FRANKLIN NEW YORK
TAX-FREE TRUST
ANNUAL REPORT
DECEMBER 31, 1998
SHAREHOLDER LETTER
Dear Shareholder:
It's a pleasure to bring you Franklin New York Tax-Free Trust's annual report
for the period ended December 31, 1998.
A TALE OF TWO ECONOMIES
During the 12 months under review, the U.S. economy began to appear like a tale
of two economies -- a healthy and expanding domestic sector contrasted with a
fragile and ailing export-oriented sector. Despite momentary dips in many
economic indicators, the gross domestic product grew 3.9% in 1998, masking much
of the underlying divergence. Consumer spending remained robust and the housing
market regained its momentum, after ebbing slightly at the end of the summer.
Consumer confidence rose in November, after tumbling in October, as retail sales
bounced back, signaling that consumers remained guardedly optimistic about the
economy, the stock market and their jobs. Housing starts, which fell in
September, rose beyond expectations in October, registering the biggest gain in
13 months, and remained solid in November.
CONTENTS
Shareholder Letter ................... 1
Special Update:
A Word About Municipal
Bond Insurance ....................... 6
Fund Reports
Franklin New York Insured
Tax-Free Income Fund ................ 8
Franklin New York
Intermediate-Term
Tax-Free Income Fund ................ 15
Franklin New York
Tax-Exempt Money Fund ............... 21
Municipal Bond Ratings ............... 23
Financial Highlights &
Statement of Investments ............. 26
Financial Statements ................. 39
Notes to
Financial Statements ................. 44
Independent
Auditors' Report ..................... 48
Tax Designation ...................... 49
FUND CATEGORY
[PYRAMID GRAPH]
<PAGE>
Meanwhile, exports were hit hard by the emerging market turmoil that prevailed
for much of the reporting period, hampering the U.S. manufacturing sector and
producing record trade deficits. The National Association of Purchasing Managers
Index in December indicated that manufacturing activity slowed for the seventh
straight month. Durable goods orders, for cars, appliances and other heavy
machinery, fell in October, the first decrease in five months. However, orders
rose more strongly than expected in November, surprising many economists.
Because of the problems in the world markets during much of the period, many
financial institutions curtailed their lending, creating a "credit crunch."
Beginning with the Russian debt crisis and culminating with the emergency
bailout of a major hedge fund, capital worldwide became less available,
adversely affecting many companies.
Taking note of these factors, the Federal Reserve Board's (the Fed's) monetary
policy panel, the Federal Open Market Committee, cut the federal funds target
rate three times, for a total of 0.75% since late September, to 4.75%, in an
effort to stimulate growth. The Fed's moves were aimed at providing liquidity to
the financial system and making it easier for major corporations to obtain
favorable lending from banks.
2
<PAGE>
The bond and stock markets reacted to the Fed's loosening of monetary policy in
two opposite ways. After the 30-year U.S. Treasury bond reached a record-low
yield of 4.70% on October 5, 1998, the U.S. bond market quickly lost ground as
investors became less enthusiastic about committing capital to fixed-income
markets. On December 31, 1998, the yield on the 30- year Treasury bond stood at
5.09%, 8.3% higher than the yield on October 5, 1998. The stock market was a
different story. After losing more than 20% of their value in the third quarter
correction, many stocks rebounded strongly. On November 23, 1998, the Dow
Jones(R) Industrial Average reached an all-time high of 9374.27, with many
other indices registering record highs as well. The Nasdaq Composite and S&P
500(R) Indices, two widely followed market indicators, continued to surge
through December, reaching record highs at the end of the month.
As of the end of the reporting period, the yields on 30-year, AAA-rated, insured
municipal bonds stood at more than 95.5% of the yield on a 30-year Treasury
bond. For those investors in the 39.6% tax bracket, the taxable equivalent yield
on an average municipal bond was 8.05% versus 5.09% for the Treasury bond.(1)
(1) Source: Bloomberg.
3
<PAGE>
THE NEW YORK ECONOMY
Over the reporting period, New York state completed three years of record
financial performance. Fiscal 1997 and 1998 finished with surpluses of $1.4
billion and $2.0 billion, respectively, while the enacted fiscal 1999 budget
contains a $902 million built-in reserve that will likely grow higher. These
surpluses resulted chiefly from the state's buoyant financial sector in the
first half of 1998. However, New York's economy still lags the nation's.
As of the end of the reporting period, the state's total employment was below
pre-recession numbers. Since 1990, New York's annual employment declined an
average of 0.3%, while U.S. employment grew almost 2.0% annually. The financial
sector had a greater impact on personal income growth than job creation, and the
state's 4.5% personal income growth rate closely tracks the 5.5% national
average.
Moody's, a national credit rating agency, gave New York general obligation debt
its A2 rating as of the end of the reporting period. This reflected the state's
recent, strong economic and financial performance, as well as its longer-term
vulnerability to an economic slowdown, based on weak employment growth and
revenue dependence on the historically volatile financial services sector.(2)
(2) Source: Moody's Investors Service, Municipal Credit Research, 7/8/98. This
does not indicate Moody's rating of the fund.
4
<PAGE>
STAYING ON COURSE
Our investment philosophy remains disciplined and focused, as we strive to offer
our shareholders high, current tax-free income and preservation of capital. The
outlook for the municipal bond market should remain positive, given the
relatively stable U.S. economy, low inflation environment and budget surplus.
Likewise, New York municipalities and municipal bonds should continue to do
well, owing to the state's sound economic condition.
We encourage you to discuss your financial goals with an investment
representative. He or she can address concerns about volatility and help you
diversify your investments and stay focused on the long term. As always, we
appreciate your support, welcome your questions and comments and look forward to
serving your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin New York Tax-Free Trust
/s/ Thomas J. Kenny
Thomas J. Kenny
Director
Franklin Municipal Bond Department
5
<PAGE>
A WORD ABOUT
MUNICIPAL BOND INSURANCE
[LOGO]
Municipal bond insurers guarantee the timely payment of interest and principal
on insured bond issues, providing bond investors with additional protection
against the potential of the issuer's payment default. Moody's and Standard &
Poor's assign the four principal municipal bond insurers -- MBIA, AMBAC, FGIC
and FSA -- their highest rating, AAA, based on their ability to pay claims. This
is important, as once a bond is insured it no longer carries the underlying
security's rating, but the insurer's rating. On June 30, 1998, the four primary
municipal bond insurers comprised more than 99% of the market, with MBIA
controlling the largest share, 37.5%.
Municipal bond insurers often work with bond reinsurers to enhance their ability
to generate new business. By purchasing portions of insured bond portfolios from
the insurers, bond reinsurers assume a portion of the risk, freeing up the
insurers' capital and enabling them to insure additional municipal bond issues.
The added capital provided by the reinsurers, in turn, increases the overall
size of the insured municipal bond market.
6
<PAGE>
Currently, many municipal bond issuers favor the use of bond insurance. In 1998,
municipal bond insurers covered 50.8% of the new-issue municipal bond market,
involving 5,825 new issues valued at $144 billion. For issuers, obtaining bond
insurance can often lower their borrowing costs as it often improves their
credit rating, which more than makes up for the cost of the insurance. In
addition, the four primary, AAA-rated bond insurers presently charge issuers
comparatively inexpensive insurance premiums, due to the extremely competitive
environment for municipal bond insurance. Bond insurance also enables issuers to
market their bonds to a larger pool of potential buyers. For example, insured
municipal bond funds purchase primarily, if not exclusively, insured bonds.
Low-cost municipal bond insurance benefits investors beyond the credit
protection it provides against payment default. As insured bonds appeal to a
wider variety of investors, insurance can lead to improved liquidity, allowing
investors to more easily buy and sell bonds.
INSURED MUNICIPAL BOND ISSUES(*)
As a % of muni bond market
[BAR CHART]
GRAPHIC MATERIAL (2)
This chart shows in bar chart format insured municipal bond issues as a % of the
total municipal bond market.
1993 - 37.0%
1994 - 37.0%
1995 - 43.0%
1996 - 46.0%
1997 - 49.0%
1998 - 50.8%
(*)Source: The Bond Buyer, 1999.
INSURERS AS A % OF MARKET SHARE(*)
6/30/98
[PIE CHART]
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the market share of municipal bond insurers
on 6/30/98.
MBIA - 37.5%
AMBAC - 23.3%
FSA - 21.3%
FGIC - 17.0%
Other - 0.9%
(*)Source: Fitch IBCA, October 28, 1998.
7
<PAGE>
FRANKLIN NEW YORK
INSURED TAX-FREE INCOME FUND
Your Fund's Goal: Franklin New York Insured Tax-Free Income Fund seeks to
provide high, current income exempt from regular federal, New York state and New
York City personal income taxes while seeking preservation of capital by
investing primarily in a portfolio of insured New York municipal
securities.(1),(2)
During the 12 months under review, uncertainty in world markets drove the yield
on the 30-year Treasury bond down to 4.70% on October 5, 1998, before edging
back up to 5.09% at the close of the period. Yields in the municipal market
trended in the same general direction as the Treasury market. Yet, due to a very
large supply of new municipal bonds, yields did not fall as much as Treasuries
during the period. The Bond Buyer 40 Index, published daily by the Bond Buyer
and a yardstick for measuring municipal bonds, yielded 5.22% on December 31,
1997, compared with a yield of 5.16% on December 31, 1998. Nationally, new
municipal supply was extremely strong in 1998, more than 28.5% greater than last
year's new issuance supply, with supply in New York state increasing more than
32% over last year's levels.
(1) For investors subject to the alternative minimum tax, a small portion of
this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
(2) Fund shares are not insured by any U.S. or other government agency, are
subject to market risk and will fluctuate in value. Insurance relates only to
the payment of principal and interest on the portfolio's securities, and the
terms of the insurance as outlined in the prospectus. No representation is made
as to any issuer's ability to meet its commitments.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 28 of
this report.
8
<PAGE>
However, overall demand for municipal bonds was not quite as great as the
supply. Arbitrage buyers and nontraditional municipal bond buyers, attracted by
municipal bonds' attractive pricing relative to Treasuries, helped fill the
void, but not enough to drive the municipal market in step with the Treasury
market. As a result, municipals underperformed Treasuries, and the yield on
AAA-rated, insured municipal securities stood at approximately 95.5% of
Treasuries, making municipal securities attractive investments at the end of the
reporting period.
As in prior reporting periods, many issuers took advantage of lower interest
rates to refund their existing higher-coupon debt, causing the fund's exposure
to prerefunded bonds to increase slightly over the period. Our management of
prerefunded bonds did not change. We typically attempted to sell such bonds with
approximately five years remaining to their call date. In doing so, we were able
to sell the prerefunded bonds at a premium and use the capital to invest in
current coupon bonds. By extending the fund's call protection and preserving its
income earning potential, we were able to maintain a relatively stable share
value.
Franklin New York Insured Tax-Free Income Fund's Class I share price, as
measured by net asset value, increased five cents, from $11.66 on December 31,
1997, to $11.71 on December 31, 1998. In addition, the fund's total net assets
increased during the reporting period, from $266.6 million on December 31, 1997,
to $279.9 million on December 31, 1998. We invested new money and proceeds from
sold securities in current coupon bonds as they became available. The fund
purchased bonds over the course of the period in many different sectors,
maintaining healthy sector diversification. Some of the fund's significant
purchases during
9
<PAGE>
DIVIDEND DISTRIBUTIONS(*)
Franklin New York Insured Tax-Free Income Fund
1/1/98 - 12/31/98
<TABLE>
<CAPTION>
Dividend per Share
-----------------------------
Month Class I Class II
- --------------------------------------------------------------------
<S> <C> <C>
January 4.9 cents 4.34 cents
February 4.9 cents 4.34 cents
March 4.9 cents 4.34 cents
April 4.7 cents 4.14 cents
May 4.7 cents 4.14 cents
June 4.7 cents 4.14 cents
July 4.7 cents 4.14 cents
August 4.7 cents 4.14 cents
September 4.7 cents 4.14 cents
October 4.7 cents 4.41 cents
November 4.7 cents 4.41 cents
December 4.7 cents 4.41 cents
- --------------------------------------------------------------------
Total 57.0 cents 51.09 cents
</TABLE>
(*)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 during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
the period included St. Lawrence University, Long Island Power Authority and New
York State Dormitory Authority.
The graphs on page 14 compare the performance of Franklin New York Insured
Tax-Free Income Fund with that of the Lehman Brothers Municipal Bond Index,
which is composed of all fixed-rate investment-grade bonds over $50 million
issued after January 1, 1991, with at least one year to maturity. Please keep in
mind that a market index is unmanaged and has inherent performance advantages
when compared with any fund. Unlike an index, mutual funds are never fully
invested, which may reduce returns, because they need cash available to redeem
shares. If the fund's operating expenses -- management fees and commissions on
trades -- had been applied to the index, its
10
<PAGE>
performance would have been lower. An index is simply a measure of performance,
and one cannot invest in it directly.
Going forward, our outlook for the fund, the municipal bond market and the state
of New York remains positive. We expect the supply of New York municipal bonds
to remain strong in 1999. We will continue to manage the fund with the intention
of protecting its share value and maintaining its competitive yield. However,
due to the lower interest rate environment, new bonds purchased during the
period offered lower interest rates than the prerefunded issues sold, which most
likely will lead to reduced dividends in the future.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of December 31, 1998, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
PORTFOLIO BREAKDOWN
Franklin New York Insured
Tax-Free Income Fund
12/31/98
<TABLE>
<CAPTION>
% of Total
Long-Term
Sector Investments
- --------------------------------------------------
<S> <C>
Utilities 19.8%
Education 18.4%
Transportation 18.3%
Prerefunded 13.2%
Hospitals 10.5%
Health Care 8.1%
General Obligation 6.0%
Other Revenue 4.9%
Certificates of Participation 0.8%
</TABLE>
11
<PAGE>
FRANKLIN NEW YORK
INSURED TAX-FREE
INCOME FUND
PERFORMANCE SUMMARY AS OF 12/31/98
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION (1/1/98 - 12/31/98)
<TABLE>
<CAPTION>
CLASS I CHANGE 12/31/98 12/31/97
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value +$0.05 $11.71 $11.66
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS
---------------------------------
<S> <C>
Dividend Income $ 0.570
Long-Term Capital Gain $0.0566
TOTAL $0.6266
</TABLE>
<TABLE>
<CAPTION>
CLASS II CHANGE 12/31/98 12/31/97
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value +$0.07 $11.82 $11.75
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS
---------------------------------
<S> <C>
Dividend Income $0.5109
Long-Term Capital Gain $0.0566
TOTAL $0.5675
</TABLE>
Franklin New York Insured Tax-Free Income Fund paid distributions derived from
long-term capital gains of 5.66 cents ($0.0566) per share in December 1998. The
fund hereby designates such distributions as capital gain dividends per Internal
Revenue Code Section 852(b)(3).
Class I:
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge with dividends
reinvested at the offering price. Thus, actual total returns would differ.
Effective May 1, 1994, the fund eliminated the sales charge on reinvested
dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
Class II:
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class I shares.
12 Past performance is not predictive of future results.
<PAGE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS I 1-YEAR 5-YEAR (5/1/91)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) +5.94% +30.76% +74.81%
Average Annual Total Return(2) +1.42% +4.60% +6.95%
Distribution Rate(3) 4.61%
Taxable Equivalent Distribution Rate(4) 8.60%
30-Day Standardized Yield(5) 3.70%
Taxable Equivalent Yield(4) 6.90%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS II 1-YEAR 3-YEAR (5/1/95)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) +5.55% +18.58% +29.16%
Average Annual Total Return(2) +3.49% +5.48% +6.93%
Distribution Rate(3) 4.43%
Taxable Equivalent Distribution Rate(4) 8.26%
30-Day Standardized Yield(5) 3.29%
Taxable Equivalent Yield(4) 6.14%
</TABLE>
(1) Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
(2) Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, applicable,
maximum sales charge(s) for that class.
(3) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price per share on December
31, 1998.
(4) Taxable equivalent distribution rate and yield assume the 1998 maximum
combined federal, New York state and New York City personal income tax bracket
of 46.4%, based on the federal income tax rate of 39.6%.
(5) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended December 31, 1998.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results. 13
<PAGE>
FRANKLIN NEW YORK
INSURED TAX-FREE
INCOME FUND
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
The unmanaged index differs from the fund in composition, does not pay
management fees or expenses and includes reinvested dividends. One cannot invest
directly in an index. Total return represents the change in value of an
investment over the periods shown. It includes the current, applicable, maximum
sales charge(s), fund expenses, account fees and reinvested distributions.
Performance of the fund's shares exceeded the rate of inflation as measured by
the Consumer Price Index (CPI).
AVERAGE ANNUAL TOTAL RETURN
12/31/98
<TABLE>
<CAPTION>
Class I
- ----------------------------------
<S> <C>
1-Year +1.42%
5-Year +4.60%
Since Inception (5/1/91) +6.95%
</TABLE>
CLASS I (5/1/91-12/31/98)
[LINE GRAPH]
GRAPHIC MATERIAL (6)
This graph compares the performance of Franklin New York Insured Tax-Free Income
Fund's Class I shares as tracked by the growth in value of a $10,000 investment,
to that of Lehman Brothers Municipal Bond Index and the Consumer Price Index
(CPI) from 5/1/91-12/31/98. Source: Standard and Poor's Micropal.
<TABLE>
<CAPTION>
Franklin New York Insured Tax-Free Income LB Muni Index CPI
Fund-Class A
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5/1/91 9579 10,000 10,000
5/31/91 9588 0.89% 10,089 0.30% 10,030
6/30/91 9559 -0.10% 10,079 0.29% 10,059
7/31/91 9722 1.22% 10,202 0.15% 10,074
8/31/91 9866 1.32% 10,337 0.29% 10,103
9/30/91 9976 1.30% 10,471 0.44% 10,148
10/31/91 10058 0.90% 10,565 0.15% 10,163
11/30/91 10043 0.28% 10,595 0.29% 10,193
12/31/91 10234 2.15% 10,823 0.07% 10,200
1/31/92 10307 0.23% 10,847 0.15% 10,215
2/29/92 10322 0.03% 10,851 0.36% 10,252
3/31/92 10347 0.04% 10,855 0.51% 10,304
4/30/92 10438 0.89% 10,952 0.14% 10,318
5/31/92 10590 1.18% 11,081 0.14% 10,333
6/30/92 10743 1.68% 11,267 0.36% 10,370
7/31/92 11149 3.00% 11,605 0.21% 10,392
8/31/92 10968 -0.98% 11,491 0.28% 10,421
9/30/92 10981 0.65% 11,566 0.28% 10,450
10/31/92 10768 -0.98% 11,453 0.35% 10,487
11/30/92 11058 1.79% 11,658 0.14% 10,501
12/31/92 11215 1.02% 11,777 -0.07% 10,494
1/31/93 11362 1.16% 11,913 0.49% 10,545
2/28/93 11698 3.62% 12,344 0.35% 10,582
3/31/93 11700 -1.06% 12,214 0.35% 10,619
4/30/93 11787 1.01% 12,337 0.28% 10,649
5/31/93 11828 0.56% 12,406 0.14% 10,664
6/30/93 12029 1.67% 12,613 0.14% 10,679
7/31/93 12060 0.13% 12,630 0.00% 10,679
8/31/93 12284 2.08% 12,892 0.28% 10,709
9/30/93 12531 1.14% 13,039 0.21% 10,731
10/31/93 12583 0.19% 13,064 0.41% 10,775
11/30/93 12496 -0.88% 12,949 0.07% 10,783
12/31/93 12789 2.11% 13,222 0.00% 10,783
1/31/94 12920 1.14% 13,373 0.27% 10,812
2/28/94 12533 -2.59% 13,027 0.34% 10,849
3/31/94 11912 -4.07% 12,496 0.34% 10,886
4/30/94 12011 0.85% 12,603 0.14% 10,901
5/31/94 12155 0.87% 12,712 0.07% 10,909
6/30/94 12007 -0.61% 12,635 0.34% 10,946
7/31/94 12254 1.83% 12,866 0.27% 10,975
8/31/94 12264 0.35% 12,911 0.40% 11,019
9/30/94 12036 -1.47% 12,721 0.27% 11,049
10/31/94 11737 -1.78% 12,495 0.07% 11,057
11/30/94 11382 -1.81% 12,269 0.13% 11,071
12/31/94 11750 2.20% 12,539 0.00% 11,071
1/31/95 12189 2.86% 12,897 0.40% 11,115
2/28/95 12618 2.91% 13,272 0.40% 11,160
3/31/95 12769 1.15% 13,425 0.33% 11,197
4/30/95 12778 0.12% 13,441 0.33% 11,233
5/31/95 13178 3.19% 13,870 0.20% 11,256
6/30/95 13046 -0.87% 13,749 0.20% 11,278
7/31/95 13105 0.95% 13,880 0.00% 11,278
8/31/95 13248 1.27% 14,056 0.26% 11,308
9/30/95 13318 0.63% 14,145 0.20% 11,330
10/30/95 13558 1.45% 14,350 0.33% 11,368
11/30/95 13775 1.66% 14,588 -0.07% 11,360
12/31/95 13920 0.96% 14,728 -0.07% 11,352
1/31/96 14017 0.76% 14,840 0.59% 11,419
2/29/96 13917 -0.68% 14,739 0.32% 11,455
3/31/96 13744 -1.28% 14,550 0.52% 11,515
4/30/96 13693 -0.28% 14,510 0.39% 11,560
5/31/96 13704 -0.04% 14,504 0.19% 11,582
6/30/96 13853 1.09% 14,662 0.06% 11,589
7/31/96 13952 0.91% 14,795 0.19% 11,611
8/31/96 13962 -0.02% 14,792 0.19% 11,633
9/30/96 14176 1.40% 15,000 0.32% 11,670
10/31/96 14315 1.13% 15,169 0.32% 11,707
11/30/96 14582 1.83% 15,447 0.19% 11,730
12/31/96 14517 -0.42% 15,382 0.00% 11,730
1/31/97 14490 0.19% 15,411 0.32% 11,767
2/28/97 14604 0.92% 15,553 0.31% 11,804
3/31/97 14434 -1.33% 15,346 0.25% 11,833
4/30/97 14563 0.84% 15,475 0.12% 11,847
5/31/97 14759 1.51% 15,709 -0.06% 11,840
6/30/97 14915 1.07% 15,877 0.12% 11,855
7/31/97 15336 2.77% 16,316 0.12% 11,869
8/31/97 15162 -0.94% 16,163 0.19% 11,891
9/30/97 15320 1.19% 16,355 0.25% 11,921
10/31/97 15453 0.64% 16,460 0.25% 11,951
11/30/97 15533 0.59% 16,557 -0.06% 11,944
12/31/97 15788 1.46% 16,799 -0.12% 11,929
1/31/98 15894 1.03% 16,972 0.19% 11,952
2/28/98 15893 0.03% 16,977 0.19% 11,975
3/31/98 15932 0.09% 16,992 0.19% 11,997
4/30/98 15832 -0.45% 16,916 0.18% 12,019
5/31/98 16117 1.58% 17,183 0.18% 12,041
6/30/98 16196 0.39% 17,250 0.12% 12,055
7/31/98 16219 0.25% 17,293 0.12% 12,070
8/31/98 16439 1.55% 17,561 0.12% 12,084
9/30/98 16630 1.25% 17,781 0.12% 12,099
10/31/98 16640 0.00% 17,781 0.24% 12,128
11/30/98 16707 0.35% 17,843 0.00% 12,128
12/31/98 16744 0.25% 17,888 -0.06% 12,120
Totals 67.44% 78.88% 21.20%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
12/31/98
CLASS II (5/1/95-12/31/98)
[LINE GRAPH]
<TABLE>
<CAPTION>
Class II
- ----------------------------------
<S> <C>
1-Year +3.49%
3-Year +5.48%
Since Inception (5/1/95) +6.93%
</TABLE>
CLASS II (5/1/95 - 12/31/98)
[LINE GRAPH]
GRAPHIC MATERIAL (8)
This graph compares the performance of Franklin New York Insured Tax-Free Income
Fund's Class II shares as tracked by the growth in value of a $10,000
investment, to that of Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI) from 5/1/95-12/31/98. Source: Standard and Poor's Micropal.
<TABLE>
<CAPTION>
Franklin New York Insured LB Muni Index CPI
Tax-Free Income Fund-Class C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5/1/95 $ 9,900 10,000 10,000
5/31/95 $10,212 3.19% 10,319 0.20% 10,020
6/30/95 $10,114 -0.87% 10,229 0.20% 10,040
7/31/95 $10,162 0.95% 10,326 0.00% 10,040
8/31/95 $10,277 1.27% 10,458 0.26% 10,066
9/30/95 $10,326 0.63% 10,523 0.20% 10,086
10/30/95 $10,505 1.45% 10,676 0.33% 10,120
11/30/95 $10,676 1.66% 10,853 -0.07% 10,112
12/31/95 $10,773 0.96% 10,957 -0.07% 10,105
1/31/96 $10,851 0.76% 11,041 0.59% 10,165
2/29/96 $10,770 -0.68% 10,966 0.32% 10,198
3/31/96 $10,631 -1.28% 10,825 0.52% 10,251
4/30/96 $10,587 -0.28% 10,795 0.39% 10,291
5/31/96 $10,590 -0.04% 10,791 0.19% 10,310
6/30/96 $10,699 1.09% 10,908 0.06% 10,316
7/31/96 $10,777 0.91% 11,008 0.19% 10,336
8/31/96 $10,778 -0.02% 11,005 0.19% 10,356
9/30/96 $10,944 1.40% 11,159 0.32% 10,389
10/31/96 $11,035 1.13% 11,286 0.32% 10,422
11/30/96 $11,234 1.83% 11,492 0.19% 10,442
12/31/96 $11,189 -0.42% 11,444 0.00% 10,442
1/31/97 $11,163 0.19% 11,466 0.32% 10,475
2/28/97 $11,245 0.92% 11,571 0.31% 10,508
3/31/97 $11,109 -1.33% 11,417 0.25% 10,534
4/30/97 $11,203 0.84% 11,513 0.12% 10,547
5/31/97 $11,356 1.51% 11,687 -0.06% 10,540
6/30/97 $11,470 1.07% 11,812 0.12% 10,553
7/31/97 $11,786 2.77% 12,139 0.12% 10,565
8/31/97 $11,648 -0.94% 12,025 0.19% 10,586
9/30/97 $11,763 1.19% 12,168 0.25% 10,612
10/31/97 $11,859 0.64% 12,246 0.25% 10,639
11/30/97 $11,913 0.59% 12,318 -0.06% 10,632
12/31/97 $12,102 1.46% 12,498 -0.12% 10,619
1/31/98 $12,188 1.03% 12,627 0.19% 10,640
2/28/98 $12,181 0.03% 12,631 0.19% 10,660
3/31/98 $12,216 0.09% 12,642 0.19% 10,680
4/30/98 $12,134 -0.45% 12,585 0.18% 10,699
5/31/98 $12,344 1.58% 12,784 0.18% 10,719
6/30/98 $12,398 0.39% 12,834 0.12% 10,731
7/31/98 $12,410 0.25% 12,866 0.12% 10,744
8/31/98 $12,581 1.55% 13,065 0.12% 10,757
9/30/98 $12,710 1.25% 13,229 0.12% 10,770
10/31/98 $12,714 0.00% 13,229 0.24% 10,796
11/30/98 $12,761 0.35% 13,275 0.00% 10,796
12/31/98 $12,786 0.25% 13,308 -0.06% 10,789
Total 27.86% 33.08% 7.89%
</TABLE>
(*)Source: Standard and Poor's Micropal.
Past performance is not predictive of future results.
14
<PAGE>
FRANKLIN NEW YORK INTERMEDIATE-
TERM TAX-FREE INCOME FUND
Your Fund's Goal: Franklin New York Intermediate-Term Tax-Free Income Fund seeks
to provide high, current income exempt from regular federal, New York state and
New York City personal income taxes while seeking preservation of capital by
investing primarily in a portfolio of New York municipal securities with an
average weighted maturity (the time in which debt must be repaid) between three
and 10 years.(1)
During the reporting period, assets in Franklin New York Intermediate-Term
Tax-Free Income Fund grew strongly, increasing from approximately $59 million on
December 31, 1997, to more than $80 million on December 31, 1998. Municipal bond
supply in New York was extremely robust in 1998, increasing more than 32% over
last year's level. However, the overall demand for municipals was not quite as
great as the supply, resulting in municipal bonds' underperforming comparable
Treasury securities. At the end of the reporting period, the yield on AAA-rated
insured municipal securities stood at approximately 95.5% of Treasuries, making
municipal securities attractive investments.
CREDIT QUALITY BREAKDOWN
Franklin New York Intermediate-
Term Tax-Free Income Fund
Based on Total Long-Term Investments(*)
12/31/98
[PIE CHART]
GRAPHIC MATERIAL (9)
This chart shows in pie chart format the credit quality breakdown of Franklin
New York Intermediate-Term Tax-Free Income Fund based on total long-term
investments on 12/31/98.
<TABLE>
<CAPTION>
<S> <C>
AAA 25.0%
AA 5.7%
A 39.5%
BBB 29.8%
</TABLE>
(*) Quality breakdowns may include internal ratings for bonds not rated by a
national rating agency.
(1) For investors subject to the alternative minimum tax, a small portion of
this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 33 of
this report.
15
<PAGE>
During the period under review, we purchased bonds in many different industries,
as we attempted to maintain the fund's broad diversification. Our holdings of
AAA-rated bonds increased from 14.2% of the fund's total long-term investments
on December 31, 1997, to 25.0% at the end of the reporting period. However,
falling interest rates during the period meant that many of the new securities
purchased by the fund offered lower interest rates than the existing holdings,
forcing the fund to reduce its dividend. Significant purchases during the period
included Long Island Power Authority, Metropolitan Transportation Authority, New
York City Transitional Financing Authority and New York State Urban Development
Corporation.
The graph on page 20 compares the performance of Franklin New York
Intermediate-Term Tax-Free Income Fund with that of the Lehman Brothers Muni
10-Year Bond Index, which is composed of all fixed-rate investment-grade bonds
over $50 million issued after January 1, 1991, with a maturity of eight to 12
years. Please keep in mind that a market index is unmanaged and has inherent
performance advantages when compared with any fund. Unlike an index, mutual
funds are never fully invested, which may reduce returns, because they need cash
available to redeem shares. If the fund's operating expenses -- management fees
and commissions on trades -- had been applied to the index, its performance
would have been lower. An index is simply a measure of performance, and one
cannot invest in it directly.
PORTFOLIO BREAKDOWN
Franklin New York Intermediate-
Term Tax-Free Income Fund
12/31/98
<TABLE>
<CAPTION>
% of Total
Long-Term
Sector Investments
- --------------------------------------------------
<S> <C>
Hospitals 22.0%
General Obligation 20.2%
Other Revenue 19.0%
Utilities 8.7%
Transportation 8.6%
Housing 6.8%
Prerefunded 5.5%
Education 5.2%
Certificates of Participation 4.0%
</TABLE>
16
<PAGE>
During the period, the fund's share price, as measured by net asset value,
increased 15 cents, from $10.62 on December 31, 1997, to $10.77 on December 31,
1998. Going forward, our outlook for the fund, the municipal bond market and the
state of New York remains positive. We will continue to manage the fund with the
intention of protecting its share value and maintaining its competitive yield.
To ensure that the fund retains its relatively stable income earning potential,
we will strive to purchase bonds with longer call protection than those we sell.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of December 31, 1998, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
DIVIDEND DISTRIBUTIONS(*)
Franklin New York Intermediate-Term
Tax-Free Income Fund - Class I
1/1/98 - 12/31/98
<TABLE>
<CAPTION>
Dividend
Month per Share
- -------------------------------
<S> <C>
January 4.6 cents
February 4.6 cents
March 4.6 cents
April 4.5 cents
May 4.5 cents
June 4.5 cents
July 4.5 cents
August 4.5 cents
September 4.5 cents
October 4.3 cents
November 4.3 cents
December 4.3 cents
- -------------------------------
Total 53.7 cents
</TABLE>
(*)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 during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
17
<PAGE>
FRANKLIN NEW YORK
INTERMEDIATE-TERM
TAX-FREE INCOME FUND
PERFORMANCE SUMMARY AS OF 12/31/98
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
Class I:
Subject to the maximum 2.25% initial sales charge. The fund's manager agreed in
advance to waive a portion of the management fees, which reduces operating
expenses and increases distribution rate, yield and total return to
shareholders. Without this waiver, the fund's distribution rate and total return
would have been lower, and the yield for the period would have been 3.16%. The
fee waiver may be discontinued at any time upon notice to the fund's Board of
Trustees.
PRICE AND DISTRIBUTION INFORMATION (1/1/98-12/31/98)
<TABLE>
<CAPTION>
CLASS I CHANGE 12/31/98 12/31/97
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value +$0.15 $10.77 $10.62
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS
--------------------------------------
<S> <C>
Dividend Income $0.537
</TABLE>
18 Past performance is not predictive of future results.
<PAGE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS I 1-YEAR 5-YEAR (9/23/92)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) +6.63% +31.20% +47.82%
Average Annual Total Return(2) +4.27% +5.09% +6.04%
Distribution Rate(3) 4.68%
Taxable Equivalent Distribution Rate(4) 8.73%
30-Day Standardized Yield(5) 3.62%
Taxable Equivalent Yield(4) 6.75%
</TABLE>
(1) Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
(2) Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the applicable, maximum
sales charge for that class.
(3) Distribution rate is based on an annualization of the current 4.3 cent per
share monthly dividend and the maximum offering price of $11.02 on December 31,
1998.
(4) Taxable equivalent distribution rate and yield assume the 1998 maximum
combined federal and New York state and City personal income tax bracket of
46.4%, based on the federal income tax rate of 39.6%.
(5) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended December 31, 1998.
Bond prices and thus the fund's share price generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results. 19
<PAGE>
FRANKLIN NEW YORK
INTERMEDIATE-TERM
TAX-FREE INCOME FUND
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
The unmanaged index differs from the fund in composition, does not pay
management fees or expenses and includes reinvested dividends. One cannot invest
directly in an index. Total return represents the change in value of an
investment over the periods shown. It includes the applicable, maximum sales
charge(s), fund expenses, account fees and reinvested distributions. Performance
of the fund's shares exceeded the rate of inflation as measured by the Consumer
Price Index (CPI).
AVERAGE ANNUAL TOTAL RETURN
12/31/98
<TABLE>
<CAPTION>
CLASS I
- -----------------------------------------
<S> <C>
1-Year +4.27%
5-Year +5.09%
Since Inception (9/23/92) +6.04%
</TABLE>
CLASS I (9/23/92)-12/31/98)
[LINE GRAPH]
GRAPHIC MATERIAL (13)
This graph compares the performance of Franklin New York Intermediate-Term
Tax-Free Income Fund, as tracked by the growth in value of a $10,000 investment,
to that of Lehman Brothers Muni 10-Year Bond Index and Consumer Price Index
(CPI) from 9/23/92-12/31/98. Source: Standard and Poor's Micropal.
<TABLE>
<CAPTION>
Franklin New York Intermediate-Term Tax-Free LB Muni 10-Year Bond Index CPI
Income Fund
<S> <C> <C> <C> <C> <C>
9/23/92 9,775 10,000 10,000
9/30/92 9,785 0.19% 10,019 0.07% 10,007
10/31/92 9,765 -1.02% 9,917 0.35% 10,042
11/30/92 9,892 1.83% 10,099 0.14% 10,056
12/31/92 9,980 1.16% 10,216 -0.07% 10,049
1/31/93 10,055 1.69% 10,388 0.49% 10,098
2/28/93 10,316 3.66% 10,769 0.35% 10,133
3/31/93 10,312 -1.46% 10,611 0.35% 10,169
4/30/93 10,378 0.95% 10,712 0.28% 10,197
5/31/93 10,413 0.35% 10,750 0.14% 10,211
6/30/93 10,489 1.97% 10,962 0.14% 10,226
7/31/93 10,506 0.25% 10,989 0.00% 10,226
8/31/93 10,683 2.07% 11,216 0.28% 10,254
9/30/93 10,800 1.23% 11,354 0.21% 10,276
10/31/93 10,845 0.16% 11,373 0.41% 10,318
11/30/93 10,695 -0.82% 11,279 0.07% 10,325
12/31/93 10,997 2.13% 11,520 0.00% 10,325
1/31/94 11,135 1.23% 11,661 0.27% 10,353
2/28/94 10,901 -2.74% 11,342 0.34% 10,388
3/31/94 10,458 -3.82% 10,908 0.34% 10,424
4/30/94 10,556 1.10% 11,028 0.14% 10,438
5/31/94 10,665 0.80% 11,117 0.07% 10,445
6/30/94 10,648 -0.43% 11,069 0.34% 10,481
7/31/94 10,821 1.68% 11,255 0.27% 10,509
8/31/94 10,857 0.39% 11,299 0.40% 10,551
9/30/94 10,659 -1.35% 11,146 0.27% 10,580
10/31/94 10,427 -1.46% 10,983 0.07% 10,587
11/30/94 10,228 -1.89% 10,776 0.13% 10,601
12/31/94 10,415 1.80% 10,970 0.00% 10,601
1/31/95 10,593 2.59% 11,254 0.40% 10,643
2/28/95 10,881 2.83% 11,572 0.40% 10,686
3/31/95 10,951 1.35% 11,729 0.33% 10,721
4/30/95 10,968 0.12% 11,743 0.33% 10,757
5/31/95 11,285 3.17% 12,115 0.20% 10,778
6/30/95 11,214 -0.62% 12,040 0.20% 10,800
7/31/95 11,343 1.47% 12,217 0.00% 10,800
8/31/95 11,507 1.36% 12,383 0.26% 10,828
9/30/95 11,547 0.64% 12,462 0.20% 10,849
10/30/95 11,712 1.15% 12,606 0.33% 10,885
11/30/95 11,844 1.34% 12,774 -0.07% 10,878
12/31/95 11,908 0.61% 12,852 -0.07% 10,870
1/31/96 11,984 1.01% 12,982 0.59% 10,934
2/29/96 11,899 -0.41% 12,929 0.32% 10,969
3/31/96 11,802 -1.24% 12,769 0.52% 11,026
4/30/96 11,797 -0.35% 12,724 0.39% 11,069
5/31/96 11,769 -0.28% 12,688 0.19% 11,090
6/30/96 11,882 0.95% 12,809 0.06% 11,097
7/31/96 11,995 0.96% 12,932 0.19% 11,118
8/31/96 11,978 0.00% 12,932 0.19% 11,139
9/30/96 12,139 1.03% 13,065 0.32% 11,175
10/31/96 12,254 1.26% 13,230 0.32% 11,210
11/30/96 12,453 2.02% 13,497 0.19% 11,232
12/31/96 12,424 -0.45% 13,436 0.00% 11,232
1/31/97 12,468 0.39% 13,489 0.32% 11,268
2/28/97 12,584 0.94% 13,615 0.31% 11,303
3/31/97 12,457 -1.34% 13,433 0.25% 11,331
4/30/97 12,562 0.74% 13,532 0.12% 11,344
5/31/97 12,718 1.42% 13,724 -0.06% 11,338
6/30/97 12,836 1.10% 13,875 0.12% 11,351
7/31/97 13,154 2.81% 14,265 0.12% 11,365
8/31/97 13,074 -0.97% 14,127 0.19% 11,386
9/30/97 13,219 1.27% 14,306 0.25% 11,415
10/31/97 13,303 0.53% 14,382 0.25% 11,443
11/30/97 13,374 0.46% 14,448 -0.06% 11,437
12/31/97 13,533 1.58% 14,677 -0.12% 11,423
1/31/98 13,656 1.11% 14,840 0.19% 11,445
2/28/98 13,676 -0.01% 14,838 0.19% 11,466
3/31/98 13,684 -0.07% 14,828 0.19% 11,488
4/30/98 13,625 -0.55% 14,746 0.18% 11,509
5/31/98 13,852 1.70% 14,997 0.18% 11,530
6/30/98 13,924 0.37% 15,052 0.12% 11,543
7/31/98 13,930 0.16% 15,076 0.12% 11,557
8/31/98 14,148 1.74% 15,339 0.12% 11,571
9/30/98 14,299 1.49% 15,567 0.12% 11,585
10/31/98 14,316 0.04% 15,573 0.24% 11,613
11/30/98 14,374 0.30% 15,620 0.00% 11,613
12/31/98 14,449 0.31% 15,669 -0.06% 11,606
Total 44.49% 56.69% 16.06%
</TABLE>
(*)Source: Standard and Poor's Micropal.
20 Past performance is not predictive of future results.
<PAGE>
FRANKLIN NEW YORK
TAX-EXEMPT MONEY FUND
Your Fund's Goal: Franklin New York Tax-Exempt Money Fund seeks to provide high,
current income exempt from regular federal and New York state personal income
taxes while seeking preservation of capital and liquidity by investing primarily
in a portfolio of short-term municipal debt securities issued in New York. The
fund is managed to maintain a $1.00 share price.(1)
During the reporting period, Franklin New York Tax-Exempt Money Fund continued
to invest in high-quality, widely traded securities. Furthermore, to ensure the
fund's safety and stability, we managed the fund more conservatively than SEC
guidelines require, purchasing only highly rated securities for the portfolio.
We did not buy derivative securities, but purchased only "plain-vanilla,"
short-term securities. Seeking to lower risk, we eliminated our exposure to
Japanese bank guarantees several years ago because of the problems with these
banks, and stayed with this philosophy throughout the period.
Worldwide economic weakness and signs of financial instability increased the
risk of a U.S. economic slowdown during the year under review, increasing the
possibility that the Federal Reserve Board will further lower short-term
interest rates. As a result, we sought additional opportunities to extend the
maturities of the fund's positions, to capture the prevailing higher rates.
(1) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution. There is no guarantee that
the $1.00 per share price will be maintained.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 36 of
this report.
WHAT ARE TANS, RANS AND TRANS?
TANs, RANs and TRANs are acronyms for short-term government debt instruments
issued by municipal agencies that are sold in anticipation of tax receipts
(TANs), revenues (RANs) or tax receipts and revenues (TRANs).
21
<PAGE>
The volatility of the world markets caused investors to move a large amount of
assets into short-term debt instruments. In 1998, total assets of all money
funds increased by more than $290.7 billion, or 27.5%, to a record $1.35
trillion. However, the domestic economy's strength left state and local
municipalities with cash surpluses and less need for short-term financing,
lowering overall supply. Note issuance in 1998 was only $34.5 billion, down from
$46.2 billion in 1997. The largest note issues in the third quarter were $1.6
billion State of Texas TRANs and $1.7 billion State of California RANs, but each
issue was $1.3 billion less than in 1997. This supply and demand imbalance put
downward pressure on short-term interest rates. As a result, Franklin New York
Tax-Exempt Money Fund had a 7-day yield of 3.01% on December 31, 1998 compared
with 3.30% on December 31, 1997.
During the reporting period, the fund participated in several attractive deals
including Suffolk County TANs, Erie County RANs and Puerto Rico TRANs.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of December 31, 1998, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
PERFORMANCE SUMMARY
12/31/98
<TABLE>
<S> <C>
- ----------------------------------------
Seven-day effective yield(1) 3.06%
Seven-day annualized yield 3.01%
Taxable equivalent yield(2) 5.62%
</TABLE>
(1) The seven-day effective yield assumes the compounding of daily dividends.
(2) Taxable equivalent yield assumes the 1998 maximum combined federal and New
York state and City personal income tax bracket of 46.4%, based on the federal
income tax rate of 39.6%.
Annualized and effective yields are for the seven days ended December 31, 1998.
Yields reflect fluctuations in interest rates on portfolio investments, as well
as fund expenses. Yields should be viewed in terms of the current, low rate of
inflation -- just as high inflation usually results in higher yields, low
inflation often brings the opposite.
22 Past performance is not predictive of future results.
<PAGE>
MUNICIPAL BOND RATINGS
MOODY'S
Aaa: Best quality. They carry the smallest degree of investment risk and
generally are referred to as "gilt-edged." Interest payments are protected by a
large or exceptionally stable margin, and principal is secure. Although the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: High quality by all standards. Together with the Aaa group, they comprise
what generally are known as high-grade bonds. Aa bonds are rated lower than Aaa
because margins of protection may not be as large, fluctuation of protective
elements may be of greater amplitude, or there may be other elements which make
the long-term risks appear larger.
A: Possess many favorable investment attributes and are considered upper
medium-grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa: Medium-grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
23
<PAGE>
Ba: Contain speculative elements. Often the protection of interest and principal
payments may be very moderate and, thereby, not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa: Poor standing. Such issues may be in default, or elements of danger with
respect to principal or interest may be present.
Ca: Obligations that are highly speculative. Such issues are often in default or
have other marked shortcomings.
C: Lowest-rated class of bonds. Issues rated C can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
S&P(R)
AAA: The highest rating assigned by S&P to a debt obligation and indicates the
ultimate degree of protection as to principal and interest.
AA: Also qualify as high-grade obligations, and, in the majority of instances,
differ from AAA issues only in a small degree.
A: Generally regarded as upper medium-grade. They have considerable investment
strength but are not entirely free from adverse effects of changes in economic
and trade conditions. Interest and principal are regarded as safe.
24
<PAGE>
BBB: Regarded as having an adequate capacity to pay principal and interest.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for bonds
in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds likely will have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: Reserved for income bonds on which no interest is being paid.
D: Debt rated "D" is in default and payment of interest and/or repayment of
principal is in arrears.
25
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Highlights
FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
CLASS I
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 11.66 $ 11.29 $ 11.41 $ 10.16 $ 11.68
--------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .57 .58 .59 .59 .59
Net realized and unrealized gains (losses) ........ .11 .38 (.12) 1.25 (1.52)
--------------------------------------------------------------
Total from investment operations ................... .68 .96 .47 1.84 (.93)
--------------------------------------------------------------
Less distributions from:
Net investment income ............................. (.57)(1) (.59) (.59) (.59) (.59)
Net realized gains ................................ (.06) -- -- -- --
--------------------------------------------------------------
Total distributions ................................ (.63) (.59) (.59) (.59) (.59)
--------------------------------------------------------------
Net asset value, end of year ....................... $ 11.71 $ 11.66 $ 11.29 $ 11.41 $ 10.16
==============================================================
Total return(*) .................................... 5.94% 8.77% 4.30% 18.46% (8.19%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $270,435 $260,990 $261,068 $256,171 $225,061
Ratios to average net assets:
Expenses .......................................... .72% .71% .65% .65% .56%
Expenses excluding waiver and payments by affiliate .72% .71% .70% .73% .71%
Net investment income ............................. 4.84% 5.09% 5.25% 5.38% 5.48%
Portfolio turnover rate ............................ 12.05% 26.85% 15.09% 22.99% 25.66%
</TABLE>
(*)Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from net
investment income were reinvested at the offering price.
(1)Includes distributions in excess of net investment income in the amount of
$.003.
26
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Highlights (continued)
FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND (CONT.)
<TABLE>
<CAPTION>
CLASS II
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996(2) 1995(1,2)
------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 11.75 $ 11.37 $ 11.46 $ 10.85
------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .48 .52 .53(3) .36
Net realized and unrealized gains (losses) ........ .16 .38 (.10) .59
------------------------------------------------------------
Total from investment operations ................... .64 .90 .43 .95
------------------------------------------------------------
Less distributions from:
Net investment income ............................. (.51)(4) (.52) (.52) (.34)
Net realized gains ................................ (.06) -- -- --
------------------------------------------------------------
Total distributions ................................ (.57) (.52) (.52) (.34)
------------------------------------------------------------
Net asset value, end of year ....................... $ 11.82 $ 11.75 $ 11.37 $ 11.46
------------------------------------------------------------
Total return(*) .................................... 5.55% 8.17% 3.87% 8.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................. $ 9,450 $ 5,601 $ 4,137 $ 696
Ratios to average net assets:
Expenses .......................................... 1.28% 1.27% 1.22% 1.23%(**)
Expenses excluding waiver and payments by affiliate 1.28% 1.27% 1.27% 1.30%(**)
Net investment income ............................. 4.27% 4.63% 4.69% 4.74%(**)
Portfolio turnover rate ............................ 12.05% 26.85% 15.09% 22.99%
</TABLE>
(*)Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
(**)Annualized
(1)For the period May 1,1995 (effective date) to December 31,1995.
(2)Ratio has been calculated using average daily net assets during the period.
(3)Ratio has been calculated using average daily outstanding shares during the
period.
(4)Includes distributions in excess of net investment income in the amount of
$.002.
See notes to financial statements. 27
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31,1998
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.5%
Albany County GO, FGIC Insured, 5.85%, 6/01/12 ..................................................... $1,000,000 $1,096,480
Albany Municipal Water Finance Authority, Water and Sewer Systems Revenue, Refunding, Series A,
FGIC Insured,
5.95%, 12/01/12 .................................................................................. 2,505,000 2,712,589
5.50%, 12/01/22 .................................................................................. 8,990,000 9,318,225
Amsterdam HDC, Mortgage Revenue, Refunding, MBIA Insured, 6.25%, 1/01/25 ........................... 2,495,000 2,603,183
Battery Park City Authority, Series A, AMBAC Insured, 5.50%, 11/01/26 .............................. 1,000,000 1,043,080
Brookhaven GO, Series B, MBIA Insured, 7.00%, 5/01/09 .............................................. 200,000 245,546
Broome County COP, Public Safety Facilities, MBIA Insured, 5.25%, 4/01/22 .......................... 2,125,000 2,160,615
Buffalo and Fort Erie Public Bridge Authority, Toll Bridge System Revenue, MBIA Insured, 5.75%,
1/01/25 .......................................................................................... 4,000,000 4,247,200
Buffalo General Improvement, Series A, FGIC Insured, 5.00%,
2/01/15 .......................................................................................... 425,000 432,217
2/01/16 .......................................................................................... 425,000 430,398
2/01/17 .......................................................................................... 425,000 428,944
Buffalo GO,
Refunding, Series C, FGIC Insured, 5.00%, 12/01/17 ............................................... 415,000 419,063
Refunding, Series C, FGIC Insured, 5.00%, 12/01/18 ............................................... 400,000 401,048
Refunding, Series C, FGIC Insured, 5.00%, 12/01/21 ............................................... 150,000 150,260
Refunding, Series C, FGIC Insured, 5.00%, 12/01/22 ............................................... 170,000 169,757
Series E, AMBAC Insured, Pre-Refunded, 6.70%, 12/01/17 ........................................... 360,000 417,370
Series E, AMBAC Insured, Pre-Refunded, 6.70%, 12/01/18 ........................................... 385,000 446,354
Series E, AMBAC Insured, Pre-Refunded, 6.70%, 12/01/19 ........................................... 410,000 475,338
Buffalo Municipal Water Finance Authority, Water System Revenue, FGIC Insured, Pre-Refunded,
6.10%, 7/01/26 ................................................................................... 1,350,000 1,542,456
Buffalo School GO, Series B, FGIC Insured, 5.00%,
2/01/15 .......................................................................................... 370,000 376,283
2/01/17 .......................................................................................... 410,000 413,805
Central Square School District, FGIC Insured, 6.50%, 6/15/09 ....................................... 900,000 1,069,308
Dutchess County IDA, Civic Facilities Revenue, Bard College Project, AMBAC Insured,
5.50%, 6/01/17 ................................................................................... 2,315,000 2,438,621
5.375%, 6/01/27 .................................................................................. 2,000,000 2,053,620
Erie County GO, Series B, FGIC Insured, 5.625%, 6/15/20 ............................................ 1,000,000 1,055,700
Hempstead Town IDA, Civic Facilities Revenue, Hofstra University Project, MBIA Insured, 5.80%,
7/01/15 .......................................................................................... 1,340,000 1,464,392
Long Island Power Authority, Electric System Revenue, Series A, FSA Insured,
5.125%, 12/01/22 ................................................................................. 8,750,000 8,828,575
5.25%, 12/01/26 .................................................................................. 1,500,000 1,506,315
Metropolitan Transportation Authority,
Commuter Facilities Revenue, Series A, FSA Insured, 5.00%, 7/01/23 ............................... 3,000,000 2,987,370
Dedicated Tax Fund, Series A, FGIC Insured, 5.00%, 4/01/23 ....................................... 3,000,000 2,987,250
Monroe County IDA Revenue, Civic Facilities, Nazareth College, MBIA Insured, 6.00%, 6/01/20 ........ 2,000,000 2,152,320
Mount Sinai Union Free School District, Refunding, AMBAC Insured, 6.20%, 2/15/13 ................... 1,055,000 1,234,719
Nassau County IDA, Civic Facilities Revenue, Hofstra University Project, AMBAC Insured,
Pre-Refunded, 6.75%, 8/01/11 ..................................................................... 1,150,000 1,257,606
New Rochelle GO, Series C, MBIA Insured, 6.25%,
3/15/22 .......................................................................................... 390,000 426,114
3/15/23 .......................................................................................... 530,000 579,078
3/15/24 .......................................................................................... 555,000 606,393
New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue,
Series A, FGIC Insured, 6.75%, 6/15/16 ........................................................... 505,000 540,835
Series C, AMBAC Insured, Pre-Refunded, 6.20%, 6/15/21 ............................................ 7,000,000 7,641,130
</TABLE>
28
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31, 1998 (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
New York City Trust, Cultural Resource Revenue,
American Museum of National History, Series A, MBIA Insured, 5.65%, 4/01/27 ..................... $5,620,000 $5,924,435
New York Botanical Garden, MBIA Insured, 5.75%, 7/01/16 ......................................... 3,000,000 3,223,920
New York State Dormitory Authority Revenues,
Associated Children's, Inc., MBIA Insured, 7.60%, 7/01/18 ....................................... 140,000 143,175
Brooklyn Law School, FSA Insured, 6.40%, 7/01/11 ................................................ 2,460,000 2,632,667
Children's Home, Series B, AMBAC Insured, 5.25%, 7/01/17 ........................................ 1,000,000 1,025,130
Comsewogue Public Library, MBIA Insured, 6.05%, 7/01/24 ......................................... 2,445,000 2,678,277
Hamilton College, MBIA Insured, 6.50%, 7/01/21 .................................................. 1,000,000 1,074,250
Hartwick College, MBIA Insured, 6.25%, 7/01/12 .................................................. 1,000,000 1,081,440
Hospital Special Surgery, MBIA Insured, 5.00%, 2/01/28 .......................................... 2,250,000 2,219,355
Ithaca College, AMBAC Insured, 5.25%, 7/01/17 ................................................... 1,000,000 1,029,250
Judicial Lease Facilities, Suffolk County, Series B, MBIA Insured, 7.00%, 4/15/16 ............... 2,780,000 3,017,217
Leake and Watts Services, Inc., MBIA Insured, 6.00%, 7/01/23 .................................... 1,890,000 2,042,618
Maimonides Medical Center, Series A, MBIA Insured, 5.75%, 8/01/24 ............................... 1,500,000 1,604,865
Marist College, Refunding, MBIA Insured, 6.00%, 7/01/22 ......................................... 1,000,000 1,060,680
Mount Sinai School of Medicine, Refunding, MBIA Insured, 6.75%, 7/01/15 ......................... 2,500,000 2,700,875
New York Presbyterian Hospital, Refunding, AMBAC Insured, 5.00%, 2/01/19 ........................ 5,000,000 4,974,750
New York Public Library, Series A, MBIA Insured, 5.875%, 7/01/22 ................................ 1,000,000 1,051,410
New York University, FGIC Insured, 6.25%, 7/01/09 ............................................... 1,000,000 1,070,620
North Shore University Hospital, MBIA Insured, 5.25%, 11/01/19 .................................. 2,000,000 2,045,860
Oceanside Library, AMBAC Insured, 6.00%, 7/01/25 ................................................ 1,195,000 1,309,218
Pace University, Refunding, MBIA Insured, 5.75%, 7/01/26 ........................................ 4,500,000 4,875,975
Rochester Institute of Technology, Refunding, MBIA Insured, 5.25%, 7/01/22 ...................... 1,000,000 1,022,660
Rosalind and Joseph Nursing Home, AMBAC Insured, 5.60%, 2/01/27 ................................. 4,000,000 4,207,320
Siena College, Refunding, MBIA Insured, 5.70%, 7/01/17 .......................................... 2,000,000 2,140,120
St.John's University, AMBAC Insured, 6.875%, 7/01/11 ............................................ 1,000,000 1,083,770
St.John's University, MBIA Insured, 5.70%, 7/01/26 .............................................. 5,000,000 5,323,950
St.Vincent's Hospital and Medical Center, AMBAC Insured, 6.00%, 8/01/28 ......................... 5,000,000 5,452,100
University of Rochester, Refunding, Series A, MBIA Insured, 5.00%, 7/01/27 ...................... 2,500,000 2,484,950
University of Rochester, Strong Health Facilities, MBIA Insured, 5.90%, 7/01/17 ................. 2,355,000 2,532,685
Wildwood Programs, Inc., Refunding, MBIA Insured, 5.875%, 7/01/15 ............................... 1,000,000 1,097,540
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 5,481,000
Electric Facilities Revenue, Consolidated Edison Project, Series A, MBIA Insured, 6.75%, 1/15/27 4,950,000 5,242,991
Electric Facilities Revenue, Consolidated Edison Project, Series C, MBIA Insured, 7.25%, 11/01/24 210,000 214,452
Gas Facilities Revenue, Brooklyn Union Gas, Series A, MBIA Insured, 6.75%, 2/01/24 .............. 2,240,000 2,445,632
PCR, Refunding, Niagara Mohawk Power Corp., Series A, FGIC Insured, 6.625%, 10/01/13 ............ 1,500,000 1,628,715
PCR, Refunding, Niagara Mohawk Power Corp., Series A, FGIC Insured, 7.20%, 7/01/29 .............. 5,000,000 5,794,400
PCR, Refunding, Rochester Gas and Electric Project, Series A, MBIA Insured, 6.35%, 5/15/32 ...... 1,150,000 1,239,850
PCR, Refunding, Rochester Gas and Electric Project, Series B, MBIA Insured, 6.50%, 5/15/32 ...... 1,000,000 1,083,090
New York State Environmental Facilities Corp., Water Facilities Revenue, Refunding, Spring Valley
Water Project,
Series A, AMBAC Insured, 6.30%, 8/01/24 ......................................................... 2,000,000 2,186,000
Series B, AMBAC Insured, 6.15%, 8/01/24 ......................................................... 3,000,000 3,257,190
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 6,909,855
Long-Term Health Care, Series B, FSA Insured, 6.45%, 11/01/14 ................................... 5,355,000 5,842,037
</TABLE>
29
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31, 1998 (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
New York State Medical Care Facilities, Finance Agency Revenue, (cont)
Long-Term Health Care, Series C, FSA Insured, 6.40%, 11/01/14 .................................. $ 4,245,000 $ 4,624,588
Our Lady of Victory Hospital, Series A, AMBAC Insured, 6.625%, 11/01/16 ........................ 1,000,000 1,087,710
Refunding, Hospital and Nursing Home Mortgage, Series C, MBIA Insured, 6.25%, 8/15/12 .......... 1,000,000 1,092,540
Refunding, St.Mary's Hospital Project, Series A, AMBAC Insured, 6.20%, 11/01/14 ................ 1,495,000 1,656,909
Sisters of Charity Hospital, Series A, AMBAC Insured, 6.60%, 11/01/10 .......................... 700,000 762,111
Sisters of Charity Hospital, Series A, AMBAC Insured, 6.625%, 11/01/18 ......................... 1,500,000 1,629,465
New York State Power Authority Revenue and General Purpose,
Series Y, AMBAC Insured, Pre-Refunded, 6.50%, 1/01/11 .......................................... 2,255,000 2,419,006
Series Z, FGIC Insured, Pre-Refunded, 6.50%, 1/01/19 ........................................... 2,000,000 2,189,800
Series AA, MBIA Insured, Pre-Refunded, 6.25%, 1/01/23 .......................................... 2,000,000 2,175,800
New York State Tollway Authority, General Revenue, Series C, FGIC Insured, Pre-Refunded, 6.00%,
1/01/25 ........................................................................................ 13,975,000 15,630,479
Niagara County GO, Public Improvement, MBIA Insured, 6.00%,
7/15/18 ........................................................................................ 500,000 543,630
7/15/19 ........................................................................................ 510,000 553,977
7/15/20 ........................................................................................ 610,000 661,978
7/15/21 ........................................................................................ 645,000 699,960
Niagara Falls Bridge Commission Toll Revenue, Refunding, Series B, FGIC Insured, 5.25%, 10/01/21 . 10,000,000 10,163,600
Niagara Falls Public Improvement, MBIA Insured,
6.85%, 3/01/19 ................................................................................. 1,000,000 1,135,710
6.90%, 3/01/20 ................................................................................. 500,000 568,505
6.90%, 3/01/21 ................................................................................. 500,000 568,505
Niagara Falls Water Treatment Plant, MBIA Insured, 7.00%, 11/01/12 ............................... 1,200,000 1,375,176
Niagara Frontier Transportation Authority, Airport Revenue, Greater Buffalo International Airport,
Series A, AMBAC Insured, 6.25%, 4/01/24 ........................................................ 1,000,000 1,086,310
Series C, AMBAC Insured, 6.00%, 4/01/24 ........................................................ 1,440,000 1,559,650
North Hempstead GO, Refunding, Series B, FGIC Insured, 6.40%,
4/01/15 ........................................................................................ 1,065,000 1,268,926
4/01/16 ........................................................................................ 1,000,000 1,192,610
Otsego County Industrial Development Agency, Civic Facilities Revenue, Bassett Healthcare Project,
Series A, MBIA Insured, 5.35%, 11/01/20 ........................................................ 2,000,000 2,061,760
Phelps-Clifton GO, Springs Central School District, AMBAC Insured, 5.65%, 6/15/13 ................ 1,355,000 1,460,771
Port Authority of New York and New Jersey,
Consolidated 71st Series, AMBAC Insured, 6.50%, 1/15/26 ........................................ 1,000,000 1,065,840
Consolidated 71st Series, MBIA Insured, 6.50%, 1/15/26 ......................................... 1,600,000 1,705,344
Consolidated 76th Series, AMBAC Insured, 6.50%, 11/01/26 ....................................... 4,230,000 4,525,804
Rensselear County GO, AMBAC Insured, 6.70%, 2/15/11 .............................................. 810,000 985,948
(b)St.Lawrence County IDA, Civic Facility Revenue, St.Lawrence University Project, Series A, MBIA
Insured, 5.00%, 7/01/28 ........................................................................ 2,050,000 2,037,454
Suffolk County GO, Public Improvement, Refunding, Series B, FGIC Insured, 6.20%,
5/01/11 ........................................................................................ 500,000 540,980
5/01/13 ........................................................................................ 500,000 539,360
Suffolk County Water Authority, Waterworks Revenue, AMBAC Insured, Pre-Refunded, 7.10%, 6/01/10 .. 1,000,000 1,035,790
Triborough Bridge and Tunnel Authority Revenue,
General Purpose, Refunding, Series Q, AMBAC Insured, 6.00%, 1/01/13 ............................ 1,500,000 1,526,100
General Purpose, Series B, MBIA Insured, 5.20%, 1/01/27 ........................................ 9,110,000 9,223,234
General Purpose, Series P, FGIC Insured, 5.50%, 1/01/19 ........................................ 1,435,000 1,439,477
</TABLE>
30
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31,1998 (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Triborough Bridge and Tunnel Authority Revenue, (cont.)
General Purpose, Series X, AMBAC Insured, 6.50%, 1/01/19 ..................................... $ 4,475,000 $ 4,845,262
General Purpose, Series X, MBIA Insured, 6.50%, 1/01/19 ...................................... 2,750,000 2,977,535
Series T, MBIA Insured, Pre-Refunded, 7.00%, 1/01/20 ......................................... 1,100,000 1,190,453
Upper Mohawk Valley Regional Water Finance Authority, Water System Revenue, Refunding, Series A,
FSA Insured, 5.125%, 10/01/26 ................................................................ 2,000,000 2,013,800
------------
TOTAL LONG TERM INVESTMENTS (COST $256,187,722) ................................................ 275,637,708
------------
(a)SHORT TERM INVESTMENTS .6%
New York City GO, Series B, Sub Series B-3, MBIA Insured, Daily VRDN and Put, 5.10%, 8/15/04 ... 100,000 100,000
New York City GO, Series B, Sub Series B-4, MBIA Insured, Daily VRDN and Put, 5.10%, 8/15/23 ... 400,000 400,000
New York City GO, Series B, Sub Series B-7, AMBAC Insured, Daily VRDN and Put, 5.10%, 8/15/18 .. 200,000 200,000
New York City GO, Sub Series A-8, 5.10%, 8/01/18 ............................................... 300,000 300,000
New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue,
Series C, FGIC Insured, Daily VRDN and Put, 5.10%, 6/15/22 ................................... 200,000 200,000
Series C, FGIC Insured, Daily VRDN and Put, 5.10%, 6/15/23 ................................... 400,000 400,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,600,000) ................................................. 1,600,000
------------
TOTAL INVESTMENTS (COST $257,787,722) 99.1% .................................................... 277,237,708
OTHER ASSETS, LESS LIABILITIES .9% ............................................................. 2,647,244
------------
NET ASSETS 100.0% .............................................................................. $279,884,952
------------
</TABLE>
See glossary of terms on page 38.
(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.
(b)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements. 31
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Highlights
FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 10.62 $ 10.28 $ 10.40 $ 9.60 $ 10.68
--------------------------------------------------------
Income from investment operations:
Net investment income ............................. .51 .54 .56 .55 .55
Net realized and unrealized gains (losses) ........ .18 .35 (.12) .80 (1.10)
--------------------------------------------------------
Total from investment operations ................... .69 .89 .44 1.35 (.55)
--------------------------------------------------------
Less distributions from net investment income ...... (.54) (.55) (.56) (.55) (.53)
--------------------------------------------------------
Net asset value, end of year ....................... $ 10.77 $ 10.62 $ 10.28 $ 10.40 $ 9.60
--------------------------------------------------------
Total return(*) .................................... 6.63% 8.89% 4.38% 14.31% (5.42%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $80,689 $58,916 $44,822 $43,229 $35,166
Ratios to average net assets:
Expenses .......................................... .45% .45% .37% .33% .05%
Expenses excluding waiver and payments by affiliate .83% .82% .83% .83% .80%
Net investment income ............................. 4.81% 5.26% 5.47% 5.51% 5.57%
Portfolio turnover rate ............................ 10.46% 6.87% 24.67% 24.68% 188.38%
</TABLE>
(*)Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from net
investment income were reinvested at the offering price.
32 See notes to financial statements.
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.1%
Albany County, Airport Authority Revenue, Series B, FSA Insured, 4.75%, 12/15/13 .................... $1,850,000 $1,854,977
Cortland County IDA, Civic Facility Revenue, Cortland Memorial Hospital Inc. Project, 6.15%, 7/01/02 100,000 104,808
Erie County GO, FGIC Insured,
4.60%, 11/01/11 ................................................................................... 945,000 957,861
4.70%, 11/01/12 ................................................................................... 700,000 709,478
4.75%, 11/01/13 ................................................................................... 525,000 529,699
Franklin County IDA, Lease Revenue, County Correctional Facility Project, 6.375%, 11/01/02 .......... 45,000 47,555
Guam Airport Authority Revenue, Refunding, Series A, 6.00%, 10/01/03 ................................ 260,000 277,935
Guam Power Authority Revenue, Series A, 6.00%, 10/01/04 ............................................. 1,300,000 1,399,554
Metropolitan Transportation Authority,
New York Service Contract, Transportation Facilities, Series O, 5.75%, 7/01/07 .................... 500,000 551,465
Transportation Facilities Revenue, Series C, FSA Insured, 4.75%, 7/01/16 .......................... 3,000,000 2,940,630
New Rochelle Municipal Housing Authority Revenue, Series A, 5.55%, 12/01/14 ......................... 2,000,000 2,033,080
New York City GO,
Refunding, Series A, 6.375%, 8/01/05 .............................................................. 3,455,000 3,763,048
Refunding, Series A, Pre-Refunded, 6.375%, 8/01/05 ................................................ 1,745,000 1,916,499
Refunding, Series B, 6.20%, 8/15/06 ............................................................... 1,000,000 1,118,230
Refunding, Series F, 6.00%, 8/01/12 ............................................................... 700,000 769,461
Series A, 5.25%, 8/01/10 .......................................................................... 600,000 631,404
Series D, 5.40%, 8/01/11 .......................................................................... 4,250,000 4,486,258
Series G, 5.75%, 10/15/10 ......................................................................... 1,000,000 1,100,310
Series H, 7.00%, 2/01/06 .......................................................................... 340,000 373,068
New York City IDA, Civic Facility Revenue,
New York Blood Center Inc. Project, ETM, 6.80%, 5/01/02 ........................................... 210,000 222,436
USTA National Tennis Center Project, FSA Insured, 6.00%, 11/15/03 ................................. 1,875,000 2,057,194
USTA National Tennis Center Project, FSA Insured, 6.10%, 11/15/04 ................................. 1,675,000 1,871,813
New York City Transitional Financing Authority Revenue, Future Tax Secured, Series A, 4.75%, 11/15/13 2,500,000 2,499,850
New York State COP, Commissioner of General Services, Executive Department, 6.50%, 3/01/00 .......... 3,010,000 3,106,832
New York State Dormitory Authority Revenue,
City University, Refunding, Series U, 6.25%, 7/01/02 .............................................. 100,000 107,523
City University, Refunding, Series U, 6.35%, 7/01/04 .............................................. 1,720,000 1,909,286
Department of Health, 6.25%, 7/01/04 .............................................................. 690,000 762,574
Department of Health, 6.30%, 7/01/05 .............................................................. 735,000 822,281
Department of Health, 5.125%, 7/01/13 ............................................................. 1,410,000 1,432,645
North General Hospital, Refunding, 5.20%, 2/15/13 ................................................. 2,000,000 2,050,820
Nyack Hospital, Refunding, 6.00%, 7/01/06 ......................................................... 2,000,000 2,148,120
St. Agnes Hospital, Series A, 5.30%, 2/15/13 ...................................................... 1,380,000 1,426,782
State Service Contract, Albany County, 5.25%, 4/01/12 ............................................. 500,000 522,865
State University Educational Facilities, Refunding, Series A, 5.25%, 5/15/15 ...................... 2,000,000 2,096,440
Terence Cardinal Cooke Health, 4.50%, 7/01/10 ..................................................... 2,000,000 1,989,340
W. K. Nursing Home Corp., FHA Insured, 5.55%, 8/01/08 ............................................. 300,000 325,503
New York State HFA Revenue,
Health Facilities, Refunding, Series A, 6.00%, 11/01/08 ........................................... 3,045,000 3,324,013
Nursing Home and Health Care Project, Series A, 5.10%, 11/01/12 ................................... 1,975,000 2,037,884
New York State Medical Care Facilities, Finance Agency Revenue, 5.70%, 2/15/05 ...................... 1,500,000 1,611,690
Huntington Hospital Mortgage Project, Refunding, Series A, 5.90%, 11/01/04 ........................ 475,000 513,475
</TABLE>
33
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31, 1998 (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
Franklin New York Intermediate-Term Tax-Free Income Fund AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments (cont.)
New York State Thruway Authority,
General Revenue, Series A, Pre-Refunded, 5.80%, 1/01/06 ........................................... $ 1,900,000 $ 2,040,258
Service Contract Revenue, Local Highway and Bridge, Refunding, 5.25%, 4/01/10 ..................... 550,000 576,136
New York State Urban Development Corp. Revenue,
5.00%, 1/01/12 .................................................................................... 2,000,000 2,038,960
Correctional Facilities, Refunding, 5.75%, 1/01/13 ................................................ 500,000 530,570
Youth Facilities, 5.75%, 4/01/10 .................................................................. 400,000 441,944
Youth Facilities, 5.875%, 4/01/10 ................................................................. 1,500,000 1,644,870
Oneida-Herkimer Solid Waste Management Authority, Solid Waste Systems Revenue, Refunding,
6.65%, 4/01/05 ..................................................................................... 125,000 140,416
Puerto Rico Commonwealth GO, 6.00%, 7/01/05 ......................................................... 1,000,000 1,113,900
Puerto Rico Electric Power Authority Revenue, Series T, 6.00%, 7/01/04 .............................. 1,500,000 1,649,565
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 ........ 1,830,000 1,990,271
Puerto Rico Municipal Finance Agency, Series A,
5.875%, 7/01/06 ................................................................................... 300,000 320,115
FSA Insured, 5.60%, 7/01/05 ....................................................................... 300,000 330,645
United Nations Development Corp. Revenue, Refunding, Series A, ETM, 5.70%, 7/01/02 .................. 350,000 372,106
Virgin Islands PFA Revenue, Senior Lien, Fund Loan Notes, Refunding, Series A, 5.30%, 10/01/11 ...... 3,000,000 3,052,260
Virgin Islands Water and Power Authority,
Electric System Revenue, Refunding, 5.125%, 7/01/13 ............................................... 1,775,000 1,738,577
(b) Water System Revenue, Refunding, 4.875%, 7/01/06 ............................................... 1,985,000 1,973,307
-----------
Total Long Term Investments (Cost $73,897,692) ...................................................... 78,358,586
-----------
(a)Short Term Investments 3.7%
Long Island Power Authority, Electricity Systems Revenue, Sub Series 5, Daily VRDN and Put, 5.10%,
5/01/33 ........................................................................................... 1,500,000 1,500,000
New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue,
Series C, FGIC Insured, Daily VRDN and Put, 5.10%, 6/15/23 ........................................ 1,000,000 1,000,000
Series G, FGIC Insured, Daily VRDN and Put, 5.10%, 6/15/24 ........................................ 400,000 400,000
Puerto Rico Commonwealth Government Development Bank, Refunding, MBIA Insured, Weekly VRDN and Put,
3.60%, 12/01/15 .................................................................................... 100,000 100,000
-----------
Total Short Term Investments (Cost $3,000,000) ...................................................... 3,000,000
-----------
Total Investments (Cost $76,897,692) 100.8% ......................................................... 81,358,586
Other Assets, less Liabilities (.8%) ................................................................ (669,497)
-----------
Net Assets 100.0% ................................................................................... $80,689,089
===========
</TABLE>
See glossary of terms on page 38.
(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.
(b)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
34 See notes to financial statements.
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Highlights
FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------
Income from investment operations -
Net investment income ............................. .03 .03 .03 .03 .02
Less distributions from net investment income ...... (.03) (.03) (.03) (.03) (.02)
--------------------------------------------------------
Net asset value, end of year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========================================================
Total return ....................................... 2.79% 3.01% 2.79% 3.11% 2.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $57,878 $63,720 $59,178 $61,079 $64,835
Ratios to average net assets:
Expenses .......................................... .60% .60% .60% .60% .60%
Expenses excluding waiver and payments by affiliate .83% .81% .86% .85% .93%
Net investment income ............................. 2.75% 2.97% 2.75% 3.06% 2.12%
</TABLE>
See notes to financial statements. 35
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS 99.1%
Battery Park City Authority Revenue, Pre-Refunded, 6.50%, 5/01/99 ...................................... $2,000,000 $2,022,815
Erie County RAN, 4.00%, 10/13/99 ....................................................................... 1,000,000 1,007,579
Haft Hollow Hills Central School District TAN, 3.90%, 6/25/99 .......................................... 2,000,000 2,003,240
(a)Long Island Power Authority, Electricity Systems Revenue,
Sub Series 2, Weekly VRDN and Put, 3.80%, 5/01/33 .................................................... 600,000 600,000
Sub Series 5, Daily VRDN and Put, 5.10%, 5/01/33 ..................................................... 1,700,000 1,700,000
Metropolitan Transportation Authority Facilities TECP, 2.95%, 2/17/99 .................................. 1,500,000 1,500,000
Monroe County TECP, 3.40%, 1/14/99 ..................................................................... 2,000,000 2,000,000
(a)Nassau IDA, Research Facility Revenue, Cold Spring Harbor Laboratory Project, Daily VRDN and
Put, 5.00%, 7/01/23 .................................................................................. 600,000 600,000
(a)New York City GO,
Series B, Sub Series B-7, AMBAC Insured, Daily VRDN and Put, 5.10%, 8/15/18 .......................... 1,400,000 1,400,000
Sub Series A-4, Daily VRDN and Put, 5.00%, 8/01/23 ................................................... 900,000 900,000
(a)New York City HDC, Mortgage Revenue, Columbus Apartments, Series A, Weekly VRDN and Put, 3.65%,
3/15/25 .............................................................................................. 1,500,000 1,500,000
(a)New York City IDA, Civic Facilities Revenue,
American Civil Liberties, Weekly VRDN and Put, 3.80%, 6/01/12 ........................................ 905,000 905,000
National Audubon Society, Daily VRDN and Put, 5.00%, 12/01/14 ........................................ 500,000 500,000
(a)New York City MAC,
Refunding, Sub Series K-3, Weekly VRDN and Put, 3.80%, 7/01/08 ....................................... 800,000 800,000
Sub Series K-2, Weekly VRDN and Put, 3.80%, 7/01/08 .................................................. 3,100,000 3,100,000
(a)New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue,
Refunding, Series G, FGIC Insured, Daily VRDN and Put, 5.10%, 6/15/24 ................................ 600,000 600,000
Series C, FGIC Insured, Daily VRDN and Put, 5.10%, 6/15/23 ........................................... 1,400,000 1,400,000
(a)New York City Tri-Cultural Resources Revenue, American Museum of Natural History, Series B,
MBIA Insured, Weekly VRDN and Put, 3.80%, 4/01/21 .................................................... 1,100,000 1,100,000
New York Islip GO,
Airport Improvement, Series B, FSA Insured, 4.25%, 1/15/99 ........................................... 355,000 355,059
Public Improvement, Series A, FSA Insured, 4.25%, 1/15/99 ............................................ 160,000 160,039
New York State Dormitory Authority, Sloan Kettering Memorial TECP, 2.90%,
2/10/99 .............................................................................................. 1,000,000 1,000,000
2/18/99 .............................................................................................. 1,200,000 1,200,000
New York State Dormitory Authority Lease Revenue, State University Educational Facilities, Refunding,
Series A, AMBAC Insured, 5.00%, 7/01/99 .............................................................. 1,500,000 1,509,679
New York State Dormitory Authority Revenue,
(a)New York Public Library, Series B, Weekly VRDN and Put, 3.80%, 7/01/22 ............................ 400,000 400,000
(a)Oxford University Press Inc., Weekly VRDN and Put, 3.85%, 7/01/25 ................................. 1,000,000 1,000,000
State University Educational Facilities, Refunding, Series A, Pre-Refunded, 7.125%, 5/15/99 .......... 1,000,000 1,032,616
(a)New York State Energy,Research & Development Authority PCR,
New York Electric & Gas, Refunding, Series B, Daily VRDN and Put, 5.05%, 2/01/29 ..................... 3,900,000 3,900,000
Niagara Mohawk Power Corp., Refunding, Series B, Daily VRDN and Put, 5.05%, 12/01/25 ................. 1,200,000 1,200,000
Orange and Rockland Project, Refunding, Series A, FGIC Insured, Weekly VRDN and Put, 3.80%, 10/01/14 . 1,000,000 1,000,000
Orange and Rockland Utilities, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 3.80%, 8/01/15 1,350,000 1,350,000
Rochester Gas & Electric Corp., Refunding, Series C, MBIA Insured, Weekly VRDN and Put, 3.80%, 8/01/32 1,500,000 1,500,000
New York State Environmental Quality TECP, 3.05%, 1/07/99 .............................................. 2,000,000 2,000,000
(a)New York State HFAR, Normandie Court I Project, Weekly VRDN and Put, 4.10%, 5/15/15 .................. 2,100,000 2,100,000
(a)New York State Job Development Authority, Guaranteed Special Purpose, Refunding, Series A-1 thru A-25,
Daily VRDN and Put, 5.10%, 3/01/07 ................................................................... 4,300,000 4,300,000
</TABLE>
36
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments December 31, 1998 (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS (CONT.)
(a)New York State Local Government Assistance Corp.,
Series B, Weekly VRDN and Put, 3.85%, 4/01/23 ................................................... $ 500,000 $ 500,000
Series D, Weekly VRDN and Put, 4.10%, 4/01/25 ................................................... 200,000 200,000
Series F, Weekly VRDN and Put, 3.80%, 4/01/25 ................................................... 200,000 200,000
(a)New York State Medical Care Facilities, Finance Agency Revenue, Pooled Equipment Loan Program II,
Series A, Weekly VRDN and Put, 3.90%, 11/01/03 .................................................. 2,230,000 2,230,000
(a)Niagara County IDA, IDR, Pyron Corp. Project, Weekly VRDN and Put, 4.00%, 11/01/04 .............. 650,000 650,000
Puerto Rico Commonwealth TRAN, Series A, 3.50%, 7/30/99 ........................................... 1,000,000 1,003,690
South Huntington TAN, Union Free School District, 3.90%, 6/30/99 .................................. 1,000,000 1,001,428
Suffolk County TAN, Series II,
3.75%, 9/09/99 .................................................................................. 1,000,000 1,002,790
4.00%, 9/09/99 .................................................................................. 1,500,000 1,506,481
(a)Syracuse IDA, Civic Facilities Revenue, Multi-Modal, Syracuse University Project, Daily VRDN and
Put, 5.00%, 3/01/23 ............................................................................. 400,000 400,000
Triborough Bridge & Tunnel Authority, Special Obligation, Refunding, Series A, MBIA Insured, 4.00%,
1/01/99 ......................................................................................... 1,000,000 1,000,000
-----------
Total Investments (Cost $57,340,416) 99.1% ........................................................ 57,340,416
Other Assets, less Liabilities .9% ................................................................ 537,564
-----------
Net Assets 100.0% ................................................................................. $57,877,980
-----------
</TABLE>
See glossary of terms on page 38.
(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.
See notes to financial statements. 37
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Statement of Investments, December 31, 1998 (cont.)
GLOSSARY OF TERMS
- ----------------------------------------------------------------------
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
ETM - Escrow To Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority Revenue
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
MAC - Municipal Assistance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
PFA - Public Finance Authority
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
TECP - Tax-Exempt Commercial Paper
TRAN - Tax and Revenue Anticipation Notes
USTA - United States Tennis Association
VRDN - Variable Rate Demand Notes
38
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FRANKLIN NEW YORK FRANKLIN NEW YORK FRANKLIN NEW YORK
INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT
INCOME FUND TAX-FREE INCOME FUND MONEY FUND
---------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in securities:
Cost ...................................................... $ 257,787,722 $ 76,897,692 $ 57,340,416
---------------------------------------------------------------
Value ..................................................... 277,237,708 81,358,586 57,340,416
Cash ....................................................... 479,241 120,273 17,758
Receivables:
Investment securities sold ................................ 20,000 -- 401,083
Capital shares sold ....................................... 36,478 123,510 91,744
Interest .................................................. 5,138,970 1,325,667 309,650
---------------------------------------------------------------
Total assets .......................................... 282,912,397 82,928,036 58,160,651
---------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ........................... 2,020,740 1,981,126 --
Capital shares redeemed ................................... 139,851 30,000 119,368
Affiliates ................................................ 185,091 39,677 49,483
Shareholders .............................................. 340,489 79,615 97,274
Distributions to shareholders .............................. 306,479 99,705 5,411
Other liabilities .......................................... 34,795 8,824 11,135
---------------------------------------------------------------
Total liabilities ..................................... 3,027,445 2,238,947 282,671
---------------------------------------------------------------
Net assets, at value ................................. $ 279,884,952 $ 80,689,089 $ 57,877,980
---------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ........................ $ -- $ 65,217 $ --
Accumulated distributions in excess of net investment income (77,013) -- --
Net unrealized appreciation ................................ 19,449,986 4,460,894 --
Accumulated net realized gain (loss) ....................... 92,853 (2,559,531) --
Capital shares ............................................. 260,419,126 78,722,509 57,877,980
---------------------------------------------------------------
Net assets, at value ................................. $ 279,884,952 $ 80,689,089 $ 57,877,980
===============================================================
</TABLE>
See notes to financial statements. 39
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FRANKLIN NEW YORK FRANKLIN NEW YORK FRANKLIN NEW YORK
INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT
INCOME FUND TAX-FREE INCOME FUND MONEY FUND
-----------------------------------------------------------------
<S> <C> <C> <C>
Class I:
Net assets, at value ................................ $270,434,525 $80,689,089 $57,877,980
=================================================================
Shares outstanding .................................. 23,092,312 7,490,318 57,877,980
=================================================================
Net asset value per share(*) ........................ $ 11.71 $ 10.77 $ 1.00
=================================================================
Maximum offering price per share (net asset value per
share (divided by) 95.75%, 97.75%, 100%,
respectively) ...................................... $ 12.23 $ 11.02 $ 1.00
=================================================================
Class II:
Net assets, at value ................................ $ 9,450,427 -- --
=================================================================
Shares outstanding .................................. 799,661 -- --
=================================================================
Net asset value per share(*) ........................ $ 11.82 -- --
=================================================================
Maximum offering price per share (net asset value per
share (divided by) 99%) ............................ $ 11.94 -- --
=================================================================
</TABLE>
(*)Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
40 See notes to financial statements.
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FRANKLIN NEW YORK FRANKLIN NEW YORK FRANKLIN NEW YORK
INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT
INCOME FUND TAX-FREE INCOME FUND MONEY FUND
-------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Interest .......................................... $15,187,162 $ 3,509,216 $ 2,017,989
-------------------------------------------------------------
Expenses:
Management fees (Note 3) .......................... 1,482,054 420,910 376,567
Distribution fees (Note 3)
Class I .......................................... 235,976 66,332 --
Class II ......................................... 45,348 -- --
Transfer agent fees (Note 3) ...................... 108,520 35,131 65,096
Custodian fees .................................... 3,251 797 1,141
Reports to shareholders ........................... 37,990 8,914 33,956
Registration and filing fees ...................... 21,294 6,623 10,421
Professional fees ................................. 29,863 7,017 6,428
Trustees' fees and expenses ....................... 11,296 2,868 2,496
Other ............................................. 29,821 7,061 1,418
-------------------------------------------------------------
Total expenses ............................... 2,005,413 555,653 497,523
Expenses waived/paid by affiliate (Note 3) ... -- (255,944) (136,218)
-------------------------------------------------------------
Net expenses ................................ 2,005,413 299,709 361,305
-------------------------------------------------------------
Net investment income ...................... 13,181,749 3,209,507 1,656,684
-------------------------------------------------------------
Realized and unrealized gains:
Net realized gain from investments ................ 1,939,615 262,095 --
Net unrealized appreciation on investments ........ 706,841 861,981 --
-------------------------------------------------------------
Net realized and unrealized gain ................... 2,646,456 1,124,076 --
-------------------------------------------------------------
Net increase in net assets resulting from operations $15,828,205 $ 4,333,583 $ 1,656,684
=============================================================
</TABLE>
See notes to financial statements. 41
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
FRANKLIN NEW YORK
FRANKLIN NEW YORK INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------
<S> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income ................................................. $ 13,181,749 $ 13,357,463 $ 3,209,507 $ 2,643,481
Net realized gain from investments .................................... 1,939,615 2,443,437 262,095 237,610
Net unrealized appreciation on investments ............................ 706,841 6,182,799 861,981 1,496,404
-------------------------------------------------------
Net increase in net assets resulting
from operations .................................................. 15,828,205 21,983,699 4,333,583 4,377,495
Distributions to shareholders from:
Net investment income:
Class I .............................................................. (12,887,618) (13,364,273) (3,321,193) (2,646,832)
Class II ............................................................. (294,131) (214,741) -- --
In excess of net investment income:
Class I .............................................................. (74,373) (928) -- --
Class II ............................................................. (1,697) (15) -- --
Net realized gains:
Class I .............................................................. (1,299,492) -- -- --
Class II ............................................................. (44,540) -- -- --
-------------------------------------------------------
Total distributions to shareholders .................................... (14,601,851) (13,579,957) (3,321,193) (2,646,832)
Capital share transactions:(Note 2)
Class I .............................................................. 8,241,153 (8,309,946) 20,760,497 12,363,508
Class II ............................................................. 3,826,083 1,292,535 -- --
-------------------------------------------------------
Total capital share transactions ....................................... 12,067,236 (7,017,411) 20,760,497 12,363,508
Net increase in net assets ............................................ 13,293,590 1,386,331 21,772,887 14,094,171
Net assets:
Beginning of year ...................................................... 266,591,362 265,205,031 58,916,202 44,822,031
-------------------------------------------------------
End of year ............................................................ $279,884,952 $266,591,362 $80,689,089 $58,916,202
=======================================================
Undistributed net investment income (accumulated distributions in
excess of net investment income) included in net assets:
End of year ........................................................... $ (77,013) $ (943) $ 65,217 $ 176,903
=======================================================
</TABLE>
42 See notes to financial statements.
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
FRANKLIN NEW YORK
TAX-EXEMPT MONEY FUND
-------------------------------
1998 1997
-------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................ $ 1,656,684 $ 1,851,246
------------ ------------
Net increase in net assets resulting from operations ............................. 1,656,684 1,851,246
Distributions to shareholders from net investment income ............................... (1,656,684) (1,851,246)
Capital share transactions:(Note 2) .................................................... (5,841,785) 4,542,185
------------ ------------
Net increase (decrease) in net assets ................................................ (5,841,785) 4,542,185
Net assets (there is no undistributed net investment income at beginning or end of year):
Beginning of year ...................................................................... 63,719,765 59,177,580
------------ ------------
End of year ............................................................................ $ 57,877,980 $ 63,719,765
============ ============
</TABLE>
See notes to financial statements. 43
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin New York Tax-Free Trust (the Trust) is registered under the Investment
Company Act of 1940 as an open-end, non-diversified investment company,
consisting of three series (the Funds). The Funds seek to provide tax-free
income. The Franklin New York Tax-Exempt Money Fund (Money Fund) also seeks
liquidity in its investments. The following summarizes the Funds' significant
accounting policies.
a. SECURITY VALUATION:
Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. In the absence of a
sale or reported bid and asked prices, information with respect to bond and note
transactions, quotations from bond dealers, market transactions in comparable
securities, and various relationships between securities are used to determine
the value of the security. The Franklin New York Insured Tax-Free Income Fund
(Insured Fund) and the Franklin New York Intermediate-Term Tax-Free Income Fund
(Intermediate-Term Fund) may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions under
procedures approved by the Board of Trustees. Securities for which market
quotations are not readily available are valued at fair value as determined by
management in accordance with procedures established by the Board of Trustees.
Securities in the Money Fund are valued at amortized cost which approximates
value.
b. INCOME TAXES:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
c. SECURITY TRANSACTIONS INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily for
the Money Fund. Such distributions are reinvested in additional shares of the
Fund. Distributions from net investment income are normally declared daily and
distributed monthly to shareholders for the Insured Fund and the
Intermediate-Term Fund.
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.
d. INSURANCE:
The scheduled payments of interest and principal for each long-term municipal
security in the Insured Fund are insured by either a new issue insurance policy,
a portfolio insurance policy, a secondary insurance policy, or 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.
44
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 amount of income and expense during the reporting
period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
During the year ended December 31, 1998 the classes of shares offered within
each of the funds are indicated below. Effective January 1, 1999, Class I and
Class II were renamed Class A and Class C, respectively. The shares differ by
their initial sales load, distribution fees, voting rights on matters affecting
a single class and the exchange privilege of each class.
<TABLE>
<CAPTION>
Class I Class I & Class II
- --------------------------------------------------------
<S> <C>
Intermediate-Term Fund Insured Fund
Money Fund
</TABLE>
At December 31, 1998, there were an unlimited number of shares authorized (no
par value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN NEW YORK FRANKLIN NEW YORK FRANKLIN NEW YORK
INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT
INCOME FUND TAX-FREE INCOME FUND MONEY FUND
----------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES/AMOUNT
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS I SHARES:
Year Ended December 31,1998
Shares sold .................................. 2,627,781 $ 30,700,744 3,890,300 $ 41,529,693 $ 51,502,356
Shares issued in reinvestment of distributions 679,637 7,946,653 189,172 2,019,473 1,656,994
Shares redeemed .............................. (2,604,462) (30,406,244) (2,136,427) (22,788,669) (59,001,135)
----------------------------------------------------------------------------------
Net increase (decrease) ..................... 702,956 $ 8,241,153 1,943,045 $ 20,760,497 $ (5,841,785)
==================================================================================
Year Ended December 31,1997
Shares sold .................................. 2,143,970 $ 24,240,358 2,234,707 $ 23,236,717 $ 52,257,638
Shares issued in reinvestment of distributions 666,814 7,568,139 154,882 1,611,794 1,850,557
Shares redeemed .............................. (3,542,992) (40,118,443) (1,202,679) (12,485,003) (49,566,010)
----------------------------------------------------------------------------------
Net increase (decrease) ..................... (732,208) $ (8,309,946) 1,186,910 $ 12,363,508 $ 4,542,185
==================================================================================
CLASS II SHARES:
Year Ended December 31,1998
Shares sold .................................. 410,496 $ 4,858,484
Shares issued in reinvestment of distributions 21,224 250,668
Shares redeemed .............................. (108,928) (1,283,069)
-------------------------
Net increase ................................ 322,792 $ 3,826,083
=========================
Year Ended December 31,1997
Shares sold .................................. 197,439 $ 2,247,696
Shares issued in reinvestment of distributions 14,217 162,739
Shares redeemed .............................. (98,680) (1,117,900)
-------------------------
Net increase ................................ 112,976 $ 1,292,535
=========================
</TABLE>
45
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES
Certain trustees of the Funds are also officers and/or directors of Franklin
Advisers, Inc. (Advisers), Franklin Templeton Services, Inc. (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors), and Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds' investment manager,
administrative manager, principal underwriter, and transfer agent, respectively.
The Funds pay an investment management fee to Advisers based on the month-end
net assets of the Insured Fund and the Intermediate-Term Fund and on the average
daily net assets of the Money Fund as follows:
ANNUALIZED
FEE RATE NET ASSETS
- --------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Advisers agreed in advance to waive management fees for the Money Fund and the
Intermediate-Term Fund, as noted in the Statements of Operations.
Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.
The Intermediate-Term Fund reimburses Distributors up to .10% per year of its
average daily net assets and the Insured Fund reimburses Distributors up to .10%
and .65% per year of the average daily net assets of Class I and Class II,
respectively, for costs incurred in marketing the Funds' shares.
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the year as follows:
FRANKLIN NEW YORK FRANKLIN NEW YORK
INSURED TAX-FREE INTERMEDIATE-TERM
INCOME FUND TAX-FREE INCOME FUND
-----------------------------------------------
Net commissions
paid ............. $ 72,423 $113,651
Contingent deferred
sales charges .... $ 4,871 $ 1,171
The Funds paid transfer agent fees of $208,747, of which $181,076 was paid to
Investor Services.
46
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Notes to Financial Statements (continued)
4. INCOME TAXES
At December 31, 1998, the Intermediate-Term Fund had tax basis capital losses of
$2,559,531 which may be carried over to offset future capital gains. Such losses
expire as follows:
FRANKLIN
NEW YORK
INTERMEDIATE-TERM
TAX-FREE INCOME FUND
--------------------
Capital loss carryovers expiring in:
2002 ................................... $2,297,936
2003 ................................... --
2004 ................................... 261,595
--------------------
$2,559,531
====================
At December 31, 1998, the net unrealized appreciation based on the cost of
investments for income tax purposes was as follows:
<TABLE>
<CAPTION>
FRANKLIN NEW YORK FRANKLIN NEW YORK FRANKLIN NEW YORK
INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT
INCOME FUND TAX-FREE INCOME FUND MONEY FUND
---------------------------------------------------------------
<S> <C> <C> <C>
Investments at cost .......... $257,787,722 $ 76,897,692 $ 57,340,416
---------------------------------------------------------------
Unrealized appreciation ...... $ 19,449,986 $ 4,477,426 --
Unrealized depreciation ...... -- (16,532) --
===============================================================
Net unrealized appreciation .. $ 19,449,986 $ 4,460,894 --
===============================================================
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
FRANKLIN NEW YORK FRANKLIN NEW YORK
INSURED TAX-FREE INTERMEDIATE-TERM
INCOME FUND TAX-FREE INCOME FUND
----------------------------------------
<S> <C> <C>
Purchases ..... $44,607,749 $28,775,890
Sales ......... $32,486,482 $ 6,451,090
</TABLE>
6. CREDIT RISK
The Funds have investments in excess of 10% of their total net assets in the
state of New York and U.S. territories and possessions. Such concentration may
subject the Funds more significantly to economic changes occurring within that
state and those U.S. territories and possessions.
47
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF FRANKLIN NEW YORK TAX-FREE TRUST:
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds constituting the
Franklin New York Tax-Free Trust, (hereafter referred to as the "Fund") at
December 31, 1998, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
February 4, 1999
48
<PAGE>
FRANKLIN NEW YORK TAX-FREE TRUST
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Franklin New York
Insured Tax-Free Income Fund hereby designates $1,436,885 as 20% rate capital
gain dividends for the fiscal year ended December 31, 1998.
Under Section 852(b)(5)(A) of the Internal Revenue Code, each fund hereby
designates 100% of the distributions paid from net investment income as
exempt-interest dividends for the fiscal year ended December 31, 1998.
49
