, 2/01/25 ................................ 5,000,000 5,222,350
Future Tax Secured, Series E, 5.00%, 2/01/27 ................................ 10,000,000 10,396,100
Future Tax Secured, Series E, 5.00%, 2/01/33 ................................ 8,895,000 9,108,391
New York City Transportation Authority MTA Triborough Bridge and Tunnel
Authority COP,
Series A, AMBAC Insured, Pre-Refunded, 5.25%, 1/01/29 ....................... 79,840,000 80,946,582
New York City Trust for Cultural Resources Revenue,
Museum of Modern Art 2001, Series D, AMBAC Insured, 5.125%, 7/01/31 ......... 15,500,000 15,759,160
Wildlife Conservation Society, FGIC Insured, 5.00%, 2/01/34 ................. 10,500,000 10,644,900
New York Convention Center Development Corp. Revenue, Hotel Unit Fee Secured,
AMBAC Insured, 5.00%,
11/15/35 .................................................................... 33,130,000 32,329,248
11/15/44 .................................................................... 31,000,000 28,648,960
New York GO, Refunding, Series C, 5.00%,
8/01/24 ..................................................................... 10,000,000 10,703,200
8/01/25 ..................................................................... 7,575,000 8,070,329
8/01/26 ..................................................................... 2,190,000 2,322,473
New York IDA Parking Facility Revenue, Royal Charter Presbyterian, FSA Insured,
5.25%, 12/15/32 ............................................................. 1,525,000 1,566,739
New York Liberty Development Corp. Revenue,
5.50%, 10/01/37 ............................................................. 27,000,000 26,997,840
Goldman Sachs Headquarters, 5.25%, 10/01/35 ................................. 78,600,000 77,391,918

Semiannual Report | 23

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Dormitory Authority Lease Revenue,
Court Facilities, Pre-Refunded, 6.00%, 5/15/39 .............................. $58,245,000 $ 60,337,160
Refunding, Series A, FGIC Insured, 5.00%, 7/01/33 ........................... 12,650,000 12,678,209
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.50%,
7/01/27 .................................................................. 2,000,000 2,157,280
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.10%,
7/01/31 .................................................................. 7,700,000 8,257,172
State University Dormitory Facilities, Pre-Refunded, 5.00%, 7/01/32 ......... 5,500,000 6,095,650
State University Dormitory Facilities, Series A, 5.00%, 7/01/39 ............. 7,250,000 7,315,612
State University Dormitory Facilities, Series A, Pre-Refunded, 6.00%,
7/01/30 .................................................................. 5,750,000 5,998,860
New York State Dormitory Authority Personal Income Tax Revenue, Series A,
5.00%, 3/15/38 .............................................................. 5,000,000 5,103,900
New York State Dormitory Authority Revenue,
City University System, Consolidated Fourth General Resolution, Series A,
Pre-Refunded, 5.25%, 7/01/31 ............................................. 12,000,000 12,896,640
FGIC Insured, Pre-Refunded, 5.125%, 5/15/31 ................................. 22,000,000 24,576,860
Mental Health Services Facilities Improvement, Series B, 5.00%, 2/15/33 ..... 35,000,000 35,353,850
Mental Health Services Facilities Improvement, Series B, NATL Insured,
Pre-Refunded, 6.00%, 2/15/25 ............................................. 5,460,000 5,522,954
Mental Health Services Facilities Improvement, Series B, NATL Insured,
Pre-Refunded, 6.00%, 2/15/30 ............................................. 4,300,000 4,349,579
Mental Health Services Facilities Improvement, Series B, NATL Insured,
Pre-Refunded, 5.25%, 8/15/31 ............................................. 3,975,000 4,294,908
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.50%, 2/15/21 ............................................. 1,015,000 1,052,393
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.50%, 8/15/21 ............................................. 2,065,000 2,141,075
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.25%, 8/15/30 ............................................. 4,460,000 4,616,501
Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.125%, 2/01/22 ............ 4,000,000 4,095,040
Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.00%, 2/01/31 ............. 5,500,000 5,510,505
North Shore L.I. Jewish Group, Pre-Refunded, 5.50%, 5/01/33 ................. 2,500,000 2,882,700
School Districts Financing Program, Series A, NATL Insured, 5.00%, 4/01/31 .. 9,500,000 9,644,400
Teachers College, NATL Insured, 5.00%, 7/01/22 .............................. 2,885,000 2,978,474
Teachers College, NATL Insured, 5.00%, 7/01/32 .............................. 6,000,000 6,070,560
Upstate Community Colleges, Series A, 5.00%, 7/01/27 ........................ 3,720,000 3,774,572
New York State Dormitory Authority Revenues,
Buena Vida Nursing Home, Series A, 5.25%, 7/01/28 ........................... 4,730,000 4,749,819
City University System, Consolidated, Third General, Refunding, Series 1,
FGIC Insured, 5.25%, 7/01/25 ............................................. 4,100,000 4,102,214
City University System, Consolidated Second General Resolution,
Refunding, Series C, 7.50%, 7/01/10 ...................................... 2,995,000 3,109,169
Fashion Institute of Technology Student Housing Corp., FGIC Insured,
Pre-Refunded, 5.00%, 7/01/29 ............................................. 9,700,000 11,280,518
Fashion Institute of Technology Student Housing Corp., FGIC Insured,
Pre-Refunded, 5.125%, 7/01/34 ............................................ 15,000,000 17,527,200
Fordham University, Refunding, NATL Insured, 5.00%, 7/01/28 ................. 490,000 490,010
Good Samaritan Hospital Medical Center, Series A, NATL Insured, 5.50%,
7/01/24 .................................................................. 5,000,000 4,999,750
Mental Health Services Facilities Improvement, Series A, AMBAC Insured,
5.00%, 2/15/30 ........................................................... 5,000,000 5,072,750

24 | Semiannual Report

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Dormitory Authority Revenues, (continued)
Montefiore Hospital, FGIC Insured, 5.00%, 8/01/29 ........................... $ 5,995,000 $ 6,065,261
New School University, NATL Insured, 5.00%, 7/01/31 ......................... 2,500,000 2,519,875
New York Hospital Medical Center, AMBAC Insured, 5.60%, 2/15/39 ............. 4,900,000 4,916,072
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/26 ................ 3,500,000 3,569,545
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/31 ................ 5,000,000 5,069,450
New York University, Series A, FGIC Insured, 5.00%, 7/01/34 ................. 15,200,000 15,479,224
Non-State Supported Debt, Brooklyn Law School, Refunding, 5.75%, 7/01/33 .... 3,750,000 3,785,550
Non-State Supported Debt, Cornell University, Refunding, Series A, 5.00%,
7/01/34 .................................................................. 10,000,000 10,592,800
Non-State Supported Debt, Cornell University, Refunding, Series A, 5.00%,
7/01/39 .................................................................. 22,000,000 22,882,200
Non-State Supported Debt, Fordham University, FGIC Insured, 5.00%, 7/01/27 .. 2,435,000 2,510,875
Non-State Supported Debt, Fordham University, FGIC Insured, 5.00%, 7/01/32 .. 3,125,000 3,180,781
Non-State Supported Debt, Fordham University, Series B, Assured Guaranty,
5.00%, 7/01/33 ........................................................... 9,000,000 9,233,190
Non-State Supported Debt, Fordham University, Series B, Assured Guaranty,
5.00%, 7/01/38 ........................................................... 5,000,000 5,062,450
Non-State Supported Debt, Health Quest Systems, Series B, Assured
Guaranty, 5.125%, 7/01/37 ................................................ 3,000,000 3,002,670
Non-State Supported Debt, Hospital Special Surgery, NATL Insured, 5.00%,
8/15/29 .................................................................. 7,750,000 7,841,372
Non-State Supported Debt, Hospital Special Surgery, NATL Insured, 5.00%,
8/15/33 .................................................................. 5,200,000 5,156,840
Non-State Supported Debt, Long Island University, Refunding, Radian
Insured, 5.125%, 9/01/23 ................................................. 1,700,000 1,669,451
Non-State Supported Debt, Long Island University, Refunding, Radian
Insured, 5.25%, 9/01/28 .................................................. 1,420,000 1,377,059
Non-State Supported Debt, Montefiore Medical Center, FGIC Insured, 5.00%,
2/01/28 .................................................................. 10,060,000 10,214,723
Non-State Supported Debt, Mortgage Hospital, Montefiore, FHA Insured,
5.00%, 8/01/24 ........................................................... 2,500,000 2,546,800
Non-State Supported Debt, Mount Sinai School Medical New York University,
Refunding, NATL Insured, 5.00%, 7/01/35 .................................. 5,000,000 4,907,750
Non-State Supported Debt, Municipal Health Facilities, Lease, Refunding,
Series 2, Sub Series 2-4, 5.00%, 1/15/27 ................................. 5,000,000 5,113,550
Non-State Supported Debt, Municipal Health Facilities, Lease, Refunding,
Series 2, Sub Series 2-4, 5.00%, 1/15/28 ................................. 5,000,000 5,083,100
Non-State Supported Debt, Municipal Health Facilities, Lease, Refunding,
Series 2, Sub Series 2-5, 5.00%, 1/15/32 ................................. 20,000,000 19,945,800
Non-State Supported Debt, New York and Presbyterian Hospital, FSA
Insured, 5.00%, 8/15/36 .................................................. 14,185,000 13,937,614
Non-State Supported Debt, New York University, AMBAC Insured, 5.00%,
7/01/26 .................................................................. 5,475,000 5,800,324
Non-State Supported Debt, New York University, Series A, 5.00%, 7/01/38 ..... 22,800,000 23,164,800
(a) Non-State Supported Debt, New York University, Series A, 5.00%,
7/01/39 .................................................................. 10,000,000 10,205,600
Non-State Supported Debt, New York University, Series A, AMBAC Insured,
5.00%, 7/01/27 ........................................................... 5,470,000 5,765,872
Non-State Supported Debt, New York University, Series A, AMBAC Insured,
5.00%, 7/01/32 ........................................................... 5,000,000 5,155,600
Non-State Supported Debt, New York University, Series A, AMBAC Insured,
5.00%, 7/01/37 ........................................................... 10,805,000 11,029,960
Non-State Supported Debt, New York University, Series B, 5.00%, 7/01/38 ..... 26,995,000 27,426,920
(a) Non-State Supported Debt, New York University, Series B, 5.00%, 7/01/39 ..... 16,650,000 16,928,221

Semiannual Report | 25

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Dormitory Authority Revenues, (continued)
Non-State Supported Debt, New York University, Series B, 5.25%, 7/01/48 ..... $49,665,000 $ 50,589,762
Non-State Supported Debt, New York University, Series C, 5.00%, 7/01/38 ..... 25,000,000 25,400,000
Non-State Supported Debt, North Shore L.I. Jewish, Refunding, Series E,
5.00%, 5/01/21 ........................................................... 5,590,000 5,606,379
Non-State Supported Debt, North Shore L.I. Jewish, Refunding, Series E,
5.00%, 5/01/22 ........................................................... 2,300,000 2,303,312
Non-State Supported Debt, North Shore L.I. Jewish, Refunding, Series E,
5.00%, 5/01/23 ........................................................... 2,150,000 2,143,657
Non-State Supported Debt, North Shore L.I. Jewish, Refunding, Series E,
5.50%, 5/01/33 ........................................................... 3,000,000 3,037,200
Non-State Supported Debt, North Shore L.I. Jewish, Series A, 5.25%,
5/01/25 .................................................................. 3,000,000 3,016,260
Non-State Supported Debt, North Shore L.I. Jewish, Series A, 5.25%,
5/01/30 .................................................................. 8,750,000 8,738,712
Non-State Supported Debt, North Shore L.I. Jewish, Series A, 5.50%,
5/01/30 .................................................................. 3,000,000 3,052,740
Non-State Supported Debt, North Shore L.I. Jewish, Series A, 5.50%,
5/01/37 .................................................................. 13,000,000 13,103,740
Non-State Supported Debt, North Shore L.I. Jewish Obligated Group, Series
A, 5.00%, 5/01/32 ........................................................ 6,250,000 6,009,625
Non-State Supported Debt, Ozanam Hall of Queens Nursing Home, 5.00%,
11/01/26 ................................................................. 2,665,000 2,498,891
Non-State Supported Debt, Ozanam Hall of Queens Nursing Home, 5.00%,
11/01/31 ................................................................. 2,500,000 2,179,175
Non-State Supported Debt, Residential Institution for Children, 5.00%,
6/01/38 .................................................................. 5,000,000 5,097,050
Non-State Supported Debt, School District Financing Program, Series C, FSA
Insured, 5.00%, 10/01/37 ................................................. 6,550,000 6,754,949
Non-State Supported Debt, School Districts Bond Financing, Refunding,
Series C, NATL Insured, 5.00%, 4/01/35 ................................... 7,525,000 7,704,622
Non-State Supported Debt, School Districts Bond Financing, Series B, NATL
Insured, 5.00%, 10/01/34 ................................................. 5,000,000 5,072,800
Non-State Supported Debt, School Districts Financing Program, Series C,
Assured Guaranty, 5.00%, 10/01/31 ........................................ 4,000,000 4,232,120
Non-State Supported Debt, School Districts Financing Program, Series C,
Assured Guaranty, 5.125%, 10/01/36 ....................................... 5,000,000 5,217,400
Non-State Supported Debt, The New York Hospital Medical Center of Queens,
FHA Insured, 4.75%, 2/15/37 .............................................. 5,000,000 4,608,450
Non-State Supported Debt, University Rochester, Series A, 5.125%, 7/01/39 ... 10,500,000 10,816,050
Non-State Supported Debt, Yeshiva University, Refunding, 5.00%, 9/01/38 ..... 14,535,000 14,679,187
Rockefeller University, Series A, Sub Series A1, 5.00%, 7/01/32 ............. 11,500,000 11,744,720
Skidmore College, FGIC Insured, 5.00%, 7/01/33 .............................. 6,565,000 6,704,638
St. John's University, Series A, NATL Insured, Pre-Refunded, 5.25%,
7/01/25 .................................................................. 5,310,000 5,759,438
State Rehabilitation Assn., Series A, AMBAC Insured, 5.00%, 7/01/23 ......... 1,725,000 1,797,002
State Supported Debt, FSA Insured, 5.00%, 2/15/33 ........................... 13,280,000 13,743,074
State Supported Debt, FSA Insured, 5.00%, 2/15/38 ........................... 22,260,000 22,635,304
State Supported Debt, Mental Health, Refunding, Series D, NATL Insured,
5.00%, 8/15/17 ........................................................... 2,250,000 2,251,125
State Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded,
5.50%, 2/15/21 ........................................................... 95,000 98,500
State Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded,
5.50%, 8/15/21 ........................................................... 205,000 212,552
State Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded,
5.25%, 8/15/30 ........................................................... 165,000 170,790
State Supported Debt, Mental Health Facilities, Series B, 5.00%, 2/15/28 .... 7,690,000 7,791,123

26 | Semiannual Report

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Dormitory Authority Revenues, (continued)
State Supported Debt, Mental Health Facilities, Series B, Pre-Refunded,
5.00%, 2/15/28 ........................................................... $ 1,505,000 $ 1,721,238
State Supported Debt, Mental Health Services, Series B, NATL Insured,
Pre-Refunded, 6.00%, 2/15/25 ............................................. 640,000 647,379
State Supported Debt, Mental Health Services, Series B, NATL Insured,
Pre-Refunded, 6.00%, 2/15/30 ............................................. 565,000 571,514
State Supported Debt, Mental Health Services, Series D, FSA Insured,
5.25%, 8/15/30 ........................................................... 145,000 146,270
State Supported Debt, Mental Health Services, Series D, FSA Insured,
Pre-Refunded, 5.50%, 2/15/21 ............................................. 25,000 25,921
State Supported Debt, Mental Health Services, Series D, FSA Insured,
Pre-Refunded, 5.50%, 8/15/21 ............................................. 45,000 46,658
State Supported Debt, Mental Health Services, Series D, FSA Insured,
Pre-Refunded, 5.25%, 8/15/30 ............................................. 230,000 238,071
State Supported Debt, Mental Health Services Facilities Improvement,
Series A, FSA Insured, 5.00%, 2/15/32 .................................... 28,000,000 28,938,000
State Supported Debt, Mental Health Services Facilities Improvement,
Series B, FSA Insured, 5.00%, 2/15/32 .................................... 8,680,000 8,970,780
State Supported Debt, Mental Health Services Facilities Improvement,
Series B, NATL Insured, 5.25%, 8/15/31 ................................... 3,640,000 3,657,909
State Supported Debt, Mental Health Services Facilities Improvement,
Series B, NATL Insured, Pre-Refunded, 5.25%, 8/15/31 ..................... 2,385,000 2,576,945
State Supported Debt, Mental Health Services Facilities Improvement,
Series E, 5.00%, 2/15/30 ................................................. 12,100,000 12,354,463
State Supported Debt, State University Dormitory Facilities, 5.00%,
7/01/33 .................................................................. 14,210,000 14,730,939
State Supported Debt, State University Dormitory Facilities, 5.00%,
7/01/38 .................................................................. 10,785,000 11,072,097
State Supported Debt, Upstate Community Colleges, 6.00%, 7/01/31 ............ 20,000,000 22,073,600
State Supported Debt, Upstate Community Colleges, Refunding, Series A,
5.00%, 7/01/28 ........................................................... 3,250,000 3,279,282
W.K. Nursing Home Corp., FHA Insured, 6.05%, 2/01/26 ........................ 6,800,000 6,813,736
Yeshiva University, AMBAC Insured, 5.125%, 7/01/29 .......................... 13,260,000 13,720,918
Yeshiva University, AMBAC Insured, 5.125%, 7/01/34 .......................... 23,510,000 24,023,223
New York State Dormitory Authority State Personal Income Tax Revenue,
Education, Refunding, Series C, 5.75%, 3/15/32 .............................. 30,100,000 33,482,638
Education, Series A, 5.00%, 3/15/36 ......................................... 7,395,000 7,522,046
Education, Series A, 5.00%, 3/15/37 ......................................... 69,750,000 70,979,692
Education, Series A, AMBAC Insured, 5.00%, 3/15/34 .......................... 10,325,000 10,525,718
Education, Series C, 5.00%, 12/15/31 ........................................ 17,305,000 17,948,227
Education, Series C, 5.00%, 12/15/35 ........................................ 10,000,000 10,219,800
Education, Series D, 5.00%, 3/15/36 ......................................... 49,000,000 49,899,150
Series A, 5.00%, 2/15/34 .................................................... 16,525,000 17,040,249
Series A, 5.00%, 2/15/39 .................................................... 20,705,000 21,116,615
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 20,217,400
New York State Environmental Facilities Corp. PCR, State Water, Series E,
6.875%, 6/15/14 ............................................................. 1,190,000 1,190,369
New York State Environmental Facilities Corp. State Clean Water and Drinking
Revenue,
Revolving Funds, New York City Municipal Water, Refunding, Series A,
5.00%, 6/15/37 ........................................................... 2,700,000 2,785,077
Revolving Funds, New York City Municipal Water, Refunding, Series B,
5.00%, 6/15/33 ........................................................... 6,510,000 6,818,314

Semiannual Report | 27

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Environmental Facilities Corp. State Clean Water and Drinking
Revenue, (continued)
Revolving Funds, New York City Municipal Water, Refunding, Series B,
5.00%, 6/15/37 ........................................................... $ 5,310,000 $ 5,492,505
Revolving Funds, Pooled Financing, Series B, 5.25%, 5/15/31 ................. 9,595,000 9,800,141
Revolving Funds, Series C, 5.25%, 6/15/31 ................................... 37,600,000 38,449,008
Series A, 5.125%, 6/15/38 ................................................... 35,000,000 36,624,700
New York State GO, Series A, 5.00%, 2/15/39 .................................... 6,000,000 6,209,880
New York State HFA State Personal Income Tax Revenue,
Economic Development and Housing, Series A, FGIC Insured, 5.00%, 9/15/34 .... 11,580,000 11,805,115
Series A, 5.00%, 3/15/34 .................................................... 10,000,000 10,271,700
Series A, 5.00%, 3/15/38 .................................................... 15,000,000 15,269,850
New York State HFAR,
Affordable Housing, Series B, 4.85%, 11/01/41 ............................... 8,500,000 8,218,480
Children's Rescue Fund Housing, Series A, 7.625%, 5/01/18 ................... 3,435,000 3,449,599
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.10%,
11/01/15 ................................................................. 19,670,000 19,754,188
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.125%,
11/01/20 ................................................................. 26,570,000 26,629,517
MFM, Refunding, Series B, AMBAC Insured, 6.35%, 8/15/23 ..................... 2,280,000 2,284,651
MFM, Series B, AMBAC Insured, 6.25%, 8/15/14 ................................ 80,000 80,088
New York State Medical Care Facilities Finance Agency Revenue,
Hospital and Nursing Home, Series A, FHA Insured, 6.30%, 8/15/23 ............ 6,940,000 6,940,555
Hospital and Nursing Home, Series A, FHA Insured, 6.375%, 8/15/33 ........... 5,880,000 5,885,351
Mortgage Revenue Project, Series E, FHA Insured, 6.375%, 2/15/35 ............ 13,200,000 13,212,276
Security Mortgage, 2008, Series A, 6.375%, 11/15/20 ......................... 4,915,000 4,919,276
New York State Mortgage Agency SONYMA Homeowner Mortgage Revenue,
Series 156, 5.20%, 10/01/28 ................................................. 7,500,000 7,686,150
Series 156, 5.35%, 10/01/33 ................................................. 11,440,000 11,713,874
Series 158, 6.60%, 10/01/38 ................................................. 4,000,000 4,344,840
New York State Municipal Bond Bank Agency School Purpose Revenue, Series C,
5.25%, 6/01/21 .............................................................. 5,110,000 5,386,247
5.25%, 12/01/21 ............................................................. 8,025,000 8,458,831
5.25%, 6/01/22 .............................................................. 3,400,000 3,575,814
5.25%, 12/01/22 ............................................................. 5,000,000 5,258,550
5.00%, 6/01/23 .............................................................. 5,925,000 6,169,406
5.00%, 12/01/23 ............................................................. 3,000,000 3,123,750
New York State Municipal Bond Bank Agency Special Program Revenue, Buffalo,
Series A,
AMBAC Insured, 5.25%, 5/15/31 ............................................... 4,145,000 4,197,932
New York State Power Authority Revenue, Series A, 5.25%,
11/15/30 .................................................................... 2,000,000 2,021,540
11/15/40 .................................................................... 9,000,000 9,059,400
New York State Thruway Authority General Revenue,
AMBAC Insured, 5.00%, 1/01/30 ............................................... 10,000,000 10,165,400
Refunding, Series G, FSA Insured, 5.00%, 1/01/30 ............................ 10,000,000 10,179,700
Refunding, Series H, FGIC Insured, 5.00%, 1/01/37 ........................... 54,810,000 54,326,028
Refunding, Series H, FSA Insured, 5.00%, 1/01/32 ............................ 10,000,000 10,118,900
Series G, FSA Insured, 5.00%, 1/01/32 ....................................... 35,000,000 35,303,450
Series H, FSA Insured, 5.00%, 1/01/37 ....................................... 10,000,000 9,911,700
New York State Thruway Authority Highway and Bridge Trust Fund Revenue,
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/19 .......................... 20,000,000 21,016,400
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/20 .......................... 18,835,000 19,614,769

28 | Semiannual Report

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York State Thruway Authority Highway and Bridge Trust Fund Revenue,
(continued)
Series B-1, FGIC Insured, Pre-Refunded, 5.75%, 4/01/15 ...................... $ 2,000,000 $ 2,056,120
Series B-1, FGIC Insured, Pre-Refunded, 5.75%, 4/01/16 ...................... 2,000,000 2,056,120
New York State Thruway Authority Revenue, State Personal Income Tax,
Transportation, Series A, 5.00%, 3/15/22 .................................... 14,270,000 14,700,240
New York State Thruway Authority Service Contract Revenue, Local Highway
and Bridge, AMBAC Insured, Pre-Refunded, 5.375%, 4/01/19 .................... 10,555,000 10,840,091
Refunding, 5.00%, 4/01/18 ................................................... 31,330,000 35,276,327
Refunding, 5.00%, 4/01/19 ................................................... 12,000,000 13,441,680
New York State Urban Development Corp. Revenue,
Correctional Facilities Service Contract, Series D, FSA Insured,
Pre-Refunded, 5.25%, 1/01/30 ............................................. 10,000,000 10,534,500
Empire State Development Corp., Series B, 5.00%, 1/01/26 .................... 8,830,000 9,321,125
Empire State Development Corp., Series B, 5.00%, 1/01/27 .................... 7,730,000 8,114,490
Empire State Development Corp., Series B, 5.00%, 1/01/28 .................... 5,460,000 5,695,763
FGIC Insured, 5.00%, 3/15/29 ................................................ 7,000,000 7,222,530
Personal Income Tax, Series C-1, Pre-Refunded, 5.00%, 3/15/25 ............... 3,225,000 3,659,665
Personal Income Tax, State Facilities, Series A, Pre-Refunded, 5.25%,
3/15/32 .................................................................. 20,000,000 22,120,200
Refunding, Series D, 5.625%, 1/01/28 ........................................ 3,780,000 4,126,286
State Personal Income Tax, Series B-1, 5.00%, 3/15/36 ....................... 10,000,000 10,238,000
Niagara Falls Public Water Authority Revenue, Series A, NATL Insured,
5.00%, 7/15/34 .............................................................. 9,000,000 9,118,260
Orangetown Housing Authority Housing Facilities Revenue, Senior Housing
Center Project, Refunding, NATL Insured, zero cpn., 4/01/30 ................. 21,170,000 6,077,695
Port Authority of New York and New Jersey Revenue, Consolidated,
One Hundred Forty-Eighth Series, FSA Insured, 5.00%, 8/15/34 ................ 30,000,000 31,083,600
One Hundred Forty-Eighth Series, FSA Insured, 5.00%, 8/15/37 ................ 74,235,000 75,943,890
One Hundred Sixty-First Series, 5.00%, 10/15/34 ............................. 35,000,000 36,014,650
One Hundred Sixty-First Series, 5.00%, 10/15/35 ............................. 29,000,000 29,725,000
One Hundred Sixty-First Series, 5.00%, 10/15/39 ............................. 25,000,000 25,466,750
Sachem Central School District Holbrook GO, Series B, NATL Insured,
Pre-Refunded, 5.00%,
10/15/27 .................................................................... 3,885,000 4,450,617
10/15/28 .................................................................... 2,000,000 2,291,180
Sales Tax Asset Receivable Corp. Revenue, Series A, AMBAC Insured, 5.00%,
10/15/29 .................................................................... 5,195,000 5,448,204
10/15/32 .................................................................... 94,975,000 98,367,507
Saratoga County Water Authority Revenue, Water System, 5.00%, 9/01/48 .......... 7,225,000 7,311,194
Syracuse IDA Civic Facility Revenue, Crouse Health Hospital Inc., Project A,
5.25%, 1/01/16 .............................................................. 4,000,000 3,741,920
5.375%, 1/01/23 ............................................................. 4,760,000 4,045,952
Tobacco Settlement Financing Corp. Revenue, Asset-Backed, Series A-1C, AMBAC
Insured, 5.25%, 6/01/21 ..................................................... 18,000,000 18,942,840
Tompkins County IDAR, Civic Facility, Cornell University Lake, Pre-Refunded,
5.75%, 7/01/30 .............................................................. 7,510,000 7,795,004
Triborough Bridge and Tunnel Authority Revenues,
5.00%, 11/15/24 ............................................................. 6,965,000 7,528,747
5.00%, 11/15/37 ............................................................. 30,000,000 30,471,300
Convention Center Project, Series E, zero cpn., 1/01/12 ..................... 21,625,000 20,596,082
General, Refunding, Series B, NATL Insured, 5.00%, 11/15/27 ................. 10,000,000 10,289,500

Semiannual Report | 29

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
Triborough Bridge and Tunnel Authority Revenues, (continued)
General, Series A, 5.00%, 11/15/35 .......................................... $ 9,155,000 $ 9,326,839
General, Series A-2, 5.25%, 11/15/34 ........................................ 10,000,000 10,449,800
General Purpose, Refunding, Series A, 5.00%, 1/01/27 ........................ 34,500,000 35,214,840
General Purpose, Refunding, Series A, NATL Insured, 5.00%, 1/01/32 .......... 3,770,000 3,824,024
General Purpose, Refunding, Series B, 5.125%, 11/15/29 ...................... 17,175,000 17,692,826
General Purpose, Refunding, Series B, 5.00%, 11/15/32 ....................... 10,000,000 10,200,100
General Purpose, Series A, 5.00%, 1/01/32 ................................... 6,110,000 6,197,556
General Purpose, Series A, Pre-Refunded, 5.125%, 1/01/31 .................... 24,310,000 26,567,427
General Purpose, Series B, NATL Insured, Pre-Refunded, 5.20%, 1/01/27 ....... 4,110,000 5,011,035
General Purpose, Series B, Pre-Refunded, 5.20%, 1/01/27 ..................... 15,000,000 18,288,450
General Purpose, Series B, Pre-Refunded, 5.50%, 1/01/30 ..................... 32,185,000 39,912,940
Refunding, NATL Insured, 5.00%, 11/15/26 .................................... 10,000,000 10,312,000
Refunding, NATL Insured, 5.00%, 11/15/32 .................................... 22,875,000 23,332,729
Refunding, Series C, 5.00%, 11/15/33 ........................................ 31,840,000 32,812,075
Refunding, Series C, 5.00%, 11/15/38 ........................................ 22,900,000 23,279,453
Series A, FGIC Insured, 5.00%, 1/01/32 ...................................... 1,970,000 1,998,230
Series D, 5.00%, 11/15/31 ................................................... 48,955,000 50,813,821
sub. bond, AMBAC Insured, 5.00%, 11/15/28 ................................... 15,000,000 15,548,250
Utica IDA Civic Facility Revenue, Munson-Williams-Proctor Institute Project,
5.40%, 7/15/30 .............................................................. 1,000,000 1,022,430
Series A, 5.50%, 7/15/29 .................................................... 5,170,000 5,258,355
Warren and Washington IDA Civic Facility Revenue, Series A, FSA Insured, 5.00%,
12/01/27 .................................................................... 8,115,000 8,333,456
Westchester Tobacco Asset Securitization Corp. Revenue,
Capital Appreciation, Pre-Refunded, 6.75%, 7/15/29 .......................... 15,000,000 15,752,100
Refunding, 5.00%, 6/01/26 ................................................... 2,000,000 1,831,560
Refunding, 5.125%, 6/01/38 .................................................. 7,000,000 5,681,480
Yonkers GO,
Refunding, Series B, NATL Insured, 5.00%, 8/01/30 ........................... 7,710,000 7,355,957
Refunding, Series B, NATL Insured, 5.00%, 8/01/35 ........................... 17,130,000 15,400,213
Series A, AMBAC Insured, 5.00%, 9/01/31 ..................................... 12,490,000 11,674,403
(a) Yonkers IDA Civic Facility Revenue,
Sarah Lawrence College Project, Series A, 6.00%, 6/01/41 .................... 5,000,000 5,043,150
Series A, 5.75%, 6/01/24 .................................................... 1,150,000 1,179,590
Series A, 6.00%, 6/01/29 .................................................... 1,000,000 1,021,760
--------------
5,698,916,687
--------------
U.S. TERRITORIES 5.5%
PUERTO RICO 5.5%
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, senior lien,
Series A, 6.00%, 7/01/38 .................................................... 15,600,000 15,976,896
Puerto Rico Commonwealth GO,
Public Improvement, Refunding, Series A, 5.00%, 7/01/20 ..................... 11,540,000 11,362,746
Public Improvement, Refunding, Series A, 5.125%, 7/01/24 .................... 17,580,000 16,975,248
Public Improvement, Refunding, Series A, NATL Insured, 5.50%, 7/01/20 ....... 17,810,000 18,254,360
Public Improvement, Refunding, Series A-4, FSA Insured, 5.25%, 7/01/30 ...... 14,000,000 14,523,600
Public Improvement, Refunding, Series A-4, FSA Insured, 5.00%, 7/01/31 ...... 7,150,000 7,204,197
Public Improvement, Refunding, Series B, 6.00%, 7/01/39 ..................... 20,000,000 20,085,600
Refunding, Series C, Sub Series C-7, NATL Insured, 6.00%, 7/01/27 ........... 10,500,000 10,796,835

30 | Semiannual Report

Franklin New York Tax-Free Income Fund

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2009 (UNAUDITED) (CONTINUED)

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

MUNICIPAL BONDS (CONTINUED)
U.S. TERRITORIES (CONTINUED)
PUERTO RICO (CONTINUED)
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue,
Series Y, Pre-Refunded,
5.00%, 7/01/36 .............................................................. $ 4,000,000 $ 4,744,240
5.50%, 7/01/36 .............................................................. 10,000,000 12,167,600
Puerto Rico Commonwealth Highway and Transportation Authority Transportation
Revenue, Refunding,
Series A, 5.00%, 7/01/38 .................................................... 575,000 523,037
Series N, NATL Insured, 5.25%, 7/01/32 ...................................... 24,225,000 22,634,629
Puerto Rico Electric Power Authority Power Revenue, Series WW, 5.25%,
7/01/33 ..................................................................... 32,250,000 31,231,867
Puerto Rico PBA Guaranteed Revenue,
Government Facilities, Refunding, Series P, 6.50%, 7/01/30 .................. 10,000,000 10,636,700
Government Facilities, Refunding, Series P, 6.75%, 7/01/36 .................. 12,500,000 13,400,500
Refunding, Series Q, 5.625%, 7/01/39 ........................................ 10,000,000 9,563,000
Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue, first subordinate,
Series A,
5.75%, 8/01/37 .............................................................. 15,000,000 15,220,800
6.00%, 8/01/42 .............................................................. 90,000,000 92,379,600
6.50%, 8/01/44 .............................................................. 10,000,000 10,594,700
--------------
TOTAL U.S. TERRITORIES ......................................................... 338,276,155
--------------
TOTAL MUNICIPAL BONDS BEFORE SHORT TERM INVESTMENTS
(COST $5,855,047,213) ....................................................... 6,037,192,842
--------------
SHORT TERM INVESTMENTS 0.9%
MUNICIPAL BONDS 0.9%
NEW YORK 0.9%
(b) New York City IDAR, Liberty, One Bryant Park LLC, Series B, Daily VRDN and Put,
0.22%, 11/01/39 ............................................................. 13,750,000 13,750,000
(b) New York State Dormitory Authority Revenues, Non-State Supported Debt, Cornell
University, Refunding, Series C, Daily VRDN and Put, 0.21%, 7/01/37 ......... 4,075,000 4,075,000
(b) Port Authority of New York and New Jersey Special Obligation Revenue, Versatile
Structure Obligations, Refunding, Series 3, Daily VRDN and Put, 0.20%,
6/01/20 ..................................................................... 26,800,000 26,800,000
(b) Syracuse IDA Civic Facility Revenue, Syracuse University Project, Series A-2,
Daily VRDN and Put, 0.20%, 12/01/37 ......................................... 12,700,000 12,700,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $57,325,000) ................................ 57,325,000
--------------
TOTAL INVESTMENTS (COST $5,912,372,213) 99.1% .................................. 6,094,517,842
OTHER ASSETS, LESS LIABILITIES 0.9% ............................................ 55,368,601
--------------
NET ASSETS 100.0% .............................................................. $6,149,886,443
==============

See Abbreviations on page 42.

(a) Security purchased on a when-issued basis. See Note 1(b).

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

The accompanying notes are an integral part of these financial statements.

Semiannual Report | 31

Franklin New York Tax-Free Income Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
November 30, 2009 (unaudited)

Assets:
Investments in securities:
Cost .................................................... $5,912,372,213
--------------
Value ................................................... $6,094,517,842
Cash ....................................................... 7,969,142
Receivables:
Capital shares sold ..................................... 11,350,386
Interest ................................................ 79,889,400
Other assets ............................................... 1,871
--------------
Total assets ......................................... 6,193,728,641
--------------
Liabilities:
Payables:
Investment securities purchased ......................... 34,248,100
Capital shares redeemed ................................. 5,943,341
Affiliates .............................................. 3,352,613
Accrued expenses and other liabilities ..................... 298,144
--------------
Total liabilities .................................... 43,842,198
--------------
Net assets, at value .............................. $6,149,886,443
==============
Net assets consist of:
Paid-in capital ............................................ $5,959,695,917
Undistributed net investment income ........................ 2,583,917
Net unrealized appreciation (depreciation) ................. 182,145,629
Accumulated net realized gain (loss) ....................... 5,460,980
--------------
Net assets, at value .............................. $6,149,886,443
==============

The accompanying notes are an integral part of these financial statements.

32 | Semiannual Report

Franklin New York Tax-Free Income Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
November 30, 2009 (unaudited)

CLASS A:
Net assets, at value ....................................... $5,183,481,008
--------------
Shares outstanding ......................................... 447,705,806
--------------
Net asset value per share(a) ............................... $ 11.58
--------------
Maximum offering price per share
(net asset value per share / 95.75%) .................... $ 12.09
--------------
CLASS B:
Net assets, at value ....................................... $ 91,080,412
--------------
Shares outstanding ......................................... 7,885,558
--------------
Net asset value and maximum offering price per share(a) .... $ 11.55
--------------
CLASS C:
Net assets, at value ....................................... $ 729,383,414
--------------
Shares outstanding ......................................... 63,062,165
--------------
Net asset value and maximum offering price per share(a) .... $ 11.57
--------------
ADVISOR CLASS:
Net assets, at value ....................................... $ 145,941,609
--------------
Shares outstanding ......................................... 12,600,997
--------------
Net asset value and maximum offering price per share ....... $ 11.58
--------------

(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.

The accompanying notes are an integral part of these financial statements.

Semiannual Report | 33

Franklin New York Tax-Free Income Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended November 30, 2009 (unaudited)

Investment income:
Interest ............................................................. $144,559,028
------------
Expenses:
Management fees (Note 3a) ............................................ 13,506,087
Distribution fees: (Note 3c)
Class A ........................................................... 2,363,039
Class B ........................................................... 334,038
Class C ........................................................... 2,072,942
Transfer agent fees (Note 3e) ........................................ 1,032,153
Custodian fees ....................................................... 39,569
Reports to shareholders .............................................. 80,842
Registration and filing fees ......................................... 33,096
Professional fees .................................................... 76,290
Trustees' fees and expenses .......................................... 66,139
Other ................................................................ 153,762
------------
Total expenses ................................................. 19,757,957
------------
Net investment income ....................................... 124,801,071
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............................ 12,409,391
Net change in unrealized appreciation (depreciation) on investments .. 109,335,572
------------
Net realized and unrealized gain (loss) ................................. 121,744,963
------------
Net increase (decrease) in net assets resulting from operations ......... $246,546,034
============

The accompanying notes are an integral part of these financial statements.

34 | Semiannual Report

Franklin New York Tax-Free Income Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

SIX MONTHS
ENDED
NOVEMBER 30,
2009 YEAR ENDED
(UNAUDITED) MAY 31, 2009
-------------- --------------

Increase (decrease) in net assets:
Operations:
Net investment income .................................................. $ 124,801,071 $ 238,336,063
Net realized gain (loss) from investments .............................. 12,409,391 3,604,211
Net change in unrealized appreciation (depreciation) on
investments ......................................................... 109,335,572 (113,017,831)
-------------- --------------
Net increase (decrease) in net assets resulting from operations .. 246,546,034 128,922,443
-------------- --------------
Distributions to shareholders from:
Net investment income:
Class A ............................................................. (109,735,021) (211,229,061)
Class B ............................................................. (2,002,956) (5,157,857)
Class C ............................................................. (11,963,329) (18,003,571)
Advisor Class ....................................................... (2,759,150) (4,347,694)
Net realized gains:
Class A ............................................................. -- (21,100,747)
Class B ............................................................. -- (582,711)
Class C ............................................................. -- (2,081,118)
Advisor Class ....................................................... -- (460,466)
-------------- --------------
Total distributions to shareholders ....................................... (126,460,456) (262,963,225)
-------------- --------------
Capital share transactions: (Note 2)
Class A ............................................................. 248,795,539 247,185,529
Class B ............................................................. (23,052,135) (32,427,944)
Class C ............................................................. 180,920,322 148,126,368
Advisor Class ....................................................... 41,352,980 19,941,580
-------------- --------------
Total capital share transactions .......................................... 448,016,706 382,825,533
-------------- --------------
Redemption fees ........................................................... -- 9,007
-------------- --------------
Net increase (decrease) in net assets ............................ 568,102,284 248,793,758
Net assets:
Beginning of period ....................................................... 5,581,784,159 5,332,990,401
-------------- --------------
End of period ............................................................. $6,149,886,443 $5,581,784,159
============== ==============
Undistributed net investment income included in net assets:
End of period ............................................................. $ 2,583,917 $ 4,243,302
============== ==============

The accompanying notes are an integral part of these financial statements.

Semiannual Report | 35

Franklin New York Tax-Free Income Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin New York Tax-Free Income Fund (Trust) is registered under the
Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment
company, consisting of one fund, the Franklin New York Tax-Free Income Fund
(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 Fund 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 Fund's Board of
Trustees.

B. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS

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

36 | Semiannual Report

Franklin New York Tax-Free Income Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. INCOME TAXES

No provision has been made for U.S. income taxes because it is the Fund's policy
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.

The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of November 30, 2009, and has
determined that no provision for income tax is required in the Fund's financial
statements.

D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Distributions to shareholders are recorded on the 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 of
America. 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, not
including class specific expenses, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Differences in
per share distributions, by class, are generally due to differences in class
specific expenses.

E. INSURANCE

The scheduled payments of interest and principal for each insured municipal
security in the Fund are insured by either a new issue insurance policy or a
secondary insurance policy. Some municipal securities in the Fund are secured by
collateral guaranteed by an agency of the U.S. government. Insurance companies
typically insure municipal bonds that tend to be of very high quality, with the
majority of underlying municipal bonds rated A or better. However, there is a
risk that in the event of an issuer default, the insurer may not be able to
fulfill its obligations under the terms of the policy.

Depending on the type of coverage, premiums for insurance are either added to
the cost basis of the security or paid by a third party.

Semiannual Report | 37

Franklin New York Tax-Free Income Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

F. 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.

G. REDEMPTION FEES

A short term trading redemption fee was imposed, with some exceptions, on any
Fund shares that were redeemed or exchanged within seven calendar days following
their purchase date. The redemption fee was 2% of the amount redeemed. Such fees
were retained by the Fund and accounted for as an addition to paid-in capital.
Effective September 1, 2008, the redemption fee was eliminated.

H. GUARANTEES AND INDEMNIFICATIONS

Under the Trust's organizational documents, its officers and trustees 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, on behalf of the Fund, 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. Currently, the
Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At November 30, 2009, there were an unlimited number of shares authorized
(without par value). Transactions in the Fund's shares were as follows:

SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 2009 MAY 31, 2009
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------

CLASS A SHARES:
Shares sold ....................... 40,509,753 $ 464,957,256 72,833,499 $ 811,336,906
Shares issued in reinvestment of
distributions .................. 6,119,406 70,046,685 13,025,932 143,664,727
Shares redeemed ................... (24,917,560) (286,208,402) (64,888,450) (707,816,104)
----------- ------------- ----------- -------------
Net increase (decrease) ........... 21,711,599 $ 248,795,539 20,970,981 $ 247,185,529
=========== ============= =========== =============
CLASS B SHARES:
Shares sold ....................... 43,303 $ 494,473 297,363 $ 3,295,800
Shares issued in reinvestment of
distributions .................. 121,345 1,385,217 350,106 3,854,036
Shares redeemed ................... (2,176,610) (24,931,825) (3,590,154) (39,577,780)
----------- ------------- ----------- -------------
Net increase (decrease) ........... (2,011,962) $ (23,052,135) (2,942,685) $ (32,427,944)
=========== ============= =========== =============

38 | Semiannual Report

Franklin New York Tax-Free Income Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 2009 MAY 31, 2009
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------

CLASS C SHARES:
Shares sold ............................ 19,525,554 $224,068,392 20,598,895 $231,064,373
Shares issued in reinvestment of
distributions ....................... 752,972 8,625,276 1,274,313 14,029,190
Shares redeemed ........................ (4,505,780) (51,773,346) (8,937,983) (96,967,195)
---------- ------------ ---------- ------------
Net increase (decrease) ................ 15,772,746 $180,920,322 12,935,225 $148,126,368
========== ============ ========== ============
ADVISOR CLASS SHARES:
Shares sold ............................ 4,967,971 $ 56,960,409 5,000,769 $ 55,643,726
Shares issued in reinvestment of
distributions ....................... 133,277 1,528,197 230,784 2,531,998
Shares redeemed ........................ (1,493,533) (17,135,626) (3,540,156) (38,234,144)
---------- ------------ ---------- ------------
Net increase (decrease) ................ 3,607,715 $ 41,352,980 1,691,397 $ 19,941,580
========== ============ ========== ============

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

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 $7.5 billion
0.440% Over $7.5 billion, up to and including $10 billion
0.430% 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

Semiannual Report | 39

Franklin New York Tax-Free Income Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

B. ADMINISTRATIVE FEES

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

C. DISTRIBUTION FEES

The 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 for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to the maximum annual plan rate.
Under the Class A reimbursement distribution plan, costs exceeding the maximum
for the current plan year cannot be reimbursed in subsequent periods.

In addition, under the Fund's Class B and C compensation distribution plans, the
Fund pays Distributors for costs incurred in connection with the servicing, sale
and distribution of the Fund's shares up to the maximum annual plan rate for
each class.

The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:

Class A .... 0.10%
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 period:

Sales charges retained net of commissions paid to unaffiliated
broker/dealers ............................................ $1,172,011
Contingent deferred sales charges retained ................... $ 135,582

E. TRANSFER AGENT FEES

For the period ended November 30, 2009, the Fund paid transfer agent fees of
$1,032,153, of which $651,898 was retained by Investor Services.

4. INCOME TAXES

For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At May 31, 2009, the Fund deferred realized capital losses of
$5,579,906.

40 | Semiannual Report

Franklin New York Tax-Free Income Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES (CONTINUED)

At November 30, 2009, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ........................... $5,912,457,810
==============
Unrealized appreciation ....................... $ 221,099,256
Unrealized depreciation ....................... (39,039,224)
--------------
Net unrealized appreciation (depreciation) .... $ 182,060,032
==============

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

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended November 30, 2009, aggregated $1,002,340,448 and $469,216,728,
respectively.

6. CONCENTRATION OF RISK

The Fund invests a large percentage of its total assets in obligations of
issuers within New York and U.S. territories. Such concentration may subject the
Fund to risks associated with industrial or regional matters, and economic,
political or legal developments occurring within New York and U.S. territories.

7. CREDIT FACILITY

Effective January 23, 2009, the Fund, together with other U.S. registered and
foreign investment funds managed by Franklin Templeton Investments
(individually, "Borrower"; collectively "Borrowers"), entered into a joint
syndicated senior unsecured credit facility totaling $725 million (Global Credit
Facility) to provide a source of funds to the Borrowers for temporary and
emergency purposes, including the ability to meet future unanticipated or
unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to
interest charged on any borrowings made by the Fund and other costs incurred by
the Fund, pay its share of fees and expenses incurred in connection with the
implementation and maintenance of the Global Credit Facility, based upon its
relative share of the aggregate net assets of all of the Borrowers, including an
annual commitment fee based upon the unused portion of the Global Credit
Facility.

Semiannual Report | 41

Franklin New York Tax-Free Income Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. CREDIT FACILITY (CONTINUED)

During the period, the Fund incurred commitment fees of $6,524 of its pro rata
portion of the Global Credit Facility, which is reflected in other expenses on
the Statement of Operations. During the period ended November 30, 2009, the Fund
did not utilize the Global Credit Facility.

8. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data
obtained from independent sources (observable inputs) and the Fund's own market
assumptions (unobservable inputs). These inputs are used in determining the
value of the Fund's investments and are summarized in the following fair value
hierarchy:

- Level 1 - quoted prices in active markets for identical securities

- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)

- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.

At November 30, 2009, all of the Fund's investments in securities carried at
fair value were in Level 2 inputs.

9. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through January 19, 2010, the issuance
date of the financial statements and determined that no events have occurred
that require disclosure.

ABBREVIATIONS

SELECTED PORTFOLIO

AMBAC - American Municipal Bond Assurance Corp.
BHAC - Berkshire Hathaway 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
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority Revenue
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority Revenue
MFHR - Multi-Family Housing Revenue
MFM - Multi-Family Mortgage
MTA - Metropolitan Transit Authority
NATL - National Public Financial Guarantee Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
SONYMA - State of New York Mortgage Agency
XLCA - XL Capital Assurance

42 | Semiannual Report

Franklin New York Tax-Free Income Fund

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund's investment manager 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 (954) 527-7678 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 (800)
SEC-0330.

Semiannual Report | 43

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Franklin Templeton Funds

LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(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.

VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund(2)
Mutual Recovery Fund(3)
Mutual Shares Fund

BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund

GROWTH
Franklin DynaTech Fund
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund

SECTOR
Franklin Biotechnology Discovery Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund

GLOBAL
Mutual Global Discovery Fund(4)
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund

HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund

ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(5)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(5)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund

TAX-FREE INCOME(6)

NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)

LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

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

INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(10)

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

(2.) Effective 5/1/09, Mutual Qualified Fund changed its name to Mutual Quest
Fund. The fund's investment goal and strategy remained unchanged.

(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.) Effective 5/1/09, Mutual Discovery Fund changed its name to Mutual Global
Discovery Fund. The fund's investment goal and strategy remained unchanged.

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

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

(7.) The fund invests primarily in insured municipal securities.

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

(9.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/15/09.

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

01/10 Not part of the semiannual report

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

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN NEW YORK
TAX-FREE INCOME FUND

INVESTMENT MANAGER
Franklin Advisers, Inc.

DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES
(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 S2009 01/10

ITEM 2. CODE OF ETHICS.

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

(d) N/A

(f) Pursuant to Item 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 expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

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

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

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

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

ITEM 8. 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 Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting 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/LAURA F. FERGERSON
---------------------------
Laura F. Fergerson
Chief Executive Officer -
Finance and Administration
Date January 27, 2010

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/LAURA F. FERGERSON
---------------------------
Laura F. Fergerson
Chief Executive Officer -
Finance and Administration
Date January 27, 2010

By /s/GASTON GARDEY
------------------------------
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date January 27, 2010