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

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

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

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

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

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

[GRAPHIC OMITTED]

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NOVEMBER 30, 2005
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER TAX-FREE INCOME
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?

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

FRANKLIN o Templeton o Mutual Series

FRANKLIN TEMPLETON INVESTMENTS

GAIN FROM OUR PERSPECTIVE(R)

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

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

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

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as arbitrage
situations and distressed securities.

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

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

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MUTUAL FUNDS - RETIREMENT PLANS - 529 COLLEGE SAVINGS PLANS - SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]

Not part of the semiannual report

CONTENTS

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

SPECIAL FEATURE:

Understanding Interest Rates .............................................. 4

SEMIANNUAL REPORT

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

Performance Summary ....................................................... 13

Your Fund's Expenses ...................................................... 16

Financial Highlights and
Statement of Investments .................................................. 18

Financial Statements ...................................................... 36

Notes to Financial Statements ............................................. 40

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

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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 such taxes.(1)

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CREDIT QUALITY BREAKDOWN*
Based on Total Long-Term Investments as of 11/30/05**

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

AAA ............................ 59.6%
AA ............................. 22.5%
A .............................. 8.9%
BBB ............................ 3.0%
Not Rated by S&P ............... 6.0%

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

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

RATINGS MOODY'S INTERNAL
AAA or Aaa 1.3% 0.1%
AA or Aa 0.4% --
A 1.1% --
BBB or Baa 0.5% 2.3%
Below Investment Grade 0.1% 0.2%
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Total 3.4% 2.6%

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This semiannual report for Franklin New York Tax-Free Income Fund covers the
period ended November 30, 2005.

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

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 22.

Semiannual Report | 7

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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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DIVIDEND DISTRIBUTIONS(2)

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DIVIDEND PER SHARE
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MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
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June 4.35 cents 3.81 cents 3.80 cents 4.44 cents
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July 4.35 cents 3.81 cents 3.80 cents 4.44 cents
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August 4.35 cents 3.81 cents 3.80 cents 4.44 cents
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September 4.35 cents 3.78 cents 3.79 cents 4.43 cents
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October 4.35 cents 3.78 cents 3.79 cents 4.44 cents
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November 4.30 cents 3.73 cents 3.74 cents 4.39 cents
================================================================================
TOTAL 26.05 CENTS 22.72 CENTS 22.72 CENTS 26.58 CENTS
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PERFORMANCE OVERVIEW

Because bond yield and price move in opposite directions, as municipal bond
yields rose, prices fell for the six-month reporting period. The Fund's Class A
share price, as measured by net asset value, decreased from $12.01 on May 31,
2005, to $11.81 on November 30, 2005. The Fund's Class A shares paid dividends
totaling 26.05 cents per share for the same period.(2) The Performance Summary
beginning on page 13 shows that at the end of this reporting period the Fund's
Class A shares' distribution rate was 4.18%, based on an annualization of
November's 4.30 cent per share dividend and the maximum offering price of $12.33
on November 30, 2005. An investor in the 2005 maximum combined federal and New
York state and City personal income tax bracket of 42.90% would need to earn a
distribution rate of 7.32% from a taxable investment to match the Fund's Class A
tax-free distribution rate. For the Fund's Class B, C and Advisor shares'
performance, please see the Performance Summary.

The Fund was subject to bond calls during the period under review as many
municipal bond issuers sought to take advantage of lower interest rates and
exercised call options on their outstanding higher coupon bonds issued several
years ago. In general, we were limited to reinvesting the proceeds from these
bond calls as well as from cash inflows at current, lower interest rates, which
tended to reduce the Fund's income and cause dividend distributions to decline
slightly, as shown in the dividend distributions table.

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

8 | Semiannual Report

STATE UPDATE(3)

New York's overall economy appeared headed toward full recovery, due in large
part to improvement in the greater New York City, Long Island and Hudson Valley
area economies. Growth was supplemented by rebounding healthy profits and
bonuses in the finance and insurance industries. Many upstate urban centers,
however, remained constrained. For example, according to the state, downstate
area private sector employment increased 0.9% during 2004 compared with 0.3% for
upstate centers. Nevertheless, New York's overall economy is anticipated to
approach prerecession levels by 2006.

The state closed fiscal year 2004-2005 in better financial condition than
anticipated due to strong revenue performance only marginally offset by expense
growth. Revenues came in $1.8 billion above estimates, resulting in an operating
surplus of $1.2 billion. Largely as a result, despite sizable future structural
budget imbalances, the improved economy combined with stronger revenues left the
state on more certain financial footing than has been the case in many years. In
2005, New York adopted a budget essentially on time for the first time in nearly
two decades.

The 2005-2006 enacted budget is forecast to be in balance; however, future
budget gaps were higher but within a manageable range assuming continued sound
economic performance. Compared with the early 1990s' recession, New York was
recovering much more quickly and strongly. Real estate and the securities
industry played key roles in the recovery. The relatively weak U.S. dollar
benefited the state's tourism industry. On the other hand, manufacturing
continued to lag.

Although the state's debt levels continued to be problematic, New York's debt
ratios were within the range of other Northeast states. At 8.6% of consolidated
general and debt service fund expenditures, debt service costs were manageable.
Standard & Poor's, an independent credit rating agency, assigned New York's
general obligation (GO) bonds a rating of AA.(4) The rating reflects the
state's steady, measurable economic improvement, conservative budget management,
and improved debt and capital planning management and policies.

MUNICIPAL BOND MARKET OVERVIEW

For the six-month period ended November 30, 2005, the municipal bond market
performed comparatively well as the fixed income markets continued

(3) Source: Standard & Poor's, "Research: New York State Dormitory Authority
New York State; Appropriation, Appropriations," RATINGSDIRECT, 11/21/05.

(4) This does not reflect Standard & Poor's rating of the Fund.

Semiannual Report | 9

to face a tightening Federal Reserve Board (Fed) policy, volatile oil prices,
increased inflation expectations, concerns about the dollar, mixed economic
releases, and the aftermath of Hurricanes Katrina and Rita. As interest rates
generally increased, municipal bonds, which have domestic tax advantages,
outperformed U.S. Treasury bonds. The Lehman Brothers Municipal Bond Index
returned +0.36% for the period, while the Lehman Brothers U.S. Treasury Index
posted a -0.81% return.(5)

During the reporting period, short-term interest rates steadily increased as the
Fed followed its tightening policy and raised the federal funds target rate from
3.00% to 4.00% in four successive moves. Intermediate- and longer-term Treasury
yields also increased, although at a slower pace. Demand persisted from foreign
and domestic buyers who continued to buy intermediate- and longer-term Treasury
bonds, as they sought relatively higher yield and expected inflation to remain
fairly contained. As a result, the Treasury yield curve flattened during the
reporting period. Two-year Treasury yields increased 82 basis points (100 basis
points equal one percentage point), while 10-year and 30-year Treasury yields
increased 49 and 37 basis points. The 10-year Treasury note yielded 4.49% and
the 30-year Treasury bond yielded 4.69% on November 30, 2005. The municipal
yield curve also flattened, though less than the Treasury yield curve. According
to Municipal Market Data, the two-year municipal bond yield rose 48 basis points
during the period, while 10-year and 30-year yields increased 38 and 29 basis
points.(6) Consequently, long-maturity municipal bonds continued to perform
comparatively well.

Motivated by a relatively low interest rate environment, along with expectations
that rates may continue to rise, municipal bond issuers actively refunded higher
yielding outstanding debt and accessed the debt market to finance capital needs.
As a result, the municipal bond market appeared to be on a record-setting pace

(5) Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond
Index is a market value-weighted index engineered for the long-term
tax-exempt bond market. All bonds included have a minimum credit rating of
at least Baa. They must have an outstanding par value of at least $5
million and be issued as part of a transaction of at least $50 million.
The bonds must be dated after 12/31/90, and must be at least one year from
their maturity date. Remarketed issues, taxable municipal bonds, bonds
with floating rates and derivatives are excluded from the index. The index
has four main bond sectors: general obligation, revenue, insured and
prerefunded. The Lehman Brothers U.S. Treasury Index includes public
obligations of the U.S. Treasury with a remaining maturity of one year or
more. All issues must have at least one year to final maturity regardless
of call features, have at least $250 million par amount outstanding and be
rated investment grade (Baa3 or better). They must also be dollar
denominated, nonconvertible and publicly issued. The index excludes
Treasury bills (because of the maturity constraint), flower bonds,
targeted investor notes (TINs), and state and local government series
(SLGS) bonds, STRIPS and Treasury Inflation-Protected Securities (TIPS).

(6) Source: Thomson Financial.

10 | Semiannual Report

for new issuance with more than $375 billion in new deals year-to-date on
November 30.(7) Refunding deals represented more than $123 billion.(7) Just as
homebuyers seek to lower their mortgage rates, municipalities tend to borrow
more when interest rates are low. Demand for municipal bonds remained strong as
investors found municipal bonds' taxable equivalent yields attractive. Healthy
demand came from a wide range of traditional buyers such as mutual funds,
individuals, and property and casualty companies, and also from non-traditional
crossover participants. Crossover buyers typically invest in taxable securities;
however, they will enter the municipal bond market when municipal valuations are
attractive, as they were during the reporting period. Overall credit trends
remained positive for the municipal bond market as credit rating agencies
Moody's and Standard & Poor's reported that upgrades continued to outpace
downgrades during the third quarter of 2005.

INVESTMENT STRATEGY

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

MANAGER'S DISCUSSION

Franklin New York Tax-Free Income Fund performed well during the six months
under review, as it benefited from refunding of some higher coupon bonds.
Consistent with our income-oriented investment philosophy, the Fund tends to own
higher-coupon bonds, which are generally more susceptible to refunding than
lower-coupon bonds. During the period, the Fund's holdings in prerefunded bonds
increased from 33.2% of total long-term investments at the beginning of the
period to 36.9% at period-end, which helped performance.

Significant New York municipal bond supply and investor demand for the high
relative after-tax returns offered by municipal bonds also contributed to

PORTFOLIO BREAKDOWN
11/30/05

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% OF TOTAL
LONG-TERM INVESTMENTS*
- --------------------------------------------------------------------------------
Prerefunded 36.9%
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Subject to Government Appropriations 12.7%
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Transportation 11.6%
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Tax-Supported 8.6%
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Utilities 7.5%
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Higher Education 5.8%
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General Obligation 5.1%
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Hospital & Health Care 5.1%
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Other Revenue 5.1%
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Housing 1.6%
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* Does not include short-term investments and other net assets.
(7) Source: THE BOND BUYER.

Semiannual Report | 11

the Fund's performance. We invested mainly in high-grade bonds, as we believed
they offered good relative value.

In line with our conservative investment strategy, we tend to avoid derivative
securities or other exotic investment vehicles designed to leverage the
portfolio. This strategy helped reduce portfolio volatility. During the period,
the Fund had no exposure to leveraged bonds, airline bonds or bonds subject to
alternative minimum tax. At period-end, the Fund had about 2% of total long-term
investments in tobacco bonds.

The mixture of our value-oriented philosophy of investing primarily for income,
an ample supply of municipal bonds, and a relatively steep municipal yield curve
compared to Treasuries favored the use of longer-term bonds. Consequently, we
sought to remain fully invested in bonds that ranged from 15 to 30 years in
maturity with good call features. We intend to maintain our conservative,
buy-and-hold investment strategy as we attempt to provide shareholders with
high, current, tax-free income.

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

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF NOVEMBER 30, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.

12 | Semiannual Report

PERFORMANCE SUMMARY AS OF 11/30/05

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

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CLASS A (SYMBOL: FNYTX) CHANGE 11/30/05 5/31/05
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Net Asset Value (NAV) -$0.20 $11.81 $12.01
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DISTRIBUTIONS (6/1/05-11/30/05)
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Dividend Income $0.2605
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CLASS B (SYMBOL: FTFBX) CHANGE 11/30/05 5/31/05
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Net Asset Value (NAV) -$0.21 $11.78 $11.99
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DISTRIBUTIONS (6/1/05-11/30/05)
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Dividend Income $0.2272
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CLASS C (SYMBOL: FNYIX) CHANGE 11/30/05 5/31/05
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Net Asset Value (NAV) -$0.20 $11.80 $12.00
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DISTRIBUTIONS (6/1/05-11/30/05)
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Dividend Income $0.2272
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ADVISOR CLASS (SYMBOL: FNYAX) CHANGE 11/30/05 5/31/05
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Net Asset Value (NAV) -$0.21 $11.81 $12.02
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DISTRIBUTIONS (6/1/05-11/30/05)
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Dividend Income $0.2658
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Semiannual Report | 13

PERFORMANCE SUMMARY (CONTINUED)

PERFORMANCE

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

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

Cumulative Total Return(1) +0.50% +4.33% +31.36% +70.42%
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Average Annual Total Return(2) -3.74% -0.14% +4.69% +5.02%
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Avg. Ann. Total Return (12/31/05)(3) -0.61% +4.39% +5.01%
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Distribution Rate(4) 4.18%
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Taxable Equivalent Distribution Rate(5) 7.32%
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30-Day Standardized Yield(6) 3.36%
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Taxable Equivalent Yield(5) 5.88%
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return(1) +0.14% +3.76% +27.71% +33.61%
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Average Annual Total Return(2) -3.79% -0.24% +4.68% +4.28%
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Avg. Ann. Total Return (12/31/05)(3) -0.75% +4.38% +4.34%
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Distribution Rate(4) 3.80%
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Taxable Equivalent Distribution Rate(5) 6.65%
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30-Day Standardized Yield(6) 2.96%
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Taxable Equivalent Yield(5) 5.18%
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return(1) +0.22% +3.75% +27.76% +60.91%
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Average Annual Total Return(2) -0.76% +2.75% +5.02% +4.87%
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Avg. Ann. Total Return (12/31/05)(3) +2.22% +4.73% +4.88%
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Distribution Rate(4) 3.80%
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Taxable Equivalent Distribution Rate(5) 6.65%
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30-Day Standardized Yield(6) 2.97%
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Taxable Equivalent Yield(5) 5.20%
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ADVISOR CLASS(7) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return(1) +0.46% +4.42% +31.82% +71.02%
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Average Annual Total Return(2) +0.46% +4.42% +5.68% +5.51%
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/05)(3) +3.89% +5.39% +5.51%
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Distribution Rate(4) 4.46%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 7.81%
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30-Day Standardized Yield(6) 3.63%
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Taxable Equivalent Yield(5) 6.36%
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.

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

14 | Semiannual Report

PERFORMANCE SUMMARY (CONTINUED)

ENDNOTES

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

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

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

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

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

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

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

(4) Distribution rate is based on an annualization of the respective class's
November dividend and the maximum offering price (NAV for Classes B, C and
Advisor) per share on 11/30/05.

(5) Taxable equivalent distribution rate and yield assume the published rates
as of 6/3/05 for the maximum combined federal and New York state and City
personal income tax bracket of 42.90%, based on the federal income tax
rate of 35.00%.

(6) Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 11/30/05.

(7) Effective 10/1/01, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 10/1/01, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 9/30/01, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 10/1/01
(commencement of sales), the cumulative and average annual total returns
of Advisor Class shares were +22.79% and +5.05%.

Semiannual Report | 15

YOUR FUND'S EXPENSES

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

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

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

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

ACTUAL FUND EXPENSES

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

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

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

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

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

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

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

16 | Semiannual Report

YOUR FUND'S EXPENSES (CONTINUED)

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

- -----------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 6/1/05 VALUE 11/30/05 PERIOD* 6/1/05-11/30/05
- -----------------------------------------------------------------------------------------------------------

Actual $1,000 $1,005.00 $3.02
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.06 $3.04
- -----------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,001.40 $5.82
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.25 $5.87
- -----------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,002.20 $5.82
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.25 $5.87
- -----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,004.60 $2.56
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.51 $2.59
- -----------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio 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.

Semiannual Report | 17

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS

-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2005 YEAR ENDED MAY 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------------

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

Net asset value, beginning of period ... $ 12.01 $ 11.64 $ 12.22 $ 11.65 $ 11.62 $ 11.06
-----------------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) ............ 0.26 0.54 0.55 0.57 0.59 0.62

Net realized and unrealized gains
(losses) ........................... (0.20) 0.37 (0.58) 0.57 0.04 0.57
-----------------------------------------------------------------------------------------

Total from investment operations ....... 0.06 0.91 (0.03) 1.14 0.63 1.19
-----------------------------------------------------------------------------------------
Less distributions from net investment
income ................................ (0.26) (0.54) (0.55) (0.57) (0.60) (0.63)
-----------------------------------------------------------------------------------------
Redemption fees ........................ --(c) --(c) -- -- -- --
-----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 11.81 $ 12.01 $ 11.64 $ 12.22 $ 11.65 $ 11.62
=========================================================================================

Total return(b) ........................ 0.50% 7.95% (0.27)% 10.06% 5.55% 10.97%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 4,396,361 $ 4,497,924 $ 4,429,312 $ 4,828,889 $ 4,609,318 $ 4,483,909

Ratio to average net assets:

Expenses ............................ 0.60%(d) 0.60% 0.60% 0.60% 0.59% 0.60%

Net investment income ............... 4.37%(d) 4.50% 4.62% 4.81% 5.09% 5.39%

Portfolio turnover rate ................ 5.67% 10.97% 10.35% 13.44% 9.57% 7.83%

(a) Based on average daily shares outstanding.

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

(d) Annualized.

18 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2005 YEAR ENDED MAY 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------

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

Net asset value, beginning of period ............. $ 11.99 $ 11.61 $ 12.20 $ 11.63 $ 11.61 $ 11.04
-----------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) ...................... 0.23 0.47 0.48 0.50 0.53 0.55

Net realized and unrealized gains (losses) .... (0.21) 0.38 (0.59) 0.57 0.03 0.58
-----------------------------------------------------------------------------
Total from investment operations ................. 0.02 0.85 (0.11) 1.07 0.56 1.13
-----------------------------------------------------------------------------
Less distributions from net investment income .... (0.23) (0.47) (0.48) (0.50) (0.54) (0.56)
-----------------------------------------------------------------------------
Redemption fees .................................. --(c) --(c) -- -- -- --
-----------------------------------------------------------------------------
Net asset value, end of period ................... $ 11.78 $ 11.99 $ 11.61 $ 12.20 $ 11.63 $ 11.61
=============================================================================

Total return(b) .................................. 0.14% 7.46% (0.91)% 9.46% 4.88% 10.46%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................ $ 219,555 $ 231,020 $ 231,664 $ 233,767 $ 160,194 $ 87,697

Ratio to average net assets:

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

Net investment income ......................... 3.81%(d) 3.94% 4.06% 4.24% 4.53% 4.80%

Portfolio turnover rate .......................... 5.67% 10.97% 10.35% 13.44% 9.57% 7.83%

(a) Based on average daily shares outstanding.

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

(d) Annualized.

Semiannual Report | See notes to financial statements. | 19

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2005 YEAR ENDED MAY 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
----------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 12.00 $ 11.63 $ 12.22 $ 11.64 $ 11.62 $ 11.06
----------------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) ........... 0.23 0.47 0.48 0.50 0.53 0.55

Net realized and unrealized gains
(losses) ........................ (0.20) 0.37 (0.59) 0.58 0.03 0.57
----------------------------------------------------------------------------------------
Total from investment operations ...... 0.03 0.84 (0.11) 1.08 0.56 1.12
----------------------------------------------------------------------------------------
Less distributions from net investment
income ............................. (0.23) (0.47) (0.48) (0.50) (0.54) (0.56)
----------------------------------------------------------------------------------------
Redemption fees ....................... --(c) --(c) -- -- -- --
----------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 11.80 $ 12.00 $ 11.63 $ 12.22 $ 11.64 $ 11.62
========================================================================================

Total return(b) ....................... 0.22% 7.36% (0.91)% 9.55% 4.86% 10.35%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $ 242,145 $ 235,805 $ 231,051 $ 242,965 $ 188,642 $ 146,824

Ratio to average net assets:

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

Net investment income .............. 3.81%(d) 3.94% 4.06% 4.24% 4.53% 4.82%

Portfolio turnover rate ............... 5.67% 10.97% 10.35% 13.44% 9.57% 7.83%

(a) Based on average daily shares outstanding.

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

(d) Annualized.

20 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

---------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2005 YEAR ENDED MAY 31,
ADVISOR CLASS (UNAUDITED) 2005 2004 2003 2002(e)
---------------------------------------------------------------------------------

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

Net asset value, beginning of period ........... $ 12.02 $ 11.64 $ 12.23 $ 11.65 $ 11.68
---------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) .................... 0.27 0.55 0.56 0.58 0.40

Net realized and unrealized gains (losses) .. (0.21) 0.38 (0.59) 0.58 (0.08)
---------------------------------------------------------------------------------
Total from investment operations ............... 0.06 0.93 (0.03) 1.16 0.32
---------------------------------------------------------------------------------
Less distributions from net investment income .. (0.27) (0.55) (0.56) (0.58) (0.35)
---------------------------------------------------------------------------------
Redemption fees ................................ --(c) --(c) -- -- --
---------------------------------------------------------------------------------
Net asset value, end of period ................. $ 11.81 $ 12.02 $ 11.64 $ 12.23 $ 11.65
=================================================================================

Total return(b) ................................ 0.46% 8.14% (0.26)% 10.24% 2.80%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .............. $ 33,317 $ 30,487 $ 22,470 $ 18,278 $ 14,054

Ratios to average net assets:

Expenses .................................... 0.51%(d) 0.51% 0.51% 0.52% 0.51%(d)

Net investment income ....................... 4.46%(d) 4.59% 4.71% 4.89% 5.16%(d)

Portfolio turnover rate ........................ 5.67% 10.97% 10.35% 13.44% 9.57%

(a) Based on average daily shares outstanding.

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

(d) Annualized.

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

Semiannual Report | See notes to financial statements. | 21

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED)

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

LONG TERM INVESTMENTS 98.7%
BONDS 96.7%
NEW YORK 96.0%
Albany Housing Authority Ltd. Obligation Revenue, Refunding, 6.25%, 10/01/12 .............. $ 5,250,000 $ 5,378,730
Albany IDA Civic Facility Revenue,
Albany Medical Center Project, 6.00%, 5/01/19 ......................................... 1,270,000 1,285,075
Albany Medical Center Project, 6.00%, 5/01/29 ......................................... 1,460,000 1,450,831
St. Rose Project, Series A, AMBAC Insured, 5.375%, 7/01/31 ............................ 2,750,000 2,927,953
Albany Parking Authority Revenue,
Refunding, Series A, 5.625%, 7/15/20 .................................................. 1,250,000 1,338,350
Series A, 5.625%, 7/15/25 ............................................................. 1,000,000 1,070,680
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 1,512,789
Series A, AMBAC Insured, 5.25%, 8/01/31 ............................................... 5,055,000 5,358,401
Series B, AMBAC Insured, 5.625%, 8/01/20 .............................................. 1,690,000 1,835,881
Series B, AMBAC Insured, 5.75%, 8/01/25 ............................................... 3,050,000 3,336,151
Series B, AMBAC Insured, 5.75%, 8/01/30 ............................................... 3,440,000 3,755,035
Series B, AMBAC Insured, 5.25%, 8/01/31 ............................................... 1,000,000 1,060,020
Battery Park City Authority Revenue, Series A, 5.00%,
11/01/24 .............................................................................. 9,000,000 9,424,260
11/01/25 .............................................................................. 12,000,000 12,557,520
11/01/26 .............................................................................. 14,250,000 14,882,842
Bethany Retirement Home Inc. Mortgage Loan Revenue, FHA Insured, 7.50%, 2/01/34 ........... 8,160,000 8,291,050
Clinton County COP, Correctional Facilities Project, 8.125%, 8/01/17 ...................... 4,820,000 5,753,827
Dutchess County IDA Civic Facility Revenue, Vassar College Project, 5.35%, 9/01/40 ........ 16,000,000 16,985,120
Franklin County COP, Court House Redevelopment Project, 8.125%, 8/01/06 ................... 1,540,000 1,551,180
Geneva IDA Civic Facilities Revenue, Colleges of the Seneca Project, AMBAC Insured,
5.00%, 9/01/21 ........................................................................ 2,835,000 2,975,219
5.125%, 9/01/31 ....................................................................... 5,045,000 5,264,912
Hempstead Town IDA Civic Facility Revenue, Adelphi University Civic Facility, 5.00%,
10/01/30 .............................................................................. 3,000,000 3,069,960
10/01/35 .............................................................................. 1,500,000 1,526,700
Ilion Elderly Housing Corp. Mortgage Revenue, 7.25%, 7/01/09 .............................. 870,000 876,403
Long Island Power Authority Electric System Revenue,
General, Refunding, Series A, 5.75%, 12/01/24 ......................................... 15,000,000 15,987,150
General, Refunding, Series A, AMBAC Insured, 5.25%, 12/01/26 .......................... 5,000,000 5,229,500
General, Refunding, Series A, FSA Insured, 5.00%, 12/01/18 ............................ 10,000,000 10,424,300
General, Refunding, Series A, FSA Insured, 5.125%, 12/01/22 ........................... 28,210,000 29,456,036
General, Refunding, Series A, MBIA Insured, 5.75%, 12/01/24 ........................... 15,060,000 15,984,232
General, Refunding, Series A, MBIA Insured, 5.25%, 12/01/26 ........................... 9,000,000 9,413,100
Series A, AMBAC Insured, 5.00%, 9/01/29 ............................................... 24,000,000 24,892,560
Series A, AMBAC Insured, 5.00%, 9/01/34 ............................................... 20,670,000 21,393,450
Madison County IDA Civic Facility Revenue, Colgate University Project,
Series A, AMBAC Insured, 5.00%, 7/01/30 ............................................... 9,410,000 9,809,549
Series A, AMBAC Insured, 5.00%, 7/01/35 ............................................... 6,165,000 6,387,803
Series A, AMBAC Insured, 5.00%, 7/01/40 ............................................... 18,315,000 18,905,109
Series B, 5.00%, 7/01/33 .............................................................. 2,000,000 2,054,460
Middleburg Central School District GO, FGIC Insured,
4.60%, 8/15/17 ........................................................................ 1,045,000 1,078,858

22 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
Middleburg Central School District GO, FGIC Insured, (cont.)
4.625%, 8/15/18 ....................................................................... $ 1,155,000 $ 1,191,637
4.625%, 8/15/19 ....................................................................... 1,210,000 1,246,082
4.75%, 8/15/20 ........................................................................ 1,270,000 1,312,596
4.75%, 8/15/21 ........................................................................ 1,330,000 1,372,307
Monroe County IDAR, Civic Facilities, De Paul Community Facilities, 6.50%, 2/01/24 ........ 1,285,000 1,290,191
Monroe County Water Authority Water Revenue,
5.15%, 8/01/22 ........................................................................ 1,000,000 1,055,790
5.25%, 8/01/36 ........................................................................ 2,250,000 2,376,450
Montgomery County IDA Lease Revenue, Hamilton Fulton Montgomery
Board of Cooperative Educational Services Project, Series 2004A, XLCA Insured, 5.00%,
7/01/29 ............................................................................... 5,710,000 5,870,108
7/01/34 ............................................................................... 3,000,000 3,081,960
MTA Commuter Facilities Revenue,
Series 8, Pre-Refunded, 5.50%, 7/01/21 ................................................ 5,000,000 5,586,000
Series A, FGIC Insured, Pre-Refunded, 5.25%, 7/01/28 .................................. 8,655,000 9,415,515
Series A, MBIA Insured, Pre-Refunded, 5.625%, 7/01/27 ................................. 10,000,000 10,620,600
Series A, Pre-Refunded, 6.00%, 7/01/24 ................................................ 5,575,000 6,072,290
Series A, Pre-Refunded, 5.25%, 7/01/28 ................................................ 18,300,000 19,908,021
Series A, Pre-Refunded, 6.125%, 7/01/29 ............................................... 9,625,000 10,523,686
Series C-1, FGIC Insured, Pre-Refunded, 5.375%, 7/01/27 ............................... 19,100,000 20,404,721
Series R, Pre-Refunded, 5.50%, 7/01/17 ................................................ 2,000,000 2,248,440
MTA Dedicated Tax Fund Revenue,
Refunding, Series A, 5.00%, 11/15/30 .................................................. 25,000,000 25,558,250
Series A, FGIC Insured, Pre-Refunded, 6.00%, 4/01/30 .................................. 27,260,000 30,096,676
Series A, FGIC Insured, Pre-Refunded, 5.00%, 11/15/31 ................................. 39,685,000 42,853,847
Series A, FSA Insured, 5.00%, 11/15/28 ................................................ 41,575,000 43,002,270
Series A, FSA Insured, 5.00%, 11/15/32 ................................................ 71,685,000 74,016,196
Series A, FSA Insured, Pre-Refunded, 5.00%, 4/01/29 ................................... 25,800,000 28,100,844
Series A, MBIA Insured, Pre-Refunded, 5.25%, 4/01/26 .................................. 20,500,000 22,144,305
MTA Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 11/15/25 .................................... 22,010,000 22,885,778
Refunding, Series A, FGIC Insured, 5.25%, 11/15/31 .................................... 34,000,000 35,878,840
Refunding, Series A, FSA Insured, 5.00%, 11/15/30 ..................................... 78,130,000 80,577,032
Refunding, Series A, MBIA Insured, 5.125%, 11/15/31 ................................... 15,000,000 15,690,000
Refunding, Series E, 5.25%, 11/15/31 .................................................. 15,000,000 15,709,800
Refunding, Series U, FGIC Insured, 5.125%, 11/15/31 ................................... 5,000,000 5,230,000
Series A, FGIC Insured, 5.00%, 11/15/32 ............................................... 10,355,000 10,662,440
Series B, 5.25%, 11/15/32 ............................................................. 28,720,000 30,203,388
Transportation, Series F, 5.00%, 11/15/35 ............................................. 11,000,000 11,224,400
MTA Service Contract Revenue,
Refunding, Series A, 5.125%, 1/01/29 .................................................. 6,000,000 6,228,420
Refunding, Series A, AMBAC Insured, 5.25%, 7/01/31 .................................... 50,000,000 52,634,500
Refunding, Series A, FGIC Insured, 5.00%, 7/01/25 ..................................... 12,760,000 13,244,114
Series B, 5.375%, 1/01/30 ............................................................. 50,000,000 52,842,000
Series B, MBIA Insured, 5.00%, 1/01/31 ................................................ 22,290,000 22,904,535

Semiannual Report | 23

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
MTA Transit Facilities Revenue, Series A,
FSA Insured, Pre-Refunded, 6.10%, 7/01/21 ............................................. $ 15,000,000 $ 15,543,300
MBIA Insured, Pre-Refunded, 5.625%, 7/01/25 ........................................... 8,000,000 8,412,880
Pre-Refunded, 5.50%, 7/01/22 .......................................................... 16,170,000 17,122,575
Pre-Refunded, 6.00%, 7/01/24 .......................................................... 7,000,000 7,624,400
Pre-Refunded, 5.625%, 7/01/27 ......................................................... 14,440,000 15,334,702
Pre-Refunded, 6.125%, 7/01/29 ......................................................... 11,595,000 12,677,625
Nassau County Tobacco Settlement Corp. Revenue, Asset Backed, Series A, 6.50%, 7/15/27 .... 15,000,000 15,854,400
Nassau Health Care Corp. Health System Revenue, Nassau County Guaranteed,
FSA Insured, Pre-Refunded, 5.75%, 8/01/29 ............................................... 36,040,000 39,589,940
New York City GO,
Fiscal 2003, Series I, 5.00%, 3/01/29 ................................................. 10,000,000 10,187,700
Fiscal 2003, Series I, 5.00%, 3/01/30 ................................................. 14,785,000 15,044,329
Pre-Refunded, 5.50%, 5/15/24 .......................................................... 7,630,000 8,338,064
Refunding, 5.50%, 5/15/24 ............................................................. 2,370,000 2,532,250
Refunding, Series H, 6.125%, 8/01/25 .................................................. 4,170,000 4,377,499
Series A, FSA Insured, 6.00%, 5/15/30 ................................................. 1,095,000 1,203,788
Series A, FSA Insured, Pre-Refunded, 6.00%, 5/15/30 ................................... 5,155,000 5,750,042
Series A, Pre-Refunded, 6.25%, 8/01/17 ................................................ 2,675,000 2,766,672
Series B, 7.00%, 2/01/18 .............................................................. 25,000 25,146
Series B, Pre-Refunded, 6.00%, 8/15/26 ................................................ 915,000 946,156
Series C, 7.00%, 2/01/12 .............................................................. 705,000 708,927
Series C, FSA Insured, 5.125%, 3/15/25 ................................................ 6,500,000 6,828,380
Series D, 8.00%, 8/01/17 .............................................................. 5,000 5,036
Series D, 7.50%, 2/01/18 .............................................................. 5,000 5,030
Series D, 5.125%, 8/01/19 ............................................................. 1,985,000 2,072,400
Series D, 5.25%, 8/01/21 .............................................................. 10,680,000 11,043,440
Series D, 5.25%, 10/15/23 ............................................................. 5,000,000 5,289,800
Series D, 5.50%, 6/01/24 .............................................................. 23,945,000 25,682,928
Series D, 5.00%, 10/15/29 ............................................................. 5,000,000 5,100,650
Series D, 5.00%, 11/01/34 ............................................................. 5,000,000 5,093,350
Series D, FGIC Insured, 5.25%, 8/01/21 ................................................ 5,355,000 5,553,028
Series D, Pre-Refunded, 5.25%, 8/01/21 ................................................ 3,820,000 3,980,096
Series F, 5.875%, 8/01/24 ............................................................. 2,205,000 2,272,760
Series F, 5.30%, 1/15/26 .............................................................. 45,000,000 47,419,650
Series F, Pre-Refunded, 5.875%, 8/01/24 ............................................... 4,795,000 4,947,769
Series G, Pre-Refunded, 6.00%, 10/15/26 ............................................... 9,900,000 10,495,386
Series H, 7.20%, 2/01/15 .............................................................. 5,000 5,030
Series H, FSA Insured, 5.375%, 8/01/27 ................................................ 8,510,000 8,935,330
Series H, MBIA Insured, 5.125%, 8/01/25 ............................................... 3,885,000 4,028,862
Series H, MBIA Insured, Pre-Refunded, 5.125%, 8/01/25 ................................. 115,000 121,555
Series H, Pre-Refunded, 6.125%, 8/01/25 ............................................... 830,000 876,397
Series I, Pre-Refunded, 6.25%, 4/15/27 ................................................ 9,500,000 9,979,940
Series J, 5.00%, 3/01/30 .............................................................. 10,000,000 10,214,500
Series K, Pre-Refunded, 6.25%, 4/01/26 ................................................ 9,000,000 9,224,640
Series M, 5.00%, 4/01/35 .............................................................. 10,000,000 10,193,400

24 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York City IDA Civic Facility Revenue,
College of New Rochelle Project, 5.80%, 9/01/26 ....................................... $ 1,500,000 $ 1,570,740
Ethical Culture School Project, Series B-1, XLCA Insured, 5.00%, 6/01/35 .............. 10,595,000 10,992,101
Institute of International Education Inc. Project, 5.25%, 9/01/21 ..................... 1,530,000 1,619,872
Institute of International Education Inc. Project, 5.25%, 9/01/31 ..................... 5,235,000 5,477,066
New York University Project, AMBAC Insured, 5.00%, 7/01/31 ............................ 18,000,000 18,474,300
Staten Island University Hospital Project, Series A, 6.375%, 7/01/31 .................. 3,975,000 4,041,820
New York City Municipal Water Finance Authority Revenue, Series B, 5.00%, 6/15/26 ......... 25,000,000 25,877,500
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Fiscal 2004, Refunding, Series C, MBIA Insured, 5.00%, 6/15/35 ........................ 4,000,000 4,117,440
Refunding, Series B, 6.10%, 6/15/31 ................................................... 11,005,000 12,204,435
Refunding, Series B, 6.00%, 6/15/33 ................................................... 6,040,000 6,673,294
Refunding, Series B, FSA Insured, 5.00%, 6/15/36 ...................................... 5,000,000 5,153,800
Refunding, Series C, MBIA Insured, 5.00%, 6/15/28 ..................................... 6,920,000 7,196,523
Refunding, Series E, MBIA Insured, 5.125%, 6/15/31 .................................... 34,175,000 35,626,070
Series A, FGIC Insured, 5.25%, 6/15/33 ................................................ 7,000,000 7,310,030
Series A, FGIC Insured, Pre-Refunded, 5.75%, 6/15/31 .................................. 19,315,000 21,030,365
Series A, FGIC Insured, Pre-Refunded, 5.50%, 6/15/32 .................................. 11,655,000 12,593,810
Series A, FSA Insured, 5.00%, 6/15/29 ................................................. 5,000,000 5,191,900
Series A, FSA Insured, 5.00%, 6/15/32 ................................................. 10,000,000 10,368,100
Series A, Pre-Refunded, 5.75%, 6/15/30 ................................................ 41,190,000 44,848,084
Series B, FGIC Insured, 5.125%, 6/15/30 ............................................... 12,500,000 12,850,125
Series B, MBIA Insured, Pre-Refunded, 5.50%, 6/15/27 .................................. 32,620,000 34,055,280
Series B, Pre-Refunded, 5.75%, 6/15/26 ................................................ 24,455,000 25,621,503
Series B, Pre-Refunded, 6.10%, 6/15/31 ................................................ 3,995,000 4,473,002
Series B, Pre-Refunded, 6.00%, 6/15/33 ................................................ 10,260,000 11,444,927
New York City Transitional Finance Authority Revenue,
Future Tax Secured, 2004, Series C, Pre-Refunded, 5.50%, 5/01/25 ...................... 55,000 59,358
Future Tax Secured, 2004, Series C, Pre-Refunded, 5.00%, 5/01/26 ...................... 5,000 5,252
Future Tax Secured, 2004, Series C, Pre-Refunded, 5.00%, 5/01/26 ...................... 3,675,000 3,772,167
Future Tax Secured, 2005, Series A, Pre-Refunded, 5.125%, 8/15/21 ..................... 6,120,000 6,373,613
Future Tax Secured, 2005, Series C, Pre-Refunded, 5.50%, 5/01/25 ...................... 5,515,000 5,951,953
Future Tax Secured, Refunding, Series B, AMBAC Insured, 5.00%, 5/01/30 ................ 3,000,000 3,093,450
Future Tax Secured, Refunding, Series B, MBIA Insured, 5.00%, 8/01/32 ................. 15,000,000 15,480,300
Future Tax Secured, Series A, 5.25%, 5/01/31 .......................................... 26,545,000 27,905,431
Future Tax Secured, Series A, 5.25%, 8/01/31 .......................................... 30,605,000 32,421,407
Future Tax Secured, Series A, FGIC Insured, 5.00%, 5/01/28 ............................ 16,065,000 16,508,073
Future Tax Secured, Series A, Pre-Refunded, 5.125%, 8/15/21 ........................... 8,815,000 9,180,294
Future Tax Secured, Series A, Pre-Refunded, 5.625%, 2/15/26 ........................... 20,000,000 21,906,600
Future Tax Secured, Series A, Pre-Refunded, 5.00%, 8/15/27 ............................ 6,915,000 7,187,382
Future Tax Secured, Series A, Pre-Refunded, 6.00%, 8/15/29 ............................ 29,000,000 31,925,810
Future Tax Secured, Series A, Pre-Refunded, 5.25%, 5/01/31 ............................ 460,000 499,790
Future Tax Secured, Series B, 5.00%, 5/01/30 .......................................... 7,520,000 7,740,712
Future Tax Secured, Series B, Pre-Refunded, 6.00%, 11/15/29 ........................... 15,000,000 16,731,450
Future Tax Secured, Series C, 5.00%, 5/01/29 .......................................... 5,215,000 5,354,397
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 11/01/24 ........................... 16,800,000 18,383,736
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 5/01/25 ............................ 4,430,000 4,780,989
Future Tax Secured, Series C, Pre-Refunded, 5.00%, 5/01/26 ............................ 320,000 336,112

Semiannual Report | 25

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York City Transitional Finance Authority Revenue, (cont.)
Future Tax Secured, Series C, Pre-Refunded, 5.00%, 5/01/29 ............................ $ 8,655,000 $ 9,202,429
Future Tax Secured, Series C, Pre-Refunded, 5.50%, 11/01/29 ........................... 13,660,000 14,947,728
Future Tax Secured, Series D, 5.00%, 2/01/27 .......................................... 62,025,000 64,053,838
Future Tax Secured, Series E, 5.00%, 2/01/25 .......................................... 5,000,000 5,182,150
Future Tax Secured, Series E, 5.00%, 2/01/27 .......................................... 10,000,000 10,327,100
Future Tax Secured, Series E, 5.00%, 2/01/33 .......................................... 18,035,000 18,447,460
Series C, MBIA Insured, 5.00%, 5/01/29 ................................................ 1,365,000 1,403,234
Series C, MBIA Insured, Pre-Refunded, 5.00%, 5/01/29 .................................. 2,270,000 2,413,578
New York City Transportation Authority MTA Triborough COP, Series A, AMBAC Insured,
Pre-Refunded, 5.25%, 1/01/29 ............................................................ 79,840,000 86,138,578
New York City Trust Cultural Resources Revenue,
Museum of Modern Art 2001, Series D, AMBAC Insured, 5.125%, 7/01/31 ................... 15,500,000 16,161,695
Wildlife Conservation Society, FGIC Insured, 5.00%, 2/01/34 ........................... 10,500,000 10,847,235
New York Convention Center Development Corp. Revenue, Hotel Unit Fee Secured,
AMBAC Insured, 5.00%, 11/15/44 .......................................................... 23,000,000 23,616,170
New York IDA Parking Facility Revenue, Royal Charter Presbyterian, FSA Insured,
5.25%, 12/15/32 ......................................................................... 1,525,000 1,608,692
New York State Appropriated Tobacco Corp. Revenue, Asset Backed, Series A-1,
AMBAC Insured, 5.25%, 6/01/21 ........................................................... 18,000,000 19,167,840
New York State Commissioner of General Services Revenue, People of the
State of New York, Certificate of Lease Assessment,
5.70%, 3/01/29 ........................................................................ 65,523,812 67,756,208
5.75%, 3/01/29 ........................................................................ 34,333,145 35,567,765
New York State COP, Hanson Redevelopment Project, 8.375%, 5/01/08 ......................... 8,385,000 8,825,799
New York State Dormitory Authority Lease Revenue,
Court Facilities, Pre-Refunded, 6.00%, 5/15/39 ........................................ 58,245,000 64,840,664
Court Facilities, Series A, Pre-Refunded, 5.375%, 5/15/23 ............................. 4,000,000 4,429,680
Refunding, Series A, FGIC Insured, 5.00%, 7/01/33 ..................................... 12,650,000 13,002,555
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.50%, 7/01/27 ..... 2,000,000 2,200,860
State University Dormitory Facilities, FGIC Insured, Pre-Refunded, 5.10%, 7/01/31 ..... 7,700,000 8,318,618
State University Dormitory Facilities, Pre-Refunded, 5.00%, 7/01/32 ................... 5,500,000 5,953,640
State University Dormitory Facilities, Series A, 6.00%, 7/01/30 ....................... 5,750,000 6,419,472
State University Dormitory Facilities, Series B, MBIA Insured, 5.125%, 7/01/28 ........ 1,365,000 1,458,980
State University Dormitory Facilities, Series B, MBIA Insured, Pre-Refunded,
5.125%, 7/01/28 ..................................................................... 3,435,000 3,671,500
State University Dormitory Facilities, Series C, MBIA Insured, 5.50%, 7/01/19 ......... 2,410,000 2,606,126
State University Dormitory Facilities, Series C, MBIA Insured, Pre-Refunded,
5.50%, 7/01/19 ...................................................................... 2,680,000 2,898,098
State University Dormitory Facilities, Series C, MBIA Insured, Pre-Refunded,
5.50%, 7/01/29 ...................................................................... 9,250,000 10,002,765
New York State Dormitory Authority Revenue,
FGIC Insured, Pre-Refunded, 5.125%, 5/15/31 ........................................... 45,000,000 49,408,650
FHA, Insured Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.125%, 2/01/22 ......... 4,000,000 4,222,160
FHA, Insured Mortgage, St. Barnabas, Series A, AMBAC Insured, 5.00%, 2/01/31 .......... 5,500,000 5,637,225
Insured, Fordham University, FGIC Insured, 5.00%, 7/01/27 ............................. 6,020,000 6,241,416
Insured, Fordham University, FGIC Insured, 5.00%, 7/01/32 ............................. 7,735,000 7,974,862
School District Financing Program, Series A, MBIA Insured, 5.00%, 4/01/31 ............. 9,500,000 9,770,180

26 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State Dormitory Authority Revenue, (cont.)
State University Educational Facilities, 5.125%, 5/15/21 .............................. $ 12,090,000 $ 12,593,669
State University Educational Facilities, Pre-Refunded, 5.125%, 5/15/21 ................ 2,910,000 3,066,878
Teachers College, MBIA Insured, 5.00%, 7/01/22 ........................................ 2,885,000 3,002,823
Teachers College, MBIA Insured, 5.00%, 7/01/32 ........................................ 6,000,000 6,186,060
Upstate Community Colleges, Series A, 5.00%, 7/01/27 .................................. 3,720,000 3,840,528
Upstate Community Colleges, Series A, Pre-Refunded, 5.00%, 7/01/31 .................... 7,365,000 7,980,419
New York State Dormitory Authority Revenues,
Bishop Henry B. Hucles Nursing Home, 6.00%, 7/01/24 ................................... 2,545,000 2,623,920
Buena Vida Nursing Home, Series A, 5.25%, 7/01/28 ..................................... 4,730,000 4,884,813
City University System Consolidated, Fourth, Series A, Pre-Refunded, 5.25%, 7/01/31 ... 12,000,000 13,022,880
City University System Consolidated, FSA Insured, Pre-Refunded, 5.375%, 7/01/24 ....... 5,000,000 5,308,850
City University System Consolidated, Series 1, FGIC Insured, Pre-Refunded,
5.375%, 7/01/24 ..................................................................... 14,300,000 15,183,311
City University System Consolidated, Series 1, MBIA Insured, Pre-Refunded,
5.125%, 7/01/27 ..................................................................... 6,680,000 7,059,357
City University System Consolidated, Series C, 7.50%, 7/01/10 ......................... 12,850,000 14,008,556
City University System Consolidated, Series D, ETM, 7.00%, 7/01/09 .................... 1,870,000 1,997,777
City University System Consolidated, Third General, Series 1, FSA Insured,
Pre-Refunded, 5.50%, 7/01/29 ........................................................ 38,375,000 41,497,957
City University System Consolidated, Third, Refunding, Series 1, FGIC Insured,
5.25%, 7/01/25 ...................................................................... 4,100,000 4,339,481
City University System, Consolidated, Fourth General, Series A, FGIC Insured,
Pre-Refunded, 5.25%, 7/01/30 ........................................................ 20,705,000 22,286,655
City University System, Third General Residence, Series 2,
Pre-Refunded, 6.00%, 7/01/20 ........................................................ 13,000,000 13,459,680
City University System, Third General Residence, Series 2,
Pre-Refunded, 6.00%, 7/01/26 ........................................................ 6,020,000 6,232,867
City University, Third General, Series 2, Pre-Refunded, 6.20%, 7/01/22 ................ 28,555,000 29,596,972
Concord Nursing Home Inc., 6.50%, 7/01/29 ............................................. 2,500,000 2,719,450
Fashion Institute of Technology Student Housing Corp.,
FGIC Insured, 5.00%, 7/01/29 ........................................................ 9,700,000 10,055,408
Fashion Institute of Technology Student Housing Corp.,
FGIC Insured, 5.125%, 7/01/34 ....................................................... 15,000,000 15,780,000
Fordham University, MBIA Insured, Pre-Refunded, 5.00%, 7/01/28 ........................ 4,510,000 4,746,955
Fordham University, Refunding, MBIA Insured, 5.00%, 7/01/28 ........................... 490,000 509,693
Good Samaritan Hospital Medical Center, Series A, MBIA Insured, 5.50%, 7/01/24 ........ 5,000,000 5,330,150
Interfaith Medical Center, Series D, 5.40%, 2/15/28 ................................... 14,000,000 14,488,600
Ithaca College, AMBAC Insured, Pre-Refunded, 5.25%, 7/01/26 ........................... 2,000,000 2,101,340
Long Island University, 5.125%, 9/01/23 ............................................... 1,800,000 1,865,430
Long Island University, 5.25%, 9/01/28 ................................................ 1,500,000 1,559,310
Mental Health Facilities Improvement, Series B, 5.00%, 2/15/33 ........................ 35,000,000 35,609,700
Mental Health Services Facilities Improvement, Series B, AMBAC Insured,
5.00%, 2/15/35 ...................................................................... 18,410,000 18,927,873
Mental Health Services Facilities Improvement, Series B,
MBIA Insured, 5.25%, 8/15/31 ........................................................ 4,160,000 4,340,378
Mental Health Services Facilities Improvement, Series B, MBIA Insured,
Pre-Refunded, 6.00%, 2/15/25 ........................................................ 5,460,000 6,012,497
Mental Health Services Facilities Improvement, Series B, MBIA Insured,
Pre-Refunded, 6.00%, 2/15/30 ........................................................ 4,300,000 4,735,117
Mental Health Services Facilities Improvement, Series B, MBIA Insured,
Pre-Refunded, 5.25%, 8/15/31 ........................................................ 3,975,000 4,320,428

Semiannual Report | 27

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State Dormitory Authority Revenues, (cont.)
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.50%, 2/15/21 ........................................................ $ 1,015,000 $ 1,105,335
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.50%, 8/15/21 ........................................................ 2,065,000 2,248,785
Mental Health Services Facilities Improvement, Series D, FSA Insured,
Pre-Refunded, 5.25%, 8/15/30 ........................................................ 4,460,000 4,808,950
Mental Health Services Facilities Improvement, Series D, MBIA Insured,
5.00%, 8/15/17 ...................................................................... 22,985,000 23,951,519
Mental Health Services Facilities Improvement, Series D, MBIA Insured,
Pre-Refunded, 5.00%, 8/15/17 ........................................................ 15,000 15,817
Mental Health Services, Series A, Pre-Refunded, 5.75%, 8/15/22 ........................ 1,355,000 1,421,192
Mental Health Services, Series A, Pre-Refunded, 5.75%, 2/15/27 ........................ 9,070,000 9,513,069
Mental Health, Pre-Refunded, 6.00%, 8/15/21 ........................................... 1,600,000 1,682,816
Mental Health, Series B, 5.75%, 8/15/12 ............................................... 2,140,000 2,234,460
Mental Health, Series B, Pre-Refunded, 5.75%, 8/15/12 ................................. 25,000 26,221
Montefiore Hospital, FGIC Insured, 5.00%, 8/01/29 ..................................... 6,000,000 6,209,100
New School University, MBIA Insured, 5.00%, 7/01/31 ................................... 2,500,000 2,565,875
New York Hospital Medical Center, AMBAC Insured, 5.60%, 2/15/39 ....................... 4,900,000 5,227,957
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/26 .......................... 3,500,000 3,606,155
New York University, Series 2, AMBAC Insured, 5.00%, 7/01/31 .......................... 5,000,000 5,131,750
New York University, Series A, FGIC Insured, 5.00%, 7/01/34 ........................... 15,200,000 15,724,096
Non State Supported Debt, Hospital Special Surgery, MBIA Insured, 5.00%, 8/15/29 ...... 7,750,000 8,038,610
Non State Supported Debt, Hospital Special Surgery, MBIA Insured, 5.00%, 8/15/33 ...... 5,200,000 5,369,936
Non State Supported Debt, Montefiore Medical Center, FGIC Insured, 5.00%, 2/01/28 ..... 12,250,000 12,723,340
Non State Supported Debt, School Districts Bond Financing, Series B,
MBIA Insured, 5.00%, 10/01/34 ....................................................... 5,000,000 5,184,350
Non State Supported Debt, School Districts Bond Financing, Series C,
MBIA Insured, 5.00%, 4/01/26 ........................................................ 1,500,000 1,564,620
Non State Supported Debt, School Districts Bond Financing, Series C,
MBIA Insured, 5.00%, 4/01/35 ........................................................ 2,500,000 2,588,375
North Shore L.I. Jewish Group, 5.50%, 5/01/33 ......................................... 2,500,000 2,634,925
Nursing Home, Arden Hill, FHA Insured, Pre-Refunded, 5.85%, 8/01/26 ................... 4,150,000 4,342,809
Nursing Home, Center for Nursing, FHA Insured, 5.55%, 8/01/37 ......................... 8,435,000 8,818,877
Nursing Home, St. John's Health Care Corp., Refunding, FHA Insured, 6.25%, 2/01/36 .... 30,665,000 31,426,105
Nursing Home, Wesley Garden, FHA Insured, 6.125%, 8/01/35 ............................. 1,960,000 2,034,402
Pace University, MBIA Insured, Pre-Refunded, 5.75%, 7/01/26 ........................... 2,000,000 2,116,540
Rockefeller University, Series A1, 5.00%, 7/01/32 ..................................... 11,500,000 11,889,735
Second Hospital, St. Clare's Hospital, Series B, 5.40%, 2/15/25 ....................... 6,500,000 6,724,120
Skidmore College, FGIC Insured, 5.00%, 7/01/33 ........................................ 6,565,000 6,815,061
St. Francis Hospital, Series A, MBIA Insured, 5.50%, 7/01/29 .......................... 1,000,000 1,064,310
St. Johns University, MBIA Insured, 5.25%, 7/01/25 .................................... 5,770,000 6,054,403
St. Johns University, Series A, MBIA Insured, 5.25%, 7/01/25 .......................... 5,310,000 5,648,194
State Rehabilitation Assn., Series A, AMBAC Insured, 5.00%, 7/01/23 ................... 1,725,000 1,801,142
State University Adult Facility, Series B, Pre-Refunded, 5.375%, 5/15/23 .............. 9,500,000 10,333,055
Supported Debt, Mental Health Facilities, Series B, 5.00%, 2/15/28 .................... 7,690,000 7,886,941
Supported Debt, Mental Health Facilities, Series B, Pre-Refunded, 6.00%, 8/15/21 ...... 160,000 168,282

28 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

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

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State Dormitory Authority Revenues, (cont.)
Supported Debt, Mental Health Facilities, Series B, Pre-Refunded, 5.00%, 2/15/28 ....... $ 1,505,000 $ 1,617,890
Supported Debt, Mental Health Services Facilities Improvement, Series B, MBIA
Insured, Pre-Refunded, 5.25%, 8/15/31 ................................................ 1,865,000 2,032,085
Supported Debt, Mental Health Services, Refunding, Series A, 5.75%, 2/15/27 ............ 85,000 88,701
Supported Debt, Mental Health Services, Series A, Pre-Refunded, 5.75%, 2/15/27 ......... 215,000 225,503
Supported Debt, Mental Health Services, Series B, MBIA Insured, 6.00%, 2/15/25 ......... 95,000 103,142
Supported Debt, Mental Health Services, Series B, MBIA Insured, 6.00%, 2/15/30 ......... 80,000 86,695
Supported Debt, Mental Health Services, Series B, MBIA Insured, Pre-Refunded,
6.00%, 2/15/25 ....................................................................... 545,000 600,149
Supported Debt, Mental Health Services, Series B, MBIA Insured, Pre-Refunded,
6.00%, 2/15/30 ....................................................................... 485,000 534,077
Supported Debt, Mental Health, Series A, 5.75%, 8/15/22 ................................ 25,000 26,089
Supported Debt, Mental Health, Series A, Pre-Refunded, 5.75%, 8/15/22 .................. 10,000 10,489
Supported Debt, Mental Health, Series D, 6.00%, 8/15/21 ................................ 25,000 26,176
Supported Debt, Mental Health, Series D, FSA Insured, 5.50%, 2/15/21 ................... 25,000 26,810
Supported Debt, Mental Health, Series D, FSA Insured, 5.50%, 8/15/21 ................... 45,000 48,238
Supported Debt, Mental Health, Series D, FSA Insured, 5.25%, 8/15/30 ................... 375,000 392,734
Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded, 5.50%, 2/15/21 ..... 95,000 103,455
Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded, 5.50%, 8/15/21 ..... 205,000 223,245
Supported Debt, Mental Health, Series D, FSA Insured, Pre-Refunded, 5.25%, 8/15/30 ..... 165,000 177,910
Supported Debt, State University Educational Facilities, Pre-Refunded, 5.00%,
5/15/17 .............................................................................. 420,000 440,912
Supported Debt, State University Educational Facilities, Refunding, 5.00%, 5/15/17 ..... 3,180,000 3,292,667
Supported Debt, Upstate Community Colleges, Refunding, Series A, 5.00%, 7/01/19 ........ 4,610,000 4,772,318
Supported Debt, Upstate Community Colleges, Refunding, Series A, 5.00%, 7/01/28 ........ 16,360,000 16,702,088
Supported Debt, Upstate Community Colleges, Series A, Pre-Refunded,
5.00%, 7/01/19 ....................................................................... 2,620,000 2,784,877
Supported Debt, Upstate Community Colleges, Series A, Pre-Refunded,
5.00%, 7/01/28 ....................................................................... 9,315,000 9,901,193
The Highlands Living, FHA Insured, 6.60%, 2/01/34 ...................................... 3,270,000 3,321,143
Upstate Community Colleges, Series A, Pre-Refunded, 6.00%, 7/01/22 ..................... 7,000,000 7,428,960
Upstate Community Colleges, Series A, Pre-Refunded, 6.125%, 7/01/27 .................... 11,845,000 12,593,367
W.K. Nursing Home Corp., FHA Insured, 6.05%, 2/01/26 ................................... 6,800,000 7,054,388
Yeshiva University, AMBAC Insured, 5.125%, 7/01/29 ..................................... 13,260,000 14,007,731
Yeshiva University, AMBAC Insured, 5.125%, 7/01/34 ..................................... 23,510,000 24,732,520
New York State Dormitory Authority State Personal Income Tax Revenue, Education,
Series A, AMBAC Insured, 5.00%, 3/15/34 .................................................. 7,500,000 7,775,625
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 20,726,000
New York State Environmental Facilities Corp. PCR, State Water, Series E,
6.875%, 6/15/14 .......................................................................... 1,190,000 1,201,127
New York State Environmental Facilities Corp. State Clean Water and Drinking Revenue,
Revolving Funds,
Pooled Financing, Series B, 5.25%, 5/15/31 ............................................. 9,595,000 10,047,212
Series C, 5.25%, 6/15/31 ............................................................... 37,600,000 39,396,904

Semiannual Report | 29

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State HFA Service Contract Obligation Revenue,
Series A, 6.50%, 3/15/24 ............................................................... $ 330,000 $ 334,534
Series A, 6.50%, 3/15/25 ............................................................... 860,000 884,579
Series A, 6.00%, 3/15/26 ............................................................... 970,000 1,004,745
Series A, Pre-Refunded, 6.375%, 9/15/15 ................................................ 4,430,000 4,673,296
Series A, Pre-Refunded, 6.00%, 3/15/26 ................................................. 15,755,000 16,403,948
Series A-2003, 6.375%, 9/15/15 ......................................................... 30,000 30,851
Series C, 6.30%, 3/15/22 ............................................................... 1,950,000 1,957,196
Series C, 5.50%, 3/15/25 ............................................................... 17,015,000 17,708,361
New York State HFA State Personal Income Tax Revenue, Economic Development and
Housing, Series A,
FGIC Insured, 5.00%, 9/15/34 ........................................................... 7,330,000 7,571,304
Pre-Refunded, 5.125%, 9/15/28 .......................................................... 12,425,000 13,578,040
Pre-Refunded, 5.00%, 3/15/33 ........................................................... 7,000,000 7,594,160
New York State HFAR,
Children's Rescue Fund Housing, Series A, 7.625%, 5/01/18 .............................. 4,495,000 4,504,080
Health Facilities of New York City, Refunding, Series A, 6.00%, 11/01/08 ............... 2,400,000 2,459,304
Health Facilities of New York City, Series A, 6.00%, 5/01/07 ........................... 11,200,000 11,478,096
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.10%, 11/01/15 ............ 22,910,000 23,713,912
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.125%, 11/01/20 ........... 28,445,000 29,441,997
MFH, Second Mortgage Program, Series E, 6.75%, 8/15/25 ................................. 2,745,000 2,748,623
MFM Housing, Refunding, Series A, FHA Insured, 7.00%, 8/15/22 .......................... 1,760,000 1,765,562
MFM Housing, Refunding, Series C, FHA Insured, 6.45%, 8/15/14 .......................... 375,000 375,525
MFM, Refunding, Series B, AMBAC Insured, 6.35%, 8/15/23 ................................ 4,780,000 4,807,103
MFM, Refunding, Series C, FHA Insured, 6.50%, 8/15/24 .................................. 2,445,000 2,448,252
MFM, Second Mortgage Program, Series D, 6.25%, 8/15/23 ................................. 2,500,000 2,507,950
MFM, Series B, AMBAC Insured, 6.25%, 8/15/14 ........................................... 360,000 362,113
New York State Local Government Assistance Corp. Revenue, Refunding, Series B,
MBIA Insured, 4.875%, 4/01/20 ............................................................ 4,080,000 4,213,783
New York State Medical Care Facilities Finance Agency Revenue,
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.30%, 8/15/23 ..... 9,000,000 9,046,350
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.25%, 2/15/27 ..... 12,235,000 12,535,492
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.375%, 8/15/33 .... 7,940,000 7,981,209
Hospital and Nursing Home, Mortgage Revenue, Series C, FHA Insured, 6.20%, 8/15/23 ..... 21,540,000 22,096,163
Mortgage Revenue Project, Series A, FHA Insured, 6.50%, 2/15/35 ........................ 3,200,000 3,255,328
Mortgage Revenue Project, Series B, FHA Insured, 6.15%, 2/15/35 ........................ 2,200,000 2,236,564
Mortgage Revenue Project, Series C, FHA Insured, 6.375%, 8/15/29 ....................... 7,775,000 7,907,564
Mortgage Revenue Project, Series D, FHA Insured, 6.20%, 2/15/35 ........................ 6,250,000 6,416,687
Mortgage Revenue Project, Series E, FHA Insured, 6.375%, 2/15/35 ....................... 13,200,000 13,555,740
Second Mortgage, Health Care Project Revenue, Series B, 6.35%, 11/01/14 ................ 1,220,000 1,222,501
Security Mortgage Program, Series A, 6.375%, 11/15/20 .................................. 10,930,000 11,287,630
Series A, FHA Insured, 6.125%, 2/15/15 ................................................. 320,000 325,306
Series A, FHA Insured, Pre-Refunded, 6.125%, 2/15/15 ................................... 810,000 831,619
New York State Mortgage Agency Revenue, Homeowners Mortgage, Series 61,
5.90%, 4/01/27 ........................................................................... 2,345,000 2,386,952

30 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State Municipal Bond Bank Agency School Purpose Revenue, Series C,
5.25%, 6/01/21 ......................................................................... $ 5,110,000 $ 5,411,286
5.25%, 12/01/21 ........................................................................ 8,025,000 8,498,154
5.25%, 6/01/22 ......................................................................... 3,400,000 3,591,556
5.25%, 12/01/22 ........................................................................ 5,000,000 5,281,700
5.00%, 6/01/23 ......................................................................... 5,925,000 6,092,559
5.00%, 12/01/23 ........................................................................ 3,000,000 3,084,840
New York State Municipal Bond Bank Agency Special Program Revenue, Buffalo, Series A,
AMBAC Insured, 5.25%, 5/15/31 ............................................................ 4,145,000 4,330,157
New York State Power Authority Revenue, Series A, 5.25%,
11/15/30 ............................................................................... 2,000,000 2,106,520
11/15/40 ............................................................................... 9,000,000 9,450,540
New York State Thruway Authority General Revenue, Series G, FSA Insured, 5.00%,
1/01/32 ................................................................................ 15,000,000 15,553,950
New York State Thruway Authority Revenue, State Personal Income Tax, Transportation,
Series A, 5.00%, 3/15/22 ................................................................. 14,270,000 14,805,553
New York State Thruway Authority Service Contract Revenue, Local Highway and Bridge,
AMBAC Insured, Pre-Refunded, 5.375%, 4/01/19 ........................................... 10,555,000 11,481,518
Pre-Refunded, 5.75%, 4/01/19 ........................................................... 30,000,000 32,562,300
New York State Tollway Authority General Revenue,
AMBAC Insured, 5.00%, 1/01/30 .......................................................... 10,000,000 10,353,700
Refunding, Series E, FGIC Insured, 5.00%, 1/01/25 ...................................... 5,500,000 5,671,050
Series D, Pre-Refunded, 5.25%, 1/01/21 ................................................. 41,675,000 42,992,763
Series D, Pre-Refunded, 5.375%, 1/01/27 ................................................ 10,975,000 11,442,425
New York State Tollway Authority Highway and Bridge Trust Fund Revenue,
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/19 ..................................... 20,000,000 21,221,200
Refunding, Series C, AMBAC Insured, 5.00%, 4/01/20 ..................................... 18,835,000 19,855,480
Series A, FGIC Insured, Pre-Refunded, 5.00%, 4/01/17 ................................... 9,000,000 9,543,420
Series A, FGIC Insured, Pre-Refunded, 5.00%, 4/01/20 ................................... 2,500,000 2,697,525
Series A, FGIC Insured, Pre-Refunded, 5.00%, 4/01/21 ................................... 2,500,000 2,697,525
Series B-1, FGIC Insured, Pre-Refunded, 5.75%, 4/01/15 ................................. 2,000,000 2,201,240
Series B-1, FGIC Insured, Pre-Refunded, 5.75%, 4/01/16 ................................. 2,000,000 2,201,240
New York State Urban Development Corp. Revenue,
Correctional Capital Facilities, Series 7, Pre-Refunded, 5.70%, 1/01/16 ................ 3,000,000 3,137,970
Correctional Capital Facilities, Series 7, Pre-Refunded, 5.70%, 1/01/27 ................ 10,000,000 10,459,900
Correctional Facilities Service Contract, Series A, Pre-Refunded, 5.00%, 1/01/28 ....... 14,000,000 14,760,340
Correctional Facilities Service Contract, Series B, Pre-Refunded, 5.00%, 1/01/25 ....... 21,055,000 22,282,506
Correctional Facilities Service Contract, Series C, AMBAC Insured, Pre-Refunded,
6.00%, 1/01/29 ....................................................................... 34,135,000 37,114,303
Correctional Facilities Service Contract, Series D, FSA Insured, Pre-Refunded,
5.25%, 1/01/30 ....................................................................... 10,000,000 10,816,300
Correctional, Series A, MBIA Insured, Pre-Refunded, 5.00%, 1/01/18 ..................... 12,000,000 12,651,720
FGIC Insured, 5.00%, 3/15/29 ........................................................... 7,000,000 7,239,190
Onondaga County Convention Project, Refunding, 6.25%, 1/01/20 .......................... 28,325,000 28,941,352
Personal Income Tax, Series C-1, FGIC Insured, Pre-Refunded, 5.00%, 3/15/28 ............ 4,900,000 5,315,912
Personal Income Tax, Series C-1, Pre-Refunded, 5.00%, 3/15/25 .......................... 3,225,000 3,488,031
Personal Income Tax, State Facilities, Series A, Pre-Refunded, 5.25%, 3/15/32 .......... 20,000,000 21,838,400
State Personal Income Tax, Series B Empire State, MBIA Insured, Pre-Refunded,
5.00%, 3/15/33 ....................................................................... 11,010,000 11,944,529

Semiannual Report | 31

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State Urban Development Corp (cont.)
Empire State, Pre-Refunded, 5.125%, 3/15/29 ............................................ $ 9,000,000 $ 9,805,230
Niagara Falls City School District COP, High School Facilities, Pre-Refunded, 5.375%,
6/15/28 .................................................................................. 5,000,000 5,291,850
Niagara Falls Public Water Authority Revenue, Series A, MBIA Insured, 5.00%, 7/15/34 ....... 9,000,000 9,280,980
Otsego County IDA Civic Facility Revenue, Hartwick College Project, Series A,
Pre-Refunded, 5.50%, 7/01/19 ........................................................... 3,400,000 3,664,758
Rensselaer Municipal Leasing Corp. Leasehold Mortgage Revenue,
Rensselaer County Nursing Home,
Series A, 6.90%, 6/01/24 ............................................................... 9,755,000 9,854,599
Series B, 6.90%, 6/01/24 ............................................................... 3,265,000 3,298,336
Sachem Central School District Holbrook GO, Series B, MBIA Insured, 5.00%,
10/15/27 ............................................................................... 3,885,000 4,059,320
10/15/28 ............................................................................... 2,000,000 2,087,020
Sales Tax Asset Receivable Corp. Revenue, Series A, AMBAC Insured, 5.00%,
10/15/29 ............................................................................... 12,500,000 13,016,875
10/15/32 ............................................................................... 104,975,000 109,236,985
St. Lawrence County IDA Civic Facility Revenue, Clarkson University Project, Series A,
5.50%, 7/01/29 ........................................................................... 6,000,000 6,303,660
Suffolk County Judicial Facilities Agency Service Agreement Revenue,
John P. Cohalan Complex, AMBAC Insured, 5.00%, 4/15/16 ................................. 2,720,000 2,865,602
Syracuse IDA Civic Facility Revenue, Crouse Health Hospital Inc., Project A,
5.25%, 1/01/16 ......................................................................... 4,000,000 3,585,280
5.375%, 1/01/23 ........................................................................ 4,760,000 4,038,098
Tompkins County IDAR Civic Facility, Cornell University, Pre-Refunded, 5.75%, 7/01/30 ...... 7,510,000 8,305,609
Triborough Bridge and Tunnel Authority Revenues,
General Purpose, Refunding, Series A, 5.00%, 1/01/27 ................................... 34,500,000 35,572,950
General Purpose, Refunding, Series A, MBIA Insured, 5.00%, 1/01/32 ..................... 3,770,000 3,879,142
General Purpose, Refunding, Series B, 5.125%, 11/15/29 ................................. 17,175,000 17,996,480
General Purpose, Refunding, Series B, 5.00%, 11/15/32 .................................. 10,000,000 10,265,100
General Purpose, Refunding, Series B, MBIA Insured, 5.00%, 11/15/27 .................... 10,000,000 10,385,700
General Purpose, Series A, FGIC Insured, Pre-Refunded, 5.00%, 1/01/32 .................. 12,245,000 13,206,845
General Purpose, Series A, MBIA Insured, Pre-Refunded, 5.00%, 1/01/32 .................. 20,230,000 21,819,066
General Purpose, Series A, Pre-Refunded, 5.125%, 1/01/31 ............................... 24,310,000 26,384,372
General Purpose, Series A, Pre-Refunded, 5.00%, 1/01/32 ................................ 34,340,000 37,037,407
General Purpose, Series A, Pre-Refunded, 5.00%, 1/01/32 ................................ 6,110,000 6,303,320
General Purpose, Series B, MBIA Insured, Pre-Refunded, 5.20%, 1/01/27 .................. 4,110,000 4,591,815
General Purpose, Series B, Pre-Refunded, 5.20%, 1/01/27 ................................ 15,000,000 16,758,450
General Purpose, Series B, Pre-Refunded, 5.50%, 1/01/30 ................................ 32,185,000 36,742,718
Refunding, MBIA Insured, 5.00%, 11/15/26 ............................................... 10,000,000 10,385,700
Refunding, MBIA Insured, 5.00%, 11/15/32 ............................................... 22,875,000 23,618,895
Series A, FGIC Insured, 5.00%, 1/01/32 ................................................. 1,970,000 2,027,032
Subordinate Bonds, AMBAC Insured, 5.00%, 11/15/28 ...................................... 15,000,000 15,526,350
TSASC Inc. New York Revenue, Tobacco Flexible Amortization Bonds, Series 1, 6.25%,
7/15/27 ................................................................................ 35,000,000 36,755,250
7/15/34 ................................................................................ 40,000,000 41,924,800
United Nations Development Corp. Revenue, senior lien, Refunding, Series A, 5.25%,
7/01/23 ................................................................................ 2,500,000 2,575,525
7/01/25 ................................................................................ 2,000,000 2,057,200

32 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
Utica IDA Civic Facility Revenue, Munson-Williams-Proctor Institute,
5.40%, 7/15/30 ......................................................................... $ 1,000,000 $ 1,066,300
Series A, 5.50%, 7/15/29 ............................................................... 9,915,000 10,540,438
Warren and Washington IDA Civic Facility Revenue, Series A, FSA Insured, 5.00%,
12/01/27 ............................................................................... 8,115,000 8,439,925
Westchester Tobacco Asset Securitization Corp. Revenue,
Capital Appreciation, Pre-Refunded, 6.75%, 7/15/29 ..................................... 15,000,000 17,200,200
Refunding, 5.00%, 6/01/26 .............................................................. 2,000,000 1,920,720
Refunding, 5.125%, 6/01/38 ............................................................. 7,000,000 6,634,950
Yonkers GO, Refunding, Series B, MBIA Insured, 5.00%,
8/01/30 ................................................................................ 7,710,000 7,978,231
8/01/35 ................................................................................ 15,000,000 15,498,150
----------------
4,693,331,827
----------------

U.S. TERRITORIES 0.7%
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue, Series Y,
5.00%, 7/01/36 ......................................................................... 4,000,000 3,962,720
5.50%, 7/01/36 ......................................................................... 10,000,000 10,694,600
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Series A, 5.00%, 7/01/38 ................................................................. 12,000,000 11,885,160
Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Series A,
MBIA Insured, Pre-Refunded, 5.00%, 8/01/31 ............................................... 4,000,000 4,305,280
Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%,
10/01/15 ............................................................................... 2,500,000 2,611,125
10/01/18 ............................................................................... 2,500,000 2,601,625
----------------
36,060,510
----------------
TOTAL BONDS (COST $4,462,598,966) .......................................................... 4,729,392,337
----------------

ZERO COUPON BONDS 2.0%
NEW YORK 2.0%
MTA Service Contract Revenue,
Commuter Facilities, Refunding, Series 7, ETM, 7/01/10 ................................. 7,500,000 6,333,975
Commuter Facilities, Refunding, Series 7, ETM, 7/01/11 ................................. 7,590,000 6,137,046
Commuter Facilities, Refunding, Series 7, ETM, 7/01/13 ................................. 2,065,000 1,523,144
Transit Facilities, Refunding, Series 7, ETM, 7/01/09 .................................. 13,125,000 11,562,469
Transit Facilities, Refunding, Series 7, ETM, 7/01/10 .................................. 9,000,000 7,600,770
Transit Facilities, Refunding, Series 7, ETM, 7/01/12 .................................. 15,380,000 11,908,888
Transit Facilities, Refunding, Series 7, ETM, 7/01/13 .................................. 7,935,000 5,852,856
New York City GO,
Capital Appreciation, Series A-2, 8/01/10 .............................................. 2,690,000 2,220,783
Citysavers, Series B, 8/01/09 .......................................................... 8,875,000 7,675,988
Citysavers, Series B, 6/01/12 .......................................................... 1,030,000 840,676
Citysavers, Series B, 12/01/12 ......................................................... 1,030,000 819,653
Citysavers, Series B, 6/01/13 .......................................................... 1,030,000 801,031
Citysavers, Series B, 12/01/13 ......................................................... 1,030,000 780,235
Citysavers, Series B, 6/01/14 .......................................................... 1,030,000 762,694
Citysavers, Series B, 12/01/14 ......................................................... 1,030,000 742,197
Citysavers, Series B, 6/01/15 .......................................................... 1,030,000 722,504
Citysavers, Series B, 12/01/15 ......................................................... 1,030,000 706,436

Semiannual Report | 33

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS (CONT.)
NEW YORK (CONT.)
New York City GO, (cont.)
Citysavers, Series B, 6/01/16 .......................................................... $ 1,030,000 $ 690,718
Citysavers, Series B, 12/01/16 ......................................................... 1,030,000 675,361
Citysavers, Series B, 6/01/17 .......................................................... 1,030,000 655,904
Citysavers, Series B, 12/01/17 ......................................................... 1,030,000 641,124
Citysavers, Series B, 6/01/18 .......................................................... 1,030,000 622,862
Citysavers, Series B, 12/01/18 ......................................................... 1,005,000 593,905
Citysavers, Series B, 6/01/19 .......................................................... 1,030,000 593,259
Citysavers, Series B, 12/01/19 ......................................................... 1,030,000 579,694
Citysavers, Series B, 6/01/20 .......................................................... 10,000,000 5,101,200
Orangetown Housing Authority Housing Facilities Revenue, Senior Housing Center Project,
Refunding, MBIA Insured, 4/01/30 ......................................................... 21,170,000 5,520,289
Triborough Bridge and Tunnel Authority Revenues, Convention Center Project,
Series E, 1/01/12 ........................................................................ 21,625,000 16,642,167
----------------
TOTAL ZERO COUPON BONDS (COST $78,905,012) ................................................. 99,307,828
----------------
TOTAL LONG TERM INVESTMENTS (COST $4,541,503,978) .......................................... 4,828,700,165
----------------
SHORT TERM INVESTMENTS 0.7%
BONDS 0.7%
NEW YORK 0.7%
(a) Jay Street Development Corp. Courts Facility Lease Revenue, Jay Street Project,
Series A, Daily VRDN and Put, 2.97%, 5/01/22 ............................................. 18,935,000 18,935,000
(a) Long Island Power Authority Electric System Revenue,
Sub Series 2, Daily VRDN and Put, 2.97%, 5/01/33 ....................................... 5,325,000 5,325,000
Sub Series 3B, Daily VRDN and Put, 2.94%, 5/01/33 ...................................... 10,800,000 10,800,000
----------------
TOTAL SHORT TERM INVESTMENTS (COST $35,060,000) ............................................ 35,060,000
----------------
TOTAL INVESTMENTS (COST $4,576,563,978) 99.4% .............................................. 4,863,760,165
OTHER ASSETS, LESS LIABILITIES 0.6% ........................................................ 27,617,135
----------------
NET ASSETS 100.0% .......................................................................... $ 4,891,377,300
================

SEE SELECTED PORTFOLIO ABBREVIATIONS ON PAGE 35.

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

34 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2005 (UNAUDITED) (CONTINUED)

SELECTED PORTFOLIO ABBREVIATIONS

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

Semiannual Report | See notes to financial statements. | 35

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
November 30, 2005 (unaudited)

Assets:
Investments in securities:
Cost .................................................. $ 4,576,563,978
================
Value ................................................. $ 4,863,760,165
Cash ..................................................... 97,734
Receivables:
Capital shares sold ................................... 3,009,985
Interest .............................................. 69,116,428
----------------
Total assets ....................................... 4,935,984,312
----------------

Liabilities:
Payables:
Investment securities purchased ....................... 35,641,864
Capital shares redeemed ............................... 5,704,908
Affiliates ............................................ 2,930,416
Accrued expenses and other liabilities ................... 329,824
----------------
Total liabilities .................................. 44,607,012
----------------
Net assets, at value ............................ $ 4,891,377,300
================

Net assets consist of:
Paid-in capital .......................................... $ 4,603,292,137
Undistributed net investment income ...................... 2,450,923
Net unrealized appreciation (depreciation) ............... 287,196,187
Accumulated net realized gain (loss) ..................... (1,561,947)
----------------
Net assets, at value ............................ $ 4,891,377,300
================

36 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
November 30, 2005 (unaudited)

CLASS A:
Net assets, at value ..................................... $ 4,396,360,990
================
Shares outstanding ....................................... 372,354,540
================
Net asset value per share(a) ............................. $ 11.81
================
Maximum offering price per share
(net asset value per share / 95.75%) .................. $ 12.33
================
CLASS B:
Net assets, at value ..................................... $ 219,554,884
================
Shares outstanding ....................................... 18,634,677
================
Net asset value and maximum offering price per share(a) .. $ 11.78
================
CLASS C:
Net assets, at value ..................................... $ 242,144,618
================
Shares outstanding ....................................... 20,520,115
================
Net asset value and maximum offering price per share(a) .. $ 11.80
================

ADVISOR CLASS:
Net assets, at value ..................................... $ 33,316,808
================
Shares outstanding ....................................... 2,820,631
================
Net asset value and maximum offering price per share(a) .. $ 11.81
================

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

Semiannual Report | See notes to financial statements. | 37

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended November 30, 2005 (unaudited)

Investment income:
Interest ................................................. $ 123,369,017
----------------
Expenses:
Management fees (Note 3a) ................................ 11,266,713
Distribution fees (Note 3c)
Class A ............................................... 1,942,409
Class B ............................................... 736,624
Class C ............................................... 777,879
Transfer agent fees (Note 3e) ............................ 1,077,861
Custodian fees ........................................... 39,100
Reports to shareholders .................................. 68,131
Registration and filing fees ............................. 50,587
Professional fees (Note 3f) .............................. 63,456
Trustees' fees and expenses .............................. 44,802
Other .................................................... 135,860
----------------
Total expenses ..................................... 16,203,422
----------------
Net investment income ........................... 107,165,595
----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............. 3,725,550
Net change in unrealized appreciation (depreciation)
on investments ...................................... (88,645,487)
----------------
Net realized and unrealized gain (loss) ..................... (84,919,937)
----------------
Net increase (decrease) in net assets resulting from
operations ............................................... $ 22,245,658
================

38 | See notes to financial statements. | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2005 YEAR ENDED
(UNAUDITED) MAY 31, 2005
------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................... $ 107,165,595 $ 221,187,771
Net realized gain (loss) from investments ........................... 3,725,550 12,894,854
Net change in unrealized appreciation (depreciation) on
investments ...................................................... (88,645,487) 144,064,424
------------------------------------
Net increase (decrease) in net assets resulting
from operations ............................................ 22,245,658 378,147,049
------------------------------------
Distributions to shareholders from:
Net investment income:
Class A .......................................................... (97,384,168) (201,969,159)
Class B .......................................................... (4,332,401) (9,225,878)
Class C .......................................................... (4,531,970) (9,243,050)
Advisor Class .................................................... (672,836) (1,135,781)
------------------------------------
Total distributions to shareholders .................................... (106,921,375) (221,573,868)
------------------------------------

Capital share transactions: (Note 2)
Class A .......................................................... (25,369,127) (72,585,682)
Class B .......................................................... (7,582,669) (7,935,505)
Class C .......................................................... 10,432,646 (2,588,931)
Advisor Class .................................................... 3,334,782 7,255,999
------------------------------------
Total capital share transactions ....................................... (19,184,368) (75,854,119)
------------------------------------

Redemption fees ........................................................ 1,700 19,172
------------------------------------
Net increase (decrease) in net assets ......................... (103,858,385) 80,738,234
Net assets
Beginning of period .................................................... 4,995,235,685 4,914,497,451
------------------------------------
End of period .......................................................... $ 4,891,377,300 $ 4,995,235,685
====================================
Undistributed net investment income included in net assets:
End of period .......................................................... $ 2,450,923 $ 2,206,703
====================================

Semiannual Report | See notes to financial statements. | 39

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin New York Tax-Free Income Fund (the Trust) is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company,
consisting of one fund, the Franklin New York Tax-Free Income Fund (the Fund).

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 Trust's pricing services use valuation models or matrix pricing, which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, to determine current value.

The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Trust's Board of
Trustees.

B. INCOME TAXES

No provision has been made for U.S. income taxes because the Fund's policy is to
continue to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.

C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Distributions to shareholders are recorded on the 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 generally accepted accounting principles. These differences may
be permanent or temporary. Permanent differences

40 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)

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 will reverse in subsequent
periods.

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

D. ACCOUNTING ESTIMATES

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

E. REDEMPTION FEES

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

F. GUARANTEES AND INDEMNIFICATIONS

Under the Trust's organizational documents, its officers and 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 enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.

Semiannual Report | 41

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. Effective March 1, 2005, Class B shares are only offered to existing
Class B shareholders in the form of reinvested distributions and certain
exchanges from other Franklin Templeton Class B shares. Each class of shares
differs by its initial sales load, contingent deferred sales charges,
distribution fees, voting rights on matters affecting a single class and its
exchange privilege.

At November 30, 2005, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:

---------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 2005 MAY 31, 2005
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------

CLASS A SHARES:
Shares sold .............................. 11,723,170 $ 139,703,350 23,312,040 $ 276,349,955
Shares issued in reinvestment of
distributions .......................... 4,787,543 57,033,423 9,958,639 117,575,907
Shares redeemed .......................... (18,646,910) (222,105,900) (39,423,254) (466,511,544)
---------------------------------------------------------------
Net increase (decrease) .................. (2,136,197) $ (25,369,127) (6,152,575) $ (72,585,682)
===============================================================
CLASS B SHARES:
Shares sold .............................. 42,411 $ 504,406 1,159,514 $ 13,699,756
Shares issued in reinvestment of
distributions .......................... 242,653 2,886,111 521,638 6,147,967
Shares redeemed .......................... (923,929) (10,973,186) (2,354,517) (27,783,228)
---------------------------------------------------------------
Net increase (decrease) .................. (638,865) $ (7,582,669) (673,365) $ (7,935,505)
===============================================================

CLASS C SHARES:
Shares sold .............................. 1,932,750 $ 23,006,941 2,834,242 $ 33,632,181
Shares issued in reinvestment of
distributions .......................... 251,080 2,990,911 519,836 6,136,558
Shares redeemed .......................... (1,306,771) (15,565,206) (3,577,047) (42,357,670)
---------------------------------------------------------------
Net increase (decrease) .................. 877,059 $ 10,432,646 (222,969) $ (2,588,931)
===============================================================

ADVISOR CLASS SHARES:
Shares sold .............................. 436,888 $ 5,181,256 1,113,154 $ 13,240,294
Shares issued in reinvestment of
distributions .......................... 2,920 34,832 5,039 59,723
Shares redeemed .......................... (156,404) (1,881,306) (511,246) (6,044,018)
---------------------------------------------------------------
Net increase (decrease) .................. 283,404 $ 3,334,782 606,947 $ 7,255,999
===============================================================

42 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

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 Transfer agent
Services)

A. MANAGEMENT FEES

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

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion

B. ADMINISTRATIVE FEES

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

C. DISTRIBUTION FEES

The Trust's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Fund's Class A reimbursement distribution plan, the Fund
reimburses Distributors up to 0.10% per year of Class A's average daily net
assets for costs incurred in connection with the sale and distribution of the
Fund's shares. Under the Class A reimbursement distribution plan, costs
exceeding the maximum for the current plan year cannot be reimbursed in
subsequent periods.

Under the Fund's compensation distribution plans, the Fund pays Distributors for
costs incurred in connection with the sale and distribution of the Fund's shares
up to a certain percentage per year of its average daily net assets of each
class as follows:

Class B ................................................. 0.65%
Class C ................................................. 0.65%

Semiannual Report | 43

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

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:

Net sales charges received(a) ............................ $ 394,259
Contingent deferred sales charges retained ............... $ 168,881

(a) Net of commissions paid to unaffiliated broker/dealers.

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $1,077,861, of which $721,469 was retained
by Investor Services.

F. OTHER AFFILIATED TRANSACTIONS

Included in professional fees are legal fees of $17,700 that were paid to a law
firm in which a partner is an officer of the Trust.

4. INCOME TAXES

At May 31, 2005, the Fund had tax basis capital losses of $4,615,561 expiring on
May 31, 2009, which may be carried over to offset future capital gains, if any.

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

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

At November 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ...................................... $ 4,575,702,038
================

Unrealized appreciation .................................. $ 297,810,720
Unrealized depreciation .................................. (9,752,593)
----------------
Net unrealized appreciation (depreciation) ............... $ 288,058,127
================

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended, November 30, 2005, aggregated $276,597,618 and $278,120,263,
respectively.

44 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. CREDIT RISK

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

7. REGULATORY MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.

Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds. The Trust did not
participate in the CAGO settlement. The SEC has not yet approved the
distribution plan pertaining to the December 13, 2004 SEC Order. When approved,
disbursements of settlement monies will be made promptly to the relevant funds,
in accordance with the terms and conditions of that order. The IDC continues to
develop the plan of distribution under the August 2, 2004 SEC Order that
resolved the SEC's market timing investigation.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.

The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate.

Semiannual Report | 45

FRANKLIN NEW YORK TAX-FREE INCOME FUND

SHAREHOLDER INFORMATION

BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT

At a meeting held July 14, 2005, the Board of Trustees ("Board"), including a
majority of non-interested or independent Trustees, approved renewal of the
investment advisory contract for the Fund. In reaching this decision, the Board
took into account information furnished throughout the year at regular Board
meetings, as well as information prepared specifically in connection with the
annual renewal review process. Information furnished and discussed throughout
the year included investment performance reports and related financial
information for the Fund, as well as periodic reports on shareholder services,
legal, compliance, pricing, brokerage commissions and execution and other
services provided by the Investment Manager ("Manager") and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for the Fund prepared by Lipper Financial Services ("Lipper"),
an independent organization, as well as a Fund profitability analysis report
prepared by management. The Lipper report compared the Fund's investment
performance and expenses with those of other mutual funds deemed comparable to
the Fund as selected by Lipper. The Fund profitability analysis report discussed
the profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager including management's explanation of
differences where relevant and a three-year expense analysis with an explanation
for any increase in expense ratios. Additional information accompanying such
report was a memorandum prepared by management describing enhancements to the
services provided to the Fund by the Franklin Templeton Investments
organization, as well as a memorandum relating to economies of scale.

In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment advisory contract for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment advisory contract was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.

NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses of the Fund discussed later, the Board's opinion was based, in part,
upon periodic reports furnished them showing that the investment policies and
restrictions for the Fund were consistently complied with as well as other
reports periodically furnished the Board covering matters such as the compliance
of portfolio managers and other management personnel with the code of ethics
adopted throughout the Franklin Templeton fund complex, the adherence to fair
value pricing procedures established by the Board, and the accuracy of net asset
value calculations. The Board also noted the extent of

46 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)

benefits provided Fund shareholders from being part of the Franklin Templeton
family of funds, including the right to exchange investments between the same
class of funds without a sales charge, the ability to reinvest Fund dividends
into other funds and the right to combine holdings in other funds to obtain a
reduced sales charge. Favorable consideration was given to management's efforts
and expenditures in establishing back-up systems and recovery procedures to
function in the event of a natural disaster, it being noted by the Board that
such systems and procedures had functioned smoothly during the hurricanes and
blackout experienced last year in Florida. Other factors taken into account by
the Board were the Manager's best execution trading policies, as well as the
compliance procedures and qualifications of the Chief Compliance Officer
established in accordance with recently adopted SEC requirements. Consideration
was also given to the experience of the Fund's portfolio management team, the
number of accounts managed and general method of compensation. In this latter
respect, the Board noted that a primary factor in management's determination of
the amount of a portfolio manager's bonus compensation was the relative
investment performance of the funds he or she managed so as to be aligned with
the interests of Fund shareholders. The Board also took into account the
transfer agent and shareholder services provided Fund shareholders by an
affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties such as Dalbar, and the firsthand
experience of the individual Trustees who deal with the shareholder services
department in their capacities as shareholders in one or more of the various
Franklin Templeton funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
such performance was given to the Lipper report furnished for the contract
renewal. The Lipper report prepared for the Fund showed the investment
performance of its Class A shares during the year ended May 31, 2005, as well as
the previous ten years ended that date in comparison to a performance universe
consisting of all retail and institutional New York municipal debt funds as
selected by Lipper. The Lipper report showed the Fund's income return for the
one-year period as well as for each of the previous three-, five- and ten-year
periods on an annualized basis was in the first or highest quintile of its
Lipper performance universe. The Lipper report also showed the Fund's total
return for the one-year period was in the second-highest quintile of such
universe, and on an annualized basis was either in the highest or second-highest
quintile of such universe during each of the previous three-, five- and ten-year
periods. The Board expressed its satisfaction with such performance.

Semiannual Report | 47

FRANKLIN NEW YORK TAX-FREE INCOME FUND

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fee and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group
under the Lipper report. Prior to making such comparison, the Board relied upon
a survey showing that the scope of management advisory services covered under
the Fund's investment advisory contract was similar to those provided by fund
managers to other mutual fund groups that would be used as a basis of comparison
in the Lipper report. In reviewing comparative costs, emphasis was given to the
Fund's management fee in comparison with the effective management fee that would
have been charged by other funds within its Lipper expense group assuming they
were the same size as the Fund, as well as the actual total expenses of the Fund
in comparison with those of its Lipper expense group. The Lipper effective
management fee analysis includes administrative charges as being part of a
management fee, and total expenses, for comparative consistency, are shown by
Lipper for Fund Class A shares. The results of such expense comparisons showed
that the effective management fee rate for the Fund was in the second least
expensive quintile of its Lipper expense group, while its actual total expenses
were in the lowest or least expensive quintile of its Lipper expense group. The
Board was satisfied with the management fee and total expenses of the Fund in
comparison to its Lipper expense group as shown in the Lipper report.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
including its interest in a joint venture entity which finances up-front
commissions paid to brokers/dealers who sold fund Class B shares, as well as
potential benefits resulting from allocation of fund brokerage and the use of
"soft" commission dollars to pay for research. Specific attention was given to
the methodology followed in allocating costs to the Fund, it being recognized
that allocation methodologies are inherently subjective and various allocation
methodologies may each be reasonable while producing different results. In this
respect, the Board noted that the cost allocation methodology was consistent
with that followed in profitability report presentations for the Fund made in
prior years and that it had engaged on a biennial basis the Fund's independent
accountants to perform certain procedures specified by the Board solely for its
purpose and use. It was also noted that legal costs and payments incurred by
Franklin Templeton in resolving various legal proceedings arising from its U.S.
fund operations had not been allocated to the Fund for purposes of determining
profitability. Included in the analysis for the Fund were the revenue and
related costs broken down separately from the management, underwriting and
shareholder services functions provided by the Manager and its affiliates to the
Fund, as well as the relative contribution of the Fund to the profitability of
the Manager's parent. In reviewing and discussing such analysis, management
discussed with the Board its belief that costs incurred in establishing

48 | Semiannual Report

FRANKLIN NEW YORK TAX-FREE INCOME FUND

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)

the infrastructure necessary to the type of mutual fund operations conducted by
the Manager and its corporate affiliates may not be fully reflected in the
expenses allocated to the Fund in determining its profitability, as well as the
fact that the level of profits, to a certain extent, reflected operational cost
savings and efficiencies initiated by management. The Board also took into
account management's expenditures in improving shareholder services provided the
Fund, as well as the need to meet additional regulatory and compliance
requirements resulting from the Sarbanes-Oxley Act and recent SEC requirements.
In addition, the Board considered a third-party study comparing the
profitability of the Manager's parent on an overall basis as compared to other
publicly held managers broken down to show profitability from management
operations exclusive of distribution expenses, as well as profitability
including distribution expenses. Based upon its consideration of all these
factors, the Board determined that the level of profits realized by the Manager
under its investment advisory contract with the Fund was not excessive in view
of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Board also noted that
economies of scale are shared with a fund and its shareholders through
management fee breakpoints so that as a fund grows in size, its effective
management fee rate declines. The fee structure under the Fund's investment
advisory contract provides an initial fee of 0.625% on the first $100 million of
assets; 0.50% on the next $150 million of assets; 0.45% on the next $9.75
billion of net assets; 0.44% on the next $2.5 billion of net assets; and
thereafter declines by 0.02% for each subsequent $2.5 billion of net assets
until it reaches a final breakpoint of 0.36% for assets in excess of $20
billion. The Fund's net assets were approximately $5 billion at June 30, 2005,
and the Board believes that to the extent any economies of scale may be realized
by the Manager and its affiliates, the schedule of fees under the investment
advisory contract provides a sharing of benefits with the Fund and its
shareholders.

PROXY VOTING POLICIES AND PROCEDURES

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

Semiannual Report | 49

FRANKLIN NEW YORK TAX-FREE INCOME FUND

SHAREHOLDER INFORMATION

QUARTERLY STATEMENT OF INVESTMENTS

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

50 | Semiannual Report

This page intentionally left blank.

LITERATURE REQUEST

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

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

GLOBAL

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

GROWTH

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

VALUE

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

BLEND

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

SECTOR

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

ASSET ALLOCATION

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

TARGET FUNDS

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

INCOME

Franklin Adjustable U.S. Government
Securities Fund(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund(4)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund
Templeton Income Fund

TAX-FREE INCOME(5)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(6)

LIMITED-TERM FUNDS

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

INTERMEDIATE-TERM FUNDS

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

STATE-SPECIFIC

Alabama
Arizona
California(7)
Colorado
Connecticut
Florida(7)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(6)
Michigan(6)
Minnesota(6)
Missouri
New Jersey
New York(7)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust(8)

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

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

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

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

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

(6) Portfolio of insured municipal securities.

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

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

09/05 Not part of the semiannual report

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

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

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

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN NEW YORK
TAX-FREE INCOME FUND

INVESTMENT MANAGER

Franklin Advisers, Inc.

DISTRIBUTOR

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

SHAREHOLDER SERVICES

1-800/632-2301

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

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

115 S2005 01/06

ITEM 2. CODE OF ETHICS.

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

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

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

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

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 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 Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

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

SIGNATURES

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

FRANKLIN NEW YORK TAX-FREE INCOME FUND

By /S/ JIMMY D. GAMBILL
-----------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 23, 2006

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

By /S/ JIMMY D. GAMBILL
-----------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 23, 2006

By /S/ GALEN G. VETTER
-----------------------
Galen G. Vetter
Chief Financial Officer
Date January 23, 2006