-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BU940s3JfYgfucy0S/qGpWdV8nzaURJN70Nt/rxcPMwXdPcjHWrzqQTg9qRdzrdR RtrAXIejEbKduJGF4oNpkQ== 0000773478-04-000007.txt : 20040302 0000773478-04-000007.hdr.sgml : 20040302 20040302143255 ACCESSION NUMBER: 0000773478-04-000007 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040302 EFFECTIVENESS DATE: 20040302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN CALIFORNIA TAX FREE TRUST CENTRAL INDEX KEY: 0000773478 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04356 FILM NUMBER: 04642319 BUSINESS ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 BUSINESS PHONE: 650-312-2000 MAIL ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 N-CSRS 1 fctftsemincsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4356 -------- FRANKLIN CALIFORNIA TAX-FREE TRUST ---------------------------------- (Exact name of registrant as specified in charter) ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 (Address of principal executive offices) (Zip code) MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 ----------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (650) 312-2000 -------------- Date of fiscal year end: 06/30 ----- Date of reporting period: 12/31/03 -------- ITEM 1. REPORTS TO STOCKHOLDERS. DECEMBER 31, 2003 - -------------------------------------------------------------------------------- Franklin California Insured Tax-Free Income Fund Franklin California Intermediate-Term Tax-Free Income Fund Franklin California Limited-Term Tax-Free Income Fund Franklin California Tax-Exempt Money Fund - -------------------------------------------------------------------------------- SEMIANNUAL REPORT AND SHAREHOLDER LETTER | TAX-FREE INCOME - -------------------------------------------------------------------------------- WANT TO RECEIVE THIS DOCUMENT FRANKLIN FASTER VIA EMAIL? CALIFORNIA TAX-FREE TRUST ELIGIBLE SHAREHOLDERS CAN SIGN UP FOR EDELIVERY AT FRANKLINTEMPLETON.COM. SEE INSIDE FOR DETAILS. - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] [LOGO OMITTED] FRANKLIN(R) TEMPLETON(R) INVESTMENTS FRANKLIN o TEMPLETON o MUTUAL SERIES Franklin Templeton Investments GAIN FROM OUR PERSPECTIVE Franklin Templeton's distinct multi-manager structure combines the specialized expertise of three world-class investment management groups--Franklin, Templeton and Mutual Series. SPECIALIZED EXPERTISE Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success. FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a driving force in fixed income investing around the globe. They also bring expertise in growth- and value-style U.S. equity investing. TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry's oldest global fund. Today, with research offices in over 25 countries, they offer investors the broadest global reach in the industry. MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style of value investing, searching aggressively for opportunity among undervalued stocks, arbitrage situations and distressed companies. TRUE DIVERSIFICATION Because our management groups work independently and adhere to distinctly different investment approaches, Franklin, Templeton and Mutual Series funds typically have a low overlap of securities. That's why our funds can be used to build truly diversified portfolios covering every major asset class. RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to consistently provide investors with exceptional risk-adjusted returns over the long term, as well as the reliable account services that have helped us become one of the most trusted names in financial services. - ------------------------------------------------------------------------------- MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS - ------------------------------------------------------------------------------- [photo omitted] Not part of the semiannual report Contents SHAREHOLDER LETTER .................. 1 SPECIAL FEATURE: Understanding Your Tax-Free Income Fund ................ 5 SEMIANNUAL REPORT State Update and Municipal Bond Market Overview ................ 9 Franklin California Insured Tax-Free Income Fund ................ 12 Franklin California Intermediate-Term Tax-Free Income Fund ................ 17 Franklin California Limited-Term Tax-Free Income Fund ................ 22 Franklin California Tax-Exempt Money Fund ............... 25 Financial Highlights and Statements of Investments ........... 27 Financial Statements ................ 62 Notes to Financial Statements ....... 67 Proxy Voting Policies and Procedures .......................... 75 - -------------------------------------------------------------------------------- Regulatory Update AS OF FEBRUARY 12, 2004 On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the "Company"), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund. The Company, in addition to other entities within Franklin Templeton Investments, including the Funds and other funds, has been named in shareholder class actions related to the matter described above. The Company believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. It is anticipated that the Company may be named in additional similar civil actions related to the matter described above. In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business. The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Funds' investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC's investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Funds is uncertain at this time. If it is found that the Company bears responsibility for any unlawful or improper conduct, we have committed to making the funds or their shareholders whole, as appropriate. Any further updates on these matters will be disclosed on the Company's website at franklintempleton.com under "Statement on Current Industry Issues." Semiannual Report State Update and Municipal Bond Market Overview California's recall election occurred in October and Governor Arnold Schwarzenegger was inaugurated in mid-November. Although the administrative transition came at a sensitive time for the state's finances, it was not in itself viewed as a significant credit event. The governor immediately reduced the state's motor vehicle license fee (MVLF) by two-thirds and stated his intention to provide replacement state revenues to compensate for the resulting loss in revenue to local governments. The state could realize a $2 billion to $3 billion operating deficit in fiscal year 2004 if the legislature finally approves Governor Schwarzenegger's proposal to reimburse local governments for their revenue losses following his decision to lower the MVLF. 1 In a special legislative session called by the governor in December 2003 to deal with looming financial crises, the administration decided to offer voters two ballot measures totaling $15 billion in a March 2004 referendum. One would help the state access the private debt markets to pay for ongoing operations, and the other would amend the state constitution to address the state's chronic budget imbalance. Neither measure changed independent credit rating agency Standard & Poor's BBB rating on the state's general obligation debt. 2 Governor Schwarzenegger has placed before the legislature $2.3 billion of mid-fiscal year 2004 budget cuts, which have not yet been acted upon. 1 The governor's success in closing the structural budget gap, either in mid-fiscal year 2004, or in his fiscal year 2005 budget proposal due to be released January 10, 2004, will be key in determining the direction of future state credit quality, according to Standard & Poor's. During the six months under review, the state's large and diverse economy performed fairly close to that of the nation. Despite a multi-year downturn in the high-technology sector, overall private-sector employment statewide declined by a moderate 2.4% from its mid-2001 peak, similar to the 2.3% private-sector job loss nationally. 3 However, California's revenue declines in the recent recession were more severe than employment declines. The state experienced volatile financial operations largely due to wide revenue swings, persistent expenditure pressures from population growth and education spending policies, and a limited willingness to maintain reserves. The general fund faced large operating shortfalls in the past two fiscal years, and state income tax revenues fell sharply due to a dramatic decline of stock market-related sources of income such as capital gains and stock option 1. Source: Standard & Poor's, "California Ballot Proposals Offer Debt Relief, but a Structural Deficit Looms," RATINGSDIRECT, 12/17/03. 2. This does not indicate Standard & Poor's rating of the Funds. 3. Source: Moody's Investors Service, "New Issue: California (State of)," 10/24/03. Semiannual Report | 9 exercises, which had risen dramatically in prior years. Budgetary responses in fiscal years 2003 and 2004 relied heavily on temporary measures and were limited by the state legislature's rejection of deep expenditure reductions. A broadly diversified and high-wealth economy and wide legal powers to raise revenues were California's most significant fundamental credit strengths. Per-capita income was about 106% of the U.S. average, with a greater proportion of high-income taxpayers than the nation. 3 Several of the state's largest metropolitan regions outperformed the U.S. economy throughout the recent business cycle. However, California faces a weak liquidity position and exposure to market refinancing risk as the state implements a strategy to replace short-term debt maturing in June 2004 with proposed longer-term deficit financing. For fiscal year 2004, the state budget anticipates modest employment growth and a 3.1% increase in overall tax revenues; however, uncertainties remain regarding the U.S. economy and when it will begin to produce overall employment growth. 3 Moody's Investors Service downgraded California's general obligation bond rating to A3 in August 2003, reflecting the state's delayed and weak response to its budget imbalance, weakened liquidity position and exposure to refinancing risk stemming from its funding of deficits with large levels of short-term debt. 4 On the positive side, preliminary economic indicators show a state manufacturing uptick the past few months, particularly in the high-technology sector. In addition, personal income growth has begun to match the nation's recently. The municipal bond market, like other bond markets, was volatile for the six months ended December 31, 2003. Daily news of progress in the war on terrorism, conflicting economic data, massive new supply of municipal bonds, financial market scandals and the Federal Reserve Board's (the Fed's) continuation of its low interest rate policy all contributed to rapid changes in investor sentiment. For the period under review, the municipal bond market rose slightly amid confusing economic data. For example, a nearly 20-year high in gross domestic product growth of 8.2% annualized for third quarter 2003 might imply an inflationary rise; however, December's inflation compared with October's actually fell nearly 0.4% annualized. The 30-year municipal bond yields measured by Municipal Market Data rose from 4.45% at the beginning of the period, to 4.63% on December 31, 2003. 5 Fixed income securities' prices move inversely to yields, so as yields rise bond prices decrease and vice-versa. 4. This does not indicate Moody's rating of the Funds. 5. Source: Thomson Financial. 10 | Semiannual Report Municipal bond markets fell from the beginning of the reporting period through mid-August. Declining bond prices were attributed to rising consumer confidence driven by several factors that were perceived to put the economy in a stronger posture toward growth, coupled with record new supply in the municipal bond market. From August 13 through December 31, 2003, municipal bonds, as measured by the Lehman Brothers Municipal Bond Index, rebounded and rose 5.05%. 6 The Fed's comments on benign inflation contributed to the Lehman Brothers Municipal Bond Index's underlying strength. Overall, municipal bonds returned 1.45% over the six-month period, as measured by the Lehman Brothers Municipal Bond Index. 6 Although yields rose during the period, municipal bonds' income drove the index's total return higher. 6. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index is a market value-weighted index engineered for the long-term tax-exempt bond market. All bonds included have a minimum credit rating of at least Baa. They must have an outstanding par value of at least $5 million and be issued as part of a transaction of at least $50 million. The bonds must be dated after 12/31/90, and must at be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates and derivatives are excluded from the index. The index has four main bond sectors: general obligation, revenue, insured and prerefunded. Semiannual Report | 11 Franklin California Insured Tax-Free Income Fund YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Insured Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and California personal income taxes through a portfolio consisting mainly of insured California municipal securities. 1, 2 This semiannual report for Franklin California Insured Tax-Free Income Fund covers the period ended December 31, 2003. PERFORMANCE OVERVIEW Because bond yield and price move in opposite directions, as yields rose bond prices fell for the six-month reporting period. The Fund's Class A share price, as measured by net asset value, declined from $12.83 on June 30, 2003, to $12.65 on December 31, 2003. The Fund's Class A shares paid dividends totaling 28.08 cents per share for the same period. 3 The Performance Summary beginning on page 15 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 4.25%, based on an annualization of the current 4.68 cent ($0.0468) per share dividend and the maximum offering price of $13.21 on December 31, 2003. An investor in the 2003 maximum combined federal and California state personal income tax bracket of 41.05% would need to earn a distribution rate of 7.21% from a taxable investment to match the Fund's Class A tax-free distribution rate. For the Fund's Class B and C shares' performance, please see the Performance Summary. 1. For investors subject to alternative minimum tax, a small portion of this income may be taxable. Distributions of capital gains are generally taxable. 2. The insurance relates only to the payment of principal and interest on the portfolio's insured securities. No representation is made as to any insurer's ability to meet its commitments. 3. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the Fund during the reporting period. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 30. 12 | Semiannual Report DIVIDEND DISTRIBUTIONS* Franklin California Insured Tax-Free Income Fund 7/1/03-12/31/03 - --------------------------------------------------------------------- DIVIDEND PER SHARE ----------------------------------------------- MONTH CLASS A CLASS B CLASS C - --------------------------------------------------------------------- July 4.68 cents 4.09 cents 4.07 cents - --------------------------------------------------------------------- August 4.68 cents 4.08 cents 4.07 cents - --------------------------------------------------------------------- September 4.68 cents 4.08 cents 4.07 cents - --------------------------------------------------------------------- October 4.68 cents 4.08 cents 4.07 cents - --------------------------------------------------------------------- November 4.68 cents 4.08 cents 4.07 cents - --------------------------------------------------------------------- December 4.68 cents 4.13 cents 4.13 cents - --------------------------------------------------------------------- TOTAL 28.08 CENTS 24.54 CENTS 24.48 CENTS - --------------------------------------------------------------------- PORTFOLIO BREAKDOWN Franklin California Insured Tax-Free Income Fund 12/31/03 - -------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS - -------------------------------------------------------------- General Obligation 18.6% - -------------------------------------------------------------- Transportation 15.4% - -------------------------------------------------------------- Subject to Government Appropriations 14.1% - -------------------------------------------------------------- Tax-Supported 12.9% - -------------------------------------------------------------- Utilities 11.9% - -------------------------------------------------------------- Hospital & Health Care 10.3% - -------------------------------------------------------------- Higher Education 6.8% - -------------------------------------------------------------- Prerefunded 5.3% - -------------------------------------------------------------- Other Revenue 3.8% - -------------------------------------------------------------- Housing 0.9% - -------------------------------------------------------------- *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. INVESTMENT STRATEGY We use a consistent, disciplined strategy to maximize income for our shareholders by seeking to maintain our exposure to higher coupon securities. We generally employ a buy-and-hold approach and invest in securities that we believe should provide the most relative value in the market. As we invest throughout different interest rate environments, the Fund's portfolio becomes well diversified with a broad range of coupons, calls and maturities. This broad diversification helps stabilize Fund share price. We generally stay fully invested to support income distribution. MANAGER'S DISCUSSION Consistent with our strategy, we typically look to remain fully invested in bonds ranging from 15 to 30 years in maturity with good call options. Early in the reporting period, however, municipal bond market yields began to increase significantly. As a result, we focused on executing tax losses, which entails selling bonds purchased in a lower interest rate environment, and purchasing similarly structured bonds. This strategy enabled the Fund to book losses that may be used to offset capital gains, and allowed it to increase the portfolio's book yield or distributable yield. We also took the opportunity to sell prerefunded bonds. Semiannual Report | 13 The Fund was heavily weighted in higher-coupon bonds purchased in a more favorable yield environment. Such bonds are susceptible to being called when interest rates decline. On the other hand, many of the higher-coupon bonds we held recently traded at a premium, which generally makes them less price sensitive to interest rate fluctuations and thus causes them to behave defensively when interest rates are rising. Furthermore, our higher-coupon bonds provided shareholders an attractive tax-free distribution yield, which we expect ultimately to drive the Fund's intermediate- and long-term performance. Thank you for your participation in Franklin California Insured Tax-Free Income Fund. We look forward to serving your future investment needs. THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2003, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. 14 | Semiannual Report Performance Summary as of 12/31/03 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND Your dividend income will vary depending on dividends or interest paid by securities in the Fund's portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes due on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects the Fund's dividend income, capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION - ------------------------------------------------------------------------------------------------- CLASS A CHANGE 12/31/03 6/30/03 - ------------------------------------------------------------------------------------------------- Net Asset Value (NAV) -$0.18 $12.65 $12.83 - ------------------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/03-12/31/03) - ------------------------------------------------------------------------------------------------- Dividend Income $0.2808 - ------------------------------------------------------------------------------------------------- CLASS B CHANGE 12/31/03 6/30/03 - ------------------------------------------------------------------------------------------------- Net Asset Value (NAV) -$0.17 $12.71 $12.88 - ------------------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/03-12/31/03) - ------------------------------------------------------------------------------------------------- Dividend Income $0.2454 - ------------------------------------------------------------------------------------------------- CLASS C CHANGE 12/31/03 6/30/03 - ------------------------------------------------------------------------------------------------- Net Asset Value (NAV) -$0.17 $12.76 $12.93 - ------------------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/03-12/31/03) - ------------------------------------------------------------------------------------------------- Dividend Income $0.2448 - -------------------------------------------------------------------------------------------------
Semiannual Report|Past performance does not guarantee future results.| 15 Performance Summary (CONTINUED)
PERFORMANCE - --------------------------------------------------------------------------------------------------------------------- CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR - --------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +0.85% +4.91% +28.40% +69.84% - --------------------------------------------------------------------------------------------------------------------- Average Annual Total Return 2 -3.44% +0.45% +4.21% +4.98% - --------------------------------------------------------------------------------------------------------------------- Distribution Rate 3 4.25% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 4 7.21% - --------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 5 3.49% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 4 5.92% - --------------------------------------------------------------------------------------------------------------------- CLASS B 6-MONTH 1-YEAR 3-YEAR INCEPTION (2/1/00) - --------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +0.64% +4.39% +16.65% +31.90% - --------------------------------------------------------------------------------------------------------------------- Average Annual Total Return 2 -3.30% +0.39% +4.36% +6.69% - --------------------------------------------------------------------------------------------------------------------- Distribution Rate 3 3.90% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 4 6.61% - --------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 5 3.10% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 4 5.26% - --------------------------------------------------------------------------------------------------------------------- CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95) - --------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +0.64% +4.37% +25.06% +60.27% - --------------------------------------------------------------------------------------------------------------------- Average Annual Total Return 2 -1.34% +2.32% +4.36% +5.47% - --------------------------------------------------------------------------------------------------------------------- Distribution Rate 3 3.84% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 4 6.52% - --------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 5 3.07% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 4 5.21% - ---------------------------------------------------------------------------------------------------------------------
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. 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 MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. ENDNOTES MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS. BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST RATES. THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC CONDITIONS AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS 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. 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 any current, applicable, maximum sales charge(s). Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price (NAV for Class B) per share on 12/31/03. 4. Taxable equivalent distribution rate and yield assume the published rates as of 6/18/03 for the maximum combined federal and California state personal income tax bracket of 41.05%, based on the federal income tax rate of 35.00%. 5. Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 12/31/03. 16 | Past performance does not guarantee future results. | Semiannual report Franklin California Intermediate-Term Tax-Free Income Fund YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Intermediate-Term Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and California personal income taxes through a portfolio consisting mainly of California municipal securities with an average weighted maturity (the time at which debt must be repaid) between 3 and 10 years. 1 - -------------------------------------------------------------------------------- CREDIT QUALITY BREAKDOWN* Franklin California Intermediate-Term Tax-Free Income Fund Based On Total Long-Term Investments as of 12/31/03 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: AAA ......... 52.1% AA .......... 3.2% A ........... 11.8% BBB ......... 32.9% *Quality breakdown may include internal ratings for bonds not rated by an independent rating agency. - -------------------------------------------------------------------------------- This semiannual report for Franklin California Intermediate-Term Tax-Free Income Fund covers the period ended December 31, 2003. PERFORMANCE OVERVIEW Because bond yield and price move in opposite directions, as yields rose bond prices fell for the six-month reporting period. The Fund's Class A share price, as measured by net asset value, declined from $11.74 on June 30, 2003, to $11.63 on December 31, 2003. The Fund's Class A shares paid dividends totaling 21.95 cents per share for the same period. 2 The Performance Summary beginning on page 20 1. For investors subject to alternative minimum tax, a small portion of this income may be taxable. Distributions of capital gains are generally taxable. 2. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the Fund during the reporting period. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 44. Semiannual Report | 17 PORTFOLIO BREAKDOWN Franklin California Intermediate-Term Tax-Free Income Fund 12/31/03 - ---------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS - ---------------------------------------------------------------- General Obligation 22.1% - ---------------------------------------------------------------- Tax-Supported 19.5% - ---------------------------------------------------------------- Hospital & Health Care 15.9% - ---------------------------------------------------------------- Subject to Government Appropriations 13.8% - ---------------------------------------------------------------- Utilities 13.7% - ---------------------------------------------------------------- Other Revenue 5.9% - ---------------------------------------------------------------- Housing 3.2% - ---------------------------------------------------------------- Prerefunded 2.0% - ---------------------------------------------------------------- Transportation 2.0% - ---------------------------------------------------------------- Higher Education 1.9% - ---------------------------------------------------------------- also shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 3.68%, based on an annualization of the current 3.65 cent ($0.0365) per share dividend and the maximum offering price of $11.90 on December 31, 2003. An investor in the 2003 maximum combined federal and California state personal income tax bracket of 41.05% would need to earn a distribution rate of 6.24% from a taxable investment to match the Fund's Class A tax-free distribution rate. For the Fund's Class C shares' performance, please see the Performance Summary. The Fund was subject to bond calls during the six months under review as many municipal bond issuers sought to take advantage of lower interest rates and exercised call options on their outstanding higher-coupon bonds issued several years ago. In general, we were limited to reinvesting the proceeds from these bond calls as well as from cash inflows at current, lower interest rates, which tended to reduce the Fund's income and cause dividend distributions to decline slightly, as shown in the dividend distributions table. INVESTMENT STRATEGY We use a consistent, disciplined strategy to maximize income for our shareholders by seeking to maintain our exposure to higher coupon securities. We generally employ a buy-and-hold approach and invest in securities that we believe should provide the most relative value in the market. As we invest throughout different interest rate environments, our portfolios become well diversified with a broad range of coupons, calls and maturities. This broad diversification helps stabilize Fund share price. We generally stay fully invested to support income distribution. MANAGER'S DISCUSSION Consistent with our strategy, we typically look to remain fully invested in bonds ranging from 1 to 10 years in maturity. Early in the reporting period, however, municipal bond market yields began to increase significantly. As a result, we focused more on executing tax losses, which entails selling bonds purchased in a lower interest rate environment, and purchasing similarly structured bonds. This strategy enabled the Fund to book losses that may be used to offset future capital gains, and allowed it to increase the portfolio's book yield or distributable yield. 18 | Semiannual Report DIVIDEND DISTRIBUTIONS* Franklin California Intermediate-Term Tax-Free Income Fund 7/1/03-12/31/03 - ------------------------------------------------------------------------- DIVIDEND PER SHARE MONTH CLASS A CLASS C - ------------------------------------------------------------------------- July 3.70 cents 1.96 cents - ------------------------------------------------------------------------- August 3.65 cents 3.11 cents - ------------------------------------------------------------------------- September 3.65 cents 3.11 cents - ------------------------------------------------------------------------- October 3.65 cents 3.11 cents - ------------------------------------------------------------------------- November 3.65 cents 3.11 cents - ------------------------------------------------------------------------- December 3.65 cents 3.11 cents - ------------------------------------------------------------------------- TOTAL 21.95 CENTS 17.51 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. The Fund was heavily weighted in higher-coupon bonds purchased in a more favorable yield environment. Such bonds are susceptible to being called when interest rates decline. On the other hand, many of the higher-coupon bonds we held recently traded at a premium, which generally makes them less price sensitive to interest rate fluctuations and thus causes them to behave defensively when interest rates are rising. Furthermore, our higher-coupon bonds provided shareholders an attractive tax-free distribution yield, which we expect ultimately to drive the Fund's intermediate- and long-term performance. Thank you for your participation in Franklin California Intermediate-Term Tax-Free Income Fund. We look forward to serving your future investment needs. THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2003, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. Semiannual Report | 19 Performance Summary as of 12/31/03 FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND Your dividend income will vary depending on dividends or interest paid by securities in the Fund's portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes due on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects the Fund's dividend income, capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION - --------------------------------------------------------------------------------------------------------------------- CLASS A CHANGE 12/31/03 6/30/03 - --------------------------------------------------------------------------------------------------------------------- Net Asset Value (NAV) -$0.11 $11.63 $11.74 - --------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/03-12/31/03) - --------------------------------------------------------------------------------------------------------------------- Dividend Income $0.2195 - --------------------------------------------------------------------------------------------------------------------- CLASS C CHANGE 12/31/03 7/1/03 - --------------------------------------------------------------------------------------------------------------------- Net Asset Value (NAV) -$0.08 $11.65 $11.73 - --------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/03-12/31/03) - --------------------------------------------------------------------------------------------------------------------- Dividend Income $0.1751 - ---------------------------------------------------------------------------------------------------------------------
PERFORMANCE - --------------------------------------------------------------------------------------------------------------------- CLASS A 1 6-MONTH 1-YEAR 5-YEAR 10-YEAR - --------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 2 +0.98% +3.97% +26.65% +70.30% - --------------------------------------------------------------------------------------------------------------------- Average Annual Total Return 3 -1.29% +1.61% +4.37% +5.23% - --------------------------------------------------------------------------------------------------------------------- Distribution Rate 4 3.68% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 5 6.24% - --------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 6 3.06% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 5 5.19% - --------------------------------------------------------------------------------------------------------------------- CLASS C INCEPTION (7/1/03) - --------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 2 +0.95% - --------------------------------------------------------------------------------------------------------------------- Aggregate Total Return 7 -1.05% - --------------------------------------------------------------------------------------------------------------------- Distribution Rate 4 3.17% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 5 5.38% - --------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 6 2.59% - --------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 5 4.39% - ---------------------------------------------------------------------------------------------------------------------
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. 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 MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. 20 |Past performance does not guarantee future results.|Semiannual Report Performance Summary (CONTINUED) ENDNOTES MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS. BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST RATES. THEREFORE, THE FUND'S YIELD AND SHARE PRICEWILL FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC CONDITIONS AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS A: Subject to the maximum 2.25% initial sales charge. CLASS C: Subject to 1% initial sales charge and 1% contingent deferred sales charge for shares redeemed within 18 months of investment. These shares have higher annual fees and expenses than Class A shares. 1. Past expense reductions by the Fund's manager increased the Fund's total returns. Without these reductions, the Fund's total return would have been lower. 2. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 3. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes any applicable maximum sales charge(s). Six-month return has not been annualized. 4. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price per share on 12/31/03. 5. Taxable equivalent distribution rate and yield assume the published rates as of 6/18/03 for the maximum combined federal and California state personal income tax bracket of 41.05%, based on the federal income tax rate of 35.00%. 6. Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 12/31/03. 7. Aggregate total return represents the change in value of an investment since inception and includes sales charges. Since Class C shares have existed for less than one year, average annual total returns are not provided. Semiannual Report | Past performance does not guarantee future results. | 21 Franklin California Limited-Term Tax-Free Income Fund YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Limited-Term Tax-Free Income Fund seeks to provide high, current income exempt from regular federal and California personal income taxes through a portfolio consisting mainly of California municipal securities with an average weighted maturity (the time at which debt must be repaid) of five years or less. 1 - -------------------------------------------------------------------------------- CREDIT QUALITY BREAKDOWN* Franklin California Limited-Term Tax-Free Income Fund Based on Total Long-Term Investments as of 12/31/03 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: AAA ........... 94.2% AA ............ 2.4% A ............. 3.4% *Quality breakdown may include internal ratings for bonds not rated by an independent rating agency. - -------------------------------------------------------------------------------- This inaugural semiannual report for Franklin California Limited-Term Tax-Free Income Fund covers the four-month period since inception on September 2, 2003, through December 31, 2003. PERFORMANCE OVERVIEW Because bond yield and price move in opposite directions, as yields fell bond prices rose slightly during the four-month reporting period. The Fund's Class A share price, as measured by net asset value, rose from $10.00 on September 2, 2003, to $10.04 on December 31, 2003. The Fund's Class A shares paid dividends totaling 3.00 cents 1. For investors subject to alternative minimum tax, a small portion of this income may be taxable. Distributions of capital gains are generally taxable. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 53. 22 | Semiannual Report per share for the same period. 2 The Performance Summary beginning on page 24 also shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 1.20%. An investor in the 2003 maximum combined federal and California state personal income tax bracket of 41.05% would need to earn a distribution rate of 2.03% from a taxable investment to match the Fund's Class A tax-free distribution rate. INVESTMENT STRATEGY We use a consistent, disciplined strategy to maximize income for our shareholders by seeking to maintain our exposure to higher coupon securities. We generally employ a buy-and-hold approach and invest in securities that we believe should provide the most relative value in the market. As we invest throughout different interest rate environments, the Fund's portfolio becomes well diversified with a broad range of coupons, calls and maturities. This broad diversification helps stabilize Fund share price. We generally stay fully invested to support income distribution. MANAGER'S DISCUSSION Consistent with our income-oriented investment philosophy, we generally invested in bonds that we believed would provide the most relative value from an income perspective, and we were comfortable holding them unless we found an opportunity to enhance the portfolio's structure or increase its future income-earning potential. We sought a dollar-weighted average portfolio maturity of five years or less, investing with optimal tax-free income production in mind. As a result of our strategy and the interest rate environment over the reporting period, the fund was positioned to quickly capture changes in interest rates, preserve capital, and produce tax-free income. Thank you for your participation in Franklin California Limited-Term Tax-Free Income Fund. We look forward to serving your future investment needs. PORTFOLIO BREAKDOWN Franklin California Limited-Term Tax-Free Income Fund 12/31/03 - ---------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS - ---------------------------------------------------------------- General Obligation 28.4% - ---------------------------------------------------------------- Tax-Supported 23.4% - ---------------------------------------------------------------- Utilities 13.2% - ---------------------------------------------------------------- Subject to Government Appropriations 12.4% - ---------------------------------------------------------------- Other Revenue 8.8% - ---------------------------------------------------------------- Transportation 6.9% - ---------------------------------------------------------------- Hospital & Health Care 4.5% - ---------------------------------------------------------------- Higher Education 2.4% - ---------------------------------------------------------------- DIVIDEND DISTRIBUTIONS 2 Franklin California Limited-Term Tax-Free Income Fund - Class A 9/2/03-12/31/03 - ---------------------------------------------------------------- MONTH DIVIDEND PER SHARE - ---------------------------------------------------------------- September -- - ---------------------------------------------------------------- October 1.00 cents* - ---------------------------------------------------------------- November 1.00 cents - ---------------------------------------------------------------- December 1.00 cents - ---------------------------------------------------------------- TOTAL 3.00 CENTS - ---------------------------------------------------------------- *Initial distribution; daily accrual began 9/22/03 and the first dividend was paid on 10/17/03. THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2003, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. 2. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity during the month. Income distributions include all accrued income earned by the Fund during the reporting period. Semiannual Report | 23 Performance Summary as of 12/31/03 FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND Your dividend income will vary depending on dividends or interest paid by securities in the Fund's portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes due on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects the Fund's dividend income, capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION - --------------------------------------------------------------------------------------------------------- CLASS A CHANGE 12/31/03 9/2/03 - --------------------------------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.04 $10.04 $10.00 - --------------------------------------------------------------------------------------------------------- DISTRIBUTIONS (9/2/03-12/31/03) - --------------------------------------------------------------------------------------------------------- Dividend Income $0.0300 - --------------------------------------------------------------------------------------------------------- PERFORMANCE 1 - --------------------------------------------------------------------------------------------------------- CLASS A INCEPTION (9/2/03) - --------------------------------------------------------------------------------------------------------- Cumulative Total Return 2 +0.74% - --------------------------------------------------------------------------------------------------------- Aggregate Total Return 3 +0.74% - --------------------------------------------------------------------------------------------------------- Distribution Rate 4 1.20% - --------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 5 2.03% - --------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 6 1.20% - --------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 5 2.04% - ---------------------------------------------------------------------------------------------------------
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. 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 MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. ENDNOTES MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS. BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST RATES. THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC CONDITIONS AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS A: Subject to no initial sales charge. 1. The Fund's manager has agreed in advance to waive a portion of its management fees. If the manager had not taken this action, the Fund's distribution rate and total return would have been lower, and yield for the period would have been 0.61%. After 3/1/04, the fee waiver may be discontinued at any time upon notice to the Fund's Board of Trustees. 2. Cumulative total return represents the change in value of an investment since inception. 3. Aggregate total return represents the change in value of an investment since inception. Since Class A shares have existed for less than one year, average annual total returns are not provided. 4. Distribution rate is based on an annualization of the current 1.00 cent per share monthly dividend and the maximum offering price of $10.04 per share on 12/31/03. 5. Taxable equivalent distribution rate and yield assume the published rates as of 6/18/03 for the maximum combined federal and California state personal income tax bracket of 41.05%, based on the federal income tax rate of 35.00%. 6. Yield, calculated as required by the SEC, is based on the earnings of the Fund's portfolio for the 30 days ended 12/31/03. 24 | Past performance does not guarantee future results. | Semiannual Report Franklin California Tax-Exempt Money Fund YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Tax-Exempt Money Fund seeks to provide high, current income exempt from regular federal and California personal income taxes while seeking preservation of capital and liquidity through a portfolio consisting mainly of short-term municipal debt securities issued in California. The Fund tries to maintain a stable $1.00 share price. 1 This semiannual report for Franklin California Tax-Exempt Money Fund covers the period ended December 31, 2003. PERFORMANCE OVERVIEW With relatively steady, low interest rates, money market portfolio yields saw little change during the period. Largely as a result, Franklin California Tax-Exempt Money Fund's seven-day effective yield rose from 0.45% at the beginning of the period to 0.58% on December 31, 2003. INVESTMENT STRATEGY We invest predominately in high quality, short-term municipal securities whose interest is free from federal income taxes, including federal alternative minimum tax, and from California state personal income tax. We maintain a dollar-weighted average portfolio maturity of 90 days or less. 1. An investment in the Fund is not guaranteed by the U.S. government or any other entity or institution. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 57. Semiannual Report | 25 PERFORMANCE SUMMARY Franklin California Tax-Exempt Money Fund 12/31/03 - ------------------------------------------------------- Seven-day effective yield 1 0.58% - ------------------------------------------------------- Seven-day annualized yield 0.57% - ------------------------------------------------------- Taxable equivalent yield 2 0.97% - ------------------------------------------------------- MANAGER'S DISCUSSION During the reporting period, the Fund participated in several deals, including Los Angeles Unified School District tax and revenue anticipation notes, California State revenue anticipation notes (enhanced with a Letter of Credit from Citibank), California State Department of Water Resources tax-exempt commercial paper, Los Angeles Wastewater System Revenue mandatory puts, and Metropolitan Water District of Southern California variable rate demand notes. Thank you for your participation in Franklin California Tax-Exempt Money Fund. We look forward to serving your future investment needs. 1. The seven-day effective yield assumes the compounding of daily dividends. 2. Taxable equivalent yield assumes the published rates as of 6/18/03 for the maximum combined federal and California state personal income tax bracket of 41.05%, based on the federal income tax rate of 35.00%. Annualized and effective yields are for the seven-day period ended 12/31/03. The Fund's average weighted maturity was 53 days. Yield reflects Fund expenses and fluctuations in interest rates on portfolio investments. Past performance does not guarantee future results. THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2003, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. 26 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
---------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED JUNE 30, CLASS A (UNAUDITED) 2003 2002 2001 2000 1999 ---------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .................................. $12.83 $12.32 $12.17 $11.76 $12.12 $12.47 ---------------------------------------------------------------------------------- Income from investment operations: Net investment income a ................. .28 .57 .59 .61 .61 .61 Net realized and unrealized gains (losses) ................................ (.18) .51 .15 .40 (.36) (.26) ---------------------------------------------------------------------------------- Total from investment operations ......... .10 1.08 .74 1.01 .25 .35 ---------------------------------------------------------------------------------- Less distributions from: Net investment income ................... (.28) (.57) (.59) (.60) (.61) (.63) Net realized gains ...................... -- -- -- -- -- d (.07) ---------------------------------------------------------------------------------- Total distributions ...................... (.28) (.57) (.59) (.60) (.61) (.70) ---------------------------------------------------------------------------------- Net asset value, end of period ........... $12.65 $12.83 $12.32 $12.17 $11.76 $12.12 ---------------------------------------------------------------------------------- Total return b ........................... .85% 8.97% 6.15% 8.73% 2.24% 2.76% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ........ $1,858,684 $1,912,784 $1,789,914 $1,665,581 $1,558,857 $1,775,212 Ratios to average net assets: Expenses ................................ .60% c .61% .61% .61% .60% .60% Net investment income ................... 4.50% c 4.50% 4.74% 5.00% 5.24% 4.91% Portfolio turnover rate .................. 6.12% 9.79% 16.99% 10.09% 29.40% 15.53% a Based on average daily shares outstanding. b Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. c Annualized. d The fund made a capital gain distribution of $.0016.
Semiannual Report| 27 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONTINUED)
----------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED JUNE 30, CLASS B (UNAUDITED) 2003 2002 2001 2000 D ----------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ................... $12.88 $12.37 $12.21 $11.78 $11.36 --------------------------------------------------------- Income from investment operations: Net investment income a ............................... .25 .50 .53 .54 .23 Net realized and unrealized gains (losses) ............ (.17) .51 .15 .42 .42 --------------------------------------------------------- Total from investment operations ....................... .08 1.01 .68 .96 .65 --------------------------------------------------------- Less distributions from net investment income .......... (.25) (.50) (.52) (.53) (.23) --------------------------------------------------------- Net asset value, end of period ......................... $12.71 $12.88 $12.37 $12.21 $11.78 --------------------------------------------------------- Total return b ......................................... .64% 8.34% 5.62% 8.29% 5.76% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ...................... $82,742 $85,698 $56,303 $20,926 $1,884 Ratios to average net assets: Expenses .............................................. 1.15% c 1.16% 1.16% 1.16% 1.16% c Net investment income ................................. 3.95% c 3.95% 4.20% 4.42% 4.82% c Portfolio turnover rate ................................ 6.12% 9.79% 16.99% 10.09% 29.40% a Based on average daily shares outstanding. b Total return does not reflect contingent deferred sales charge, and is not annualized for periods less than one year. c Annualized. d For the period February 1, 2000 (effective date) to June 30, 2000.
28 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONTINUED)
-------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED JUNE 30, CLASS C (UNAUDITED) 2003 2002 2001 2000 1999 -------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .............. $12.93 $12.41 $12.26 $11.84 $12.20 $12.55 -------------------------------------------------------------------------- Income from investment operations: Net investment income a .......................... .25 .50 .53 .54 .55 .55 Net realized and unrealized gains (losses) ....... (.17) .52 .14 .41 (.36) (.27) -------------------------------------------------------------------------- Total from investment operations .................. .08 1.02 .67 .95 .19 .28 -------------------------------------------------------------------------- Less distributions from: Net investment income ............................ (.25) (.50) (.52) (.53) (.55) (.56) Net realized gains ............................... -- -- -- -- -- d (.07) -------------------------------------------------------------------------- Total distributions ............................... (.25) (.50) (.52) (.53) (.55) (.63) -------------------------------------------------------------------------- Net asset value, end of period .................... $12.76 $12.93 $12.41 $12.26 $11.84 $12.20 -------------------------------------------------------------------------- Total return b .................................... .64% 8.39% 5.51% 8.17% 1.66% 2.16% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................. $129,986 $136,674 $108,802 $79,803 $67,395 $80,336 Ratios to average net assets: Expenses ......................................... 1.15% c 1.16% 1.16% 1.16% 1.16% 1.16% Net investment income ............................ 3.95% c 3.95% 4.19% 4.45% 4.68% 4.35% Portfolio turnover rate ........................... 6.12% 9.79% 16.99% 10.09% 29.40% 15.53% a Based on average daily shares outstanding. b Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. c Annualized. d The fund made a capital gain distribution of $.0016.
Semiannual Report|See notes to financial statements.| 29 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 96.8% BONDS 92.0% ABAG Finance Authority for Nonprofit Corps. COP, Lincoln Child Center Inc., California Mortgage Insured, 6.125%, 11/01/24 ................ $ 2,055,000 $ 2,248,828 Lytton Gardens Inc., California Mortgage Insured, 6.00%, 2/15/30 ........................ 3,500,000 3,664,850 Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 ........................... 5,000,000 5,318,750 ABAG Finance Authority for Nonprofit Corps. Revenue, Poway RHF Housing Inc. Project, Series A, California Mortgage Insured, 5.375%, 11/15/25 ............................................................................... 5,145,000 5,276,507 Sansum-Santa Barbara, Series A, California Mortgage Insured, 5.60%, 4/01/26 ............. 2,750,000 2,841,300 ABAG Revenue, Tax Allocation, RDA Pool, Series A2, FSA Insured, 6.60%, 12/15/24 ........... 10,775,000 11,509,855 Alameda County Water District Revenue COP, Water Systems Project, FGIC Insured, Pre-Refunded, 6.00%, 6/01/20 ............................................................. 1,000,000 1,039,950 Alameda Power and Telecommunication Electric System Revenue COP, MBIA Insured, 5.75%, 7/01/30 ........................................................................... 3,305,000 3,632,261 Alhambra City Elementary School District GO, Series A, FSA Insured, 5.60%, 9/01/24 ........ 2,065,000 2,249,260 Alhambra COP, Police Facilities AD No. 91-1, AMBAC Insured, 6.75%, 9/01/23 ................ 10,730,000 10,924,857 Anaheim PFAR, Local Agency, CFD, Refunding, Series A, MBIA Insured, 5.75%, 9/01/14 ........ 3,790,000 3,979,500 Antelope Valley UHSD, GO, Series A, MBIA Insured, 5.00%, 2/01/27 .......................... 5,000,000 5,153,250 Arcata Joint Powers Financing Authority Wastewater Revenue, FSA Insured, 5.80%, 12/01/22 ................................................................................. 1,080,000 1,220,929 Baldwin Park California RDA, Tax Allocation, Refunding, FSA Insured, 5.70%, 9/01/25 ....... 4,000,000 4,398,160 Barstow RDA, Tax Allocation, Central Redevelopment Project, Series A, MBIA Insured, 6.25%, 9/01/22 ........................................................................... 2,000,000 2,101,460 Beaumont USD, COP, Refunding, Series A, FSA Insured, 5.80%, 1/01/21 ....................... 1,500,000 1,668,960 Berkeley USD, GO, Election 2000, FSA Insured, 5.00%, 8/01/27 .............................. 9,305,000 9,565,819 Brea Olinda USD, GO, Series A, FGIC Insured, 5.60%, 8/01/20 ............................... 1,000,000 1,118,100 Cabrillo Community College District GO, Series C, AMBAC Insured, 5.375%, 5/01/26 .......... 5,400,000 5,728,374 Calaveras County Water District Revenue COP, Water and Sewer System Improvement Project, Refunding, AMBAC Insured, 6.00%, 5/01/16 ................................................. 3,950,000 4,086,235 Calexico USD, CFD No. 1, Special Tax, Refunding, AMBAC Insured, 5.60%, 9/01/17 ............ 2,930,000 3,272,341 California Community College Financing Authority Lease Revenue, Grossmont, Palomar, and Shasta, Series A, MBIA Insured, 5.125%, 4/01/31 .......................................... 3,030,000 3,139,928 California Educational Facilities Authority Revenue, Pomona College, Series B, 5.50%, 7/01/29 ................................................ 4,455,000 4,767,073 Stanford University, Refunding, Series O, 5.125%, 1/01/31 ............................... 24,705,000 25,398,716 Stanford University, Series N, 5.25%, 12/01/26 .......................................... 6,450,000 6,720,900 Stanford University, Series N, 5.35%, 6/01/27 ........................................... 21,250,000 22,379,437 Stanford University, Series N, 5.20%, 12/01/27 .......................................... 6,000,000 6,236,160 Student Loan Program, Series A, MBIA Insured, 6.00%, 3/01/16 ............................ 3,385,000 3,595,412 University of Southern California, Refunding, Series C, 5.125%, 10/01/28 ................ 3,845,000 3,951,084 California Health Facilities Financing Authority Revenue, Catholic Healthcare West, Refunding, Series A, MBIA Insured, 6.00%, 7/01/17 ............. 5,000,000 5,553,200 Catholic Healthcare West, Series A, 5.00%, 7/01/28 ...................................... 15,000,000 13,864,650 Catholic Healthcare, Refunding, 5.00%, 7/01/28 .......................................... 10,000,000 9,512,200 Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 ...... 1,220,000 1,280,988 Kaiser Permanente, Series A, 5.40%, 5/01/28 ............................................. 15,400,000 15,737,568 Kaiser Permanente, Series B, 5.00%, 10/01/18 ............................................ 5,000,000 5,108,550 Kaiser Permanente, Series B, 5.00%, 10/01/20 ............................................ 4,000,000 4,033,840 Marshall Hospital, Series A, California Mortgage Insured, 5.30%, 11/01/28 ............... 3,325,000 3,338,499
30 |Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) California Health Facilities Financing Authority Revenue, (cont.) Northern California Presbyterian, 5.40%, 7/01/28 ........................................ $ 5,000,000 $ 5,045,500 Orange County Health Facility, Series A, California Mortgage Insured, 6.20%, 11/01/24 ....................................................... 3,435,000 3,755,176 Scripps Memorial Hospital, Series A, MBIA Insured, 6.40%, 10/01/12 ...................... 3,500,000 3,574,760 Senior Living, Aldersly, Series A, California Mortgage Insured, 5.25%, 3/01/32 .......... 2,000,000 1,994,020 Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/19 ................................... 1,700,000 1,794,571 Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/38 ................................... 4,000,000 4,050,280 The Help Group, CHFCLP Insured, 5.40%, 8/01/22 .......................................... 5,000,000 5,122,850 True to Life Children's Services, Series A, California Mortgage Insured, 5.625%, 9/01/25 ............................................................................... 1,250,000 1,297,237 UCSF-Stanford Health Care, Series A, FSA Insured, 5.00%, 11/15/28 ....................... 9,530,000 9,717,836 California Infrastructure and Economic Development Bank Revenue, Bay Area Toll Bridges, First Lien, Series A, AMBAC Insured, 5.00%, 7/01/33 .............. 8,460,000 8,704,579 California PCFA, PCR, Southern California Edison Co., Series C, MBIA Insured, 5.55%, 9/01/31 .......................................................................... 4,800,000 5,063,952 California Public School District Financing Authority Lease Revenue, Southern Kern USD, Series B, FSA Insured, Pre-Refunded, ETM, 5.90%, 9/01/26 .............. 1,615,000 1,934,318 California State Department of Water Resources Central Valley Project Revenue, Water System, Refunding, Series Q, MBIA Insured, 5.375%, 12/01/27 ............... 1,000,000 1,047,850 California State Department Water Resources Water Revenue, Series W, FSA Insured, 5.125%, 12/01/29 ............................................................ 5,000,000 5,182,100 California State GO, 5.00%, 10/01/27 ......................................................................... 30,790,000 30,241,630 AMBAC Insured, 6.30%, 9/01/06 ........................................................... 9,000,000 10,059,210 FGIC Insured, Pre-Refunded, 6.00%, 5/01/20 .............................................. 2,990,000 3,098,118 FSA Insured, 5.50%, 9/01/29 ............................................................. 34,500,000 36,844,965 MBIA Insured, 6.00%, 8/01/16 ............................................................ 210,000 219,624 MBIA Insured, 6.00%, 10/01/21 ........................................................... 65,000 66,348 MBIA Insured, 5.00%, 8/01/29 ............................................................ 20,250,000 20,658,037 Refunding, 5.125%, 6/01/31 .............................................................. 25,000,000 24,654,500 Refunding, FGIC Insured, 5.375%, 6/01/26 ................................................ 5,000,000 5,223,500 California State HFAR, Home Mortgage, Series L, MBIA Insured, 6.40%, 8/01/27 .............. 1,420,000 1,425,240 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 4,833,229 California State Public Works Board Lease Revenue, Department of Mental Health Hospital, Series A, AMBAC Insured, 5.00%, 12/01/21 ................................................................................ 4,100,000 4,309,018 12/01/26 ................................................................................ 5,675,000 5,835,489 California State University, Fresno, Auxiliary Residence Student Project Revenue, MBIA Insured, Pre-Refunded, 6.25%, 2/01/17 ............................................... 1,500,000 1,597,380 California State University Foundation Revenue, Monterey Bay, MBIA Insured, 5.35%, 6/01/31 .................................................................................. 2,000,000 2,133,160 California State University Los Angeles Auxiliary Services Inc. Revenue, MBIA Insured, 5.125%, 6/01/33 ............................................................ 3,200,000 3,304,256 California State University Revenue and Colleges, Systemwide, Series A, AMBAC Insured, 5.00%, 11/01/33 .......................................................................... 22,000,000 22,550,440
Semiannual Report| 31 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) California Statewide CDA, COP, California Mortgage Insured, 5.75%, 8/01/21 ........................................ $ 9,585,000 $ 10,497,971 COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 ................................... 12,250,000 12,379,360 COP, FSA Insured, 5.50%, 8/15/31 ........................................................ 7,000,000 7,527,450 COP, Kaiser Permanente, 5.30%, 12/01/15 ................................................. 9,700,000 10,130,777 COP, MBIA Insured, 5.00%, 4/01/18 ....................................................... 3,000,000 3,160,230 MFR, Silver Ridge Apartments, Series H, FNMA Insured, 5.80%, 8/01/33 .................... 2,785,000 2,995,574 Water and Wastewater Revenue, Pooled Financing Program, Series A, FSA Insured, 5.00%, ... 10/01/32 ............................................................................... 9,320,000 9,551,322 Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured, 5.65%, ... 10/01/26 ............................................................................... 3,420,000 3,781,426 Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured, 5.75%, ... 10/01/29 ............................................................................... 1,465,000 1,624,333 California Statewide CDA Revenue, ......................................................... Brentwood School, Series A, FSA Insured, 5.25%, 10/01/29 ................................ 7,625,000 7,961,644 COP, John Muir/Mt. Diablo Health System, MBIA Insured, 5.125%, 8/15/22 .................. 5,000,000 5,244,050 Hospital Monterey Peninsula, Series B, FSA Insured, 5.25%, 6/01/23 ...................... 2,000,000 2,104,480 Refunding, California Mortgage Insured, 5.00%, 8/01/21 .................................. 2,035,000 2,027,857 Cambria Community Services District Revenue COP, Wastewater Treatment System Upgrade, ..... MBIA Insured, Pre-Refunded, 6.90%, 11/01/24 .............................................. 1,000,000 1,067,420 Cambria Community Services District Water and Wastewater Revenue, Refunding, Series A, .... MBIA Insured, 6.00%, 5/01/15 ............................................................. 1,330,000 1,428,274 Campbell USD, GO, FSA Insured, 5.00%, 8/01/27 ............................................. 7,150,000 7,353,846 Castaic Lake Water Agency Revenue COP, Series A, MBIA Insured, 5.00%, 8/01/29 ............. 8,000,000 8,202,560 Chaffey Community College District GO, Series A, FSA Insured, 5.00%, 7/01/27 .............. 5,750,000 5,925,145 Chico PFAR, Merged Redevelopment Project Area, MBIA Insured, 5.125%, 4/01/24 .............. 2,790,000 2,902,855 Chino Basin Regional Financing Authority Revenue, Municipal Water District, Sewer System .. Project, Refunding, AMBAC Insured, 6.00%, 8/01/16 ........................................ 2,000,000 2,091,660 Chula Vista COP, MBIA Insured, 5.00%, 8/01/29 3,000,000 3,094,380 Chula Vista PFA, Local Agency Revenue, Series 1995-A, FSA Insured, 6.125%, 9/02/14 ........ 3,785,000 4,160,283 Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 ....................... 3,265,000 3,352,763 Coachella Valley Recreation and Park District 1915 Act, Reassessment District 94-1, ....... MBIA Insured, Pre-Refunded, 6.20%, 9/02/16 ............................................... 1,500,000 1,580,625 Contra Costa Mosquito Abatement District COP, Public Improvements Project, Refunding, ..... FSA Insured, 6.25%, 2/01/06 .............................................................. 815,000 817,747 Corona-Norco USD, COP, Refunding, FSA Insured, 5.125%, .................................... 4/15/25 ................................................................................. 5,355,000 5,526,949 4/15/29 ................................................................................. 2,540,000 2,615,971 Coronado CDA, Tax Allocation, Community Development Project, MBIA Insured, 5.375%, ........ 9/01/26 ................................................................................. 2,700,000 2,889,999 Cucamonga County Water District COP, FGIC Insured, 5.00%, 9/01/29 ......................... 5,070,000 5,205,825 Culver City USD, GO, MBIA Insured, ........................................................ 5.125%, 8/01/37 ......................................................................... 650,000 666,575 5.20%, 8/01/38 .......................................................................... 3,285,000 3,376,783 Delano USD, ............................................................................... COP, Refinancing Project, MBIA Insured, 5.125%, 1/01/22 ................................. 1,620,000 1,777,642 GO, Series A, FSA Insured, ETM, 6.10%, 5/01/17 .......................................... 1,065,000 1,089,303
32 |Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) East Bay MUD, Water System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 ............... $ 14,000,000 $ 14,356,160 El Dorado County Public Agency Financing Authority Revenue, FGIC Insured, 5.50%, .......... 2/15/16 ................................................................................. 2,250,000 2,448,000 2/15/21 ................................................................................. 3,500,000 3,772,370 El Monte Water Authority Revenue, Water System Project, AMBAC Insured, 5.60%, ............. 9/01/34 .................................................................................. 1,800,000 1,966,644 Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured, 5.125%, .......... 9/01/30 .................................................................................. 3,770,000 3,886,455 Escondido USD, GO, Series A, FSA Insured, 5.00%, 8/01/26 .................................. 11,665,000 12,000,369 Eureka USD, GO, FSA Insured, 5.00%, 8/01/25 ............................................... 4,145,000 4,278,510 Fairfield Suisun USD, GO, MBIA Insured, 5.00%, 8/01/27 .................................... 12,000,000 12,367,800 Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A, .. MBIA Insured, 5.00%, 3/01/33 ............................................................. 5,000,000 5,145,400 Folsom COP, Central Business District Fire Station, MBIA Insured, 5.125%, 10/01/26 ........ 2,030,000 2,122,466 Foothill/Eastern Corridor Agency Toll Road Revenue, senior lien, Refunding, Series A, ..... MBIA Insured, 5.00%, 1/01/35 ............................................................. 66,735,000 68,117,749 Franklin-McKinley School District COP, Financing Project, Series A, AMBAC Insured, 5.125%, 9/01/27 .................................................................................. 2,765,000 2,887,932 Fremont UHSD, Santa Clara County GO, Series C, FSA Insured, 5.00%, 9/01/26 ................ 10,000,000 10,289,500 Fresno USD, GO, ........................................................................... Refunding, Series C, MBIA Insured, 5.90%, 2/01/20 ....................................... 2,065,000 2,480,251 Refunding, Series C, MBIA Insured, 5.90%, 8/01/22 ....................................... 3,000,000 3,613,860 Series B, FSA Insured, ETM, 5.875%, 8/01/20 ............................................. 1,190,000 1,234,137 Fullerton University Foundation Auxiliary Organization Revenue, Series A, MBIA Insured, ... 5.75%, ................................................................................... 7/01/25 ................................................................................. 1,250,000 1,385,062 7/01/30 ................................................................................. 1,000,000 1,102,020 Glendale USD, GO, Series C, FSA Insured, 5.50%, 9/01/24 ................................... 2,750,000 2,967,085 Glendora PFAR, Tax Allocation, Project No. 1, Series A, MBIA Insured, 5.00%, 9/01/24 ...... 5,000,000 5,162,050 Grant Joint UHSD, GO, FSA Insured, 5.00%, 8/01/26 ......................................... 5,235,000 5,399,536 Grossmont UHSD, COP, FSA Insured, 5.75%, 9/01/26 .......................................... 2,250,000 2,489,445 Hemet USD, COP, Nutrition Center Project, FSA Insured, 5.875%, 4/01/27 .................... 1,250,000 1,382,688 Hercules COP, Capital Improvement Projects, Refunding, AMBAC Insured, 6.00%, .............. 6/01/15 .................................................................................. 125,000 127,500 Hollister RDA Tax Allocation, Community Development Project, Refunding, AMBAC Insured, .... 5.125%, 10/01/32 ......................................................................... 19,815,000 20,465,526 Huntington Beach City School District COP, MBIA Insured, 5.25%, 7/01/29 ................... 1,795,000 1,889,076 Jefferson San Mateo County UHSD, GO, Refunding, Series A, MBIA Insured, 6.45%, ............ 8/01/25 ................................................................................. 3,045,000 3,844,343 8/01/29 ................................................................................. 3,075,000 3,941,474 Jurupa Community Services District Special Tax, CFD No. 2, Series A, AMBAC Insured, ....... 5.00%, 9/01/32 ........................................................................... 7,000,000 7,172,480 Jurupa USD, COP, FSA Insured, 5.625%, 9/01/24 ............................................. 1,600,000 1,770,464 Kern Community College District COP, Refunding, MBIA Insured, 5.00%, 1/01/25 .............. 7,800,000 7,961,928 Kern County High School District GO, FSA Insured, ETM, 6.625%, ............................ 8/01/14 ................................................................................. 1,535,000 1,965,107 8/01/15 ................................................................................. 1,400,000 1,802,416
Semiannual Report| 33 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Lake Elsinore USD, COP, School Facilities Project, MBIA Insured, 5.00%, 9/01/26 ................................................................................ $ 1,585,000 $ 1,635,118 9/01/31 ................................................................................ 1,505,000 1,546,689 Lakewood PFA, Water Revenue, FGIC Insured, 5.70%, 4/01/16 ................................. 2,485,000 2,632,758 Lodi COP, Wastewater Treatment Project, Refunding, AMBAC Insured, 6.70%, 8/01/26 .......... 8,800,000 9,974,008 Lodi Electric System Revenue COP, Series A, MBIA Insured, Pre-Refunded, 5.50%, ............ 1/15/32 .................................................................................. 4,000,000 4,619,160 Lodi USD, GO, MBIA Insured, 5.00%, 8/01/23 ................................................ 2,150,000 2,231,872 Long Beach Bond Finance Authority Lease Revenue, .......................................... Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/19 ................ 4,000,000 4,254,840 Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/26 ................ 11,000,000 11,323,400 Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.25%, 11/01/30 ................ 2,000,000 2,111,060 Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/26 ....................... 6,780,000 6,979,332 Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/31 ....................... 10,500,000 10,770,375 Long Beach Bond Finance Authority Tax Allocation Revenue, North Long Beach ................ Redevelopment Projects, Series A, AMBAC Insured, 5.00%, .................................. 8/01/25 ................................................................................. 13,550,000 13,949,183 8/01/31 ................................................................................. 12,000,000 12,302,160 Long Beach Harbor Revenue, ................................................................ 5.125%, 5/15/18 ......................................................................... 3,625,000 3,673,611 MBIA Insured, 5.25%, 5/15/25 ............................................................ 25,000,000 25,475,500 Long Beach University School District GO, Election 1999, Series C, MBIA Insured, 5.125%, .. 8/01/31 .................................................................................. 13,870,000 14,286,239 Los Angeles Community College District, Series B, FSA Insured, 5.00%, 8/01/27 ............. 4,000,000 4,122,600 Los Angeles Community College District GO, Series A, MBIA Insured, 5.00%, 6/01/26 ......... 4,000,000 4,103,720 Los Angeles COP, .......................................................................... Municipal Improvement Corp. MICLA AW, AMBAC Insured, 5.00%, 6/01/27 ..................... 5,895,000 6,073,088 Real Property Program, MBIA Insured, 5.00%, 2/01/27 ..................................... 9,890,000 10,153,865 Los Angeles County COP, Antelope Valley Courthouse, Series A, AMBAC Insured, 5.25%, ....... 11/01/27 ................................................................................ 2,500,000 2,615,775 11/01/33 ................................................................................ 2,500,000 2,601,450 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 28,997,342 Proposition C, Refunding, Second Series A, AMBAC Insured, 5.00%, 7/01/23 ................ 22,400,000 23,092,608 Los Angeles Harbor Department Revenue, Series B, MBIA Insured, 6.20%, 8/01/25 ............. 2,500,000 2,747,600 Los Angeles Mortgage Revenue, Refunding, Series I, MBIA Insured, 6.50%, 7/01/22 ........... 1,970,000 2,003,372 Los Angeles USD, COP, Administration Building Project, Series B, AMBAC Insured, 5.00%, .... 10/01/31 ................................................................................. 16,525,000 16,906,893 Los Angeles Wastewater System Revenue, Refunding, MBIA, Insured, 5.00%, 6/01/26 ........... 10,000,000 10,309,800 Los Angeles Water and Power Revenue, Power System, Refunding, Series A, MBIA Insured, ..... 5.00%, 7/01/24 ........................................................................... 12,000,000 12,329,880 Lynwood PFA, .............................................................................. Tax Allocation, Project Area A, Series A, FSA Insured, 5.85%, 9/01/18 ................... 1,765,000 2,040,587 Water Revenue, Water System Improvement Project, MBIA Insured, 5.85%, 6/01/22 ........... 665,000 750,665 Water Revenue, Water System Improvement Project, MBIA Insured, 5.90%, 6/01/29 ........... 3,105,000 3,450,804 Mendocino County COP, Public Facilities Corp., MBIA Insured, 5.25%, 6/01/30 ............... 2,680,000 2,823,058 Menlo Park CDA, Tax Allocation, Las Pulgas Community Development Project, Refunding, ...... AMBAC Insured, 5.375%, 6/01/22 ........................................................... 10,000,000 10,650,500
34 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Metropolitan Water District Southern California Waterworks Revenue, Series A, MBIA Insured, 5.00%, 7/01/30 .................................................. $ 6,525,000 $ 7,299,648 Series C, MBIA Insured, 5.00%, 7/01/27 .................................................. 2,500,000 2,534,550 Millbrae COP, Police Department Expansion, AMBAC Insured, 5.875%, 3/01/24 ................. 1,025,000 1,151,813 Modesto Health Facilities Revenue, Memorial Hospital Association, Refunding, Series A, .... MBIA Insured, 6.00%, 6/01/18 ............................................................. 5,565,000 5,708,354 Modesto Irrigation District COP, Capital Improvements, Series A, FSA Insured, 5.00%, ...... 7/01/26 ................................................................................. 5,000,000 5,135,750 7/01/31 ................................................................................. 8,285,000 8,482,100 Modesto Wastewater Treatment Facility Revenue, MBIA Insured, 5.75%, 11/01/22 .............. 14,375,000 16,035,169 Montebello Community RDA, Tax Allocation, ................................................. Housing, Series A, FSA Insured, 5.45%, 9/01/19 ........................................... 1,100,000 1,203,026 Montebello Hills Redevelopment Project, Refunding, MBIA Insured, 5.60%, 3/01/19 ......... 2,460,000 2,619,310 Montebello COP, Capital Improvement Project, Refunding, FSA Insured, 5.375%, .............. 11/01/26 ................................................................................. 8,715,000 9,369,584 Morgan Hill USD, GO, FGIC Insured, 5.50%, 8/01/25 ......................................... 3,840,000 4,123,354 Mount Diablo USD, CFD No. 1, Special Tax, ................................................. FSA Insured, 6.00%, 8/01/24 .............................................................. 1,000,000 1,076,480 Refunding, AMBAC Insured, 5.75%, 8/01/15 ................................................ 1,000,000 1,111,230 Refunding, AMBAC Insured, 5.75%, 8/01/16 ................................................ 2,270,000 2,516,409 Refunding, AMBAC Insured, 5.375%, 8/01/19 ............................................... 7,290,000 7,804,966 Murrieta Valley USD, COP, MBIA Insured, 5.00%, 8/01/27 .................................... 2,380,000 2,452,947 Natomas USD, GO, FSA Insured, 5.00%, 9/01/26 .............................................. 2,535,000 2,615,157 Nevada Irrigation District Revenue COP, Cascade Bench Flume Project, MBIA Insured, 5.50%, . 1/01/17 .................................................................................. 4,600,000 5,060,460 Nevada Joint UHSD, Series A, FSA Insured, 5.00%, 8/01/26 .................................. 1,295,000 1,332,231 Norco RDA, Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured, 5.625%, ........ 3/01/30 .................................................................................. 1,000,000 1,090,280 North City West School Facilities Financing Authority Special Tax, Refunding, Series B, FSA Insured, ............................................................................. 5.75%, 9/01/15 .......................................................................... 1,260,000 1,414,463 6.00%, 9/01/19 .......................................................................... 2,500,000 2,791,300 Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded, 7.50%, ...... 7/01/23 .................................................................................. 3,200,000 4,410,848 Oakland Revenue, 1800 Harrison Foundation, Refunding, Series A, AMBAC Insured, 6.00%, ..... 1/01/29 .................................................................................. 10,000,000 11,276,300 Oceanside Community Development Commission COP, Public Parking Project, FSA Insured, ...... Pre-Refunded, 7.875%, 4/01/19 ............................................................ 3,940,000 4,083,219 Oceanside COP, ............................................................................ AMBAC Insured, 5.20%, 4/01/23 ........................................................... 2,500,000 2,638,625 Oceanside Civic Center Project, Refunding, MBIA Insured, 5.75%, 8/01/15 ................. 1,000,000 1,087,840 Waste Reuse Association Finance Project, Series A, AMBAC Insured, Pre-Refunded, ......... 6.50%, 10/01/17 ........................................................................ 2,180,000 2,228,025 Oroville PFA, Tax Allocation Revenue, Oroville Redevelopment Project No. 1, AMBAC Insured, 5.90%, 9/15/21 ......................................................................... 1,245,000 1,361,295 6.10%, 9/15/23 ......................................................................... 2,865,000 3,109,184 Oxnard Financing Authority Solid Waste Revenue, AMBAC Insured, 6.00%, 5/01/16 5,000,000 5,342,050 Oxnard UHSD, Series B, FSA Insured, ETM, 5.875%, 8/01/27 .................................. 3,615,000 3,902,176
Semiannual Report| 35 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Palm Springs Financing Authority Lease Revenue, Refunding, Convention Center Project, Series A, MBIA Insured, 5.00%, 11/01/25 .................................................. $ 2,295,000 $ 2,370,391 Paramount USD, COP, Master Lease Program, FSA Insured, Pre-Refunded, 6.30%, 9/01/26 .................................................................................. 4,750,000 5,229,180 Parlier USD, GO, Series B, AMBAC Insured, 6.00%, 6/01/16 .................................. 1,130,000 1,257,328 Pasadena Area Community College District GO, Election of 2002, Series A, FGIC Insured, 5.00%, 6/01/28 ........................................................................... 4,000,000 4,117,760 Pasadena USD, GO, Series B, FGIC Insured, 5.25%, 7/01/24 .................................. 1,000,000 1,051,540 Peralta Community College District GO, Election of 2000, Series B, MBIA Insured, 5.25%, 8/01/32 .................................................................................. 8,450,000 8,865,571 Perris CFD, Special Tax, No. 93-1, Series A, AMBAC Insured, 5.125%, 8/15/23 ............... 4,000,000 4,205,400 Petaluma COP, Refunding, Series A, AMBAC Insured, 5.625%, 8/01/13 ......................... 1,000,000 1,023,250 Placer County COP, Administrative and Emergency Services, MBIA Insured, 5.65%, 6/01/24 ...................... 4,000,000 4,354,040 Jail Kitchen Project, MBIA Insured, Pre-Refunded, 6.90%, 10/01/21 ....................... 3,745,000 3,980,935 Placer County Water Agency COP, FSA Insured, 5.90%, 7/01/25 ............................... 2,350,000 2,517,250 Plumas County COP, Capital Improvement Program, Series A, AMBAC Insured, 5.00%, 6/01/33 .................................................................................. 3,280,000 3,373,677 Porterville COP, Sewer System Refining Project, Refunding, AMBAC Insured, 5.25%, 10/01/23 ................................................................................. 3,000,000 3,168,690 Poway RDA, Tax Allocation, Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 ............................. 9,195,000 9,441,518 Refunding, MBIA Insured, 5.75%, 6/15/33 .................................................. 11,475,000 12,744,709 Rancho Cucamonga RDA, Tax Allocation, Rancho Redevelopment Project, Housing Set Aside, MBIA Insured, 5.25%, 9/01/26 .......................................... 2,000,000 2,084,380 Refunding, FSA Insured, 5.25%, 9/01/20 ................................................... 2,500,000 2,713,550 Redding Joint Powers Financing Authority Lease Revenue, Civic Center Project, Series A, MBIA Insured, 5.75%, 3/01/19 .......................................................................... 3,090,000 3,413,152 5.25%, 3/01/26 .......................................................................... 75,000 77,852 Redlands USD, Series B, FSA Insured, 6.25%, 6/01/19 ....................................... 2,115,000 2,180,565 Redwood City PFA, Local Agency Revenue, Series A, AMBAC Insured, 6.50%, 7/15/11 ........... 1,155,000 1,157,899 Redwood City School District GO, FGIC Insured, 5.00%, 7/15/27 ............................. 3,000,000 3,083,790 Ripon RDA, Tax Allocation, Community Redevelopment Project, MBIA Insured, 5.85%, 11/01/30 ................................................................................. 3,975,000 4,425,050 Riverside County COP, Historic Courthouse, MBIA Insured, 5.875%, 11/01/27 ................. 3,000,000 3,362,460 Riverside RDA, Lease Revenue, Series A, AMBAC Insured, 6.375%, 10/01/23 ........................................................................ 12,540,000 13,281,866 6.50%, 10/01/24 ......................................................................... 2,000,000 2,120,140 Rowland USD, GO, Series A, FSA Insured, 5.25%, 9/01/25 .................................... 5,685,000 5,965,612 Sacramento Area Flood Control Agency Special Assessment, Capital AD No. 2, FGIC Insured, 5.80%, 11/01/16 ......................................... 1,000,000 1,128,770 Operation and Maintenance, FGIC Insured, 5.80%, 11/01/16 ................................ 1,475,000 1,664,936 Operation and Maintenance, FGIC Insured, 5.90%, 11/01/25 ................................ 2,690,000 2,977,400 Sacramento City Financing Authority Revenue, Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/26 ........................... 8,395,000 8,608,569 Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/32 ........................... 21,500,000 21,965,905 City Hall and Redevelopment Projects, Series A, FSA Insured, 5.00%, 12/01/28 ............ 10,000,000 10,281,700
36 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Sacramento County Airport System Revenue, Series A, MBIA Insured, 6.00%, 7/01/17 .......... $ 5,920,000 $ 6,452,326 Salida Area Public Facilities Financing Agency, CFD, Special Tax No. 1988-1, FSA Insured, 5.75%, 9/01/30 ........................................................................... 3,435,000 3,792,343 Salida USD, COP, Financing Project, AMBAC Insured, 5.375%, 5/01/26 ........................ 1,645,000 1,653,570 San Bernardino County COP, 1997 Public Improvement Financing Project, MBIA Insured, 5.25%, 10/01/25 .......................................................................... 7,000,000 7,359,800 San Buenaventura Public Facilities Financing Authority Lease Revenue, Refunding, FSA Insured, 5.75%, 6/01/14 .............................................................. 2,250,000 2,434,545 San Carlos School District GO, MBIA Insured, 5.50%, 10/01/24 .............................. 2,110,000 2,283,885 San Diego IDR, San Diego Gas and Electric, Custodial Receipts, Series A, AMBAC Insured, 6.40%, 9/01/18 ........................................................................... 1,650,000 1,675,592 San Diego Public Facilities Financing Authority Sewer Revenue, Series B, FGIC Insured, 5.25%, 5/15/27 ........................................................................... 2,950,000 3,071,570 San Diego Public Facilities Financing Authority Water Revenue, Subordinated, MBIA Insured, 5.00%, 8/01/32 ........................................................................... 11,000,000 11,269,170 San Francisco BART, District Sales Tax Revenue, FGIC Insured, 5.50%, 7/01/26 ............................................................ 6,500,000 7,065,110 FGIC Insured, 5.50%, 7/01/34 ............................................................ 12,000,000 12,975,360 Refunding, AMBAC Insured, 5.00%, 7/01/28 ................................................ 8,000,000 8,173,120 San Francisco City and County Airport Commission International Airport Revenue, Issue 5, Second Series, FGIC Insured, 6.50%, 5/01/24 .................................... 6,900,000 7,133,772 Issue 8A, Second Series, FGIC Insured, 6.25%, 5/01/20 ................................... 3,500,000 3,583,230 Issue 9B, Second Series, FGIC Insured, Pre-Refunded, 6.00%, 5/01/25 ..................... 6,400,000 6,876,160 Issue 11, Second Series, FGIC Insured, Pre-Refunded, 6.00%, 5/01/11 ..................... 2,105,000 2,257,255 San Francisco City and County Airports Commission International Airport Revenue, Refunding, Second Series-28A, MBIA Insured, 5.125%, 5/01/24 ................................................................................. 9,745,000 10,006,556 5/01/27 ................................................................................. 16,575,000 16,939,816 San Francisco City and County Public Utilities Commission Water Revenue, Refunding, Series A, FSA Insured, 5.00%, 11/01/31 ................................................... 3,885,000 3,975,598 San Francisco Community College District GO, Series A, FGIC Insured, 5.00%, 6/15/26 ....... 6,000,000 6,149,280 San Francisco State University Foundation Inc. Auxiliary Organization Revenue Housing, MBIA Insured, 5.00%, 9/01/31 ............................................................. 13,415,000 13,755,204 San Gabriel USD, COP, Facilities Development Program, Series A, FSA Insured, Pre-Refunded, 6.00%, 9/01/15 ........................................................................... 1,000,000 1,095,990 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 ...................................... 18,075,000 19,033,337 Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 ....................................... 11,860,000 12,347,920 senior lien, MBIA Insured, 5.00%, 1/01/33 ............................................... 10,035,000 10,131,838 San Jose Financing Authority Lease Revenue, Civic Center Project, Refunding, Series B, AMBAC Insured, 5.00%, 6/01/32 ...................................... 30,015,000 30,737,461 Series B, AMBAC Insured, 5.00%, 6/01/27 ................................................. 10,000,000 10,275,700 San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 .......... 3,500,000 3,704,155 San Juan USD, GO, Election of 1998, Series A, MBIA Insured, 5.00%, 8/01/28 ................................ 5,115,000 5,267,785 Election of 2002, MBIA Insured, 5.00%, 8/01/28 .......................................... 17,000,000 17,507,790 San Leandro COP, Library and Fire Stations Financing, AMBAC Insured, 5.75%, 11/01/29 ...... 5,000,000 5,565,300
Semiannual Report| 37 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL 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 $ 5,944,969 5.80%, 10/01/30 ......................................................................... 7,800,000 8,677,032 San Ramon COP, Central Park Expansion Project, FSA Insured, Pre-Refunded, 7.20%, 2/01/25 .................................................................................. 5,110,000 5,390,999 Santa Ana Financing Authority Water Revenue, MBIA Insured, 6.125%, 9/01/24 ................ 1,000,000 1,026,990 Santa Clara COP, Refunding, AMBAC Insured, 5.00%, 2/01/27 ................................. 5,555,000 5,718,095 Santa Clara County Financing Authority Lease Revenue, Refunding, Series A, AMBAC Insured, 5.00%, 11/15/22 .......................................................................... 3,950,000 4,124,906 Santa Cruz County COP, Sub-Joint Wastewater Treatment Project, AMBAC Insured, 6.20%, 9/01/19 .................................................................................. 475,000 487,934 Santa Fe Springs PFA, Water Revenue, Series A, MBIA Insured, 5.90%, 5/01/21 ................................................................................. 900,000 1,001,574 5/01/26 ................................................................................. 1,190,000 1,307,608 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 24,012,000 Santa Monica Community College District GO, Series B, AMBAC Insured, 5.75%, 7/01/20 ....... 1,495,000 1,614,495 Santa Rosa High School District GO, FGIC Insured, 5.90%, 5/01/16 ............................................................ 1,000,000 1,035,040 Refunding, FSA Insured, 5.75%, 5/01/18 .................................................. 1,050,000 1,086,120 Santa Rosa Wastewater Revenue, Series B, FGIC Insured, 5.125%, 9/01/31 .................... 4,000,000 4,151,160 Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement, AMBAC Insured, 6.00%, 7/02/15 ............................................................ 2,000,000 2,429,440 Sonoma CDA Tax Allocation, Redevelopment Project, MBIA Insured, 5.70%, 12/01/30 ........... 3,455,000 3,838,851 Sonoma Valley USD, GO, FSA Insured, 6.00%, 7/15/21 ........................................ 2,400,000 2,630,544 South Gate COP, Series A, AMBAC Insured, 5.00%, 9/01/24 ................................... 3,155,000 3,279,023 South San Francisco COP, 5.00%, 4/01/29 ................................................... 2,000,000 2,009,500 Southern Mono Health Care District GO, Series A, MBIA Insured, 5.00%, 8/01/24 ............. 3,005,000 3,082,799 Southern Public Power Authority Power Projects Revenue, Series A, AMBAC Insured, 5.00%, 7/01/33 .................................................................................. 29,000,000 29,771,110 Stanislaus County Board of Education COP, FSA Insured, 5.70%, 9/01/24 ..................... 2,000,000 2,204,500 Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series B, FSA Insured, 5.90%, 7/01/12 .............................................................. 3,035,000 3,435,286 Stockton Revenue COP, Wastewater System Project, Refunding, Series A, MBIA Insured, 5.00%, 9/01/23 ........................................................................... 6,500,000 6,699,745 Susanville PFAR, MBIA Insured, 5.70%, 6/01/30 ............................................. 3,000,000 3,290,850 Tahoe-Truckee Joint USD, Series B, FGIC Insured, 5.95%, 9/01/20 ........................... 3,620,000 4,064,283 Tahoe-Truckee USD, GO, ID No. 2, Series A, FGIC Insured, Pre-Refunded, 5.75%, 8/01/20 ..... 4,340,000 5,131,659 Tehachapi Water and Sewer Revenue, Refunding, MBIA Insured, 6.75%, 11/01/20 ............... 2,000,000 2,127,220 Thousand Oaks RDA, Tax Allocation, Thousand Oaks Boulevard Redevelopment, Refunding, MBIA Insured, 5.375%, 12/01/25 ........................................................... 2,390,000 2,501,517 Tri-City Hospital District Revenue, MBIA Insured, 6.00%, 2/01/22 ............................................................ 2,350,000 2,416,529 Refunding, Series A, MBIA Insured, 5.625%, 2/15/17 ...................................... 2,750,000 2,996,070 Truckee PFA, Lease Revenue, Series A, AMBAC Insured, 6.00%, 11/01/30 ...................... 1,990,000 2,248,123
38 |Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Turlock Auxiliary Organization Revenue COP, California State University, Stanislaus Foundation, MBIA Insured, 5.875%, 6/01/22 ............................................... $ 2,000,000 $ 2,214,500 Turlock PFA, Sewer Revenue, FGIC Insured, 5.50%, 9/15/29 6,855,000 7,438,977 Union City CRDA, Tax Allocation Revenue, Community Redevelopment Project, ................. AMBAC Insured, 5.75%, 10/01/32 ........................................................... 14,100,000 15,733,626 University of California Revenue, ......................................................... Multi Purpose, Series K, 5.00%, 9/01/23 ................................................. 3,160,000 3,256,538 Multi Purpose Projects, Series H, FGIC Insured, 5.50%, 9/01/28 .......................... 2,500,000 2,668,875 Multi Purpose Projects, Series M, FGIC Insured, 5.125%, 9/01/30 ......................... 8,720,000 9,021,276 Vacaville PFA Tax Allocation Revenue, Vacaville Redevelopment Projects, FSA Insured, ...... 5.00%, 9/01/31 ........................................................................... 5,095,000 5,195,270 Vallejo Revenue, Water Improvement Project, Refunding, Series A, FSA Insured, 5.875%, ..... 5/01/26 12,500,000 13,803,625 Vista USD, GO, Series A, FSA Insured, 5.25%, 8/01/25 ...................................... 5,000,000 5,253,150 Washington Township Hospital District Revenue, HealthCare District Revenue, ............... 5.00%, 7/01/18 .......................................................................... 2,000,000 2,024,900 5.125%, 7/01/23 ......................................................................... 450,000 452,358 Washington USD, GO, Yolo County Election of 1999, Series A, FGIC Insured, 5.375%, ......... 8/01/25 ................................................................................. 2,045,000 2,181,483 Waugh School District Special Tax GO, Corona/Ely CFD No. 1, AMBAC Insured, 5.80%, ......... 9/01/26 .................................................................................. 5,640,000 6,067,738 West Basin Municipal Water District Revenue COP, .......................................... 1992 Project, Refunding, Series A, AMBAC Insured, 5.50%, 8/01/17 ........................ 3,370,000 3,732,983 Refunding, Series A, MBIA Insured, 5.00%, 8/01/24 ....................................... 2,500,000 2,589,550 West Sacramento Financing Authority Revenue, MBIA Insured, Pre-Refunded, 6.25%, ........... 9/01/16 .................................................................................. 4,185,000 4,410,697 Westlands Water District Revenue COP, MBIA Insured, 5.00%, 9/01/29 ........................ 11,775,000 12,119,537 William S. Hart Joint School Financing Authority Special Tax Revenue, Community Facilities, Refunding, FSA Insured, 6.60%, 9/01/18 ................................................... 1,285,000 1,409,684 Windsor Joint Powers Financing Authority Wastewater Revenue, Refunding, Series A, ......... AMBAC Insured, 6.125%, 12/15/12 .......................................................... 750,000 797,835 Woodland Finance Authority Lease Revenue, Refunding and Capital Projects, XLCA Insured, ... 5.00%, 3/01/32 ........................................................................... 6,340,000 6,531,024 Yucaipa-Sweetwater School Facilities Financing Authority Special Tax Revenue, Sweetwater, . Series A, MBIA Insured, 5.70%, 9/01/19 ................................................... 4,000,000 4,335,280 --------------- TOTAL BONDS (COST $1,773,166,781) ......................................................... 1,906,493,111 --------------- ZERO COUPON/STEP-UP BONDS 4.8% Acalanes UHSD, GO, Capital Appreciation, Election of 2002, Series A, FGIC Insured, 8/01/25 .................................................................................. 9,045,000 2,767,318 California HFAR, Home Mortgage, Series N, AMBAC Insured, 8/01/31 .......................... 3,235,000 2,235,385
Semiannual Report| 39 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) ZERO COUPON/STEP-UP BONDS (CONT.) Corona-Norco USD, GO, Series B, FSA Insured, 9/01/23 .......................................................... $ 2,320,000 $ 857,356 Series B, FSA Insured, 9/01/24 .......................................................... 2,620,000 907,516 Series B, FSA Insured, 3/01/25 .......................................................... 1,400,000 462,994 Series C, FGIC Insured, 9/01/25 ......................................................... 4,655,000 1,499,748 Series C, FGIC Insured, 9/01/26 ......................................................... 6,080,000 1,859,021 Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, MBIA Insured, 1/15/17 ................................................................................. 20,000,000 10,469,200 1/15/18 ................................................................................. 25,000,000 12,268,750 1/15/19 ................................................................................. 5,970,000 2,747,752 Fullerton School District GO, Capital Appreciation, Series A, FGIC Insured, 8/01/23 ....... 3,030,000 1,124,463 Lancaster School District GO, Capital Appreciation, Election of 1999, MBIA Insured, 8/01/25 ................................................................................. 5,495,000 1,778,017 7/01/26 ................................................................................. 5,965,000 1,835,788 Newark USD, GO, Capital Appreciation, Series B, FGIC Insured, 8/01/24 9,905,000 3,144,045 Series C, FSA Insured, 8/01/22 .......................................................... 2,165,000 785,007 Series C, FSA Insured, 8/01/23 .......................................................... 2,465,000 836,769 Series C, FSA Insured, 8/01/24 .......................................................... 2,560,000 814,925 Series C, FSA Insured, 8/01/25 .......................................................... 2,705,000 805,684 Patterson Joint USD, GO, Series A, FGIC Insured, 8/01/22 ................................................................................. 1,900,000 751,203 8/01/23 ................................................................................. 1,985,000 736,653 8/01/24 ................................................................................. 2,075,000 721,809 8/01/25 ................................................................................. 2,170,000 702,147 8/01/26 ................................................................................. 2,265,000 694,041 San Bernardino County SFMR, Series A, GNMA Secured, ETM, 5/01/22 .......................... 28,405,000 11,514,819 San Gabriel USD GO, Capital Appreciation, Series A, FSA Insured, 8/01/26 ................................................................................. 3,530,000 1,081,663 2/01/27 ................................................................................. 1,850,000 550,967 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, Series A, MBIA Insured, 1/15/26 .............................................. 13,155,000 4,147,640 San Marino USD, GO, Series A, MBIA Insured, 7/01/25 ....................................... 6,080,000 1,976,000 Santa Ana USD, COP, Capital Appreciation Financing Project, FSA Insured, 4/01/24 .......... 14,245,000 5,040,878 Southern Kern USD, COP, Convertible Capital Appreciation Building Program, Series B, FSA Insured, 9/01/26 ..................................................................... 2,250,000 2,064,128 Southern Mono Health Care District Revenue, Capital Appreciation Bonds, Series A, MBIA Insured, 8/01/28 ................................................................................. 2,340,000 627,401 8/01/29 ................................................................................. 2,440,000 618,540 8/01/30 ................................................................................. 2,550,000 611,057 8/01/31 ................................................................................. 2,660,000 602,437
40 |Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) ZERO COUPON/STEP-UP BONDS (CONT.) Union Elementary School District GO, Capital Appreciation, Series A, FGIC Insured, 9/01/24 ......................................................... $ 2,000,000 $ 692,760 Series B, FGIC Insured, 9/01/25 ......................................................... 5,500,000 1,771,990 Series B, FGIC Insured, 9/01/26 ......................................................... 5,850,000 1,784,718 Vista USD, GO, Capital Appreciation, Series A, FSA Insured, ............................... 8/01/26 ................................................................................. 7,150,000 2,190,903 2/01/27 ................................................................................. 4,795,000 1,428,047 Western Placer USD, Financing Corp. COP, Convertible Capital Appreciation, zero cpn. to 11/01/05, 5.55% thereafter, 11/01/30 ..................................................... 11,890,000 10,895,996 --------------- TOTAL ZERO COUPON/STEP-UP BONDS (COST $88,302,314) ........................................ 98,405,535 --------------- TOTAL LONG TERM INVESTMENTS (COST $1,861,469,095) ......................................... 2,004,898,646 --------------- SHORT TERM INVESTMENTS 2.0% a California State Department Water Resources Power Supply Revenue, Series B-6, Daily VRDN and Put, 1.27%, 5/01/22 ....................................................... 10,000,000 10,000,000 a California State GO, Series A-3, Daily VRDN and Put, 1.26%, 5/01/33 ...................... 2,400,000 2,400,000 a Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Weekly VRDN and Put, 1.27%, 7/01/35 ...................................................... 4,200,000 4,200,000 a Metropolitan Water District Southern California Waterworks Revenue, Refunding, Series B-1, Daily VRDN and Put, 1.27%, 7/01/35 .......................................... 24,000,000 24,000,000 Series B-3, Daily VRDN and Put, 1.26%, 7/01/35 .......................................... 1,000,000 1,000,000 --------------- TOTAL SHORT TERM INVESTMENTS (COST $41,600,000) .......................................... 41,600,000 --------------- TOTAL INVESTMENTS (COST $1,903,069,095) 98.8% ............................................ 2,046,498,646 OTHER ASSETS, LESS LIABILITIES 1.2% ...................................................... 24,913,520 --------------- NET ASSETS 100.0% ........................................................................ $2,071,412,166 --------------- 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.
Semiannual Report | See notes to financial statements. | 41 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED JUNE 30, CLASS A (UNAUDITED) 2003 2002 2001 2000 1999 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .............. $11.74 $11.41 $11.25 $10.92 $11.02 $11.24 ------------------------------------------------------------------------- Income from investment operations: Net investment income a .......................... .22 .44 .47 .51 .52 .51 Net realized and unrealized gains (losses) ....... (.11) .34 .17 .34 (.10) (.21) ------------------------------------------------------------------------- Total from investment operations .................. .11 .78 .64 .85 .42 .30 Less distributions from net investment income ..... (.22) (.45) (.48) (.52) (.52) (.52) ------------------------------------------------------------------------- Net asset value, end of period .................... $11.63 $11.74 $11.41 $11.25 $10.92 $11.02 ------------------------------------------------------------------------- Total return b .................................... .98% 6.92% 5.80% 7.86% 3.95% 2.63% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................. $396,040 $414,558 $324,061 $224,156 $186,880 $192,547 Ratios to average net assets: Expenses ......................................... .67% c .68% .68% .60% .60% .60% Expenses excluding waiver and payments by affiliate ....................................... .67% c .68% .70% .72% .74% .75% Net investment income ............................ 3.76% c 3.80% 4.13% 4.56% 4.79% 4.50% Portfolio turnover rate ........................... 8.42% 9.56% 12.05% 8.02% 10.29% 5.48% a Based on average daily shares outstanding. b Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. c Annualized.
42 |Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND (CONTINUED)
------------ SIX MONTHS ENDED DECEMBER 31, 2003 C CLASS C (UNAUDITED) ------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .................................... $11.73 ------------ Income from investment operations: Net investment income a ................................................ .19 Net realized and unrealized gains (losses) ............................. (.08) ------------ Total from investment operations ........................................ .11 Less distributions from net investment income ........................... (.19) ------------ Net asset value, end of period .......................................... $11.65 ------------ Total return b .......................................................... .95% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ....................................... $6,093 Ratios to average net assets: Expenses ............................................................... 1.22% d Net investment income .................................................. 3.21% d Portfolio turnover rate ................................................. 8.42% a Based on average daily shares outstanding. b Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. c For the period July 1, 2003 (effective date) to December 31, 2003. d Annualized.
Semiannual Report|See notes to financial statements.| 43 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 97.9% BONDS 92.7% ABAG Finance Authority for Nonprofit Corps. COP, Partner North County Health Project, 5.50%, 3/01/06 ............................ $ 485,000 $ 508,833 Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/15 ......... 3,000,000 3,147,810 ABAG Finance Authority for Nonprofit Corps. Revenue, San Diego Hospital Association, Series C, 5.125%, 3/01/18 ................................................................ 2,695,000 2,677,402 5.25%, 3/01/19 ................................................................. 1,315,000 1,313,540 ABAG Revenue, Refunding, Series A-E, 5.00%, 9/15/06 ................................................................. 600,000 615,486 5.05%, 9/15/07 ................................................................. 615,000 630,639 5.40%, 9/15/14 ................................................................. 2,455,000 2,508,151 ABAG Water and Wastewater Revenue, Pooled Financing Program, Series A, FSA Insured, 5.00%, 10/01/10 ....................................................... 3,035,000 3,406,848 Alameda County COP, Series 1994, 5.90%, 4/01/04 ................................ 440,000 444,690 Alameda-Contra Costa Transportation District COP, Refunding, AMBAC Insured, 4.375%, 8/01/14 ................................................................ 1,330,000 1,397,378 4.50%, 8/01/16 ................................................................. 1,705,000 1,772,586 Antelope Valley UHSD, GO, Series A, MBIA Insured, 4.50%, 8/01/13 ................................................................. 1,230,000 1,334,255 4.625%, 8/01/14 ................................................................ 1,250,000 1,352,912 Antioch PFA, Reassessment Revenue, sub. lien, Series B, 5.20%, 9/02/05 ................................................................. 1,985,000 2,063,110 5.40%, 9/02/07 ................................................................. 1,105,000 1,166,294 Brentwood Infrastructure Financing Authority Infrastructure Revenue, CIFP 94-1, 5.30%, 9/02/08 ................................................................. 915,000 943,704 5.35%, 9/02/09 ................................................................. 700,000 721,749 5.40%, 9/02/10 ................................................................. 905,000 932,928 5.45%, 9/02/11 ................................................................. 910,000 938,064 5.50%, 9/02/12 ................................................................. 900,000 927,648 Burbank Electric Revenue, MBIA Insured, 4.00%, 6/01/12 .......................... 1,000,000 1,048,730 Burbank USD, GO, Election of 1997, Series C, FGIC Insured, 4.00%, 8/01/12 ....... 2,500,000 2,623,925 Burbank Water and Electric Revenue, MBIA Insured, 4.00%, 6/01/11 ................ 1,000,000 1,067,290 Burbank Water and Power Electric Revenue, MBIA Insured, 4.00%, 6/01/11 .......... 5,045,000 5,068,308 California Educational Facilities Authority Revenue, Pooled College and University Projects, Series B, 6.125%, 4/01/13 .............. 1,000,000 1,097,470 Stanford University, Refunding, Series R, 4.00%, 11/01/11 ...................... 1,000,000 1,065,610 California Health Facilities Financing Authority Revenue, Kaiser Permanente, Series B, 5.25%, 10/01/13 ................................... 5,000,000 5,308,350 Kaiser Permanente, Series B, 5.25%, 10/01/14 ................................... 2,000,000 2,111,820 Kaiser Permanente, Series B, 5.25%, 10/01/16 ................................... 3,850,000 4,027,985 Paradise Valley Estates, California Mortgage Insured, 3.875%, 1/01/09 .......... 1,555,000 1,603,018 Paradise Valley Estates, California Mortgage Insured, 4.125%, 1/01/10 .......... 1,000,000 1,032,940 Paradise Valley Estates, California Mortgage Insured, 5.00%, 1/01/11 ........... 1,480,000 1,589,002 Paradise Valley Estates, California Mortgage Insured, 4.375%, 1/01/12 .......... 1,000,000 1,024,040 Paradise Valley Estates, California Mortgage Insured, 5.00%, 1/01/13 ........... 1,815,000 1,928,329 Paradise Valley Estates, California Mortgage Insured, 5.00%, 1/01/14 ........... 1,635,000 1,722,047 Sutter Health, Refunding, Series A, MBIA Insured, 5.875%, 8/15/16 .............. 3,750,000 4,225,687 The Episcopal Home, California Mortgage Insured, 4.625%, 2/01/12 ............... 1,350,000 1,405,768 The Episcopal Home, California Mortgage Insured, 4.75%, 2/01/13 ................ 1,200,000 1,247,244
44 |Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) California HFAR, SFM Purchase, Class III, Series A-1, MBIA Insured, 5.70%, 8/01/11 $ 1,160,000 $ 1,204,428 California State Department of Water Resources Central Valley Project Revenue, Water System, Refunding, Series S, 5.00%, 12/01/19 ............................. 4,000,000 4,195,080 California State Department of Water Resources Power Supply Revenue, Series A, 5.50%, 5/01/12 ................................................................. 2,000,000 2,240,460 5.125%, 5/01/18 ................................................................ 2,500,000 2,613,825 California State Department Water Resources Water Revenue, Central Valley Project, Series Z, FGIC Insured, 3.50%, 12/01/12 ............................... 5,000,000 5,064,900 California State GO, 5.25%, 2/01/14 ................................................................. 4,000,000 4,311,680 5.25%, 6/01/16 ................................................................. 2,000,000 2,083,260 Refunding, 5.00%, 12/01/05 ..................................................... 7,000,000 7,383,320 Refunding, 4.00%, 2/01/10 ...................................................... 6,900,000 7,075,674 Refunding, 5.00%, 11/01/12 ..................................................... 2,000,000 2,133,040 Refunding, MBIA Insured, 5.00%, 2/01/18 ........................................ 1,175,000 1,240,483 Veterans, Series B, 5.00%, 12/01/12 ............................................ 2,000,000 2,037,740 Veterans, Series B, 5.25%, 12/01/15 ............................................ 2,310,000 2,391,889 Veterans, Series B, 5.375%, 12/01/16 ........................................... 605,000 613,016 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 1,024,030 Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 ......... 1,325,000 1,329,054 Various Community College Projects, Refunding, Series C, 5.50%, 9/01/09 ........ 1,555,000 1,685,853 California Statewide CDA Revenue, Insured Health Facilities, Jewish Home, 5.00%, 11/15/18 ........................ 3,000,000 3,055,950 Mission Community, California Mortgage Insured, 4.40%, 11/01/10 ................ 1,100,000 1,150,710 Mission Community, California Mortgage Insured, 4.50%, 11/01/11 ................ 1,145,000 1,200,303 a Viewpoint School, 4.50%, 10/01/17 .............................................. 460,000 455,786 a Viewpoint School, 4.75%, 10/01/18 .............................................. 480,000 482,376 California Statewide CDA, COP, California Lutheran Homes, ETM, 5.375%, 11/15/06 ............................... 1,000,000 1,100,320 Kaiser Permanente, 5.30%, 12/01/15 ............................................. 2,000,000 2,088,820 St. Joseph Health System, Refunding, 5.00%, 7/01/12 ............................ 2,180,000 2,312,457 St. Joseph Health System Obligation Group, 5.25%, 7/01/11 ...................... 1,005,000 1,084,294 Central Joint Powers Health Financing Authority COP, Community Hospitals of Central California, 5.125%, 2/01/13 ................................................................ 1,375,000 1,422,217 5.25%, 2/01/14 ................................................................. 1,435,000 1,482,585 5.75%, 2/01/16 ................................................................. 1,585,000 1,673,839 Central Valley Financing Authority Cogeneration Project Revenue, Carson Ice General Project, Refunding, MBIA Insured, 5.00%, 7/01/17 ....................... 2,000,000 2,124,380 Cerritos Community College District, COP, AMBAC Insured, 4.00%, 9/01/13 ......... 1,000,000 1,036,680 Cerritos PFAR, Tax Allocation, Redevelopment Project, Series A, AMBAC Insured, 3.00%, 11/01/11 ................................................................ 2,585,000 2,561,787 Chaffey Community College District COP, 5.10%, 9/01/13 .......................... 1,860,000 2,128,175 Clovis MFR, Refunding, FNMA Insured, 5.10%, 11/01/30 ............................ 4,105,000 4,458,687 Clovis PFA Water Revenue, AMBAC Insured, 4.00%, 3/01/14 .................................................. 1,575,000 1,623,699 Refunding, AMBAC Insured, 3.25%, 3/01/09 ....................................... 1,000,000 1,038,480
Semiannual Report| 45 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Coalinga COP, Custody Facility, Refunding, 4.25%, 4/01/10 ....................... $ 1,000,000 $ 1,051,380 Coastside County Water District 1915 Act GO, Crystal Springs Project, Refunding, 5.20%, 9/02/04 ................................................................. 885,000 896,240 5.40%, 9/02/06 ................................................................. 520,000 525,476 Colma 1915 Act Special Assessment, Local ID No. 1, Refunding, 5.30%, 9/02/04 ................................................................. 545,000 546,875 5.40%, 9/02/05 ................................................................. 570,000 571,995 Colton PFAR, Electric Generation Facility Project, AMBAC Insured, 4.50%, 4/01/17 ................................................................. 1,860,000 1,925,937 4.50%, 4/01/18 ................................................................. 1,945,000 2,000,180 4.75%, 4/01/19 ................................................................. 2,030,000 2,109,799 Commerce Joint Powers Financing Authority Water Facilities Lease Revenue, Refunding, Series A, 5.75%, 10/01/04 ........................................... 470,000 485,971 Compton COP, Civic Center and Capital Improvement, Refunding, Series A, 5.00%, 9/01/08 ................................................................. 4,340,000 4,722,050 5.50%, 9/01/15 ................................................................. 1,180,000 1,243,873 Contra Costa Community College District GO, Election 2002, FGIC Insured, 4.75%, 8/01/18 ........................................................................ 2,450,000 2,565,836 Contra Costa County Public Financing Lease Revenue, Refunding, Series B, MBIA Insured, 4.00%, 6/01/13 ................................................... 1,065,000 1,107,387 Corona PFA, Lease Revenue, City Hall Project, Series B, MBIA Insured, 3.75%, 9/01/13 ................................................................. 1,000,000 1,022,240 4.00%, 9/01/14 ................................................................. 1,210,000 1,245,671 Danville Financing Authority Revenue, Sycamore Valley, Reassessment District No. 93-2, 5.80%, 9/02/04 ....................................................... 725,000 745,779 Duarte RDA, Tax Allocation, Merged Redevelopment Project Area, Refunding, 5.125%, 10/01/16 ....................................................................... 4,930,000 5,250,795 Eden Township Hospital District Health Facilities Revenue COP, Eden Hospital Health Services Corp., Refunding, California Mortgage Insured, 5.75%, 7/01/12 .. 1,195,000 1,221,804 Fairfax School District GO, Election of 2000, Series A, FGIC Insured, 5.00%, 11/01/17 ................................................................ 905,000 1,006,423 Fairfield-Suisun Sewer District Sewer Revenue, Series A, Refunding, FGIC Insured, 5.00%, 5/01/12 ................................................................. 600,000 663,330 Folsom PFA Lease Revenue, City Hall and Community Center, Refunding, FSA Insured, 5.00%, 10/01/17 ................................................................ 1,275,000 1,383,146 Foothill/Eastern Corridor Agency Toll Road Revenue, Refunding, MBIA Insured, 5.00%, 1/15/16 ................................................................. 1,000,000 1,072,600 Fremont UHSD, Santa Clara County GO, Series C, FSA Insured, 4.25%, 9/01/13 ...... 1,310,000 1,387,775 Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement Project, 5.00%, 4/01/12 ............................................ 2,390,000 2,500,394 Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%, 9/01/12 ................................................................. 1,955,000 2,079,182 Garden Grove Agency Community Development, Tax Allocation, Garden Grove Community Project, Refunding, AMBAC insured, 4.25%, 10/01/13 ................... 2,025,000 2,157,921 Golden State Tobacco Securitization Corp., Tobacco Settlement Revenue, 5.00%, 6/01/12 ................................................................. 1,500,000 1,581,990 Hayward RDA, Tax Allocation, Downtown Hayward Redevelopment Project, Refunding, 5.70%, 3/01/14 ................................................................. 1,500,000 1,536,840
46 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Hi Desert Memorial Health Care District Revenue, Refunding, 5.10%, 10/01/06 ................................................................ $ 615,000 $ 617,128 5.125%, 10/01/07 ............................................................... 650,000 650,273 Hollister RDA, Tax Allocation, Community Development Project, Series 1994, 5.45%, 10/01/04 ................................................................ 550,000 567,897 5.55%, 10/01/05 ................................................................ 585,000 605,399 Huntington Beach City School District GO, Series A, FGIC Insured, 5.00%, 8/01/18 1,245,000 1,326,423 Huntington Beach PFAR, Lease Capital Improvement Refinancing Project, Series B, AMBAC Insured, 4.00%, 8/01/13 ................................................................. 1,500,000 1,566,720 4.125%, 8/01/14 ................................................................ 2,140,000 2,230,222 4.25%, 8/01/15 ................................................................. 2,080,000 2,164,635 Industry GO, Refunding, MBIA Insured, 4.00%, 7/01/13 ............................ 4,000,000 4,125,680 Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 .................. 1,000,000 1,171,420 Irvine 1915 Act, Special Assessment, AD, No. 00-18, Group 2, 4.375%, 9/02/10 ....................................................... 885,000 893,354 Group 2, 4.70%, 9/02/12 ........................................................ 1,475,000 1,490,606 Group 2, 4.80%, 9/02/13 ........................................................ 1,175,000 1,187,373 Group 2, 5.125%, 9/02/17 ....................................................... 1,705,000 1,699,084 Group 3, 4.75%, 9/02/15 ........................................................ 1,000,000 994,550 Group 3, 5.00%, 9/02/17 ........................................................ 1,000,000 999,250 Kings River Conservation District Pine Flat Power Revenue, Refunding, Series E, 5.125%, 1/01/18 ................................................................ 1,735,000 1,849,649 La Palma Community Development Commission Tax Allocation, La Palma Community Development Project No. 1, Refunding, 5.70%, 6/01/04 ................................................................. 150,000 152,309 5.80%, 6/01/05 ................................................................. 160,000 164,253 La Quinta RDA, Tax Allocation, Redevelopment Project Areas No. 1 and 2, MBIA Insured, 5.40%, 9/01/07 ........................................................ 560,000 605,181 Lake Elsinore PFA, Tax Allocation Revenue, Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.40%, 9/01/08 .... 1,500,000 1,531,635 Series A, 5.00%, 9/01/09 ....................................................... 1,755,000 1,888,871 Lake Elsinore School Financing Authority Revenue, Refunding, 6.00%, 9/01/11 ..... 1,000,000 1,098,840 Lancaster COP, School District Project, Refunding, FSA Insured, 5.125%, 4/01/14 . 2,000,000 2,198,840 Lancaster RDA, Tax Allocation, Central Business District Redevelopment, Refunding, 5.70%, 8/01/04 ............. 45,000 45,587 Central Business District Redevelopment, Refunding, 5.70%, 8/01/05 ............. 50,000 50,641 Fox Field Redevelopment Project Area, Refunding, 5.70%, 8/01/04 ................ 70,000 70,920 Fox Field Redevelopment Project Area, Refunding, 5.70%, 8/01/05 ................ 75,000 75,962 Las Virgenes USD, GO, Series D, FGIC Insured, 3.30%, 9/01/13 .................... 1,415,000 1,397,652 Lemon Grove CDA, Tax Allocation, 1998 Refunding, 5.00%, 8/01/06 ................................................................. 555,000 589,454 5.10%, 8/01/07 ................................................................. 205,000 220,689 5.20%, 8/01/08 ................................................................. 215,000 233,045 Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series A, 3.00%, 8/15/12 ....................................................... 4,525,000 4,413,957
Semiannual Report | 47 47 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Los Angeles County MTA Sales Tax Revenue, First Tier Proposition A, Refunding, Series A, FSA Insured, 5.00%, 7/01/15 .......................................... $ 5,345,000 $ 5,775,059 Los Angeles USD COP, Capital Project, Series B, AMBAC Insured, 5.00%, 8/01/18 ... 1,085,000 1,166,961 Los Angeles USD, GO, Refunding, MBIA Insured, 5.25%, 7/01/13 .................... 3,500,000 4,005,995 Los Angeles Wastewater System Revenue, Series A, FGIC Insured, 5.00%, 6/01/14 ... 1,075,000 1,163,193 Lynwood PFAR, Water System Improvement Project, 6.15%, 6/01/08 .................. 565,000 604,070 M-S-R Public Power Agency San Juan Project Revenue, Refunding, Series I, MBIA Insured, 4.25%, 7/01/11 ................................................................. 5,055,000 5,447,723 5.00%, 7/01/18 ................................................................. 1,000,000 1,061,480 a Manteca USD Special Tax, CFD, No. 89-1, AMBAC Insured, 2.50%, 9/01/08 ........... 250,000 251,530 Metropolitan Water District Southern California GO, Waterworks, Refunding, 3.75%, 3/01/14 ................................................................. 2,515,000 2,550,260 4.00%, 3/01/15 ................................................................. 2,560,000 2,611,712 Series B, 4.125%, 3/01/13 ...................................................... 1,000,000 1,045,650 Series B, 4.25%, 3/01/14 ....................................................... 1,000,000 1,043,840 Series B, 4.30%, 3/01/15 ....................................................... 1,000,000 1,038,000 Morgan Hill USD, GO, FGIC Insured, 4.25%, 8/01/14 ............................... 1,585,000 1,660,351 Moulton-Niguel Water District GO, Refunding, AMBAC Insured, 4.00%, 9/01/12 ...... 2,930,000 3,076,441 Murrieta COP, Road Improvement Project, 6.00%, 4/01/07 ........................................................................ 235,000 258,411 4/01/08 ........................................................................ 245,000 269,520 Nevada County COP, Refunding, MBIA Insured, 4.125%, 10/01/12 .................... 1,040,000 1,095,931 Newport Mesa USD, GO, MBIA Insured, 4.00%, 8/01/12 .............................. 1,000,000 1,049,420 North City West School Facilities Financing Authority Special Tax, Refunding, Series B, FSA Insured, 5.625%, 9/01/08 ......................................... 500,000 559,405 Orange County CFD, No. 02-1 Ladera Ranch, Series A, 4.60%, 8/15/14 ................................ 1,000,000 978,600 No. 02-1 Ladera Ranch, Series A, 4.75%, 8/15/15 ................................ 1,000,000 977,270 No. 02-1 Ladera Ranch, Series A, 4.90%, 8/15/16 ................................ 1,285,000 1,254,250 No. 86-2, Special Tax, Rancho Santa Margarita, Refunding, Series A, 5.375%, 8/15/12 ............................................................... 1,500,000 1,543,380 Orange County Local Transportation Authority Sales Tax Revenue, First Senior Measure M, 6.00%, 2/15/06 ...................................................... 500,000 547,170 Orange County Recovery COP, Series A, MBIA Insured, 6.00%, 7/01/08 .............. 1,500,000 1,734,585 Oroville Hospital Revenue, Oroville Hospital, Series A, CHFCLP Insured, 5.125%, 12/01/12 ....................................................................... 1,435,000 1,509,017 Palm Desert Financing Authority Lease Revenue, Blythe County Administrative Project, 6.375%, 8/01/11 ....................................................... 855,000 978,471 Palm Desert Financing Authority Tax Allocation Revenue, MBIA Insured, 4.75%, 8/01/18 ................................................................. 1,050,000 1,108,958 Pleasant Hill RDA, RMR, Refunding, 5.40%, 2/01/05 ............................... 25,000 25,749 Pomona RDA, Tax Allocation, Mountain Meadows Redevelopment Project, Refunding, Series X, 5.35%, 12/01/16 ...................................................... 1,000,000 1,078,400 Poway RDA, Tax Allocation, Paguay Redevelopment Project, Series A, MBIA Insured, 4.50%, 6/15/14 ................................................................. 4,595,000 4,885,588 Puerto Rico Commonwealth GO, Public Improvement, FSA Insured, 5.25%, 7/01/16 .... 2,500,000 2,868,450 Richmond Joint Powers Financing Authority Revenue, Multiple Redevelopment Projects, Refunding, Series B, ETM, 5.35%, 5/15/13 ............................. 2,000,000 2,315,500 Riverside County Housing Authority MFHR, Brandon Place Apartments, Series B, FNMA Insured, 5.625%, 7/01/29 .................................................. 995,000 1,080,401
48 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Riverside RDA, Lease Revenue, Refunding, Series A, AMBAC Insured, 4.00%, 10/01/16 ............. $ 1,025,000 $ 1,029,879 Tax Allocation, Merged Project Area, Refunding, MBIA Insured, 4.00%, 8/01/14 ... 1,615,000 1,660,268 Riverside USD, GO, Election, Series A, FGIC Insured, 4.00%, 2/01/13 ................................................................. 1,000,000 1,042,500 4.50%, 2/01/18 ................................................................. 1,500,000 1,546,170 San Bernardino County COP, Medical Center Financing Project, Refunding, 6.00%, 8/01/09 ................................................................. 2,000,000 2,257,440 San Clemente 1915 Act, AD No. 8, Refunding, 5.20%, 9/02/04 ...................... 460,000 466,440 San Francisco City and County GO, Refunding, Series 1, FGIC Insured, 5.00%, 6/15/12 ................................................................. 3,650,000 3,999,524 San Gorgonio Memorial Health Care District Health Facility Revenue, Pre-Refunded, 6.375%, 6/01/08 ................................................................ 750,000 766,155 San Joaquin County COP, General Hospital Project, Refunding, MBIA Insured, 5.00%, 9/01/17 .............. 1,000,000 1,061,220 MBIA Insured, 4.00%, 4/01/12 ................................................... 2,925,000 3,065,020 Solid Waste System Facilities Projects, MBIA Insured, 5.00%, 4/01/17 ........... 1,340,000 1,448,996 San Jose MFHR, Countrybrook Project, Refunding, Series A, FNMA Insured, 4.95%, 4/01/12 ........................................................................ 4,805,000 5,086,861 San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area-3-A, MBIA Insured, 4.50%, 10/01/04 ........... 495,000 507,444 Senior Tax Increment Project Area-3-A, MBIA Insured, 5.30%, 10/01/11 ........... 350,000 402,623 Tax Increment Project Area-3-A, MBIA Insured, 4.70%, 10/01/05 .................. 595,000 629,712 Tax Increment Project Area-3-A, MBIA Insured, 5.10%, 10/01/09 .................. 515,000 586,122 Santa Ana COP, Refunding, Series A, AMBAC Insured, 4.25%, 6/01/13 ............... 1,405,000 1,488,766 Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.25%, 9/02/11 ................................................................. 1,720,000 1,772,580 Santa Clara County Financing Authority Lease Revenue, Multiple Facilities Projects, Refunding, Series A, AMBAC Insured, 4.50%, 5/15/12 ................... 2,900,000 3,061,588 Santa Monica-Malibu USD, COP, Series C, MBIA Insured, 4.00%, 5/01/12 ................................................................. 525,000 547,664 4.25%, 5/01/14 ................................................................. 840,000 874,826 4.25%, 5/01/15 ................................................................. 875,000 903,306 4.25%, 11/01/15 ................................................................ 670,000 691,675 Sebastopol COP, 5.70%, 6/01/05 ................................................................. 240,000 248,568 Refunding, Series 1994, 5.60%, 6/01/04 ......................................... 215,000 218,479 Shafter Joint Powers Financing Authority Lease Revenue, Community Correctional Facility Project, Series A, 5.50%, 1/01/06 ..................................... 950,000 1,010,781 South County Regional Wastewater Authority Revenue, Regional Wastewater Facilities Project, Refunding, FSA Insured, 3.25%, 8/01/11 ..................... 1,000,000 1,011,390 South Gate PFA, Tax Allocation Revenue, South Gate Redevelopment Project No. 1, XLCA Insured, 5.00%, 9/01/16 ................................................................. 2,000,000 2,190,340 Water Revenue, Refunding, Series A, FGIC Insured, 5.35%, 10/01/07 .............. 995,000 1,117,057 Water Revenue, Refunding, Series A, FGIC Insured, 5.45%, 10/01/08 .............. 1,040,000 1,188,179 Southeast Resource Recovery Facilities Authority Lease Revenue, Series A, AMBAC Insured, 4.50%, 12/01/16 ................................................. 2,000,000 2,091,040 Stockton Health Facilities Revenue, Dameron Hospital Association, Refunding, Series A, 5.35%, 12/01/09 ...................................................... 385,000 412,073 Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series A, FSA Insured, 5.75%, 7/01/11 .......................................... 1,295,000 1,473,399
Semiannual Report| 49 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) BONDS (CONT.) Stockton Revenue, O'Connor Woods Housing Corp., Series A, 5.375%, 11/01/11 ...... $ 1,525,000 $ 1,564,498 Sunline Transport Agency COP, Transport Finance Corp., Series B, 5.75%, 7/01/06 . 445,000 458,234 Sweetwater UHSD, COP, FSA Insured, 4.15%, 9/01/12 ............................... 1,000,000 1,061,170 Tahoe City PUD, COP, Capital Facilities Project, Series B, 6.30%, 6/01/04 ....... 545,000 555,769 Temecula Valley USD, Series E, FSA Insured, 5.65%, 9/01/07 ...................... 370,000 402,312 Tobacco Securitization Authority Northern California Tobacco Settlement Revenue, Asset Back Bonds, Series B, 4.25%, 6/01/09 ................................................................. 880,000 849,640 4.375%, 6/01/10 ................................................................ 1,665,000 1,578,936 4.50%, 6/01/11 ................................................................. 1,540,000 1,431,014 4.60%, 6/01/12 ................................................................. 1,760,000 1,608,851 4.70%, 6/01/13 ................................................................. 1,500,000 1,362,735 4.80%, 6/01/14 ................................................................. 725,000 654,922 Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%, 6/01/12 ................................................................. 1,000,000 1,086,680 University of California Revenues, Multiple Purpose Projects N, FGIC Insured, 4.00%, 9/01/12 ...................... 1,380,000 1,438,691 Research Facilities, Series E, AMBAC Insured, 5.00%, 9/01/15 ................... 3,645,000 3,935,470 Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 .......................... 4,150,000 4,445,563 Refunding, Series A, 5.30%, 10/01/11 ........................................... 1,000,000 1,073,660 Virgin Islands Water and Power Authority Water System Revenue, Refunding, 4.875%, 7/01/06 ................................................................ 2,000,000 2,105,880 5.00%, 7/01/09 ................................................................. 2,000,000 2,148,560 West Contra Costa USD, GO, Series B, FSA Insured, 4.00%, 8/01/12 ................ 1,875,000 1,967,944 Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital, 5.00%, 6/01/11 ........................................................................ 1,060,000 1,135,016 6/01/12 ........................................................................ 2,225,000 2,384,021 6/01/13 ........................................................................ 2,335,000 2,484,393 ------------- TOTAL BONDS (COST $356,711,389) ................................................. 372,810,040 ------------- ZERO COUPON/STEP-UP BONDS 5.2% Burbank USD, GO, Capital Appreciation, Election of 1997, Series C, FGIC Insured, 8/01/15 ........................................................................ 4,600,000 2,824,630 8/01/16 ........................................................................ 4,670,000 2,682,401 Conejo Valley USD, GO, Election 1998, Series C, FSA Insured, 8/01/17 ............ 2,500,000 1,355,900 Montebello USD, GO, Capital Appreciation, FGIC Insured, 8/01/18 ........................................................................ 1,455,000 743,680 8/01/19 ........................................................................ 1,480,000 712,576 San Francisco City and County Redevelopment Financing Authority Tax Allocation, Redevelopment Projects, Series A, 8/01/17 ...................................... 3,825,000 1,896,282 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien, Refunding, Series A, 1/15/16 ................................................... 3,000,000 2,399,100 Santa Ana USD, GO, Election of 1999, Series B, FGIC Insured, 8/01/14 ............ 3,125,000 2,030,719 Western Placer USD, Financing Corp. COP, Convertible Capital Appreciation, zero cpn. to 11/01/05, 5.35% thereafter, 11/01/18 ................................... 6,655,000 6,211,710 ------------- TOTAL ZERO COUPON/STEP-UP BONDS (COST $20,015,073) ................................... 20,856,998 ------------- TOTAL LONG TERM INVESTMENTS (COST $376,726,462) ...................................... 393,667,038 -------------
50 |Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------------------------------------------------------- SHORT TERM INVESTMENTS 1.3% b Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Weekly VRDN and Put, 1.27%, 7/01/35 ............................................ $ 500,000 $ 500,000 b Metropolitan Water District Southern California Waterworks Revenue, Refunding, Series B-1, Daily VRDN and Put, 1.27%, 7/01/35 ...................... 1,700,000 1,700,000 Series C-1, Daily VRDN and Put, 1.25%, 7/01/36 ................................. 600,000 600,000 b Orange County Sanitation Districts COP, Refunding, Series A, Daily VRDN and Put, 1.27%, 8/01/29 ................................................................. 2,400,000 2,400,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $5,200,000) ....................................... 5,200,000 ------------- TOTAL INVESTMENTS (COST $381,926,462) 99.2% .......................................... 398,867,038 OTHER ASSETS, LESS LIABILITIES .8% ................................................... 3,266,726 ------------- NET ASSETS 100.0% .................................................................... $402,133,764 ------------- See Glossary of Terms on page 61. a See Note 1(b) regarding securities purchased on a when-issued or delayed delivery basis. b Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates.
Semiannual Report | See notes to financial statements. | 51 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND
-------------- PERIOD ENDED DECEMBER 31, 2003 C (UNAUDITED) -------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ......................................... $10.00 -------------- Income from investment operations: Net investment income a ..................................................... .04 Net realized and unrealized gains (losses) .................................. .03 -------------- Total from investment operations ............................................. .07 Less distributions from net investment income ................................ (.03) -------------- Net asset value, end of period ............................................... $10.04 -------------- Total return b ............................................................... .74% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ............................................ $13,425 Ratios to average net assets: Expenses .................................................................... .50% d Expenses excluding waiver and payments by affiliate ......................... 1.25% d Net investment income ....................................................... 1.17% d Portfolio turnover rate ...................................................... 5.17% a Based on average daily shares outstanding. b Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. c For the period September 2, 2003 (effective date) to December 31, 2003. d Annualized.
52 | See notes to financial statements. | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 70.9% Azusa Redevelopment Agency Tax Allocation, Refunding, West End Redevelopment Project Area A, AMBAC Insured, 2.00%, 8/01/06 ..................................... $ 375,000 $ 378,855 Brea Olinda USD, GO, Election of 1999, Series A, FGIC Insured, 2.60%, 8/01/09 ...... 120,000 120,619 Cajon Valley Unified Elementary School District COP, MBIA Insured, 2.50%, 5/01/08 250,000 254,002 California Educational Facilities Authority Revenue, Santa Clara University, Series A, FSA Insured, 2.625%, 9/01/09 ............................................ 100,000 100,653 California Health Facilities Financing Authority Revenue, AMBAC Insured, 3.75%, 7/01/05 .................................................................... 300,000 310,512 California State Department of Water Resources Central Valley Project Revenue, Water Systems, Refunding, Series Y, FGIC Insured, 5.00%, 12/01/08 ................. 200,000 225,788 California State Department of Water Resources Power Supply Revenue, Series A, MBIA Insured, 3.50%, 5/01/07 ...................................................... 305,000 319,317 California Statewide CDA, Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured, 2.00%, 10/01/05 ............................................ 270,000 273,278 a California Statewide CDA Revenue, Viewpoint School, 3.50%, 10/01/08 ................ 320,000 328,288 Chaffey Joint UHSD, COP, Refunding, 3.00%, 5/01/08 ................................. 250,000 259,135 Costa Mesa RDA Tax Allocation Revenue, Downtown Redevelopment Project, FSA Insured, 2.50%, 10/01/08 ................................................................... 265,000 267,835 Evergreen School District, GO, Refunding, Series D, FGIC Insured, 2.75%, 9/01/08 ... 150,000 153,561 Foothill-De Anza Community College District, GO, Election of 1999, Series B, 2.60%, 8/01/08 ........................................................................... 100,000 101,685 Glendale USD, GO, Series F, MBIA Insured, 2.50%, 9/01/08 ........................... 200,000 202,548 Glendora Public Finance Authority Revenue, Tax Allocation, Project No. 1, Series A, MBIA Insured, 2.00%, 9/01/07 .................................................................... 100,000 100,069 2.125%, 9/01/08 ................................................................... 105,000 104,146 Goleta Water District Revenue COP, 1991 Project and 2003 Project, Refunding, MBIA Insured, 2.00%, 12/01/05 ..................................................... 300,000 303,762 Guam International Airport Authority Revenue, Series A, MBIA Insured, 2.375%, 10/01/08 250,000 249,940 Industry Urban Development Agency Tax Allocation, Civic Recreational Industrial, Series 1-B, MBIA Insured, 2.50%, 5/01/05 .......................................... 500,000 508,150 Inglewood USD, GO, Election of 1998, Series C, FSA Insured, 2.50%, 10/01/08 ........ 265,000 268,434 Lodi USD, COP, Capital Projects, Refunding, FSA Insured, 3.00%, 2/01/08 ............ 110,000 114,015 Los Angeles Convention and Exhibition Center Authority Lease Revenue, Series A, AMBAC Insured, 3.25%, 8/15/09 ..................................................... 250,000 259,750 Los Angeles County Transportation Authority Sales Tax Revenue, Proposition A, First Tier Senior, Refunding, Series A, FSA Insured, 2.50%, 7/01/07 ............... 100,000 102,082 Los Angeles USD, GO, Election of 1997, Series F, FSA Credit Support, 3.00%, 7/01/06 150,000 155,322 Lynwood USD, GO, Election of 2002, Series A, FSA Insured, 4.00%, 8/01/10 ........... 100,000 106,968 Modesto High School District Stanislaus County GO, Refunding, FSA Insured, 2.50%, 8/01/05 ........................................................................... 100,000 101,905 North Orange County Community College District GO, Election of 2002, Series B, FGIC Insured, 2.125%, 8/01/08 ..................................................... 500,000 498,160 Placer County Water Agency Revenue COP, Refunding, MBIA Insured, 2.375%, 7/01/07 ... 105,000 106,746 Poway Redevelopment Agency Tax Allocation, Paguay Redevelopment Project, Series A, MBIA Insured, 3.00%, 6/15/09 ...................................................... 100,000 102,528
Semiannual Report | 53 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series C, MBIA Insured, 5.00%, 7/01/28 .................................................................... $ 200,000 $ 222,170 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series AA, FGIC Insured, 2.625%, 7/01/08 ..................................................... 300,000 305,805 Redlands GO, Refunding, FSA Insured, 2.00%, 2/01/04 ................................ 300,000 300,207 Rio Linda, Unified Elementary School District, Election of 2002, Series A, FSA Insured, 4.00%, 8/01/10 ........................................................... 100,000 106,968 Riverside County Assessment Leasing Corporation Leasehold Revenue, Hospital Project, Refunding, Series A, MBIA Insured, 3.00%, 6/01/08 ................................. 115,000 118,790 San Diego Community College District GO, Election of 2002, Refunding, Series B, 4.00%, 5/01/05 .................................................................... 150,000 155,499 San Diego Regional Building Authority Lease Revenue, San Miguel Conservation Fire District, Refunding, AMBAC Insured, 3.00%, 1/01/08 ................................ 240,000 248,590 San Francisco City and County Public Utility Commission Warrant Revenue, Refunding, Series A, MBIA Insured, 3.00%, 10/01/08 ........................................... 100,000 103,532 San Jose Financing Authority Lease Revenue, Central Service Yard Project, Refunding, AMBAC Insured, 3.00%, 10/15/06 .................................................... 245,000 254,678 San Mateo Foster City School District GO, Refunding, FSA Insured, 2.50%, 9/01/08 ... 200,000 202,548 Santa Clara Electric Revenue, Sub-Series A, MBIA Insured, 3.00%, 7/01/09 ........... 225,000 231,316 Santa Clara Valley Transportation Authority Sales Tax Revenue, Measure A, AMBAC Insured, 3.00%, 4/01/36 ........................................................... 500,000 514,060 Sonoma County COP, Series A, Refunding, MBIA Insured, 3.00%, 11/15/08 .............. 250,000 259,048 University of California Revenue, University and College Improvements, Refunding, Series A, 3.00%, 5/15/05 .......................................................... 120,000 122,688 ------------- TOTAL LONG TERM INVESTMENTS (COST $9,496,668) ...................................... 9,523,952 ------------- SHORT TERM INVESTMENTS 30.5% b Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Series C, AMBAC Insured, Weekly VRDN and Put, 1.23%, 4/01/37 ...................................... 100,000 100,000 b California State Department of Water Resources Power Supply Revenue, Series B-5, Daily VRDN and Put, 1.26%, 5/01/22 ................................................ 500,000 500,000 b California Statewide CDA Revenue, COP, John Muir/Mt. Diablo Health System, AMBAC Insured, Daily VRDN and Put, 1.14%, 8/15/27 ....................................... 400,000 400,000 b Daly City HFA, MFR, Refunding, Weekly VRDN and Put, 1.20%, 10/15/29 ................ 100,000 100,000 b Irvine 1915 Act, Special Assessment, AD No. 94-13, Daily VRDN and Put, 1.27%, 9/02/22 ........................................................................... 100,000 100,000 Irvine Ranch Water District Revenue, b Consolidated Bonds, Series C, Daily VRDN and Put, 1.27%, 10/01/10 .................. 200,000 200,000 b Construction Bonds, Daily VRDN and Put, 1.27%, 10/01/05 ............................ 145,000 145,000 b Nos. 140, 105, and 250, Daily VRDN and Put, 1.27%, 4/01/33 ......................... 100,000 100,000 b Livermore COP, Capital Projects, Weekly VRDN and Put, 1.25%, 10/01/30 .............. 200,000 200,000 b Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Weekly VRDN and Put, 1.27%, 7/01/35 ...................................................... 600,000 600,000
54 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------------- SHORT TERM INVESTMENTS (CONT.) Metropolitan Water District Southern California Waterworks Revenue, Refunding, b Series B-1, Daily VRDN and Put, 1.27%, 7/01/35 ..................................... $ 200,000 $ 200,000 b Series B-2, Weekly VRDN and Put, 1.07%, 7/01/35 .................................... 200,000 200,000 b Series B-3, Daily VRDN and Put, 1.26%, 7/01/35 ..................................... 200,000 200,000 b Orange County Sanitation Districts COP, Refunding, Series B, Daily VRDN and Put, 1.27%, 8/01/30 .................................................................... 200,000 200,000 b Rancho Water District Financing Authority Revenue, Series B, FGIC Insured, Weekly VRDN and Put, 1.07%, 8/01/31 ...................................................... 200,000 200,000 b San Bernardino County COP, County Center Refinancing Project, Refunding, Weekly VRDN and Put, 1.07%, 7/01/15 ...................................................... 200,000 200,000 b Tustin 1915 Act, Special Assessment, Reassessment District, No. 95-2, Series A, Daily VRDN and Put, 1.27%, 9/02/13 ................................................ 350,000 350,000 b Westminster COP, Civic Center Refunding Project, Series B, AMBAC Insured, Weekly VRDN and Put, 1.25%, 6/01/24 ............................................... 100,000 100,000 ------------- TOTAL SHORT TERM INVESTMENTS (COST $4,095,000) .......................................... 4,095,000 ------------- TOTAL INVESTMENTS (COST $13,591,668) 101.4% ............................................. 13,618,952 OTHER ASSETS, LESS LIABILITIES (1.4)% ................................................... (194,100) ------------- NET ASSETS 100.0% ....................................................................... $ 13,424,852 ------------- See Glossary of Terms on page 61. a See Note 1(b) regarding securities purchased on a when-issued or delayed delivery basis. b Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates.
Semiannual Report | See notes to financial statements. | 55 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
--------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED JUNE 30, (UNAUDITED) 2003 2002 2001 2000 1999 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 --------------------------------------------------------------------------------- Income from investment operations - net investment income ............................. -- b .01 .01 .03 .03 .02 Less distributions from net investment income .. -- b (.01) (.01) (.03) (.03) (.02) --------------------------------------------------------------------------------- Net asset value, end of period ................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 --------------------------------------------------------------------------------- Total return a ................................. .18% .71% 1.21% 2.76% 2.64% 2.39% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $642,529 $671,392 $679,788 $711,789 $696,803 $706,877 Ratios to average net assets: Expenses ...................................... .56% c .56% .56% .56% .56% .59% Net investment income ......................... .35% c .71% 1.20% 2.72% 2.61% 2.36% a Total return does not reflect contingent deferred sales charge and is not annualized for periods less than one year. b Includes net investment income and distributions from net investment income in the amount of .002. c Annualized.
56 | See notes to financial statements. | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------- INVESTMENTS 100.0% Alameda Contra Costa Transit RAN, Transit District, 2.00%, 8/19/04 ................ $ 13,000,000 $ 13,082,792 a Alameda County IDAR, United Manufacturing Project, Series A, Weekly VRDN and Put, 1.17%, 6/01/30 ................................................................... 1,000,000 1,000,000 a Alvord USD, Financing Corp., COP, Refinancing Project, Weekly VRDN and Put, 1.25%, 9/01/19 .......................................................................... 2,300,000 2,300,000 a Anaheim COP, Police Facilities Refinancing Project, AMBAC Insured, Weekly VRDN and Put, 1.03%, 8/01/08 .............................................................. 3,100,000 3,100,000 a Big Bear Lake Industrial Revenue, Southwest Gas Corp. Project, Series A, Weekly VRDN and Put, 1.12%, 12/01/28 .................................................... 2,700,000 2,700,000 a Butte County Housing Authority MFR, Pine Tree Apartment Project, Weekly VRDN and Put, 1.16%, 12/01/10 ............................................................. 1,762,000 1,762,000 a California Health Facilities Financing Authority Revenue, Catholic Healthcare West, MBIA Insured, Weekly VRDN and Put, 1.15%, 7/01/16 ...... 5,000,000 5,000,000 Pooled Loan Program, Series B, FGIC Insured, Weekly VRDN and Put, 1.25%, 10/01/10 . 3,000,000 3,000,000 Scripps Health, Series A, MBIA Insured, Weekly VRDN and Put, 1.11%, 10/01/22 ...... 5,000,000 5,000,000 California Infrastructure and Economic Development Bank Revenue, Series A, 1.00%, 5/13/04 ......................................................... 20,000,000 20,000,000 Refunding, Series D, 1.00%, 5/13/04 ............................................... 10,000,000 10,000,000 Series C, 1.00%, 5/13/04 .......................................................... 10,000,000 10,000,000 California School Cash Reserve Program Authority Revenue, Series A, 2.00%, 7/06/04 25,000,000 25,139,490 a California State Department Water Resources Power Supply Revenue, Series B-5, Daily VRDN and Put, 1.26%, 5/01/22 ................................... 3,400,000 3,400,000 Series B-6, Daily VRDN and Put, 1.27%, 5/01/22 .................................... 12,200,000 12,200,000 Series C-12, Weekly VRDN and Put, 1.22%, 5/01/22 .................................. 6,700,000 6,700,000 California State Department Water Resources Water Revenue TECP, 1.05%, 1/08/04 .... 5,000,000 5,000,000 a California State Economic Development Financing Authority Revenue, Calco Project, Weekly VRDN and Put, 1.40%, 4/01/27 ............................... 1,600,000 1,600,000 KQED Inc. Project, Refunding, Weekly VRDN and Put, 1.15%, 4/01/20 ................. 1,170,000 1,170,000 a California State GO, Series A-3, Daily VRDN and Put, 1.26%, 5/01/33 ............... 3,100,000 3,100,000 California State RAN, Sub Series A-2, 2.00%, 6/23/04 .............................. 10,000,000 10,044,046 a California Statewide CDA, MFHR, Ivy Hills Apartment Project, Series I, Weekly VRDN and Put, 1.20%, 2/01/33 .......................................................... 3,894,000 3,894,000 a Carlsbad USD, COP, School Facility Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 1.20%, 9/01/14 .......................................................................... 5,100,000 5,100,000 9/01/24 .......................................................................... 5,500,000 5,500,000 a Chico MFMR, Webb Homes Project, Weekly VRDN and Put, 1.05%, 1/01/10 ............... 1,670,000 1,670,000 a Chino Basin Regional Financing Authority Revenue, Inland Empire Utilities, Series A, AMBAC Insured, Weekly VRDN and Put, 1.03%, 6/01/32 ............................... 5,585,000 5,585,000 a Commerce Joint Powers Financing Authority IDR, Weekly VRDN and Put, 1.17%, 11/01/14 1,740,000 1,740,000 a Dublin Housing Authority MFHR, Park Sierra Housing, Series A, Weekly VRDN and Put, 1.12%, 6/01/28 ................................................................... 1,100,000 1,100,000 a Elsinore Valley Municipal Water District COP, Series A, FGIC Insured, Weekly VRDN and Put, 1.10%, 7/01/29 .......................................................... 13,600,000 13,600,000 a Fremont PFA, COP, Weekly VRDN and Put, 1.25%, 8/01/30 ............................. 6,100,000 6,100,000 a Grant Joint UHSD, COP, School Facilities Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 1.20%, 9/01/34 .............................................. 4,900,000 4,900,000
Semiannual Report | 57 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) a Hillsborough COP, Water and Sewer System Project, Refunding, Series B, Weekly VRDN and Put, 1.25%, 6/01/30 .......................................................... $ 4,400,000 $ 4,400,000 a Irvine 1915 Act, Special Assessment, AD No. 00-18, Series A, Daily VRDN and Put, 1.27%, 9/02/26 ....................... 4,500,000 4,500,000 AD No. 93-14, Daily VRDN and Put, 1.26%, 9/02/25 ................................. 3,200,000 3,200,000 AD No. 94-15, Daily VRDN and Put, 1.27%, 9/02/20 ................................. 2,000,000 2,000,000 AD No. 97-13, Daily VRDN and Put, 1.27%, 9/02/23 ................................. 8,063,000 8,063,000 AD No. 97-16, Daily VRDN and Put, 1.27%, 9/02/22 ................................. 9,311,000 9,311,000 a Irvine Ranch Water District GO, Nos. 105, 140, 240 and 250, Daily VRDN and Put, 1.26%, 1/01/21 ................................................................... 7,000,000 7,000,000 a Irvine Ranch Water District Revenue, Consolidated Bonds, Refunding, Series B, Daily VRDN and Put, 1.33%, 10/01/09 ..... 2,300,000 2,300,000 Construction Bonds, Daily VRDN and Put, 1.27%, 10/01/05 ........................... 1,400,000 1,400,000 Nos. 140, 105, and 250, Daily VRDN and Put, 1.27%, 4/01/33 ........................ 5,900,000 5,900,000 a Kern County COP, Kern Public Facilities Project, Series A, Weekly VRDN and Put, 1.10%, 8/01/06 ................................................................... 600,000 600,000 Kern County TRAN, 2.00%, 6/30/04 .................................................. 10,000,000 10,053,392 Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Sub Series B-2, .97%, 6/16/04 .................................................... 2,620,000 2,620,000 Los Angeles County GO, TRAN, Series A, 2.00%, 6/30/04 ............................. 20,000,000 20,107,807 a Los Angeles County Pension Obligation Revenue, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 1.03%, 6/30/07 ..................... 1,800,000 1,800,000 Series B, Weekly VRDN and Put, 1.04%, 6/30/07 .................................... 4,400,000 4,400,000 Los Angeles County Schools Pooled Financing Program COP, TRAN, Series A, FSA Insured, 1.75%, 6/30/04 .......................................................... 6,000,000 6,024,398 a Los Angeles CRDA, COP, Baldwin Hill Park, Weekly VRDN and Put, 1.11%, 12/01/14 .... 1,000,000 1,000,000 a Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Daily VRDN and Put, 1.27%, 7/01/35 ..................................................... 750,000 750,000 a Los Angeles MFR, Casden Project, Series K, Weekly VRDN and Put, 1.15%, 7/01/10 .... 950,000 950,000 Los Angeles USD, GO, TRAN, Series A, 2.00%, 7/01/04 ............................... 20,000,000 20,106,167 Los Angeles Wastewater System Revenue, Series A, MBIA Insured, Pre-Refunded, 5.875%, 6/01/24 ............................ 5,400,000 5,619,807 Refunding, Sub Series A, FGIC Insured, 1.15%, 12/01/31 ............................ 10,000,000 10,000,000 Los Angeles Water and Power Revenue, Power System, Sub Series A-2, 1.20%, 7/01/35 . 5,000,000 5,000,000 a Metropolitan Water District Southern California Waterworks Revenue, Refunding, Series A, Weekly VRDN and Put, 1.20%, 6/01/23 ......................... 6,875,000 6,875,000 Refunding, Series B-1, Daily VRDN and Put, 1.27%, 7/01/35 ........................ 1,450,000 1,450,000 Refunding, Series C-1, Weekly VRDN and Put, 1.18%, 7/01/30 ....................... 3,000,000 3,000,000 Series B-4, Weekly VRDN and Put, 1.03%, 7/01/35 .................................. 3,500,000 3,500,000 Series C, Weekly VRDN and Put, 1.25%, 7/01/28 .................................... 13,200,000 13,200,000 Series C-1, Daily VRDN and Put, 1.25%, 7/01/36 ................................... 5,200,000 5,200,000 a Oakland COP, Capital Equipment Project, Weekly VRDN and Put, 1.12%, 12/01/15 ...... 6,400,000 6,400,000 a Orange County Apartment Development Revenue, Wood Canyon Villas, Refunding, Issue E, Weekly VRDN and Put, 1.20%, 8/15/31 ........................................... 5,000,000 5,000,000 a Orange County Sanitation Districts COP, Refunding, Series A, Daily VRDN and Put, 1.27%, 8/01/29 ..................................... 1,825,000 1,825,000 Series B, Daily VRDN and Put, 1.27%, 8/01/30 ...................................... 1,300,000 1,300,000 a Pajaro Valley USD, COP, School Facility Bridge Funding Program, Weekly VRDN and Put, 1.20%, 9/01/31 .............................................................. 700,000 700,000
58 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) a Pleasanton MFMR, Valley Plaza, Series A, Weekly VRDN and Put, 1.08%, 7/15/18 $ 1,860,000 $ 1,860,000 a Rancho Mirage Joint Powers Financing Authority Revenue, Eisenhower Medical Center, Series A, Daily VRDN and Put, 1.14%, 1/01/26 8,000,000 8,000,000 a Rancho Water District Financing Authority Revenue, Series B, FGIC Insured, Weekly VRDN and Put, 1.07%, 8/01/31 3,880,000 3,880,000 a Redwood City COP, City Hall Project, Weekly VRDN and Put, 1.25%, 7/01/21 2,200,000 2,200,000 a Riverside County Asset Leasing Corp., Leasehold Revenue, Southwest Justice Center, Series B, MBIA Insured, Weekly VRDN and Daily Put, 1.04%, 11/01/32 5,000,000 5,000,000 a Sacramento County COP, Administration Center and Courthouse Project, Weekly VRDN and Put, 1.25%, 6/01/20 12,000,000 12,000,000 a Sacramento County Sanitation District Financing Authority Revenue, Series C, Weekly VRDN and Put, 1.10%, 12/01/30 .................................................... 13,600,000 13,600,000 a San Diego Housing Authority MFHR, La Cima Apartments, Series K, Weekly VRDN and Put, 1.20%, 12/01/22 ............... 23,000,000 23,000,000 Nobel Courts, Weekly VRDN and Put, 1.20%, 12/01/22 ................................ 31,000,000 31,000,000 a San Francisco City and County RDA, MFR, Derek Silva Community, Series D, Weekly VRDN and Put, 1.30%, 12/01/19 ............ 4,650,000 4,650,000 Fillmore Center, Refunding, Series B-2, Weekly VRDN and Put, 1.13%, 12/01/17 ...... 1,000,000 1,000,000 San Joaquin County Transportation Authority Sales Tax Revenue, TECP, .85%, 2/02/04 31,200,000 31,200,000 a San Jose-Santa Clara Water Financing Authority Sewer Revenue, Series B, Weekly VRDN and Put, 1.03%, 11/15/11 1,200,000 1,200,000 a San Mateo County MFHR, Pacific Oaks Apartment Project, Series A, Weekly VRDN and Put, 1.17%, 7/01/17 2,950,000 2,950,000 a Santa Ana Housing Authority MFHR, Vintage Apartments, Refunding, Series A, Weekly VRDN and Put, 1.30%, 12/15/22 4,650,000 4,650,000 a Santa Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding, Series A, Weekly VRDN and Put, 1.25%, 12/15/25 5,000,000 5,000,000 a South San Francisco MFHR, Magnolia Plaza Apartments, Series A, Weekly VRDN and Put, 1.17%, 5/01/17 ................................................................... 500,000 500,000 a Southern California Public Power Authority Transmission Project Revenue, Southern Transmission, Refunding, AMBAC Insured, Weekly VRDN and Put, 1.03%, 7/01/19 ................................ 27,815,000 27,815,000 Series B, FSA Insured, Weekly VRDN and Put, 1.10%, 7/01/23 ........................ 6,600,000 6,600,000 a Stanislaus Waste to Energy Financing Agency Revenue, Solid Waste Facility, Ogden Martin Systems Project, Refunding, MBIA Insured, Weekly VRDN and Put, 1.25%, 1/01/10 ................................................................... 4,400,000 4,400,000 a Suisun City Housing Authority MFR, Village Green, Series A, Weekly VRDN and Put, 1.08%, 6/15/18 ................................................................... 7,600,000 7,600,000 a Sulphur Springs USD, COP, Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 1.20%, 3/01/27 ................................................................... 5,000,000 5,000,000 a Turluck Irrigation District COP, Capital Improvement and Refunding Project, Daily VRDN and Put, 1.27%, 1/01/31 ..................................................... 2,000,000 2,000,000 a Tustin 1915 Act, Special Assessment, Reassessment District, No. 95-2, Series A, Daily VRDN and Put, 1.27%, 9/02/13 ............................................... 17,569,000 17,569,000 a Upland CRDA, MFHR, Weekly VRDN and Put, 1.23%, 2/15/30 ............................ 1,000,000 1,000,000
Semiannual Report | 59 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------------- INVESTMENTS (CONT.) a Vallecitos Water District Revenue COP, Twin Oaks Reservoir Project, Weekly VRDN and Put, 1.10%, 7/01/30 .......................................................... $ 2,500,000 $ 2,500,000 a Vallejo Housing Authority MFR, FNMA Insured, Weekly VRDN and Put, 1.08%, 5/15/22 .. 1,985,000 1,985,000 a Watereuse Finance Authority Revenue, FSA Insured, Weekly VRDN and Put, 1.25%, 5/01/28 .......................................................................... 26,200,000 26,200,000 West Contra Costa USD, GO, Series B, FSA Insured, 5.00%, 8/01/04 .................. 1,940,000 1,985,236 a Western Placer Union School COP, Facilities Project B, Weekly VRDN and Put, 1.20%, 8/01/23 ................................................................... 5,000,000 5,000,000 a Western Riverside County Regional Wastewater Authority Revenue, Regional Wastewater Treatment, Daily VRDN and Put, 1.27%, 4/01/28 ......................... 1,050,000 1,050,000 ------------- TOTAL INVESTMENTS (COST $642,437,135) 100.0% ........................................... 642,437,135 OTHER ASSETS, LESS LIABILITIES ......................................................... 91,594 ------------- NET ASSETS 100.0% ...................................................................... $642,528,729 ------------- 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.
60 | See notes to financial statements. | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (UNAUDITED) (CONTINUED) GLOSSARY OF TERMS 1915 Act - Improvement Bond Act of 1915 ABAG - The Association of Bay Area Governments 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 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 HFA - Housing Finance Authority/Agency HFAR - Housing Finance Authority/Agency Revenue ID - Improvement District IDAR - Industrial Development Authority/Agency 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 Transit 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 RAN - Revenue Anticipation Notes RDA - Redevelopment Agency/Authority 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/Union High School District USD - Unified/Union School District XLCA - XL Capital Assurance Semiannual Report| 61 Franklin California Tax-Free Trust FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES December 31, 2003 (unaudited)
------------------------------------------------------------------------- FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INTERMEDIATE-TERM LIMITED-TERM CALIFORNIA INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND INCOME FUND MONEY FUND ------------------------------------------------------------------------- Assets: Investments in securities: Cost ........................................ $1,903,069,095 $381,926,462 $13,591,668 $642,437,135 ------------------------------------------------------------------------- Value ....................................... 2,046,498,646 398,867,038 13,618,952 642,437,135 Cash ......................................... 65,285 789,658 87,946 1,096 Receivables: Capital shares sold ......................... 2,485,752 801,557 -- 6,967,726 Interest .................................... 29,699,915 5,024,589 63,719 1,621,740 Offering costs ............................... -- -- 13,855 -- ------------------------------------------------------------------------- Total assets .......................... 2,078,749,598 405,482,842 13,784,472 651,027,697 ------------------------------------------------------------------------- Liabilities: Payables: Investment securities purchased ............. -- 1,184,880 326,144 -- Capital shares redeemed ..................... 2,009,607 1,274,483 -- 7,876,067 Affiliates .................................. 1,321,714 247,419 3,677 308,927 Shareholders ................................ 665,950 72,145 169 223,174 Offering costs .............................. -- -- 20,782 -- Distributions to shareholders ................ 3,238,053 539,276 5,743 47,903 Other liabilities ............................ 102,108 30,875 3,105 42,897 ------------------------------------------------------------------------- Total liabilities ..................... 7,337,432 3,349,078 359,620 8,498,968 ------------------------------------------------------------------------- Net assets, at value ................. $2,071,412,166 $402,133,764 $13,424,852 $642,528,729 ------------------------------------------------------------------------- Net assets consist of: Undistributed net investment income .......... $ (1,293,283) $ (193,736) $ 1,548 $ -- Net unrealized appreciation .................. (depreciation) ............................... 143,429,551 16,940,576 27,284 -- Accumulated net realized gain (loss) ......... (9,620,866) (1,502,202) -- -- Capital shares ............................... 1,938,896,764 386,889,126 13,396,020 642,528,729 ------------------------------------------------------------------------- Net assets, at value ................. $2,071,412,166 $402,133,764 $13,424,852 $642,528,729 -------------------------------------------------------------------------
62 |Semiannual Report Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) December 31, 2003 (unaudited)
----------------------------------------------------------------------- FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INTERMEDIATE-TERM LIMITED-TERM CALIFORNIA INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND INCOME FUND MONEY FUND ----------------------------------------------------------------------- CLASS A: Net assets, at value ................................. $1,858,684,443 $396,040,461 $13,424,852 $642,528,729 ----------------------------------------------------------------------- Shares outstanding ................................... 146,928,706 34,044,925 1,336,697 642,528,729 ----------------------------------------------------------------------- Net asset value per share a .......................... $12.65 $11.63 $10.04 $1.00 ----------------------------------------------------------------------- Maximum offering price per share (net asset value per share (DIVIDE) 95.75%, 97.75%, 100% and 100%, respectively) ....................................... $13.21 $11.90 $10.04 $1.00 ----------------------------------------------------------------------- CLASS B: Net assets, at value ................................. $ 82,741,921 -- ---------------------------------- Shares outstanding ................................... 6,512,270 -- ---------------------------------- Net asset value and maximum offering price per share a ......................................... $12.71 -- ---------------------------------- CLASS C: Net assets, at value ................................. $ 129,985,802 $ 6,093,303 ---------------------------------- Shares outstanding ................................... 10,189,478 523,131 ---------------------------------- Net asset value per share a .......................... $12.76 $11.65 ---------------------------------- Maximum offering price per share (net asset value per share (DIVIDE) 99%) ............................. $12.89 $11.77 ---------------------------------- a Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
Semiannual Report | See notes to financial statements. | 63 Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF OPERATIONS for the six months ended December 31, 2003 (unaudited)
----------------------------------------------------------------------- FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INTERMEDIATE-TERM LIMITED-TERM CALIFORNIA INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND INCOME FUND A MONEY FUND ----------------------------------------------------------------------- Investment income: Interest $ 52,418,886 $ 8,877,072 $ 50,736 $3,082,862 ----------------------------------------------------------------------- Expenses: Management fees (Note 3) 4,708,533 1,017,443 15,102 1,659,659 Administrative fees (Note 3) -- -- 6,041 -- Distribution fees (Note 3) Class A 911,047 198,882 4,556 -- Class B 266,955 -- -- -- Class C 423,273 11,127 -- -- Transfer agent fees (Note 3) 284,647 61,672 428 181,310 Custodian fees 9,574 2,095 40 3,321 Reports to shareholders 20,972 8,067 200 10,086 Registration and filing fees 5,961 9,889 -- 3,236 Offering costs [Note 1(f)] - - 6,927 - Professional fees 27,701 9,895 4,158 7,224 Trustees' fees and expenses 23,711 4,731 -- 7,993 Other 67,241 30,634 496 21,210 ----------------------------------------------------------------------- Total expenses 6,749,615 1,354,435 37,948 1,894,039 Expenses waived/paid by affiliate (Note 3) -- -- (22,846) -- ----------------------------------------------------------------------- Net expenses 6,749,615 1,354,435 15,102 1,894,039 ----------------------------------------------------------------------- Net investment income 45,669,271 7,522,637 35,634 1,188,823 ----------------------------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments 5,212,442 (832,755) -- -- Net unrealized appreciation (depreciation) on investments (36,023,660) (2,937,133) 27,284 -- ----------------------------------------------------------------------- Net realized and unrealized gain (loss) (30,811,218) (3,769,888) 27,284 -- ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 14,858,053 $ 3,752,749 $ 62,918 $1,188,823 ----------------------------------------------------------------------- a For the period September 2, 2003 (effective date) to December 31, 2003.
64 | See notes to financial statements. | Semiannual Report Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS for the six months ended December 31, 2003 (unaudited) and the year ended June 30, 2003
------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE FRANKLIN CALIFORNIA INTERMEDIATE-TERM INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 2003 JUNE 30, 2003 DECEMBER 31, 2003 JUNE 30, 2003 ------------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ...................... $ 45,669,271 $ 91,581,577 $ 7,522,637 $ 14,324,630 Net realized gain (loss) from investments ............................... 5,212,442 2,154,831 (832,755) 281,135 Net unrealized appreciation (depreciation) on investments ............................ (36,023,660) 80,640,225 (2,937,133) 9,785,130 --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .............. 14,858,053 174,376,633 3,752,749 24,390,895 Distributions to shareholders from: Net investment income: Class A .................................. (41,595,478) (84,464,602) (7,578,139) (14,471,962) Class B .................................. (1,617,457) (2,836,488) -- -- Class C .................................. (2,536,293) (4,951,681) (54,499) -- --------------------------------------------------------------------------- Total distributions to shareholders (45,749,228) (92,252,771) (7,632,638) (14,471,962) Capital share transactions: (Note 2) Class A .................................. (26,522,163) 48,510,072 (14,524,721) 80,578,468 Class B .................................. (1,688,407) 26,565,574 -- -- Class C .................................. (4,642,028) 22,938,158 5,980,407 -- --------------------------------------------------------------------------- Total capital share transactions ........... (32,852,598) 98,013,804 (8,544,314) 80,578,468 Net increase (decrease) in net assets .................................. (63,743,773) 180,137,666 (12,424,203) 90,497,401 Net assets: Beginning of period ........................ 2,135,155,939 1,955,018,273 414,557,967 324,060,566 --------------------------------------------------------------------------- End of period .............................. $2,071,412,166 $2,135,155,939 $402,133,764 $414,557,967 --------------------------------------------------------------------------- Undistributed net investment income included in net assets: End of period ............................. $ (1,293,283) $ (1,213,326) $ (193,736) $ (83,735) ---------------------------------------------------------------------------
Semiannual Report| 65 Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) for the six months ended December 31, 2003 (unaudited) and the year ended June 30, 2003
---------------------------------------------------------------- FRANKLIN FRANKLIN CALIFORNIA LIMITED-TERM CALIFORNIA TAX-EXEMPT TAX-FREE INCOME FUND MONEY FUND ---------------------------------------------------------------- PERIOD ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 2003 A DECEMBER 31, 2003 JUNE 30, 2003 ---------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income ................................. $ 35,634 $ 1,188,823 $ 4,942,920 Net realized gain (loss) from investments ............. -- -- (2,466) Net unrealized appreciation (depreciation) on investments .......................................... 27,284 -- -- ---------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ......................................... 62,918 1,188,823 4,940,454 Distributions to shareholders from net investment income ................................................ (34,086) (1,188,823) (4,940,454) b Capital share transactions (Note 2) .................... 13,396,020 (28,863,640) (8,395,879) ---------------------------------------------------------------- Net increase (decrease) in net assets ............... 13,424,852 (28,863,640) (8,395,879) Net assets: Beginning of period .................................... -- 671,392,369 679,788,248 ---------------------------------------------------------------- End of period .......................................... $ 13,424,852 $642,528,729 $671,392,369 ---------------------------------------------------------------- Undistributed net investment income included in net assets: End of period .......................................... $ 1,548 $ -- $ -- ---------------------------------------------------------------- a For the period September 2, 2003 (effective date) to December 31, 2003. b Distributions were decreased by net realized losses from security transactions of $2,466.
66 | See notes to financial statements. | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 four 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. Effective September 2, 2003, the Franklin California Tax-Free Trust began offering shares of the Franklin California Limited-Term Tax-Free Income Fund (Limited-Term Fund). 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. If events occur that materially affect the values of securities after the prices are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees. Securities in the Money Fund are valued at amortized cost which approximates value. B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS The Funds may purchase securities on a when-issued or delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities. C. 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 income. Semiannual Report| 67 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. For the California Insured Tax-Free Income Fund (Insured Fund), the Intermediate-Term Fund, and the Limited -Term Fund, dividends from net investment income are normally declared daily and distributed monthly to shareholders. For the Money Fund, dividends from net investment income and capital gains or losses are normally declared daily. Such distributions are reinvested in additional shares of the fund or distributed monthly. Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each fund to the combined net assets. Other expenses are charged to each fund on a specific identification basis. Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class for the Insured Fund and the Intermediate-Term Fund. E. INSURANCE The scheduled payments of interest and principal for each insured municipal security in the Insured Fund are insured by either a new issue insurance policy, a portfolio insurance policy, or a secondary insurance policy. Some municipal securities in the fund are secured by collateral guaranteed by an agency of the U.S. government. Depending on the type of coverage, premiums for insurance are either added to the cost basis of the security, included as an expense of the fund, or paid by a third party. F. OFFERING COSTS Offering costs are amortized on a straight line basis over twelve months. G. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 68 |Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. GUARANTEES AND INDEMNIFICATIONS Under the Trust's organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on experience, the Trust expects the risk of loss to be remote. 2. SHARES OF BENEFICIAL INTEREST The classes of shares offered within each of the funds are indicated below. Effective July 1, 2003, the Intermediate-Term Fund began offering a new class of shares, Class C. Each class of shares differs by its initial sales load, contingent deferred sales charges, distribution fees, voting rights on matters affecting a single class and its exchange privilege. - -------------------------------------------------------------------------- CLASS A CLASS A & CLASS C CLASS A, CLASS B & CLASS C - -------------------------------------------------------------------------- Limited-Term Fund Intermediate-Term Fund Insured Fund Money Fund At December 31, 2003, there were an unlimited number of shares authorized (no par value). Transactions in the Money Fund's shares were at $1.00 per share. Transactions in the Funds' shares were as follows:
------------------------------------------------------------------ INSURED FUND INTERMEDIATE-TERM FUND ------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------ CLASS A SHARES: Six months ended December 31, 2003 Shares sold ...................... 11,401,008 $ 142,159,452 5,429,135 $ 62,350,250 Shares issued in reinvestment of distributions ................... 1,750,904 21,883,682 382,647 4,405,551 Shares redeemed .................. (15,313,137) (190,565,297) (7,088,809) (81,280,522) ------------------------------------------------------------------ Net increase (decrease) .......... (2,161,225) $ (26,522,163) (1,277,027) $(14,524,721) ------------------------------------------------------------------ Year ended June 30, 2003 Shares sold ...................... 20,344,406 $ 256,925,150 15,013,466 $174,239,975 Shares issued in reinvestment of distributions ................... 3,412,993 43,027,957 719,268 8,349,349 Shares redeemed .................. (19,958,238) (251,443,035) (8,814,514) (102,010,856) ------------------------------------------------------------------ Net increase (decrease) .......... 3,799,161 $ 48,510,072 6,918,220 $ 80,578,468 ------------------------------------------------------------------
Semiannual Report| 69 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
------------------------------------------------------------- INSURED FUND INTERMEDIATE-TERM FUND ------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------- CLASS B SHARES: Six months ended December 31, 2003 Shares sold .................................. 709,542 $ 8,886,779 Shares issued in reinvestment of distributions ............................... 85,585 1,073,745 Shares redeemed .............................. (934,755) (11,648,931) ---------------------------- Net increase (decrease) ...................... (139,628) $ (1,688,407) ---------------------------- Year ended June 30, 2003 Shares sold .................................. 2,487,468 $ 31,490,684 Shares issued in reinvestment of distributions ............................... 149,457 1,893,274 Shares redeemed .............................. (537,929) (6,818,384) ---------------------------- Net increase (decrease) ...................... 2,098,996 $ 26,565,574 ---------------------------- CLASS C SHARES: Six months ended December 31, 2003 a Shares sold .................................. 1,101,889 $ 13,860,508 553,090 $ 6,325,786 Shares issued in reinvestment of distributions ............................... 115,196 1,450,969 2,720 31,441 Shares redeemed .............................. (1,594,593) (19,953,505) (32,679) (376,820) ------------------------------------------------------------- Net increase (decrease) ...................... (377,508) $ (4,642,028) 523,131 $ 5,980,407 ------------------------------------------------------------- Year ended June 30, 2003 Shares sold .................................. 3,318,249 $ 42,185,455 Shares issued in reinvestment of distributions ............................... 230,685 2,931,577 Shares redeemed .............................. (1,746,017) (22,178,874) ---------------------------- Net increase (decrease) ...................... 1,802,917 $ 22,938,158 ---------------------------- ------------------------------------------------------------- LIMITED-TERM FUND MONEY FUND ------------------------------------------------------------- CLASS A SHARES: SHARES AMOUNT AMOUNT ------------------------------------------------------------- Six months ended December 31, 2003 b Shares sold .................................. 1,451,569 $ 14,548,431 $ 380,405,883 Shares issued in reinvestment of distributions ............................... 1,615 16,204 1,176,719 Shares redeemed .............................. (116,487) (1,168,615) (410,446,242) ------------------------------------------------------------- Net increase (decrease) ...................... 1,336,697 $ 13,396,020 $ (28,863,640) ------------------------------------------------------------- Year ended June 30, 2003 Shares sold .................................. $ 738,232,187 Shares issued in reinvestment of distributions ............................... 4,945,536 Shares redeemed .............................. (751,573,602) -------------- Net increase (decrease) ...................... $ (8,395,879) -------------- a For the period July 1, 2003 (effective date) to December 31, 2003 for the Intermediate-Term Fund. b For the period September 2, 2003 (effective date) to December 31, 2003 for the Limited-Term Fund.
70 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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) Administrative manager Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter Franklin/Templeton Investor Services LLC (Investor Services) Transfer agent
The Insured Fund and the Intermediate-Term Fund pay an investment management fee to Advisers based on the month-end net assets and the Money Fund pays an investment management fee to Advisers based on average daily net assets as follows: - ---------------------------------------------------------------------------- ANNUALIZED FEE RATE NET ASSETS - ---------------------------------------------------------------------------- .625% First $100 million .500% Over $100 million, up to and including $250 million .450% In excess of $250 million The Limited-Term Fund pays an investment management fee to Advisers based on the average daily net assets of the fund as follows: - ---------------------------------------------------------------------------- ANNUALIZED FEE RATE NET ASSETS - ---------------------------------------------------------------------------- .500% First $100 million .450% Over $100 million, up to and including $250 million .425% Over $250 million, up to and including $500 million Fees are further reduced on net assets over $500 million. Advisers and FT Services agreed in advance to waive management and administrative fees, respectively, and assume payment of other expenses for the Limited-Term Fund, as noted in the Statement of Operations. Under an agreement with Advisers, FT Services provides administrative services to the Insured Fund, the Intermediate-Term Fund and the Money Fund. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Funds. The Limited-Term Fund pays an administrative fee to FT Services of .20% per year of the average daily net assets of the fund. The Funds reimburse Distributors for costs incurred in marketing the Funds' shares up to a certain percentage per year of their average daily net assets of each class as follows: ----------------------------------- INSURED INTERMEDIATE- LIMITED- FUND TERM FUND TERM FUND ----------------------------------- Class A ................ .10% .10% .15% Class B ................ .65% -- -- Class C ................ .65% .65% -- Semiannual Report| 71 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) Distributors paid net commissions on sales of the Funds' shares, and received contingent deferred sales charges for the period as follows: ---------------------------------- INSURED INTERMEDIATE- MONEY FUND TERM FUND FUND ---------------------------------- Net commissions paid ..................... $ 405,278 $ 56,327 $ -- Contingent deferred sales charges ........ $ 187,911 $ 33,428 $ 4,462 The Funds paid transfer agent fees as noted in the Statement of Operations of which the following amounts were paid to Investor Services: ------------------------------------------------- INSURED INTERMEDIATE- LIMITED- MONEY FUND TERM FUND TERM FUND FUND ------------------------------------------------- Transfer agent fees...... $ 196,027 $41,119 $ 428 $ 127,757 4. INCOME TAXES At June 30, 2003, certain 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: 2005 ................................... $ -- $ -- $ 1,444 2006 ................................... -- -- 9,957 2007 ................................... -- -- 4,593 2008 ................................... 7,009,033 90,667 9,293 2009 ................................... 7,452,092 321,166 21,840 2010 ................................... -- 112,465 -- 2011 ................................... -- 145,149 -- ----------------------------------- $14,461,125 $669,447 $47,127 ----------------------------------- At June 30, 2003, the Money Fund had deferred capital losses occurring subsequent to October 31, 2002 of $2,466. For tax purposes, such losses will be reflected in the year ending June 30, 2004. Distributions of income to shareholders may not equal net investment income due to differing treatments of dividend distributions for book and tax purposes. Net investment income differs for financial statement and tax purposes primarily due to differing treatments of bond discounts and offering costs. Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales and bond discounts. 72 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 4. INCOME TAXES (CONTINUED) At December 31, 2003, the net unrealized appreciation (depreciation) based on the cost of investments for income tax purposes were as follows:
--------------------------------------------------------------- INSURED INTERMEDIATE- LIMITED- MONEY FUND TERM FUND TERM FUND FUND --------------------------------------------------------------- Cost of investments .............. $1,902,723,736 $381,907,826 $13,591,668 $642,437,135 --------------------------------------------------------------- Unrealized appreciation .......... 144,403,980 17,923,714 32,906 -- Unrealized depreciation .......... (629,070) (964,502) (5,622) -- --------------------------------------------------------------- Net unrealized appreciation (depreciation) .................. $ 143,774,910 $ 16,959,212 $ 27,284 $ -- ---------------------------------------------------------------
5. INVESTMENT TRANSACTIONS Purchases and sales of investments (excluding short-term securities) for the period ended December 31, 2003, were as follows:
------------------------------------------------ INSURED INTERMEDIATE- LIMITED- CAPITAL LOSS CARRYOVERS EXPIRING IN: FUND TERM FUND TERM FUND ------------------------------------------------ Purchases .......................... $123,194,779 $32,977,147 $9,907,894 Sales .............................. $161,934,566 $40,313,457 $ 398,980
6. REGULATORY MATTERS On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the "Company"), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund. The Funds, in addition to other entities within Franklin Templeton Investments, including the Company and other funds, has been named in shareholder class actions related to the matter described above. The Funds' management believes that the claims made in the lawsuit are without merit and they intend to defend vigorously against the allegations. It is anticipated that the Funds may be named in additional similar civil actions related to the matter described above. Semiannual Report| 73 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. REGULATORY MATTERS (CONTINUED) In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business. The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Funds' investment adviser and a senior executive officer relating to the frequent trading issues that are the subject of the SEC's investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Funds' management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Funds is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Funds or their shareholders whole, as appropriate. 74 |Semiannual Report Franklin California Tax-Free Trust PROXY VOTING POLICIES AND PROCEDURES The Fund has established Proxy Voting Policies and Procedures ("Policies") that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund's complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Semiannual Report| 75 This page intentionally left blank. Literature Request For a brochure and prospectus, which contains more complete information, including charges and expenses, call Franklin Templeton Investments at 1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before investing or sending money. To ensure the highest quality of service, we may monitor, record and access telephone calls to or from our service departments. These calls can be identified by the presence of a regular beeping tone. FRANKLIN TEMPLETON INVESTMENTS INTERNATIONAL Mutual European Fund Templeton China World Fund Templeton Developing Markets Trust Templeton Foreign Fund Templeton Foreign Smaller Companies Fund Templeton International (Ex EM) Fund GLOBAL Franklin Global Aggressive Growth Fund Franklin Global Growth Fund Mutual Discovery Fund Templeton Capital Accumulator Fund Templeton Global Long-Short Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Growth Fund Templeton World Fund GROWTH Franklin Aggressive Growth Fund Franklin Capital Growth Fund Franklin Flex Cap Growth Fund Franklin Small-Mid Cap Growth Fund Franklin Small Cap Growth Fund II 1 VALUE Franklin Balance Sheet Investment Fund 2 Franklin Equity Income Fund Franklin Large Cap Value Fund Franklin MicroCap Value Fund 3 Franklin Small Cap Value Fund Mutual Beacon Fund Mutual Qualified Fund Mutual Recovery Fund 4 Mutual Shares Fund BLEND Franklin Blue Chip Fund Franklin Convertible Securities Fund Franklin Growth Fund Franklin Rising Dividends Fund Franklin U.S. Long-Short Fund 5 SECTOR Franklin Biotechnology Discovery Fund Franklin DynaTech Fund Franklin Global Communications Fund Franklin Global Health Care Fund Franklin Gold and Precious Metals Fund Franklin Natural Resources Fund Franklin Real Estate Securities Fund Franklin Utilities Fund Franklin Technology Fund Mutual Financial Services Fund ASSET ALLOCATION Franklin Templeton Corefolio Allocation Fund Franklin Templeton Founding Funds Allocation Fund TARGET FUNDS Franklin Templeton Conservative Target Fund Franklin Templeton Growth Target Fund Franklin Templeton Moderate Target Fund INCOME Franklin Adjustable U.S. Government Securities Fund 6 Franklin's AGE High Income Fund Franklin Federal Money Fund 6, 7 Franklin Floating Rate Daily Access Fund Franklin Floating Rate Trust 4 Franklin Income Fund Franklin Money Fund 6, 7 Franklin Short-Intermediate U.S. Government Securities Fund 6 Franklin Strategic Income Fund Franklin Strategic Mortgage Portfolio 6 Franklin Templeton Hard Currency Fund Franklin Total Return Fund Franklin U.S. Government Securities Fund 6 Templeton Global Bond Fund TAX-FREE INCOME 8 NATIONAL FUNDS Double Tax-Free Income Fund Federal Tax-Free Income Fund High Yield Tax-Free Income Fund Insured Tax-Free Income Fund 9 Tax-Exempt Money Fund 6, 7 LIMITED-TERM FUNDS California Limited-Term Tax-Free Income Fund Federal Limited-Term Tax-Free Income Fund New York Limited-Term Tax-Free Income Fund INTERMEDIATE-TERM FUNDS California Intermediate-Term Tax-Free Income Fund Federal Intermediate-Term Tax-Free Income Fund New York Intermediate-Term Tax-Free Income Fund STATE-SPECIFIC 8 Alabama Arizona California 10 Colorado Connecticut Florida 10 Georgia Kentucky Louisiana Maryland Massachusetts 9 Michigan 9 Minnesota 9 Missouri New Jersey New York 10 North Carolina Ohio 9 Oregon Pennsylvania Tennessee Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust 11 1. The fund is closed to new investors. Existing shareholders can continue adding to their accounts. 2. The fund is only open to existing shareholders as well as select retirement plans. 3. Effective June 30, 2003, the fund reopened to all new investors. 4. The fund is a continuously offered, closed-end fund. Shares may be purchased daily; there is no daily redemption. However, each quarter, pending board approval, the fund will authorize the repurchase of 5%-25% of the outstanding number of shares. Investors may tender all or a portion of their shares during the tender period. 5. Upon reaching approximately $350 million in assets, the fund intends to close to all investors. 6. An investment in the fund is neither insured nor guaranteed by the U.S. government or by any other entity or institution. 7. No assurance exists that the fund's $1.00 per share price will be maintained. It is possible to lose money by investing in the fund. 8. For investors subject to the alternative minimum tax, a small portion of these dividends may be taxable. Distributions of capital gains are generally taxable. 9. Portfolio of insured municipal securities. 10. These funds are available in two or more variations, including long-term portfolios, portfolios of insured securities, a high-yield portfolio (CA) and money market portfolios (CA and NY). 11. The funds of the Franklin Templeton Variable Insurance Products Trust are generally available only through insurance company variable contracts. 11/03 Not part of the semiannual report [LOGO OMITTED] FRANKLIN(R) TEMPLETON(R) One Franklin Parkway INVESTMENTS San Mateo, CA 94403-1906 WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL? Eligible shareholders can sign up for eDelivery at franklintempleton.com. See inside for details. SEMIANNUAL REPORT AND SHAREHOLDER LETTER FRANKLIN CALIFORNIA TAX-FREE TRUST INVESTMENT MANAGER Franklin Advisers, Inc. DISTRIBUTOR Franklin Templeton Distributors, Inc. 1-800/DIAL BEN [R] franklintempleton.com SHAREHOLDER SERVICES 1-800/632-2301 This report must be preceded or accompanied by the current Franklin California Tax-Free Trust prospectus, which contains more complete information, including charges, expenses and risks. To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be identified by the presence of a regular beeping tone. CAT S2003 02/04 ITEM 2. CODE OF ETHICS. (A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER. (C) N/A (D) N/A (F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS FINANCIAL AND ACCOUNTING OFFICER. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS AUDIT COMMITTEE. (2) THE AUDIT COMMITTEE FINANCIAL EXPERT IS FRANK W.T. LAHAYE, AND HE IS "INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION RULES AND RELEASES. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A ITEM 9. CONTROLS AND PROCEDURES. (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant's management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant's management, including the Registrant's principal executive officer and the Registrant's principal financial officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures. Based on such evaluation, the Registrant's principal executive officer and principal financial officer concluded that the Registrant's disclosure controls and procedures are effective. (B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR. ITEM 10. EXHIBITS. (A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS. (B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER (B)(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRANKLIN CALIFORNIA TAX-FREE TRUST By /s/Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date February 27, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date February 27, 2004 By /s/Kimberley H. Monasterio Chief Financial Officer Date February 27, 2004 EX-99.CODE ETH 3 codeofethics.txt EXHIBIT (A) FRANKLIN TEMPLETON FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS AND PURPOSE OF THE CODE This code of ethics (the "Code")1 is for the investment companies within the complex registered with the United States Securities & Exchange Commission ("SEC") (collectively, "FT Funds") applies to each FT Fund's Principal Executive Officers, Principal Financial Officer and Principal Accounting Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting: o Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o Full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by or on behalf of the FT Funds; o Compliance with applicable laws and governmental rules and regulations; o The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o Accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the FT Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the FT Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the FT Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the FT Funds because of their status as "affiliated persons" of the FT Funds. The FT Funds' and the investment advisers' compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the FT Funds, the investment advisers and the fund administrator of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the FT Funds, for the adviser, the administrator, or for all three), be involved in establishing policies and implementing decisions that will have different effects on the adviser, administrator and the FT Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the FT Funds, the adviser, and the administrator and is consistent with the performance by the Covered Officers of their duties as officers of the FT Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the FT Funds' Boards of Directors ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the FT Funds. Each Covered Officer must: o Not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the FT Funds whereby the Covered Officer would benefit personally to the detriment of the FT Funds; o Not cause the FT Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the FT Funds; o Not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; o Report at least annually the following affiliations or other relationships:/2 o all directorships for public companies and all companies that are required to file reports with the SEC; o any direct or indirect business relationship with any independent directors; o any direct or indirect business relationship with any independent public accounting firm; and o any direct or indirect interest in any transaction with any FT Fund that will benefit the officer (not including benefits derived from the advisory, sub-advisory, distribution or service agreements with affiliates of Franklin Resources). There are some conflict of interest situations that should always be approved in writing by FT's General Counsel or Deputy General Counsel, if material. Examples of these include/3: o Service as a director on the board of any public or private Company; o The receipt of any gifts in excess of $100; o The receipt of any entertainment from any Company with which the FT Funds has current or prospective business dealings unless such entertainment is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. Notwithstanding the foregoing, the Covered Officers must obtain prior approval for any entertainment with a value in excess of $1000. o Any ownership interest in, or any consulting or employment relationship with, any of the FT Fund's service providers, other than an investment adviser, principal underwriter, administrator or any affiliated person thereof; o A direct or indirect financial interest in commissions, transaction charges or spreads paid by the FT Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. FT's General Counsel or Deputy General Counsel will provide a report to the FT Funds Audit Committee of any approvals granted at the next regularly scheduled meeting. III. DISCLOSURE AND COMPLIANCE o Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the FT Funds; o Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the FT Funds to others, whether within or outside the FT Funds, including to the FT Funds' directors and auditors, and to governmental regulators and self-regulatory organizations; o Each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the FT Funds, the adviser and the administrator with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the FT Funds file with, or submit to, the SEC and in other public communications made by the FT Funds; and o It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o Upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code (see Exhibit B); o Annually thereafter affirm to the Board that he has complied with the requirements of the Code; and o Notify FT's General Counsel or Deputy General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself is a violation of this Code. FT's General Counsel and Deputy General Counsel are responsible for applying this Code to specific situations in which questions are presented under it and have the authority to interpret this Code in any particular situation.4 However, the Independent Directors of the respective fund will consider any approvals or waivers5 sought by any Chief Executive Officers of the Funds. The FT Funds will follow these procedures in investigating and enforcing this Code: o FT's General Counsel or Deputy General Counsel will take all appropriate action to investigate any potential violations reported to him; o If, after such investigation, FT's General Counsel or Deputy General Counsel believes that no violation has occurred, FT's General Counsel is not required to take any further action; o Any matter that FT's General Counsel or Deputy General Counsel believes is a violation will be reported to the Independent Directors of the appropriate FT Fund; o If the Independent Directors concur that a violation has occurred, it will inform and make a recommendation to the Board of the appropriate Funds, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o The Independent Directors will be responsible for granting waivers, as appropriate; and o Any changes to or waivers of this Code will, to the extent required, are disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the FT Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies there under. Insofar as other policies or procedures of the FT Funds, the FT Funds' advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The FT Code of Ethics and Policy Statement On Insider Trading, adopted by the FT Funds, FT investment advisers and FT Fund's principal underwriter pursuant to Rule 17j-l under the Investment Company Act and more detailed policies and procedures set forth in FT's Employee Handbook are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the FT Funds' Board including a majority of independent directors. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the FT Funds' Board and their counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the FT Funds and does not constitute an admission, by or on behalf of any FT Funds, as to any fact, circumstance, or legal conclusion. EXHIBIT A Persons Covered by the Franklin Templeton Funds Code of Ethics FRANKLIN GROUP OF FUNDS Edward b. Jamieson, President and Chief Executive Officer - Investment Management Charles B. Johnson, President and Chief Executive Officer - Investment Management Gregory E. Johnson, President and Chief Executive Officer - Investment Management Rupert H. Johnson, Jr. President and Chief Executive Officer - Investment Management William J. Lippman, President and Chief Executive Officer - Investment Management Christopher Molumphy President and Chief Executive Officer - Investment Management Jimmy D. Gambill, Senior Vice President and Chief Executive Officer - Finance and Administration Kimberley H. Monasterio Treasurer & Chief Financial Officer FRANKLIN MUTUAL SERIES FUNDS David Winters Chairman of the Board, President, Chief Executive Officer-Investment Management Jimmy D. Gambill Senior Vice President and Chief Executive Officer- Finance and Administration Bruce S. Rosenberg Treasurer & Chief Financial Officer TEMPLETON GROUP OF FUNDS Jeffrey A. Everett President and Chief Executive Officer - Investment Management Martin L. Flanagan President and Chief Executive Officer - Investment Management Mark Mobius President and Chief Executive Officer - Investment Management Christopher J. Molumphy President and Chief Executive Officer - Investment Management Gary P. Motyl President and Chief Executive Officer - Investment Management Donald F. Reed President and Chief Executive Officer - Investment Management Jimmy D. Gambill, Senior Vice President and Chief Executive Officer - Finance and Administration Bruce S. Rosenberg Treasurer & Chief Financial Officer EXHIBIT B ACKNOWLEDGMENT FORM FRANKLIN TEMPLETON FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS. INSTRUCTIONS: 1. Complete all sections of this form. 2. Print the completed form, sign, and date. 3. Submit completed form to FT's General Counsel within 10 days of becoming a Covered Officer and by January 30th of each subsequent year. INTER-OFFICE MAIL: Murray Simpson, General Counsel, Legal SM-920/2 TELEPHONE: (650) 312-7331 Fax: (650) 312-2221 E-MAIL: Simpson, Murray (internal address); mlsimpson@frk.com (external address) - ---------------------------------------------------------------------------- COVERED OFFICER'S NAME: - ---------------------------------------------------------------------------- TITLE: - ---------------------------------------------------------------------------- DEPARTMENT: - ---------------------------------------------------------------------------- LOCATION: - ---------------------------------------------------------------------------- CERTIFICATION FOR YEAR ENDING: - ---------------------------------------------------------------------------- TO: FT GENERAL COUNSEL, LEGAL DEPARTMENT I hereby acknowledge receipt of a copy of Franklin Templeton Fund's code of ethics for Principal Executive Officers and Senior Financial Officers (the "Code") that I have read and understand. I will comply fully with all provisions of the Code to the extent they apply to me during the period of my employment. I further understand and acknowledge that any violation of the Code may subject me to disciplinary action, including termination of employment -------------------- --------------------- Signature Date signed 1 Item 2 of Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the report, it has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these officers are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, it must explain why it has not done so. The registrant must also: (1) file with the SEC a copy of the code as an exhibit to its annual report; (2) post the text of the code on its Internet website and disclose, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted the code on its Internet website; or (3) undertake in its most recent report on Form N-CSR to provide to any person without charge, upon request, a copy of the code and explain the manner in which such request may be made. Disclosure is also required of amendments to, or waivers (including implicit waivers) from, a provision of the code in the registrant's annual report on Form N-CSR or on its website. If the registrant intends to satisfy the requirement to disclose amendments and waivers by posting such information on its website, it will be required to disclose its Internet address and this intention. 2 Reporting of these affiliations or other relationships may be made separately by completing the Directors and Officers Questionnaire and returning to FT's General Counsel or Deputy General Counsel. 3 Any activity or relationship that would present a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if a member of the Covered Officer's immediate family engages in such an activity or has such a relationship. The Cover Person should also obtain written approval by FT's General Counsel in such situations. 4 FT's General Counsel and Deputy General Counsel are authorized to consult, as appropriate, with members of the Audit Committee, counsel to the FT Funds and counsel to the Independent Directors, and are encouraged to do so. 5 Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver," which must also be disclosed, as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer" of the registrant. EX-99.CERT 4 fctftjimg302.txt EXHIBIT (B)(1) CERTIFICATIONS I, Jimmy D. Gambill, certify that: 1. I have reviewed this report on Form N-CSR of Franklin California Tax-Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 25, 2004 /S/JIMMY D. GAMBILL Chief Executive Officer - Finance and Administration I, Kimberley H. Monasterio, certify that: 1. I have reviewed this report on Form N-CSR of Franklin California Tax-Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 25, 2004 /S/KIMBERLEY H. MONASTERIO Treasurer and Chief Financial Officer EX-99.906 5 fctftjimg906.txt EXHIBITS (B)(2) CERTIFICATIONS CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Jimmy D. Gambill, Chief Executive Officer of the Franklin California Tax-Free Trust (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 12/31/03 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: February 25, 2004 /S/JIMMY D. GAMBILL Chief Executive Officer - Finance and Administration A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Kimberley H. Monasterio, Chief Financial Officer of the Franklin California Tax-Free Trust (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 12/31/03 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: February 25, 2004 /S/KIMBERLEY H. MONASTERIO Treasurer and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----