N-CSRS 1 fnytftsemincsr.txt 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 811-04787 --------- FRANKLIN NEW YORK TAX-FREE TRUST -------------------------------- (Exact name of registrant as specified in charter) ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 (Address of principal executive offices) (Zip code) MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 ----------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 650 312-2000 ------------ Date of fiscal year end: 09/30 ----- Date of reporting period: 03/31/05 -------- ITEM 1. REPORTS TO STOCKHOLDERS. [GRAPHIC OMITTED] -------------------------------------------------------------------------------- MARCH 31, 2005 -------------------------------------------------------------------------------- Franklin New York Insured Tax-Free Income Fund Franklin New York Intermediate-Term Tax-Free Income Fund Franklin New York Limited-Term Tax-Free Income Fund Franklin New York Tax-Exempt Money Fund -------------------------------------------------------------------------------- SEMIANNUAL REPORT AND SHAREHOLDER LETTER | TAX-FREE INCOME -------------------------------------------------------------------------------- WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL? FRANKLIN NEW YORK TAX-FREE TRUST Eligible shareholders can sign up for eDelivery at franklintempleton.com. See inside for details. -------------------------------------------------------------------------------- [LOGO](R) FRANKLIN TEMPLETON INVESTMENTS FRANKLIN o Templeton o Mutual Series FRANKLIN TEMPLETON INVESTMENTS GAIN FROM OUR PERSPECTIVE Franklin Templeton's distinct multi-manager structure combines the specialized expertise of three world-class investment management groups--Franklin, Templeton and Mutual Series. SPECIALIZED EXPERTISE Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success. FRANKLIN. Founded in 1947, Franklin is a recognized leader in fixed income investing and also brings expertise in growth- and value-style U.S. equity investing. TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry's oldest global fund. Today, with research offices in over 25 countries, they offer investors the broadest global reach in the industry. MUTUAL SERIES. Founded in 1949, Mutual Series is dedicated to a unique style of value investing, searching aggressively for opportunity among undervalued stocks, arbitrage situations and distressed companies. TRUE DIVERSIFICATION Because our management groups work independently and adhere to distinctly different investment approaches, Franklin, Templeton and Mutual Series funds typically have a low overlap of securities. That's why our funds can be used to build truly diversified portfolios covering every major asset class. RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to consistently provide investors with exceptional risk-adjusted returns over the long term, as well as the reliable account services that have helped us become one of the most trusted names in financial services. -------------------------------------------------------------------------------- MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Not part of the semiannual report CONTENTS SHAREHOLDER LETTER ........................................................ 1 SPECIAL FEATURE: Understanding Interest Rates .............................................. 4 SEMIANNUAL REPORT State Update and Municipal Bond Market Overview ........................... 7 Franklin New York Insured Tax-Free Income Fund ............................ 9 Franklin New York Intermediate-Term Tax-Free Income Fund .................. 15 Franklin New York Limited-Term Tax-Free Income Fund ....................... 22 Franklin New York Tax-Exempt Money Fund ................................... 28 Financial Highlights and Statements of Investments ........................ 32 Financial Statements ...................................................... 52 Notes to Financial Statements ............................................. 58 Shareholder Information ................................................... 67 -------------------------------------------------------------------------------- SHAREHOLDER LETTER Dear Shareholder: During the six-month period ended March 31, 2005, the U.S. economy continued to grow at a healthy pace. Growth was supported by low interest rates, benign inflation, improving economic data and positive corporate earnings reports. Counterbalancing these positive factors were high oil prices and concerns about U.S. budget deficits and their potential long-term effects on interest rates and economic growth. A dollar that weakened against most currencies also fanned fears of potential inflation. Surprising to many observers, U.S. bond markets performed better than expected, with positive returns despite rising yields. Many analysts had forecast higher long-term rates because of inflation fears and the Federal Reserve Board's (Fed's) "measured pace" of raising short-term rates. The Fed continued to raise the federal funds target rate during the period, bringing it to 2.75%. The 10-year Treasury yield began the period at 4.14%; however, inflation expectations drove yields up, and the yield on the 10-year Treasury ended the period at 4.50%. We continue to believe that inflation still remains relatively tame and that in the near future there is little reason to fear the high inflation and high interest rates we experienced in the 1970s and 1980s. Long-term interest rates are largely driven by the market's expectation of inflation. As the economy keeps improving, -------------------------------------------------------------------------------- EDELIVERY DETAILS Log in at franklintempleton.com and click on eDelivery. Shareholders who are registered at franklintempleton.com can receive these reports via email. Not all accounts are eligible for eDelivery. ------------------------------------------------------- NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE ------------------------------------------------------- Not part of the semiannual report | 1 -------------------------------------------------------------------------------- WHAT IS STAGFLATION? -------------------------------------------------------------------------------- Coined by economists in the 1970s, stagflation is used to describe a combination of slow economic growth and high unemployment (stagnation) with rising prices (inflation). As is characteristic of stagflation, fiscal and monetary policies aimed at stimulating the economy and reducing unemployment tend only to worsen the inflationary effects. -------------------------------------------------------------------------------- it is reasonable to expect prices for goods and services to rise, as the Fed noted in March 2005. Productivity is still strong by historical standards and there is a perceived slack in the economy that might allow it to grow without exerting large inflationary pressures. While we do agree with most market observers who think rates might be too low given the fundamentals, we do not believe that inflation or interest rates should rise rapidly. The economic environment appears relatively stable, and we expect rates to gradually reach levels typical of this environment. At the same time, we remain mindful of potential inflationary risks posed by the U.S. budget and trade deficits and their effect on the value of the U.S. dollar versus other currencies. A sustained dollar decline would make import prices higher for American consumers, which would contribute to higher inflation, but no one can tell the extent to which the dollar might fall and how effectively the government can reduce the deficits. Oil prices reached a record high in March 2005 of nearly $57 a barrel before declining to about $55 on March 31. Although there is much discussion about the point at which the price of oil can trigger a recession or stagflation, there is no definite consensus. However, recent supply and demand conditions made it hard to anticipate future oil price movements and what effect, if any, they could have on our economy. We believe that no factor alone, including oil prices, could raise inflation to levels that would harm financial markets. At times of such volatility, we continue to recommend investors consult their financial advisors and review their portfolios to design a strategy and portfolio allocation that meet their individual needs, goals and risk tolerance. Municipal bonds provide tax-free income and diversification from equities. Despite periods of volatility, municipal bonds have a solid long-term record of performance, driven mostly by their income component. In the enclosed semiannual report you will find an overview of the municipal bond market, the managers' investment strategy and a discussion about how we managed funds within Franklin New York Tax-Free Trust. You can also find specific performance data and financial information about your Fund. Please remember that all securities markets fluctuate, as do mutual fund share prices. This report contains new information about the Board of Trustees' approval of the Trust's investment advisory contract in the past six months. It is designed to give you an understanding of several factors considered before the Board approved its contract with the Investment Manager. The disclosure begins on page 67 in the "Shareholder Information" section. 2 | Not part of the semiannual report If you would like more frequent updates, FRANKLINTEMPLETON.COM provides daily prices, monthly performance figures, portfolio holdings and other information. You can also access your account, buy and sell shares, read timely commentary from portfolio managers, and find helpful financial planning tools. We hope you will take advantage of these online services. We appreciate your confidence in us and encourage you to contact us when you have questions about your Franklin Templeton tax-free investment. Sincerely, /s/ Charles B. Johnson Charles B. Johnson Chairman Franklin New York Tax-Free Trust /s/Sheila Amoroso Sheila Amoroso /s/ Rafael R. Costas Jr. Rafael R. Costas Jr. Senior Vice Presidents and Co-Directors Franklin Municipal Bond Department THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF MARCH 31, 2005. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE. Not part of the semiannual report | 3 SPECIAL FEATURE UNDERSTANDING INTEREST RATES DID YOU EVER WONDER WHY YOUR TAX-FREE INCOME FUND SHARE PRICE FLUCTUATES? OR WHY THE DIVIDENDS YOU RECEIVE FROM YOUR TAX-FREE INCOME FUND AREN'T ALWAYS THE SAME? AT FRANKLIN TEMPLETON INVESTMENTS, MAXIMIZING TAX-FREE INCOME AND PRESERVING OUR SHAREHOLDERS' CAPITAL ARE OUR TOP PRIORITIES.(1) EVEN SO, CHANGES IN THE ECONOMY AND INTEREST RATES CAN HAVE AN IMPACT ON YOUR FUND'S SHARE PRICE AND DIVIDENDS. BELOW, YOU'LL FIND ANSWERS TO COMMONLY ASKED QUESTIONS ABOUT THE RELATIONSHIP BETWEEN MUNICIPAL BONDS AND INTEREST RATES. UNDERSTANDING WHAT AFFECTS YOUR TAX-FREE INCOME FUND MAY HELP YOU BECOME A MORE EFFECTIVE INVESTOR. Q. WHAT IS THE DIFFERENCE BETWEEN SHORT- AND LONG-TERM INTEREST RATES? A. The Federal Reserve Board controls the Federal funds target rate (Fed funds rate), which in turn influences the market for shorter-term securities. The Fed closely monitors the economy and has the power to raise or lower the Fed funds rate in order to keep inflation in check or to help stimulate the economy. The Fed funds rate is the rate that banks charge other banks for overnight loans. Long-term interest rates, as represented by yields of the 10-year or 30-year Treasury bond, are market-driven and tend to move in anticipation of changes in the economy and inflation. Q. WHAT CAUSES INTEREST RATES TO RISE AND FALL? A. Interest rate trends are primarily determined by economic factors such as inflation, the strength of the U.S. dollar and the pace of economic growth. If the economy slows down, the Fed may lower the Fed funds rate to stimulate economic growth, as we witnessed from January 2001 to June 2003. On the other hand, strong economic growth can lead to inflation. If the Fed becomes concerned about inflation, it may attempt to cool the economy by raising the Fed funds rate, as it did five times in 2004. It should be noted that short- and long-term interest rates don't necessarily move in tandem. While short-term rates rose in 2004, long-term rates, despite some fluctuations, ended the year just about where they started. (1) For investors subject to the alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable. [GRAPHIC Q&A] ------------------------------------------------------- NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE ------------------------------------------------------- 4 | Not part of the semiannual report Q. HOW DO CHANGES IN INTEREST RATES AFFECT BOND PRICES? A. Typically, bond prices, and thus a tax-free income fund's share price, move in the opposite direction of interest rates. So, when interest rates rise, bond prices fall, and conversely, when rates decline, bond prices tend to rise in value. When rates go up, newly issued bonds, with their new, higher yields become more attractive than comparable existing bonds with lower yields. So, investors who want to sell their existing bonds have to reduce their prices to make them equally attractive. [GRAPHIC] Generally, tax-free income fund portfolios comprising municipal bonds with longer maturities are more sensitive to changes in long-term interest rates than portfolios with shorter-term municipal bonds. Similarly, funds with shorter-term municipal bonds are typically more influenced by short-term rate changes than funds with longer-term municipal bonds. But, while tax-free income fund prices will fluctuate with interest rate changes, it's important to remember that price movement is only part of the picture. As a tax-free income fund shareholder, you also receive monthly tax-free income,(1) which has historically been the largest component of total return for municipal bonds.(2) Total return includes price movement (capital appreciation or depreciation) and income. And since bonds generally pay interest whether prices move up or down, the interest from municipal bonds can help cushion a fund's overall total return, especially when rates are rising. Q. HOW DO INTEREST RATES AFFECT MY TAX-FREE DIVIDENDS? A. When interest rates decline, municipal bond issuers often "call" or redeem existing higher-yielding bonds and replace them with new, lower-yielding bonds to reduce the amount of interest they pay on the debt. As funds then have to reinvest proceeds from the called bonds into new, lower-yielding bonds, their investment earnings decline, and the dividends paid out to shareholders also decline. (2) Source: Lehman Brothers Municipal Bond Index, 12/31/04. Total return includes compounded income and capital appreciation over the 20-year period ending 12/31/04. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. [GRAPHIC Q&A] Not part of the semiannual report | 5 Higher interest rates may lead to higher dividends. When interest rates rise, fewer bonds are called and fund managers may have the opportunity to invest in new, higher-yielding bonds. As a result, the funds' investment earnings can increase, and they are able to pay out higher dividends to shareholders over time. Q. WHAT IS THE BENEFIT OF FRANKLIN'S INVESTMENT APPROACH WHEN INTEREST RATES ARE VOLATILE? A. Since 1977, Franklin has consistently adhered to a strategy of investing for high, current, tax-free income.(1) Our straightforward, "plain-vanilla" approach to investing means we do not use leverage or invest in speculative derivatives or futures, which could increase the level of risk for our fund portfolios, especially when interest rates are volatile. Similarly, we do not try to time the market and predict interest rate movements. Instead, we carefully select bonds for our fund portfolios that we believe should provide a high level of stable income until maturity. We generally invest in current coupon securities to maximize tax-free income. Over time, as we invest in different interest rate climates, the portfolios become well diversified with a broad range of securities. As a result of this strategy, we own many older securities with higher coupons, which are generally less sensitive to interest rate movements and help to provide stability to our fund portfolios. Our tax-free income fund investment strategy cannot eliminate interest rate risk, but it may help to reduce this risk. Q. WHAT ARE THE KEY BENEFITS OF INVESTING IN TAX-FREE INCOME FUNDS? A. It's important to remember the reasons to own tax-free income funds don't change when market conditions change. For long-term investors seeking monthly, tax-free income and portfolio diversification, we believe tax-free income funds are an attractive investment option. At Franklin, we will continue to serve our shareholders by seeking to provide a high level of tax-free income consistent with prudent investment management and the preservation of shareholders' capital. [LOGO](R) FRANKLIN TEMPLETON INVESTMENTS [GRAPHIC Q&A] 6 | Not part of the semiannual report SEMIANNUAL REPORT STATE UPDATE AND MUNICIPAL BOND MARKET OVERVIEW New York's economic recovery continued during the reporting period, led by New York City and its suburbs. The City's employment figures improved across various sectors, notably professional and business services; however, they remained below prerecession levels. The state's overall economic recovery was reflected in recent tax revenues as fiscal year 2005 baseline state tax revenue growth, which excludes the effect of tax law changes, was forecast at more than 10%, up from 5.5% in fiscal year 2004.(1) New York's conservative budget management allowed the state to benefit from the improved economic situation, and modest budget surpluses were recorded. The next fiscal year's budget, adopted in March 2005 on time for the first time in 20 years, should result in manageable out-year budget gaps. New York has made efforts at budget reform and to institutionalize sound financial management practices, and the state has a record of closing future-year budget gaps and maintaining fiscal solvency. In November 2004, Moody's Investors Service, an independent credit rating agency, upgraded New York's general obligation bond rating to A1 from A2 and assigned a positive rating outlook.(2) The upgrade reflected the state's recent trend of recovery in its economy, tax revenue and liquidity position. Moody's noted that the state's finances fared better than expected given the depth of the economic and revenue decline experienced since fiscal year 2002. For the six-month period ended March 31, 2005, the fixed income markets had positive performance, despite rising interest rates, record high oil prices, the presidential election, concerns about the U.S. dollar, and mixed economic releases. Although experiencing volatility throughout the period, long-term interest rates ended the year close to where they started. Municipal bonds outperformed U.S. Treasury bonds with similar maturities. The Lehman Brothers Municipal Bond (1) Source: Moody's Investors Service, "New York (State of)," 2/24/05. (2) This does not indicate Moody's rating of the Funds. Semiannual Report | 7 Index returned 1.21% for the six-month period, while the Lehman Brothers U.S. Treasury Index returned 0.01%.(3) In contrast, short-term interest rates experienced greater changes over the reporting period. The Federal Reserve Board raised the federal funds target rate from 1.75% to 2.75% in four successive moves from October 2004 through March 2005. The Treasury yield curve, which shows Treasury rates with short to long maturities, flattened somewhat as short-term rates increased and longer-maturity rates traded in a narrower range. Over the six-month reporting period, the 10-year Treasury note yield increased 36 basis points (100 basis points equal one percent), while the 30-year Treasury bond yield decreased 13 basis points. According to Municipal Market Data, the 10-year municipal bond yield increased 37 basis points, while the 30-year municipal bond yield declined 10 basis points.(4) Consequently, long-term municipal bonds outperformed their intermediate-term counterparts. Although short-term interest rates rose during the period, interest rates remained relatively low overall. This environment led to another period of high volume for new-issue municipal bonds. Just as homebuyers seek low mortgage rates, municipalities borrow money when interest rates are low. Thus, over the past couple of years, municipalities have issued bonds to lock in historically low rates. Municipalities issued more that $358 billion in new debt during 2004.(5) Although this was a decrease of more than 6% from 2003 (a record year), 2004 was the third successive year of more than $300 billion in new issuance.(5) Demand for municipal bonds remained strong as investors sought to reinvest proceeds from a combination of coupon payments, maturities and bond calls. Healthy demand came from a wide range of traditional buyers including mutual funds, individuals, and property and casualty companies, as well as from crossover buyers. Crossover buyers, such as hedge funds, typically invest in taxable securities, but they tend to enter the tax-exempt market when municipal security valuations are attractive. (3) Source: Lehman Brothers Inc. The Lehman Brothers Municipal Bond Index is a market value-weighted index engineered for the long-term tax-exempt bond market. All bonds included have a minimum credit rating of at least Baa. They must have an outstanding par value of at least $5 million and be issued as part of a transaction of at least $50 million. The bonds must be dated after 12/31/90, and must be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates and derivatives are excluded from the index. The index has four main bond sectors: general obligation, revenue, insured and prerefunded. 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). (4) Source: Thomson Financial. (5) Source: THE BOND BUYER. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF MARCH 31, 2005. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE, INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE. 8 | Semiannual Report FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin New York Insured Tax-Free Income Fund seeks to provide high, current income exempt from federal, New York state and New York City personal income taxes consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes.(1),(2) -------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- This semiannual report for Franklin New York Insured Tax-Free Income Fund covers the period ended March 31, 2005. PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, declined from $11.64 on September 30, 2004, to $11.60 on March 31, 2005. The Fund's Class A shares paid dividends totaling 25.56 cents per share for the same period.(3) The Performance Summary beginning on page 11 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 4.22%, based on an annualization of the current 4.26 cent per share dividend and the maximum offering price of $12.11 on March 31, 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 7.39% from a taxable investment to match the Fund's Class A tax-free distribution rate. For the Fund's Class C shares' performance, please see the Performance Summary. 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, the Fund's portfolio becomes well diversified with a (1) For investors subject to the alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. (2) The insurance relates only to the payment of principal and interest on the portfolio's insured securities. No representation is made as to any insurer's ability to meets its commitments. (3) Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. 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 34. Semiannual Report | 9 PORTFOLIO BREAKDOWN Franklin New York Insured Tax-Free Income Fund 3/31/05 -------------------------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS* -------------------------------------------------------------------------------- Prerefunded 19.1% -------------------------------------------------------------------------------- Hospital & Health Care 15.8% -------------------------------------------------------------------------------- Higher Education 15.0% -------------------------------------------------------------------------------- Subject to Government Appropriations 11.2% -------------------------------------------------------------------------------- Utilities 11.2% -------------------------------------------------------------------------------- Transportation 7.5% -------------------------------------------------------------------------------- Other Revenue 7.3% -------------------------------------------------------------------------------- General Obligation 6.5% -------------------------------------------------------------------------------- Tax-Supported 4.9% -------------------------------------------------------------------------------- Housing 1.5% -------------------------------------------------------------------------------- * Does not include short-term investments and other net assets. DIVIDEND DISTRIBUTIONS* Franklin New York Insured Tax-Free Income Fund 10/1/04-3/31/05 -------------------------------------------------------------------------------- DIVIDEND PER SHARE -------------------------- MONTH CLASS A CLASS C -------------------------------------------------------------------------------- October 4.26 cents 3.73 cents -------------------------------------------------------------------------------- November 4.26 cents 3.73 cents -------------------------------------------------------------------------------- December 4.26 cents 3.71 cents -------------------------------------------------------------------------------- January 4.26 cents 3.71 cents -------------------------------------------------------------------------------- February 4.26 cents 3.71 cents -------------------------------------------------------------------------------- March 4.26 cents 3.70 cents -------------------------------------------------------------------------------- TOTAL 25.56 CENTS 22.29 CENTS -------------------------------------------------------------------------------- * Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. 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 The effects of increasing interest rates and diminishing but still significant New York municipal bond supply were partially offset by investor demand for the high relative after-tax returns offered by municipal bonds. The mixture of our value-oriented philosophy of investing primarily for income, ample municipal bond supply, and relatively attractive long-term yields led us to favor longer-term 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 Insured Tax-Free Income Fund. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF MARCH 31, 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. 10 | Semiannual Report PERFORMANCE SUMMARY AS OF 3/31/05 FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND Your dividend income will vary depending on dividends or interest paid by securities in the Fund's portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes due on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund's dividends and capital gain distributions, if any, and any unrealized gains or losses. PRICE AND DISTRIBUTION INFORMATION -------------------------------------------------------------------------------- CLASS A (SYMBOL: FRNYX) CHANGE 3/31/05 9/30/04 -------------------------------------------------------------------------------- Net Asset Value (NAV) -$ 0.04 $ 11.60 $ 11.64 -------------------------------------------------------------------------------- DISTRIBUTIONS (10/1/04-3/31/05) -------------------------------------------------------------------------------- Dividend Income $ 0.2556 -------------------------------------------------------------------------------- CLASS C (SYMBOL: FNYKX) CHANGE 3/31/05 9/30/04 -------------------------------------------------------------------------------- Net Asset Value (NAV) -$ 0.05 $ 11.76 $ 11.81 -------------------------------------------------------------------------------- DISTRIBUTIONS (10/1/04-3/31/05) -------------------------------------------------------------------------------- Dividend Income $ 0.2229 -------------------------------------------------------------------------------- PERFORMANCE CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN INCLUDES MAXIMUM SALES CHARGES.
---------------------------------------------------------------------------------------------------- CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR ---------------------------------------------------------------------------------------------------- Cumulative Total Return(1) +1.85% +2.92% +33.97% +74.51% ---------------------------------------------------------------------------------------------------- Average Annual Total Return(2) -2.51% -1.43% +5.10% +5.27% ---------------------------------------------------------------------------------------------------- Distribution Rate(3) 4.22% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate(4) 7.39% ---------------------------------------------------------------------------------------------------- 30-Day Standardized Yield(5) 3.26% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Yield(4) 5.71% ---------------------------------------------------------------------------------------------------- CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95) ---------------------------------------------------------------------------------------------------- Cumulative Total Return(1) +1.46% +2.31% +30.46% +66.36% ---------------------------------------------------------------------------------------------------- Average Annual Total Return(2) +0.46% +1.33% +5.46% +5.26% ---------------------------------------------------------------------------------------------------- Distribution Rate(3) 3.78% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate(4) 6.62% ---------------------------------------------------------------------------------------------------- 30-Day Standardized Yield(5) 2.87% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Yield(4) 5.03% ----------------------------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. Semiannual Report | 11 PERFORMANCE SUMMARY (CONTINUED) ENDNOTES MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS; THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST RATES. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS 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. (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) Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price (NAV for Class C) per share on 3/31/05. (4) Taxable equivalent distribution rate and yield assume the published rates as of 12/23/04 for the maximum combined federal and New York state and City personal income tax bracket of 42.90%, based on the federal income tax rate of 35.00%. (5) Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 3/31/05. 12 | Semiannual Report YOUR FUND'S EXPENSES FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND As a Fund shareholder, you can incur two types of costs: o Transaction costs, including sales charges (loads) on Fund purchases and redemption fees; and o Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated. ACTUAL FUND EXPENSES The first line (Actual) for each share class listed in the table below provides actual account values and expenses. The "Ending Account Value" is derived from the Fund's actual return, which includes the effect of Fund expenses. You can estimate the expenses you paid during the period, by following these steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS ILLUSTRATION: 1. Divide your account value by $1,000. IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6. 2. Multiply the result by the number under the heading "Expenses Paid During Period." IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50. In this illustration, the estimated expenses paid this period are $64.50. HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical "Ending Account Value" is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund's actual return. The figure under the heading "Expenses Paid During Period" shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds. Semiannual Report | 13 YOUR FUND'S EXPENSES (CONTINUED) PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES 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 9/30/04 VALUE 3/31/05 PERIOD* 9/30/04-3/31/05 ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,018.50 $3.52 ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.44 $3.53 ---------------------------------------------------------------------------------------------------- CLASS C ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,014.60 $6.28 ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.70 $6.29 ----------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A: 0.70% and C: 1.25%), multiplied by the average account value over the period, multiplied by 182/365 to reflect the one-half year period. 14 | Semiannual Report FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin New York Intermediate-Term Tax-Free Income Fund seeks to provide high, current income exempt from federal, New York state and New York City personal income taxes consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes and by maintaining a dollar-weighted average portfolio maturity (the time at which the debt must be repaid) of 3 to 10 years.(1) -------------------------------------------------------------------------------- CREDIT QUALITY BREAKDOWN* Franklin New York Intermediate-Term Tax-Free Income Fund Based on Total Long-Term Investments as of 3/31/05** [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] AAA ........................... 61.1% AA ............................ 13.0% A ............................. 6.5% BBB ........................... 1.6% Not Rated by S&P .............. 17.8% * Standard & Poor's (S&P) is the primary independent rating agency; Moody's and Fitch are the secondary and tertiary rating agencies. 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 FITCH INTERNAL AAA or Aaa 13.1% -- -- AA or Aa 1.7% -- -- A 1.0% -- -- BBB or Baa -- 0.8% 0.8% Below Investment Grade -- -- 0.4% ------------------------------------------------------------ Total 15.8% 0.8% 1.2% -------------------------------------------------------------------------------- This semiannual report for Franklin New York Intermediate-Term Tax-Free Income Fund covers the period ended March 31, 2005. (1) For investors subject to the alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. 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 40. Semiannual Report | 15 -------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, declined from $11.15 on September 30, 2004, to $10.92 on March 31, 2005. The Fund's Class A shares paid dividends totaling 18.96 cents per share for the same period.(2) The Performance Summary beginning on page 18 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 3.39%, based on an annualization of the current 3.16 cent per share dividend and the maximum offering price of $11.17 on March 31, 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 5.94% from a taxable investment to match the Fund's Class A tax-free distribution rate. For the Fund's Class C shares' performance, please see the Performance Summary. 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, the Fund's portfolio becomes well diversified with a broad range of coupons, calls and maturities. This broad diversification may help mitigate interest rate risk. We generally stay fully invested to maximize income distribution. MANAGER'S DISCUSSION Consistent with our strategy, we typically look to remain fully invested in a portfolio of bonds that maintain an average maturity of 3 to 10 years. Investor demand for the high relative after-tax returns offered by municipal bonds helped offset the effects of rising interest rates and still significant New York municipal bond supply. (2) Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. 16 | Semiannual Report DIVIDEND DISTRIBUTIONS(2) Franklin New York Intermediate-Term Tax-Free Income Fund 10/1/04-3/31/05 -------------------------------------------------------------------------------- DIVIDEND PER SHARE -------------------------- MONTH CLASS A CLASS C -------------------------------------------------------------------------------- October 3.16 cents 2.65 cents -------------------------------------------------------------------------------- November 3.16 cents 2.65 cents -------------------------------------------------------------------------------- December 3.16 cents 2.63 cents -------------------------------------------------------------------------------- January 3.16 cents 2.63 cents -------------------------------------------------------------------------------- February 3.16 cents 2.63 cents -------------------------------------------------------------------------------- March 3.16 cents 2.64 cents -------------------------------------------------------------------------------- TOTAL 18.96 CENTS 15.83 CENTS -------------------------------------------------------------------------------- The mixture of our value-oriented philosophy of investing primarily for income and a relatively steep yield curve favored the use of longer-term bonds while operating within the Fund's stated parameters. Consequently, we sought to remain fully invested in bonds that ranged from 8 to 15 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 Intermediate-Term Tax-Free Income Fund. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF MARCH 31, 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. PORTFOLIO BREAKDOWN Franklin New York Intermediate-Term Tax-Free Income Fund 3/31/05 -------------------------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS* -------------------------------------------------------------------------------- General Obligation 34.9% -------------------------------------------------------------------------------- Subject to Government Appropriations 13.0% -------------------------------------------------------------------------------- Utilities 9.1% -------------------------------------------------------------------------------- Transportation 8.4% -------------------------------------------------------------------------------- Prerefunded 8.1% -------------------------------------------------------------------------------- Hospital & Health Care 7.4% -------------------------------------------------------------------------------- Tax-Supported 6.8% -------------------------------------------------------------------------------- Other Revenue 4.8% -------------------------------------------------------------------------------- Higher Education 4.1% -------------------------------------------------------------------------------- Corporate-Backed 2.9% -------------------------------------------------------------------------------- Housing 0.5% -------------------------------------------------------------------------------- * Does not include short-term investments and other net assets. Semiannual Report | 17 PERFORMANCE SUMMARY AS OF 3/31/05 FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND Your dividend income will vary depending on dividends or interest paid by securities in the Fund's portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes due on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund's dividends and capital gain distributions, if any, and any unrealized gains or losses. PRICE AND DISTRIBUTION INFORMATION -------------------------------------------------------------------------------- CLASS A (SYMBOL: FKNIX) CHANGE 3/31/05 9/30/04 -------------------------------------------------------------------------------- Net Asset Value (NAV) -$ 0.23 $ 10.92 $ 11.15 -------------------------------------------------------------------------------- DISTRIBUTIONS (10/1/04-3/31/05) -------------------------------------------------------------------------------- Dividend Income $ 0.1896 -------------------------------------------------------------------------------- CLASS C (SYMBOL: N/A) CHANGE 3/31/05 9/30/04 -------------------------------------------------------------------------------- Net Asset Value (NAV) -$ 0.23 $ 10.93 $ 11.16 -------------------------------------------------------------------------------- DISTRIBUTIONS (10/1/04-3/31/05) -------------------------------------------------------------------------------- Dividend Income $ 0.1583 -------------------------------------------------------------------------------- PERFORMANCE(1) CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN INCLUDES MAXIMUM SALES CHARGES.
---------------------------------------------------------------------------------------------------- CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR ---------------------------------------------------------------------------------------------------- Cumulative Total Return(2) -0.38% +0.93% +32.20% +74.98% ---------------------------------------------------------------------------------------------------- Average Annual Total Return(3) -2.65% -1.36% +5.27% +5.51% ---------------------------------------------------------------------------------------------------- Distribution Rate(4) 3.39% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate(5) 5.94% ---------------------------------------------------------------------------------------------------- 30-Day Standardized Yield(6) 2.82% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Yield(5) 4.94% ---------------------------------------------------------------------------------------------------- CLASS C 6-MONTH 1-YEAR INCEPTION (7/1/03) ---------------------------------------------------------------------------------------------------- Cumulative Total Return(2) -0.66% +0.37% +2.12% ---------------------------------------------------------------------------------------------------- Average Annual Total Return(3) -1.64% -0.61% +1.21% ---------------------------------------------------------------------------------------------------- Distribution Rate(4) 2.90% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate(5) 5.08% ---------------------------------------------------------------------------------------------------- 30-Day Standardized Yield(6) 2.34% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Yield(5) 4.10% ----------------------------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. 18 | 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, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST RATES. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS 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. (1) Past expense reductions by the Fund's manager increased the Fund's total returns. If the manager had not taken this action, the Fund's total returns would have been lower. (2) Cumulative total return represents the change in value of an investment over the periods indicated and does not include a sales charge. (3) 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. (4) Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price (NAV for Class C) per share on 3/31/05. (5) Taxable equivalent distribution rate and yield assume the published rates as of 12/23/04 for the maximum combined federal and New York state and City personal income tax bracket of 42.90%, based on the federal income tax rate of 35.00%. (6) Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 3/31/05. Semiannual Report | 19 YOUR FUND'S EXPENSES FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND 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. 20 | 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 9/30/04 VALUE 3/31/05 PERIOD* 9/30/04-3/31/05 ---------------------------------------------------------------------------------------------------- Actual $1,000 $ 996.20 $3.68 ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.24 $3.73 ---------------------------------------------------------------------------------------------------- CLASS C ---------------------------------------------------------------------------------------------------- Actual $1,000 $ 993.40 $6.41 ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.50 $6.49 ----------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A: 0.74% and C: 1.29%), multiplied by the average account value over the period, multiplied by 182/365 to reflect the one-half year period. Semiannual Report | 21 FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin New York Limited-Term Tax-Free Income Fund seeks to provide high, current income exempt from federal, New York state and New York City personal income taxes consistent with prudent investment management and preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes and by maintaining a dollar-weighted average portfolio maturity (the time at which the debt must be repaid) of five years or less.(1) -------------------------------------------------------------------------------- CREDIT QUALITY BREAKDOWN* Franklin New York Limited-Term Tax-Free Income Fund Based on Total Long-Term Investments as of 3/31/05** [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] AAA ........................... 48.0% AA ............................ 14.8% A ............................. 2.9% Not Rated by S&P .............. 34.3% * Standard & Poor's (S&P) is the primary independent rating agency; Moody's is the secondary rating agency. 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 AAA or Aaa 25.8% AA or Aa 8.5% ------------------------------------- Total 34.3% -------------------------------------------------------------------------------- This semiannual report for Franklin New York Limited-Term Tax-Free Income Fund covers the period ended March 31, 2005. (1) For investors subject to the alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. 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 46. 22 | Semiannual Report PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, declined from $10.02 on September 30, 2004, to $9.89 on March 31, 2005. The Fund's Class A shares paid dividends totaling 7.63 cents per share for the same period.(2) The Performance Summary beginning on page 25 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 1.67%. 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 2.92% from a taxable investment to match the Fund's Class A tax-free distribution rate. 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, the Fund's portfolio becomes well diversified with a broad range of coupons, calls and maturities. The broad diversification may help mitigate interest rate risk. We generally stay fully invested to maximize income distribution. MANAGER'S DISCUSSION Shorter-term municipal bond yields generally increased but were volatile during the reporting period as economic data reflected conflicting signals for the U.S. economy. Consistent with our investment philosophy, we invested in bonds we believed could provide the most relative value from an income perspective and provide investors with lower share price volatility relative to longer-term fixed income alternatives. The Fund's prospectus allows for a dollar-weighted average portfolio maturity of up to five years, but we targeted a shorter average maturity to provide investors with both tax-free income and a lower volatility investment. As a result of our strategy, the Fund was positioned to capture changes in short-term interest rates, preserve capital and produce tax-free income. Reflecting higher short-term interest rates, the Fund's dividend increased in March 2005. (2) Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. -------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- DIVIDEND DISTRIBUTIONS(2) Franklin New York Limited-Term Tax-Free Income Fund 10/1/04-3/31/05 -------------------------------------------------------------------------------- MONTH DIVIDEND PER SHARE -------------------------------------------------------------------------------- October 1.25 cents -------------------------------------------------------------------------------- November 1.25 cents -------------------------------------------------------------------------------- December 1.25 cents -------------------------------------------------------------------------------- January 1.25 cents -------------------------------------------------------------------------------- February 1.25 cents -------------------------------------------------------------------------------- March 1.38 cents -------------------------------------------------------------------------------- TOTAL 7.63 CENTS -------------------------------------------------------------------------------- Semiannual Report | 23 PORTFOLIO BREAKDOWN Franklin New York Limited-Term Tax-Free Income Fund 3/31/05 -------------------------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS* -------------------------------------------------------------------------------- General Obligation 47.1% -------------------------------------------------------------------------------- Hospital & Health Care 13.6% -------------------------------------------------------------------------------- Utilities 11.7% -------------------------------------------------------------------------------- Tax-Supported 8.1% -------------------------------------------------------------------------------- Transportation 7.6% -------------------------------------------------------------------------------- Subject to Government Appropriations 3.9% -------------------------------------------------------------------------------- Housing 3.8% -------------------------------------------------------------------------------- Higher Education 2.9% -------------------------------------------------------------------------------- Other Revenue 1.3% -------------------------------------------------------------------------------- * Does not include short-term investments and other net assets. 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 Limited-Term Tax-Free Income Fund. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF MARCH 31, 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. 24 | Semiannual Report PERFORMANCE SUMMARY AS OF 3/31/05 FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND Your dividend income will vary depending on dividends or interest paid by securities in the Fund's portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes due on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund's dividends and capital gain distributions, if any, and any unrealized gains or losses. PRICE AND DISTRIBUTION INFORMATION
---------------------------------------------------------------------------------------------------- CLASS A (SYMBOL: FNYLX) CHANGE 3/31/05 9/30/04 ---------------------------------------------------------------------------------------------------- Net Asset Value (NAV) -$ 0.13 $ 9.89 $ 10.02 ---------------------------------------------------------------------------------------------------- DISTRIBUTIONS (10/1/04-3/31/05) ---------------------------------------------------------------------------------------------------- Dividend Income $ 0.0763 ----------------------------------------------------------------------------------------------------
PERFORMANCE(1)
---------------------------------------------------------------------------------------------------- CLASS A 6-MONTH 1-YEAR INCEPTION (9/2/03) ---------------------------------------------------------------------------------------------------- Cumulative Total Return(2) -0.54% -0.48% +1.09% ---------------------------------------------------------------------------------------------------- Average Annual Total Return(3) -0.54% -0.48% +0.69% ---------------------------------------------------------------------------------------------------- Distribution Rate(4) 1.67% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate(5) 2.92% ---------------------------------------------------------------------------------------------------- 30-Day Standardized Yield(6) 2.14% ---------------------------------------------------------------------------------------------------- Taxable Equivalent Yield(5) 3.75% ----------------------------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. ENDNOTES MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS; THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST RATES. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. (1) The Fund's manager has agreed in advance to waive a portion of its management fees. If the manager had not taken this action, the Fund's distribution rate and total return would have been lower, and yield for the period would have been 1.34%. The fee waiver may be discontinued at any time upon notice to the Fund's Board of Trustees. (2) Cumulative total return represents the change in value of an investment over the periods indicated. (3) Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized. (4) Distribution rate is based on an annualization of the 1.38 cent per share current monthly dividend and the maximum offering price of $9.89 on 3/31/05. (5) Taxable equivalent distribution rate and yield assume the published rates as of 12/23/04 for the maximum combined federal and New York state and City personal income tax bracket of 42.90%, based on the federal income tax rate of 35.00%. (6) Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 3/31/05. Semiannual Report | 25 YOUR FUND'S EXPENSES FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND 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. 26 | 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 9/30/04 VALUE 3/31/05 PERIOD* 9/30/04-3/31/05 ---------------------------------------------------------------------------------------------------- Actual $1,000 $ 994.60 $2.49 ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.44 $2.52 ----------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio, net of expense waivers, of 0.50%, multiplied by the average account value over the period, multiplied by 182/365 to reflect the one-half year period. Semiannual Report | 27 FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin New York Tax-Exempt Money Fund seeks to provide high, current income exempt from federal, New York state and New York City personal income taxes consistent with prudent investment management, preservation of capital and liquidity.(1) The Fund's portfolio invests at least 80% of its total assets in short-term municipal debt securities issued in New York. The Fund tries to maintain a stable $1.00 share price. -------------------------------------------------------------------------------- AN INVESTMENT IN THE FUND IS NOT GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR INSTITUTION. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- We are pleased to bring you Franklin New York Tax-Exempt Money Fund's semiannual report for the period ended March 31, 2005. PERFORMANCE OVERVIEW Reflecting rising short-term interest rates for the six-month period under review, Franklin New York Tax-Exempt Money Fund's seven-day effective yield increased from 0.86% on September 30, 2004, to 1.53% on March 31, 2005. INVESTMENT STRATEGY We invest predominantly in high-quality, short-term municipal securities whose interest is free from federal income tax and New York state and City personal income taxes. Although the Fund tries to invest all of its assets in tax-free securities, it is possible, although not anticipated, that a portion of its assets may be in securities that pay taxable interest, including interest that may be subject to federal alternative minimum tax. We maintain a dollar-weighted average portfolio maturity of 90 days or less. (1) For investors subject to the alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. 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 49. 28 | Semiannual Report MANAGER'S DISCUSSION Short-term municipal bond yields increased during the reporting period, reflecting the Federal Reserve Board's consecutive increases of the federal funds target rate during the period. The Bond Market Association Municipal Swap Index, a benchmark for variable rate securities, which make up a large portion of Franklin New York Tax-Exempt Money Fund, averaged a 1.79% rate for the six months under review. During the reporting period, the Fund participated in several deals including Monroe County general obligation bonds, Long Island Power Authority commercial paper, and variable rate demand notes issued by Jay Street Development Corporation and New York City Industrial Development Authority. Thank you for your continued participation in Franklin New York Tax-Exempt Money Fund. We look forward to serving your future investment needs. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF MARCH 31, 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. PORTFOLIO BREAKDOWN Franklin New York Tax-Exempt Money Fund 3/31/05 -------------------------------------------------------------------------------- % OF TOTAL INVESTMENTS -------------------------------------------------------------------------------- Variable Rate Notes 78.2% -------------------------------------------------------------------------------- Notes and Bonds 14.0% -------------------------------------------------------------------------------- Tax-Exempt Commercial Paper 4.7% -------------------------------------------------------------------------------- Put or Option Tender Bonds 3.1% -------------------------------------------------------------------------------- PERFORMANCE SUMMARY(1) Franklin New York Tax-Exempt Money Fund Symbol: FRNXX 3/31/05 -------------------------------------------------------------------------------- Seven-day effective yield(2) 1.53% -------------------------------------------------------------------------------- Seven-day annualized yield 1.52% -------------------------------------------------------------------------------- Taxable equivalent yield(3) 2.62% -------------------------------------------------------------------------------- (1) The Fund's manager has agreed in advance to waive a portion of its fees. If the manager had not taken this action, the Fund's annualized and effective yields for the period would have been 1.41% and 1.42%. The fee waiver may be discontinued at any time upon notice to the Fund's Board of Trustees. (2) The seven-day effective yield assumes the compounding of daily dividends. (3) Taxable equivalent yield assumes the published rates as of 12/23/04 for the maximum combined federal and New York state and City personal income tax bracket of 42.90%, based on the federal income tax rate of 35.00%. Annualized and effective yields are for the seven-day period ended 3/31/05. The Fund's average weighted maturity was 22 days. Yields reflect Fund expenses and fluctuations in interest rates on portfolio investments. PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. Semiannual Report | 29 YOUR FUND'S EXPENSES FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND 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. 30 | 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 9/30/04 VALUE 3/31/05 PERIOD* 9/30/04-3/31/05 ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,005.30 $3.20 ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.74 $3.23 ----------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio, net of expense waivers, of 0.64%, multiplied by the average account value over the period, multiplied by 182/365 to reflect the one-half year period. Semiannual Report | 31 FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND
---------------------------------------------------------------------------- SIX MONTHS ENDED PERIOD ENDED MARCH 31, 2005 SEPTEMBER 30, YEAR ENDED DECEMBER 31, CLASS A (UNAUDITED) 2004(e) 2003 2002 2001 2000 ---------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.64 $ 11.71 $ 11.69 $ 11.22 $ 11.34 $ 10.77 ---------------------------------------------------------------------------- Income from investment operations: Net investment income(a) ..................... 0.25 0.39 0.52 0.53 0.55 0.57 Net realized and unrealized gains (losses) ... (0.04) (0.07) 0.02 0.47 (0.11) 0.56 ---------------------------------------------------------------------------- Total from investment operations .............. 0.21 0.32 0.54 1.00 0.44 1.13 Less distributions from net investment income ....................................... (0.25) (0.39) (0.52) (0.53) (0.56) (0.56) Redemption fees ............................... --(c) -- -- -- -- -- ---------------------------------------------------------------------------- Net asset value, end of period ................ $ 11.60 $ 11.64 $ 11.71 $ 11.69 $ 11.22 $ 11.34 ============================================================================ Total return(b) ............................... 1.85% 2.77% 4.69% 9.17% 4.00% 10.78% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 296,677 $ 292,813 $ 296,917 $ 291,965 $269,449 $234,528 Ratios to average net assets: Expenses ..................................... 0.70%(d) 0.71%(d) 0.71% 0.71% 0.73% 0.74% Net investment income ........................ 4.34%(d) 4.44%(d) 4.44% 4.66% 4.83% 5.19% Portfolio turnover rate ....................... 5.49% 7.96% 7.96% 9.52% 7.78% 19.66%
(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. (c) Amount is less than $0.01 per share. (d) Annualized. (e) For the period January 1, 2004 to September 30, 2004. See Note 1. 32 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND (CONTINUED)
---------------------------------------------------------------------------- SIX MONTHS ENDED PERIOD ENDED MARCH 31, 2005 SEPTEMBER 30, YEAR ENDED DECEMBER 31, CLASS C (UNAUDITED) 2004(e) 2003 2002 2001 2000 ---------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 11.81 $ 11.87 $ 11.84 $ 11.35 $ 11.46 $ 10.88 ---------------------------------------------------------------------------- Income from investment operations: Net investment income(a) ..................... 0.22 0.34 0.46 0.47 0.49 0.51 Net realized and unrealized gains (losses) ... (0.05) (0.06) 0.02 0.49 (0.10) 0.57 ---------------------------------------------------------------------------- Total from investment operations .............. 0.17 0.28 0.48 0.96 0.39 1.08 Less distributions from net investment income ....................................... (0.22) (0.34) (0.45) (0.47) (0.50) (0.50) Redemption fees ............................... --(c) -- -- -- -- -- ---------------------------------------------------------------------------- Net asset value, end of period ................ $ 11.76 $ 11.81 $ 11.87 $ 11.84 $ 11.35 $ 11.46 ============================================================================ Total return(b) ............................... 1.46% 2.40% 4.12% 8.65% 3.47% 10.19% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $ 37,123 $ 37,606 $ 39,803 $ 29,207 $ 18,947 $ 12,498 Ratios to average net assets: Expenses ..................................... 1.25%(d) 1.26%(d) 1.27% 1.25% 1.28% 1.28% Net investment income ........................ 3.79%(d) 3.89%(d) 3.88% 4.12% 4.27% 4.64% Portfolio turnover rate ....................... 5.49% 7.96% 7.96% 9.52% 7.78% 19.66%
(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. (c) Amount is less than $0.01 per share. (d) Annualized. (e) For the period January 1, 2004 to September 30, 2004. See Note 1. Semiannual Report | See notes to financial statements. | 33 FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.2% BONDS 98.2% NEW YORK 98.2% Amherst IDA Civic Facility Revenue, University of Buffalo Foundation, Student Housing, Creekside Project, Series A, AMBAC Insured, 5.00%, 8/01/32 ........................ $ 2,785,000 $ 2,853,372 Amsterdam HDC Mortgage Revenue, Refunding, MBIA Insured, 6.25%, 1/01/25 ............. 2,220,000 2,223,241 Babylon IDA Civic Facility Revenue, Winthrop South Nassau University Health Systems East Inc. Project, Series A, AMBAC Insured, 6.00%, 8/01/24 ........................ 4,020,000 4,467,949 Brookhaven GO, Series B, MBIA Insured, 7.00%, 5/01/09 ............................... 200,000 227,484 Buffalo Municipal Water Finance Authority Water System Revenue, FSA Insured, 6.00%, 7/01/26 .......................................................................... 1,185,000 1,319,355 7/01/29 .......................................................................... 3,000,000 3,336,360 Central Square GO, Central School District, FGIC Insured, ETM, 6.50%, 6/15/09 ....... 900,000 1,017,927 Eastport South Manor Central School District GO, FGIC Insured, 5.00%, 6/15/20 ....... 1,000,000 1,054,210 Fredonia Central School District GO, Refunding, FGIC Insured, 5.00%, 6/01/19 ........ 2,300,000 2,410,446 Hempstead Town IDA Civic Facilities Revenue, Hofstra University Project, MBIA Insured, 5.80%, 7/01/15 .................................................................... 1,340,000 1,415,804 Long Island Power Authority Electric System Revenue, General, Refunding, Series A, FSA Insured, 5.125%, 12/01/22 .................................................... 5,000,000 5,258,900 MBIA Insured, 5.75%, 12/01/24 .................................................... 1,540,000 1,669,868 Madison County IDA Civic Facility Revenue, College University Project, Series A, MBIA Insured, 5.00%, 7/01/39 ...................................................... 3,750,000 3,847,387 Middle Country Central School District Centereach GO, FSA Insured, 4.875%, 6/01/20 .. 1,650,000 1,713,591 Monroe County IDA Civic Facility Revenue, Nazareth College Rochester Project, MBIA Insured, 5.25%, 10/01/21 .................................................................. 1,520,000 1,626,795 5.00%, 10/01/31 .................................................................. 3,100,000 3,181,747 Mount Sinai Union Free School District, Refunding, AMBAC Insured, 6.20%, 2/15/13 .... 1,055,000 1,230,299 MTA Commuter Facilities Revenue, Series A, FSA Insured, Pre-Refunded, 5.00%, 7/01/23 3,000,000 3,258,840 MTA Dedicated Tax Fund Revenue, Refunding, Series A, MBIA Insured, 5.00%, 11/15/30 ............................... 8,000,000 8,218,640 Series A, FGIC Insured, Pre-Refunded, 6.00%, 4/01/30 ............................. 2,500,000 2,816,725 Series A, FGIC Insured, Pre-Refunded, 5.00%, 11/15/31 ............................ 2,000,000 2,174,400 MTA Revenue, Refunding, Series A, FGIC Insured, 5.25%, 11/15/31 ............................... 4,000,000 4,212,400 Series A, AMBAC Insured, 5.00%, 11/15/21 ......................................... 5,000,000 5,304,250 MTA Service Contract Revenue, Refunding, AMBAC Insured, 5.00%, 7/01/30 ......................................... 7,000,000 7,209,370 Series B, MBIA Insured, 5.00%, 1/01/31 ........................................... 3,000,000 3,076,680 Nassau County GO, Public Improvement, Series E, FSA Insured, ETM, 6.00%, 3/01/20 .... 1,510,000 1,698,297 Nassau Health Care Corp. Health System Revenue, Nassau County Guaranteed, FSA Insured, Pre-Refunded, 5.75%, 8/01/29 ...................................................... 2,655,000 2,973,573 New York City GO, Series A, MBIA Insured, 6.00%, 5/15/30 ........................................... 360,000 403,528 Series A, MBIA Insured, Pre-Refunded, 6.00%, 5/15/30 ............................. 1,640,000 1,866,320 Series I, MBIA Insured, 5.00%, 4/15/29 ........................................... 3,000,000 3,075,210 New York City Health and Hospital Corp. Revenue, Health System, Series A, FSA Insured, 5.125%, 2/15/23 ................................................................... 3,890,000 4,069,329 New York City IDA Civic Facility Revenue, Polytechnic Prep Country Day School, FSA Insured, 5.375%, 5/01/29 .......................................................... 980,000 1,035,419 New York City Municipal Water Authority Revenue, Refunding, Series E, FGIC Insured, 5.00%, 6/15/26 .................................................................... 1,000,000 1,031,070
34 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) New York City Municipal Water Finance Authority Water and Sewer System Revenue, Refunding, Series B, FGIC Insured, 5.125%, 6/15/31 ............................... $ 5,000,000 $ 5,172,450 Series A, FSA Insured, 5.375%, 6/15/26 ........................................... 3,000,000 3,128,070 Series B, MBIA Insured, 5.75%, 6/15/26 ........................................... 1,285,000 1,343,930 Series B, MBIA Insured, 5.50%, 6/15/27 ........................................... 5,000,000 5,334,400 Series B, MBIA Insured, Pre-Refunded, 5.75%, 6/15/26 ............................. 615,000 643,948 Series G, FSA Insured, 5.00%, 6/15/34 ............................................ 3,000,000 3,063,840 New York City Transitional Finance Authority Revenue, Future Tax Secured, Series A, FGIC Insured, 5.00%, 5/01/28 ........................................... 6,000,000 6,148,020 Series C, 4.75%, 5/01/23 ......................................................... 1,800,000 1,824,228 Series D, MBIA Insured, 5.00%, 2/01/22 ........................................... 2,000,000 2,086,640 New York City Transportation Authority MTA Triborough Bridge and Tunnel Authority COP, AMBAC Insured, Pre-Refunded, 5.75%, 1/01/20 .................................. 3,000,000 3,355,320 New York City Transportation Authority MTA Triborough COP, Series A, AMBAC Insured, Pre-Refunded, 5.25%, 1/01/29 ...................................................... 3,500,000 3,838,240 New York City Trust Cultural Resources Revenue, American Museum of Natural History, Series A, MBIA Insured, 5.65%, 4/01/27 ....... 2,000,000 2,118,440 Museum of Modern Art 2001, Series D, AMBAC Insured, 5.125%, 7/01/31 .............. 7,500,000 7,795,725 New York Botanical Garden, MBIA Insured, 5.75%, 7/01/16 .......................... 2,000,000 2,092,580 Wildlife Conservation Society, FGIC Insured, 5.00%, 2/01/34 ...................... 3,000,000 3,086,010 New York State Appropriated Tobacco Corp. Revenue, Asset Backed, Series A-1, AMBAC Insured, 5.25%, 6/01/21 ............................................................ 6,000,000 6,401,040 New York State Dormitory Authority Lease Revenue, Master Boces Program, Series A, FSA Insured, 5.25%, 8/15/21 ....................................................... 1,740,000 1,846,958 New York State Dormitory Authority Revenue, Iona College, XLCA Insured, 5.125%, 7/01/32 ...................................... 4,000,000 4,155,240 School Districts Financing Program, Series D, MBIA Insured, 5.25%, 10/01/23 ...... 1,750,000 1,885,660 School Districts Financing Program, Series D, MBIA Insured, 5.00%, 10/01/30 ...... 1,750,000 1,797,267 New York State Dormitory Authority Revenues, 853 Schools Program, Issue 2, Series E, AMBAC Insured, 5.75%, 7/01/19 ............ 1,340,000 1,473,196 City University System Consolidated, Third General, Series 1, FSA Insured, Pre-Refunded, 5.50%, 7/01/29 .................................................... 1,585,000 1,746,179 Comsewogue Public Library, MBIA Insured, 6.05%, 7/01/24 .......................... 2,445,000 2,515,025 Department of Health, MBIA Insured, 5.50%, 7/01/25 ............................... 790,000 829,824 Department of Health, MBIA Insured, Pre-Refunded, 5.50%, 7/01/25 ................. 1,210,000 1,276,659 Good Samaritan Hospital Medical Center, Series A, MBIA Insured, 5.50%, 7/01/24 ... 2,000,000 2,139,960 Insured Mortgage Nursing Home, MBIA Insured, 5.40%, 2/01/31 ...................... 400,000 421,333 Insured Mortgage Nursing Home, MBIA Insured, 5.50%, 2/01/41 ...................... 1,880,000 1,989,980 Maimonides Medical Center, MBIA Insured, 5.00%, 8/01/24 .......................... 6,540,000 6,791,398 Maimonides Medical Center, Series A, MBIA Insured, 5.75%, 8/01/24 ................ 1,500,000 1,564,350 Mental Health Services Facilities Improvement, Series A, AMBAC Insured, 5.00%, 2/15/30 5,000,000 5,148,850 Mental Health Services Facilities Improvement, Series A, MBIA Insured, Pre-Refunded, 5.25%, 8/15/26 .................................................... 2,570,000 2,832,089 Mental Health Services, Refunding, Series B, MBIA Insured, 5.00%, 2/15/24 ........ 2,260,000 2,323,416 Mental Health Services, Series D, FSA Insured, Pre-Refunded, 5.25%, 2/15/29 ...... 2,000,000 2,179,949 Montefiore Hospital, FGIC Insured, 5.00%, 8/01/29 ................................ 2,105,000 2,162,424 Montefiore Hospital, FGIC Insured, 5.00%, 8/01/33 ................................ 6,000,000 6,163,680
Semiannual Report | 35 FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) New York University, Series 2, AMBAC Insured, 5.00%, 7/01/23 ...................... $ 885,000 $ 916,568 NYSARC Inc., Series A, FSA Insured, 5.00%, 7/01/26 ................................ 1,700,000 1,767,354 Pace University, MBIA Insured, 6.00%, 7/01/29 ..................................... 3,000,000 3,371,790 Pace University, Refunding, MBIA Insured, 5.75%, 7/01/26 .......................... 6,500,000 7,005,570 Series 1, MBIA Insured, 5.00%, 7/01/22 ............................................ 2,000,000 2,090,480 Series 1, MBIA Insured, 5.00%, 7/01/24 ............................................ 2,000,000 2,076,440 Siena College, MBIA Insured, 5.00%, 7/01/31 ....................................... 3,500,000 3,589,460 Siena College, Refunding, MBIA Insured, 5.70%, 7/01/17 ............................ 2,000,000 2,153,400 St. John's University, Series A, MBIA Insured, 5.25%, 7/01/30 ..................... 3,500,000 3,678,045 St. Vincent's Hospital and Medical Center, AMBAC Insured, 6.00%, 8/01/28 .......... 5,000,000 5,154,900 University of Rochester, Refunding, Series A, MBIA Insured, 5.00%, 7/01/27 ........ 1,000,000 1,023,040 Upstate Community College, MBIA Insured, Pre-Refunded, 5.125%, 7/01/30 ............ 5,945,000 6,515,839 Wildwood Programs Inc., Refunding, MBIA Insured, 5.875%, 7/01/15 .................. 1,000,000 1,057,470 New York State Energy Research and Development Authority Electric Facilities Revenue, Consolidated Edison Project, Refunding, Series A, AMBAC Insured, 6.10%, 8/15/20 .... 5,000,000 5,143,800 New York State Energy Research and Development Authority PCR, Central Hudson Gas, Refunding, Series A, AMBAC Insured, 5.45%, 8/01/27 ................................. 3,500,000 3,707,445 New York State Environmental Facilities Corp. Water Facilities Revenue, Spring Valley Water Project, Refunding, Series B, AMBAC Insured, 6.15%, 8/01/24 .... 3,000,000 3,073,440 New York State Medical Care Facilities Finance Agency Revenue, Long-Term Health Care, Series A, FSA Insured, 6.80%, 11/01/14 ............................................ 6,285,000 6,415,728 Series B, FSA Insured, 6.45%, 11/01/14 ............................................ 5,355,000 5,373,582 Series C, FSA Insured, 6.40%, 11/01/14 ............................................ 4,245,000 4,333,296 New York State Municipal Bond Bank Agency Special Program Revenue, Buffalo, Series A, AMBAC Insured, 5.25%, 5/15/31 ...................................................... 4,000,000 4,173,720 New York State Thruway Authority State Personal Income Tax Revenue, Transportation, Series A, MBIA Insured, 5.00%, 3/15/22 ............................................. 5,500,000 5,741,560 New York State Tollway Authority Highway and Bridge Trust Fund Revenue, Series B, MBIA Insured, 4.90%, 4/01/20 ....................................................... 2,120,000 2,198,631 New York State Urban Development Corp. Revenue, Correctional Capital Facility, Series 6, AMBAC Insured, Pre-Refunded, 5.375%, 1/01/25 .......................................................................... 2,480,000 2,581,407 Correctional Facilities Service Contract, Series C, AMBAC Insured, Pre-Refunded, 6.00%, 1/01/29 ................................................................... 11,200,000 12,458,544 Niagara Falls New York City School District COP, High School Facility, MBIA Insured, 5.375%, 6/15/28 .................................................................... 2,000,000 2,096,120 Niagara Falls Public Improvement GO, MBIA Insured, 6.85%, 3/01/19 .................... 5,000 5,069 North Hempstead GO, Refunding, Series B, FGIC Insured, 6.40%, 4/01/15 ........................................................................... 1,065,000 1,284,507 4/01/16 ........................................................................... 1,000,000 1,214,700 Port Authority New York and New Jersey Revenue, XLCA Insured, 5.00%, 9/15/27 ......... 4,500,000 4,711,230 Rensselear County GO, AMBAC Insured, 6.70%, 2/15/11 .................................. 810,000 945,294 Sachem Central School District Holbrook GO, MBIA Insured, 5.00%, 6/15/30 ............. 1,000,000 1,034,580 Schenectady IDA Civic Facility Revenue, Schaffer Heights, Series A, GNMA Secured, 6.00%, 11/01/30 ......................... 3,000,000 3,191,670 Schaffer Heights, Series A, GNMA Secured, 6.05%, 11/01/35 ......................... 2,375,000 2,522,060 Union College Project, Series A, AMBAC Insured, 5.00%, 7/01/32 .................... 2,395,000 2,461,557 St. Lawrence County IDA Civic Facility Revenue, St. Lawrence University Project, Series A, MBIA Insured, 5.00%, 7/01/28 .................................... 2,455,000 2,502,382
36 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) Taconic Hills Central School District at Craryville GO, Columbia County, Refunding, FGIC Insured, 5.00%, 6/15/27 ...................................................... $ 1,295,000 $ 1,346,437 Triborough Bridge and Tunnel Authority Revenues, General Purpose, Series B, MBIA Insured, Pre-Refunded, 5.20%, 1/01/27 ............................................. 1,000,000 1,118,010 Upper Mohawk Valley Regional Water Finance Authority Water Systems Revenue, AMBAC Insured, 5.75%, 8/01/29 .................................................... 550,000 601,854 Refunding, Series A, FSA Insured, 5.125%, 10/01/26 ............................... 2,000,000 2,075,620 Warren and Washington Counties IDA Civic Facility Revenue, Series B, FSA Insured, 5.00%, 12/01/27 ................................................................... 3,680,000 3,810,493 Westchester County Health Care Corp. Revenue, Series B, 5.375%, 11/01/30 ............ 1,500,000 1,587,465 ------------- TOTAL LONG TERM INVESTMENTS (COST $309,046,062)...................................... 328,065,661 ------------- SHORT TERM INVESTMENTS 0.5% BONDS 0.5% (a) NEW YORK 0.5% Jay Street Development Corp. Courts Facility Lease Revenue, New York City, Jay Street Project, Series A, Daily VRDN and Put, 2.28%, 5/01/22 ............................. 600,000 600,000 Long Island Power Authority Electric System Revenue, Sub Series 3B, Daily VRDN and Put, 2.25%, 5/01/33 ............................................................... 800,000 800,000 New York City GO, Series B2, Sub Series B5, MBIA Insured, Weekly VRDN and Put, 2.18%, 8/15/11 ........................................................................... 140,000 140,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $1,540,000)....................................... 1,540,000 ------------- TOTAL INVESTMENTS (COST $310,586,062) 98.7%.......................................... 329,605,661 OTHER ASSETS, LESS LIABILITIES 1.3%.................................................. 4,193,472 ------------- NET ASSETS 100.0%.................................................................... $ 333,799,133 =============
See Selected Portfolio Abbreviations on page 51. (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. Semiannual Report | See notes to financial statements. | 37 FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND
------------------------------------------------------------------------------- SIX MONTHS ENDED PERIOD ENDED MARCH 31, 2005 SEPTEMBER 30, YEAR ENDED DECEMBER 31, CLASS A (UNAUDITED) 2004(e) 2003 2002 2001 2000 ------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ..... $ 11.15 $ 11.16 $ 11.04 $ 10.51 $ 10.56 $ 10.08 ------------------------------------------------------------------------------- Income from investment operations: Net investment income(a) ................ 0.19 0.30 0.41 0.44 0.49 0.52 Net realized and unrealized gains (losses) (0.23) (0.02) 0.12 0.54 (0.03) 0.49 ------------------------------------------------------------------------------- Total from investment operations ......... (0.04) 0.28 0.53 0.98 0.46 1.01 Less distributions from net investment income .................................. (0.19) (0.29) (0.41) (0.45) (0.51) (0.53) Redemption fees .......................... --(c) -- -- -- -- -- ------------------------------------------------------------------------------- Net asset value, end of period .......... $ 10.92 $ 11.15 $ 11.16 $ 11.04 $ 10.51 $ 10.56 =============================================================================== Total return(b)........................... (0.38)% 2.57% 4.85% 9.46% 4.40% 10.36% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ........ $229,590 $ 227,288 $ 217,829 $ 180,829 $ 113,980 $ 75,703 Ratios to average net assets: Expenses ................................ 0.74%(d) 0.75%(d) 0.75% 0.78% 0.82% 0.84% Expenses net of waiver and payments by affiliate........................... 0.74%(d) 0.67%(d) 0.60% 0.60% 0.51% 0.45% Net investment income ................... 3.40%(d) 3.57%(d) 3.64% 4.05% 4.61% 5.12% Portfolio turnover rate .................. 2.85% 4.66% 3.35% 8.92% 3.15% 19.95%
(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. (c) Amount is less than $0.01 per share. (d) Annualized. (e) For the period January 1, 2004 to September 30, 2004. See Note 1. 38 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND (CONTINUED)
------------------------------------------------ SIX MONTHS ENDED PERIOD ENDED PERIOD ENDED MARCH 31, 2005 SEPTEMBER 30, DECEMBER 31, CLASS C (UNAUDITED) 2004(e) 2003(f) ------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............................... $ 11.16 $ 11.17 $ 11.27 ------------------------------------------------ Income from investment operations: Net investment income(a) .......................................... 0.16 0.25 0.17 Net realized and unrealized gains (losses) ........................ (0.23) (0.01) (0.10) ------------------------------------------------ Total from investment operations ................................... (0.07) 0.24 0.07 Less distributions from net investment income ...................... (0.16) (0.25) (0.17) Redemption fees .................................................... --(d) -- -- ------------------------------------------------ Net asset value, end of period ..................................... $ 10.93 $ 11.16 $ 11.17 ================================================ Total return(b) .................................................... (0.66)% 2.14% 0.64% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .................................. $ 10,663 $ 8,772 $ 3,965 Ratios to average net assets: Expenses(c) ....................................................... 1.29% 1.30% 1.30% Expenses net of waiver and payments by affiliate(c) ............... 1.29% 1.22% 1.15% Net investment income(c) .......................................... 2.85% 3.02% 3.09% Portfolio turnover rate ............................................ 2.85% 4.66% 3.35%
(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. (c) Annualized. (d) Amount is less than $0.01 per share. (e) For the period January 1, 2004 to September 30, 2004. See Note 1. (f) For the period July 1, 2003 (effective date) to December 31, 2003. Semiannual Report | See notes to financial statements. | 39 FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 99.5% BONDS 98.4% NEW YORK 95.3% Albany County Airport Authority Revenue, Series B, FSA Insured, 4.75%, 12/15/13 ..... $ 1,850,000 $ 1,931,918 Albany IDA Civic Facility Revenue, Albany Medical Center Project, 5.75%, 5/01/09 .................................... 1,010,000 1,009,586 St. Rose Project, Series A, AMBAC Insured, 5.00%, 7/01/12 ........................ 420,000 449,123 Amherst IDA Civic Facility Revenue, University of Buffalo Foundation, Student Housing, Creekside Project, Series A, AMBAC Insured, 4.625%, 8/01/16 ....................... 1,030,000 1,081,088 Bath Central School District GO, Refunding, FGIC Insured, 4.00%, 6/15/19 ..................................................... 1,850,000 1,808,708 FSA Insured, 5.10%, 6/15/13 ...................................................... 775,000 834,225 Buffalo GO, Refunding, Series C, FGIC Insured, 5.25%, 12/01/15 ............................... 1,225,000 1,333,033 Series E, FSA Insured, Pre-Refunded, 5.35%, 12/01/12 ............................. 880,000 964,779 Byram Hills Central School District GO, Refunding, 4.00%, 11/15/10 .................. 1,375,000 1,407,601 Canisteo Central School District GO, Refunding, FSA Insured, 4.25%, 6/15/14 ......... 1,080,000 1,107,551 Clarence Central School District GO, Refunding, FSA Insured, 4.75%, 5/15/15 ......... 2,390,000 2,516,527 Cleveland Hill Union Free School District Cheektowaga GO, Refunding, Series B, FGIC Insured, 3.50%, 10/15/11 .......................................................... 1,135,000 1,133,672 4.00%, 10/15/14 .................................................................. 1,000,000 1,010,360 Connetquot Central School District Islip GO, Series B, FSA Insured, 4.40%, 6/15/16 .. 1,000,000 1,023,490 Dansville Central School District GO, Refunding, Series B, FGIC Insured, 4.25%, 6/15/11 ................................................................... 930,000 970,083 4.35%, 6/15/12 ................................................................... 870,000 907,071 4.45%, 6/15/13 ................................................................... 995,000 1,039,158 Erie County GO, FGIC Insured, 4.70%, 11/01/12 .................................................... 700,000 730,065 Public Improvement, Series A, FGIC Insured, 4.00%, 9/01/11 ....................... 4,255,000 4,358,822 Public Improvement, Series A, FGIC Insured, 5.625%, 10/01/12 ..................... 1,000,000 1,101,820 Erie County IDA School Facility Revenue, City School District of Buffalo Project, FSA Insured, 5.00%, 5/01/14 ........................................................... 2,985,000 3,252,844 Fayetteville-Manlius Central School District GO, Refunding, FGIC Insured, 4.50%, 6/15/15 .......................................................................... 1,095,000 1,144,811 Fredonia Central School District GO, Refunding, FGIC Insured, 4.125%, 6/01/09 ....... 1,000,000 1,033,330 Guilderland Central School District, Refunding, Series A, FSA Insured, 4.00%, 5/15/10 1,260,000 1,296,351 Harborfields Central School District Greenlawn GO, FSA Insured, 5.00%, 6/01/17 ...... 2,105,000 2,230,521 Highland Central School District GO, Refunding, FSA Insured, 3.75%, 6/15/12 ................................................................... 1,790,000 1,798,914 4.125%, 6/15/16 .................................................................. 1,080,000 1,086,966 Holland Patent Central School District GO, MBIA Insured, ETM, 4.25%, 6/15/09 .......................................................................... 1,125,000 1,173,679 6/15/10 .......................................................................... 1,125,000 1,179,427 Huntington GO, Public Improvement, 4.20%, 9/01/13 ................................... 1,230,000 1,254,403 Jordan-El Bridge Central School District GO, Refunding, FGIC Insured, 4.00%, 6/15/11 1,610,000 1,657,125 Long Island Power Authority Electric System Revenue, MBIA Insured, 5.125%, 4/01/11 .................................................... 1,410,000 1,498,774 Refunding, Series 8, AMBAC Insured, 5.25%, 4/01/09 ............................... 2,000,000 2,150,060 Middle Country Central School District Centereach GO, FSA Insured, 4.75%, 6/01/17 ... 1,650,000 1,716,594 Monroe County GO, Public Improvement, FGIC Insured, 4.30%, 3/01/13 ................................. 3,015,000 3,107,560 Refunding, AMBAC Insured, 5.00%, 6/01/14 ......................................... 3,000,000 3,254,280
40 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) Montgomery Otsego Schoharie Counties Solid Waste Management Authority Revenue, Refunding, MBIA Insured, 4.00%, 1/01/12 .......................................................................... $ 1,845,000 $ 1,889,833 1/01/13 .......................................................................... 1,920,000 1,955,770 MTA Dedicated Tax Fund Revenue, Refunding, Series A, FSA Insured, 3.90%, 11/15/12 ... 4,000,000 4,055,160 MTA Revenue, Series A, MBIA Insured, 5.00%, 11/15/15 ................................ 2,000,000 2,176,900 MTA Transit Facilities Revenue, Series A, Pre-Refunded, 6.00%, 7/01/15 ........................................... 1,500,000 1,668,945 Series C, FSA Insured, Pre-Refunded, 4.75%, 7/01/16 .............................. 1,915,000 2,054,650 Nassau County GO, General Improvements, Series V, AMBAC Insured, 5.25%, 3/01/13 .................... 1,000,000 1,059,470 Refunding, Series A, FGIC Insured, 6.00%, 7/01/11 ................................ 1,000,000 1,134,770 Nassau Health Care Corp. Health System Revenue, Nassau County Guaranteed, FSA Insured, Pre-Refunded, 6.00%, 8/01/10 ...................................................... 1,000,000 1,130,010 New York Bridge Authority Revenue, General, 4.125%, 1/01/13 ......................... 4,000,000 4,090,800 New York City GO, Refunding, Series F, 5.25%, 8/01/13 .............................................. 1,095,000 1,172,329 Refunding, Series G, XLCA Insured, 5.50%, 8/01/12 ................................ 2,000,000 2,212,740 Series B, 6.20%, 8/15/06 ......................................................... 770,000 787,140 Series B, Pre-Refunded, 6.20%, 8/15/06 ........................................... 230,000 235,520 Series D, 4.30%, 10/15/16 ........................................................ 3,000,000 2,994,570 Series F, 6.00%, 8/01/12 ......................................................... 300,000 316,176 Series F, Pre-Refunded, 6.00%, 8/01/12 ........................................... 400,000 423,344 Series H, 4.125%, 8/01/11 ........................................................ 1,560,000 1,588,189 Series J, 5.00%, 6/01/10 ......................................................... 4,000,000 4,251,480 New York City Health and Hospital Corp. Revenue, Health System, Refunding, Series A, AMBAC Insured, 4.60%, 2/15/12 ............................... 1,000,000 1,038,310 Series A, AMBAC Insured, 5.00%, 2/15/11 .......................................... 2,000,000 2,153,260 Series A, FSA Insured, 4.15%, 2/15/12 ............................................ 750,000 770,715 Series A, FSA Insured, 4.30%, 2/15/13 ............................................ 1,000,000 1,023,230 New York City IDA Civic Facility Revenue, Institute of International Education Inc. Project, 5.125%, 9/01/16 ............... 2,320,000 2,436,673 United States Tennis Association., National 1 Tennis Center Project, Refunding, FSA Insured, 4.25%, 11/15/14 .................................................... 3,000,000 3,090,660 New York City Municipal Water Finance Authority Water and Sewer System Revenue, Refunding, Series D, 5.00%, 6/15/12 .............................................. 2,000,000 2,160,180 Series D, 4.50%, 6/15/11 ......................................................... 2,000,000 2,102,460 New York City Transitional Finance Authority Revenue, Future Tax Secured, Series A, 4.75%, 11/15/13 ........................................................ 1,000,000 1,044,760 Series B, 6.00%, 11/15/13 ........................................................ 265,000 301,570 Series B, 4.75%, 11/01/16 ........................................................ 2,200,000 2,282,632 Series B, Pre-Refunded, 6.00%, 11/15/13 .......................................... 735,000 836,430 New York State Appropriated Tobacco Corp. Revenue, Asset Backed, Series A-1, AMBAC Insured, 5.25%, 6/01/21 ..................................................... 4,200,000 4,480,728 New York State Dormitory Authority Lease Revenue, State University Dormitory Facilities, 4.00%, 7/01/12 ........................................................ 2,000,000 2,016,180 Series A, 5.50%, 7/01/12 ......................................................... 1,815,000 1,977,824
Semiannual Report | 41 FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) New York State Dormitory Authority Revenue, Iona College, XLCA Insured, 3.875%, 7/01/10 ...................................... $ 1,000,000 $ 1,020,170 Mount St. Mary College, Radian Insured, 4.00%, 7/01/12 ........................... 2,080,000 2,081,186 School District Financing Program, Series C, MBIA Insured, 3.75%, 4/01/11 ........ 1,050,000 1,064,637 School District Financing Program, Series C, MBIA Insured, 4.00%, 4/01/12 ........ 1,125,000 1,149,795 Teachers College, MBIA Insured, 4.00%, 7/01/12 ................................... 1,000,000 1,019,490 New York State Dormitory Authority Revenues, City University, Refunding, Series F, FGIC Insured, 5.75%, 7/01/09 ............... 1,000,000 1,084,210 Department of Health, 6.30%, 7/01/05 ............................................. 735,000 741,791 FSA Insured, 5.125%, 2/15/07 ..................................................... 1,000,000 1,039,810 Hospital, Maimonides, MBIA Insured, 5.00%, 8/01/17 ............................... 1,720,000 1,837,459 Hospital, Maimonides, MBIA Insured, 5.00%, 8/01/19 ............................... 1,895,000 2,006,331 Insured Mortgage Nursing Home, MBIA Insured, 4.60%, 2/01/11 ...................... 170,000 172,781 Kateri Residence, 4.00%, 7/01/10 ................................................. 1,275,000 1,292,404 Mandatory Put 5/15/12, Refunding, Series B, 5.25%, 11/15/23 ...................... 2,000,000 2,157,160 Montefiore Hospital, FGIC Insured, 5.00%, 2/01/18 ................................ 2,975,000 3,157,397 New York State Department of Health, Refunding, 5.25%, 7/01/17 ................... 5,000,000 5,398,250 Office of General Services, MBIA Insured, 5.00%, 4/01/18 ......................... 2,000,000 2,073,160 Series 1, MBIA Insured, 5.00%, 7/01/10 ........................................... 5,000,000 5,380,700 St. John's University, Series A, MBIA Insured, 5.00%, 7/01/14 .................... 750,000 802,867 University of Rochester, Series A, 5.25%, 7/01/21 ................................ 500,000 535,475 New York State Energy Research and Development Authority PCR, New York State Electric and Gas, Series B, MBIA Insured, 4.00%, 10/15/15 .......................................... 5,000,000 4,932,300 Series D, MBIA Insured, 4.10%, 12/01/15 .......................................... 2,000,000 1,989,660 (a) MBIA Insured, 4.10%, 3/15/15 ..................................................... 2,000,000 1,990,260 New York State Environmental Facilities Corp. State Clean Water and Drinking Revenue, Revolving Funds, Series B, 5.80%, 1/15/16 ......................................................... 1,010,000 1,132,877 Pre-Refunded, 5.80%, 1/15/16 ..................................................... 1,490,000 1,660,456 New York State GO, Refunding, Series A, 4.50%, 3/15/07 .............................. 1,000,000 1,028,680 New York State HFAR, Health Facilities of New York City, Refunding, Series A, 6.00%, 11/01/08 ................................................................... 3,045,000 3,180,198 New York State Local Government Assistance Corp. Revenue, Refunding, Series A-1, FSA Insured, 5.00%, 4/01/13 .......................................... 2,200,000 2,389,904 Series B, MBIA Insured, 4.875%, 4/01/20 .......................................... 3,750,000 3,852,450 New York State Municipal Bond Bank Agency Special Program Revenue, Series A, FGIC Insured, 3.75%, 2/15/13 ...................................................... 1,415,000 1,417,816 New York State Tollway Authority Highway and Bridge Trust Fund Revenue, FSA Insured, 5.25%, 4/01/12 ...................................................... 1,620,000 1,774,435 Series C, FGIC Insured, Pre-Refunded, 5.25%, 4/01/14 ............................. 2,000,000 2,152,580 New York State Tollway Authority Service Contract Revenue, Local Highway and Bridge, MBIA Insured, 3.75%, 4/01/12 ...................................................... 2,500,000 2,509,150
42 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) New York State Urban Development Corp. Revenue, Correctional Capital Facilities, Refunding, MBIA Insured, 5.00%, 1/01/09 ......... $ 1,525,000 $ 1,620,938 Correctional Facilities Service Contract, Series C, AMBAC Insured, Pre-Refunded, 6.00%, 1/01/15 .................................................................. 1,000,000 1,112,370 State Personal Income Tax, Series C-1 Empire State, 4.125%, 12/15/16 ............. 1,490,000 1,487,869 State Personal Income Tax, Series C-1 Empire State, 4.25%, 12/15/17 .............. 1,955,000 1,961,960 Youth Facilities, Pre-Refunded, 5.75%, 4/01/10 ................................... 400,000 431,052 Youth Facilities, Pre-Refunded, 5.875%, 4/01/10 .................................. 1,500,000 1,530,000 Newark Central School District GO, Refunding, FGIC Insured, 3.75%, 6/15/10 .......... 1,630,000 1,654,564 Newfield Central School District GO, Refunding, MBIA Insured, 4.00%, 6/15/15 ........ 1,185,000 1,189,361 North Hempstead GO, FGIC Insured, ETM, 6.00%, 7/15/14 ............................... 1,715,000 1,924,830 Olean City School District GO, Refunding, FGIC Insured, 4.00%, 6/15/11 ................................................................... 1,005,000 1,034,416 4.00%, 6/15/12 ................................................................... 1,065,000 1,087,003 4.375%, 6/15/17 .................................................................. 1,335,000 1,361,780 Oneida-Herkimer Solid Waste Management Authority Solid Waste System Revenue, Refunding, 6.65%, 4/01/05 ......................................................... 125,000 125,000 Phelps-Clifton Springs Central School District GO, Refunding, FGIC Insured, 3.25%, 6/01/11 ........................................................................... 1,555,000 1,531,893 Port Authority New York and New Jersey Conservation Revenue, FSA Insured, 3.60%, 7/15/14 ........................................................................... 3,665,000 3,591,114 Rochester GO, MBIA Insured, ETM, 4.125%, 2/15/10 ............................................... 520,000 540,764 Refunding, MBIA Insured, 4.125%, 2/15/10 ......................................... 490,000 504,671 Series A, FGIC Insured, 3.00%, 10/15/11 .......................................... 1,930,000 1,842,011 Saratoga Springs City School District GO, Series A, FSA Insured, 4.50%, 6/15/15 ..... 1,025,000 1,067,148 Schenectady Metroplex Development Authority Revenue, FGIC Insured, 4.50%, 9/15/21 ... 1,720,000 1,733,192 Spencerport Central School District GO, MBIA Insured, 4.00%, 6/15/11 ................ 1,165,000 1,199,100 Suffolk County GO, Public Improvement, Refunding, Series A, MBIA Insured, 4.10%, 4/01/11 ........................................................................... 1,155,000 1,194,039 Suffolk County Judicial Facilities Agency Service Agreement Revenue, John P. Cohalan Complex, AMBAC Insured, 5.25%, 10/15/14 .................................................................. 1,435,000 1,563,519 5.00%, 4/15/16 ................................................................... 1,000,000 1,069,110 Suffolk County Water Authority Waterworks Revenue, sub. lien, Refunding, MBIA Insured, 5.10%, 6/01/13 .................................................................... 2,000,000 2,185,160 Tobacco Settlement Financing Corp. Revenue, Series B-1, 4.00%, 6/01/12 .............. 1,985,000 1,982,459 Upper Mohawk Valley Regional Water Finance Authority Water Systems Revenue, AMBAC Insured, 5.75%, 4/01/20 ..................................................... 1,000,000 1,105,750 William Floyd Union Free School District GO, MBIA Insured, 4.00%, 6/15/10 ..................................................... 1,000,000 1,029,270 Refunding, MBIA Insured, 4.00%, 6/15/13 .......................................... 1,100,000 1,117,842 Yonkers GO, Series A, AMBAC Insured, 5.00%, 12/15/14 ......................................... 1,795,000 1,900,779 Series B, FSA Insured, 4.00%, 10/15/14 ........................................... 1,810,000 1,818,163 York Central School District GO, Refunding, FSA Insured, 4.00%, 6/15/10 ............. 915,000 941,782 Yorktown Central School District GO, MBIA Insured, 4.625%, 6/15/18 .................. 1,890,000 1,957,038 ------------- 228,889,513 -------------
Semiannual Report | 43 FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) U.S. TERRITORIES 3.1% Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing Authority Hospital Revenue, Mennonite General Hospital Project, Series A, 6.375%, 7/01/06 ............................................... $ 545,000 $ 546,603 Virgin Islands PFAR, senior lien, Refunding, Series A, 5.30%, 10/01/11 .............. 3,000,000 3,186,210 Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.125%, 7/01/13 ........................................................................... 1,775,000 1,802,956 Virgin Islands Water and Power Authority Water System Revenue, Refunding, 4.875%, 7/01/06 .................................................................. 1,285,000 1,303,363 5.00%, 7/01/09 ................................................................... 520,000 539,443 ------------- 7,378,575 ------------- TOTAL BONDS (COST $230,321,877) ..................................................... 236,268,088 ------------- ZERO COUPON/STEP-UP BOND (COST $2,641,474) 1.1% NEW YORK 1.1% New York State Dormitory Authority Revenues, State University, Capital Appreciation Bond, Refunding, Series B, MBIA Insured, 5/15/08 ..................... 3,000,000 2,714,520 ------------- TOTAL LONG TERM INVESTMENTS (COST $232,963,351)...................................... 238,982,608 ------------- SHORT TERM INVESTMENTS 0.4% BONDS 0.4% (b) NEW YORK 0.4% Jay Street Development Corp. Courts Facility Lease Revenue, New York City, Jay Street Project, Series A, Daily VRDN and Put, 2.28%, 5/01/22 ............................. 500,000 500,000 Long Island Power Authority Electric System Revenue, Sub Series 3B, Daily VRDN and Put, 2.25%, 5/01/33 ............................................................... 300,000 300,000 New York City GO, Series B2, Sub Series B5, MBIA Insured, Weekly VRDN and Put, 2.18%, 8/15/11 ........................................................................... 100,000 100,000 New York City Municipal Water Finance Authority Water and Sewer System Revenue, Series G, FGIC Insured, Daily VRDN and Put, 2.28%, 6/15/24 ........................ 100,000 100,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $1,000,000) ...................................... 1,000,000 ------------- TOTAL INVESTMENTS (COST $233,963,351) 99.9% ......................................... 239,982,608 OTHER ASSETS, LESS LIABILITIES 0.1% ................................................. 270,507 ------------- NET ASSETS 100.0% ................................................................... $ 240,253,115 =============
See Selected Portfolio Abbreviations on page 51. (a) See Note 1(b) regarding securities purchased on a delayed delivery basis. (b) Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end. VRDNs are valued at cost. 44 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND
--------------------------------------------- SIX MONTHS ENDED PERIOD ENDED PERIOD ENDED MARCH 31, 2005 SEPTEMBER 30, DECEMBER 31, CLASS A (UNAUDITED) 2004(d) 2003(e) --------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ................................... $ 10.02 $ 10.06 $ 10.00 --------------------------------------------- Income from investment operations: Net investment income(a) .............................................. 0.08 0.10 0.04 Net realized and unrealized gains (losses) ............................ (0.13) (0.03) 0.05 --------------------------------------------- Total from investment operations ....................................... (0.05) 0.07 0.09 --------------------------------------------- Less distributions from net investment income .......................... (0.08) (0.11) (0.03) --------------------------------------------- Net asset value, end of period ........................................ $ 9.89 $ 10.02 $ 10.06 ============================================= Total return(b) ........................................................ (0.54)% 0.68% 0.94% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ...................................... $ 9,020 $ 9,816 $ 5,773 Ratios to average net assets: Expenses(c) ........................................................... 1.26% 1.57% 2.22% Expenses net of waiver and payments by affiliate(c) ................... 0.50% 0.50% 0.50% Net investment income(c) .............................................. 1.71% 1.33% 1.18% Portfolio turnover rate ................................................ 1.61% 8.21% --
(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. (c) Annualized. (d) For the period January 1, 2004 to September 30, 2004. See Note 1. (e) For the period September 2, 2003 (commencement of operations) to December 31, 2003. Semiannual Report | See notes to financial statements. | 45 FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 86.8% BONDS 86.8% NEW YORK 84.3% Albany County GO, Series A, FSA Insured, 2.00%, 11/01/05 ............................... $ 400,000 $ 398,684 Brockport Central School District GO, Refunding, FGIC Insured, 3.75%, 6/15/08 .......... 125,000 127,564 Buffalo Fiscal Stability Authority Sales Tax and State Aid Revenue, Series A, 4.00%, 8/15/05 .............................................................................. 335,000 337,023 Buffalo Sewer Authority Revenue, Sewer Systems, Series I, FSA Insured, 2.00%, 7/01/06 .. 100,000 98,881 Candor Central School District GO, Refunding, FSA Insured, 3.75%, 6/15/08 .............. 125,000 127,564 Catskill Central School District GO, FGIC Insured, 3.75%, 6/15/06 ...................... 100,000 101,353 Cattaraugus County GO, FGIC Insured, 4.90%, 7/15/08 ........................................................ 200,000 205,454 Public Improvement, Refunding, MBIA Insured, 2.50%, 6/01/06 ......................... 500,000 499,480 Chappaqua Central School District GO, Refunding, 2.50%, 10/15/08 ....................... 340,000 331,432 Clarkstown GO, Public Improvement, MBIA Insured, 3.75%, 9/15/08 ........................ 105,000 107,143 Erie County IDA School Facility Revenue, City of Buffalo Project, FSA Insured, 4.00%, 5/01/06 .............................................................................. 100,000 101,469 Franklinville Central School District GO, Series B, FGIC Insured, 3.50%, 6/01/07 ....... 100,000 101,494 Gates Chili Center School District GO, FSA Insured, 2.375%, 6/15/08 .................... 200,000 193,848 Long Island Power Authority Electric System Revenue, Mandatory Put 4/01/07, Refunding, Sub Series 8G, MBIA Insured, 5.00%, 4/01/12 .......................................... 200,000 207,628 Monroe County GO, Refunding, AMBAC Insured, 4.00%, 6/01/07 ............................. 400,000 408,864 Moravia Central School District GO, Refunding, FSA Insured, 3.375%, 6/01/08 ............ 100,000 100,908 New York City HDC, MFHR, Series A, 2.10%, 11/01/05 ..................................... 300,000 298,347 New York City Transitional Finance Authority Revenue, Future Tax Secured, Series E, 2.70%, 2/01/08 ............................................................. 200,000 197,588 New York State Dormitory Authority Revenue, City University Systems Consolidated, 4th General, Series A, Refunding, 3.00%, 7/01/08 .............................................................................. 100,000 99,265 State Personal Income Tax Education, 3.10%, 3/15/08 ................................. 100,000 99,887 New York State Dormitory Authority Revenues, Montefiore Hospital, FGIC Insured, 2.875%, 8/01/09 .................................. 500,000 487,340 Mortgage, White Plains Hospital, FHA Insured, 3.55%, 2/15/10 ........................ 255,000 257,035 University of Rochester, Series A, 3.50%, 7/01/07 ................................... 225,000 227,558 New York State Environmental Facilities Corp. State Clean Water and Drinking Water Revenue, Revolving Funds, Refunding, Series C, 4.10%, 6/15/09 ........................ 200,000 207,562 New York State Power Authority Revenue, Series A, 4.00%, 11/15/08 ...................... 100,000 103,153 New York State Thruway Authority Service Contract Revenue, Local Highway and Bridge, Series A, 2.75%, 3/15/08 ............................................................. 250,000 245,997 New York State Urban Development Corp. Revenue, Correctional and Youth Facilities Service, Mandatory Put 1/01/09, Series A, 4.00%, 1/01/28 ............................. 200,000 203,398 Niagara Falls Bridge Common Toll Revenue, Bridge System, Series B, MBIA Insured, 2.25%, 10/01/07 ...................................................................... 125,000 121,783 Patchogue-Medford Union Free School District GO, Series A, FGIC Insured, 3.50%, 7/01/06 275,000 277,956 Ramapo Central School District GO, MBIA Insured, 2.00%, 7/01/05 ........................ 350,000 349,668 Schenectady City School District GO, Refunding, FGIC Insured, 3.75%, 6/15/06 ........... 100,000 101,353 Sweet Home Central School District GO, New York Amherst and Tonawanda, Refunding, Series B, 3.50%, 7/15/08 ............................................................. 100,000 101,172 Triborough Bridge and Tunnel Authority Revenues, Refunding, Series B, 5.00%, 11/15/08 .. 100,000 106,370 Warren and Washington Counties IDA Civic Facility Revenue, Glens Falls Hospital Project, Series B, FSA Insured, 3.00%, 12/01/08 ................ 200,000 198,830 Series B, FSA Insured, 2.00%, 12/01/06 .............................................. 125,000 122,646
46 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) NEW YORK (CONT.) Warren and Washington Counties IDAR, Hudson Falls Recovery, Refunding, Series A, AMBAC Insured, 3.375%, 11/01/10 ...................................................... $ 300,000 $ 298,863 York Central School District GO, Refunding, FSA Insured, 2.75%, 6/15/05 ................ 50,000 50,052 ------------- 7,604,612 ------------- U.S. TERRITORIES 2.5% Guam International Airport Authority Revenue, Series A, MBIA Insured, 2.75%, 10/01/09 .. 125,000 120,602 Puerto Rico Commonwealth GO, Public Improvement, Mandatory Put 7/01/08, Refunding, Series C, MBIA Insured, 5.00%, 7/01/28 ............................................... 100,000 106,125 ------------- 226,727 ------------- TOTAL LONG TERM INVESTMENTS (COST $7,938,829)........................................... 7,831,339 ------------- SHORT TERM INVESTMENTS 12.2% BONDS (a) NEW YORK 8.9% Jay Street Development Corp. Certificates Facility Lease Revenue, Jay Street Project, Series A-4, Daily VRDN and Put, 2.28%, 5/01/22 ....................................... 400,000 400,000 Long Island Power Authority Electric System Revenue, Sub Series 2, Daily VRDN and Put, 2.28%, 5/01/33 ....................................................................... 300,000 300,000 Port Authority of New York and New Jersey Special Obligation Revenue, Versatile Structure, Series 2, Daily VRDN and Put, 2.24%, 5/01/19 .............................. 100,000 100,000 ------------- 800,000 ------------- (a) U.S. TERRITORIES 3.3% Puerto Rico Commonwealth Government Development Bank Revenue, Refunding, MBIA Insured, Weekly VRDN and Put, 2.19%, 12/01/15 ................................................. 300,000 300,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $1,100,000).......................................... 1,100,000 ------------- TOTAL INVESTMENTS (COST $9,038,829) 99.0%............................................... 8,931,339 OTHER ASSETS, LESS LIABILITIES 1.0%..................................................... 88,250 ------------- NET ASSETS 100.0%....................................................................... $ 9,019,589 =============
See Selected Portfolio Abbreviations on page 51. (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. Semiannual Report | See notes to financial statements. | 47 FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND
------------------------------------------------------------------------------- SIX MONTHS ENDED PERIOD ENDED MARCH 31, 2005 SEPTEMBER 30, YEAR ENDED DECEMBER 31, CLASS A (UNAUDITED) 2004(c) 2003 2002 2001 2000 ------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------------------------------------------------------------------------------- Income from investment operations - net investment income ....................... 0.005 0.003 0.004 0.008 0.021 0.030 Less distributions from net investment income .................................. (0.005) (0.003) (0.004) (0.008) (0.021) (0.030) ------------------------------------------------------------------------------- Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 =============================================================================== Total return(a) .......................... 0.53% 0.32% 0.45% 0.83% 2.08% 3.35% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ........ $ 64,381 $ 72,147 $ 75,278 $ 79,928 $ 70,243 $ 67,950 Ratios to average net assets: Expenses ................................ 0.77%(b) 0.76%(b) 0.76% 0.78% 0.78% 0.80% Expenses net of waiver and payments by affiliate .......................... 0.64%(b) 0.62%(b) 0.60% 0.60% 0.60% 0.60% Net investment income ................... 1.05%(b) 0.42%(b) 0.44% 0.83% 2.07% 3.30%
(a) Total return does not reflect the contingent deferred sales charge, and is not annualized for periods less than one year. (b) Annualized. (c) For the period January 1, 2004 to September 30, 2004. See Note 1. 48 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- BONDS 99.0% NEW YORK 96.1% Erie County RAN, 3.00%, 7/13/05 ...................................................... $ 1,500,000 $ 1,506,040 (a) Jay Street Development Corp. Courts Facility Lease Revenue, Jay Street Project, Series A-1, Weekly VRDN and Put, 2.23%, 5/01/22 ............... 1,300,000 1,300,000 Jay Street Project, Series A-4, Daily VRDN and Put, 2.28%, 5/01/22 ................ 800,000 800,000 New York City, Jay Street Project, Series A, Daily VRDN and Put, 2.28%, 5/01/22 ... 200,000 200,000 Long Island Power Authority Electric System Revenue, (a)Sub Series 2, Daily VRDN and Put, 2.28%, 5/01/33 .................................. 1,700,000 1,700,000 TECP, 2.05%, 4/06/05 .............................................................. 1,000,000 1,000,000 (a) Monroe County IDA Civic Facility Revenue, Various Saint John Fisher College Project, Radian Insured, Weekly VRDN and Put, 2.33%, 6/01/34 ................................ 1,000,000 1,000,000 MTA Revenue, TECP, 1.84%, 4/07/05 .................................................... 2,000,000 2,000,000 (a) Nassau County Interim Finance Authority Revenue, Sales Tax Secured, Refunding, Series B, FSA Insured, Weekly VRDN and Put, 2.21%, 11/15/22 .................................. 2,000,000 2,000,000 (a) New York City GO, Refunding, Sub Series C-4, Weekly VRDN and Put, 2.23%, 8/01/20 .................... 1,000,000 1,000,000 Series 8, Sub Series A-8, Daily VRDN and Put, 2.24%, 8/01/18 ...................... 500,000 500,000 Series B, Sub Series B-6, MBIA Insured, Daily VRDN and Put, 2.18%, 8/15/05 ........ 400,000 400,000 Sub Series E-3, Daily VRDN and Put, 2.28%, 8/01/23 ................................ 1,300,000 1,300,000 (a) New York City HDC, MF Rental Housing Revenue, Brittany Development, Series A, FNMA Insured, Weekly VRDN and Put, 2.27%, 6/15/29 .............................................. 1,500,000 1,500,000 MF Rental Housing Revenue, Carnegie Park, Series A, FNMA Insured, Weekly VRDN and Put, 2.23%, 11/15/19 ............................................. 2,950,000 2,950,000 MF Rental Housing Revenue, One Columbus Place Development, Series A, FNMA Insured, Weekly VRDN and Put, 2.28%, 11/15/28 ............................................. 1,000,000 1,000,000 MF Revenue, Mortgage, Marseilles Apartments, Series A, Weekly VRDN and Put, 2.26%, 12/01/34 .................................................................. 1,000,000 1,000,000 (a) New York City IDA Civic Facility Revenue, National Audubon Society, Daily VRDN and Put, 2.28%, 12/01/14 .................................................................... 500,000 500,000 (a) New York City IDAR, Liberty, 1 Bryant Park LLC, Series A, Weekly VRDN and Put, 2.32%, 11/01/39 .................................... 3,000,000 3,000,000 Series B, Daily VRDN and Put, 2.32%, 11/01/39 ..................................... 1,400,000 1,400,000 (a) New York City Municipal Water Finance Authority Water and Sewer System Revenue, Series C, FGIC Insured, Daily VRDN and Put, 2.24%, 6/15/23 ........................ 500,000 500,000 Series G, FGIC Insured, Daily VRDN and Put, 2.28%, 6/15/24 ........................ 2,500,000 2,500,000 (a) New York City Transitional Finance Authority Revenue, Future Tax Secured, Refunding, Sub Series C5, Daily VRDN and Put, 2.28%, 8/01/31 .. 2,100,000 2,100,000 New York City Recovery, Refunding, Series 3, Sub Series 3F, Daily VRDN and Put, 2.28%, 11/01/22 .................................................................. 500,000 500,000 New York City Recovery, Series 1, Sub Series 1D, Daily VRDN and Put, 2.28%, 11/01/22 200,000 200,000 (a) New York State Dormitory Authority Revenues, Columbia University, Series A-2, Annual VRDN and Put, 1.60%, 7/01/14 .............. 1,000,000 1,000,000 Cornell University, Series A, Weekly VRDN and Put, 2.24%, 7/01/29 ................. 1,000,000 1,000,000 Cornell University, Series B, Weekly VRDN and Put, 2.24%, 7/01/30 ................. 1,500,000 1,500,000 New York Public Library, Series B, MBIA Insured, Weekly VRDN and Put, 2.23%, 7/01/28 2,300,000 2,300,000 Oxford University Press Inc., Weekly VRDN and Put, 2.23%, 7/01/25 ................. 700,000 700,000 Rockefeller University, Series A2, Weekly VRDN and Put, 2.24%, 7/01/32 ............ 2,000,000 2,000,000
Semiannual Report | 49 FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 2005 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------- FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------- BONDS (CONT.) NEW YORK (CONT.) (a) New York State Energy Research and Development Authority PCR, Orange and Rockland Project, Series A, AMBAC Insured, Weekly VRDN and Put, 2.26%, 8/01/15 ................................ $ 1,350,000 $ 1,350,000 FGIC Insured, Weekly VRDN and Put, 2.26%, 10/01/14 ................................ 1,100,000 1,100,000 New York State Environmental Facilities Corp. Pollution Control Revenue, State Water, Revolving Fund, New York City Municipal, Series B, Pre-Refunded, 5.25%, 6/15/15 .... 1,550,000 1,577,166 (a) New York State GO, Series B, Annual VRDN and Put, 1.58%, 3/15/30 ..................... 2,000,000 2,000,000 (a) New York State HFAR, 100 Maiden Lane Housing, Series A, Weekly VRDN and Put, 2.29%, 11/01/37 ........... 1,000,000 1,000,000 350 West 43rd Street, Series A, Weekly VRDN and Put, 2.27%, 11/01/34 .............. 2,000,000 2,000,000 FNMA Insured, Weekly VRDN and Put, 2.26%, 11/15/29 ................................ 500,000 500,000 (a) New York State Local Government Assistance Corp. Revenue, Series F, Weekly VRDN and Put, 2.21%, 4/01/25 ..................................... 900,000 900,000 Series G, Weekly VRDN and Put, 2.24%, 4/01/25 ..................................... 2,700,000 2,700,000 New York State Power Authority Revenue and General Purpose GO, Consented, 2.15%, 3/01/16 1,000,000 1,000,000 Suffolk County GO, Refunding, Series B, FSA Insured, 3.00%, 5/01/05 .................. 3,000,000 3,003,670 Syracuse RAN, Series E, 3.00%, 6/30/05 ............................................... 1,000,000 1,002,890 (a) Triborough Bridge and Tunnel Authority Special Obligation Revenue, Refunding, Series C, FSA Insured, Weekly VRDN and Put, 2.27%, 1/01/31 ................................... 1,800,000 1,800,000 (a) Westchester County IDA, IDR, Levister Redevelopment Co. LLC, Series A, Weekly VRDN and Put, 2.26%, 8/01/33 ..................................................................... 1,600,000 1,600,000 ------------- 61,889,766 ------------- U.S. TERRITORIES 2.9% Puerto Rico Commonwealth TRAN, 3.00%, 7/29/05 ........................................ 1,865,000 1,871,265 ------------- TOTAL BONDS (COST $63,761,031) 99.0%.................................................. 63,761,031 OTHER ASSETS, LESS LIABILITIES 1.0%................................................... 620,414 ------------- NET ASSETS 100.0%..................................................................... $ 64,381,445 =============
See Selected Portfolio Abbreviations on page 51. (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. 50 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST STATEMENT OF INVESTMENTS, MARCH 31, 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 FNMA - Federal National Mortgage Association FSA - Financial Security Assistance GNMA - Government National Mortgage Association GO - General Obligation HDC - Housing Development Corp. HFAR - Housing Finance Authority/Agency Revenue IDA - Industrial Development Authority/Agency IDAR - Industrial Development Authority/Agency Revenue IDR - Industrial Development Revenue LLC - Limited Liability Corp. MBIA - Municipal Bond Investors Assurance Corp. MF - Multi-Family MFHR - Multi-Family Housing Revenue MTA - Metropolitan Transit Authority PCR - Pollution Control Revenue PFAR - Public Financing Authority Revenue RAN - Revenue Anticipation Notes TECP - Tax-Exempt Commercial Paper TRAN - Tax and Revenue Anticipation Notes XLCA - XL Capital Assurance Semiannual Report | See notes to financial statements. | 51 FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005 (unaudited)
------------------------------------------------------------------- FRANKLIN FRANKLIN FRANKLIN NEW YORK NEW YORK FRANKLIN NEW YORK INTERMEDIATE-TERM LIMITED-TERM NEW YORK INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND INCOME FUND MONEY FUND ------------------------------------------------------------------- Assets: Investments in securities: Cost ...................................... $ 310,586,062 $ 233,963,351 $ 9,038,829 $ 63,761,031 ------------------------------------------------------------------- Value ..................................... 329,605,661 239,982,608 8,931,339 63,761,031 Cash ....................................... 23,227 39,027 26,697 373,625 Receivables: Capital shares sold ....................... 1,324,487 363,074 19,999 156,978 Interest .................................. 4,579,063 3,251,413 75,231 250,520 Affiliates ................................ -- -- 22,348 -- ------------------------------------------------------------------- Total assets........................... 335,532,438 243,636,122 9,075,614 64,542,154 ------------------------------------------------------------------- Liabilities: Payables: Investment securities purchased ........... -- 2,003,644 -- -- Capital shares redeemed ................... 1,074,579 906,069 37,576 113,429 Affiliates ................................ 241,500 163,732 -- 29,569 Professional fees ......................... 14,009 10,791 9,055 8,228 Distributions to shareholders .............. 376,458 272,293 4,873 189 Other liabilities .......................... 26,759 26,478 4,521 9,294 ------------------------------------------------------------------- Total liabilities ..................... 1,733,305 3,383,007 56,025 160,709 ------------------------------------------------------------------- Net assets, at value ................. $ 333,799,133 $ 240,253,115 $ 9,019,589 $ 64,381,445 =================================================================== Net assets consist of: Undistributed net investment income ........ $ 86,088 $ 108,282 $ 10,100 $ -- Net unrealized appreciation (depreciation) . 19,019,599 6,019,257 (107,490) -- Accumulated net realized gain (loss) ....... (3,161,504) (687,874) -- -- Paid-in capital ............................ 317,854,950 234,813,450 9,116,979 64,381,445 ------------------------------------------------------------------- Net assets, at value ................. $ 333,799,133 $ 240,253,115 $ 9,019,589 $ 64,381,445 =================================================================== CLASS A: Net assets, at value ....................... $ 296,676,550 $ 229,589,718 $ 9,019,589 $ 64,381,445 =================================================================== Shares outstanding ......................... 25,582,047 21,029,780 911,824 64,381,445 =================================================================== Net asset value per share(a) ............... $ 11.60 $ 10.92 $ 9.89 $ 1.00 =================================================================== Maximum offering price per share (net asset value per share / 95.75%, 97.75%, 100%, and 100%, respectively) .................. $ 12.11 $ 11.17 $ 9.89 $ 1.00 =================================================================== CLASS C: Net assets, at value ....................... $ 37,122,583 $ 10,663,397 =================================== Shares outstanding ......................... 3,156,051 975,308 =================================== Net asset value and maximum offering price per share(a) .............................. $ 11.76 $ 10.93 ===================================
(a) Redemption price is equal to net asset value less contingent deferred sales charges, if applicable, and redemption fees retained by the Fund. 52 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF OPERATIONS for the six months ended March 31, 2005 (unaudited)
-------------------------------------------------------------------- FRANKLIN FRANKLIN FRANKLIN NEW YORK NEW YORK FRANKLIN NEW YORK INTERMEDIATE-TERM LIMITED-TERM NEW YORK INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND INCOME FUND MONEY FUND -------------------------------------------------------------------- Investment income: Interest .......................................... $ 8,371,804 $ 4,975,815 $ 107,266 $ 575,082 -------------------------------------------------------------------- Expenses: Management fees (Note 3) .......................... 875,279 665,373 24,326 212,318 Administrative fees (Note 3) ...................... -- -- 9,731 -- Distribution fees: (Note 3) Class A .......................................... 147,041 114,963 7,295 -- Class C .......................................... 122,035 31,964 -- -- Transfer agent fees (Note 3) ...................... 67,290 51,929 1,515 25,829 Custodian fees .................................... 2,818 1,910 84 565 Reports to shareholders ........................... 6,865 7,941 1,435 4,878 Registration and filing fees ...................... 19,592 13,826 4,922 5,981 Professional fees ................................. 10,470 7,784 7,358 5,352 Trustees' fees and expenses ....................... 6,421 5,210 204 1,800 Other ............................................. 11,346 18,726 4,424 3,221 -------------------------------------------------------------------- Total expenses ............................... 1,269,157 919,626 61,294 259,944 Expenses waived/paid by affiliate (Note 3) ... -- -- (36,956) (42,600) -------------------------------------------------------------------- Net expenses ................................ 1,269,157 919,626 24,338 217,344 -------------------------------------------------------------------- Net investment income ...................... 7,102,647 4,056,189 82,928 357,738 -------------------------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments ......... 746,664 9,335 -- -- Net change in unrealized appreciation (depreciation) on investments .................... (2,052,496) (5,014,651) (126,572) -- -------------------------------------------------------------------- Net realized and unrealized gain (loss) ............ (1,305,832) (5,005,316) (126,572) -- -------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ................................... $ 5,796,815 $ (949,127) $ (43,644) $ 357,738 ====================================================================
Semiannual Report | See notes to financial statements. | 53 FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS for the six months ended March 31, 2005 (unaudited), the period January 1, 2004 to September 30, 2004, and the year ended December 31, 2003
------------------------------------------------------------- FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND ------------------------------------------------------------- SIX MONTHS ENDED PERIOD ENDED YEAR ENDED MARCH 31, 2005 SEPTEMBER 30, 2004 DECEMBER 31, 2003 ------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ..................................... $ 7,102,647 $ 10,933,852 $ 14,505,017 Net realized gain (loss) from investments ................. 746,664 110,377 (333,959) Net change in unrealized appreciation (depreciation) on investments ........................................... (2,052,496) (2,289,270) 482,493 ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ...................................... 5,796,815 8,754,959 14,653,551 ------------------------------------------------------------- Distributions to shareholders from: Net investment income: Class A .................................................. (6,442,739) (9,843,271) (13,046,439) Class C .................................................. (706,804) (1,106,022) (1,364,639) ------------------------------------------------------------- Total distributions to shareholders ........................ (7,149,543) (10,949,293) (14,411,078) ------------------------------------------------------------- Capital share transactions: (Note 2) Class A .................................................. 5,085,009 (2,147,152) 4,741,205 Class C .................................................. (352,376) (1,959,262) 10,563,805 ------------------------------------------------------------- Total capital share transactions ........................... 4,732,633 (4,106,414) 15,305,010 ------------------------------------------------------------- Redemption fees............................................. 5 -- -- ------------------------------------------------------------- Net increase (decrease) in net assets ................. 3,379,910 (6,300,748) 15,547,483 Net assets: Beginning of period ....................................... 330,419,223 336,719,971 321,172,488 ------------------------------------------------------------- End of period ............................................. $ 333,799,133 $ 330,419,223 $ 336,719,971 ============================================================= Undistributed net investment income included in net assets: End of period ............................................ $ 86,088 $ 132,984 $ 151,792 =============================================================
54 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) for the six months ended March 31, 2005 (unaudited), the period January 1, 2004 to September 30, 2004, and the year ended December 31, 2003
------------------------------------------------------------ FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND ------------------------------------------------------------ SIX MONTHS ENDED PERIOD ENDED YEAR ENDED MARCH 31, 2005 SEPTEMBER 30, 2004 DECEMBER 31, 2003 ------------------------------------------------------------ Increase (decrease) in net assets: Operations: Net investment income ..................................... $ 4,056,189 $ 6,037,569 $ 7,520,383 Net realized gain (loss) from investments ................. 9,335 (82,555) (64,561) Net change in unrealized appreciation (depreciation) on investments .......................................... (5,014,651) (538,745) 2,261,298 ------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations ...................................... (949,127) 5,416,269 9,717,120 ------------------------------------------------------------ Distributions to shareholders from: Net investment income: Class A .................................................. (3,937,341) (5,807,273) (7,481,106) Class C .................................................. (140,141) (145,582) (35,469) ------------------------------------------------------------ Total distributions to shareholders ........................ (4,077,482) (5,952,855) (7,516,575) ------------------------------------------------------------ Capital share transactions: (Note 2) Class A .................................................. 7,114,156 9,994,227 34,873,634 Class C .................................................. 2,104,281 4,808,637 3,890,723 ------------------------------------------------------------ Total capital share transactions ........................... 9,218,437 14,802,864 38,764,357 ------------------------------------------------------------ Redemption fees............................................. 1,215 -- -- ------------------------------------------------------------ Net increase (decrease) in net assets ................ 4,193,043 14,266,278 40,964,902 Net assets: Beginning of period ........................................ 236,060,072 221,793,794 180,828,892 ------------------------------------------------------------ End of period .............................................. $ 240,253,115 $ 236,060,072 $ 221,793,794 ============================================================ Undistributed net investment income included in net assets: End of period ............................................. $ 108,282 $ 129,575 $ 44,698 ============================================================
Semiannual Report | See notes to financial statements. | 55 FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) for the six months ended March 31, 2005 (unaudited), the period January 1, 2004 to September 30, 2004, and the year ended December 31, 2003
-------------------------------------------------------------- FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND -------------------------------------------------------------- SIX MONTHS ENDED PERIOD ENDED YEAR ENDED MARCH 31, 2005 SEPTEMBER 30, 2004 DECEMBER 31, 2003(a) -------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ..................................... $ 82,928 $ 73,858 $ 18,339 Net change in unrealized appreciation (depreciation) on investments .......................................... (126,572) 7,710 11,372 -------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ...................................... (43,644) 81,568 29,711 Distributions to shareholders from net investment income ... (74,436) (81,252) (16,934) Capital share transaction (Note 2) ......................... (678,110) 4,042,959 5,759,727 -------------------------------------------------------------- Net increase (decrease) in net assets ................. (796,190) 4,043,275 5,772,504 Net assets: Beginning of period ........................................ 9,815,779 5,772,504 -- -------------------------------------------------------------- End of period .............................................. $ 9,019,589 $ 9,815,779 $ 5,772,504 ============================================================== Undistributed net investment income included in net assets: End of period .............................................. $ 10,100 $ 1,608 $ 5,476 ==============================================================
(a) For the period September 2, 2003 (commencement of operations) to December 31, 2003. 56 | See notes to financial statements. | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) for the six months ended March 31, 2005 (unaudited), the period January 1, 2004 to September 30, 2004, and the year ended December 31, 2003
----------------------------------------------------------- FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND ----------------------------------------------------------- SIX MONTHS ENDED PERIOD ENDED YEAR ENDED MARCH 31, 2005 SEPTEMBER 30, 2004 DECEMBER 31, 2003 ----------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income...................................... $ 357,738 $ 235,296 $ 338,732 Distributions to shareholders from net investment income.... (357,738) (235,296) (338,732) Capital share transactions (Note 2)......................... (7,765,448) (3,130,773) (4,650,026) ----------------------------------------------------------- Net increase (decrease) in net assets.................. (7,765,448) (3,130,773) (4,650,026) Net assets: (there is no undistributed net investment income at beginning or end of period) Beginning of period......................................... 72,146,893 75,277,666 79,927,692 ----------------------------------------------------------- End of period............................................... $ 64,381,445 $ 72,146,893 $ 75,277,666 ===========================================================
Semiannual Report | See notes to financial statements. | 57 FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Franklin New York Tax-Free Trust (the Trust) is registered under the Investment Company Act of 1940 as a non-diversified, open-end investment company, consisting of four series (the Funds). On July 15, 2004, the Board of Trustees approved the change of the Trust's fiscal year end from December 31 to September 30 effective September 30, 2004. The following summarizes the Funds' significant accounting policies. A. SECURITY VALUATION Municipal securities generally trade in the over-the-counter market rather than on a securities exchange. 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. Some 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. Securities in the Franklin New York Tax-Exempt Money Fund (Money Fund) are valued at amortized cost which approximates market value. This method involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. All security valuation procedures are approved by the Trust's Board of Trustees. B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS The Funds may purchase securities on a when-issued or delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities. 58 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. INCOME TAXES No provision has been made for U.S. income taxes because each Fund's policy is to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and to distribute substantially all of its income. Fund distributions to shareholders are determined on an income tax basis and may differ from net investment income and realized gains for financial reporting purposes. D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. For the Franklin New York Insured Tax-Free Income Fund (Insured Fund), the Franklin New York Intermediate-Term Tax-Free Income Fund (Intermediate-Term Fund) and the Franklin New York Limited-Term Tax-Free Income Fund (Limited-Term Fund), dividends from net investment income are normally declared daily and distributed monthly to shareholders. For the Money Fund, dividends from net investment income and capital gains or losses are normally declared daily. Such distributions are reinvested in additional shares of the fund or distributed monthly. Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets. Other expenses are charged to each Fund on a specific identification basis. 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 for the Insured Fund and the Intermediate-Term Fund. E. INSURANCE The scheduled payments of interest and principal for each insured municipal security in the Insured Fund are insured by either a new issue insurance policy, a portfolio insurance policy, or a secondary insurance policy. Some municipal securities in the Fund are secured by collateral guaranteed by an agency of the U.S. government. Depending on the type of coverage, premiums for insurance are either added to the cost basis of the security, included as an expense of the fund, or paid by a third party. F. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Semiannual Report | 59 FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. REDEMPTION FEES Effective June 1, 2004, redemptions and exchanges of the Funds', except the Money Fund, shares held five trading days or less may be subject to the Funds' redemption fee, which is 2% of the amount redeemed. Such fees are retained by the Funds and accounted for as additional paid-in capital. H. GUARANTEES AND INDEMNIFICATIONS Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust 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. 2. SHARES OF BENEFICIAL INTEREST The classes of shares offered within each of the funds are indicated below. 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. -------------------------------------------------------------------------------- CLASS A CLASS A & CLASS C -------------------------------------------------------------------------------- Limited-Term Fund Insured Fund Money Fund Intermediate-Term Fund At March 31, 2005, there were an unlimited number of shares authorized (no par value). Transactions in the Money Fund's shares were at $1.00 per share. Transactions in the Funds' shares were as follows:
------------------------------------------------------- INSURED FUND INTERMEDIATE-TERM FUND ------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------- CLASS A SHARES: Six months ended March 31, 2005 Shares sold ......................... 1,451,973 $ 16,964,992 2,181,741 $ 24,240,359 Shares issued in reinvestment of distributions ...................... 349,001 4,079,159 224,129 2,486,835 Shares redeemed ..................... (1,367,025) (15,959,142) (1,767,978) (19,613,038) ------------------------------------------------------- Net increase (decrease).............. 433,949 $ 5,085,009 637,892 $ 7,114,156 ======================================================= Period ended September 30, 2004(a) Shares sold ......................... 2,240,144 $ 26,180,107 4,250,204 $ 47,148,481 Shares issued in reinvestment of distributions ...................... 539,928 6,260,667 325,389 3,605,923 Shares redeemed ..................... (2,991,878) (34,587,926) (3,701,767) (40,760,177) ------------------------------------------------------- Net increase (decrease).............. (211,806) $ (2,147,152) 873,826 $ 9,994,227 =======================================================
60 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
------------------------------------------------------- INSURED FUND INTERMEDIATE-TERM FUND ------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------- Year ended December 31, 2003 Shares sold ......................... 3,630,012 $ 42,499,518 7,459,429 $ 82,565,354 Shares issued in reinvestment of distributions ...................... 705,433 8,234,561 406,887 4,509,820 Shares redeemed ..................... (3,948,218) (45,992,874) (4,722,970) (52,201,540) ------------------------------------------------------- Net increase (decrease).............. 387,227 $ 4,741,205 3,143,346 $ 34,873,634 ======================================================= CLASS C SHARES: Six months ended March 31, 2005 Shares sold ......................... 279,094 $ 3,304,786 206,720 $ 2,296,132 Shares issued in reinvestment of distributions ...................... 33,513 397,167 9,520 105,760 Shares redeemed ..................... (342,041) (4,054,329) (26,908) (297,611) ------------------------------------------------------- Net increase (decrease).............. (29,434) $ (352,376) 189,332 $ 2,104,281 ======================================================= Period ended September 30, 2004(a) Shares sold ......................... 432,321 $ 5,101,156 558,815 $ 6,219,377 Shares issued in reinvestment of distributions ...................... 53,559 629,871 9,212 101,856 Shares redeemed ..................... (654,733) (7,690,289) (136,929) (1,512,596) ------------------------------------------------------- Net increase (decrease) ............. (168,853) $ (1,959,262) 431,098 $ 4,808,637 ======================================================= Year ended December 31, 2003(b) Shares sold ......................... 1,244,737 $ 14,780,797 382,547 $ 4,196,870 Shares issued in reinvestment of distributions ...................... 72,034 851,693 1,316 14,594 Shares redeemed ..................... (429,345) (5,068,685) (28,985) (320,741) ------------------------------------------------------- Net increase (decrease) ............. 887,426 $ 10,563,805 354,878 $ 3,890,723 =======================================================
----------------------------------------- LIMITED-TERM FUND MONEY FUND ----------------------------------------- SHARES AMOUNT AMOUNT ----------------------------------------- CLASS A SHARES: Six months ended March 31, 2005 Shares sold ...................................... 307,189 $ 3,068,028 $ 16,812,265 Shares issued in reinvestment of distributions ................................... 4,729 47,211 358,063 Shares redeemed .................................. (379,595) (3,793,349) (24,935,776) ----------------------------------------- Net increase (decrease) .......................... (67,677) $ (678,110) $ (7,765,448) ========================================= Period ended September 30, 2004(a) Shares sold ...................................... 642,905 $ 6,422,127 $ 32,411,011 Shares issued in reinvestment of distributions ................................... 4,465 44,697 236,529 Shares redeemed .................................. (241,545) (2,423,865) (35,778,313) ----------------------------------------- Net increase (decrease) .......................... 405,825 $ 4,042,959 $ (3,130,773) =========================================
Semiannual Report | 61 FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (CONTINUED) --------------------------------------- LIMITED-TERM FUND MONEY FUND --------------------------------------- SHARES AMOUNT AMOUNT --------------------------------------- Year ended December 31, 2003(c) Shares sold ...................... 576,598 $ 5,789,125 $ 68,653,210 Shares issued in reinvestment of distributions ................... 645 6,485 343,285 Shares redeemed .................. (3,567) (35,883) (73,646,521) --------------------------------------- Net increase (decrease) .......... 573,676 $ 5,759,727 $ (4,650,026) ======================================= (a) For the period January 1, 2004 to September 30, 2004. (b) For the period July 1, 2003 (commencement of operations) to December 31, 2003 for the Intermediate-Term Fund. (c) For the period September 2, 2003 (commencement of operations) to December 31, 2003 for the Limited-Term Fund. 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 Transfer agent (Investor Services) A. MANAGEMENT FEES The Insured Fund and the Intermediate-Term Fund pay an investment management fee to Advisers based on the month-end net assets and the Money Fund pays an investment management fee to Advisers based on average daily net assets as follows: -------------------------------------------------------------------------------- ANNUALIZED FEE RATE NET ASSETS -------------------------------------------------------------------------------- 0.625% First $100 million 0.500% Over $100 million, up to and including $250 million 0.450% In excess of $250 million The Limited-Term Fund pays an investment management fee to Advisers based on the average daily net assets of the fund as follows: -------------------------------------------------------------------------------- ANNUALIZED FEE RATE NET ASSETS -------------------------------------------------------------------------------- 0.500% First $100 million 0.450% Over $100 million, up to and including $250 million 0.425% Over $250 million, up to and including $500 million Fees are further reduced on net assets over $500 million. 62 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) B. ADMINISTRATIVE FEES Under an agreement with Advisers, FT Services provides administrative services to the Insured Fund, the Intermediate-Term Fund and the Money Fund. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the funds. The Limited-Term Fund pays an administrative fee to FT Services of 0.20% per year of the fund's average daily net assets. C. WAIVERS/EXPENSE REIMBURSEMENTS Advisers agreed in advance to voluntarily waive a portion of management fees for the Money Fund as noted in the Statements of Operations. Total expenses waived by Advisers are not subject to reimbursement by the fund subsequent to the fund's fiscal year end. FT Services agreed in advance to voluntarily waive administrative fees for the Limited-Term Fund. Additionally, Advisers agreed in advance to voluntarily waive management fees and assume payment of other expenses for the fund, as noted in the Statements of Operations. Total expenses waived by Advisers and FT services are not subject to reimbursement by the fund subsequent to the fund's fiscal year end. D. DISTRIBUTION FEES The Funds reimburse Distributors for costs incurred in marketing the Funds' shares under a Rule 12b-1 plan up to a certain percentage per year of their average daily net assets of each class as follows: -------------------------------------- INSURED INTERMEDIATE- LIMITED- FUND TERM FUND TERM FUND -------------------------------------- Class A ............................. 0.10% 0.10% 0.15% Class C ............................. 0.65% 0.65% -- Under the Class A distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. E. SALES CHARGES/UNDERWRITING AGREEMENTS Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds' shares for the period: -------------------------------------- INSURED INTERMEDIATE- MONEY FUND TERM FUND FUND -------------------------------------- Net sales charges received............ $ 48,518 $ 22,270 $ -- Contingent deferred sales charges retained............................. $ 933 $ 1,782 $ 9,887 Semiannual Report | 63 FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) F. TRANSFER AGENT FEES The Funds paid transfer agent fees as noted in the Statement of Operations of which the following amounts were retained by Investor Services: -------------------------------------------------------- INSURED INTERMEDIATE- LIMITED- MONEY FUND TERM FUND TERM FUND FUND -------------------------------------------------------- Transfer agent fees... $ 44,632 $ 32,338 $ 1,035 $ 19,963 4. INCOME TAXES At September 30, 2004, the following Funds had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows: ------------------------------ INSURED INTERMEDIATE- FUND TERM FUND ------------------------------ Capital loss carryovers expiring in: 2007.......................................... $ 961,955 $ 213,880 2008.......................................... 2,471,475 283,875 2009.......................................... -- 251 2010.......................................... -- 34,731 2011.......................................... 474,738 -- 2012.......................................... -- 164,472 ------------------------------ $ 3,908,168 $ 697,209 ============================== At March 31, 2005, the net unrealized appreciation (depreciation) based on the cost of investments for income tax purposes were as follows:
---------------------------------------------------------- INSURED INTERMEDIATE- LIMITED- MONEY FUND TERM FUND TERM FUND FUND ---------------------------------------------------------- Cost of investments............ $ 310,492,007 $ 233,899,574 $ 9,038,829 $ 63,761,031 ========================================================== Unrealized appreciation........ $ 19,626,514 $ 6,865,379 $ 3,854 $ -- Unrealized depreciation........ (512,860) (782,345) (111,344) -- ---------------------------------------------------------- Net unrealized appreciation (depreciation)................ $ 19,113,654 $ 6,083,034 $ (107,490) $ -- ==========================================================
Net investment income (loss) and net realized gains (losses) differs for financial statement and tax purposes primarily due to differing treatments of bond discounts. 64 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 5. INVESTMENT TRANSACTIONS Purchases and sales of investments (excluding short-term securities) for the period ended March 31, 2005, were as follows: -------------------------------------------------- INSURED INTERMEDIATE- LIMITED- FUND TERM FUND TERM FUND -------------------------------------------------- Purchases................. $ 23,979,944 $ 21,044,153 $ 2,170,602 Sales .................... $ 18,110,967 $ 6,761,488 $ 115,000 6. REGULATORY MATTERS INVESTIGATIONS AND SETTLEMENTS As part of various investigations by a number of federal, state, and foreign regulators and governmental entities, including the Securities and Exchange Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the National Association of Securities Dealers, Inc. ("NASD"), 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 (as used in this section, together, the "Company"), as well as certain current or former executives and employees of the Company, provided documents and information in response to subpoenas and/or requests for documents, information and/or testimony. Beginning in August 2004, the Company entered into settlements with certain of the regulators and a governmental entity investigating the mutual fund industry practices noted above. The Company believes that settlement of each of the matters is in the best interest of the Company and shareholders of the Franklin, Templeton, and Mutual Series mutual funds (the "funds"). Two of the settlement agreements, those with the SEC and the CAGO concerning marketing support payments, provide that the distribution of settlement monies are to be made to the relevant funds, not to individual shareholders. The CAGO has approved the distribution plan pertaining to the distribution of the monies owed under the CAGO settlement agreement and, in accordance with the terms and conditions of that settlement, the monies were disbursed to the participating funds. The Trust did not participate in the CAGO settlement. The SEC has not yet approved the distribution plan pertaining to the SEC settlement. When approved, disbursements of settlement monies under the SEC's settlement will be made promptly in accordance with the terms and conditions of that order. OTHER LEGAL PROCEEDINGS On April 12, 2005, the Attorney General of West Virginia filed a complaint in the Circuit Court of Marshall County, West Virginia against a number of companies engaged in the mutual fund industry, including Franklin Resources, Inc. and its subsidiary, Franklin Advisers, Inc., and certain other parties alleging violations of the West Virginia Consumer Credit and Protection Act Semiannual Report | 65 FRANKLIN NEW YORK TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. REGULATORY MATTERS (CONTINUED) OTHER LEGAL PROCEEDINGS (CONTINUED) and seeking, among other things, civil penalties and attorneys' fees and costs. To the extent applicable to the Company, the complaint arises from activity that occurred in 2001 and duplicates, in whole or in part, the allegations asserted in the February 4, 2004 Massachusetts Administrative Complaint concerning one instance of market timing (the "Administrative Complaint") and the SEC's findings regarding market timing in its August 2, 2004 Order (the "SEC Order"), both of which matters were previously reported. The Trust, in addition to the Company and other funds, and certain current and former officers, employees, and directors have been named in multiple lawsuits in different courts alleging violations of various federal securities laws and seeking, among other relief, monetary damages, restitution, removal of fund trustees, directors, advisers, administrators, and distributors, rescission of management contracts and 12b-1 plans, and/or attorneys' fees and costs. Specifically, the lawsuits claim breach of duty with respect to alleged arrangements to permit market timing and/or late trading activity, or breach of duty with respect to the valuation of the portfolio securities of certain Templeton funds managed by Franklin Resources, Inc. subsidiaries, resulting in alleged market timing activity. The majority of these lawsuits duplicate, in whole or in part, the allegations asserted in the Administrative Complaint and the SEC's findings regarding market timing in the SEC Order. The lawsuits are styled as class actions, or derivative actions on behalf of either the named funds or Franklin Resources, Inc. In addition, the Company, as well as certain current and former officers, employees, and directors, have been named in multiple lawsuits alleging violations of various securities laws and pendent state law claims relating to the disclosure of marketing support payments and/or payment of allegedly excessive commissions and/or advisory or distribution fees, and seeking, among other relief, monetary damages, restitution, rescission of advisory contracts, including recovery of all fees paid pursuant to those contracts, an accounting of all monies paid to the named advisers, declaratory relief, injunctive relief, and/or attorneys' fees and costs. These lawsuits are styled as class actions or derivative actions brought on behalf of the Trust and other funds. The Company and fund management strongly believe that the claims made in each of the lawsuits described above are without merit and intends 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. Public trust and confidence are critical to the Company's business and any material loss of investor and/or client confidence could result in a significant decline in assets under management by the Company, which would have an adverse effect on future financial results. If 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 their shareholders whole, as appropriate. The Company is committed to taking all appropriate actions to protect the interests of its funds' shareholders. 66 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST SHAREHOLDER INFORMATION BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT At a meeting held February 28, 2005, the Board of Trustees ("Board"), including a majority of non-interested or independent Trustees, approved renewal of the investment advisory contract for each of the four separate tax-exempt funds within the Trust (the "Fund(s)"). 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 each 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 each Fund prepared by Lipper Financial Services ("Lipper"), an independent organization, as well as a Fund profitability analysis report prepared by management. The Lipper reports compared each 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 utilizing expense allocation methodologies deemed reasonable by the Fund's independent accountants. 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 were a memorandum prepared by management describing enhancements to the services provided to the funds 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. While the management contracts for all the Funds were considered at the same Board meeting, the Trustees dealt with each Fund separately. In approving continuance of the investment advisory contract for each 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 each 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 SERVICE. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Funds and their shareholders. In addition to investment performance and expenses discussed later, the Board's opinion is based, in part, upon periodic reports furnished them showing that the investment policies and restrictions for each 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 Semiannual Report | 67 FRANKLIN NEW YORK TAX-FREE TRUST SHAREHOLDER INFORMATION (CONTINUED) BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED) 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 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 been favorably reported on in discussions with the Fund's outside accountants and 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, including a favorable third party report on portfolio execution, 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 each 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 each 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 performance was given to the Lipper reports furnished for the contract renewals. The Lipper reports prepared for each individual Fund showed their investment performance in comparison with a performance universe selected by Lipper. The following summarizes the performance results for each of the Funds. FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND - The Lipper report for this Fund showed the investment performance of its Class A shares during 2004 and the previous ten years in comparison with a performance universe consisting of all retail and institutional New York insured municipal debt funds as selected by Lipper. Such comparison showed that the Fund's income return during 2004, as shown in the Lipper report, and for the previous three, five and ten year periods on an annualized basis was in the first or top quintile of its performance universe. The Lipper report also showed that the Fund's total return during 2004 was in the top quintile and for the previous three, five and ten year periods on an annualized basis was in the first or second quintile of its performance universe. The Board expressed its satisfaction with such performance. 68 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST SHAREHOLDER INFORMATION (CONTINUED) BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED) FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND - The Lipper report for this Fund showed the investment performance of its Class A shares during 2004 and the previous ten years in comparison with a performance universe consisting of all retail and institutional New York intermediate municipal debt funds as selected by Lipper. Such comparison showed that the Fund's income return in 2004, as shown in the Lipper report, and during each of the previous ten years was in the first or top quintile of its performance universe. The Lipper report also showed that the Fund's total return during 2004 and for the previous three, five and ten year periods on an annualized basis was in the top quintile of its performance universe. The Board expressed its satisfaction with such performance. FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND - Lipper compared this Fund's performance to a group of retail and institutional municipal debt funds as selected by Lipper, and the Fund's income and total return during 2004, as shown in the Lipper report, placed it in the fifth and fourth quintile of such universe, respectively. The Board was satisfied with management's explanation for such performance which was that this Fund had not been in existence for more than a year and is of a relatively small size. The Board also noted that the Fund's management fees and other expenses have been partially waived or absorbed by management. FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND - Lipper compared this Fund's performance to a performance universe consisting of all retail and institutional New York tax-exempt money market funds as selected by Lipper. This Fund's performance was in the fourth lowest quintile of its performance universe during 2004 and in each of the previous three, five and ten year periods on an annualized basis. The Board was satisfied with management's explanation for such performance which was that this Fund was conservatively run to ensure safety and stability of assets with no holdings in non-rated or tier 2 securities and with less than ten percent of its assets being invested in securities subject to the alternative minimum tax. COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the management fees and total expense ratios of each Fund compared with its peer 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 which would be used as a basis of comparison in the Lipper reports. In reviewing comparative costs, emphasis was given to each 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 peer group which, for comparative consistency, is shown by Lipper for Fund Class A shares. The results of such expense comparisons showed that the effective management fee rate of the Franklin New York Insured Tax-Free Income Fund was in the second lowest quintile of its Lipper expense group and its actual Semiannual Report | 69 FRANKLIN NEW YORK TAX-FREE TRUST SHAREHOLDER INFORMATION (CONTINUED) BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED) total expenses were in the first or lowest quintile of such group. The effective management fee rate of the Franklin New York Intermediate-Term Tax-Free Income Fund was in the fourth quintile, but its total expenses were the lowest in its Lipper expense group. While realizing that other factors such as the Manager's profitability and economies of scale bear on the reasonableness of fees, the Board was satisfied with the management fee and total expenses of these Funds in comparison to their Lipper expense groups. The Lipper expense comparison for the Franklin New York Limited-Term Tax-Free Income Fund was not considered to be particularly meaningful in view of this Fund's small size and management's partial waiver or absorption of expenses. The Lipper expense comparison for the Franklin New York Tax-Exempt Money Fund showed its effective management fee rate and total expenses were in the fifth and fourth quintiles, respectively, of its Lipper expense group. In discussing these expense comparisons, management pointed out that this Fund is not actively marketed and largely serves as an alternative and frequently temporary investment vehicle for shareholders of the various Franklin Templeton funds and also provides a number of services to shareholders, including check writing, dividend reimbursements, and exchange rights. Management also pointed out that this Fund was relatively small and that its total expenses as shown on the Lipper report were within 20 basis points of the Lipper expense group median. The Board found such expenses to be acceptable, noting the points raised by management, as well as management's partial absorption of expenses for this Fund. MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of each 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 each 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 Funds made in prior years and that such methodology was subject to review and testing by the Funds' outside accountants every other year. 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 Funds for purposes of determining profitability. Included in the analysis for each 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 each Fund, as well as the relative contribution of each 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 the infrastructure necessary to the type of mutual fund operations conducted by the Manager and its corporate affiliates 70 | Semiannual Report FRANKLIN NEW YORK TAX-FREE TRUST SHAREHOLDER INFORMATION (CONTINUED) BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED) may not be fully reflected in the expenses allocated to each 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 Funds, 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 their consideration of all these factors, the Board determined that the level of profits realized by the Manager under its investment advisory contract with each 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 Funds grow larger and the extent to which this is reflected in the level of management fees charged. While recognizing any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appeared 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 fund. The Board also noted that any economies of scale are shared with each of these Funds and their shareholders through management fee breakpoints existing in each of the Funds' investment advisory contracts so that as a Fund grows in size, its effective management fee rate declines. The only Fund whose asset size exceeded the last breakpoint level was the Franklin New York Insured Tax-Free Income Fund whose assets were approximately $332 million at December 31, 2004, and whose management fee structure provides an initial fee of .625% on the first $100 million of assets; .5% on the next $150 million of assets; and .45% on assets in excess of $250 million. The Board discussed the prospect of adding further fee breakpoints for this Fund with management whose position during such discussions was that the existing fee structure reaches a relatively low rate quickly as this Fund grows and that such low rate, in effect, reflects anticipated economies of scale as this Fund's assets increase beyond such level. In support of these arguments, management pointed out the favorable effective management fee and total expense comparisons for this Fund within its Lipper peer group as previously discussed under "Comparative Expenses." Management also observed and the Board recognized, and accepted, that the fact that this Fund has assets beyond the last breakpoint level does not mean that it no longer benefits from economies of scale since the amount of assets being charged at the lowest breakpoint fee level results in a lower overall effective management fee rate. While intending to monitor future growth in Fund assets and the appropriateness of additional management fee breakpoints, the Board believed that to the extent economies of scale may be realized by the Manager and its affiliates, the schedule of fees under the investment advisory contract provided a sharing of benefits with the Fund and its shareholders. At a Board meeting held April 19, 2005, management agreed to an additional series of management fee breakpoints beginning at the $10 billion level for the Franklin Insured Tax-Free Income Fund. Semiannual Report | 71 FRANKLIN NEW YORK TAX-FREE TRUST SHAREHOLDER INFORMATION (CONTINUED) PROXY VOTING POLICIES AND PROCEDURES The Trust has established Proxy Voting Policies and Procedures ("Policies") that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust'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 Trust's proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission's website at sec.gov and reflect the most recent 12-month period ended June 30. QUARTERLY STATEMENT OF INVESTMENTS The Trust 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. 72 | Semiannual Report LITERATURE REQUEST LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT 1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of service, we may monitor, record and access telephone calls to or from our service departments. These calls can be identified by the presence of a regular beeping tone. FRANKLIN TEMPLETON INVESTMENTS INTERNATIONAL Mutual European Fund Templeton China World Fund Templeton Developing Markets Trust Templeton Foreign Fund Templeton Foreign Smaller Companies Fund Templeton International (Ex EM) Fund GLOBAL Mutual Discovery Fund Templeton Global Long-Short Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Growth Fund Templeton World Fund GROWTH Franklin Aggressive Growth Fund Franklin Capital Growth Fund Franklin Flex Cap Growth Fund Franklin Small-Mid Cap Growth Fund Franklin Small Cap Growth Fund II(1) VALUE Franklin Balance Sheet Investment Fund(2) Franklin Equity Income Fund Franklin Large Cap Value Fund Franklin MicroCap Value Fund(2) Franklin 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),(5) Franklin Low Duration Total Return Fund Franklin Real Return Fund Franklin Strategic Income Fund Franklin Strategic Mortgage Portfolio Franklin Templeton Hard Currency Fund Franklin Total Return Fund Franklin U.S. Government Securities Fund(4) Templeton Global Bond Fund TAX-FREE INCOME(6) NATIONAL FUNDS Double Tax-Free Income Fund Federal Tax-Free Income Fund High Yield Tax-Free Income Fund Insured Tax-Free Income Fund(7) 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(8) Colorado Connecticut Florida(8) Georgia Kentucky Louisiana Maryland Massachusetts(7) Michigan(7) Minnesota(7) Missouri New Jersey New York(8) North Carolina Ohio(7) Oregon Pennsylvania Tennessee Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust(9) (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) Formerly Franklin Short-Intermediate U.S. Government Securities Fund. Effective 9/1/04, the fund's name changed; its investment goal and strategy remained the same. (6) For investors subject to the alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable. (7) Portfolio of insured municipal securities. (8) 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). (9) The funds of the Franklin Templeton Variable Insurance Products Trust are generally available only through insurance company variable contracts. 01/05 Not part of the semiannual report [LOGO] (R) FRANKLIN TEMPLETON One Franklin Parkway INVESTMENTS San Mateo, CA 94403-1906 o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL? Eligible shareholders can sign up for eDelivery at franklintempleton.com. See inside for details. SEMIANNUAL REPORT AND SHAREHOLDER LETTER FRANKLIN NEW YORK TAX-FREE TRUST 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. NYT S2005 05/05 ITEM 2. CODE OF ETHICS. (a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer. (c) N/A (d) N/A (f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant has an audit committee financial expert serving on its audit committee. (2) The audit committee financial expert is Frank W. T. LaHaye and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A ITEM 6. SCHEDULE OF INVESTMENTS. N/A ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein. ITEM 10. CONTROLS AND PROCEDURES. (A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant's management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant's management, including the Registrant's principal executive officer and the Registrant's principal financial officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures. Based on such evaluation, the Registrant's principal executive officer and principal financial officer concluded that the Registrant's disclosure controls and procedures are effective. (B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR. ITEM 11. EXHIBITS. (A) Code of Ethics (B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and Galen G. Vetter, Chief Financial Officer (B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and Galen G. Vetter, Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRANKLIN NEW YORK TAX-FREE TRUST By /s/Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date May 20, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date May 20, 20054 By /s/Galen G. Vetter Chief Financial Officer Date May 20, 2005