N-30D 1 fctftn30da.txt FCTFT ANNUAL REPORT SHAREHOLDER LETTER Dear Shareholder: We are pleased to bring you this annual report for Franklin California Tax-Free Trust covering the period ended June 30, 2001. During the year under review, the U.S. economy showed clear signs of decelerating economic growth. Gross domestic product (GDP), the country's broadest gauge of economic vibrancy, fell steadily, posting 1.3% and 0.7% annual rates in the first and second quarters of 2001. In the first six months of the period, personal consumption, trade and business expansion waned. By January 2001, consumer and business confidence had eroded considerably, exacerbated by high energy costs that drained purchasing power and profit margins. Consequently, slower retail sales and appreciably weaker capital spending prompted manufacturing cutbacks and subsequent layoffs. The unemployment rate, which had hovered near a 30-year low of 3.9% during the reporting period, edged up to 4.5% by June 2001.(1) Noting these circumstances, in December the Federal Reserve Board (the Fed) signaled for the first time in two years that recession, rather than inflation, posed the greatest risk to the decade-long economic expansion. In an attempt to restore price stability and sustainable economic growth, the Fed assumed a new monetary policy stance and on six separate occasions cut the federal funds target rate, lowering it to 3.75% by June 30, 2001. CONTENTS Shareholder Letter ................... 1 Special Feature: Making Sense of Dividends ............ 8 Fund Reports Franklin California Insured Tax-Free Income Fund ................. 14 Franklin California Intermediate-Term Tax-Free Income Fund ................. 22 Franklin California Tax-Exempt Money Fund ................ 27 Municipal Bond Ratings ............... 30 Financial Highlights & Statements of Investments ............ 33 Financial Statements ................. 62 Notes to Financial Statements ................. 67 Independent Auditors' Report ..................... 72 Tax Designation ...................... 73
FUND CATEGORY [PYRAMID GRAPHIC] 1. Source: Bureau of Labor Statistics, 7/13/01. "Lower supply during the first half of the fiscal year also favorably impacted municipal bond prices." BOND MARKET OVERVIEW Municipal bond market performance was quite strong during the reporting period, outpacing many other fixed income and equity asset classes. Third quarter 2000 expectations for further interest rate hikes diminished substantially, creating a more favorable bond pricing environment amid falling long-term interest rates. Equity markets, which entered a period of increased volatility and substantial decline, also provided support to bonds as investors grew cautious. As they turned away from plummeting stocks, investors began to show a preference for the relative safety of high-quality, tax-free municipal bonds, helping to drive up municipal bond prices in the face of increased demand. Bond yields and prices move in an inverse relationship, so that as yields fall, prices rise. In addition, as the Fed reduced short-term interest rates, the Treasury yield curve steepened. This led to the 10-year Treasury note outperforming the 30-year Treasury bond, which also provided strength to the municipal bond market. The yield on the 30-year Treasury bond fell from 5.90% at the beginning of the reporting period to 5.76% on June 30, 2001, and the 10-year Treasury note declined from 6.03% to 5.41%. The municipal bond market, which generally trended with the 10-year Treasury note, also saw yields decrease. The Bond Buyer Municipal Bond Index (Bond Buyer 40), an indicator of municipal bond market performance, dropped from a yield of 5.91% to 5.38% for the same period.(2) Lower supply during the first half of the fiscal year also favorably impacted municipal bond prices. Municipal governments enjoyed one of their wealthiest periods in history during 2000. 2. Source: The Bond Buyer, 7/1/01. The unmanaged Bond Buyer Municipal Bond Index is composed of the yield to maturity of 40 bonds. The index attempts to track the new-issue market as closely as possible, so it changes bonds twice a month, adding all new bonds that meet certain requirements and deleting an equivalent number according to their secondary market trading activity. As a result, the average par call date, average maturity date and average coupon rate change over time. The average maturity has generally been about 29-30 years. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed. 2 As windfall tax revenues and prudent fiscal management led to reduced use of municipal debt during the year under review, the nation's municipal bond supply declined 11.9% during calendar year 2000 compared to 1999 amid improving credit strength. During the second half of the fiscal year, national new issuance supply was up an astounding 29.5%.(3) However, demand remained strong throughout the period, with robust retail demand and extraordinary volume among arbitrageurs supporting bond prices. It is rare for the bond markets to experience such strong price returns over successive years. Long-term municipal bonds, as measured by the Lehman Brothers Long-Term Municipal Bond Index, have had a 7.8% average annual total return over the past 10 years and most of the return is a result of the income contribution, not price appreciation.(4) Historically, equities have been the strongest investments for achieving price appreciation, while bonds provided lower volatility, and municipal bonds provided the highest after-tax total return for fixed income investors.(5) We do not expect these relationships to change over the long term. Although these asset classes may experience periods of extreme over- and under-performance, over the long term, each broad investment category achieves its primary objectives. As the nation realized a large federal budget surplus, the U.S. Treasury initiated a buyback program for 30-year Treasury bonds, increasing their scarcity and price while lowering yields. This meant that, on a relative basis, long-term municipal bonds, as measured by the Bond Buyer 40, came to yield as much as 3. Source: The Bond Buyer, 7/11/01. 4. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Long Bond Index includes about 15,000 bonds from across the country. All bonds included have a minimum credit rating of at least Baa and a maturity of at least two years, and have been issued within the last 22 years or longer as part of a deal of over $50 million. Bonds subject to the alternative minimum tax or with floating or zero coupons are excluded. Bonds will be added and the index will be updated monthly with a one-month lag. 5. Source: Standard & Poor's Micropal; Lehman Brothers. 3 WHAT DOES "TAXABLE EQUIVALENT" MEAN FOR YOU? For yield and distribution rate, the taxable equivalent is the amount a taxable investment would have to earn to match a tax-free investment such as municipal bonds.* You can find your Fund's taxable equivalent distribution rate and yield in the Performance Summary of each Fund's report. * For investors subject to the federal or state alternative minimum tax, a 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. 103% of a comparable Treasury bond's yield. Historically, this ratio is about 90%.(2) Since municipals are tax-exempt, generally they yield less than Treasuries, which are subject to federal income tax. When municipal bonds are yielding approximately the same as Treasuries, investors are able to take advantage of the tax exemption at little extra cost. Depending on your federal and state tax rates, a taxable investment of comparable credit quality would need to offer a higher yield, called the taxable equivalent yield, to match the yield on a tax-free investment. Looking forward, we view the municipal bond market positively. We saw an increase in demand over the past two quarters, which contributed to solid performance over the one-year reporting period. Demand increased due to the favorable interest rate environment in 2000, as well as unfavorable equity market performance. We saw investors shift from a heavy focus on growth to a more traditional, diversified portfolio of stocks, bonds and cash, as an investment strategy. Although we experienced a U.S. economic slowdown, state and local government finances through 2000 were very strong, allowing them greater financial flexibility in times of slower growth. Most importantly, we believe municipal bonds will continue to be desirable due to the tax efficiencies they offer. Predicting market cycles is very difficult, even for professional economists -- which is why we recommend investing for the long-term. It is important to remember that over time, the tax-free income received from municipal bond funds will ultimately drive the funds' total return performance. Overall, we believe our professionally managed portfolios can provide investors with high credit quality and valuable tax-free income, for the long term. CALIFORNIA UPDATE During the year under review, California's economy remained relatively healthy despite facing adversity from its power crisis. The state's economy reported growth in every major sector, 4 with the services sector accounting for nearly half of the 440,000 jobs created in 2000. Growing demand for energy resulted in skyrocketing costs for this increasingly valuable commodity. Initially, deregulation laws passed in 1996 prevented investor-owned utilities from raising consumer rates to cover the increased cost of power. By January 2001, however, the state was forced to step in to address the electricity crisis. Governor Gray Davis signed an emergency proclamation giving the state government the ability to purchase electricity at fluctuating short-term and spot wholesale prices for resale to retail customers of the investor-owned utilities. By May 2001, the state's general fund cash advances for power purchases totaled approximately $4 billion.(6) In consideration of increasing energy costs, weakening stock market performance -- particularly in the technology sector -- and a slowing national economy's potential effects on California, the fiscal year 2002 budget proposal reduced the state's tax revenue estimate by approximately $5.4 billion, including a $2.7 billion downward revision in personal income tax.(7) The drop in these sources of income will also temper growth in sales tax collections for the upcoming year. California's debt levels were moderate. Accelerated debt issuance during the past few years has moved the state's historically low debt levels closer to most states' averages. Net tax-supported debt totaled $805 per capita in June 2001.(8) Even with anticipated increased bond issuance, the state's debt levels should remain moderate in relation to the size of the state's budget. 6. Source: Moody's Investors Service, 5/15/01. This does not indicate Moody's rating of the Fund. 7. Source: Moody's Investors Service, 6/8/01. 8. Source: Standard & Poor's, RatingsDirect, 6/20/01. 5 During the 12 months under review, both Moody's(R) and Standard & Poor's(R), two independent credit rating agencies, raised and then lowered California's general obligation (GO) bonds' credit ratings. In September 2000, Moody's raised its rating from Aa3 to Aa2, and Standard & Poor's upgraded the rating from AA- to AA.(9) In April 2001, Standard & Poor's lowered their AA rating to A+, citing uncertainty surrounding the energy crisis and its potential effects on the state's economy.(10) However, Standard & Poor's also asserted that while the state's repayment ability has been reduced by recent power expenditures, its budget should be adequate to pay the debt. In May 2001, Moody's also downgraded the state's credit rating, to Aa3 from Aa2.(6) It is important to note that California bonds, even with recent credit rating adjustments, continue to be rated investment grade. Although the state has some considerable financial problems, we believe it also has the resources to solve them. The state's baseline economic growth prospects remain very strong. Improved business diversity, a vibrant export sector and a concentration of high-growth, knowledge-based industries are all factors contributing to California's robust economy. The state's historically high cash balances and budget reserves all contribute to the expectation that it will outperform the nation in the medium term. Several factors could temper California's credit strength: a relatively inflexible budget structure, potentially volatile revenue structure during periods of economic weakening, the lack of a formal mid-year spending adjustment mechanism and the negative impact a stock market correction could have on capital gains tax collection. California's power crisis, combined with weakening economies around the world, in particular with trading partner Japan, impacted the state's economy more than the rest of the 9. Sources: Moody's Investors Service, 9/7/00; Standard & Poor's, RatingsDirect, 9/7/00. This does not indicate Moody's or Standard & Poor's rating of the Fund. 10. Source: Standard & Poor's, RatingsDirect, 4/24/01. This does not indicate Standard & Poor's rating of the Fund. 6 world's. However, a decade of expansion and growth, combined with planned long-term energy financing, should enable the state to maintain its investment-grade credit outlook. We encourage you to discuss your financial goals with an investment representative. Municipal bond funds provide an opportunity to diversify risk in investors' portfolios and continue to be an attractive investment for those seeking tax-free income. Such a tax-free investment offers a taxable equivalent yield that can be hard to match for a taxable investment with the same relative level of risk. As always, we appreciate your support, welcome your questions and look forward to serving your investment needs in the years ahead. Sincerely, /s/ Charles B. Johnson ---------------------- Charles B. Johnson Chairman Franklin California Tax-Free Trust /s/ Sheila Amoroso ---------------------- Sheila Amoroso /s/ Rafael R. Costas Jr. ------------------------ Rafael R. Costas Jr. Senior Vice Presidents/Co-Directors Franklin Municipal Bond Department 7 Q & A SPECIAL FEATURE: MAKING SENSE OF DIVIDENDS Frequently asked questions about the dividend policy of Franklin tax-free income funds. Have you ever wondered how your fund earns tax-free income and how much of that income is actually paid to you? Or, have you questioned why your monthly dividends fluctuate? Below you'll find answers to these and other commonly asked questions about dividends paid by Franklin's tax-free funds. Q. WHAT'S FRANKLIN TAX-FREE FUNDS' DIVIDEND POLICY AND HOW DOES IT AFFECT MY DIVIDEND PAYMENTS? A. Franklin tax-free income funds attempt to set dividends on a quarterly basis. This means that once a quarter, in March, June, September and December, we establish a fixed dividend amount per share that the funds will distribute over the next three months. While the income the funds accrue varies day-to-day, we do our best to maintain this fixed dividend each quarter to provide our shareholders with a stable income stream. Not FDIC Insured - May Lose Value - No Bank Guarantee NOT PART OF THE SHAREHOLDER REPORT 8 As you know, our goal is to invest for high, current tax-free income. Franklin is one of the few fund companies that work to stabilize dividend payments for three months at a time. Many other tax-free funds distribute dividends on daily income they accrue each month; meaning their dividend payments can fluctuate every month. Q. WHAT ARE THE SOURCES OF THE INCOME MY FUND DISTRIBUTES TO ME AS TAX-FREE DIVIDENDS? A. Your fund earns tax-exempt interest income from its investments in municipal securities, or bonds. A municipal bond is an IOU issued by state and local government agencies to raise money to fund public projects. The issuing municipality makes interest payments to bondholders, in this case the fund, to compensate them for the use of their money until the bond is repaid. Franklin's tax-free funds pay you this investment income as tax-free dividends, less various operating expenses. As you know, these dividends are usually free from federal income taxes.* For a state-specific fund, they may also be free from that state's personal income taxes as well, to the extent dividends are earned from interest on that state's tax-free obligations.* Sometimes, the fund may also pay you accumulated dividends that were not previously distributed. *Alternative minimum taxes may apply. NOT PART OF THE SHAREHOLDER REPORT 9 Q. WHAT OTHER FACTORS CAN AFFECT MY MONTHLY DIVIDENDS? A. Generally, interest rates are the biggest determinant of a tax-free fund's earnings level and the amount of dividends paid to you. For example, when interest rates decline, a fund's investment earnings will decline, as cash flow into the fund must be invested at the lower rates. This means dividend payments will also decrease. However, since bond prices tend to move in the opposite direction of interest rates, your fund's net asset value (NAV) will tend to increase, causing your shares to appreciate in price. Similarly, when interest rates rise, the ability of the funds to increase their dividends will rise. Interest rate trends are primarily determined by economic factors such as inflation, strength of the U.S. dollar and the pace of economic growth. Strong economic growth can lead to inflation, and the Federal Reserve may raise interest rates to cool the economy, as we saw last year. On the other hand, if the economy slows down, the Federal Reserve may lower interest rates to stimulate economic growth, as happened earlier this year. Credit quality and maturity periods of the securities in a fund's portfolio also play a role in determining the amount of income available to distribute to shareholders, as explained below. 10 NOT PART OF THE SHAREHOLDER REPORT Q. WHY DO SOME TAX-FREE FUNDS PAY HIGHER DIVIDENDS THAN OTHERS? A. Dividends are directly related to the composition of a fund's portfolio. First, the credit quality of securities held helps determine a fund's dividend payment ability. High-yield municipal bond funds, for example, can have higher dividend distributions than other tax-free funds. This is because they hold lower credit-quality municipal bonds that must pay higher yields than other securities to compensate investors for taking on additional risk. However, they're also subject to higher risk than funds that hold higher quality bonds in their portfolios. Similarly, long-term bond holdings in a fund's portfolio tend to pay higher interest income than short-term bonds to compensate for uncertainty associated with the future. Q. HOW HAS THE CURRENT DECLINING INTEREST RATE ENVIRONMENT AFFECTED MONTHLY DIVIDEND PAYMENTS? A. When interest rates decline, municipal bond issuers often "call," or redeem, their higher-yielding bonds and replace them with new, lower-yielding securities so they can reduce the amount of interest they have to pay on the debt. Most municipal bonds are callable within 10 to 12 years after they're issued. Because interest rates have generally been declining over the past 15 years, our funds are experiencing bond calls on older, higher-income securities. NOT PART OF THE SHAREHOLDER REPORT 11 Consequently, many of Franklin's tax-free funds have had to reinvest proceeds from these called bonds into lower-yielding bonds, resulting in lower earnings (dividends). Because funds can only pay out what they earn, many of our funds have had to reduce dividend payments. As you can see in the chart below, in the late 1980s and early 1990s, we were able to invest assets at approximately 8%. As these bonds matured or were called, we've had to reinvest the proceeds at approximately 5-3/8%. Because we cannot invest cash flow at the higher levels, we've had to reduce dividends. We continue to pay out the income we earn, but our earnings are lower today because we're reinvesting at a lower rate than was available 10-15 years ago. Many of the securities being called today have provided high levels of income over the past 10 years, as interest rates have trended down. Though we can't predict interest rate cycles, we'll continue to focus on producing the highest monthly tax-free income possible through our disciplined management approach. MONTHLY YIELDS OF BOND BUYER 40
Date BondBuyer 40 Yields ------------------------- Jan 85 10.35% Feb 85 10.20% Mar 85 10.01% Apr 85 9.50% May 85 9.43% Jun 85 9.40% Jul 85 9.45% Aug 85 9.80% Sep 85 9.49% Oct 85 9.24% Nov 85 8.92% Dec 85 8.48% Jan 86 8.04% Feb 86 7.82% Mar 86 7.92% Apr 86 8.14% May 86 7.90% Jun 86 7.96% Jul 86 7.88% Aug 86 7.41% Sep 86 7.56% Oct 86 7.36% Nov 86 7.19% Dec 86 7.18% Jan 87 7.11% Feb 87 7.05% Mar 87 7.18% Apr 87 8.10% May 87 8.29% Jun 87 8.19% Jul 87 8.17% Aug 87 8.16% Sep 87 8.87% Oct 87 8.72% Nov 87 8.62% Dec 87 8.40% Jan 88 7.97% Feb 88 7.85% Mar 88 8.17% Apr 88 8.17% May 88 8.20% Jun 88 8.04% Jul 88 8.05% Aug 88 8.11% Sep 88 7.89% Oct 88 7.73% Nov 88 7.90% Dec 88 7.74% Jan 89 7.66% Feb 89 7.73% Mar 89 7.79% Apr 89 7.58% May 89 7.46% Jun 89 7.29% Jul 89 7.16% Aug 89 7.36% Sep 89 7.47% Oct 89 7.38% Nov 89 7.24% Dec 89 7.25% Jan 90 7.45% Feb 90 7.40% Mar 90 7.52% Apr 90 7.74% May 90 7.53% Jun 90 7.50% Jul 90 7.35% Aug 90 7.64% Sep 90 7.79% Oct 90 7.71% Nov 90 7.47% Dec 90 7.47% Jan 91 7.39% Feb 91 7.36% Mar 91 7.34% Apr 91 7.26% May 91 7.21% Jun 91 7.21% Jul 91 7.11% Aug 91 6.97% Sep 91 6.89% Oct 91 6.85% Nov 91 6.90% Dec 91 6.66% Jan 92 6.72% Feb 92 6.76% Mar 92 6.76% Apr 92 6.74% May 92 6.63% Jun 92 6.49% Jul 92 6.19% Aug 92 6.35% Sep 92 6.39% Oct 92 6.68% Nov 92 6.42% Dec 92 6.39% Jan 93 6.31% Feb 93 6.01% Mar 93 6.04% Apr 93 5.96% May 93 5.89% Jun 93 5.76% Jul 93 5.78% Aug 93 5.60% Sep 93 5.47% Oct 93 5.48% Nov 93 5.65% Dec 93 5.52% Jan 94 5.45% Feb 94 5.77% Mar 94 6.36% Apr 94 6.37% May 94 6.40% Jun 94 6.47% Jul 94 6.33% Aug 94 6.36% Sep 94 6.58% Oct 94 6.85% Nov 94 7.16% Dec 94 6.92% Jan 95 6.66% Feb 95 6.42% Mar 95 6.37% Apr 95 6.35% May 95 6.10% Jun 95 6.28% Jul 95 6.19% Aug 95 6.11% Sep 95 6.07% Oct 95 5.91% Nov 95 5.74% Dec 95 5.56% Jan 96 5.57% Feb 96 5.71% Mar 96 5.96% Apr 96 6.05% May 96 6.09% Jun 96 6.01% Jul 96 5.98% Aug 96 6.02% Sep 96 5.89% Oct 96 5.83% Nov 96 5.66% Dec 96 5.72% Jan 97 5.82% Feb 97 5.76% Mar 97 5.95% Apr 97 5.89% May 97 5.74% Jun 97 5.69% Jul 97 5.40% Aug 97 5.55% Sep 97 5.47% Oct 97 5.40% Nov 97 5.36% Dec 97 5.25% Jan 98 5.19% Feb 98 5.24% Mar 98 5.27% Apr 98 5.39% May 98 5.22% Jun 98 5.22% Jul 98 5.26% Aug 98 5.11% Sep 98 4.99% Oct 98 5.13% Nov 98 5.10% Dec 98 5.16% Jan 99 5.09% Feb 99 5.17% Mar 99 5.23% Apr 99 5.28% May 99 5.37% Jun 99 5.53% Jul 99 5.59% Aug 99 5.78% Sep 99 5.89% Oct 99 6.08% Nov 99 6.12% Dec 99 6.22% Jan 00 6.31% Feb 00 6.17% Mar 00 5.94% Apr 00 6.00% May 00 6.13% Jun 00 5.91% Jul 00 5.79% Aug 00 5.72% Sep 00 5.82% Oct 00 5.74% Nov 00 5.75% Dec 00 5.47% Jan 01 5.45% Feb 01 5.40% Mar 01 5.30% Apr 01 5.49% May 01 5.42% June 01 5.38%
Source: S&P Micropal (Bond Buyer 40, as of 6/30/01). One cannot invest in an index; indexes are unmanaged. 12 NOT PART OF THE SHAREHOLDER REPORT Q. WHAT OTHER TYPES OF INCOME CAN MY FUND DISTRIBUTE? A. Your fund also earns income from short- and long-term capital gains, which are taxable to shareholders, whether you reinvest them or receive them as cash. Though we work to reduce capital gains, in periods of sustained low interest rates, they are often unavoidable. While short-term capital gains (on securities held in a portfolio for 12 months or less) are treated as ordinary income distributions and taxed at regular income tax rates, long-term capital gains (on securities held in a portfolio for more than 12 months) are taxed at lower rates. Sometimes, a fund may invest part of its portfolio in private activity bonds, which are basically municipal bonds issued to finance private activity. Interest earned from such bonds is exempt from federal income tax, but it's a preference item when calculating your alternative minimum tax (AMT) liability. So, as required by the Internal Revenue Code, this income must be added to your regular tax income to calculate your AMT income and AMT tax liability, if any. In case your fund makes any capital gains distributions, you can find the exact amount of the distributions on your Form 1099. For complete information on your tax liabilities, we suggest you consult a qualified tax professional. [FRANKLIN TEMPLETON LOGO] DIVQ INS 08/01 NOT PART OF THE SHAREHOLDER REPORT 13 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND -------------------------------------------------------------------------------- Your Fund's Goal: Franklin California Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and California state personal income taxes while seeking preservation of capital by investing primarily in a portfolio of insured California municipal securities. (1), (2) -------------------------------------------------------------------------------- Despite uncertainty surrounding California's energy crisis during the 12 months ended June 30, 2001, the state's economy remained healthy. The nation's economy, however, showed clear signs of slowing down. This prompted the Federal Reserve Board to reverse its previous tightening bias and cut the federal funds target rate on six separate occasions during the period, lowering it to 3.75% by June 30, 2001. Generally declining interest rates benefited the municipal bond market during the reporting period, as bond prices increase when interest rates fall. Franklin California Insured Tax-Free Income Fund's Class A share price, as measured by net asset value, rose from $11.76 on June 30, 2000, to $12.17 on June 30, 2001. 1. For investors subject to the federal 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. The insurance guarantees the scheduled payment of principal and interest on the insured securities in the Fund's portfolio, but does not guarantee the insured security's market value, the value of the Fund's shares or the Fund's distributions. Fund shares are not insured. No representation is made as to any insurer's ability to meet its obligation to the Fund if called upon to do so. The dollar value, number of shares or principal value, and complete legal titles of all portfolio holdings are listed in the Fund's Statement of Investments (SOI). The SOI begins on page 36. 14 California's general obligation (GO) bonds experienced significant weakening in the municipal bond market. The state's downgraded debt created opportunities not seen since the last recession more than seven years ago. California GO debt traded at prices lower than those of national GO bonds. Keeping in mind that California has the world's sixth largest economy -- right behind France and just ahead of Italy -- we sought to take advantage of this situation and purchased California State GO bonds at levels that represented significant value relative to their historical prices. Apart from California GO bonds, the market for the state's general municipal debt remained robust. California's investment grade bonds traded at higher prices relative to comparable national municipal bonds. Other bonds we purchased during the period included Sacramento City Financing Authority, California State Department Water Resources Water and Long Beach Board Financial Authority Lease - Aquarium of the South Pacific revenue bonds. Among the bonds we sold were some of our California Education Facilities Authority - Stanford University revenue bonds. During the reporting period, Franklin California Insured Tax-Free Income Fund experienced net inflows as well as calls on higher coupon bonds. We invested the resulting proceeds at recent, lower interest rates. Due to these circumstances, in June 2001 the Fund reduced its Class A monthly dividend from PORTFOLIO BREAKDOWN Franklin California Insured Tax-Free Income Fund 6/30/01
% of Total Long-Term Investments ------------------------------------- Utilities 16.2% Tax-Supported 14.5% Transportation 13.7% Prerefunded 12.1% General Obligation 11.6% Subject to Government Appropriations 11.5% Hospital & Health Care 10.6% Higher Education 4.9% Housing 2.7% Other Revenue 2.2%
15 DIVIDEND DISTRIBUTIONS* Franklin California Insured Tax-Free Income Fund 7/1/00 - 6/30/01
DIVIDEND PER SHARE ------------------ MONTH CLASS A CLASS B CLASS C -------------------------------------------------------------------- July 5.07 cents 4.51 cents 4.53 cents August 5.07 cents 4.51 cents 4.53 cents September 5.07 cents 4.50 cents 4.52 cents October 5.07 cents 4.50 cents 4.52 cents November 5.07 cents 4.50 cents 4.52 cents December 5.07 cents 4.55 cents 4.56 cents January 5.07 cents 4.55 cents 4.56 cents February 5.07 cents 4.55 cents 4.56 cents March 5.07 cents 4.46 cents 4.44 cents April 5.07 cents 4.46 cents 4.44 cents May 5.07 cents 4.46 cents 4.44 cents June 5.02 cents 4.46 cents 4.45 cents -------------------------------------------------------------------- TOTAL 60.79 CENTS 54.01 CENTS 54.07 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the Fund during the reporting period. 5.07 cents per share to 5.02 cents per share. For a detailed discussion of our dividend policy, please see "Making Sense of Dividends" beginning on page 8. Keep in mind that your Fund combines the advantages of high credit quality and tax-free yields. (1) The Performance Summary beginning on page 18 shows that on June 30, 2001, the Fund's Class A shares' distribution rate was 4.74% based on an annualization of the current 5.02 cent ($0.0502) per share dividend and 16 the maximum offering price of $12.71 on June 30, 2001. An investor in the maximum combined federal and California state personal income tax bracket of 44.76% would need to earn 8.58% from a taxable investment to match the Fund's tax-free distribution rate. The Performance Summary also shows the distribution rates and taxable equivalents for Class B and C shares. Looking forward, strong retail and institutional demand for California municipal bonds -- along with a slowing economy -- should prove advantageous to the Fund. We believe the Fund's conservative, buy-and-hold, income-oriented philosophy, as well as its reserve of higher coupon bonds from previous, higher interest-rate periods should help moderate its share price volatility, reduce portfolio turnover and protect its income stream. -------------------------------------------------------------------------------- This discussion reflects our views, opinions and portfolio holdings as of June 30, 2001, the end of the reporting period. The information provided is not a complete analysis of every aspect of any state, industry, security or the Fund. Our strategies and the Fund's portfolio composition will change depending on market and economic conditions. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. -------------------------------------------------------------------------------- 17 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND Class A: Subject to the current, maximum 4.25% initial sales charge. Prior to 7/1/94, Fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective 5/1/94, the Fund implemented a Rule 12b-1 plan, which affects subsequent performance. Class B: Subject to no initial sales charge, but subject to a contingent deferred sales charge (CDSC) declining from 4% to 0% over six years. These shares have higher annual fees and expenses than Class A shares. Class C: Subject to 1% initial sales charge and 1% CDSC for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. PERFORMANCE SUMMARY AS OF 6/30/01 Distributions and returns will vary based on earnings of the Fund's portfolio and any profits realized from the sale of the portfolio's securities, as well as the level of operating expenses for each class. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 6/30/01 6/30/00 -------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.41 $12.17 $11.76 DISTRIBUTIONS (7/1/00 - 6/30/01) Dividend Income $0.6079
CLASS B CHANGE 6/30/01 6/30/00 ------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.43 $12.21 $11.78 DISTRIBUTIONS (7/1/00 - 6/30/01) Dividend Income $0.5401
CLASS C CHANGE 6/30/01 6/30/00 -------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.42 $12.26 $11.84 DISTRIBUTIONS (7/1/00 - 6/30/01) Dividend Income $0.5407
18 PERFORMANCE
CLASS A 1-YEAR 5-YEAR 10-YEAR -------------------------------------------------------------------------------- Cumulative Total Return(1) +8.73% +33.00% +89.73% Average Annual Total Return(2) +4.12% +4.96% +6.15% Distribution Rate(3) 4.74% Taxable Equivalent Distribution Rate(4) 8.58% 30-Day Standardized Yield(5) 4.01% Taxable Equivalent Yield(4) 7.26%
INCEPTION CLASS B 1-YEAR (2/1/00) --------------------------------------------------------------------------------- Cumulative Total Return(1) +8.29% +14.53% Average Annual Total Return(2) +4.29% +7.34% Distribution Rate(3) 4.38% Taxable Equivalent Distribution Rate(4) 7.93% 30-Day Standardized Yield(5) 3.72% Taxable Equivalent Yield(4) 6.73%
INCEPTION CLASS C 1-YEAR 5-YEAR (5/1/95) -------------------------------------------------------------------------------- Cumulative Total Return(1) +8.17% +29.42% +39.26% Average Annual Total Return(2) +6.09% +5.08% +5.34% Distribution Rate(3) 4.31% Taxable Equivalent Distribution Rate(4) 7.80% 30-Day Standardized Yield(5) 3.61% Taxable Equivalent Yield(4) 6.54%
For updated performance figures, see "Prices and Performance" at franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236. Past performance does not guarantee future results. 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 (NAV for Class B) per share on 6/30/01. 4. Taxable equivalent distribution rate and yield assume the published rates as of 6/20/01 for the maximum combined federal and California state personal income tax bracket of 44.76%, based on the federal income tax rate of 39.1%. 5. Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 6/30/01. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 19 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AVERAGE ANNUAL TOTAL RETURN
CLASS A 6/30/01 -------------------------------------------------------------------------- 1-Year +4.12% 5-Year +4.96% 10-Year +6.15%
AVERAGE ANNUAL TOTAL RETURN
Class B 6/30/01 ------------------------------------------------------------------------------ 1-Year +4.29% Since Inception (2/1/00) +7.34%
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT Total return represents the change in value of an investment over the periods shown. It includes the current, applicable, maximum sales charge(s), Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvested interest. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index. The Consumer Price Index (CPI) is a commonly used measure of the inflation rate.
CA Ins. TF Class A LB Muni Index CPI ------------------ ------------- --- 07/01/1991 $ 9,575 $ 10,000 $ 10,000 07/31/1991 $ 9,696 1.22% $ 10,122 0.15% $ 10,015 08/31/1991 $ 9,783 1.32% $ 10,256 0.29% $ 10,044 09/30/1991 $ 9,906 1.30% $ 10,389 0.44% $ 10,088 10/31/1991 $ 9,976 0.90% $ 10,482 0.15% $ 10,103 11/30/1991 $ 9,961 0.28% $ 10,512 0.29% $ 10,133 12/31/1991 $ 10,155 2.15% $ 10,738 0.07% $ 10,140 01/31/1992 $ 10,165 0.23% $ 10,762 0.15% $ 10,155 02/29/1992 $ 10,165 0.03% $ 10,766 0.36% $ 10,192 03/31/1992 $ 10,201 0.03% $ 10,769 0.51% $ 10,244 04/30/1992 $ 10,281 0.89% $ 10,865 0.14% $ 10,258 05/31/1992 $ 10,434 1.18% $ 10,993 0.14% $ 10,272 06/30/1992 $ 10,576 1.68% $ 11,178 0.36% $ 10,309 07/31/1992 $ 10,947 3.00% $ 11,513 0.21% $ 10,331 08/31/1992 $ 10,790 -0.97% $ 11,401 0.28% $ 10,360 09/30/1992 $ 10,806 0.65% $ 11,475 0.28% $ 10,389 10/31/1992 $ 10,592 -0.98% $ 11,363 0.35% $ 10,425 11/30/1992 $ 10,886 1.79% $ 11,566 0.14% $ 10,440 12/31/1992 $ 11,024 1.02% $ 11,684 -0.07% $ 10,432 01/31/1993 $ 11,172 1.16% $ 11,820 0.49% $ 10,484 02/28/1993 $ 11,508 3.62% $ 12,248 0.35% $ 10,520 03/31/1993 $ 11,477 -1.06% $ 12,118 0.35% $ 10,557 04/30/1993 $ 11,551 1.01% $ 12,240 0.28% $ 10,587 05/31/1993 $ 11,616 0.56% $ 12,309 0.14% $ 10,601 06/30/1993 $ 11,815 1.67% $ 12,514 0.14% $ 10,616 07/31/1993 $ 11,842 0.13% $ 12,531 0.00% $ 10,616 08/31/1993 $ 12,062 2.08% $ 12,791 0.28% $ 10,646 09/30/1993 $ 12,205 1.14% $ 12,937 0.21% $ 10,668 10/31/1993 $ 12,279 0.19% $ 12,962 0.41% $ 10,712 11/30/1993 $ 12,256 -0.88% $ 12,848 0.07% $ 10,720 12/31/1993 $ 12,458 2.11% $ 13,119 0.00% $ 10,720 01/31/1994 $ 12,583 1.14% $ 13,268 0.27% $ 10,749 02/28/1994 $ 12,331 -2.59% $ 12,925 0.34% $ 10,785 03/31/1994 $ 11,837 -4.07% $ 12,399 0.34% $ 10,822 04/30/1994 $ 11,884 0.85% $ 12,504 0.14% $ 10,837 05/31/1994 $ 11,960 0.87% $ 12,613 0.07% $ 10,844 06/30/1994 $ 11,915 -0.61% $ 12,536 0.34% $ 10,881 07/31/1994 $ 12,124 1.83% $ 12,765 0.27% $ 10,911 08/31/1994 $ 12,171 0.35% $ 12,810 0.40% $ 10,954 09/30/1994 $ 12,013 -1.47% $ 12,622 0.27% $ 10,984 10/31/1994 $ 11,792 -1.78% $ 12,397 0.07% $ 10,992 11/30/1994 $ 11,592 -1.81% $ 12,173 0.13% $ 11,006 12/31/1994 $ 11,796 2.20% $ 12,440 0.00% $ 11,006 01/31/1995 $ 12,189 2.86% $ 12,796 0.40% $ 11,050 02/28/1995 $ 12,532 2.91% $ 13,169 0.40% $ 11,094 03/31/1995 $ 12,623 1.15% $ 13,320 0.33% $ 11,131 04/30/1995 $ 12,660 0.12% $ 13,336 0.33% $ 11,168 05/31/1995 $ 13,008 3.19% $ 13,761 0.20% $ 11,190 06/30/1995 $ 12,843 -0.87% $ 13,642 0.20% $ 11,212 07/31/1995 $ 12,924 0.95% $ 13,771 0.00% $ 11,212 08/31/1995 $ 13,040 1.27% $ 13,946 0.26% $ 11,241 09/30/1995 $ 13,122 0.63% $ 14,034 0.20% $ 11,264 10/31/1995 $ 13,313 1.45% $ 14,238 0.33% $ 11,301 11/30/1995 $ 13,561 1.66% $ 14,474 -0.07% $ 11,293 12/31/1995 $ 13,722 0.96% $ 14,613 -0.07% $ 11,285 01/31/1996 $ 13,807 0.76% $ 14,724 0.59% $ 11,352 02/29/1996 $ 13,735 -0.68% $ 14,624 0.32% $ 11,388 03/31/1996 $ 13,530 -1.28% $ 14,437 0.52% $ 11,447 04/30/1996 $ 13,481 -0.28% $ 14,396 0.39% $ 11,492 05/31/1996 $ 13,487 -0.04% $ 14,390 0.19% $ 11,514 06/30/1996 $ 13,642 1.09% $ 14,547 0.06% $ 11,521 07/31/1996 $ 13,761 0.90% $ 14,678 0.19% $ 11,543 08/31/1996 $ 13,812 -0.02% $ 14,675 0.19% $ 11,565 09/30/1996 $ 14,001 1.40% $ 14,881 0.32% $ 11,602 10/31/1996 $ 14,134 1.13% $ 15,049 0.32% $ 11,639 11/30/1996 $ 14,348 1.83% $ 15,324 0.19% $ 11,661 12/31/1996 $ 14,296 -0.42% $ 15,260 0.00% $ 11,661 01/31/1997 $ 14,290 0.19% $ 15,289 0.32% $ 11,698 02/28/1997 $ 14,413 0.92% $ 15,430 0.31% $ 11,734 03/31/1997 $ 14,230 -1.33% $ 15,224 0.25% $ 11,764 04/30/1997 $ 14,354 0.84% $ 15,352 0.12% $ 11,778 05/31/1997 $ 14,539 1.51% $ 15,584 -0.06% $ 11,771 06/30/1997 $ 14,652 1.07% $ 15,751 0.12% $ 11,785 07/31/1997 $ 15,053 2.77% $ 16,187 0.12% $ 11,799 08/31/1997 $ 14,927 -0.94% $ 16,035 0.19% $ 11,821 09/30/1997 $ 15,090 1.19% $ 16,226 0.25% $ 11,851 10/31/1997 $ 15,179 0.64% $ 16,330 0.25% $ 11,881 11/30/1997 $ 15,268 0.59% $ 16,426 -0.06% $ 11,873 12/31/1997 $ 15,475 1.46% $ 16,666 -0.12% $ 11,859 01/31/1998 $ 15,628 1.03% $ 16,837 0.19% $ 11,882 02/28/1998 $ 15,644 0.03% $ 16,842 0.19% $ 11,904 03/31/1998 $ 15,660 0.09% $ 16,858 0.19% $ 11,927 04/30/1998 $ 15,588 -0.45% $ 16,782 0.18% $ 11,948 05/31/1998 $ 15,807 1.58% $ 17,047 0.18% $ 11,970 06/30/1998 $ 15,887 0.39% $ 17,113 0.12% $ 11,984 07/31/1998 $ 15,916 0.25% $ 17,156 0.12% $ 11,999 08/31/1998 $ 16,138 1.55% $ 17,422 0.12% $ 12,013 09/30/1998 $ 16,386 1.25% $ 17,640 0.12% $ 12,028 10/31/1998 $ 16,402 0.00% $ 17,640 0.24% $ 12,056 11/30/1998 $ 16,471 0.35% $ 17,702 0.00% $ 12,056 12/31/1998 $ 16,483 0.25% $ 17,746 -0.06% $ 12,049 01/31/1999 $ 16,617 1.19% $ 17,957 0.24% $ 12,078 02/28/1999 $ 16,607 -0.44% $ 17,878 0.12% $ 12,093 03/31/1999 $ 16,648 0.14% $ 17,903 0.30% $ 12,129 04/30/1999 $ 16,649 0.25% $ 17,948 0.73% $ 12,217 05/31/1999 $ 16,570 -0.58% $ 17,844 0.00% $ 12,217 06/30/1999 $ 16,315 -1.44% $ 17,587 0.00% $ 12,217 07/31/1999 $ 16,329 0.36% $ 17,650 0.30% $ 12,254 08/31/1999 $ 16,114 -0.80% $ 17,509 0.24% $ 12,283 09/30/1999 $ 16,128 0.04% $ 17,516 0.48% $ 12,342 10/31/1999 $ 15,883 -1.08% $ 17,327 0.18% $ 12,365 11/30/1999 $ 16,007 1.06% $ 17,510 0.06% $ 12,372 12/31/1999 $ 15,885 -0.75% $ 17,379 0.00% $ 12,372 01/31/2000 $ 15,762 -0.44% $ 17,303 0.30% $ 12,409 02/29/2000 $ 16,040 1.16% $ 17,503 0.59% $ 12,482 03/31/2000 $ 16,432 2.18% $ 17,885 0.82% $ 12,585 04/30/2000 $ 16,292 -0.59% $ 17,779 0.06% $ 12,592 05/31/2000 $ 16,224 -0.52% $ 17,687 0.12% $ 12,607 06/30/2000 $ 16,677 2.65% $ 18,156 0.52% $ 12,673 07/31/2000 $ 16,891 1.39% $ 18,408 0.23% $ 12,702 08/31/2000 $ 17,219 1.54% $ 18,691 0.00% $ 12,702 09/30/2000 $ 17,177 -0.52% $ 18,594 0.52% $ 12,768 10/31/2000 $ 17,308 1.09% $ 18,797 0.17% $ 12,790 11/30/2000 $ 17,453 0.76% $ 18,940 0.06% $ 12,798 12/31/2000 $ 17,874 2.47% $ 19,408 -0.06% $ 12,790 01/31/2001 $ 17,977 0.99% $ 19,600 0.63% $ 12,870 2/29/01 $ 18,022 0.32% $ 19,662 0.40% $ 12,922 03/31/2001 $ 18,184 0.90% $ 19,839 0.23% $ 12,952 04/30/2001 $ 17,905 -1.08% $ 19,625 0.40% $ 13,003 05/31/2001 $ 18,098 1.08% $ 19,837 0.45% $ 13,062 06/30/2001 $ 18,166 0.67% $ 19,970 0.17% $ 13,084
The following line graph compares the performance of Franklin California Insured Tax-Free Income Fund - Class B to that of the Lehman Brothers Municipal Bond Index(6) and to the Consumer Price Index(6) based on a $10,000 investment from 2/1/00 to 6/30/01.
CA Ins. TF Class B LB Muni Index CPI ------------------ ------------- --- 02/01/2000 $ 10,000 $ 10,000 $ 10,000 02/29/2000 $ 10,166 1.16% $ 10,116 0.59% $ 10,059 03/31/2000 $ 10,418 2.18% $ 10,337 0.82% $ 10,141 04/30/2000 $ 10,317 -0.59% $ 10,276 0.06% $ 10,148 05/31/2000 $ 10,277 -0.52% $ 10,222 0.12% $ 10,160 06/30/2000 $ 10,559 2.65% $ 10,493 0.52% $ 10,213 07/31/2000 $ 10,689 1.39% $ 10,639 0.23% $ 10,236 08/31/2000 $ 10,892 1.54% $ 10,803 0.00% $ 10,236 09/30/2000 $ 10,860 -0.52% $ 10,747 0.52% $ 10,289 10/31/2000 $ 10,946 1.09% $ 10,864 0.17% $ 10,307 11/30/2000 $ 11,033 0.76% $ 10,946 0.06% $ 10,313 12/31/2000 $ 11,294 2.47% $ 11,217 -0.06% $ 10,307 01/31/2001 $ 11,353 0.99% $ 11,328 0.63% $ 10,372 2/29/01 $ 11,377 0.32% $ 11,364 0.40% $ 10,413 03/31/2001 $ 11,473 0.90% $ 11,466 0.23% $ 10,437 04/30/2001 $ 11,301 -1.08% $ 11,342 0.40% $ 10,479 05/31/2001 $ 11,417 1.08% $ 11,465 0.45% $ 10,526 06/30/2001 $ 11,053 0.67% $ 11,542 0.17% $ 10,544 Total 10.53% 15.42% 5.44% Return
20
CA Ins. TF Class C LB Muni Index CPI ------------------ ------------- --- 05/01/1995 $ 9,900 $ 10,000 $ 10,000 05/31/1995 $ 10,197 3.19% $ 10,319 0.20% $ 10,020 06/30/1995 $ 10,063 -0.87% $ 10,229 0.20% $ 10,040 07/31/1995 $ 10,122 0.95% $ 10,326 0.00% $ 10,040 08/31/1995 $ 10,215 1.27% $ 10,458 0.26% $ 10,066 09/30/1995 $ 10,265 0.63% $ 10,523 0.20% $ 10,086 10/31/1995 $ 10,418 1.45% $ 10,676 0.33% $ 10,120 11/30/1995 $ 10,606 1.66% $ 10,853 -0.07% $ 10,112 12/31/1995 $ 10,727 0.96% $ 10,957 -0.07% $ 10,105 01/31/1996 $ 10,787 0.76% $ 11,041 0.59% $ 10,165 02/29/1996 $ 10,726 -0.68% $ 10,966 0.32% $ 10,198 03/31/1996 $ 10,571 -1.28% $ 10,825 0.52% $ 10,251 04/30/1996 $ 10,528 -0.28% $ 10,795 0.39% $ 10,291 05/31/1996 $ 10,527 -0.04% $ 10,791 0.19% $ 10,310 06/30/1996 $ 10,642 1.09% $ 10,908 0.06% $ 10,316 07/31/1996 $ 10,737 0.90% $ 11,006 0.19% $ 10,336 08/31/1996 $ 10,762 -0.02% $ 11,004 0.19% $ 10,356 09/30/1996 $ 10,904 1.40% $ 11,158 0.32% $ 10,389 10/31/1996 $ 11,002 1.13% $ 11,284 0.32% $ 10,422 11/30/1996 $ 11,172 1.83% $ 11,491 0.19% $ 10,442 12/31/1996 $ 11,118 -0.42% $ 11,443 0.00% $ 10,442 01/31/1997 $ 11,108 0.19% $ 11,464 0.32% $ 10,475 02/28/1997 $ 11,207 0.92% $ 11,570 0.31% $ 10,508 03/31/1997 $ 11,060 -1.33% $ 11,416 0.25% $ 10,534 04/30/1997 $ 11,142 0.84% $ 11,512 0.12% $ 10,547 05/31/1997 $ 11,287 1.51% $ 11,686 -0.06% $ 10,540 06/30/1997 $ 11,369 1.07% $ 11,811 0.12% $ 10,553 07/31/1997 $ 11,674 2.77% $ 12,138 0.12% $ 10,565 08/31/1997 $ 11,571 -0.94% $ 12,024 0.19% $ 10,586 09/30/1997 $ 11,692 1.19% $ 12,167 0.25% $ 10,612 10/31/1997 $ 11,755 0.64% $ 12,245 0.25% $ 10,639 11/30/1997 $ 11,827 0.59% $ 12,317 -0.06% $ 10,632 12/31/1997 $ 11,971 1.46% $ 12,497 -0.12% $ 10,619 01/31/1998 $ 12,092 1.03% $ 12,626 0.19% $ 10,640 02/28/1998 $ 12,089 0.03% $ 12,629 0.19% $ 10,660 03/31/1998 $ 12,096 0.09% $ 12,641 0.19% $ 10,680 04/30/1998 $ 12,044 -0.45% $ 12,584 0.18% $ 10,699 05/31/1998 $ 12,206 1.58% $ 12,783 0.18% $ 10,719 06/30/1998 $ 12,262 0.39% $ 12,832 0.12% $ 10,731 07/31/1998 $ 12,268 0.25% $ 12,865 0.12% $ 10,744 08/31/1998 $ 12,433 1.55% $ 13,064 0.12% $ 10,757 09/30/1998 $ 12,627 1.25% $ 13,227 0.12% $ 10,770 10/31/1998 $ 12,624 0.00% $ 13,227 0.24% $ 10,796 11/30/1998 $ 12,681 0.35% $ 13,274 0.00% $ 10,796 12/31/1998 $ 12,674 0.25% $ 13,307 -0.06% $ 10,789 01/31/1999 $ 12,781 1.19% $ 13,465 0.24% $ 10,815 02/28/1999 $ 12,767 -0.44% $ 13,406 0.12% $ 10,828 03/31/1999 $ 12,792 0.14% $ 13,425 0.30% $ 10,861 04/30/1999 $ 12,786 0.25% $ 13,458 0.73% $ 10,940 05/31/1999 $ 12,720 -0.58% $ 13,380 0.00% $ 10,940 06/30/1999 $ 12,520 -1.44% $ 13,187 0.00% $ 10,940 07/31/1999 $ 12,525 0.36% $ 13,235 0.30% $ 10,973 08/31/1999 $ 12,355 -0.80% $ 13,129 0.24% $ 10,999 09/30/1999 $ 12,360 0.04% $ 13,134 0.48% $ 11,052 10/31/1999 $ 12,168 -1.08% $ 12,992 0.18% $ 11,072 11/30/1999 $ 12,256 1.06% $ 13,130 0.06% $ 11,079 12/31/1999 $ 12,159 -0.75% $ 13,032 0.00% $ 11,079 01/31/2000 $ 12,048 -0.44% $ 12,974 0.30% $ 11,112 02/29/2000 $ 12,254 1.16% $ 13,125 0.59% $ 11,177 03/31/2000 $ 12,557 2.18% $ 13,411 0.82% $ 11,269 04/30/2000 $ 12,445 -0.59% $ 13,332 0.06% $ 11,276 05/31/2000 $ 12,388 -0.52% $ 13,263 0.12% $ 11,289 06/30/2000 $ 12,725 2.65% $ 13,614 0.52% $ 11,348 07/31/2000 $ 12,882 1.39% $ 13,803 0.23% $ 11,374 08/31/2000 $ 13,125 1.54% $ 14,016 0.00% $ 11,374 09/30/2000 $ 13,087 -0.52% $ 13,943 0.52% $ 11,433 10/31/2000 $ 13,191 1.09% $ 14,095 0.17% $ 11,453 11/30/2000 $ 13,284 0.76% $ 14,202 0.06% $ 11,460 12/31/2000 $ 13,597 2.47% $ 14,553 -0.06% $ 11,453 01/31/2001 $ 13,680 0.99% $ 14,697 0.63% $ 11,525 2/29/01 $ 13,708 0.32% $ 14,744 0.40% $ 11,571 03/31/2001 $ 13,823 0.90% $ 14,877 0.23% $ 11,598 04/30/2001 $ 13,606 -1.08% $ 14,716 0.40% $ 11,644 05/31/2001 $ 13,745 1.08% $ 14,875 0.45% $ 11,696 06/30/2001 $ 13,787 0.67% $ 14,974 0.17% $ 11,716 Total 37.87% 49.74% 17.16% Return
AVERAGE ANNUAL TOTAL RETURN
CLASS C 6/30/01 -------------------------------------------------------------------------------- 1-Year +6.09% 5-Year +5.08% Since Inception(5/1/95) +5.34%
6. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index includes about 40,000 bonds from across the country. All bonds included have a minimum credit rating of at least Baa and a maturity of at least two years, and have been issued within the last five years as part of a deal of over $50 million. Bonds subject to the alternative minimum tax or with floating or zero coupons are excluded. Bonds will be added and the index will be updated monthly with a one-month lag. Past performance does not guarantee future results. 21 FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND CREDIT QUALITY BREAKDOWN* Franklin California Intermediate-Term Tax-Free Income Fund Based on Total Long-Term Investments 6/30/01 [PIE CHART] AAA 25.0% AA 12.4% A 23.5% BBB 38.8% Below Investment Grade 0.3%
* Quality breakdown may include internal ratings for bonds not rated by an independent rating agency. -------------------------------------------------------------------------------- Your Fund's Goal: Franklin California Intermediate-Term Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and California state personal income taxes while seeking preservation of capital. The Fund invests primarily in a portfolio of California municipal securities with an average weighted maturity (the time at which the debt must be repaid) between 3 and 10 years.(1) -------------------------------------------------------------------------------- Despite uncertainty surrounding California's energy crisis during the 12 months ended June 30, 2001, the state's economy remained healthy. The nation's economy, however, showed clear signs of slowing down. This prompted the Federal Reserve Board to reverse its previous tightening bias and cut the federal funds target rate on six separate occasions during the period, lowering it to 3.75% by June 30, 2001. Generally declining interest rates benefited the municipal bond market during the reporting period, as bond prices increase when interest rates fall. For the 12 months ended June 30, 2001, Franklin California Intermediate-Term Tax-Free Income Fund's Class A share price, as measured by net asset value, rose from $10.92 on June 30, 2000, to $11.25 on June 30, 2001. California's credit rating downgrade coupled with the energy crisis uncertainty created volatility in the state's municipal bond 1. For investors subject to the federal 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. The dollar value, number of shares or principal value, and complete legal titles of all portfolio holdings are listed in the Fund's Statement of Investments (SOI). The SOI begins on page 49. 22 market. In particular, California's general obligation (GO) bonds experienced significant weakening. Fortunately, the majority of the Fund's exposure to California GO bonds was in the 2005 maturity range, and the nature of these positions' intermediate maturity insulated them from volatility. In addition, the Fund did not have any exposure to investor-owned utilities suffering a liquidity crisis. The state's downgraded debt created opportunities not seen since the last recession more than seven years ago. California GO debt traded at prices lower than those of national GO bonds. Keeping in mind that California has the world's sixth largest economy -- right behind France and just ahead of Italy -- we sought to take advantage of this situation and purchased California State GO bonds at levels that represented significant value relative to their historical prices. Apart from California GO bonds, the market for the state's general municipal debt remained robust. California's investment grade bonds traded at higher prices relative to comparable national municipal bonds. Other bonds we purchased during the period included Torrance Hospital - Torrance Memorial Medical Center and California Health Facilities Financing Authority - Kaiser Permanente revenue bonds. Among the bonds we sold were San Francisco City and County Public Utilities Commission revenue bonds. During the reporting period, Franklin California Intermediate-Term Tax-Free Income Fund experienced net inflows as well as called and maturing higher coupon bonds. We invested the resulting proceeds at recent, lower interest rates. Due to these circumstances, in March 2001, the Fund reduced its monthly PORTFOLIO BREAKDOWN Franklin California Intermediate-term Tax-free Income Fund 6/30/01
% OF TOTAL LONG-TERM INVESTMENTS ------------------------------------------------------------------------------- Tax-Supported 33.6% Subject to Government Appropriations 15.6% Hospital & Health Care 13.7% Utilities 12.0% General Obligation 11.1% Housing 4.4% Prerefunded 4.3% Transportation 3.0% Higher Education 1.6% Other Revenue 0.7%
23 DIVIDEND DISTRIBUTIONS* Franklin California Intermediate-Term Tax-Free Income Fund - Class A 7/1/00 - 6/30/01
DIVIDEND MONTH PER SHARE -------------------------------------------------------------------------------- July 4.36 cents August 4.36 cents September 4.36 cents October 4.36 cents November 4.36 cents December 4.36 cents January 4.36 cents February 4.36 cents March 4.30 cents April 4.30 cents May 4.30 cents June 4.30 cents ------------------------------------------------------------------------------ TOTAL 52.08 CENTS
* Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the Fund during the reporting period. dividend from 4.36 cents per share to 4.30 cents per share. For a detailed discussion of our dividend policy, please see "Making Sense of Dividends" beginning on page 8. Keep in mind that your Fund combines the advantages of high credit quality and tax-free yields.(1) The Performance Summary beginning on page 25 shows that on June 30, 2001, the Fund's Class A shares' distribution rate was 4.48%. An investor in the maximum combined federal and California state personal income tax bracket of 44.76% would need to earn 8.11% from a taxable investment to match the Fund's tax-free distribution rate. Looking forward, strong retail and institutional demand for California municipal bonds -- along with a slowing economy -- should prove advantageous to the Fund. We believe the Fund's conservative, buy-and-hold, income-oriented philosophy, as well as its reserve of higher coupon bonds from previous, higher interest-rate periods should help moderate its share-price volatility, reduce portfolio turnover and protect its income stream. -------------------------------------------------------------------------------- This discussion reflects our views, opinions and portfolio holdings as of June 30, 2001, the end of the reporting period. The information provided is not a complete analysis of every aspect of any state, industry, security or the Fund. Our strategies and the Fund's portfolio composition will change depending on market and economic conditions. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. -------------------------------------------------------------------------------- 24 PERFORMANCE SUMMARY AS OF 6/30/01 Distributions and returns will vary based on earnings of the Fund's portfolio and any profits realized from the sale of the portfolio's securities, as well as the level of the Fund's operating expenses. All total returns include reinvested distributions at net asset value. PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 6/30/01 6/30/00 -------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.33 $11.25 $10.92 DISTRIBUTIONS (7/1/00 - 6/30/01) Dividend Income $0.5208
PERFORMANCE
INCEPTION CLASS A 1-YEAR 5-YEAR (9/21/92) -------------------------------------------------------------------------------------- Cumulative Total Return(1) +7.86% +30.34% +70.16% Average Annual Total Return(2) +5.45% +4.97% +5.97%
Distribution Rate(3) 4.48% Taxable Equivalent Distribution Rate(4) 48.11% 30-Day Standardized Yield(5) 3.83% Taxable Equivalent Yield(4) 6.93%
-------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- For updated performance figures, see "Prices and Performance" at franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236. FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND -------------------------------------------------------------------------------- CLASS A: Subject to the maximum 2.25% initial sales charge. The Fund's manager has agreed in advance to waive a portion of its management fees. If the manager had not taken this action, the Fund's distribution rate and total return would have been lower, and the yield for the period would have been 3.69%. The fee waiver may be discontinued at any time, upon notice to the Fund's Board of Trustees. -------------------------------------------------------------------------------- 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include the sales charge. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes the maximum sales charge. 3. Distribution rate is based on an annualization of the current 4.30 cent per share monthly dividend and the maximum offering price of $11.51 on 6/30/01. 4. Taxable equivalent distribution rate and yield assume the published rates as of 6/20/01 for the maximum combined federal and California state personal income tax bracket of 44.76%, based on the federal income tax rate of 39.1%. 5. Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 6/30/01. Past performance does not guarantee future results. 25 FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AVERAGE ANNUAL TOTAL RETURN
CLASS A 6/30/01 -------------------------------------------------------------------------------- 1-Year +5.45% 5-Year +4.97% Since Inception (9/21/92) +5.97%
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT Total return represents the change in value of an investment over the periods shown. It includes the applicable, maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvested interest. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index. The Consumer Price Index (CPI) is a commonly used measure of the inflation rate.
CA Int.TF LB 10 Yr. Muni Index CPI --------- -------------------- --- 09/21/1992 $ 9,775 $10,000 $ 10,000 09/30/1992 $ 9,785 0.25% $10,025 0.08% $ 10,008 10/31/1992 $ 9,736 -1.02% $ 9,923 0.35% $ 10,043 11/30/1992 $ 9,922 1.83% $10,104 0.14% $ 10,057 12/31/1992 $ 9,990 1.16% $10,221 -0.07% $ 10,050 01/31/1993 $ 10,074 1.68% $10,393 0.49% $ 10,100 02/28/1993 $ 10,395 3.66% $10,774 0.35% $ 10,135 03/31/1993 $ 10,401 -1.46% $10,616 0.35% $ 10,171 04/30/1993 $ 10,436 0.95% $10,717 0.28% $ 10,199 05/31/1993 $ 10,482 0.35% $10,755 0.14% $ 10,213 06/30/1993 $ 10,588 1.97% $10,966 0.14% $ 10,228 07/31/1993 $ 10,614 0.25% $10,994 0.00% $ 10,228 08/31/1993 $ 10,759 2.07% $11,221 0.28% $ 10,256 09/30/1993 $ 10,986 1.23% $11,359 0.21% $ 10,278 10/31/1993 $ 11,031 0.16% $11,378 0.41% $ 10,320 11/30/1993 $ 10,912 -0.82% $11,284 0.07% $ 10,327 12/31/1993 $ 11,142 2.13% $11,525 0.00% $ 10,327 01/31/1994 $ 11,259 1.23% $11,666 0.27% $ 10,355 02/28/1994 $ 10,995 -2.74% $11,347 0.34% $ 10,390 03/31/1994 $ 10,645 -3.82% $10,913 0.34% $ 10,426 04/30/1994 $ 10,702 1.10% $11,033 0.14% $ 10,440 05/31/1994 $ 10,769 0.80% $11,122 0.07% $ 10,447 06/30/1994 $ 10,762 -0.43% $11,074 0.34% $ 10,483 07/31/1994 $ 10,925 1.68% $11,260 0.27% $ 10,511 08/31/1994 $ 10,972 0.39% $11,304 0.40% $ 10,553 09/30/1994 $ 10,869 -1.34% $11,152 0.27% $ 10,582 10/31/1994 $ 10,734 -1.46% $10,990 0.07% $ 10,589 11/30/1994 $ 10,578 -1.89% $10,782 0.13% $ 10,603 12/31/1994 $ 10,669 1.80% $10,976 0.00% $ 10,603 01/31/1995 $ 10,901 2.59% $11,260 0.40% $ 10,645 02/28/1995 $ 11,188 2.83% $11,579 0.40% $ 10,688 03/31/1995 $ 11,313 1.35% $11,735 0.33% $ 10,723 04/30/1995 $ 11,328 0.12% $11,749 0.33% $ 10,759 05/31/1995 $ 11,652 3.17% $12,122 0.20% $ 10,780 06/30/1995 $ 11,534 -0.62% $12,047 0.20% $ 10,802 07/31/1995 $ 11,683 1.47% $12,224 0.00% $ 10,802 08/31/1995 $ 11,867 1.36% $12,390 0.26% $ 10,830 09/30/1995 $ 11,961 0.64% $12,469 0.20% $ 10,851 10/31/1995 $ 12,146 1.15% $12,613 0.33% $ 10,887 11/30/1995 $ 12,320 1.34% $12,782 -0.07% $ 10,880 12/31/1995 $ 12,370 0.61% $12,860 -0.07% $ 10,872 01/31/1996 $ 12,477 1.01% $12,989 0.59% $ 10,936 02/29/1996 $ 12,447 -0.41% $12,936 0.32% $ 10,971 03/31/1996 $ 12,360 -1.24% $12,776 0.52% $ 11,028 04/30/1996 $ 12,330 -0.35% $12,731 0.39% $ 11,071 05/31/1996 $ 12,335 -0.28% $12,695 0.19% $ 11,092 06/30/1996 $ 12,456 0.95% $12,816 0.06% $ 11,099 07/31/1996 $ 12,554 0.96% $12,939 0.19% $ 11,120 08/31/1996 $ 12,558 0.00% $12,939 0.19% $ 11,141 09/30/1996 $ 12,681 1.03% $13,072 0.32% $ 11,177 10/31/1996 $ 12,816 1.26% $13,237 0.32% $ 11,213 11/30/1996 $ 13,034 2.02% $13,504 0.19% $ 11,234 12/31/1996 $ 12,992 -0.45% $13,444 0.00% $ 11,234 01/31/1997 $ 13,032 0.39% $13,496 0.32% $ 11,270 02/28/1997 $ 13,121 0.94% $13,623 0.31% $ 11,305 03/31/1997 $ 13,005 -1.34% $13,440 0.25% $ 11,333 04/30/1997 $ 13,107 0.74% $13,540 0.12% $ 11,347 05/31/1997 $ 13,282 1.42% $13,732 -0.06% $ 11,340 06/30/1997 $ 13,396 1.10% $13,883 0.12% $ 11,353 07/31/1997 $ 13,720 2.81% $14,273 0.12% $ 11,367 08/31/1997 $ 13,639 -0.97% $14,135 0.19% $ 11,389 09/30/1997 $ 13,767 1.27% $14,314 0.25% $ 11,417 10/31/1997 $ 13,847 0.53% $14,390 0.25% $ 11,446 11/30/1997 $ 13,914 0.46% $14,456 -0.06% $ 11,439 12/31/1997 $ 14,069 1.58% $14,685 -0.12% $ 11,425 01/31/1998 $ 14,212 1.11% $14,848 0.19% $ 11,447 02/28/1998 $ 14,230 -0.01% $14,846 0.19% $ 11,468 03/31/1998 $ 14,235 -0.07% $14,836 0.19% $ 11,490 04/30/1998 $ 14,201 -0.55% $14,754 0.18% $ 11,511 05/31/1998 $ 14,398 1.70% $15,005 0.18% $ 11,532 06/30/1998 $ 14,441 0.37% $15,061 0.12% $ 11,546 07/31/1998 $ 14,498 0.16% $15,085 0.12% $ 11,559 08/31/1998 $ 14,697 1.74% $15,347 0.12% $ 11,573 09/30/1998 $ 14,895 1.49% $15,576 0.12% $ 11,587 10/31/1998 $ 14,912 0.04% $15,582 0.24% $ 11,615 11/30/1998 $ 14,955 0.30% $15,629 0.00% $ 11,615 12/31/1998 $ 14,985 0.31% $15,677 -0.06% $ 11,608 01/31/1999 $ 15,147 1.53% $15,917 0.24% $ 11,636 02/28/1999 $ 15,098 -0.90% $15,774 0.12% $ 11,650 03/31/1999 $ 15,127 -0.05% $15,766 0.30% $ 11,685 04/30/1999 $ 15,143 0.27% $15,809 0.73% $ 11,770 05/31/1999 $ 15,039 -0.70% $15,698 0.00% $ 11,770 06/30/1999 $ 14,814 -1.86% $15,406 0.00% $ 11,770 07/31/1999 $ 14,910 0.67% $15,509 0.30% $ 11,805 08/31/1999 $ 14,859 -0.37% $15,452 0.24% $ 11,834 09/30/1999 $ 14,918 0.34% $15,504 0.48% $ 11,890 10/31/1999 $ 14,786 -0.71% $15,394 0.18% $ 11,912 11/30/1999 $ 14,912 1.09% $15,562 0.06% $ 11,919 12/31/1999 $ 14,766 -0.52% $15,481 0.00% $ 11,919 01/31/2000 $ 14,784 -0.41% $15,418 0.30% $ 11,955 02/29/2000 $ 14,899 0.79% $15,539 0.59% $ 12,025 03/31/2000 $ 15,168 1.95% $15,842 0.82% $ 12,124 04/30/2000 $ 15,075 -0.50% $15,763 0.06% $ 12,131 05/31/2000 $ 15,067 -0.59% $15,670 0.12% $ 12,146 06/30/2000 $ 15,395 2.72% $16,097 0.52% $ 12,209 07/31/2000 $ 15,583 1.38% $16,319 0.23% $ 12,237 08/31/2000 $ 15,843 1.55% $16,572 0.00% $ 12,237 09/30/2000 $ 15,820 -0.46% $16,495 0.52% $ 12,301 10/31/2000 $ 15,911 1.02% $16,664 0.17% $ 12,322 11/30/2000 $ 15,973 0.54% $16,754 0.06% $ 12,329 12/31/2000 $ 16,223 2.35% $17,147 -0.06% $ 12,322 01/31/2001 $ 16,416 1.29% $17,368 0.63% $ 12,399 2/29/01 $ 16,464 0.17% $17,398 0.40% $ 12,449 03/31/2001 $ 16,527 0.85% $17,546 0.23% $ 12,477 04/30/2001 $ 16,341 -1.23% $17,330 0.40% $ 12,527 05/31/2001 $ 16,536 1.09% $17,519 0.45% $ 12,584 06/30/2001 $ 16,634 0.60% $17,624 0.17% $ 12,605 66.34% 76.24% 26.05%
6. Source: Standard & Poor's Micropal. The Lehman Brothers Muni 10-Year Bond Index includes bonds that have a minimum credit rating of at least Baa, a maturity of at least 10 years, and have been issued within the last five years as part of a deal of over $50 million. Bonds subject to the alternative minimum tax or with floating or zero coupons are excluded. Bonds will be added and the index will be updated monthly with a one-month lag. 26 Past performance does not guarantee future results. FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND -------------------------------------------------------------------------------- Your Fund's Goal: Franklin California Tax-Exempt Money Fund seeks to provide high, current income exempt from regular federal and Cali- fornia state personal income taxes while seeking preservation of capital and liquidity by investing primarily in a portfolio of short-term munici- pal debt securities issued in California. The Fund is managed to maintain a $1.00 share price.(1) -------------------------------------------------------------------------------- The combination of lower stock prices and higher short-term interest rates in early 2000 contributed to a sharp deceleration in the U.S. economy's growth during the 12 months ended June 30, 2001. The unprecedented rise in Y2K and Internet-related spending that propelled stock prices and fueled consumer spending in the past few years began to unwind in June 2000. As a result, growth in gross domestic product (GDP), the country's broadest gauge of economic vibrancy, slowed dramatically from a 5.2% annualized pace in the first half of 2000 to a 1.6% annual rate in the second half of the year. As the year 2000 ended, it became apparent that economic growth was decelerating too quickly, potentially shutting down the longest expansion in U.S. history. In response to deteriorating economic activity, the Federal Reserve Board (the Fed) began aggressively lowering short-term interest rates to stimulate economic growth. The Fed lowered 1. There is no assurance that the Fund's $1.00 per share price will be maintained. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The dollar value, number of shares or principal value, and complete legal titles of all portfolio holdings are listed in the Fund's Statement of Investments (SOI). The SOI begins on page 57. 27 FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PERFORMANCE SUMMARY 6/30/01 -------------------------------------------------------------------------------- Seven-day effective yield(1) 2.26% Seven-day annualized yield 2.24% Taxable equivalent yield(2) 4.05% 1. The seven-day effective yield assumes the compounding of daily dividends. 2. Taxable equivalent yield assumes the published rates as of 6/20/01 for the maximum combined federal and California state personal income tax bracket of 44.76%, based on the federal income tax rate of 39.1%. Annualized and effective yields are for the seven-day period ended 6/30/01. The Fund's average weighted maturity was 56 days. Yield reflects fluctuations in interest rates on portfolio investments, as well as Fund expenses. Past performance does not guarantee future results. rates six times during the period, for a total of 275 basis points (2.75%), bringing the federal funds target rate from 6.50% to 3.75% by June 30, 2001. Despite the Fed's aggressive actions, GDP growth for first and second quarters 2001 further decelerated to 1.3% and 0.7% annualized rates. The economy ended the year under review on a very weak note and appeared to be walking a fine line between a soft landing and a recession. In response to slowing demand, manufacturing activity contracted, and businesses continued cuts in capital spending while initiating layoffs. Thus far, consumer spending held up relatively well as evidenced by higher than expected demand for housing and automobiles. However, lower stock prices, continued corporate layoffs and higher energy and electricity prices suggest the possibility of a further downshift in overall consumer spending. While we believe that the Fed is nearing the end of their easing mode, the U.S. economy remains fragile. Therefore, the Fed may cut rates further until an economic recovery is more clearly in sight. We believe that the Fed's aggressive easing, combined with lower income tax rates, should stimulate economic growth later in 2001. As signs of economic growth become more evident, we believe short-term rates should gradually begin to rise again. Reflecting the 275 basis points decrease in the federal funds target rate over the past fiscal year, the Fund's seven-day effective yield declined from 3.52% on June 30, 2000, to 2.26% on June 30, 2001. Despite the lower yields, tax-exempt money fund assets continue to grow and July 1 coupon payments and redemption money should help cash flows into money funds. The Fund's assets increased 2% during the reporting period -- from $697 million on June 30, 2000, to $712 million on June 30, 2001. 28 During the reporting period, the Fund participated in several attractive deals including San Jose Airport Revenue tax-exempt commercial paper, California School Cash Reserve Program Authority general obligation, San Diego County & School District Partnership tax and revenue anticipation notes and Metropolitan Water District of Southern California Waterworks Revenue variable rate demand notes. The investment strategy driving Franklin California Tax-Exempt Money Fund's management continues to emphasize high quality and liquidity. In many respects, we manage the Fund more conservatively than SEC guidelines require, to ensure the safety and stability of the Fund's principal. For example, SEC guidelines allow tax-exempt money funds to purchase first- and second-tier securities. Franklin Templeton purchases only first-tier securities for inclusion in its tax-exempt money market portfolios. Although allowed by the SEC for money market funds, we do not buy any derivative securities in our tax-exempt money funds -- we purchase only plain vanilla, short-term securities, from what we believe to be creditworthy institutions. Although our strategy may result in lower yields than those of other money market funds, we believe the increased yield offered by lower-rated and less liquid securities does not justify the added risk to shareholders. -------------------------------------------------------------------------------- This discussion reflects our views, opinions and portfolio holdings as of June 30, 2001, the end of the reporting period. The information provided is not a complete analysis of every aspect of any state, industry, security or the Fund. Our strategies and the Fund's portfolio composition will change depending on market and economic conditions. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. -------------------------------------------------------------------------------- 29 MUNICIPAL BOND RATINGS MOODY'S(R) 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. 30 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 a 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. 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 31 pay principal and interest for bonds in this category than for bonds in the A category. BB, B, CCC, CC: 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 out-weighed by large uncertainties or major risk exposures to adverse conditions. C: Reserved for income bonds on which no interest is being paid. D: In default, and payment of interest and/or repayment of principal is in arrears. 32 FRANKLIN CALIFORNIA TAX-FREE TRUST Financial Highlights FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
CLASS A ------------------------------------------------------------------------ YEAR ENDED JUNE 30, ------------------------------------------------------------------------ 2001 2000 1999 1998 1997 ------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the year) Net asset value, beginning of year ................ $ 11.76 $ 12.12 $ 12.47 $ 12.22 $ 12.01 ------------------------------------------------------------------------ Income from investment operations: Net investment income(a) ........................ .61 .61 .61 .64 .66 Net realized and unrealized gains (losses) ...... .40 (.36) (.26) .37 .21 ------------------------------------------------------------------------ Total from investment operations .................. 1.01 .25 .35 1.01 .87 ------------------------------------------------------------------------ Less distributions from: Net investment income ........................... (.60) (.61) (.63) (.64) (.66) Net realized gains .............................. -- --(c) (.07) (.12) -- ------------------------------------------------------------------------ Total distributions ............................... (.60) (.61) (.70) (.76) (.66) ------------------------------------------------------------------------ Net asset value, end of year ...................... $12.17 $ 11.76 $ 12.12 $ 12.47 $ 12.22 ======================================================================== Total return(b).................................... 8.73% 2.24% 2.76% 8.38% 7.41% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) ................... $1,665,581 $1,558,857 $1,775,212 $1,717,489 $1,635,543 Ratios to average net assets: Expenses ........................................ 61% .60% .60% .60% .60% Net investment income ........................... 5.00% 5.24% 4.91% 5.11% 5.41% Portfolio turnover rate ........................... 10.09% 29.40% 15.53% 21.66% 20.40%
(a)Based on average shares outstanding effective year ended June 30, 1999. (b)Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. (c)The fund made a capital gain distribution of $.0016. 33 FRANKLIN CALIFORNIA TAX-FREE TRUST Financial Highlights (continued) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONT.)
CLASS B ------------------------ YEAR ENDED JUNE 30, ------------------------ 2001 2000*(c) ------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the year) Net asset value, beginning of year .......... $ 11.78 $11.36 ------------------------ Income from investment operations: Net investment income(a).................... .54 .23 Net realized and unrealized gains .......... .42 .42 ------------------------ Total from investment operations ............ .96 .65 Less distributions from net investment income (.53) (.23) ------------------------ Net asset value, end of year ................ $ 12.21 $11.78 ======================== Total return(b).............................. 8.29% 5.76% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) ............. $20,926 $1,884 Ratios to average net assets: Expenses ................................... 1.16% 1.16%(d) Net investment income ...................... 4.42% 4.82%(d) Portfolio turnover rate ..................... 10.09% 29.40%
(a)Based on average shares outstanding. (b)Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. (c)For the period February 1, 2000 (effective date) to June 30, 2000. (d)Annualized. 34 FRANKLIN CALIFORNIA TAX-FREE TRUST Financial Highlights (continued) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONT.)
CLASS C --------------------------------------------------------------------- YEAR ENDED JUNE 30, --------------------------------------------------------------------- 2001 2000 1999 1998 1997 --------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the year) Net asset value, beginning of year ........... $ 11.84 $12.20 $ 12.55 $ 12.29 $ 12.07 --------------------------------------------------------------------- Income from investment operations: Net investment income(a)..................... .54 .55 .55 .58 .59 Net realized and unrealized gains (losses) .. .41 (.36) (.27) .37 .22 --------------------------------------------------------------------- Total from investment operations ............. .95 .19 .28 .95 .81 --------------------------------------------------------------------- Less distributions from: Net investment income ....................... (.53) (.55) (.56) (.57) (.59) Net realized gains .......................... -- --(c) (.07) (.12) -- --------------------------------------------------------------------- Total distributions .......................... (.53) (.55) (.63) (.69) (.59) --------------------------------------------------------------------- Net asset value, end of year ................. $ 12.26 $ 11.84 $ 12.20 $ 12.55 $ 12.29 ===================================================================== Total return(b)............................... 8.17% 1.66% 2.16% 7.80% 6.86% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) .............. $79,803 $67,395 $80,336 $55,371 $34,899 Ratios to average net assets: Expenses .................................... 1.16% 1.16% 1.16% 1.16% 1.16% Net investment income ....................... 4.45% 4.68% 4.35% 4.55% 4.81% Portfolio turnover rate ...................... 10.09% 29.40% 15.53% 21.66% 20.40%
(a)Based on average shares outstanding effective year ended June 30, 1999. (b)Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. (c)The fund made a capital gain distribution of $.0016. See notes to financial statements. 35 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 98.4% BONDS 95.4% ABAG Finance Authority for Nonprofit Corps. COP, Lincoln Child Center Inc., Insured, 6.125%, 11/01/24 .................................... $ 2,055,000 $ 2,203,104 Lytton Gardens Inc., California Mortgage Insured, 6.00%, 2/15/30 ........................ 3,500,000 3,608,850 Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 ........................... 5,000,000 5,270,150 ABAG Finance Authority for Nonprofit Corps. Revenue, Desert AIDS Project, Series A, California Mortgage Insured, 5.25%, 4/01/26 .............. 2,610,000 2,584,814 Poway RHF Housing Inc. Project, Series A, 5.375%, 11/15/25 .............................. 5,145,000 5,079,247 ABAG Revenue, Tax Allocation, RDA Pool, Series A2, FSA Insured, 6.60%, 12/15/24 .............. 10,775,000 11,855,840 Alameda County Water District Revenue COP, Water Systems Project, FGIC Insured, Pre-Refunded, 6.00%, 6/01/20 ................................................................ 1,000,000 1,097,060 Alameda Power and Telecommunication Electric System Revenue COP, MBIA Insured, 5.75%, 7/01/30 .............................................................................. 3,305,000 3,467,143 Alhambra City Elementary School District GO, Series A, FSA Insured, 5.60%, 9/01/24 ........... 2,065,000 2,129,366 Alhambra COP, Police Facilities AD No. 91-1, AMBAC Insured, 6.75%, 9/01/23 ................... 10,730,000 10,993,743 Anaheim PFAR, Local Agency, CFD, Refunding, Series A, MBIA Insured, 5.75%, 9/01/14 ........... 3,790,000 4,022,365 Arcata Joint Powers Financing Authority Wastewater Revenue, FSA Insured, 5.80%, 12/01/22 .................................................................................... 1,080,000 1,157,782 Baldwin Park California RDA, Tax Allocation, Refunding, FSA Insured, 5.70%, 9/01/25 .......... 4,000,000 4,187,920 Barstow RDA, Tax Allocation, Central Redevelopment Project, Series A, MBIA Insured, 6.25%, 9/01/22 .............................................................................. 2,000,000 2,142,640 Beaumont USD, COP, Refunding, Series A, FSA Insured, 5.80%, 1/01/21 .......................... 1,500,000 1,600,755 Benicia COP, Water System Project, Refunding, AMBAC Insured, 6.125%, 11/01/17 ................ 2,995,000 3,074,457 Benicia USD, GO, Series A, AMBAC Insured, Pre-Refunded, 6.85%, 8/01/16 ....................... 5,900,000 6,035,995 Brea Olinda USD, GO, Series A, FGIC Insured, 5.60%, 8/01/20 .................................. 1,000,000 1,042,960 Brea PFA Revenue, Tax Allocation, Redevelopment Project, Series A, MBIA Insured, 7.00%, 8/01/23 .............................................................................. 11,815,000 12,081,546 Brea PFAR, Tax Allocation, Redevelopment Project, Series A, MBIA Insured, 7.00%, 8/01/15 .......................................................................... 1,520,000 1,554,352 6.75%, 8/01/22 .......................................................................... 1,550,000 1,584,751 Buellton USD, GO, Series A, MBIA Insured, Pre-Refunded, 6.375%, 7/01/17 ...................... 2,155,000 2,278,115 Burbank Waste Disposal Revenue, Series B, AMBAC Insured, 6.00%, 5/01/22 ...................... 665,000 676,904 Cabrillo Community College District GO, Series C, AMBAC Insured, 5.375%, 5/01/26 ............. 5,400,000 5,441,472 Calaveras County Water District Revenue COP, Water and Sewer System Improvement Project, Refunding, AMBAC Insured, 6.00%, 5/01/16 ........................................... 3,950,000 4,187,751 Calexico CRDA Revenue, Tax Allocation, Merged Central Business and Residential, Refunding, FSA Insured, 5.85%, 8/01/15 ...................................................... 1,795,000 1,883,135 Calexico USD, CFD No. 1, Special Tax, Refunding, AMBAC Insured, 5.60%, 9/01/17 ............... 2,930,000 3,066,333 (b) California Community College Financing Authority Lease Revenue, Grossmont, Palomar, and Shasta, Series A, MBIA Insured, 5.125%, 4/01/31 ......................................... 3,030,000 2,949,038 California Educational Facilities Authority Revenue, Pomona College, Series B, 5.50%, 7/01/29 ................................................ 4,455,000 4,575,552 Pooled Facilities Program, MBIA Insured, 7.00%, 3/01/16 ................................. 330,000 335,115 Santa Clara University, MBIA Insured, Pre-Refunded, 5.75%, 9/01/21 ...................... 2,575,000 2,889,073 Stanford University, Refunding, Series O, 5.125%, 1/01/31 ............................... 23,330,000 22,826,305 Stanford University, Series N, 5.25%, 12/01/26 .......................................... 6,450,000 6,449,678 Stanford University, Series N, 5.35%, 6/01/27 ........................................... 21,250,000 21,364,963 Stanford University, Series N, 5.20%, 12/01/27 .......................................... 2,500,000 2,480,350 Student Loan Program, Series A, MBIA Insured, 6.00%, 3/01/16 ............................ 4,000,000 4,191,920 California Health Facilities Financing Authority Revenue Adventist Health Systems West, Series A, MBIA Insured, 7.00%, 3/01/13 ................... 3,000,000 3,077,490 Adventist Health Systems West, Series B, MBIA Insured, 6.75%, 3/01/14 ................... 5,065,000 5,191,017
36 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) California Health Facilities Financing Authority Revenue (cont.) Catholic Healthcare West, Refunding, Series A, MBIA Insured, 6.00%, 7/01/17 ............. $ 5,000,000 $ 5,400,200 Catholic Healthcare West, Series A, 5.00%, 7/01/28 ...................................... 25,000,000 20,904,750 Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 ................................................................................ 1,295,000 1,353,430 Kaiser Permanente, Series A, 5.40%, 5/01/28 ............................................. 15,400,000 14,686,364 Kaiser Permanente, Series B, 5.00%, 10/01/18 ............................................ 5,000,000 4,718,100 Kaiser Permanente, Series B, 5.00%, 10/01/20 ............................................ 4,000,000 3,723,640 Marshall Hospital, California Mortgage Insured, Series A, 5.30%, 11/01/28 ............... 3,325,000 3,213,047 Northern California Presbyterian, 5.40%, 7/01/28 ........................................ 5,000,000 4,888,850 Orange County Health Facility, Series A, California Mortgage Insured, 6.20%, 11/01/24 ............................................................................... 3,435,000 3,706,056 San Diego Hospital Association, Refunding, Series A, MBIA Insured, 6.20%, 8/01/20 ................................................................................ 4,850,000 5,066,795 San Diego Hospital Association, Series A, MBIA Insured, 6.20%, 8/01/12 .................. 2,425,000 2,541,279 Scripps Memorial Hospital, Series A, MBIA Insured, 6.40%, 10/01/12 ...................... 3,500,000 3,691,030 Sharp Temecula Hospital, MBIA Insured, Pre-Refunded, 7.05%, 8/01/21 ..................... 3,000,000 3,069,570 Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/19 ................................... 1,700,000 1,670,114 Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/38 ................................... 4,000,000 3,744,480 The Help Group, CHFCLP Insured, 5.40%, 8/01/22 .......................................... 5,000,000 5,048,600 California HFAR Home Mortgage, Series D, MBIA Insured, 6.15%, 8/01/28 ................................... 5,250,000 5,428,290 Series A, MBIA Insured, 7.15%, 8/01/11 .................................................. 1,315,000 1,342,444 Series A, MBIA Insured, 7.20%, 2/01/26 .................................................. 3,450,000 3,521,519 Series B, MBIA Insured, 6.80%, 8/01/11 .................................................. 1,815,000 1,869,123 Series K, AMBAC Insured, 6.25%, 8/01/27 ................................................. 4,080,000 4,193,587 California PCFA, PCR, Southern California Edison Co., Series C, MBIA Insured, 5.55%, 9/01/31 .............................................................................. 4,800,000 4,730,496 California Public School District Financing Authority Lease Revenue, Southern Kern USD, Refunding, Series B, FSA Insured, 5.90%, 9/01/26 ........................................ 235,000 249,897 Series B, FSA Insured, Pre-Refunded, 5.90%, 9/01/26 ..................................... 1,615,000 1,823,319 California State Department of Water Resources Central Valley Project Water System Revenue, Refunding, Series Q, MBIA Insured, 5.375%, 12/01/27 ......................... 1,000,000 1,006,930 California State Department of Water Resources Water Revenue, Series W, FSA Insured, 5.125%, 12/01/29 ................................................................... 5,000,000 4,872,000 California State GO, 5.00%, 10/01/27 ......................................................................... 30,790,000 29,054,984 AMBAC Insured, 6.30%, 9/01/06 ........................................................... 9,000,000 10,088,640 FGIC Insured, Pre-Refunded, 6.00%, 5/01/20 .............................................. 2,990,000 3,273,841 FSA Insured, 5.50%, 9/01/29 ............................................................. 34,500,000 35,093,055 MBIA Insured, 6.00%, 8/01/16 ............................................................ 210,000 224,603 MBIA Insured, 6.00%, 10/01/21 ........................................................... 65,000 68,162 MBIA Insured, 5.00%, 8/01/29 ............................................................ 20,250,000 19,338,548 Refunding, 5.125%, 6/01/31 .............................................................. 25,000,000 23,841,750 Refunding, FGIC Insured, 5.375%, 6/01/26 ................................................ 5,000,000 5,038,450 California State HFAR, Home Mortgage, Series L, MBIA Insured, 6.40%, 8/01/27 ................. 7,395,000 7,692,427 California State Local Government Finance Authority Revenue, Marin Valley Mobile Country Club Park Acquisition, Senior Series A, FSA Insured, 5.80%, 10/01/20 ................ 4,275,000 4,577,756 California State University and Colleges Student Union Revenue, Bakersfield, Series A, MBIA Insured, 6.30%, 11/01/22 .................................... 1,310,000 1,375,814 San Bernardino, Series B, MBIA Insured, 6.30%, 2/01/22 .................................. 2,375,000 2,496,386
37 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) California State University Foundation Revenue, Monterey Bay, MBIA Insured, 5.35%, 6/01/31 .............................................................................. $ 2,000,000 $ 2,004,460 California State University, Fresno, Auxiliary Residence Student Project Revenue, MBIA Insured, 6.25%, 2/01/17 ................................................................ 1,500,000 1,603,590 California State University, Los Angeles Auxiliary Services Inc. Revenue, MBIA Insured, 5.125%, 6/01/33 .................................................................... 3,200,000 3,114,080 California Statewide CDA, COP, 5.75%, 8/01/21 ..................................................................... 9,585,000 10,053,898 COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 ................................... 12,250,000 12,089,770 COP, FSA Insured, 5.50%, 8/15/31 ........................................................ 7,000,000 7,125,020 COP, Kaiser Permanente, 5.30%, 12/01/15 ................................................. 9,700,000 9,706,790 COP, MBIA Insured, 5.00%, 4/01/18 ....................................................... 3,000,000 2,949,690 MFR, Silver Ridge Apartments, Series H, FNMA Insured, 5.80%, 8/01/33 .................... 2,785,000 2,887,767 Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured, 5.65%,10/01/26 ................................................................ 3,420,000 3,546,198 Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured, 5.75%,10/01/29 ................................................................ 1,465,000 1,545,370 California Statewide CDA Revenue, Brentwood School, Series A, FSA Insured, 5.25%, 10/01/29 ................................ 7,625,000 7,568,804 COP, John Muir/Mt. Diablo Health System, MBIA Insured, 5.125%, 8/15/22 .................. 5,000,000 4,920,550 Cambria Community Services District Revenue COP, Wastewater Treatment System Upgrade, MBIA Insured, Pre-Refunded, 6.90%, 11/01/24 ........................................ 1,000,000 1,135,720 Cambria Community Services District Water and Wastewater Revenue, Refunding, Series A, MBIA Insured, 6.00%, 5/01/15 ...................................................... 1,330,000 1,425,082 Carpinteria Sanitary District Capital Facilities Revenue, FGIC Insured, 6.25%, 7/01/14 ..................................................................................... 2,485,000 2,629,801 Castaic Lake Water Agency Revenue COP, Series A, MBIA Insured, 5.00%, 8/01/29 ................ 8,000,000 7,651,120 Central Coast Water Authority Revenue, State Water Project Regional Facilities, AMBAC Insured, Pre-Refunded, 6.50%, 10/01/14 ......................................................................... 2,500,000 2,664,800 6.60%, 10/01/22 ......................................................................... 4,650,000 4,962,155 Chico PFAR, Southeast Chico Redevelopment Project, Series A, FGIC Insured, 6.625%, 4/01/21 ..................................................................................... 815,000 833,305 Chino Basin Regional Financing Authority Revenue, Municipal Water District, Sewer System Project, Refunding, AMBAC Insured, 6.00%, 8/01/16 .................................... 2,000,000 2,127,120 Chino COP, RDA, Water System Improvement Project, Refunding, AMBAC Insured, 6.20%, 9/01/18 ..................................................................................... 3,590,000 3,801,918 Chula Vista PFA, Local Agency Revenue, Series 1995-A, FSA Insured, 6.125%, 9/02/14 ........... 3,875,000 4,246,613 Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 .......................... 3,265,000 3,132,670 Coachella Valley Recreation and Park District 1915 Act, Reassessment District 9, Refunding, MBIA Insured, 6.20%, 9/02/16 ..................................................... 1,500,000 1,608,075 Contra Costa Mosquito Abatement District COP, Public Improvements Project, Refunding, FSA Insured, 6.25%, 2/01/06 ...................................................... 1,280,000 1,295,859 Coronado CDA Tax Allocation, Community Development Project, MBIA Insured, 5.375%, 9/01/26 ..................................................................................... 2,700,000 2,720,493 Corona-Norco USD, COP, Refunding, FSA Insured, 5.125%, 4/15/25 ................................................................................. 5,355,000 5,246,454 4/15/29 ................................................................................. 3,870,000 3,767,948 Cucamonga County Water District COP, FGIC Insured, 5.00%, 9/01/29 ............................ 5,070,000 4,848,441 Culver City USD, GO, MBIA Insured, 5.125%, 8/01/37 ......................................................................... 650,000 626,704 5.20%, 8/01/38 .......................................................................... 3,285,000 3,205,766 Delano USD, COP, Refinancing Project, MBIA Insured, 5.125%, 1/01/22 ................................. 1,620,000 1,618,963 GO, Series A, FSA Insured, Pre-Refunded, 6.10%, 5/01/17 ................................. 1,105,000 1,172,118
38 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) East Bay MUD, Water System Revenue, Refunding, FGIC Insured, 6.00%, 6/01/20 .................. $ 2,900,000 $ 3,012,201 East Side UHSD, Santa Clara County, Series D, FGIC Insured, 5.75%, 9/01/17 ................... 1,200,000 1,259,436 Eastern Municipal Water District, Water and Sewer Revenue COP, Series A, FGIC Insured, Pre-Refunded, 6.30%, 7/01/20 ....................................................... 1,400,000 1,414,000 El Dorado County Public Agency Financing Authority Revenue, FGIC Insured, 5.50%, 2/15/16 ................................................................................. 2,250,000 2,334,330 2/15/21 ................................................................................. 3,500,000 3,603,250 El Monte Water Authority Revenue, Water System Project, AMBAC Insured, 5.60%, 9/01/34 ..................................................................................... 1,800,000 1,860,228 Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured, 5.125%, 9/01/30 ..................................................................................... 3,770,000 3,672,319 Fairfield PFAR, Municipal Park, ID No. 1, FGIC Insured, Pre-Refunded, 6.30%, 7/01/23 ..................................................................................... 4,750,000 5,017,900 Folsom PFAR, Refunding, AMBAC Insured, 6.00%, 10/01/08 ................................................................................ 2,000,000 2,106,340 10/01/12 ................................................................................ 1,000,000 1,049,150 10/01/19 ................................................................................ 3,400,000 3,541,678 Fontana RDA, Tax Allocation, Southwest Industrial Park Project, FGIC Insured, Pre-Refunded, 6.125%, 9/01/25 ............................................................... 5,850,000 6,346,022 Foothill/Eastern Corridor Agency Toll Road Revenue, senior lien, Refunding, Series A, MBIA Insured, 5.00%, 1/01/35 ...................................................... 66,735,000 63,113,959 Fresno USD, GO, Refunding, Series C, MBIA Insured, 5.90%, 2/01/20 ....................................... 2,065,000 2,280,111 Refunding, Series C, MBIA Insured, 5.90%, 8/01/22 ....................................... 3,000,000 3,315,870 Series B, FSA Insured, ETM, 5.875%, 8/01/20 ............................................. 1,190,000 1,257,521 Fullerton University Foundation Auxiliary Organization Revenue, Series A, MBIA Insured, 5.75%, 7/01/25 ................................................................................. 1,250,000 1,318,725 7/01/30 ................................................................................. 1,000,000 1,052,750 Glendale Hospital Revenue, Adventist Health, Refunding, Series A, MBIA Insured, 6.75%, 3/01/13 .............................................................................. 1,000,000 1,025,280 Glendale RDA, Tax Allocation, Central Glendale Redevelopment Project, Refunding, AMBAC Insured, 6.00%, 12/01/20 .............................................................. 4,775,000 5,055,913 Glendale USD, GO, Series C, FSA Insured, 5.50%, 9/01/24 ...................................... 2,750,000 2,819,355 Grossmont UHSD, COP, FSA Insured, 5.75%, 9/01/26 ............................................. 2,250,000 2,375,978 Gustine USD, COP, FSA Insured, 5.00%, 2/01/29 ................................................ 3,210,000 3,071,135 Health Facilities Financing Authority Revenue, True to Life A, California Mortgage Insured, 5.625%, 9/01/25 ........................................................... 1,250,000 1,265,500 Hemet USD, COP, Nutrition Center Project, FSA Insured, 5.875%, 4/01/27 ....................... 1,250,000 1,332,575 Hercules COP, Capital Improvement Projects, Refunding, AMBAC Insured, 6.00%, 6/01/15 ..................................................................................... 1,000,000 1,060,490 Huntington Beach City School District COP, MBIA Insured, 5.25%, 7/01/29 ...................... 1,795,000 1,781,968 Imperial Irrigation District COP, California Water Systems Project, AMBAC Insured, 5.75%, 7/01/16 ..................................................................... 5,050,000 5,351,132 Jefferson San Mateo County UHSD, GO, Refunding, Series A, MBIA Insured, 6.45%, 8/01/25 ................................................................................. 3,045,000 3,587,467 8/01/29 ................................................................................. 3,075,000 3,649,349 Jurupa USD, COP, FSA Insured, 5.625%, 9/01/24 ................................................ 1,600,000 1,659,392 Kern County High School District GO, FSA Insured, ETM, 6.625%, 8/01/14 ................................................................................. 1,535,000 1,846,175 8/01/15 ................................................................................. 1,400,000 1,673,504 La Mirada RDA, Industrial Commercial Redevelopment Project, Series A, MBIA Insured, Pre-Refunded, 6.60%, 8/15/21 ....................................................... 3,080,000 3,124,475
39 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Lake Arrowhead Community Services District COP, FGIC Insured, 6.50%, 6/01/15 ............................................................ $ 8,785,000 $ 9,185,420 FGIC Insured, Pre-Refunded, 6.50%, 6/01/15 .............................................. 5,215,000 5,502,451 Refunding, FGIC Insured, 6.125%, 6/01/05 ................................................ 6,255,000 6,558,555 Lakewood PFA, Water Revenue, FGIC Insured, 5.70%, 4/01/16 .................................... 2,485,000 2,598,366 Lakewood RDA, Tax Allocation, Redevelopment Project No.1, Refunding, Series A, FSA Insured, 6.50%, 9/01/17 ................................................................. 3,000,000 3,155,010 Lancaster RDA, Tax Allocation, Lancaster Redevelopment Project No.5, Refunding, MBIA Insured, 6.85%, 2/01/19 ................................................................ 11,245,000 11,495,201 Lincoln USD Special Tax, CFD No. 1, AMBAC Insured, Pre-Refunded, 6.90%, 9/01/21 .............. 2,425,000 2,489,626 Lodi COP, 1996 Public Improvement Financing Project, MBIA Insured, 5.90%, 10/01/16 ................ 3,605,000 3,880,999 Wastewater Treatment Project, Refunding, AMBAC Insured, 6.70%, 8/01/26 .................. 8,800,000 9,929,216 Lodi Electric System Revenue COP, Series A, MBIA Insured, 5.50%, 1/15/32 ..................... 4,000,000 4,067,960 Long Beach Board Financial Authority Lease Revenue, Aquarium of the South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/19 ................................................................................ 4,000,000 3,929,080 11/01/26 ................................................................................ 8,350,000 8,024,935 Long Beach Harbor Revenue, 5.125%, 5/15/18 ......................................................................... 3,625,000 3,574,468 MBIA Insured, 5.25%, 5/15/25 ............................................................ 25,000,000 24,433,000 Los Angeles COP, San Pedro Peninsula Hospital Project, Refunding, AMBAC Insured, ETM, 6.25%, 5/01/15 ......................................................................... 5,825,000 5,991,886 Los Angeles County Capital Assets Leasing Corp. Leasehold Revenue, Refunding, AMBAC Insured, 6.00%, 12/01/16 .............................................................. 3,000,000 3,145,020 Los Angeles County COP, Antelope Valley Courthouse, Series A, AMBAC Insured, 5.25%, 11/01/27 ................................................................................ 2,500,000 2,468,200 11/01/33 ................................................................................ 2,500,000 2,478,650 Los Angeles County MTA, Sales Tax Revenue, Proposition A, First Tier, Refunding, Senior Series A, MBIA Insured, 5.25%, 7/01/27 ............................................... 27,870,000 27,713,371 Los Angeles County Transportation Commission Sales Tax Revenue, Series B, FGIC Insured, Pre-Refunded, 6.50%, 7/01/13 ................................................................................. 2,740,000 2,794,800 7/01/15 ................................................................................. 5,025,000 5,125,500 Los Angeles Department of Water and Power Electric Plant Revenue, FGIC Insured, Pre-Refunded, 6.125%, 1/15/33 ............................................................... 17,215,000 18,357,387 Los Angeles Department of Water and Power Waterworks Revenue, Second Issue, FGIC Insured, 6.40%, 11/01/31 .................................................................... 6,875,000 7,090,531 Los Angeles Harbor Department Revenue, Series B, MBIA Insured, 6.20%, 8/01/25 ................ 2,500,000 2,684,800 Los Angeles Mortgage Revenue, Refunding, Series I, MBIA Insured, 6.50%, 7/01/22 .............. 2,000,000 2,153,080 Los Angeles Wastewater System Revenue, Refunding, Series A, FGIC Insured, 6.00%, 12/01/18 ...................................... 12,100,000 12,448,601 Series B, AMBAC Insured, 6.00%, 6/01/22 ................................................. 3,250,000 3,379,968 Los Angeles Water and Power Revenue, Power System, Refunding, Series A, MBIA Insured, 5.00%, 7/01/24 ..................................................................... 12,000,000 11,592,720 Lynwood PFA, Tax Allocation, Area A Project, Series A, FSA Insured, 5.85%, 9/01/18 ................... 1,765,000 1,951,402 Water Revenue, Water System Improvement Project, MBIA Insured, 5.85%, 6/01/22 ........... 665,000 708,245 Water Revenue, Water System Improvement Project, MBIA Insured, 5.90%, 6/01/29 ........... 3,105,000 3,296,051 Lynwood PFAR, Series A, AMBAC Insured, 5.75%, 9/01/18 ........................................ 4,000,000 4,178,240 Mendocino County COP, Public Facilities Corp., MBIA Insured, 5.25%, 6/01/30 .................. 2,680,000 2,660,141 Menlo Park CDA, Tax Allocation, Las Pulgas Community Development Project, Refunding, AMBAC Insured, 5.375%, 6/01/22 ................................................... 10,000,000 10,099,900
40 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Mesa Construction Water District COP, Water Project, FGIC Insured, Pre-Refunded, 6.40%, 3/15/18 .............................................................................. $ 5,600,000 $ 5,859,280 Metropolitan Water District Revenue, Southern California Waterworks, Series A, MBIA Insured, 5.50%, 7/01/25 .......................................................................... 5,000,000 5,109,850 5.00%, 7/01/30 .......................................................................... 6,525,000 6,236,660 Millbrae COP, Police Department Expansion, AMBAC Insured, 5.875%, 3/01/24 .................... 1,025,000 1,088,919 Modesto Health Facilities Revenue, Memorial Hospital Association, Refunding, Series A, MBIA Insured, 6.00%, 6/01/18 ...................................................... 5,565,000 5,828,225 Modesto Irrigation District COP, Refunding and Capital Improvement Projects, Series A, MBI Insured, Pre-Refunded, 6.00%, 10/01/21 ........................................ 3,000,000 3,024,660 Modesto Irrigation District Financing Authority Revenue, Domestic Water Project, Series C, AMBAC Insured, Pre-Refunded, 5.75%, 9/01/22 ....................................... 2,500,000 2,780,575 Modesto Wastewater Treatment Facility Revenue, MBIA Insured, 5.75%, 11/01/22 ................. 14,375,000 15,217,519 Montebello Community RDA, Tax Allocation, Housing, Series A, FSA Insured, 5.45%, 9/01/19 .......................................... 1,100,000 1,132,747 Montebello Hills Redevelopment Project, Refunding, MBIA Insured, 5.60%, 3/01/19 ................................................................................ 2,460,000 2,537,859 Montebello COP, Capital Improvement Project, Refunding, FSA Insured, 5.375%, 11/01/26 .................................................................................... 8,715,000 8,784,197 Morgan Hill USD, GO, FGIC Insured, 5.50%, 8/01/25 ............................................ 3,840,000 3,938,342 Mount Diablo USD, CFD No. 1, Special Tax, AMBAC Insured, 6.25%, 8/01/14 ........................................................... 500,000 523,150 FSA Insured, 6.00%, 8/01/24 ............................................................. 1,000,000 1,062,270 Refunding, AMBAC Insured, 5.75%, 8/01/15 ................................................ 1,000,000 1,065,000 Refunding, AMBAC Insured, 5.75%, 8/01/16 ................................................ 2,270,000 2,406,949 Refunding, AMBAC Insured, 5.375%, 8/01/19 ............................................... 7,290,000 7,374,272 Mountain View COP, Capital Improvement Financing Authority Revenue, City Hall/Community Theatre, MBIA Insured, 6.50%, 8/01/16 ........................................ 1,500,000 1,532,970 National City Joint Powers Authority Lease Revenue, National City Police Facilities Project, AMBAC Insured, Pre-Refunded, 6.75%, 10/01/17 ............................ 2,000,000 2,054,780 Nevada Irrigation District Revenue COP, Cascade Bench Flume Project, MBIA Insured, 5.50%, 1/01/17 ..................................................................... 4,600,000 4,771,258 Norco RDA, Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured, 5.625%, 3/01/30 ............................................................................. 1,000,000 1,034,360 North City West School Facilities Financing Authority Special Tax, Refunding, Series B, FSA Insured 5.75%, 9/01/15 .......................................................................... 1,260,000 1,352,912 6.00%, 9/01/19 .......................................................................... 2,500,000 2,686,450 Northern California Power Agency Multiple Capital Facilities Revenue, Refunded, Series A, MBIA Insured, 6.50%, 8/01/12 ........................................ 2,840,000 3,002,789 Series A, MBIA Insured, Pre-Refunded, 6.50%, 8/01/12 .................................... 2,160,000 2,292,862 Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded, 7.50%, 7/01/23 .............................................................................. 3,200,000 4,094,016 Northern California Transmission Revenue, California/Oregon Transmission Project, Series A, MBIA Insured, 6.25%, 5/01/10 .......................................................................... 2,500,000 2,606,825 6.50%, 5/01/16 .......................................................................... 4,000,000 4,176,280 6.00%, 5/01/24 .......................................................................... 16,335,000 16,535,921 Oakland Revenue, 1800 Harrison Foundation, Refunding, Series A, AMBAC Insured, 6.00%, 1/01/29 .............................................................................. 10,000,000 10,684,800 Oceanside Community Development Commission COP, Public Parking Project, FSA Insured, Pre-Refunded, 7.875%, 4/01/19 ...................................................... 3,940,000 4,498,022 Oceanside COP, Corporation Yard Project Financing, AMBAC Insured, Pre-Refunded, 7.30%, 8/01/21 ................................................................................ 4,715,000 5,044,673 Oceanside Civic Center Project, Refunding, MBIA Insured, 5.75%, 8/01/15 ................. 1,000,000 1,063,460 Waste Reuse Association Finance Project, Series A, AMBAC Insured, Pre-Refunded, 6.50%, 10/01/17 .......................................................... 5,000,000 5,329,600
41 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Orange County COP, Juvenile Justice Center Facilities, Refunding, AMBAC Insured, 6.375%, 6/01/11 ......................................................................... $ 4,770,000 $ 4,990,040 6.00%, 6/01/17 .......................................................................... 5,000,000 5,200,300 Orange County Financing Authority Tax Allocation Revenue, Refunding, Series A, MBIA Insured, 6.50%, 9/01/22 ................................................................ 3,500,000 3,585,435 Oroville PFA, Tax Allocation Revenue, Oroville Redevelopment Project No. 1, AMBAC Insured, 5.90%, 9/15/21 .......................................................................... 1,245,000 1,323,136 6.10%, 9/15/23 .......................................................................... 2,880,000 3,087,014 Oxnard COP, AMBAC Insured, 4.75%, 6/01/28 .................................................... 1,545,000 1,407,371 Oxnard Financing Authority Solid Waste Revenue, AMBAC Insured, 6.00%, 5/01/16 ................ 5,000,000 5,311,950 Oxnard UHSD, Series B, FSA Insured, ETM, 5.875%, 8/01/27 ..................................... 3,615,000 3,917,395 Palm Springs USD, GO, Series C, MBIA Insured, 6.125%, 2/01/20 ................................ 500,000 521,895 Paramount USD, COP, Master Lease Program, FSA Insured, 6.30%, 9/01/26 ........................ 4,750,000 5,115,560 Parlier USD, GO, Series B, AMBAC Insured, 6.00%, 6/01/16 ..................................... 1,130,000 1,223,541 Pasadena USD, GO, Series B, FGIC Insured, 5.25%, 7/01/24 ..................................... 1,000,000 999,990 Petaluma COP, Refunding, Series A, AMBAC Insured, 5.625%, 8/01/13 ............................ 1,000,000 1,049,380 Pico Rivera PFAR, Water Enterprise Project, Series A, FGIC Insured, Pre-Refunded, 6.00%, 12/01/17 ............................................................................. 8,000,000 8,521,360 Pinole RDA, Tax Allocation, Pinole Vista Redevelopment Project, Series A, MBIA Insured, Pre-Refunded, 6.125%, 8/01/17 ...................................................... 1,000,000 1,022,530 Placer County COP, Administrative and Emergency Services, MBIA Insured, 5.65%, 6/01/24 ..................... 4,000,000 4,141,440 Jail Kitchen Project, MBIA Insured, Pre-Refunded, 6.90%, 10/01/21 ....................... 3,745,000 4,242,898 Placer County Water Agency COP, FSA Insured, 5.90%, 7/01/25 .................................. 2,350,000 2,479,955 Pleasant Hill RDA, Tax Allocation, Pleasant Hill Commons Project, Refunding, FSA Insured, 6.90%, 7/01/21 ..................................................................... 5,500,000 5,698,770 Porterville COP, Sewer System and Improvement Project, Refunding, AMBAC Insured, 6.30%, 10/01/18 ............................................................................... 11,010,000 11,521,966 Sewer System Refining Project, Refunding, AMBAC Insured, 5.25%, 10/01/23 ................ 3,000,000 3,003,720 Portola Valley School District GO, MBIA Insured, 5.00%, 8/01/29 .............................. 2,000,000 1,912,780 (b) Poway RDA, Tax Allocation, Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 .................................................................................... 9,195,000 8,843,475 Poway RDA, Tax Allocation, Refunding, MBIA Insured, 5.75%, 6/15/33 ........................... 11,475,000 12,064,356 Rancho Cucamonga RDA, Tax Allocation, Rancho Redevelopment Project, Housing Set Aside, MBIA Insured, 5.25%, 9/01/26 ......................................... 2,000,000 1,991,560 Refunding, FSA Insured, 5.25%, 9/01/20 .................................................. 2,500,000 2,517,900 Redding Joint Powers Financing Authority Lease Revenue, Civic Center Project, Series A, MBIA Insured, 5.75%, 3/01/19 .......................................................................... 3,090,000 3,273,052 5.25%, 3/01/26 .......................................................................... 75,000 74,687 Redding RDA, Tax Allocation, Hilltop Cypress Redevelopment Notes, Series C, FSA Insured, 6.00%, 9/01/22 .......................................................................... 2,120,000 2,241,010 Redlands USD, Series B, FSA Insured, 6.25%, 6/01/19 .......................................... 2,115,000 2,236,190 Redwood City PFA, Local Agency Revenue, Series A, AMBAC Insured, 6.50%, 7/15/11 .......................................................................... 1,270,000 1,296,772 Pre-Refunded, 6.50%, 7/15/11 ............................................................ 1,475,000 1,506,093 Ripon RDA, Tax Allocation, Community Redevelopment Project, MBIA Insured, 5.85%, 11/01/30 .................................................................................... 3,975,000 4,228,724 Riverside County COP, Historic Courthouse, MBIA Insured, 5.875%, 11/01/27 .................... 3,000,000 3,210,390
42 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Riverside RDA, Lease Revenue, Series A, AMBAC Insured, 6.375%, 10/01/23 ........................................................................ $ 12,540,000 $ 13,485,014 6.50%, 10/01/24 ......................................................................... 2,000,000 2,179,120 Romona Municipal Water District COP, Refunding, AMBAC Insured, 7.20%, 10/01/10 ............... 785,000 804,209 Rowland USD, GO, Series A, FSA Insured, 5.25%, 9/01/25 ....................................... 5,685,000 5,669,139 Rubidoux Community Services District COP, Water System Improvement Project, AMBAC Insured, Pre-Refunded, 6.20%, 12/01/14 ................................................ 2,510,000 2,680,454 Sacramento Area Flood Control Agency Special Assessment, Capital AD No. 2, FGIC Insured, 5.80%, 11/01/16 ......................................... 1,000,000 1,072,690 Operation and Maintenance, FGIC Insured, 5.80%, 11/01/16 ................................ 1,475,000 1,582,218 Operation and Maintenance, FGIC Insured, 5.90%, 11/01/25 ................................ 2,690,000 2,866,491 Sacramento City Financing Authority Revenue, Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/32 .............................................................. 10,000,000 9,543,000 Sacramento County Airport System Revenue, Series A, MBIA Insured, 6.00%, 7/01/17 ............. 5,920,000 6,366,309 Sacramento MUD, Electric Revenue, Series J, AMBAC Insured, 5.50%, 8/15/21 .................... 8,485,000 8,751,174 Salida Area Public Facilities Financing Agency, CFD, Special Tax No. 1988-1, FSA Insured, 5.75%, 9/01/30 ..................................................................... 3,435,000 3,596,136 Salida USD, COP, Financing Project, AMBAC Insured, 5.375%, 5/01/26 ........................... 1,645,000 1,646,777 San Bernardino County COP, 1997 Public Improvement Financing Project, MBIA Insured, 5.25%, 10/01/25 .................................................................... 7,000,000 7,013,300 San Bernardino County Mortgage Revenue, Don Miguel Apartments Project, Refunding, MBIA Insured, 6.40%, 3/01/25 ................................................................ 5,680,000 5,782,070 San Bernardino RDA, Capital Appreciation, Series B, AMBAC Insured, 7.70%, 1/10/09 ............ 2,382,000 2,841,726 San Buenaventura Public Facilities Financing Authority Lease Revenue, Refunding, FSA Insured, 5.75%, 6/01/14 ................................................................. 2,250,000 2,399,963 San Carlos School District GO, MBIA Insured, 5.50%, 10/01/24 ................................. 2,110,000 2,159,585 San Diego Community College District COP, Series 1991, MBIA Insured, 6.50%, 12/01/12 .................................................................................... 2,000,000 2,064,920 San Diego IDR, San Diego Gas and Electric, Custodial Receipts, Series A, AMBAC Insured, 6.40%, 9/01/18 ..................................................................... 1,650,000 1,733,408 San Diego Mortgage Revenue, University Canyon North, Refunding, Series A, MBIA Insured, 5.125%, 7/01/03 .................................................................... 80,000 81,658 San Diego Public Facilities Financing Authority Sewer Revenue, Series B, FGIC Insured, 5.25%, 5/15/27 ..................................................................... 2,950,000 2,951,682 San Francisco BART District Sales Tax Revenue, FGIC Insured, 5.50%, 7/01/26 .......................................................................... 6,500,000 6,671,405 5.50%, 7/01/34 .......................................................................... 12,000,000 12,342,600 Pre-Refunded, 6.60%, 7/01/12 ............................................................ 2,580,000 2,631,600 San Francisco City and County Airport Commission International Airport Revenue, Issue 5, Second Series, FGIC Insured, 6.50%, 5/01/24 .................................... 6,900,000 7,383,069 Issue 8A, Second Series, FGIC Insured, 6.25%, 5/01/20 ................................... 3,500,000 3,686,480 Issue 9B, Second Series, FGIC Insured, Pre-Refunded, 6.00%, 5/01/25 ..................... 6,400,000 7,074,304 Issue 11, Second Series, FGIC Insured, 6.00%, 5/01/11 ................................... 2,105,000 2,243,804 Issue 16A, Second Series, FSA Insured, 5.00%, 5/01/29 ................................... 10,000,000 9,358,500 San Francisco City and County Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/11 .................................................................................... 2,000,000 2,099,540 San Gabriel USD, COP, Facilities Development Program, Series A, FSA Insured, 6.00%, 9/01/15 .............................................................................. 1,000,000 1,075,600 San Jacinto USD, COP, Refunding Project, AMBAC Insured, Pre-Refunded, 6.50%, 10/01/23 .................................................................................... 3,000,000 3,197,760 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 ...................................... 18,075,000 18,157,964 Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 ....................................... 11,860,000 11,687,318 senior lien, MBIA Insured, 5.00%, 1/01/33 ............................................... 10,035,000 9,576,300 San Jose Financing Authority Revenue, Convention Project, Series C, FSA Insured, 6.40%, 9/01/17 .............................................................................. 8,740,000 8,950,634 San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 ............. 3,500,000 3,614,450 San Leandro COP, Library and Fire Stations Financing, AMBAC Insured, 5.75%, 11/01/29 .................................................................................... 5,000,000 5,278,450
43 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area-3-A, MBIA Insured, 5.75%, 10/01/29 ......................................................................... $ 5,340,000 $ 5,482,097 5.80%, 10/01/30 ......................................................................... 7,800,000 8,066,214 San Ramon COP, Central Park Expansion Project, FSA Insured, Pre-Refunded, 7.20%, 2/01/25 ..................................................................................... 5,110,000 5,805,778 Sanger PFAR, Utility System Financing, Series A, AMBAC Insured, 5.70%, 1/01/22 ............... 5,935,000 6,196,140 Santa Ana COP, Parking Facilities Project, Refunding, Series A, AMBAC Insured, 6.125%, 6/01/16 ............................................................................. 3,250,000 3,418,415 Santa Ana Financing Authority Water Revenue, MBIA Insured, 6.125%, 9/01/24 ................... 1,000,000 1,052,190 Santa Barbara COP, Municipal Improvement Program, Refunding, AMBAC Insured, 6.15%, 8/01/17 ................. 3,575,000 3,719,430 Water Systems Improvement Project, Refunding, AMBAC Insured, 6.70%, 4/01/27 ............. 6,500,000 6,764,940 Santa Clara County Financing Authority Lease Revenue, Refunding, Series A, AMBAC Insured, 5.00%, 11/15/22 .................................................................... 3,950,000 3,848,564 Santa Clara Electric Revenue, Series A, MBIA Insured, Pre-Refunded, 6.50%, 7/01/21 ..................................................................................... 1,350,000 1,377,000 Santa Clara RDA, Tax Allocation, Bayshore North Project, AMBAC Insured, 7.50%, 6/01/08 ..................................................................................... 200,000 203,728 Santa Cruz County COP, Sub-Joint Wastewater Treatment Project, AMBAC Insured, 6.20%, 9/01/19 .............................................................................. 475,000 502,726 Santa Fe Springs PFA, Water Revenue, Series A, MBIA Insured, 5.90%, 5/01/21 ................................................................................. 900,000 959,634 5/01/26 ................................................................................. 1,190,000 1,263,007 Santa Fe Springs RDA, Consolidated, Tax Allocation, Series A, MBIA Insured, 6.40%, 9/01/22 .............................................................................. 4,255,000 4,457,666 Santa Margarita/Dana Point Authority Revenue, ID 3, 3A, 4, and 4A, Refunding, Series B, MBIA Insured, 5.75%, 8/01/20 ...................................................... 23,000,000 24,182,660 Santa Monica Community College District GO, Series B, AMBAC Insured, 5.75%, 7/01/20 ..................................................................................... 1,495,000 1,579,124 Santa Rosa High School District GO, FGIC Insured, 5.90%, 5/01/16 ............................................................ 1,000,000 1,059,210 Refunding, FSA Insured, 5.75%, 5/01/18 .................................................. 1,050,000 1,104,306 (b) Santa Rosa Wastewater Revenue, Series B, FGIC Insured, 5.125%, 9/01/31 ....................... 4,000,000 3,894,920 Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement, AMBAC Insured, 6.00%, 7/02/15 .................................................. 2,000,000 2,251,220 Selma PFAR, Series A, MBIA Insured, 5.80%, 9/15/11 ................................................................................. 145,000 145,584 9/15/12 ................................................................................. 125,000 125,540 Sonoma CDA Tax Allocation, Redevelopment Project, MBIA Insured, 5.70%, 12/01/30 .............. 3,455,000 3,583,802 Sonoma Valley USD, GO, FSA Insured, 6.00%, 7/15/21 ........................................... 2,400,000 2,582,904 South Gate PFAR, Tax Allocation, Redevelopment Project No. 1, AMBAC Insured, 5.875%, 9/01/24 ............................................................................. 2,500,000 2,595,225 South Orange County PFA, Special Tax Revenue, senior lien, Refunding, Series A, MBIA Insured, 6.20%, 9/01/13 .......................................................................... 13,500,000 14,398,155 6.00%, 9/01/18 .......................................................................... 3,250,000 3,414,775 South San Francisco COP, 5.00%, 4/01/29 ...................................................... 2,000,000 1,871,860 Stanislaus County Board of Education COP, FSA Insured, 5.70%, 9/01/24 ........................ 2,000,000 2,071,960 Stockton COP, Wastewater System Project, Refunding, AMBAC Insured, 5.75%, 9/01/23 ............ 6,500,000 6,699,420 Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series B, FSA Insured, 5.90%, 7/01/12 .............................................................. 3,745,000 4,074,935 Stockton Revenue COP, Wastewater System Project, Refunding, Series A, MBIA Insured, 5.00%, 9/01/23 ..................................................................... 6,500,000 6,304,740 Suisun City RDA, Tax Allocation, Suisun City Redevelopment Project, Refunding, MBIA Insured, 5.625%, 10/01/13 .............................................................. 4,260,000 4,479,816 Sulfur Springs USD, COP, Series 1991, AMBAC Insured, Pre-Refunded, 7.20%, 2/01/21 ............ 800,000 802,664 Sunnyvale RDA, Tax Allocation, Central Core Project, Refunding, AMBAC Insured, 6.50%, 10/01/22 ............................................................................. 2,785,000 2,836,467 Susanville PFAR, MBIA Insured, 5.70%, 6/01/30 ................................................ 3,000,000 3,110,850
44 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Tahoe-Truckee Joint USD, Series A, FGIC Insured, Pre-Refunded, 6.00%, 9/01/17 .................................... $ 5,000,000 $ 5,411,000 Series B, FGIC Insured, 5.95%, 9/01/20 .................................................. 3,620,000 3,890,414 Tahoe-Truckee USD, GO, Improvement District No. 2, Series A, FGIC Insured, 5.75%, 8/01/20 .............................................................................. 4,340,000 4,607,387 Tehachapi Water and Sewer Revenue, Refunding, MBIA Insured, 6.75%, 11/01/20 .................. 2,000,000 2,211,040 Thousand Oaks RDA, Tax Allocation, Thousand Oaks Boulevard Redevelopment, Refunding, MBIA Insured, 5.375%, 12/01/25 ................................................... 2,390,000 2,409,813 Tri-City Hospital District Revenue, MBIA Insured, 6.00%, 2/01/22 ............................................................ 2,350,000 2,378,247 Refunding, Series A, MBIA Insured, 5.625%, 2/15/17 ...................................... 2,750,000 2,853,428 Truckee PFA, Lease Revenue, Series A, AMBAC, 6.00%, 11/01/30 ................................. 1,990,000 2,151,091 Turlock Auxiliary Organization Revenue COP, California State University, Stanislaus Foundation, MBIA Insured, 5.875%, 6/01/22 ........................................ 2,000,000 2,138,180 Turlock PFA, Sewer Revenue, FGIC Insured, 5.50%, 9/15/29 ..................................... 6,855,000 7,003,205 Union City CRDA, Tax Allocation Revenue, Community Redevelopment Project, AMBAC Insured, 5.75%, 10/01/22 ................................................................................ 6,200,000 6,502,188 10/01/32 ................................................................................ 14,100,000 14,767,353 University of California Revenues, Multi Purpose Projects, Series H, FGIC Insured, 5.50%, 9/01/28 ..................................................................... 2,500,000 2,567,525 University Revenues, Multi Purpose, Series K, 5.00%, 9/01/23 ................................. 3,160,000 3,045,008 Upland COP, Police Building Project, Refunding, AMBAC Insured, 6.60%, 8/01/16 ....................... 3,985,000 4,191,423 Water System Improvement Project, FGIC Insured, 6.60%, 8/01/16 .......................... 2,385,000 2,508,543 Vacaville PFA, Tax Allocation Revenue, Vacaville Redevelopment Projects, MBIA Insured, 6.35%, 9/01/22 ..................................................................... 1,355,000 1,375,162 Vallejo Revenue, Water Improvement Project, Refunding, Series A, FSA Insured, 5.875%, 5/01/26 ............................................................................. 12,500,000 13,250,625 Washington Township Hospital District Revenue, HealthCare District Revenue, 5.00%, 7/01/18 .......................................................................... 2,000,000 1,935,500 5.125%, 7/01/23 ......................................................................... 450,000 438,134 Washington USD, GO, Yolo County Election of 1999, Series A, FGIC Insured, 5.375%, 8/01/25 ............................................................................. 2,045,000 2,062,751 Waugh School District Special Tax GO, Corona/Ely CDF No.1, AMBAC Insured, 5.80%, 9/01/26 .............................................................................. 5,640,000 5,927,922 West Basin Municipal Water District Revenue COP, 1992 Project, Refunding, Series A, AMBAC Insured, 5.50%, 8/01/17 ..................................................... 3,370,000 3,500,082 West Sacramento Financing Authority Revenue, MBIA Insured, Pre-Refunded, 6.25%, 9/01/16 ..................................................................................... 4,185,000 4,648,782 West Sacramento RDA, Tax Allocation, West Sacramento Redevelopment Project, MBIA Insured, Pre-Refunded, 6.25%, 9/01/21 .................................................. 3,340,000 3,425,671 William S. Hart Joint School Financing Authority Special Tax Revenue, Community Facilities, Refunding, FSA Insured, 6.60%, 9/01/18 ................................ 1,285,000 1,417,818 William S. Hart USD, COP, School Project, MBIA Insured, 6.00%, 9/01/30 ....................... 7,015,000 7,596,824 Windsor Joint Powers Financing Authority Wastewater Revenue, Refunding, Series A, AMBAC Insured, 6.125%, 12/15/12 .......................................................... 750,000 816,413 Yucaipa-Sweetwater School Facilities Financing Authority Special Tax Revenue, Sweetwater, Series A, MBIA Insured, 5.70%, 9/01/19 .......................................... 4,000,000 4,191,840 -------------- TOTAL BONDS (COST $1,611,536,266) ............................................................... 1,684,789,690 --------------
45 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) ZERO COUPON BONDS 3.0% California HFR, Home Mortgage, Series N, AMBAC Insured, 8/01/31 .............................. $ 5,000,000 $ 3,087,300 Corona-Norco USD GO, Series B, FSA Insured, 9/01/23 ................................................................................. 2,320,000 686,859 9/01/24 ................................................................................. 2,620,000 730,901 3/01/25 ................................................................................. 1,400,000 378,196 Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, MBIA Insured, 1/15/17 ................................................................................. 20,000,000 8,407,000 1/15/18 ................................................................................. 25,000,000 9,938,250 1/15/19 ................................................................................. 5,970,000 2,225,377 (b) Lancaster School District GO, Capital Appreciation, Election of 1999, MBIA Insured, 08/01/25 ................................................................................ 5,495,000 1,448,922 07/01/26 ................................................................................ 5,965,000 1,491,727 Newark USD GO, Capital Appreciation, FGIC Insured, Series B, 8/10/24 ....................................................................... 9,905,000 2,558,858 Series C, 8/01/22 ....................................................................... 2,165,000 650,301 Series C, 8/01/23 ....................................................................... 2,465,000 694,021 Series C, 8/01/24 ....................................................................... 2,560,000 678,067 Series C, 8/01/25 ....................................................................... 2,705,000 673,518 San Bernardino County SFMR, Series A, GNMA Secured, ETM, 5/01/22 ............................. 28,405,000 8,903,263 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, Series A, MBIA Insured,1/15/26 ..................................... 13,155,000 3,378,204 San Marino USD, GO, Series A, MBIA Insured, 7/01/25 .......................................... 6,080,000 1,612,477 Santa Ana USD, COP, Capital Appreciation Financing Project, FSA Insured, 4/01/24 ..................................................................................... 14,245,000 3,977,346 Southern Kern USD, COP, Convertible Capital Appreciation Building Program, Series B, FSA Insured, 9/01/26 .............................................................. 2,250,000 1,724,963 Union Elementary School District GO, Capital Appreciation, Series A, FGIC Insured, 9/01/24 ............................................................................ 2,000,000 557,925 -------------- TOTAL ZERO COUPON BONDS (COST $44,428,098) ................................................... 53,803,475 -------------- TOTAL LONG TERM INVESTMENTS (COST $1,655,964,364) ............................................ 1,738,593,165 -------------- (a) SHORT-TERM INVESTMENTS .9% California PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series E, Daily VRDN and Put, 3.60%, 11/01/26 ........................................................................ 900,000 900,000 Shell Oil Co. Project, Refunding, Series A, Daily VRDN and Put, 3.10%, 10/01/07 ............................................................................... 2,100,000 2,100,000 Irvine 1915 Act Special Assessment, AD No. 93-14, Daily VRDN and Put, 3.10%, 9/02/25 ..................................................................................... 500,000 500,000 Irvine Ranch Water District COP, Capital Improvement Project, Daily VRDN and Put, 3.10%, 8/01/16 ......................................................................... 500,000 500,000 Irvine Ranch Water District Revenue, Construction Bonds, Daily VRDN and Put, 3.10%, 10/01/05 ............................................................................. 700,000 700,000 Metropolitan Water District Southern California Waterworks Revenue, Refunding, Series B-1, Daily VRDN and Put, 3.10%, 7/01/35 .............................................. 3,700,000 3,700,000 Orange County Sanitation Districts COP, Refunding, Series B, Daily VRDN and Put, 3.10%, 8/01/30 ......................................................................... 3,800,000 3,800,000 Riverside County IDAR, Merrick Engineering Inc., Weekly VRDN and Put, 2.80%, 3/01/27 ..................................................................................... 1,870,000 1,870,000
46 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------------------- (a) SHORT-TERM INVESTMENTS (CONT.) Sacramento County Sanitation District Financing Authority Revenue, Series C, Weekly VRDN and Put, 2.40%, 12/01/30 ........................................................ $ 800,000 $ 800,000 Western Riverside County Regional Wastewater Authority Revenue, Regional Wastewater Treatment, Daily VRDN and Put, 3.10%, 4/01/28 .................................... 100,000 100,000 -------------- TOTAL SHORT-TERM INVESTMENTS (COST $14,970,000) .............................................. 14,970,000 -------------- TOTAL INVESTMENTS (COST $1,670,934,364) 99.3% ................................................ 1,753,563,165 OTHER ASSETS, LESS LIABILITIES .7% ........................................................... 12,746,808 -------------- NET ASSETS 100.0% ............................................................................ $1,766,309,973 ==============
See glossary of terms on page 61. (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. 47 FRANKLIN CALIFORNIA TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
YEAR ENDED JUNE 30, ---------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ---------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the year) Net asset value, beginning of year ................. $ 10.92 $ 11.02 $ 11.24 $ 10.93 $ 10.67 ---------------------------------------------------------------------------- Income from investment operations: Net investment income(a)........................... .51 .52 .51 .53 .53 Net realized and unrealized gains (losses) ........ .34 (.10) (.21) .31 .26 ---------------------------------------------------------------------------- Total from investment operations ................... .85 .42 .30 .84 .79 Less distributions from net investment income ...... (.52) (.52) (.52) (.53) (.53) ---------------------------------------------------------------------------- Net asset value, end of year ....................... $ 11.25 $ 10.92 $ 11.02 $ 11.24 $ 10.93 ============================================================================ Total return(b)..................................... 7.86% 3.95% 2.63% 7.76% 7.58% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) .................... $ 224,156 $ 186,880 $ 192,547 $ 155,664 $ 117,666 Ratios to average net assets: Expenses .......................................... .60% .60% .60% .52% .47% Expenses excluding waiver and payments by affiliate .72% .74% .75% .78% .80% Net investment income ............................. 4.56% 4.79% 4.50% 4.76% 4.96% Portfolio turnover rate ............................ 8.02% 10.29% 5.48% 9.58% 6.29%
(a) Based on average shares outstanding effective year ended June 30, 1999. (b) Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year 48 See notes to financial statements. FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 96.6% BONDS 95.7% ABAG Finance Authority for Nonprofit Corps. COP, 5.75%,8/01/03 .......................................................................... $ 445,000 $ 466,106 Easter Seal Society for the Redwood Coast, Insured, 5.50%,6/01/03 ...................... 225,000 234,275 Partner North County Health Project, 5.50%,3/01/06 ..................................... 770,000 822,622 Rhoda Haas Goldman Plaza, Insured, 5.125%, 5/15/15 ..................................... 3,000,000 2,998,320 ABAG Finance Corp. COP, ABAG XXVI, Refunding, Series A, 5.90%,6/01/02 ..................................................... 65,000 66,450 Series B, 6.40%, 10/01/03 .............................................................. 100,000 106,186 ABAG Revenue, Refunding,Series A-E, 5.00%,9/15/06 .......................................................................... 610,000 623,298 5.05%,9/15/07 .......................................................................... 620,000 633,262 5.40%,9/15/14 .......................................................................... 2,455,000 2,501,252 ABAG Water and Wastewater Revenue, Pooled Financing Program, Series A, FSA Insured, 5.00%, 10/01/10......................................................................... 3,035,000 3,231,122 Alameda County COP,Series 1994, 5.70%,4/01/02 .......................................................................... 395,000 402,774 5.80%,4/01/03 .......................................................................... 420,000 437,216 5.90%,4/01/04 .......................................................................... 440,000 466,616 Antioch PFA, Reassessment Revenue, sub. lien, Series B, 5.00%,9/02/03 .......................................................................... 1,880,000 1,897,860 5.20%,9/02/05 .......................................................................... 2,070,000 2,102,292 5.40%,9/02/07 .......................................................................... 1,155,000 1,180,375 Auburn COP, Civic Center Project, Refunding, 5.45%,9/01/01 .......................................................................... 70,000 70,268 5.60%,9/01/02 .......................................................................... 75,000 77,152 5.70%,9/01/03 .......................................................................... 80,000 83,704 5.75%,9/01/04 .......................................................................... 80,000 84,910 Bakersfield Central District Revenue RDA, Tax Allocation, Downtown Bakersfield Redevelopment, ETM, 6.10%,4/01/02 .......................................................................... 310,000 317,874 6.20%,4/01/03 .......................................................................... 330,000 347,513 Brentwood Infrastructure Financing Authority Infrastructure Revenue, CIFP 94-1, 5.30%,9/02/08 .......................................................................... 990,000 999,910 5.35%,9/02/09 .......................................................................... 765,000 770,975 5.40%,9/02/10 .......................................................................... 990,000 994,891 5.45%,9/02/11 .......................................................................... 995,000 996,463 5.50%,9/02/12 .......................................................................... 990,000 991,554 California Educational Facilities Authority Revenue, Pooled College and University Financing, Refunding, Series B, 5.80%, 6/01/02 ........... 1,000,000 1,024,350 Pooled College and University Financing, Refunding, Series B, 5.90%, 6/01/03 ........... 1,105,000 1,153,432 Pooled College and University Projects, Series B, 6.125%,4/01/13 ....................... 1,000,000 1,083,550 California Health Facilities Financing Authority Revenue, Kaiser Permanente, Series B, 5.25%, 10/01/13 ........................................... 3,850,000 3,794,137 Kaiser Permanente, Series B, 5.25%, 10/01/14 ........................................... 3,000,000 3,034,770 Kaiser Permanente, Series B, 5.25%, 10/01/16 ........................................... 2,000,000 2,008,560 San Diego Hospital Association, Series B, MBIA Insured, 5.60%, 8/01/03 ................. 100,000 104,603 Sutter Health, Refunding, Series A, MBIA Insured, 5.875%,8/15/16 ....................... 3,750,000 4,010,625 California HFAR, SFM Purchase, Class III, Series A-1, MBIA Insured, 5.70%, 8/01/11 ............ 1,805,000 1,925,881
49 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001(CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) California State Department of Water Resources Central Valley Project Revenue, Water System, Refunding, Series S, 5.00%, 12/01/19 ........................................................... $ 4,000,000 $ 3,952,400 California State GO, 5.25%,6/01/16 ............................................................................. 2,000,000 2,025,300 Refunding, 5.00%, 12/01/05 ................................................................ 7,000,000 7,349,160 Veterans, Series B, 5.00%, 12/01/12 ....................................................... 2,000,000 2,010,240 Veterans, Series B, 5.25%, 12/01/15 ....................................................... 2,310,000 2,311,779 Veterans, Series B, 5.375%, 12/01/16 ...................................................... 605,000 607,360 California State Public Works Board Lease Revenue, Department of Corrections, Coalinga State Prison, Series B, MBIA Insured, 5.50%, 12/01/08 . 1,000,000 1,058,150 Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 .................... 1,325,000 1,263,202 Various Community College Projects, Refunding, Series C, 5.50%,9/01/09 .................... 1,555,000 1,668,344 California Statewide CDA,COP, California Lutheran Homes, ETM, 5.375%,11/15/06 ........................................... 1,000,000 1,080,230 Kaiser Permanente, 5.30%, 12/01/15 ........................................................ 2,000,000 2,001,400 St. Joseph Health System Obligation Group, 5.25%,7/01/11 .................................. 1,005,000 1,042,899 St. Joseph Health System, Refunding, 5.00%, 7/01/12 ....................................... 2,180,000 2,201,429 California Statewide Communities Development Corp. COP, Pacific Homes, Series A, Pre-Refunded, 5.50%, 4/01/04 ............................................................................ 585,000 621,299 Campbell COP, Civic Center Project, Refunding, 5.60%,10/01/03 .................................... 350,000 367,056 Carson RDA Tax Allocation, Project Area No. 1, Refunding, 6.10%,10/01/02 ......................... 200,000 207,226 Central Valley Financing Authority Cogeneration Project Revenue, Carson Ice General Project, Refunding,MBIA Insured, 5.00%, 7/01/17 ......................................................... 2,000,000 1,989,100 Chaffey Community College District COP, 5.10%, 9/01/13 ........................................... 1,860,000 1,907,765 Clovis COP, Water System Improvement Project, AMBAC Insured, 5.90%, 3/01/03 ...................... 100,000 103,859 Clovis MFR, Refunding, FNMA Insured, 5.10%, 11/01/30 ............................................. 4,105,000 4,236,894 Coastside County Water District 1915 Act GO, Crystal Springs Project, Refunding, 5.10%,9/02/03 ............................................................................. 520,000 525,465 5.20%,9/02/04 ............................................................................. 1,070,000 1,086,093 5.40%,9/02/06 ............................................................................. 625,000 632,969 Colma 1915 Act Special Assessment, Local ID No. 1, Refunding, 5.00%,9/02/01 ............................................................................. 465,000 466,265 5.10%,9/02/02 ............................................................................. 485,000 488,327 5.20%,9/02/03 ............................................................................. 515,000 521,458 5.30%,9/02/04 ............................................................................. 545,000 553,317 5.40%,9/02/05 ............................................................................. 570,000 578,687 Commerce Joint Powers Financing Authority Water Facilities Lease Revenue, Refunding, Series A, 5.50%,10/01/02 ............................................................................ 340,000 350,033 5.625%,10/01/03 ........................................................................... 360,000 376,711 5.75%,10/01/04 ............................................................................ 470,000 499,126 Compton COP, Civic Center and Capital Improvement, Refunding, Series A, 5.00%,9/01/08 ............................................................................. 4,340,000 4,463,213 5.50%,9/01/15 ............................................................................. 1,180,000 1,170,749 Compton Sewer Revenue, ETM, 5.80%,7/01/01 ............................................................................. 140,000 140,000 5.90%,7/01/02 ............................................................................. 150,000 154,802 6.00%,7/01/03 ............................................................................. 155,000 163,789
50 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Concord RDA, Tax Allocation, Central Concord Redevelopment Project, Refunding, Sub Series A, 5.50%, 7/01/02 .............................................................................. $ 625,000 $ 640,419 5.625%, 7/01/03 ............................................................................. 655,000 682,156 Contra Costa County MFHR, Byron Park Project, Series C, GNMA Secured, 6.00%, 7/20/03 ............... 280,000 288,484 Danville Financing Authority Revenue, Sycamore Valley, Reassessment District No. 93-2, 5.40%, 9/02/01 .............................................................................. 285,000 286,043 5.60%, 9/02/02 .............................................................................. 450,000 461,907 5.70%, 9/02/03 .............................................................................. 215,000 222,119 5.80%, 9/02/04 .............................................................................. 880,000 909,058 Dinuba RDA, Tax Allocation, Merged City, Refunding, Series A, 6.10%, 12/01/04 ...................... 1,500,000 1,542,495 Duarte RDA, Tax Allocation, Merged Redevelopment Project Area, Refunding, 5.125%, 10/01/16 ......... 4,930,000 4,926,993 Eden Township Hospital District Health Facilities Revenue COP, Eden Hospital Health Services Corp., Refunding, 5.75%, 7/01/12 ................................................................. 1,195,000 1,242,657 Fairfield-Suisun Sewer District Sewer Revenue, Series A, Refunding, FGIC Insured, 5.00%, 5/01/12 ... 600,000 625,746 Foster City PFAR, Community Development Project, Series A, 5.60%, 9/01/03 .......................... 1,150,000 1,202,509 Fresno Joint Powers Financing Authority Local Agency Revenue, Refunding, Series A, 6.20%, 9/02/03 .. 1,000,000 1,054,540 Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement Project, 5.00%, 4/01/12 ................................................................................... 2,390,000 2,398,963 Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%, 9/01/12 ........ 1,955,000 2,000,903 Garden Grove GO, CDA, Tax Allocation, Garden Grove Community Project, Refunding, 5.40%, 10/01/04 ... 1,425,000 1,493,785 Glendale Parking Facilities Joint Powers Authority Revenue, Series A, 5.30%, 3/01/03 ............... 125,000 128,481 Goleta Water District Revenue COP, Goleta Reclamation Project, Refunding, FGIC Insured, 5.50%, 12/01/08 .................................................................................. 750,000 794,865 Hayward RDA, Tax Allocation, Downtown Hayward Redevelopment Project, Refunding, 5.70%, 3/01/14 ..... 1,500,000 1,558,785 Health Facilities Authority Revenue, Kaiser Permanente Medical, 5.45%, 10/01/13 .................... 1,000,000 1,007,440 Hesperia PFAR, Series A, 5.80%, 10/01/03 ........................................................... 2,555,000 2,683,159 Hi Desert Memorial Health Care District Revenue, Refunding, 5.10%, 10/01/06 ............................................................................. 615,000 584,281 5.125%, 10/01/07 ............................................................................ 650,000 606,580 Hollister RDA, Tax Allocation, Community Development Project, Series 1994, 5.35%, 10/01/03 ............................................................................. 525,000 543,118 5.45%, 10/01/04 ............................................................................. 550,000 568,634 5.55%, 10/01/05 ............................................................................. 585,000 604,796 Imperial COP, Wastewater System Refining Program, Refunding, Series B, 5.40%, 10/15/06 .................... 850,000 877,183 Water System Refining Program, Refunding, Series A, 5.40%, 10/15/06 ......................... 1,205,000 1,243,536 Imperial County Local Transportation Authority Sales Tax Revenue, Series 1993, 5.50%, 5/01/04 ..................................................................................... 490,000 502,598 5/01/05 ..................................................................................... 515,000 528,071 Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 .............................................. 1,000,000 1,128,630 La Palma Community Development Commission Tax Allocation, La Palma Community Development Project No. 1, Refunding, 5.50%, 6/01/02 .............................................................................. 135,000 138,050 5.60%, 6/01/03 .............................................................................. 145,000 150,709 5.70%, 6/01/04 .............................................................................. 150,000 155,804 5.80%, 6/01/05 .............................................................................. 160,000 166,186 La Quinta RDA, Tax Allocation, Redevelopment Project Areas No. 1 and 2, MBIA Insured, 5.40%, 9/01/07 .............................................................................. 560,000 603,019
51 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Lake Elsinore PFA, Tax Allocation Revenue, Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.40%, 9/01/08 ...................................................................... $1,500,000 $1,579,050 Lake Elsinore Public Financing Authority Tax Allocation Revenue, Series A, 5.00%, 9/01/09 ........ 2,470,000 2,548,274 Lake Elsinore School Financing Authority Revenue, Refunding, 6.00%, 9/01/11 ...................... 1,000,000 1,070,700 Lancaster COP, School District Project, Refunding, FSA Insured, 5.125%, 4/01/14 .................. 2,000,000 2,060,200 Lancaster RDA, Tax Allocation, Central Business District Redevelopment, Refunding, 5.375%, 8/01/01 ....................... 40,000 40,065 Central Business District Redevelopment, Refunding, 5.50%, 8/01/02 ........................ 40,000 40,961 Central Business District Redevelopment, Refunding, 5.60%, 8/01/03 ........................ 45,000 46,857 Central Business District Redevelopment, Refunding, 5.70%, 8/01/04 ........................ 45,000 46,797 Central Business District Redevelopment, Refunding, 5.70%, 8/01/05 ........................ 50,000 51,943 Fox Field Redevelopment Project Area, Refunding, 5.375%, 8/01/01 .......................... 60,000 60,097 Fox Field Redevelopment Project Area, Refunding, 5.50%, 8/01/02 ........................... 65,000 66,562 Fox Field Redevelopment Project Area, Refunding, 5.60%, 8/01/03 ........................... 65,000 67,682 Fox Field Redevelopment Project Area, Refunding, 5.70%, 8/01/04 ........................... 70,000 72,795 Fox Field Redevelopment Project Area, Refunding, 5.70%, 8/01/05 ........................... 75,000 77,914 Lemon Grove CDA, Tax Allocation, 1998 Refunding, 5.00%, 8/01/06 ............................................................................ 885,000 921,940 5.10%, 8/01/07 ............................................................................ 205,000 213,899 5.20%, 8/01/08 ............................................................................ 215,000 224,950 Los Angeles County Transport Commission COP, Series B, 6.00%, 7/01/01 ............................ 200,000 200,000 Lynwood PFAR, Water System Improvement Project, 6.15%, 6/01/08 ................................... 565,000 605,833 Madera COP, Madera Community Hospital, Refunding, 5.10%, 3/01/03 ................................. 515,000 529,374 Mammoth Lakes COP, Refunding, 5.70%, 6/01/10 ............................................................................ 850,000 878,433 5.75%, 6/01/11 ............................................................................ 250,000 258,805 Merced Irrigation District COP, Water Facilities Project, 6.125%, 11/01/03 ....................... 540,000 571,941 Metropolitan Water District Southern California GO, Waterworks, Refunding, Series B, 4.125%, 3/01/13 ................................................................. 1,000,000 942,790 Series B, 4.25%, 3/01/14 .................................................................. 1,000,000 961,830 Series B, 4.30%, 3/01/15 .................................................................. 1,000,000 959,230 Mid-Peninsula Regional Open Space District COP, Special District Association Finance Corp., Series 1993, 5.20%, 9/01/03 ............................................................... 530,000 550,204 Mojave GO, Water Agency, ID M, Morongo Basin, ETM, 6.20%, 9/01/01 ................................ 100,000 100,565 Mount Diablo Hospital District Revenue, Series A, AMBAC Insured, ETM, 5.10%, 12/01/03 ............ 100,000 104,978 Murrieta COP, Road Improvement Project, 6.00%, 4/01/07 ................................................................................... 235,000 254,735 4/01/08 ................................................................................... 245,000 265,680 New Haven USD, COP, Refunding, 5.30%, 7/01/01 .................................................... 500,000 500,000 Newark USD, COP, 5.75%, 9/01/02 .................................................................. 300,000 301,320 North City West School Facilities Financing Authority Special Tax, Refunding, Series B, FSA Insured, 5.625%, 9/01/08 .............................................................. 500,000 548,590 Ontario Redevelopment Financing Authority Local Agency Revenue, Community Facility, AD No. 1, senior lien, Series A, FSA Insured, 5.60%, 9/02/03 .............................. 870,000 916,893 Orange County CFD, No. 86-2 Special Tax, Rancho Santa Margarita, Refunding, Series A, 5.375%, 8/15/12 ................................................................. 1,500,000 1,499,280 Orange County Development Agency Tax Allocation, Santa Ana Heights Area Project, Refunding, 5.90%, 9/01/04 ................................................................. 800,000 853,296 Orange County Local Transportation Authority Sales Tax Revenue, First Senior Measure M, 6.00%, 2/15/06 ............................................................................ 500,000 550,990 Orange County MFHR, Villa Santiago Rehabilitation Project, FNMA Insured, 5.60%, 10/01/27 ........................................................................... 495,000 512,038 Orange County Recovery COP, Series A, MBIA Insured, 6.00%, 7/01/08 ............................... 1,500,000 1,688,145 Oroville Hospital Revenue, Oroville Hospital, Series A, CHFCLP Insured, 5.125%, 12/01/12 .......................................................................... 1,435,000 1,460,385
52 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Palm Desert Financing Authority Lease Revenue, Blythe County Administrative Project, 6.375%, 8/01/11 ...................................................................... $ 855,000 $ 926,384 Paramount RDA, Tax Allocation, Redevelopment Project Area No. 1, Refunding, 6.05%, 8/01/05 .............................................................................. 1,515,000 1,634,018 Paso Robles Union School District COP, 5.75%, 8/01/03 ....................................... 1,635,000 1,717,911 Pleasant Hill RDA, RMR, Pre-Refunded, 5.40%, 2/01/05 ........................................ 515,000 538,937 Pomona RDA, Tax Allocation, Mountain Meadows Redevelopment Project, Refunding, Series X, 5.35%, 12/01/16 ............................................................ 1,000,000 1,023,180 Poway RDA, Tax Allocation, Paguay Redevelopment Project, sub. notes, 4.75%, 12/15/03 ........ 1,950,000 1,960,589 Puerto Rico Commonwealth Public Improvement GO, FSA Insured, 5.25%, 7/01/16 ................. 2,500,000 2,641,200 Rialto RDA, Tax Allocation, Industrial Redevelopment, Sub Areas A and B, Series A, ETM 5.40%, 9/01/02 ....................................................................... 270,000 278,073 5.50%, 9/01/03 ....................................................................... 280,000 294,255 Richmond Joint Powers Financing Authority Revenue, Multiple Redevelopment Projects, Refunding, Series B, ETM, 5.35%, 5/15/13 ............................................. 2,000,000 2,109,600 Riverside County Asset Leasing Corp. Leasehold Revenue, Riverside County Hospital Project, Series A, 5.90%,6/01/02 ........................................................................ 200,000 203,874 6.00%, 6/01/04 ....................................................................... 200,000 209,518 Riverside County Housing Authority MFHR, Brandon Place Apartments, Series B, FNMA Insured, 5.625%, 7/01/29 ............................................................. 995,000 1,077,048 Sacramento MUD, Electric Revenue, Series E, 5.25%, 5/15/03 .................................. 1,000,000 1,035,790 San Bernardino County COP, Medical Center Financing Project, Refunding, 6.00%, 8/01/09 ...... 2,000,000 2,157,580 San Bernardino County Mortgage Revenue, Don Miguel Apartments Project, Refunding, MBIA Insured, 6.00%, 9/01/03 ......................................................... 60,000 61,850 San Clemente 1915 Act, AD No. 8, Refunding, 5.00%, 9/02/02 ....................................................................... 415,000 418,552 5.10%, 9/02/03 ....................................................................... 435,000 441,808 5.20%, 9/02/04 ....................................................................... 460,000 469,623 San Diego Mortgage Revenue, Mariners Cove, Refunding, Series B-1, 5.125%, 9/01/03 ........... 165,000 169,407 San Diego Port Facilities Revenue, National Steel and Shipbuilding Co., Refunding, 6.60%, 12/01/02 ...................................................................... 100,000 102,413 San Francisco City and County RDA, Hotel Tax Revenue, FSA Insured, 5.80%, 7/01/01 ....................................... 300,000 300,000 Hotel Tax Revenue, FSA Insured, 5.90%, 7/01/02 ....................................... 245,000 252,965 Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.125%, 7/01/02 ................. 5,000 5,034 San Francisco City and County, Refunding, Series 1, FGIC Insured, 5.00%, 6/15/12 ............ 3,650,000 3,785,488 San Gorgonio Memorial Health Care District Health Facility Revenue, Pre-Refunded, 6.375%, 6/01/08 ...................................................................... 750,000 816,848 San Joaquin County COP, General Hospital Project, ETM, 5.90%, 9/01/03 ....................... 400,000 423,676 San Jose Financing Authority Revenue, Convention Center Project, Refunding, Series C 5.75%, 9/01/03 ....................................................................... 300,000 307,320 San Juan USD, COP, Gold River Elementary School Project, 5.65%, 4/01/03 ..................... 600,000 603,708 San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area-3-A, MBIA Insured, 4.50%, 10/01/04 ................. 495,000 514,627 Senior Tax Increment Project Area-3-A, MBIA Insured, 5.30%, 10/01/11 ................. 350,000 360,752 Tax Increment Project Area 3-A, MBIA Insured, 4.40%, 10/01/03 ........................ 405,000 417,174 Tax Increment Project Area 3-A, MBIA Insured, 4.70%, 10/01/05 ........................ 595,000 615,825 Tax Increment Project Area-3-A, MBIA Insured, 5.10%, 10/01/09 ........................ 515,000 529,121 San Ramon COP, Capital Improvements Project, 5.30%, 3/01/02 ....................................................................... 90,000 91,407 5.40%, 3/01/03 ....................................................................... 95,000 98,107 5.50%, 3/01/04 ....................................................................... 100,000 105,155 5.60%, 3/01/05 ....................................................................... 105,000 110,477 Santa Barbara RDA, Tax Allocation, Central City Redevelopment Project, 6.00%, 3/01/03 ....... 985,000 1,022,775
53 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.25%, 9/02/11 .................................................................................... $1,720,000 $1,715,855 Santa Monica Parking Authority Lease Revenue, Refunding, 6.00%, 7/01/03 ........................... 100,000 105,045 Sebastopol COP, 5.70%, 6/01/05 ............................................................................. 240,000 256,757 Refunding, Series 1994, 5.50%, 6/01/03 ..................................................... 200,000 207,304 Refunding, Series 1994, 5.60%, 6/01/04 ..................................................... 215,000 226,088 Selma PFAR, Series A, MBIA Insured, 5.25%, 9/15/02 ............................................................................. 100,000 100,495 5.50%, 9/15/04 ............................................................................. 115,000 115,511 5.60%, 9/15/05 ............................................................................. 120,000 120,592 5.65%, 9/15/06 ............................................................................. 125,000 125,596 5.70%, 9/15/07 ............................................................................. 135,000 135,603 5.70%, 9/15/08 ............................................................................. 140,000 140,598 5.75%, 9/15/09 ............................................................................. 150,000 150,654 5.75%, 9/15/10 ............................................................................. 155,000 155,564 Shafter Joint Powers Financing Authority Lease Revenue, Community Correctional Facility Project, Series A, 5.50%, 1/01/06 ...................................................... 1,500,000 1,602,405 Solana Beach COP, City Hall Project, 5.80%, 10/01/02 .............................................. 50,000 51,812 South Gate PFA Water Revenue, Refunding, Series A, FGIC Insured, 5.35%, 10/01/07 ............................................................................ 995,000 1,083,923 5.45%, 10/01/08 ............................................................................ 1,040,000 1,142,128 South Gate PFAR, Tax Allocation, Redevelopment Project No. 1, Refunding, 6.10%, 9/01/03 ............................................................................. 975,000 983,112 South San Francisco Capital Improvements Financing Authority Revenue, South San Francisco Conference Center, Refunding, 5.70%, 9/01/02 ............................................................................. 195,000 200,702 5.80%, 9/01/03 ............................................................................. 205,000 214,697 5.90%, 9/01/04 ............................................................................. 215,000 229,323 Southern California Rapid Transit District Revenue, Special Benefit AD A2, 5.80%, 9/01/01 ............................................................................. 100,000 100,437 Stockton Health Facilities Revenue, Dameron Hospital Association, Refunding, Series A, 5.35%, 12/01/09 .................................................................. 385,000 388,611 Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series A, FSA Insured, 5.75%, 7/01/11 ...................................................... 1,295,000 1,424,124 Sunline Transport Agency COP, Transport Finance Corp., Series B, 5.50%, 7/01/03 ............................................................................. 450,000 469,346 5.75%, 7/01/06 ............................................................................. 445,000 471,228 Tahoe City PUD, COP, Capital Facilities Project, Series B, 6.15%, 6/01/02 ............................................................................. 835,000 857,921 6.30%, 6/01/04 ............................................................................. 545,000 580,877 Tehachapi Cummings County Water District Revenue COP, Capital Improvement Project, MBIA Insured, Pre-Refunded, 5.50%, 8/01/04 ............................................................................. 280,000 294,280 5.60%, 8/01/05 ............................................................................. 300,000 315,615 5.75%, 8/01/06 ............................................................................. 320,000 337,162 Temecula RDAR, Tax Allocation, Temecula Redevelopment Project No. 1, Series A, 5.40%, 2/01/04 ............................................................................. 600,000 612,780 Temecula Valley USD, Series E, FSA Insured, 5.65%, 9/01/07 ........................................ 370,000 404,192 Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%, 6/01/12 ............. 1,000,000 996,640 Travis USD, COP, Foxboro Elementary School Construction Project, ETM, 6.30%, 9/01/02 .............. 200,000 208,012 Trinity County PUD, COP, Electric District Facilities, Refunding, Series 1993, 5.90%, 4/01/02 ............................................................................. 360,000 366,570 6.00%, 4/01/03 ............................................................................. 380,000 394,303
54 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Ventura USD, COP, Series A, 5.90%, 4/01/04 ...................................................................... $ 305,000 $ 312,933 6.00%, 4/01/05 ...................................................................... 320,000 328,320 6.10%, 4/01/06 ...................................................................... 340,000 348,769 6.20%, 4/01/07 ...................................................................... 365,000 374,362 6.30%, 4/01/08 ...................................................................... 385,000 394,918 6.40%, 4/01/09 ...................................................................... 410,000 420,558 Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 ............................... 4,150,000 4,274,376 Refunding, Series A, 5.30%, 10/01/11 ................................................ 1,000,000 1,028,610 Virgin Islands Water and Power Authority Water System Revenue, Refunding, 5.00%, 7/01/03 ...................................................................... 2,760,000 2,817,022 4.875%, 7/01/06 ..................................................................... 2,000,000 2,027,820 5.00%, 7/01/09 ...................................................................... 2,000,000 2,005,220 Watsonville RDA, GO, Tax Allocation, Watsonville Redevelopment Project, Series 1993, 6.00%, 8/01/02 ...................................................................... 510,000 511,076 6.10%, 8/01/03 ...................................................................... 540,000 540,960 ------------ TOTAL BONDS (COST $207,836,137) ............................................................ 214,482,842 ------------ ZERO COUPON BONDS .9% San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien, Refunding, Series A, 1/15/16 (Cost $2,218,500) ............................................ 3,000,000 2,101,590 ------------ TOTAL LONG TERM INVESTMENTS (COST $210,054,637) ............................................ 216,584,432 ------------ (a) SHORT-TERM INVESTMENTS 1.5% Irvine 1915 Act Special Assessment, AD No. 93-14, Daily VRDN and Put, 3.10%, 9/02/25 .................................... 700,000 700,000 AD No. 97-13, Daily VRDN and Put, 3.10%, 9/02/23 .................................... 600,000 600,000 Metropolitan Water District Southern California Waterworks Revenue, Refunding, Series B-1, Daily VRDN and Put, 3.10%, 7/01/35 ........................................... 200,000 200,000 Orange County Sanitation Districts COP, Refunding, Series A, Daily VRDN and Put, 3.10%, 8/01/29 ........................................ 1,000,000 1,000,000 Series B, Daily VRDN and Put, 3.10%, 8/01/30 ........................................ 800,000 800,000 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $3,300,000) ............................................. 3,300,000 ------------ TOTAL INVESTMENTS (COST $213,354,637) 98.1% ................................................ 219,884,432 OTHER ASSETS, LESS LIABILITIES 1.9% ........................................................ 4,271,452 ------------ NET ASSETS 100.0% .......................................................................... $224,155,884 ============
See glossary of terms on page 61. (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. 55 FRANKLIN CALIFORNIA TAX-FREE TRUST FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
YEAR ENDED JUNE 30, ---------------------------------------------------------------- 2001 2000 1999 1998 1997 ---------------------------------------------------------------- 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 .02 .03 .03 Less distributions from net investment income ........... (.03) (.03) (.02) (.03) (.03) ---------------------------------------------------------------- Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ================================================================ Total return(a).......................................... 2.76% 2.64% 2.39% 2.85% 2.85% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) ......................... $711,789 $696,803 $706,877 $656,725 $639,791 Ratios to average net assets: Expenses .............................................. .56% .56% .59% .60% .60% Net investment income ................................. 2.72% 2.61% 2.36% 2.82% 2.83%
(a) Total return is not annualized for periods less than one year. 56 See notes to financial statements. FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001
PRINCIPAL FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS 107.7% (a) Anaheim COP, Police Facilities Refinancing Project, AMBAC Insured, Weekly VRDN and Put, 2.50%, 8/01/08 ....................................................................... $ 4,600,000 $ 4,600,000 Refunding, Weekly VRDN and Put, 2.50%, 8/01/19 ....................................... 4,100,000 4,100,000 (a) Big Bear Lake Industrial Revenue, Southwest Gas Corp. Project, Series A, Weekly VRDN and Put, 2.65%, 12/01/28 .................................................... 2,700,000 2,700,000 (a) Butte County Housing Authority MF Revenue, Pine Tree Apartment Project, Weekly VRDN and Put, 2.60%, 12/01/10 .................................................... 2,162,000 2,162,000 (a) California Health Facilities Financing Authority Revenue, Children's Hospital, MBIA Insured, Weekly VRDN and Put, 2.45%, 11/01/21 .............. 2,500,000 2,500,000 Pooled Loan Program, Series B, FGIC Insured, Weekly VRDN and Put, 2.70%, 10/01/10 ............................................................................. 3,700,000 3,700,000 Scripps Health, Series A, MBIA Insured, Weekly VRDN and Put, 2.40%, 10/01/22 ......... 5,000,000 5,000,000 Sutter Health, Series B, AMBAC Insured, Daily VRDN and Put, 3.10%, 7/01/12 ........... 1,200,000 1,200,000 (a) California PCFA, PCR, Monthly VRDN and Put, 2.75%, 9/01/13 ................................................. 4,700,000 4,700,000 Shell Oil Co. Project, Refunding, Series B, Daily VRDN and Put, 3.10%, 10/01/11 ............................................................................. 1,300,000 1,300,000 (b) California School Cash Reserve Program Authority GO, Series A, AMBAC Insured, 4.00%, 7/03/02 ....................................................................... 25,000,000 25,328,750 California School Cash Reserve Program Authority Revenue, Series A, 5.25%, 7/03/01 ... 32,500,000 32,502,508 (a) California School Facilities Financing Corp. COP, Capital Improvement Financing Projects, Refunding, Series C, Weekly VRDN and Put, 2.50%, 7/01/22 ............................. 11,560,000 11,560,000 Series A, Weekly VRDN and Put, 2.50%, 7/01/22 ........................................ 1,950,000 1,950,000 (a) California State Economic Development Financing Authority Revenue, Calco Project, Weekly VRDN and Put, 2.80%, 4/01/27 ................................... 1,800,000 1,800,000 KQED Inc. Project, Refunding, Weekly VRDN and Put, 2.50%, 4/01/20 .................... 1,455,000 1,455,000 California State GO, TECP, 2.75%, 9/07/01 ............................................... 15,000,000 15,000,000 (a) California Statewide CDA, MFHR, Ivy Hills Apartment Project, Series I, Weekly VRDN and Put, 2.65%, 2/01/33 .................................................................. 10,094,000 10,094,000 (a) California Statewide Communities Development Corp. Revenue, Industrial Development, American Kleaner Manufacturing Co., Series C, Weekly VRDN and Put, 2.65%, 12/01/19 ............................................................................. 2,495,000 2,495,000 Karcher Property Project, Series C, Weekly VRDN and Put, 2.65%, 12/01/19 ............. 1,560,000 1,560,000 (a) Carlsbad USD, COP, Variable School Facility Bridge Funding, Weekly VRDN and Put, 2.55%, 9/01/14 .................................................. 4,500,000 4,500,000 Weekly VRDN and Put, 2.55%, 9/01/24 .................................................. 5,500,000 5,500,000 Weekly VRDN and Put, FSA Insured, 2.55%, 9/01/14 ..................................... 3,100,000 3,100,000 (a) Chico MFMR, Webb Homes Project, Weekly VRDN and Put, 3.50%, 1/01/10 ..................... 1,945,000 1,945,000 (a) Dublin Housing Authority MFHR, Park Sierra Housing, Series A, Weekly VRDN and Put, 2.65%, 6/01/28 .............................................................. 1,100,000 1,100,000 East Bay MUD Water System Revenue, AMBAC Insured, Pre-Refunded on 12/01/01, 6.375%, 6/01/21 ..................................................................... 1,150,000 1,190,993 East Bay MUD, TECP, 2.95%, 8/21/01 .................................................. 4,000,000 4,000,000 (a) Elsinore Valley Municipal Water District COP, Series A, FGIC Insured, Weekly VRDN and Put, 2.40%, 7/01/29 ........................................................ 10,000,000 10,000,000 (a) Irvine 1915 Act Special Assessment, AD No. 87-8, Daily VRDN and Put, 3.10%, 9/02/24 ..................................... 1,300,000 1,300,000 AD No. 93-14, Daily VRDN and Put, 3.10%, 9/02/25 .................................... 6,500,000 6,500,000 AD No. 94-13, Daily VRDN and Put, 3.10%, 9/02/22 .................................... 5,600,000 5,600,000 AD No. 97-13, Daily VRDN and Put, 3.10%, 9/02/23 .................................... 20,400,000 20,400,000 AD No. 97-16, Daily VRDN and Put, 3.10%, 9/02/22 .................................... 4,306,000 4,306,000 (a) Irvine Ranch Public Facilities and Infrastructure Authority Lease Revenue, Capital Improvement Project, Weekly VRDN and Put, 2.55%, 11/01/10 ........................... 4,500,000 4,500,000 (a) Irvine Ranch Water District Revenue, Consolidated Bonds, Refunding, Series B, Daily VRDN and Put, 3.20%, 10/01/09 ........ 2,300,000 2,300,000 Consolidated Refunding Series A, Daily VRDN and Put, 3.00%, 5/01/09 ................. 3,200,000 3,200,000 Construction Bonds, Daily VRDN and Put, 3.10%, 10/01/05 ............................. 2,700,000 2,700,000
57 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) (a) Irvine Ranch Water District Revenue,(cont.) ID #182, Series A, Daily VRDN and Put, 3.10%, 11/15/13 ............................ $ 1,300,000 $ 1,300,000 Joint Powers Agency, Consolidated Bonds, DATES, Series C, Daily VRDN and Put, 3.10%, 10/01/10 .............................................................. 1,900,000 1,900,000 Joint Powers Agency, Consolidated Bonds, Refunding, Series B, Daily VRDN and Put, 3.20%, 10/01/04 .......................................................... 1,100,000 1,100,000 Nos. 140, 105, and 250, Daily VRDN and Put, 3.10%, 4/01/33 ........................ 4,600,000 4,600,000 (a) Kern County COP, Kern Public Facilities Project, Series A, Weekly VRDN and Put, 2.40%, 8/01/06 ............................................................... 1,500,000 1,500,000 (a) Livermore Housing Authority MFR, Richards Manor, Refunding, Series A, Weekly VRDN and Put, 2.75%, 12/01/22 ..................................................... 5,670,000 5,670,000 (a) Los Angeles County Housing Authority MFHR, Sand Canyon Ranch Project, Series F, Weekly VRDN and Put, 2.70%, 11/01/06 ..................................................... 4,500,000 4,500,000 (a) Los Angeles County MTA, Sales Tax Revenue, Proposition C, Refunding, Second Series A, MBIA Insured, Weekly VRDN and Put, 2.45%, 7/01/20 ....................... 6,000,000 6,000,000 (a) Los Angeles County Pension Obligation Revenue, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 2.50%, 6/30/07 ...................... 2,400,000 2,400,000 Series B, Weekly VRDN and Put, 2.50%, 6/30/07 ..................................... 5,900,000 5,900,000 Los Angeles County Schools GO, Pooled Financing Program Participation Certificates, Series A, FSA Insured, 5.00%, 7/02/01 ............................... 7,000,000 7,000,268 (b) Los Angeles County Schools Pooled Financing Program COP, Pooled Transportation, Series A, 3.50%, 7/01/02 .......................................................... 5,000,000 5,039,800 (b) Los Angeles County TRAN, 3.75%, 6/28/02 .............................................. 25,000,000 25,274,500 (a) Los Angeles County Transportation Commission Sales Tax Revenue, Refunding, Weekly VRDN and Put, 2.50%, 7/01/12 ............................................... 12,000,000 12,000,000 (a) Los Angeles CRDA, COP, Baldwin Hill Park, Weekly VRDN and Put, 2.40%, 12/01/14 ....... 1,000,000 1,000,000 Los Angeles Department Water and Power Waterworks Revenue TECP, 2.60%, 9/07/01 ....... 10,100,000 10,100,000 (a) Los Angeles MFR, Casden Project, Series K, Weekly VRDN and Put, 2.40%, 7/01/10 ....... 3,200,000 3,200,000 Los Angeles Water and Power Electric Plant Revenue TECP, 2.50%, 10/17/01 ............. 5,000,000 5,000,000 (a) Metropolitan Water District of Southern California Waterworks Revenue, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 2.45%, 6/01/23 ........... 7,575,000 7,575,000 Refunding, Series B-1, Daily VRDN and Put, 3.10%, 7/01/35 ......................... 2,500,000 2,500,000 Refunding, Series B-3, Daily VRDN and Put, 3.10%, 7/01/35 ......................... 15,400,000 15,400,000 Series B-4, Weekly VRDN and Put, 2.50%, 7/01/35 ................................... 5,000,000 5,000,000 Series C, Weekly VRDN and Put, 2.70%, 7/01/28 ..................................... 13,200,000 13,200,000 (a) Monterey County IDA, IDR, VPS Company Inc. Project, Series A, Weekly VRDN and Put, 2.60%, 9/01/20 ............................................................... 4,180,000 4,180,000 (a) M-S-R Public Power Agency San Juan Project Revenue, sub. lien, Refunding, Series D, Weekly VRDN and Put, MBIA Insured, 2.55%, 7/01/18 ....................... 7,600,000 7,600,000 (a) Newport Beach Revenue, Hoag Memorial Presbyterian Hospital, Daily VRDN and Put, 3.00%, 10/01/22 .............................................................. 8,200,000 8,200,000 (a) Oakland COP, Capital Equipment Project, Weekly VRDN and Put, 2.55%, 12/01/15 ......... 7,200,000 7,200,000 (a) Orange County Sanitation Districts COP, Nos. 1-3, 5-7 and 11, Refunding, AMBAC Insured, Daily VRDN and Put, 3.10%, 8/01/16 ........................................................................... 9,100,000 9,100,000 Refunding, Series A, Daily VRDN and Put, 3.10%, 8/01/29 ........................... 3,100,000 3,100,000 Refunding, Series B, Daily VRDN and Put, 3.10%, 8/01/30 ........................... 7,900,000 7,900,000 (a) Pajaro Valley USD, COP, School Facility Bridge Funding Program, Weekly VRDN and Put, 2.55%, 9/01/31 ........................................................... 5,400,000 5,400,000 (a) Palmdale School District COP, Building Project, FSA Insured, Weekly VRDN and Put, 2.55%, 9/01/13 ............................................................... 4,200,000 4,200,000 (a) Pico Rivera RDA, COP, Weekly VRDN and Put, 2.70%, 12/01/10 ........................... 1,500,000 1,500,000 (a) Pleasanton MFMR, Valley Plaza, Series A, Weekly VRDN and Put, 2.40%, 7/15/18 ......... 4,460,000 4,460,000 Puerto Rico Commonwealth Government Development Bank TECP, 2.55%, 8/08/01 .................................................................... 6,840,000 6,840,000 2.60%, 7/23/01 .................................................................... 10,000,000 10,000,000 2.95%, 9/12/01 .................................................................... 8,000,000 8,000,000
58 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue, Series T, Pre-Refunded on 7/01/02, 6.625%, 7/01/18 ................................ $ 2,065,000 $ 2,176,473 Series Y, MBIA Insured, 6.00%, 7/01/02 ............................................ 3,410,000 3,523,273 Puerto Rico Electric Power Authority Power Revenue, Series P, Pre-Refunded on 7/01/01, 7.00%, 7/01/21 ........................................................... 5,000,000 5,100,555 (a) Redwood City COP, City Hall Project, Weekly VRDN and Put, 2.60%, 7/01/21 ............. 2,400,000 2,400,000 (a) Riverside County COP, Riverside County Public Facility, ACES, Series C, Weekly VRDN and Put, 2.60%, 12/01/15 ........................................................ 3,900,000 3,900,000 (a) Riverside County CFD, Special Tax, No 89-5, Refunding, AMBAC Insured, Weekly VRDN and Put, 2.45%, 9/01/28 ......................................................... 15,900,000 15,900,000 (a) Riverside County Housing Authority MFMR, Emeritus Park, Series B, FNMA Insured, Weekly VRDN and Put, 2.40%, 7/15/18 ....................................................................... 3,150,000 3,150,000 Riverside County Teeter Plan TECP, 2.40%, 7/26/01 .................................................................... 5,000,000 5,000,000 2.45%, 7/12/01 .................................................................... 12,375,000 12,375,000 (a) Sacramento County COP, Administration Center and Courthouse Project, Weekly VRDN and Put, 2.70%, 6/01/20 ......................................................... 13,005,000 13,005,000 (a) Sacramento County Sanitation District Financing Authority Revenue, Series C, Weekly VRDN and Put, 2.40%, 12/01/30 ...................................................................... 25,000,000 25,000,000 (a) Sacramento MFHR, Smoketree, Series A, Weekly VRDN and Put, 2.40%, 4/15/10 ............ 6,450,000 6,450,000 (a) San Bernardino County MFHR, Refunding, Quality A, FNMA Insured, Weekly VRDN and Put, 2.40%, 7/01/14 .............................................................. 4,250,000 4,250,000 San Bernardino County Transportation Authority Sales Tax Revenue, Series A, AMBAC Insured, 5.00%, 3/01/02 .............................................................. 6,930,000 7,029,261 (a) San Diego County MFHR, Country Hills, Series A, Weekly VRDN and Put, 2.40%, 8/15/13 .............................................................................. 3,175,000 3,175,000 (b) San Diego County & School District Partnership TRAN, 3.50%, 6/28/02 .................. 20,000,000 20,163,200 San Diego County Water Authority TECP, 2.65%, 10/10/01 ............................... 10,500,000 10,500,000 (a) San Diego Housing Authority MFHR, La Cima Apartments, Series K, Weekly VRDN and Put, 2.40%, 12/01/22 ............................................................. 5,000,000 5,000,000 (a) San Diego MFHR, University Town Center Apartments, Refunding, Weekly VRDN and Put, 2.65%, 10/01/15 ................................................................. 4,900,000 4,900,000 (a) San Dimas RDA, Commercial Development Revenue, San Dimas Commercial Center, Monthly VRDN and Put, 2.80%, 12/01/13 ................................................ 900,000 900,000 (a) San Francisco City and County RDA, MFR, Refunding, Fillmore Center, Series B-2, Weekly VRDN and Put, 2.50%, 12/01/17 ...... 1,000,000 1,000,000 3rd and Mission, Series C, Weekly VRDN and Put, 2.45%, 7/01/34 .................... 20,800,000 20,800,000 San Gabriel Valley Council of Governments TECP, 2.55%, 8/10/01 ....................... 7,500,000 7,500,000 San Joaquin County Authority TECP, 2.85%, 7/17/01 .................................... 12,600,000 12,600,000 San Jose Airport Revenue TECP, 2.60%, 10/12/01 ....................................... 6,497,000 6,497,000 (a) San Jose MFMR, Somerset Park Apartment Project, Series A, Weekly VRDN and Put, 2.75%, 11/01/17 ...................................................................... 1,000,000 1,000,000 (a) San Jose-Santa Clara Water Financing Authority Sewer Revenue, Series B, FGIC Insured, Weekly VRDN and Put, 2.50%, 11/15/11 ........................................ 1,200,000 1,200,000 (a) San Mateo County MFHR, Pacific Oaks Apartment Project, Series A, Weekly VRDN and Put, 2.70%, 7/01/17 .............................................................. 2,950,000 2,950,000 (a) Santa Ana Housing Authority MFHR, Vintage Apartments, Refunding, Series A, Weekly VRDN and Put, 2.60%, 12/01/22 ................................................. 4,650,000 4,650,000 (a) Santa Clara County Financing Authority Lease Revenue, Valley Medical Center Facilities Replacement Project, Series B, Weekly VRDN and Put, 2.60%, 11/15/25 ....... 5,125,000 5,125,000 (a) Santa Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding, Series A, Weekly VRDN and Put, 2.50%, 12/15/25 ............................ 5,000,000 5,000,000 Sonoma County TRAN, 4.50%, 11/01/01 .................................................. 10,000,000 10,027,185 (a) South San Francisco MFHR, Magnolia Plaza Apartments, Series A, Weekly VRDN and Put, 2.70%, 5/01/17 .................................................................. 500,000 500,000 Southern California Public Power Authority Power Project Revenue, Palo Verde Project, (a) Refunding, Series B, AMBAC Insured, Weekly VRDN and Put, 2.50%, 7/01/09 ......... 2,000,000 2,000,000 Series C, AMBAC Insured, Pre-Refunded on 7/01/02, 5.75%, 7/01/17 ................ 1,200,000 1,236,313
59 FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.)
PRINCIPAL FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) (a) Southern California Public Power Authority Transmission Project Revenue, Southern Transmission, Refunding, AMBAC Insured, Weekly VRDN and Put, 2.50%, 7/01/19 ............................. $ 26,900,000 $ 26,900,000 Series B, FSA Insured, Weekly VRDN and Put, 2.40%, 7/01/23 ..................... 6,600,000 6,600,000 (a) Suisun City Housing Authority MFR, Village Green, Series A, Weekly VRDN and Put, 2.40%, 6/15/18 ................................................................. 8,200,000 8,200,000 (a) Tustin 1915 Act, Reassessment District No. 95-2, Series A, Daily VRDN and Put, 3.10%, 9/02/13 ................................................................. 1,500,000 1,500,000 University of California Revenue, Multiple Purpose Projects, Series F, FGIC Insured, 7.00%, 9/01/01 ................................................................. 1,000,000 1,007,562 (a) Upland CRDA, MFHR, Weekly VRDN and Put, 2.50%, 2/15/30 ............................. 1,000,000 1,000,000 (a) Vallecitos Water District Revenue COP, Twin Oaks Reservoir Project, Weekly VRDN and Put, 2.40%, 7/01/30 ........................................................ 2,600,000 2,600,000 (a) Vallejo City USD, COP, Capital Improvement Financing Projects, Series E, Weekly VRDN and Put, 2.50%, 7/01/25 ....................................................... 2,500,000 2,500,000 (a) Watereuse Finance Authority Revenue, Weekly VRDN and Put, FSA Insured, 2.70%, 5/01/28 ............................................................................ 19,500,000 19,500,000 (a) West Basin Municipal Water District Revenue COP, Phase III Recyled Water Project, Series A, Weekly VRDN and Put, 2.50%, 8/01/29 . 4,300,000 4,300,000 Recycled Water Project, Series C, Weekly VRDN and Put, 2.50%, 8/01/27 .......... 1,900,000 1,900,000 (a) Western Riverside County Regional Wastewater Authority Revenue, Regional Wastewater Treatment, Daily VRDN and Put, 3.10%, 4/01/28 ...................................... 1,700,000 1,700,000 ------------- TOTAL INVESTMENTS (COST $766,379,641) 107.7% ....................................... 766,379,641 OTHER ASSETS, LESS LIABILITIES (7.7)% .............................................. (54,590,904) ------------- NET ASSETS 100.0% .................................................................. $ 711,788,737 =============
See glossary of terms on page 61. (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. 60 See notes to financial statements. FRANKLIN CALIFORNIA TAX-FREE TRUST STATEMENT OF INVESTMENTS, JUNE 30, 2001 (CONT.) GLOSSARY OF TERMS ------------------------------------------------------------------------------- 1915 ACT - Improvement Bond Act of 1915 ABAG - The Association of Bay Area Governments ACES - Adjustable Convertible Exempt Securities AD - Assessment District AMBAC - American Municipal Bond Assurance Corp. BART - Bay Area Rapid Transit CDA - Community Development Authority/Agency CFD - Community Facilities District CHFCLP - California Health Facilities Construction Loan Program CIFP - Capital Improvement Financing Program COP - Certificate of Participation CRDA - Community Redevelopment Authority/Agency DATES - Demand Adjustable Tax-Exempt Securities ETM - Escrow to Maturity FGIC - Financial Guaranty Insurance Co. FNMA - Federal National Mortgage Association FSA - Financial Security Assistance GNMA - Government National Mortgage Association GO - General Obligation HFAR - Housing Finance Authority/Agency Revenue HFR - Housing Finance Revenue ID - Improvement District IDA - Industrial Development Authority/Agency IDAR - Industrial Development Authority Revenue IDR - Industrial Development Revenue MBIA - Municipal Bond Investors Assurance Corp. MFHR - Multi-Family Housing Revenue MFMR - Multi-Family Mortgage Revenue MFR - Multi-Family Revenue MTA - Metropolitan Transportation Authority MUD - Municipal Utility District PCFA - Pollution Control Financing Authority PCR - Pollution Control Revenue PFA - Public Financing Authority PFAR - Public Financing Authority Revenue PUD - Public Utility District RDA - Redevelopment Authority/Agency RDAR - Redevelopment Agency Revenue RHF - Retirement Housing Foundation RMR - Residential Mortgage Revenue SFM - Single Family Mortgage SFMR - Single Family Mortgage Revenue TECP - Tax-Exempt Commercial Paper TRAN - Tax and Revenue Anticipation Notes UHSD - Unified High School District USD - Unified School District VRDN - Variable Rate Demand Notes 61 FRANKLIN CALIFORNIA TAX-FREE TRUST FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2001
FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INTERMEDIATE-TERM CALIFORNIA INSURED TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND MONEY FUND ------------------------------------------------------- Assets: Investments in securities: Cost .................................................................. $1,670,934,364 $213,354,637 $766,379,641 ----------------------------------------------------- Value ................................................................. 1,753,563,165 219,884,432 766,379,641 Cash ................................................................... 89,707 950,275 -- Receivables: Investment securities sold ............................................ 6,317,392 -- 16,688,893 Capital shares sold ................................................... 3,636,497 806,441 2,373,401 Interest .............................................................. 28,753,502 3,120,507 5,141,483 ----------------------------------------------------- Total assets ...................................................... 1,792,360,263 224,761,655 790,583,418 ----------------------------------------------------- Liabilities: Payables: Investment securities purchased ....................................... 18,648,919 -- 75,806,250 Capital shares redeemed ............................................... 2,424,935 119,262 2,038,093 Affiliates ............................................................ 1,122,494 124,982 353,502 Shareholders .......................................................... 1,549,393 71,783 296,221 Distributions to shareholders .......................................... 2,242,795 263,680 38,684 Funds advanced by custodian ............................................ -- -- 176,220 Other liabilities ...................................................... 61,754 26,064 85,711 ----------------------------------------------------- Total liabilities ................................................. 26,050,290 605,771 78,794,681 ----------------------------------------------------- Net assets, at value ............................................. $1,766,309,973 $224,155,884 $711,788,737 ----------------------------------------------------- Net assets consist of: Undistributed net investment income ................................... (882,268) 201,137 -- Net unrealized appreciation ........................................... 82,628,801 6,529,795 -- Accumulated net realized loss ......................................... (21,650,431) (699,209) -- Capital shares ........................................................ 1,706,213,871 218,124,161 711,788,737 ----------------------------------------------------- Net assets, at value .............................................. $1,766,309,973 $224,155,884 $711,788,737 =====================================================
62 See notes to financial statements. FRANKLIN CALIFORNIA TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONT.) JUNE 30, 2001
FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INTERMEDIATE-TERM CALIFORNIA INSURED TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND MONEY FUND -------------------------------------------------------- CLASS A: Net assets, at value ................................................ $1,665,580,500 $ 224,155,884 $ 711,788,737 -------------------------------------------------------- Shares outstanding .................................................. 136,868,836 19,918,801 711,788,737 -------------------------------------------------------- Net asset value per share* .......................................... $ 12.17 $ 11.25 $ 1.00 -------------------------------------------------------- Maximum offering price per share (net asset value per share / 95.75%, 97.75%, and 100%, respectively) .................................... $ 12.71 $ 11.51 $ 1.00 -------------------------------------------------------- CLASS B: Net assets, at value ................................................ $ 20,926,106 --------------- Shares outstanding .................................................. 1,714,363 --------------- Net asset value and maximum offering price per share* ............... $ 12.21 --------------- CLASS C: Net assets, at value ................................................ $ 79,803,367 --------------- Shares outstanding .................................................. 6,510,712 --------------- Net asset value per share* .......................................... $ 12.26 --------------- Maximum offering price per share (net asset value per share / 99.00%) $ 12.38 ---------------
* Redemption price is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. 63 FRANKLIN CALIFORNIA TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2001
FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INTERMEDIATE-TERM CALIFORNIA INSURED TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND MONEY FUND ----------------------------------------------------------- Investment income: Interest .......................................... $ 95,325,222 $ 10,800,129 $ 23,311,785 ----------------------------------------------------------- Expenses: Management fees (Note 3) .......................... 7,903,940 1,179,381 3,439,343 Distribution fees: (Note 3) Class A .......................................... 1,545,621 209,007 -- Class B .......................................... 52,181 -- -- Class C .......................................... 464,176 -- -- Transfer agent fees (Note 3) ...................... 552,960 68,677 418,848 Custodian fees .................................... 16,661 2,072 6,967 Reports to shareholders ........................... 46,593 4,733 32,747 Registration and filing fees ...................... 13,438 5,773 7,527 Professional fees ................................. 35,829 15,176 23,327 Trustees' fees and expenses ....................... 44,655 5,498 18,707 Other ............................................. 58,983 27,289 22,744 ----------------------------------------------------------- Total expenses ............................... 10,735,037 1,517,606 3,970,210 Expenses waived/paid by affiliate (Note 3 ) .. -- (260,769) -- ----------------------------------------------------------- Net expenses ................................ 10,735,037 1,256,837 3,970,210 ----------------------------------------------------------- Net investment income ...................... 84,590,185 9,543,292 19,341,575 ----------------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments ......... 458,033 (185,907) 3,835 Net unrealized appreciation on investments ........ 55,246,238 6,253,810 -- ----------------------------------------------------------- Net realized and unrealized gain ................... 55,704,271 6,067,903 3,835 ----------------------------------------------------------- Net increase in net assets resulting from operations $140,294,456 $ 15,611,195 $ 19,345,410 -----------------------------------------------------------
64 See notes to financial statements. FRANKLIN CALIFORNIA TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
FRANKLIN CALIFORNIA INSURED FRANKLIN CALIFORNIA INTERMEDIATE- TAX-FREE INCOME FUND TERM TAX-FREE INCOME FUND --------------------------------------------------------------------------------- 2001 2000 2001 2000 --------------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .................... $ 84,590,185 $ 89,530,131 $ 9,543,292 $ 8,995,796 Net realized gain (loss) from investments 458,033 (21,988,141) (185,907) (410,662) Net unrealized appreciation (depreciation) on investments ........................ 55,246,238 (35,982,421) 6,253,810 (1,387,348) --------------------------------------------------------------------------------- Net increase in net assets resulting from operations .................. 140,294,456 31,559,569 15,611,195 7,197,786 Distributions to shareholders from: Net investment income: Class A ................................. (80,363,133) (85,810,255) (9,621,998) (8,995,735) Class B ................................. (341,660) (11,715) -- -- Class C ................................. (3,143,725) (3,344,900) -- -- Net realized gains: Class A ................................. -- (230,555) -- -- Class C ................................. -- (10,029) -- -- --------------------------------------------------------------------------------- Total distributions to shareholders ....... (83,848,518) (89,407,454) (9,621,998) (8,995,735) Capital share transactions: (Note 2) Class A ................................. 52,618,488 (160,998,579) 31,287,119 (3,869,381) Class B ................................. 19,010,866 1,855,986 -- -- Class C ................................. 10,098,804 (10,422,063) -- -- --------------------------------------------------------------------------------- Total capital share transactions .......... 81,728,158 (169,564,656) 31,287,119 (3,869,381) Net increase (decrease) in net assets 138,174,096 (227,412,541) 37,276,316 (5,667,330) Net assets: Beginning of year ......................... 1,628,135,877 1,855,548,418 186,879,568 192,546,898 --------------------------------------------------------------------------------- End of year ............................... $ 1,766,309,973 $ 1,628,135,877 $ 224,155,884 $ 186,879,568 --------------------------------------------------------------------------------- Undistributed net investment income included in net assets: End of year ............................... $ (882,268) $ (1,623,935) $ 201,137 $ 279,843 ---------------------------------------------------------------------------------
See notes to financial statements. 65 FRANKLIN CALIFORNIA TAX-FREE TRUST FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONT.) FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND ----------------------------------- 2001 2000 ----------------------------------- Increase (decrease) in net assets: Operations: Net investment income ................................................................. $ 19,341,575 $ 19,335,474 Net realized gain (loss) from investments ............................................. 3,835 (25,675) ----------------------------------- Net increase in net assets resulting from operations .............................. 19,345,410 19,309,799 Distributions to shareholders from net investment income ............................... (19,345,410)* (19,309,799)* Capital share transactions (Note 2) .................................................... 14,985,438 (10,073,959) ----------------------------------- Net increase (decrease) in net assets ............................................. 14,985,438 (10,073,959) Net assets (there is no undistributed net investment income at beginning or end of year): Beginning of year ...................................................................... 696,803,299 706,877,258 ----------------------------------- End of year ............................................................................ $ 711,788,737 $ 696,803,299 ===================================
* Distributions were increased by net realized gain from security transactions of $3,835 in 2001 and decreased by net realized loss of $25,675 in 2000. 66 See notes to financial statements. FRANKLIN CALIFORNIA TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Franklin California Tax-Free Trust (the Trust) is registered under the Investment Company Act of 1940 as an open-end investment company, consisting of three series (the Funds). All Funds are diversified except the Franklin California Intermediate-Term Tax-Free Income Fund (Intermediate-Term Fund). The Funds' investment objectives are to provide a high level of current income exempt from federal and California personal income taxes, while seeking preservation of capital. The Franklin California 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 Trust 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 substantially 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. Bond discount and premium are amortized on an income tax basis. For the Franklin California Insured Tax-Free Income Fund (Insured Fund) and the Intermediate-Term Fund, dividends from net investment income are normally declared daily and distributed monthly to shareholders. Other distributions are recorded on the ex-dividend date. For the Money Fund, dividends from net investment income and capital gains or losses are normally declared daily. Such distributions are reinvested in additional shares of the Fund. Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets. Other expenses are charged to each Fund on a specific identification basis. Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class for the Insured Fund. 67 FRANKLIN CALIFORNIA TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS(CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.) d. INSURANCE The scheduled payments of interest and principal for each insured municipal security in the Insured Fund are insured by either a new issue insurance policy, a portfolio insurance policy, or a secondary insurance policy. Some municipal securities in the Insured Fund are secured by collateral guaranteed by an agency of the U.S. government. Depending on the type of coverage, premiums for insurance are either added to the cost basis of the security, included as an expense of the fund, or paid by a third party. e. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense during the reporting period. Actual results could differ from those estimates. f. AUDIT GUIDE In November 2000, a revised AICPA Audit and Accounting Guide, Audits of Investment Companies, was issued, and is effective for fiscal years beginning after December 15, 2000. The revised Guide will require the Funds to amortize all premium and discount on fixed-income securities. Such amortization will be included in net investment income but will not impact the net assets or the distributions of the Funds. As of June 30, 2001, the Funds estimate that the current cumulative adjustment required upon adoption of premium and discount amortization will increase the recorded cost of their investments as listed below:
ESTIMATED FUND COST INCREASE --------------------------------------------------------------------- Insured Fund $467,315 Intermediate-Term Fund $ 41,998
2. SHARES OF BENEFICIAL INTEREST The classes of shares offered within each of the funds are indicated below. Each class of shares differs by its initial sales load, distribution fees, voting rights on matters affecting a single class and its exchange privilege.
Class A Class A, Class B & Class C -------------------------------------------------------------------- Intermediate-Term Fund Insured Fund Money Fund
68 FRANKLIN CALIFORNIA TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS(CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (cont.) At June 30, 2001, there were an unlimited number of shares authorized (no par value). Transactions in the funds' shares were as follows:
INSURED FUND INTERMEDIATE-TERM FUND MONEY FUND ------------------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT AMOUNT ------------------------------------------------------------------------------ CLASS A SHARES: Year ended June 30, 2001 Shares sold .................................. 25,618,147 $ 310,896,160 6,399,761 $ 71,662,314 $ 940,289,497 Shares issued in reinvestment of distributions 2,853,726 34,629,219 471,351 5,277,753 19,359,771 Shares redeemed .............................. (24,180,095) (292,906,891) (4,069,402) (45,652,948) (944,663,830) ------------------------------------------------------------------------------ Net increase ................................. 4,291,778 $ 52,618,488 2,801,710 $ 31,287,119 $ 14,985,438 ------------------------------------------------------------------------------ Year ended June 30, ............................ 2000 Shares sold .................................. 23,256,442 $ 270,668,689 5,271,846 $ 57,176,503 $ 1,094,130,676 Shares issued in reinvestment of distributions 3,254,614 37,976,179 475,155 5,154,865 19,301,458 Shares redeemed .............................. (40,404,420) (469,643,447) (6,105,607) (66,200,749) (1,123,506,093) ------------------------------------------------------------------------------ Net decrease ................................. (13,893,364) $(160,998,579) (358,606) $ (3,869,381) $ (10,073,959) ------------------------------------------------------------------------------ CLASS B SHARES: Year ended June 30, 2001 Shares sold .................................. 1,597,953 $ 19,542,636 Shares issued in reinvestment of distributions 17,185 210,200 Shares redeemed .............................. (60,736) (741,970) ----------------------------- Net increase ................................. 1,554,402 $ 19,010,866 ----------------------------- Year ended June 30, 2000(a) Shares sold .................................. 159,424 $ 1,849,738 Shares issued in reinvestment of distributions 537 6,248 ----------------------------- Net increase ................................. 159,961 $ 1,855,986 ----------------------------- CLASS C SHARES: Year ended June 30, 2001 Shares sold .................................. 1,796,967 $ 22,064,852 Shares issued in reinvestment of distributions 154,741 1,891,288 Shares redeemed .............................. (1,133,543) (13,857,336) ----------------------------- Net increase ................................. 818,165 $ 10,098,804 ----------------------------- Year ended June 30, 2000 Shares sold .................................. 1,270,677 $ 14,960,202 Shares issued in reinvestment of distributions 185,479 2,180,509 Shares redeemed .............................. (2,348,447) (27,562,774) ----------------------------- Net decrease ................................. (892,291) $ (10,422,063) -----------------------------
(a) For the period February 1, 2000 (effective date) to June 30, 2000. 69 FRANKLIN CALIFORNIA TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS(CONTINUED) 3. TRANSACTIONS WITH AFFILIATES Certain officers and trustees of the Funds are also officers and/or trustees of the following entities:
ENTITY AFFILIATION ---------------------------------------------------------------------------------------------------------- Franklin Advisers, Inc. (Advisers) Investment manager Franklin Templeton Services, LLC (FT Services) Administration manager Franklin/Templeton Investor Services, LLC (Investor Services) Transfer agent Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
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 Intermediate-Term Fund, as noted in the Statement 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%, .65% and .65% per year of the average daily net assets of Class A, Class B, and Class C, 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:
INSURED INTERMEDIATE- MONEY FUND TERM FUND FUND -------------------------------------------------- Net commissions paid $956,646 $ 105,404 -- Contingent deferred sales charges $ 34,394 $ 33,670 $37,216
The Funds paid transfer agent fees of $1,040,485, of which $797,128 was paid to Investor Services. 70 FRANKLIN CALIFORNIA TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS(CONTINUED) 4. INCOME TAXES At June 30, 2001, the Funds had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows:
INSURED INTERMEDIATE- MONEY FUND TERM FUND FUND ---------------------------------------------- Capital loss carryovers Expiring in: 2003 $ -- $102,640 $14,563 2005 -- -- 1,444 2006 -- -- 9,957 2007 -- -- 4,593 2008 13,879,097 90,667 9,293 2009 7,452,092 321,166 21,840 ---------------------------------------------- $21,331,189 $514,473 $61,690 ==============================================
At June 30, 2001, the Intermediate-Term Fund had deferred capital losses occurring subsequent to October 31, 2000 of $184,736. For tax purposes, such losses will be reflected in the year ending June 30, 2002. Distributions of income to shareholders may not equal net investment income due to differing treatments of dividend distributions for book and tax purposes. Net realized capital gains differ for financial statements and tax purposes primarily due to differing treatment of wash sales. At June 30, 2001, the net unrealized appreciation based on the cost of investments for income tax purposes was as follows:
INSURED INTERMEDIATE- FUND TERM FUND -------------------------------------- Investments at cost ....... $ 1,671,253,606 $ 213,354,637 -------------------------------------- Unrealized appreciation ... $ 88,809,939 $ 6,897,004 Unrealized depreciation ... (6,500,380) (367,209) -------------------------------------- Net unrealized appreciation $ 82,309,559 $ 6,529,795 ======================================
5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the year ended June 30, 2001 were as follows:
INSURED INTERMEDIATE- FUND TERM FUND --------------------------------- Purchases $253,633,485 $44,582,633 Sales $167,058,363 $16,111,637
71 FRANKLIN CALIFORNIA TAX-FREE TRUST Independent Auditors' Report TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN CALIFORNIA 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 of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the funds included in this report constituting the Franklin California Tax-Free Trust (hereafter referred to as the "Funds") at June 30, 2001, 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 accounting generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America 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 June 30, 2001 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP San Francisco, California August 3, 2001 72 FRANKLIN CALIFORNIA TAX-FREE TRUST Tax Designation Under Section 852(b)(5)(A) of the Internal Revenue Code, the Trust hereby designates 100% of the distributions paid from net investment income as exempt-interest dividends for the fiscal year ended June 30, 2001. 73 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. Franklin California Tax-Free Trust Annual Report June 30, 2001 APPENDIX DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304 (a) OF REGULATION S-T) GRAPHIC MATERIAL (1) The following line graph tracks the monthly yields of the Bond Buyer 40 from 1/31/85 to 6/30/01.
Date BondBuyer 40 Yields ------------------------- Jan 85 10.35% Feb 85 10.20% Mar 85 10.01% Apr 85 9.50% May 85 9.43% Jun 85 9.40% Jul 85 9.45% Aug 85 9.80% Sep 85 9.49% Oct 85 9.24% Nov 85 8.92% Dec 85 8.48% Jan 86 8.04% Feb 86 7.82% Mar 86 7.92% Apr 86 8.14% May 86 7.90% Jun 86 7.96% Jul 86 7.88% Aug 86 7.41% Sep 86 7.56% Oct 86 7.36% Nov 86 7.19% Dec 86 7.18% Jan 87 7.11% Feb 87 7.05% Mar 87 7.18% Apr 87 8.10% May 87 8.29% Jun 87 8.19% Jul 87 8.17% Aug 87 8.16% Sep 87 8.87% Oct 87 8.72% Nov 87 8.62% Dec 87 8.40% Jan 88 7.97% Feb 88 7.85% Mar 88 8.17% Apr 88 8.17% May 88 8.20%
Jun 88 8.04% Jul 88 8.05% Aug 88 8.11% Sep 88 7.89% Oct 88 7.73% Nov 88 7.90% Dec 88 7.74% Jan 89 7.66% Feb 89 7.73% Mar 89 7.79% Apr 89 7.58% May 89 7.46% Jun 89 7.29% Jul 89 7.16% Aug 89 7.36% Sep 89 7.47% Oct 89 7.38% Nov 89 7.24% Dec 89 7.25% Jan 90 7.45% Feb 90 7.40% Mar 90 7.52% Apr 90 7.74% May 90 7.53% Jun 90 7.50% Jul 90 7.35% Aug 90 7.64% Sep 90 7.79% Oct 90 7.71% Nov 90 7.47% Dec 90 7.47% Jan 91 7.39% Feb 91 7.36% Mar 91 7.34% Apr 91 7.26% May 91 7.21% Jun 91 7.21% Jul 91 7.11% Aug 91 6.97% Sep 91 6.89% Oct 91 6.85% Nov 91 6.90% Dec 91 6.66% Jan 92 6.72% Feb 92 6.76% Mar 92 6.76% Apr 92 6.74% May 92 6.63% Jun 92 6.49% Jul 92 6.19% Aug 92 6.35%
Sep 92 6.39% Oct 92 6.68% Nov 92 6.42% Dec 92 6.39% Jan 93 6.31% Feb 93 6.01% Mar 93 6.04% Apr 93 5.96% May 93 5.89% Jun 93 5.76% Jul 93 5.78% Aug 93 5.60% Sep 93 5.47% Oct 93 5.48% Nov 93 5.65% Dec 93 5.52% Jan 94 5.45% Feb 94 5.77% Mar 94 6.36% Apr 94 6.37% May 94 6.40% Jun 94 6.47% Jul 94 6.33% Aug 94 6.36% Sep 94 6.58% Oct 94 6.85% Nov 94 7.16% Dec 94 6.92% Jan 95 6.66% Feb 95 6.42% Mar 95 6.37% Apr 95 6.35% May 95 6.10% Jun 95 6.28% Jul 95 6.19% Aug 95 6.11% Sep 95 6.07% Oct 95 5.91% Nov 95 5.74% Dec 95 5.56% Jan 96 5.57% Feb 96 5.71% Mar 96 5.96% Apr 96 6.05% May 96 6.09% Jun 96 6.01% Jul 96 5.98% Aug 96 6.02% Sep 96 5.89% Oct 96 5.83% Nov 96 5.66%
Dec 96 5.72% Jan 97 5.82% Feb 97 5.76% Mar 97 5.95% Apr 97 5.89% May 97 5.74% Jun 97 5.69% Jul 97 5.40% Aug 97 5.55% Sep 97 5.47% Oct 97 5.40% Nov 97 5.36% Dec 97 5.25% Jan 98 5.19% Feb 98 5.24% Mar 98 5.27% Apr 98 5.39% May 98 5.22% Jun 98 5.22% Jul 98 5.26% Aug 98 5.11% Sep 98 4.99% Oct 98 5.13% Nov 98 5.10% Dec 98 5.16% Jan 99 5.09% Feb 99 5.17% Mar 99 5.23% Apr 99 5.28% May 99 5.37% Jun 99 5.53% Jul 99 5.59% Aug 99 5.78% Sep 99 5.89% Oct 99 6.08% Nov 99 6.12% Dec 99 6.22% Jan 00 6.31% Feb 00 6.17% Mar 00 5.94% Apr 00 6.00% May 00 6.13% Jun 00 5.91% Jul 00 5.79% Aug 00 5.72% Sep 00 5.82% Oct 00 5.74% Nov 00 5.75% Dec 00 5.47% Jan 01 5.45% Feb 01 5.40%
Mar 01 5.30% Apr 01 5.49% May 01 5.42% June 01 5.38%
GRAPHIC MATERIAL (2) The following line graph compares the performance of Franklin California Insured Tax-Free Income Fund - Class A to that of the Lehman Brothers Municipal Bond Index(6) and to the Consumer Price Index(6) based on a $10,000 investment from 7/1/91 to 6/30/01.
CA Ins. TF Class A LB Muni Index CPI ------------------ ------------- --- 07/01/1991 $ 9,575 $ 10,000 $ 10,000 07/31/1991 $ 9,696 1.22% $ 10,122 0.15% $ 10,015 08/31/1991 $ 9,783 1.32% $ 10,256 0.29% $ 10,044 09/30/1991 $ 9,906 1.30% $ 10,389 0.44% $ 10,088 10/31/1991 $ 9,976 0.90% $ 10,482 0.15% $ 10,103 11/30/1991 $ 9,961 0.28% $ 10,512 0.29% $ 10,133 12/31/1991 $ 10,155 2.15% $ 10,738 0.07% $ 10,140 01/31/1992 $ 10,165 0.23% $ 10,762 0.15% $ 10,155 02/29/1992 $ 10,165 0.03% $ 10,766 0.36% $ 10,192 03/31/1992 $ 10,201 0.03% $ 10,769 0.51% $ 10,244 04/30/1992 $ 10,281 0.89% $ 10,865 0.14% $ 10,258 05/31/1992 $ 10,434 1.18% $ 10,993 0.14% $ 10,272 06/30/1992 $ 10,576 1.68% $ 11,178 0.36% $ 10,309 07/31/1992 $ 10,947 3.00% $ 11,513 0.21% $ 10,331 08/31/1992 $ 10,790 -0.97% $ 11,401 0.28% $ 10,360 09/30/1992 $ 10,806 0.65% $ 11,475 0.28% $ 10,389 10/31/1992 $ 10,592 -0.98% $ 11,363 0.35% $ 10,425 11/30/1992 $ 10,886 1.79% $ 11,566 0.14% $ 10,440 12/31/1992 $ 11,024 1.02% $ 11,684 -0.07% $ 10,432 01/31/1993 $ 11,172 1.16% $ 11,820 0.49% $ 10,484 02/28/1993 $ 11,508 3.62% $ 12,248 0.35% $ 10,520 03/31/1993 $ 11,477 -1.06% $ 12,118 0.35% $ 10,557 04/30/1993 $ 11,551 1.01% $ 12,240 0.28% $ 10,587 05/31/1993 $ 11,616 0.56% $ 12,309 0.14% $ 10,601 06/30/1993 $ 11,815 1.67% $ 12,514 0.14% $ 10,616 07/31/1993 $ 11,842 0.13% $ 12,531 0.00% $ 10,616 08/31/1993 $ 12,062 2.08% $ 12,791 0.28% $ 10,646 09/30/1993 $ 12,205 1.14% $ 12,937 0.21% $ 10,668 10/31/1993 $ 12,279 0.19% $ 12,962 0.41% $ 10,712 11/30/1993 $ 12,256 -0.88% $ 12,848 0.07% $ 10,720
12/31/1993 $ 12,458 2.11% $ 13,119 0.00% $ 10,720 01/31/1994 $ 12,583 1.14% $ 13,268 0.27% $ 10,749 02/28/1994 $ 12,331 -2.59% $ 12,925 0.34% $ 10,785 03/31/1994 $ 11,837 -4.07% $ 12,399 0.34% $ 10,822 04/30/1994 $ 11,884 0.85% $ 12,504 0.14% $ 10,837 05/31/1994 $ 11,960 0.87% $ 12,613 0.07% $ 10,844 06/30/1994 $ 11,915 -0.61% $ 12,536 0.34% $ 10,881 07/31/1994 $ 12,124 1.83% $ 12,765 0.27% $ 10,911 08/31/1994 $ 12,171 0.35% $ 12,810 0.40% $ 10,954 09/30/1994 $ 12,013 -1.47% $ 12,622 0.27% $ 10,984 10/31/1994 $ 11,792 -1.78% $ 12,397 0.07% $ 10,992 11/30/1994 $ 11,592 -1.81% $ 12,173 0.13% $ 11,006 12/31/1994 $ 11,796 2.20% $ 12,440 0.00% $ 11,006 01/31/1995 $ 12,189 2.86% $ 12,796 0.40% $ 11,050 02/28/1995 $ 12,532 2.91% $ 13,169 0.40% $ 11,094 03/31/1995 $ 12,623 1.15% $ 13,320 0.33% $ 11,131 04/30/1995 $ 12,660 0.12% $ 13,336 0.33% $ 11,168 05/31/1995 $ 13,008 3.19% $ 13,761 0.20% $ 11,190 06/30/1995 $ 12,843 -0.87% $ 13,642 0.20% $ 11,212 07/31/1995 $ 12,924 0.95% $ 13,771 0.00% $ 11,212 08/31/1995 $ 13,040 1.27% $ 13,946 0.26% $ 11,241 09/30/1995 $ 13,122 0.63% $ 14,034 0.20% $ 11,264 10/31/1995 $ 13,313 1.45% $ 14,238 0.33% $ 11,301 11/30/1995 $ 13,561 1.66% $ 14,474 -0.07% $ 11,293 12/31/1995 $ 13,722 0.96% $ 14,613 -0.07% $ 11,285 01/31/1996 $ 13,807 0.76% $ 14,724 0.59% $ 11,352 02/29/1996 $ 13,735 -0.68% $ 14,624 0.32% $ 11,388 03/31/1996 $ 13,530 -1.28% $ 14,437 0.52% $ 11,447 04/30/1996 $ 13,481 -0.28% $ 14,396 0.39% $ 11,492 05/31/1996 $ 13,487 -0.04% $ 14,390 0.19% $ 11,514 06/30/1996 $ 13,642 1.09% $ 14,547 0.06% $ 11,521 07/31/1996 $ 13,761 0.90% $ 14,678 0.19% $ 11,543 08/31/1996 $ 13,812 -0.02% $ 14,675 0.19% $ 11,565 09/30/1996 $ 14,001 1.40% $ 14,881 0.32% $ 11,602 10/31/1996 $ 14,134 1.13% $ 15,049 0.32% $ 11,639 11/30/1996 $ 14,348 1.83% $ 15,324 0.19% $ 11,661 12/31/1996 $ 14,296 -0.42% $ 15,260 0.00% $ 11,661 01/31/1997 $ 14,290 0.19% $ 15,289 0.32% $ 11,698 02/28/1997 $ 14,413 0.92% $ 15,430 0.31% $ 11,734 03/31/1997 $ 14,230 -1.33% $ 15,224 0.25% $ 11,764 04/30/1997 $ 14,354 0.84% $ 15,352 0.12% $ 11,778 05/31/1997 $ 14,539 1.51% $ 15,584 -0.06% $ 11,771 06/30/1997 $ 14,652 1.07% $ 15,751 0.12% $ 11,785 07/31/1997 $ 15,053 2.77% $ 16,187 0.12% $ 11,799 08/31/1997 $ 14,927 -0.94% $ 16,035 0.19% $ 11,821 09/30/1997 $ 15,090 1.19% $ 16,226 0.25% $ 11,851 10/31/1997 $ 15,179 0.64% $ 16,330 0.25% $ 11,881 11/30/1997 $ 15,268 0.59% $ 16,426 -0.06% $ 11,873 12/31/1997 $ 15,475 1.46% $ 16,666 -0.12% $ 11,859 01/31/1998 $ 15,628 1.03% $ 16,837 0.19% $ 11,882
02/28/1998 $ 15,644 0.03% $ 16,842 0.19% $ 11,904 03/31/1998 $ 15,660 0.09% $ 16,858 0.19% $ 11,927 04/30/1998 $ 15,588 -0.45% $ 16,782 0.18% $ 11,948 05/31/1998 $ 15,807 1.58% $ 17,047 0.18% $ 11,970 06/30/1998 $ 15,887 0.39% $ 17,113 0.12% $ 11,984 07/31/1998 $ 15,916 0.25% $ 17,156 0.12% $ 11,999 08/31/1998 $ 16,138 1.55% $ 17,422 0.12% $ 12,013 09/30/1998 $ 16,386 1.25% $ 17,640 0.12% $ 12,028 10/31/1998 $ 16,402 0.00% $ 17,640 0.24% $ 12,056 11/30/1998 $ 16,471 0.35% $ 17,702 0.00% $ 12,056 12/31/1998 $ 16,483 0.25% $ 17,746 -0.06% $ 12,049 01/31/1999 $ 16,617 1.19% $ 17,957 0.24% $ 12,078 02/28/1999 $ 16,607 -0.44% $ 17,878 0.12% $ 12,093 03/31/1999 $ 16,648 0.14% $ 17,903 0.30% $ 12,129 04/30/1999 $ 16,649 0.25% $ 17,948 0.73% $ 12,217 05/31/1999 $ 16,570 -0.58% $ 17,844 0.00% $ 12,217 06/30/1999 $ 16,315 -1.44% $ 17,587 0.00% $ 12,217 07/31/1999 $ 16,329 0.36% $ 17,650 0.30% $ 12,254 08/31/1999 $ 16,114 -0.80% $ 17,509 0.24% $ 12,283 09/30/1999 $ 16,128 0.04% $ 17,516 0.48% $ 12,342 10/31/1999 $ 15,883 -1.08% $ 17,327 0.18% $ 12,365 11/30/1999 $ 16,007 1.06% $ 17,510 0.06% $ 12,372 12/31/1999 $ 15,885 -0.75% $ 17,379 0.00% $ 12,372 01/31/2000 $ 15,762 -0.44% $ 17,303 0.30% $ 12,409 02/29/2000 $ 16,040 1.16% $ 17,503 0.59% $ 12,482 03/31/2000 $ 16,432 2.18% $ 17,885 0.82% $ 12,585 04/30/2000 $ 16,292 -0.59% $ 17,779 0.06% $ 12,592 05/31/2000 $ 16,224 -0.52% $ 17,687 0.12% $ 12,607 06/30/2000 $ 16,677 2.65% $ 18,156 0.52% $ 12,673 07/31/2000 $ 16,891 1.39% $ 18,408 0.23% $ 12,702 08/31/2000 $ 17,219 1.54% $ 18,691 0.00% $ 12,702 09/30/2000 $ 17,177 -0.52% $ 18,594 0.52% $ 12,768 10/31/2000 $ 17,308 1.09% $ 18,797 0.17% $ 12,790 11/30/2000 $ 17,453 0.76% $ 18,940 0.06% $ 12,798 12/31/2000 $ 17,874 2.47% $ 19,408 -0.06% $ 12,790 01/31/2001 $ 17,977 0.99% $ 19,600 0.63% $ 12,870 2/29/01 $ 18,022 0.32% $ 19,662 0.40% $ 12,922 03/31/2001 $ 18,184 0.90% $ 19,839 0.23% $ 12,952 04/30/2001 $ 17,905 -1.08% $ 19,625 0.40% $ 13,003 05/31/2001 $ 18,098 1.08% $ 19,837 0.45% $ 13,062 06/30/2001 $ 18,166 0.67% $ 19,970 0.17% $ 13,084
GRAPHIC MATERIAL (3) The following line graph compares the performance of Franklin California Insured Tax-Free Income Fund - Class B to that of the Lehman Brothers Municipal Bond Index(6) and to the Consumer Price Index(6) based on a $10,000 investment from 2/1/00 to 6/30/01.
CA Ins. TF Class B LB Muni Index CPI ------------------ ------------- --- 02/01/2000 $ 10,000 $ 10,000 $ 10,000 02/29/2000 $ 10,166 1.16% $ 10,116 0.59% $ 10,059 03/31/2000 $ 10,418 2.18% $ 10,337 0.82% $ 10,141 04/30/2000 $ 10,317 -0.59% $ 10,276 0.06% $ 10,148 05/31/2000 $ 10,277 -0.52% $ 10,222 0.12% $ 10,160 06/30/2000 $ 10,559 2.65% $ 10,493 0.52% $ 10,213 07/31/2000 $ 10,689 1.39% $ 10,639 0.23% $ 10,236 08/31/2000 $ 10,892 1.54% $ 10,803 0.00% $ 10,236 09/30/2000 $ 10,860 -0.52% $ 10,747 0.52% $ 10,289 10/31/2000 $ 10,946 1.09% $ 10,864 0.17% $ 10,307 11/30/2000 $ 11,033 0.76% $ 10,946 0.06% $ 10,313 12/31/2000 $ 11,294 2.47% $ 11,217 -0.06% $ 10,307 01/31/2001 $ 11,353 0.99% $ 11,328 0.63% $ 10,372 2/29/01 $ 11,377 0.32% $ 11,364 0.40% $ 10,413 03/31/2001 $ 11,473 0.90% $ 11,466 0.23% $ 10,437 04/30/2001 $ 11,301 -1.08% $ 11,342 0.40% $ 10,479 05/31/2001 $ 11,417 1.08% $ 11,465 0.45% $ 10,526 06/30/2001 $ 11,053 0.67% $ 11,542 0.17% $ 10,544 Total 10.53% 15.42% 5.44% Return
GRAPHIC MATERIAL (4) The following line graph compares the performance of Franklin California Insured Tax-Free Income Fund - Class C to that of the Lehman Brothers Municipal Bond Index(6) and to the Consumer Price Index(6) based on a $10,000 investment from 5/1/95 to 6/30/01.
CA Ins. TF Class C LB Muni Index CPI ------------------ ------------- --- 05/01/1995 $ 9,900 $ 10,000 $ 10,000 05/31/1995 $ 10,197 3.19% $ 10,319 0.20% $ 10,020 06/30/1995 $ 10,063 -0.87% $ 10,229 0.20% $ 10,040 07/31/1995 $ 10,122 0.95% $ 10,326 0.00% $ 10,040 08/31/1995 $ 10,215 1.27% $ 10,458 0.26% $ 10,066 09/30/1995 $ 10,265 0.63% $ 10,523 0.20% $ 10,086 10/31/1995 $ 10,418 1.45% $ 10,676 0.33% $ 10,120 11/30/1995 $ 10,606 1.66% $ 10,853 -0.07% $ 10,112 12/31/1995 $ 10,727 0.96% $ 10,957 -0.07% $ 10,105 01/31/1996 $ 10,787 0.76% $ 11,041 0.59% $ 10,165 02/29/1996 $ 10,726 -0.68% $ 10,966 0.32% $ 10,198 03/31/1996 $ 10,571 -1.28% $ 10,825 0.52% $ 10,251 04/30/1996 $ 10,528 -0.28% $ 10,795 0.39% $ 10,291 05/31/1996 $ 10,527 -0.04% $ 10,791 0.19% $ 10,310 06/30/1996 $ 10,642 1.09% $ 10,908 0.06% $ 10,316 07/31/1996 $ 10,737 0.90% $ 11,006 0.19% $ 10,336 08/31/1996 $ 10,762 -0.02% $ 11,004 0.19% $ 10,356 09/30/1996 $ 10,904 1.40% $ 11,158 0.32% $ 10,389
10/31/1996 $ 11,002 1.13% $ 11,284 0.32% $ 10,422 11/30/1996 $ 11,172 1.83% $ 11,491 0.19% $ 10,442 12/31/1996 $ 11,118 -0.42% $ 11,443 0.00% $ 10,442 01/31/1997 $ 11,108 0.19% $ 11,464 0.32% $ 10,475 02/28/1997 $ 11,207 0.92% $ 11,570 0.31% $ 10,508 03/31/1997 $ 11,060 -1.33% $ 11,416 0.25% $ 10,534 04/30/1997 $ 11,142 0.84% $ 11,512 0.12% $ 10,547 05/31/1997 $ 11,287 1.51% $ 11,686 -0.06% $ 10,540 06/30/1997 $ 11,369 1.07% $ 11,811 0.12% $ 10,553 07/31/1997 $ 11,674 2.77% $ 12,138 0.12% $ 10,565 08/31/1997 $ 11,571 -0.94% $ 12,024 0.19% $ 10,586 09/30/1997 $ 11,692 1.19% $ 12,167 0.25% $ 10,612 10/31/1997 $ 11,755 0.64% $ 12,245 0.25% $ 10,639 11/30/1997 $ 11,827 0.59% $ 12,317 -0.06% $ 10,632 12/31/1997 $ 11,971 1.46% $ 12,497 -0.12% $ 10,619 01/31/1998 $ 12,092 1.03% $ 12,626 0.19% $ 10,640 02/28/1998 $ 12,089 0.03% $ 12,629 0.19% $ 10,660 03/31/1998 $ 12,096 0.09% $ 12,641 0.19% $ 10,680 04/30/1998 $ 12,044 -0.45% $ 12,584 0.18% $ 10,699 05/31/1998 $ 12,206 1.58% $ 12,783 0.18% $ 10,719 06/30/1998 $ 12,262 0.39% $ 12,832 0.12% $ 10,731 07/31/1998 $ 12,268 0.25% $ 12,865 0.12% $ 10,744 08/31/1998 $ 12,433 1.55% $ 13,064 0.12% $ 10,757 09/30/1998 $ 12,627 1.25% $ 13,227 0.12% $ 10,770 10/31/1998 $ 12,624 0.00% $ 13,227 0.24% $ 10,796 11/30/1998 $ 12,681 0.35% $ 13,274 0.00% $ 10,796 12/31/1998 $ 12,674 0.25% $ 13,307 -0.06% $ 10,789 01/31/1999 $ 12,781 1.19% $ 13,465 0.24% $ 10,815 02/28/1999 $ 12,767 -0.44% $ 13,406 0.12% $ 10,828 03/31/1999 $ 12,792 0.14% $ 13,425 0.30% $ 10,861 04/30/1999 $ 12,786 0.25% $ 13,458 0.73% $ 10,940 05/31/1999 $ 12,720 -0.58% $ 13,380 0.00% $ 10,940 06/30/1999 $ 12,520 -1.44% $ 13,187 0.00% $ 10,940 07/31/1999 $ 12,525 0.36% $ 13,235 0.30% $ 10,973 08/31/1999 $ 12,355 -0.80% $ 13,129 0.24% $ 10,999 09/30/1999 $ 12,360 0.04% $ 13,134 0.48% $ 11,052 10/31/1999 $ 12,168 -1.08% $ 12,992 0.18% $ 11,072 11/30/1999 $ 12,256 1.06% $ 13,130 0.06% $ 11,079 12/31/1999 $ 12,159 -0.75% $ 13,032 0.00% $ 11,079 01/31/2000 $ 12,048 -0.44% $ 12,974 0.30% $ 11,112 02/29/2000 $ 12,254 1.16% $ 13,125 0.59% $ 11,177 03/31/2000 $ 12,557 2.18% $ 13,411 0.82% $ 11,269 04/30/2000 $ 12,445 -0.59% $ 13,332 0.06% $ 11,276 05/31/2000 $ 12,388 -0.52% $ 13,263 0.12% $ 11,289 06/30/2000 $ 12,725 2.65% $ 13,614 0.52% $ 11,348 07/31/2000 $ 12,882 1.39% $ 13,803 0.23% $ 11,374 08/31/2000 $ 13,125 1.54% $ 14,016 0.00% $ 11,374 09/30/2000 $ 13,087 -0.52% $ 13,943 0.52% $ 11,433 10/31/2000 $ 13,191 1.09% $ 14,095 0.17% $ 11,453 11/30/2000 $ 13,284 0.76% $ 14,202 0.06% $ 11,460
12/31/2000 $ 13,597 2.47% $ 14,553 -0.06% $ 11,453 01/31/2001 $ 13,680 0.99% $ 14,697 0.63% $ 11,525 2/29/01 $ 13,708 0.32% $ 14,744 0.40% $ 11,571 03/31/2001 $ 13,823 0.90% $ 14,877 0.23% $ 11,598 04/30/2001 $ 13,606 -1.08% $ 14,716 0.40% $ 11,644 05/31/2001 $ 13,745 1.08% $ 14,875 0.45% $ 11,696 06/30/2001 $ 13,787 0.67% $ 14,974 0.17% $ 11,716 Total 37.87% 49.74% 17.16% Return
GRAPHIC MATERIAL (5) The following line graph compares the performance of Franklin California Intermediate-Term Tax-Free Income Fund - Class A to that of the Lehman Brothers Municipal 10-Year Bond Index(6) and to the Consumer Price Index(6) based on a $10,000 investment from 9/21/92 to 6/30/01.
CA Int.TF LB 10 Yr. Muni Index CPI --------- -------------------- --- 09/21/1992 $ 9,775 $10,000 $ 10,000 09/30/1992 $ 9,785 0.25% $10,025 0.08% $ 10,008 10/31/1992 $ 9,736 -1.02% $ 9,923 0.35% $ 10,043 11/30/1992 $ 9,922 1.83% $10,104 0.14% $ 10,057 12/31/1992 $ 9,990 1.16% $10,221 -0.07% $ 10,050 01/31/1993 $ 10,074 1.68% $10,393 0.49% $ 10,100 02/28/1993 $ 10,395 3.66% $10,774 0.35% $ 10,135 03/31/1993 $ 10,401 -1.46% $10,616 0.35% $ 10,171 04/30/1993 $ 10,436 0.95% $10,717 0.28% $ 10,199 05/31/1993 $ 10,482 0.35% $10,755 0.14% $ 10,213 06/30/1993 $ 10,588 1.97% $10,966 0.14% $ 10,228 07/31/1993 $ 10,614 0.25% $10,994 0.00% $ 10,228 08/31/1993 $ 10,759 2.07% $11,221 0.28% $ 10,256 09/30/1993 $ 10,986 1.23% $11,359 0.21% $ 10,278 10/31/1993 $ 11,031 0.16% $11,378 0.41% $ 10,320 11/30/1993 $ 10,912 -0.82% $11,284 0.07% $ 10,327 12/31/1993 $ 11,142 2.13% $11,525 0.00% $ 10,327 01/31/1994 $ 11,259 1.23% $11,666 0.27% $ 10,355 02/28/1994 $ 10,995 -2.74% $11,347 0.34% $ 10,390 03/31/1994 $ 10,645 -3.82% $10,913 0.34% $ 10,426 04/30/1994 $ 10,702 1.10% $11,033 0.14% $ 10,440 05/31/1994 $ 10,769 0.80% $11,122 0.07% $ 10,447 06/30/1994 $ 10,762 -0.43% $11,074 0.34% $ 10,483 07/31/1994 $ 10,925 1.68% $11,260 0.27% $ 10,511 08/31/1994 $ 10,972 0.39% $11,304 0.40% $ 10,553 09/30/1994 $ 10,869 -1.34% $11,152 0.27% $ 10,582 10/31/1994 $ 10,734 -1.46% $10,990 0.07% $ 10,589 11/30/1994 $ 10,578 -1.89% $10,782 0.13% $ 10,603 12/31/1994 $ 10,669 1.80% $10,976 0.00% $ 10,603 01/31/1995 $ 10,901 2.59% $11,260 0.40% $ 10,645
02/28/1995 $ 11,188 2.83% $11,579 0.40% $ 10,688 03/31/1995 $ 11,313 1.35% $11,735 0.33% $ 10,723 04/30/1995 $ 11,328 0.12% $11,749 0.33% $ 10,759 05/31/1995 $ 11,652 3.17% $12,122 0.20% $ 10,780 06/30/1995 $ 11,534 -0.62% $12,047 0.20% $ 10,802 07/31/1995 $ 11,683 1.47% $12,224 0.00% $ 10,802 08/31/1995 $ 11,867 1.36% $12,390 0.26% $ 10,830 09/30/1995 $ 11,961 0.64% $12,469 0.20% $ 10,851 10/31/1995 $ 12,146 1.15% $12,613 0.33% $ 10,887 11/30/1995 $ 12,320 1.34% $12,782 -0.07% $ 10,880 12/31/1995 $ 12,370 0.61% $12,860 -0.07% $ 10,872 01/31/1996 $ 12,477 1.01% $12,989 0.59% $ 10,936 02/29/1996 $ 12,447 -0.41% $12,936 0.32% $ 10,971 03/31/1996 $ 12,360 -1.24% $12,776 0.52% $ 11,028 04/30/1996 $ 12,330 -0.35% $12,731 0.39% $ 11,071 05/31/1996 $ 12,335 -0.28% $12,695 0.19% $ 11,092 06/30/1996 $ 12,456 0.95% $12,816 0.06% $ 11,099 07/31/1996 $ 12,554 0.96% $12,939 0.19% $ 11,120 08/31/1996 $ 12,558 0.00% $12,939 0.19% $ 11,141 09/30/1996 $ 12,681 1.03% $13,072 0.32% $ 11,177 10/31/1996 $ 12,816 1.26% $13,237 0.32% $ 11,213 11/30/1996 $ 13,034 2.02% $13,504 0.19% $ 11,234 12/31/1996 $ 12,992 -0.45% $13,444 0.00% $ 11,234 01/31/1997 $ 13,032 0.39% $13,496 0.32% $ 11,270 02/28/1997 $ 13,121 0.94% $13,623 0.31% $ 11,305 03/31/1997 $ 13,005 -1.34% $13,440 0.25% $ 11,333 04/30/1997 $ 13,107 0.74% $13,540 0.12% $ 11,347 05/31/1997 $ 13,282 1.42% $13,732 -0.06% $ 11,340 06/30/1997 $ 13,396 1.10% $13,883 0.12% $ 11,353 07/31/1997 $ 13,720 2.81% $14,273 0.12% $ 11,367 08/31/1997 $ 13,639 -0.97% $14,135 0.19% $ 11,389 09/30/1997 $ 13,767 1.27% $14,314 0.25% $ 11,417 10/31/1997 $ 13,847 0.53% $14,390 0.25% $ 11,446 11/30/1997 $ 13,914 0.46% $14,456 -0.06% $ 11,439 12/31/1997 $ 14,069 1.58% $14,685 -0.12% $ 11,425 01/31/1998 $ 14,212 1.11% $14,848 0.19% $ 11,447 02/28/1998 $ 14,230 -0.01% $14,846 0.19% $ 11,468 03/31/1998 $ 14,235 -0.07% $14,836 0.19% $ 11,490 04/30/1998 $ 14,201 -0.55% $14,754 0.18% $ 11,511 05/31/1998 $ 14,398 1.70% $15,005 0.18% $ 11,532 06/30/1998 $ 14,441 0.37% $15,061 0.12% $ 11,546 07/31/1998 $ 14,498 0.16% $15,085 0.12% $ 11,559 08/31/1998 $ 14,697 1.74% $15,347 0.12% $ 11,573 09/30/1998 $ 14,895 1.49% $15,576 0.12% $ 11,587 10/31/1998 $ 14,912 0.04% $15,582 0.24% $ 11,615 11/30/1998 $ 14,955 0.30% $15,629 0.00% $ 11,615 12/31/1998 $ 14,985 0.31% $15,677 -0.06% $ 11,608 01/31/1999 $ 15,147 1.53% $15,917 0.24% $ 11,636 02/28/1999 $ 15,098 -0.90% $15,774 0.12% $ 11,650 03/31/1999 $ 15,127 -0.05% $15,766 0.30% $ 11,685
04/30/1999 $ 15,143 0.27% $15,809 0.73% $ 11,770 05/31/1999 $ 15,039 -0.70% $15,698 0.00% $ 11,770 06/30/1999 $ 14,814 -1.86% $15,406 0.00% $ 11,770 07/31/1999 $ 14,910 0.67% $15,509 0.30% $ 11,805 08/31/1999 $ 14,859 -0.37% $15,452 0.24% $ 11,834 09/30/1999 $ 14,918 0.34% $15,504 0.48% $ 11,890 10/31/1999 $ 14,786 -0.71% $15,394 0.18% $ 11,912 11/30/1999 $ 14,912 1.09% $15,562 0.06% $ 11,919 12/31/1999 $ 14,766 -0.52% $15,481 0.00% $ 11,919 01/31/2000 $ 14,784 -0.41% $15,418 0.30% $ 11,955 02/29/2000 $ 14,899 0.79% $15,539 0.59% $ 12,025 03/31/2000 $ 15,168 1.95% $15,842 0.82% $ 12,124 04/30/2000 $ 15,075 -0.50% $15,763 0.06% $ 12,131 05/31/2000 $ 15,067 -0.59% $15,670 0.12% $ 12,146 06/30/2000 $ 15,395 2.72% $16,097 0.52% $ 12,209 07/31/2000 $ 15,583 1.38% $16,319 0.23% $ 12,237 08/31/2000 $ 15,843 1.55% $16,572 0.00% $ 12,237 09/30/2000 $ 15,820 -0.46% $16,495 0.52% $ 12,301 10/31/2000 $ 15,911 1.02% $16,664 0.17% $ 12,322 11/30/2000 $ 15,973 0.54% $16,754 0.06% $ 12,329 12/31/2000 $ 16,223 2.35% $17,147 -0.06% $ 12,322 01/31/2001 $ 16,416 1.29% $17,368 0.63% $ 12,399 2/29/01 $ 16,464 0.17% $17,398 0.40% $ 12,449 03/31/2001 $ 16,527 0.85% $17,546 0.23% $ 12,477 04/30/2001 $ 16,341 -1.23% $17,330 0.40% $ 12,527 05/31/2001 $ 16,536 1.09% $17,519 0.45% $ 12,584 06/30/2001 $ 16,634 0.60% $17,624 0.17% $ 12,605 66.34% 76.24% 26.05%