N-CSRS 1 ncsrs.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 811-04356 --------- 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) CRAIG S. TYLE, 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: 6/30 ---- Date of reporting period: 12/31/07 -------- ITEM 1. REPORTS TO STOCKHOLDERS. [GRAPHIC OMITTED] -------------------------------------------------------------------------------- DECEMBER 31, 2007 -------------------------------------------------------------------------------- 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 FASTER VIA EMAIL? FRANKLIN CALIFORNIA TAX-FREE TRUST Eligible shareholders can sign up for eDelivery at franklintempleton.com. See inside for details. -------------------------------------------------------------------------------- [LOGO](R) FRANKLIN TEMPLETON INVESTMENTS FRANKLIN o Templeton o Mutual Series Franklin Templeton Investments GAIN FROM OUR PERSPECTIVE(R) Franklin Templeton's distinct multi-manager structure combines the specialized expertise of three world-class investment management groups--Franklin, Templeton and Mutual Series. SPECIALIZED EXPERTISE Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success. FRANKLIN. Founded in 1947, Franklin is a recognized leader in fixed income investing and also brings expertise in growth- and value-style U.S. equity investing. TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry's oldest global fund. Today, with offices in over 25 countries, Templeton offers investors a truly global perspective. MUTUAL SERIES. Founded in 1949, Mutual Series is dedicated to a unique style of value investing, searching aggressively for opportunity among what it believes are undervalued stocks, as well as arbitrage situations and distressed securities. TRUE DIVERSIFICATION Because our management groups work independently and adhere to different investment approaches, Franklin, Templeton and Mutual Series funds typically have distinct portfolios. That's why our funds can be used to build truly diversified allocation plans covering every major asset class. RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to consistently provide investors with exceptional risk-adjusted returns over the long term, as well as the reliable, accurate and personal service that has helped us become one of the most trusted names in financial services. -------------------------------------------------------------------------------- MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Not part of the semiannual report Contents SHAREHOLDER LETTER ....................................................... 1 SPECIAL FEATURE: Understanding Interest Rates ............................................. 4 SEMIANNUAL REPORT State Update and Municipal Bond Market Overview .......................... 7 Franklin California Insured Tax-Free Income Fund ......................... 10 Franklin California Intermediate-Term Tax-Free Income Fund ............... 18 Franklin California Limited-Term Tax-Free Income Fund .................... 25 Franklin California Tax-Exempt Money Fund ................................ 31 Financial Highlights and Statements of Investments ....................... 35 Financial Statements ..................................................... 72 Notes to Financial Statements ............................................ 77 Shareholder Information .................................................. 88 -------------------------------------------------------------------------------- Semiannual Report State Update and Municipal Bond Market Overview During the six months under review, California's broad-based economy performed in line with the nation's economy even though housing market weakness affected the state more than others. The state gained jobs, albeit at a slower pace, despite a mild rise in unemployment. In December, California's 6.1% unemployment rate was higher than the 5.0% national average. 1 Personal income growth exhibited volatility partly due to capital gains and stock option income attributed to Silicon Valley. Northern California's economy softened considerably during the 2001 recession but has been improving. Southern California's economy demonstrated particular strength as the defense industry grew. Economic sectors that experienced employment growth were government, professional and business services, financial services, manufacturing and various other services. Declining sectors included construction and trade. The state, which has a history of uneven financial operations, ended fiscal year 2007 with a large operating deficit. Although 55 days late, California enacted a fiscal year 2008 budget projecting essentially balanced operations. However, slow revenue growth and unexpected expenses already incurred could produce a deficit by fiscal year-end. In the first four months of fiscal year 2008, cumulative tax revenues were off by 4%, although this might have been partially related to delays in tax receipts caused by recent fires in San Diego County. 2 Additionally, California identified increased expenditures of $600 million relating to weak real estate values that will require the state to increase payments to school districts for property tax shortfalls under the Proposition 98 school funding mandate.2 Mandated social services and corrections spending has pressured state finances in recent years. Administrative and legal factors have also weakened California's fiscal flexibility compared with many other states. In early November, Governor Schwarzenegger directed state agencies to prepare for 10% spending cuts. 3 California's A+ general obligation bond rating and stable outlook, assigned by independent credit rating agency Standard & Poor's, reflects the state's financial improvement in previous years balanced by a recent slowdown in state revenues. 4 Economic and revenue trends are expected to moderate, and 1. Source: Bureau of Labor Statistics. 2. Source: Standard & Poor's, "Research: State Review: California," RATINGSDIRECT, 12/4/07. 3. Source: Moody's Investors Service, "New Issue: California (State of)," 11/26/07. 4. This does not indicate Standard & Poor's rating of the Fund. Semiannual Report | 7 although the risk now exists that current revenue forecasts will not be met, reserves are high and will provide a cushion. Overall debt levels are rising but should remain affordable despite the state's accelerating issuance of general obligation bonds. The six-month period ended December 31, 2007, proved challenging for the municipal bond market. A measured pullback in the municipal market was exacerbated mid-period as all financial markets felt the impact of subprime loan defaults. Many major financial institutions tightened credit and reassessed the risk of their direct and indirect exposure to subprime loans. A lack of liquidity across most markets in August contributed to an increase in overall volatility and declining values in many asset classes. Near period-end, ongoing concerns about the financial health of municipal insurance companies intensified. Specifically, many questioned their ability to retain their AAA ratings given losses related to their involvement in the collateralized debt obligation (CDO) and mortgage securities markets. The three major rating agencies -- Fitch Ratings, Moody's Investors Service and Standard & Poor's -- recently analyzed the major insurance companies and announced that although they retained their AAA ratings, the outlooks for some were negative. Stock prices for publicly held municipal insurance companies suffered greatly and many municipal bond market participants appeared nervous about insured bonds. Investors should be aware that insurance companies insure bonds that tend to be of very high quality. Many municipal bond issuers use insurance to appeal to a wider audience of potential buyers. The majority of issuers whose bonds are insured carry underlying ratings of A or better, and the historical default rate for such bonds is less than 1%. Ultimately, the underlying credit quality of state and local governments and their agencies supports the municipal market, and the underlying credit quality of an insured bond is not affected by an insurance company's credit quality. We believe there could be some price volatility for insured municipal bonds and insured municipal bond funds as markets react to ongoing disclosures by insurance companies. 5 However, we 5. Fund shares are not insured by any U.S. or other government agency. They are subject to market risks and will fluctuate in value. 8 | Semiannual Report encourage investors to take a longer-term view and to keep in mind the inherent high quality of municipal bonds and focus on the tax-free income they provide. 6 Over the six-month reporting period, municipal bond market returns lagged those of the U.S. Treasury market as uncertainty regarding the impact of problems associated with subprime securities drove global investors to the relative safety of U.S. Treasuries. Furthermore, investors began to require additional compensation for taking on risk, and spreads for credit-driven securities widened. For the six months ended December 31, 2007, the Lehman Brothers Municipal Bond Index had a 3.22% total return, and the Lehman Brothers U.S. Treasury Index returned 7.92%. 7 High yield municipal bonds, as measured by the Lehman Brothers Municipal Bond Index: Non-Investment Grade, had a -2.28% return for the same period. 8 In this environment, many investors opted for short- to intermediate-term securities, which resulted in steeper Treasury and municipal bond curves (spread between short- and longer-term yields). On December 31, 2007, two-year, 10-year and 30-year Treasury yields were 3.05%, 4.04% and 4.45%, respectively. The yields on two-year, 10-year and 30-year Treasuries fell 182, 99 and 68 basis points (100 basis points equal one percentage point), respectively, over the period. According to Municipal Market Data, at period-end, two-year, 10-year and 30-year municipal bonds yielded 2.97%, 3.63% and 4.32%, respectively. 9 Yields for the two-year and 10-year fell 71 and 28 basis points, while 30-year yields rose 7 basis points during the reporting period. 9 6. Franklin tax-free income funds seek income free from federal regular and, depending on the fund, state and local income taxes. For investors subject to alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN. 7. 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 Baa3/BBB-. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be dated after 12/31/90, and must be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates and derivatives are excluded from the index. The index has four main bond sectors: general obligation, revenue, insured and prerefunded. The Lehman Brothers U.S. Treasury Index includes public obligations of the U.S. Treasury with a remaining maturity of one year or more. All issues must have at least one year to final maturity regardless of call features, have at least $250 million par amount outstanding and be rated investment grade (Baa3 or better). They must also be dollar denominated, nonconvertible and publicly issued. 8. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index: Non-Investment Grade includes bonds with a maximum credit rating of Ba1. All bonds included must have an outstanding par value of at least $3 million and be issued as part of a transaction of at least $20 million. The bonds must be dated after 12/31/90, and must be at least one year from their maturity date. Taxable municipal bonds, bonds with floating rates and derivatives are excluded from the index. 9. Source: Thomson Financial. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31, 2007, THE END OF THE REPORTING PERIOD. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE. Semiannual Report | 9 Franklin California Insured Tax-Free Income Fund YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Insured Tax-Free Income Fund seeks to provide as high a level of income exempt from federal and California personal income taxes as is consistent with prudent investment management and the preservation of capital by investing at least 80% of its net assets in insured securities that pay interest free from such taxes. 1,2 -------------------------------------------------------------------------------- PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- We are pleased to bring you Franklin California Insured Tax-Free Income Fund's semiannual report for the period ended December 31, 2007. PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, increased from $12.48 on June 30, 2007, to $12.53 on December 31, 2007. The Fund's Class A shares paid dividends totaling 27.00 cents per share for the same period. 3 The Performance Summary beginning on page 13 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 4.13%, based on an annualization of the current 4.50 cent per share dividend and the maximum offering price of $13.09 on December 31, 2007. An investor in the 2007 maximum combined effective federal and California personal income tax bracket of 41.05% would need to earn a distribution rate of 7.01% 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 Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN. 2. Fund shares are not insured by any U.S. or other government agency. They are subject to market risks and will fluctuate in value. 3. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 38. 10 | Semiannual Report DIVIDEND DISTRIBUTIONS* Franklin California Insured Tax-Free Income Fund -------------------------------------------------------------------------------- DIVIDEND PER SHARE ---------------------------------------------------- MONTH CLASS A CLASS B CLASS C -------------------------------------------------------------------------------- July 4.50 cents 3.94 cents 3.92 cents -------------------------------------------------------------------------------- August 4.50 cents 3.94 cents 3.92 cents -------------------------------------------------------------------------------- September 4.50 cents 3.93 cents 3.92 cents -------------------------------------------------------------------------------- October 4.50 cents 3.93 cents 3.92 cents -------------------------------------------------------------------------------- November 4.50 cents 3.93 cents 3.92 cents -------------------------------------------------------------------------------- December 4.50 cents 3.93 cents 3.92 cents -------------------------------------------------------------------------------- * Assumes shares were purchased and held for the entire accrual period, which differs from the calendar month. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. 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 securities. This broad diversification may help mitigate interest rate risk. We do not use leverage or exotic derivatives, nor do we use hedging techniques that could add volatility and contribute to underperformance in adverse markets. We generally stay fully invested to maximize income distribution. MANAGER'S DISCUSSION Consistent with our strategy, we sought to remain fully invested in bonds that maintain an average weighted maturity of 15 to 30 years with good call features. The combination of our value oriented philosophy of investing primarily for income and a relatively steep municipal yield curve compared to Treasuries favored the use of longer term bonds. We also maintained our conservative, buy-and-hold investment strategy as we attempted to provide shareholders with high, current, tax-free income. PORTFOLIO BREAKDOWN Franklin California Insured Tax-Free Income Fund 12/31/07 -------------------------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS* -------------------------------------------------------------------------------- Prerefunded 25.4% -------------------------------------------------------------------------------- General Obligation 20.3% -------------------------------------------------------------------------------- Transportation 13.0% -------------------------------------------------------------------------------- Utilities 11.7% -------------------------------------------------------------------------------- Subject to Government Appropriations 8.4% -------------------------------------------------------------------------------- Hospital & Health Care 7.8% -------------------------------------------------------------------------------- Tax-Supported 5.8% -------------------------------------------------------------------------------- Higher Education 3.5% -------------------------------------------------------------------------------- Other Revenue 3.5% -------------------------------------------------------------------------------- Housing 0.6% -------------------------------------------------------------------------------- * Does not include short-term investments and other net assets. Semiannual Report | 11 Thank you for your participation in Franklin California Insured Tax-Free Income Fund. We look forward to serving your future investment needs. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007, 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 INVESTMENT MANAGER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. 12 | Semiannual Report Performance Summary as of 12/31/07 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 that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund's dividends and capital gain distributions, if any, and any unrealized gains or losses. PRICE AND DISTRIBUTION INFORMATION ------------------------------------------------------------------------------------- CLASS A (SYMBOL: FRCIX) CHANGE 12/31/07 6/30/07 ------------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.05 $12.53 $12.48 ------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/07-12/31/07) ------------------------------------------------------------------------------------- Dividend Income $0.2700 ------------------------------------------------------------------------------------- CLASS B (SYMBOL: FRCBX) CHANGE 12/31/07 6/30/07 ------------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.05 $12.59 $12.54 ------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/07-12/31/07) ------------------------------------------------------------------------------------- Dividend Income $0.2360 ------------------------------------------------------------------------------------- CLASS C (SYMBOL: FRCAX) CHANGE 12/31/07 6/30/07 ------------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.06 $12.66 $12.60 ------------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/07-12/31/07) ------------------------------------------------------------------------------------- Dividend Income $0.2352 -------------------------------------------------------------------------------------
Semiannual Report | 13 Performance Summary (CONTINUED) PERFORMANCE CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN INCLUDES MAXIMUM SALES CHARGES. CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1% CDSC IN FIRST YEAR ONLY. THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE. ------------------------------------------------------------------------------------------------------------------- CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR ------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +2.59% +2.93% +23.58% +61.11% ------------------------------------------------------------------------------------------------------------------- Average Annual Total Return 2 -1.74% -1.42% +3.42% +4.43% ------------------------------------------------------------------------------------------------------------------- Distribution Rate 3 4.13% ------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 4 7.01% ------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 5 3.37% ------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 4 5.72% ------------------------------------------------------------------------------------------------------------------- Total Annual Operating Expenses 6 0.61% ------------------------------------------------------------------------------------------------------------------- CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (2/1/00) ------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +2.30% +2.35% +20.24% +51.92% ------------------------------------------------------------------------------------------------------------------- Average Annual Total Return 2 -1.70% -1.59% +3.41% +5.42% ------------------------------------------------------------------------------------------------------------------- Distribution Rate 3 3.75% ------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 4 6.36% ------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 5 2.98% ------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 4 5.05% ------------------------------------------------------------------------------------------------------------------- Total Annual Operating Expenses 6 1.16% ------------------------------------------------------------------------------------------------------------------- CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR ------------------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +2.36% +2.41% +20.29% +52.60% ------------------------------------------------------------------------------------------------------------------- Average Annual Total Return 2 +1.36% +1.42% +3.76% +4.32% ------------------------------------------------------------------------------------------------------------------- Distribution Rate 3 3.72% ------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 4 6.31% ------------------------------------------------------------------------------------------------------------------- 30-Day Standardized Yield 5 2.99% ------------------------------------------------------------------------------------------------------------------- Taxable Equivalent Yield 4 5.07% ------------------------------------------------------------------------------------------------------------------- Total Annual Operating Expenses 6 1.16% -------------------------------------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. 14 | Semiannual Report Performance Summary (CONTINUED) ENDNOTES BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS B: These shares have higher annual fees and expenses than Class A shares. CLASS C: Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares. 1. Cumulative total return represents the change in value of an investment over the periods indicated. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized. 3. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price (NAV for Classes B and C) per share on 12/31/07. 4. Taxable equivalent distribution rate and yield assume the published rates as of 12/24/07 for the maximum combined effective federal and California personal income tax rate 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 12/31/07. 6. Figures are as stated in the Fund's prospectus current as of the date of this report. Semiannual Report | 15 Your Fund's Expenses FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND As a Fund shareholder, you can incur two types of costs: o Transaction costs, including sales charges (loads) on Fund purchases and redemption fees; and o Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated. ACTUAL FUND EXPENSES The first line (Actual) for each share class listed in the table provides actual account values and expenses. The "Ending Account Value" is derived from the Fund's actual return, which includes the effect of Fund expenses. You can estimate the expenses you paid during the period by following these steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS ILLUSTRATION: 1. Divide your account value by $1,000. IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6. 2. Multiply the result by the number under the heading "Expenses Paid During Period." IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50. In this illustration, the estimated expenses paid this period are $64.50. HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical "Ending Account Value" is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund's actual return. The figure under the heading "Expenses Paid During Period" shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds. 16 | Semiannual Report Your Fund's Expenses (CONTINUED) PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR REDEMPTION FEES. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
-------------------------------------------------------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING CLASS A VALUE 7/1/07 VALUE 12/31/07 PERIOD* 7/1/07-12/31/07 -------------------------------------------------------------------------------------------------------------------------- Actual $1,000 $1,025.90 $3.06 -------------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.12 $3.05 -------------------------------------------------------------------------------------------------------------------------- CLASS B -------------------------------------------------------------------------------------------------------------------------- Actual $1,000 $1,023.00 $5.85 -------------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.36 $5.84 -------------------------------------------------------------------------------------------------------------------------- CLASS C -------------------------------------------------------------------------------------------------------------------------- Actual $1,000 $1,023.60 $5.85 -------------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.36 $5.84 --------------------------------------------------------------------------------------------------------------------------
* Expenses are calculated using the most recent six-month expense ratio annualized for each class (A: 0.60%; B: 1.15%; and C: 1.15%), multiplied by the average account value over the period, multiplied by 184/366 to reflect the one-half year period. Semiannual Report | 17 Franklin California Intermediate-Term Tax-Free Income Fund YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Intermediate-Term Tax-Free Income Fund seeks to provide as high a level of income exempt from federal and California personal income taxes as is consistent with prudent investment management and the preservation of capital by investing at least 80% of its total assets in securities that pay interest free from such taxes. 1 The Fund maintains a dollar-weighted average portfolio maturity (the time at which the debt must be repaid) of 3 to 10 years. -------------------------------------------------------------------------------- CREDIT QUALITY BREAKDOWN* Franklin California Intermediate-Term Tax-Free Income Fund 12/31/07 -------------------------------------------------------------------------------- % OF TOTAL RATINGS LONG-TERM INVESTMENTS** -------------------------------------------------------------------------------- AAA 54.6% -------------------------------------------------------------------------------- AA 6.1% -------------------------------------------------------------------------------- A 17.7% -------------------------------------------------------------------------------- BBB 6.3% -------------------------------------------------------------------------------- Below Investment Grade 0.6% -------------------------------------------------------------------------------- Not Rated by S&P 14.7% -------------------------------------------------------------------------------- * Standard & Poor's (S&P) is the primary independent rating agency; Moody's and Fitch are the secondary and tertiary rating agencies. Securities not rated by an independent rating agency are assigned comparable internal ratings. Ratings for securities not rated by S&P are in the table below. ** Does not include short-term investments and other net assets. RATINGS MOODY'S FITCH INTERNAL AAA or Aaa 2.8% -- 0.4% A 1.0% -- 3.0% BBB or Baa 1.1% 2.6% 3.8% ---------------------------------------------- Total 4.9% 2.6% 7.2% -------------------------------------------------------------------------------- We are pleased to bring you Franklin California Intermediate-Term Tax-Free Income Fund's semiannual report for the period ended December 31, 2007. 1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 53. 18 | Semiannual Report DIVIDEND DISTRIBUTIONS* Franklin California Intermediate-Term Tax-Free Income Fund -------------------------------------------------------------------------------- DIVIDEND PER SHARE -------------------------------- MONTH CLASS A CLASS C -------------------------------------------------------------------------------- July 3.57 cents 3.05 cents -------------------------------------------------------------------------------- August 3.57 cents 3.05 cents -------------------------------------------------------------------------------- September 3.57 cents 3.04 cents -------------------------------------------------------------------------------- October 3.57 cents 3.04 cents -------------------------------------------------------------------------------- November 3.57 cents 3.04 cents -------------------------------------------------------------------------------- December 3.60 cents 3.08 cents -------------------------------------------------------------------------------- * Assumes shares were purchased and held for the entire accrual period, which differs from the calendar month. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, increased from $11.33 on June 30, 2007, to $11.44 on December 31, 2007. The Fund's Class A shares paid dividends totaling 21.46 cents per share for the same period. 2 The Performance Summary beginning on page 21 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 3.69%, based on an annualization of the current 3.60 cent per share dividend and the maximum offering price of $11.70 on December 31, 2007. An investor in the 2007 maximum combined effective federal and California personal income tax bracket of 41.05% would need to earn a distribution rate of 6.26% from a taxable investment to match the Fund's Class A tax-free distribution rate. For the Fund's Class C shares' performance, please see the Performance Summary. INVESTMENT STRATEGY We use a consistent, disciplined strategy to maximize income for our shareholders by seeking to maintain our exposure to higher coupon securities. We generally employ a buy-and-hold approach and invest in securities that we believe should provide the most relative value in the market. As we invest throughout different interest rate environments, the Fund's portfolio becomes well diversified with a broad range of securities. This broad diversification may help mitigate interest rate risk. We do not use leverage or exotic derivatives, -------------------------------------------------------------------------------- PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- 2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. Semiannual Report | 19 PORTFOLIO BREAKDOWN Franklin California Intermediate-Term Tax-Free Income Fund 12/31/07 -------------------------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS* -------------------------------------------------------------------------------- General Obligation 25.5% -------------------------------------------------------------------------------- Tax-Supported 15.2% -------------------------------------------------------------------------------- Hospital & Health Care 14.3% -------------------------------------------------------------------------------- Prerefunded 11.7% -------------------------------------------------------------------------------- Utilities 10.9% -------------------------------------------------------------------------------- Transportation 8.3% -------------------------------------------------------------------------------- Subject to Government Appropriations 5.2% -------------------------------------------------------------------------------- Other Revenue 4.4% -------------------------------------------------------------------------------- Housing 2.7% -------------------------------------------------------------------------------- Higher Education 1.8% -------------------------------------------------------------------------------- * Does not include short-term investments and other net assets. nor do we use hedging techniques that could add volatility and contribute to underperformance in adverse markets. We generally stay fully invested to maximize income distributions. MANAGER'S DISCUSSION Consistent with our strategy, we sought to remain fully invested in a portfolio of bonds that maintain an average weighted maturity of 3 to 10 years. We also maintained our conservative, buy-and-hold investment strategy as we attempted to provide shareholders with high, current, tax-free income. Thank you for your participation in Franklin California Intermediate-Term Tax-Free Income Fund. We look forward to serving your future investment needs. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007, 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 INVESTMENT MANAGER 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. 20 | Semiannual Report Performance Summary as of 12/31/07 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 that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund's dividends and capital gain distributions, if any, and any unrealized gains or losses. PRICE AND DISTRIBUTION INFORMATION -------------------------------------------------------------------------------- CLASS A (SYMBOL: FKCIX) CHANGE 12/31/07 6/30/07 -------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.11 $ 11.44 $ 11.33 -------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/07-12/31/07) -------------------------------------------------------------------------------- Dividend Income $0.2146 -------------------------------------------------------------------------------- CLASS C (SYMBOL: FCCIX) CHANGE 12/31/07 6/30/07 -------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.10 $ 11.46 $ 11.36 -------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/07-12/31/07) -------------------------------------------------------------------------------- Dividend Income $0.1831 -------------------------------------------------------------------------------- PERFORMANCE CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN INCLUDES MAXIMUM SALES CHARGES. CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN FIRST YEAR ONLY. THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
------------------------------------------------------------------------------------------------------ CLASS A 1 6-MONTH 1-YEAR 5-YEAR 10-YEAR ------------------------------------------------------------------------------------------------------ Cumulative Total Return 2 +2.89% +3.14% +18.70% +54.00% ------------------------------------------------------------------------------------------------------ Average Annual Total Return 3 +0.58% +0.78% +3.01% +4.17% ------------------------------------------------------------------------------------------------------ Distribution Rate 4 3.69% ------------------------------------------------------------------------------------------------------ Taxable Equivalent Distribution Rate 5 6.26% ------------------------------------------------------------------------------------------------------ 30-Day Standardized Yield 6 3.32% ------------------------------------------------------------------------------------------------------ Taxable Equivalent Yield 5 5.63% ------------------------------------------------------------------------------------------------------ Total Annual Operating Expenses 7 0.66% ------------------------------------------------------------------------------------------------------ CLASS C 6-MONTH 1-YEAR 3-YEAR INCEPTION (7/1/03) ------------------------------------------------------------------------------------------------------ Cumulative Total Return 2 +2.51% +2.49% +8.01% +12.75% ------------------------------------------------------------------------------------------------------ Average Annual Total Return 3 +1.51% +1.50% +2.60% +2.70% ------------------------------------------------------------------------------------------------------ Distribution Rate 4 3.23% ------------------------------------------------------------------------------------------------------ Taxable Equivalent Distribution Rate 5 5.48% ------------------------------------------------------------------------------------------------------ 30-Day Standardized Yield 6 2.86% ------------------------------------------------------------------------------------------------------ Taxable Equivalent Yield 5 4.85% ------------------------------------------------------------------------------------------------------ Total Annual Operating Expenses 7 1.20% ------------------------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. Semiannual Report | 21 Performance Summary (CONTINUED) ENDNOTES BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE PRICE MAY DECLINE. THE FUND IS CLASSIFIED AS A NONDIVERSIFIED FUND BECAUSE IT MAY INVEST A GREATER PORTION OF ITS ASSETS IN ONE ISSUER THAN A DIVERSIFIED FUND. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS C: Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares. 1. Past expense reductions by the Fund's manager increased the Fund's total returns. If the manager had not taken this action, the Fund's total returns would have been lower. 2. Cumulative total return represents the change in value of an investment over the periods indicated. 3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized. 4. Distribution rate is based on an annualization of the respective class's current monthly dividend and the maximum offering price (NAV for Class C) per share on 12/31/07. 5. Taxable equivalent distribution rate and yield assume the published rates as of 12/24/07 for the maximum combined effective federal and California personal income tax rate 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 12/31/07. 7. Figures are as stated in the Fund's prospectus current as of the date of this report. 22 | Semiannual Report Your Fund's Expenses FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND As a Fund shareholder, you can incur two types of costs: o Transaction costs, including sales charges (loads) on Fund purchases and redemption fees; and o Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated. ACTUAL FUND EXPENSES The first line (Actual) for each share class listed in the table provides actual account values and expenses. The "Ending Account Value" is derived from the Fund's actual return, which includes the effect of Fund expenses. You can estimate the expenses you paid during the period by following these steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS ILLUSTRATION: 1. Divide your account value by $1,000. IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6. 2. Multiply the result by the number under the heading "Expenses Paid During Period." IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50. In this illustration, the estimated expenses paid this period are $64.50. HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical "Ending Account Value" is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund's actual return. The figure under the heading "Expenses Paid During Period" shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds. Semiannual Report | 23 Your Fund's Expenses (CONTINUED) PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR REDEMPTION FEES. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
------------------------------------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING CLASS A VALUE 7/1/07 VALUE 12/31/07 PERIOD* 7/1/07-12/31/07 ------------------------------------------------------------------------------------------------------- Actual $1,000 $1,028.90 $3.37 ------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.82 $3.35 ------------------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------------------------------- Actual $1,000 $1,025.10 $6.11 ------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.10 $6.09 -------------------------------------------------------------------------------------------------------
* Expenses are calculated using the most recent six-month expense ratio annualized for each class (A: 0.66% and C: 1.20%), multiplied by the average account value over the period, multiplied by 184/366 to reflect the one-half year period. 24 | Semiannual Report Franklin California Limited-Term Tax-Free Income Fund YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Limited-Term Tax-Free Income Fund seeks to provide as high a level of income exempt from federal and California personal income taxes as is consistent with prudent investment management and the preservation of capital, by investing at least 80% of its net assets in securities that pay interest free from such taxes. 1 The Fund maintains a dollar-weighted average portfolio maturity (the time at which the debt must be repaid) of five years or less. -------------------------------------------------------------------------------- PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CREDIT QUALITY BREAKDOWN* Franklin California Limited-Term Tax-Free Income Fund Based on Total Long-Term Investments as of 12/31/07** [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] AAA ............................... 56.0% AA ................................ 8.6% A ................................. 20.6% BBB ............................... 13.6% Not Rated by S&P .................. 1.2% * Standard & Poor's (S&P) is the primary independent rating agency; Moody's is the secondary rating agency. Ratings for securities not rated by S&P are in the table below. ** Does not include short-term investments and other net assets. RATINGS MOODY'S AAA or Aaa 1.2% -------------------------------------------------------------------------------- We are pleased to bring you Franklin California Limited-Term Tax-Free Income Fund's semiannual report for the period ended December 31, 2007. PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, increased from $9.86 on June 30, 2007, to $9.92 on December 31, 2007. The Fund's Class A shares paid dividends totaling 14.10 cents per share for the same period. 2 1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN. 2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 62. Semiannual Report | 25 DIVIDEND DISTRIBUTIONS* Franklin California Limited-Term Tax-Free Income Fund - Class A -------------------------------------------------------------------------------- MONTH DIVIDEND PER SHARE -------------------------------------------------------------------------------- July 2.30 cents -------------------------------------------------------------------------------- August 2.36 cents -------------------------------------------------------------------------------- September 2.36 cents -------------------------------------------------------------------------------- October 2.36 cents -------------------------------------------------------------------------------- November 2.45 cents -------------------------------------------------------------------------------- December 2.28 cents -------------------------------------------------------------------------------- * Assumes shares were purchased and held for the entire accrual period, which differs from the calendar month. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. PORTFOLIO BREAKDOWN Franklin California Limited-Term Tax-Free Income Fund 12/31/07 -------------------------------------------------------------------------------- % OF TOTAL LONG-TERM INVESTMENTS* -------------------------------------------------------------------------------- General Obligation 24.1% -------------------------------------------------------------------------------- Utilities 22.2% -------------------------------------------------------------------------------- Tax-Supported 18.9% -------------------------------------------------------------------------------- Hospital & Health Care 11.8% -------------------------------------------------------------------------------- Other Revenue 10.7% -------------------------------------------------------------------------------- Subject to Government Appropriations 8.3% -------------------------------------------------------------------------------- Transportation 2.9% -------------------------------------------------------------------------------- Higher Education 1.1% -------------------------------------------------------------------------------- * Does not include short-term investments and other net assets. The Performance Summary beginning on page 27 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 2.70%. An investor in the 2007 maximum combined effective federal and California personal income tax bracket of 41.05% would need to earn a distribution rate of 4.58% from a taxable investment to match the Fund's Class A tax-free distribution rate. The Fund was subject to bond calls during the period under review as many municipal bond issuers sought to take advantage of lower interest rates and exercised call options on their outstanding higher coupon bonds issued several years ago. In addition, the Fund had prerefunded bonds that reached their maturity or call dates. In general, we were limited to reinvesting these proceeds as well as those 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. We do not use leverage or exotic derivatives, nor do we use hedging techniques that could add volatility and contribute to underperformance in adverse markets. We generally stay fully invested to maximize income distribution. MANAGER'S DISCUSSION Consistent with our investment strategy, we invested in bonds we believed could provide the most relative value from an income perspective. Seeking a dollar-weighted average portfolio maturity of five years or less, we concentrated in the one- to three-year range. Short-term rates trended down over the period and we sought to take advantage of relatively higher yields present on this area of the yield curve. As a result of our strategy, the Fund was positioned to 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. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007, 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 INVESTMENT MANAGER 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 Performance Summary as of 12/31/07 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 that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund's dividends and capital gain distributions, if any, and any unrealized gains or losses. PRICE AND DISTRIBUTION INFORMATION -------------------------------------------------------------------------------- CLASS A (SYMBOL: FCALX) CHANGE 12/31/07 6/30/07 -------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.06 $9.92 $9.86 -------------------------------------------------------------------------------- DISTRIBUTIONS (7/1/07-12/31/07) -------------------------------------------------------------------------------- Dividend Income $0.1410 -------------------------------------------------------------------------------- PERFORMANCE 1 CUMULATIVE TOTAL RETURN EXCLUDES THE SALES CHARGE. AVERAGE ANNUAL TOTAL RETURN INCLUDES THE MAXIMUM SALES CHARGE. CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE. THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
----------------------------------------------------------------------------------------------- CLASS A 6-MONTH 1-YEAR 3-YEAR INCEPTION (9/2/03) ----------------------------------------------------------------------------------------------- Cumulative Total Return 2 +2.05% +3.50% +6.76% +8.40% ----------------------------------------------------------------------------------------------- Average Annual Total Return 3 -0.27% +1.14% +1.43% +1.35% ----------------------------------------------------------------------------------------------- Distribution Rate 4 2.70% ----------------------------------------------------------------------------------------------- Taxable Equivalent Distribution Rate 5 4.58% ----------------------------------------------------------------------------------------------- 30-Day Standardized Yield 6 2.93% ----------------------------------------------------------------------------------------------- Taxable Equivalent Yield 5 4.97% ----------------------------------------------------------------------------------------------- Total Annual Operating Expenses 7 ----------------------------------------------------------------------------------------------- Without Waiver 1.26% ----------------------------------------------------------------------------------------------- With Waiver 0.50% -----------------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. THE MANAGER AND ADMINISTRATOR HAVE CONTRACTUALLY AGREED TO LIMIT FUND EXPENSES SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 0.50% (OTHER THAN CERTAIN NON-ROUTINE EXPENSES) UNTIL 10/31/08. Semiannual Report | 27 Performance Summary (CONTINUED) ENDNOTES BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS A: Prior to 2/1/06, these shares were offered without an initial sales charge; thus actual total returns would have differed. 1. If the manager and administrator had not waived fees, the Fund's distribution rate and total return would have been lower, and yield for the period would have been 2.38%. 2. Cumulative total return represents the change in value of an investment over the periods indicated. 3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized. 4. Distribution rate is based on an annualization of the current 2.28 cent per share monthly dividend and the maximum offering price of $10.15 per share on 12/31/07. 5. Taxable equivalent distribution rate and yield assume the published rates as of 12/24/07 for the maximum combined effective federal and California personal income tax rate 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 12/31/07. 7. Figures are as stated in the Fund's prospectus current as of the date of this report. 28 | Semiannual Report Your Fund's Expenses FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND As a Fund shareholder, you can incur two types of costs: o Transaction costs, including sales charges (loads) on Fund purchases and redemption fees; and o Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated. ACTUAL FUND EXPENSES The first line (Actual) for each share class listed in the table provides actual account values and expenses. The "Ending Account Value" is derived from the Fund's actual return, which includes the effect of Fund expenses. You can estimate the expenses you paid during the period by following these steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS ILLUSTRATION: 1. Divide your account value by $1,000. IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6. 2. Multiply the result by the number under the heading "Expenses Paid During Period." IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50. In this illustration, the estimated expenses paid this period are $64.50. HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical "Ending Account Value" is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund's actual return. The figure under the heading "Expenses Paid During Period" shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds. Semiannual Report | 29 Your Fund's Expenses (CONTINUED) PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR REDEMPTION FEES. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
-------------------------------------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING CLASS A VALUE 7/1/07 VALUE 12/31/07 PERIOD* 7/1/07-12/31/07 -------------------------------------------------------------------------------------------------------- Actual $1,000 $1,020.50 $2.54 -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.62 $2.54 --------------------------------------------------------------------------------------------------------
* Expenses are calculated using the most recent six-month annualized expense ratio, net of expense waivers, of 0.50%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the one-half year period. 30 | Semiannual Report Franklin California Tax-Exempt Money Fund YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Tax-Exempt Money Fund seeks to provide as high a level of income exempt from federal and California personal income taxes as is consistent with prudent investment management and the preservation of capital and liquidity. 1 The Fund's portfolio invests at least 80% of its total assets in securities that pay interest free from such taxes. The Fund tries to maintain a stable $1.00 share price. -------------------------------------------------------------------------------- PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AN INVESTMENT IN THE FUND IS NOT GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY. 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. -------------------------------------------------------------------------------- This semiannual report for Franklin California Tax-Exempt Money Fund covers the period ended December 31, 2007. PERFORMANCE OVERVIEW With declining short-term interest rates, money market portfolio yields decreased during the period. Largely as a result, Franklin California Tax-Exempt Money Fund's seven-day effective yield fell from 3.15% at the beginning of the period to 2.78% on December 31, 2007. INVESTMENT STRATEGY We invest at least 80% of the Fund's total assets in high quality, short-term municipal securities whose interest is free from federal and California state personal income tax. Although the Fund tries to invest all of its assets in tax-free securities, it is possible, although not anticipated, that up to 20% of its assets may be in securities that pay taxable interest, including interest that may be subject to federal alternative minimum tax. We maintain a dollar-weighted average portfolio maturity of 90 days or less. 1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 66. Semiannual Report | 31 PERFORMANCE SUMMARY Franklin California Tax-Exempt Money Fund SYMBOL: FCLXX 12/31/07 -------------------------------------------------------------------------------- Seven-day effective yield 1 2.78% -------------------------------------------------------------------------------- Seven-day annualized yield 2.74% -------------------------------------------------------------------------------- Taxable equivalent yield 2 4.64% -------------------------------------------------------------------------------- Total annual operating expenses 3 0.55% -------------------------------------------------------------------------------- 1. Seven-day effective yield assumes the compounding of daily dividends. 2. Taxable equivalent yield assumes the published rates as of 12/24/07 for the maximum combined effective federal and California personal income tax rate of 41.05%, based on the federal income tax rate of 35.00%. 3. Figures are as stated in the Fund's prospectus current as of the date of this report. Annualized and effective yields are for the seven-day period ended 12/31/07. The Fund's average weighted maturity was 24 days. Yield reflects Fund expenses and fluctuations in interest rates on portfolio investments. PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. PORTFOLIO BREAKDOWN Franklin California Tax-Exempt Money Fund 12/31/07 -------------------------------------------------------------------------------- % OF TOTAL INVESTMENTS -------------------------------------------------------------------------------- Variable Rate Notes 83.1% -------------------------------------------------------------------------------- Notes and Bonds 11.1% -------------------------------------------------------------------------------- Tax-Exempt Commercial Paper 5.8% -------------------------------------------------------------------------------- MANAGER'S DISCUSSION Short-term municipal bond yields declined during the reporting period, reflecting increased demand for high-quality, short-term instruments, and three consecutive decreases in the federal funds target rate by the Federal Reserve Board. The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index, a benchmark for variable rate securities, which make up a large portion of Franklin California Tax-Exempt Money Fund, averaged a rate of 3.57% for the period under review. 2 The Fund participated and reinvested in several issues during the period under review including California State revenue anticipation notes, University of California Regents commercial paper program, and the Turlock California Irrigation District commercial paper program. Thank you for your continued participation in Franklin California Tax-Exempt Money Fund. We look forward to serving your future investment needs. 2. Source: Thomson Financial. The SIFMA Municipal Swap Index is a weekly high-grade market index composed of seven-day tax-exempt variable rate demand notes produced by the Municipal Market Data Group. Actual issues are selected from Municipal Market Data's database of more than 10,000 active issues based on several specific criteria. The index is unmanaged and does not reflect management fees and expenses that affect Fund performance. One cannot invest directly in an index, nor is the index representative of the Fund's portfolio. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007, 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 INVESTMENT MANAGER 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. 32 | Semiannual Report Your Fund's Expenses FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND As a Fund shareholder, you can incur two types of costs: o Transaction costs, including sales charges (loads) on Fund purchases and redemption fees; and o Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated. ACTUAL FUND EXPENSES The first line (Actual) of the table provides actual account values and expenses. The "Ending Account Value" is derived from the Fund's actual return which includes the effect of Fund expenses. You can estimate the expenses you paid during the period by following these steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS ILLUSTRATION: 1. Divide your account value by $1,000. IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6. 2. Multiply the result by the number under the heading "Expenses Paid During Period." IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50. In this illustration, the estimated expenses paid this period are $64.50. HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS Information in the second line (Hypothetical) of the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical "Ending Account Value" is based on the Fund's actual expense ratio and an assumed 5% annual rate of return before expenses, which does not represent the Fund's actual return. The figure under the heading "Expenses Paid During Period" shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds. Semiannual Report | 33 Your Fund's Expenses (CONTINUED) PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR REDEMPTION FEES. Therefore, the second line is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
------------------------------------------------------------------------------------------------------------------------ BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING VALUE 7/1/07 VALUE 12/31/07 PERIOD* 7/1/07-12/31/07 ------------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,015.00 $2.79 ------------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,022.37 $2.80 ------------------------------------------------------------------------------------------------------------------------
*Expenses are calculated using the most recent annualized six-month expense ratio of 0.55%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the one-half year period. 34 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
---------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED JUNE 30, CLASS A (UNAUDITED) 2007 2006 2005 2004 2003 ---------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .......... $ 12.48 $ 12.43 $ 12.85 $ 12.24 $ 12.83 $ 12.32 ---------------------------------------------------------------------------------- Income from investment operations a: Net investment income b .................... 0.27 0.54 0.55 0.55 0.56 0.57 Net realized and unrealized gains (losses) ................................ 0.05 0.05 (0.43) 0.62 (0.59) 0.51 ---------------------------------------------------------------------------------- Total from investment operations .............. 0.32 0.59 0.12 1.17 (0.03) 1.08 ---------------------------------------------------------------------------------- Less distributions from net investment income ..................................... (0.27) (0.54) (0.54) (0.56) (0.56) (0.57) ---------------------------------------------------------------------------------- Redemption fees ............................... -- e -- e -- e -- e -- -- ---------------------------------------------------------------------------------- Net asset value, end of period ................ $ 12.53 $ 12.48 $ 12.43 $ 12.85 $ 12.24 $ 12.83 ================================================================================== Total return c ................................ 2.59% 4.79% 0.96% 9.70% (0.22)% 8.97% RATIOS TO AVERAGE NET ASSETS d Expenses ...................................... 0.60% 0.61% 0.61% 0.61% 0.61% 0.61% Net investment income ......................... 4.28% 4.29% 4.34% 4.38% 4.51% 4.50% SUPPLEMENTAL DATA Net assets, end of period (000's) ............. $1,898,804 $1,810,358 $1,751,279 $1,780,642 $1,698,669 $1,912,784 Portfolio turnover rate ....................... 6.94% 6.77% 5.75% 3.87% 12.21% 9.79%
a The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. b Based on average daily shares outstanding. c Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. d Ratios are annualized for periods less than one year. e Amount rounds to less than $0.01 per share. Semiannual Report | The accompanying notes are an integral part of these financial statements. | 35 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
---------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED JUNE 30, CLASS B (UNAUDITED) 2007 2006 2005 2004 2003 ---------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 12.54 $ 12.49 $ 12.91 $ 12.29 $ 12.88 $ 12.37 ---------------------------------------------------------------------------------- Income from investment operations a: Net investment income b ..................... 0.24 0.48 0.48 0.49 0.50 0.50 Net realized and unrealized gains (losses) .. 0.05 0.04 (0.43) 0.62 (0.60) 0.51 ---------------------------------------------------------------------------------- Total from investment operations ............... 0.29 0.52 0.05 1.11 (0.10) 1.01 ---------------------------------------------------------------------------------- Less distributions from net investment income .. (0.24) (0.47) (0.47) (0.49) (0.49) (0.50) ---------------------------------------------------------------------------------- Redemption fees ................................ -- e -- e -- e -- e -- -- ---------------------------------------------------------------------------------- Net asset value, end of period ................. $ 12.59 $ 12.54 $ 12.49 $ 12.91 $ 12.29 $ 12.88 ================================================================================== Total return c ................................. 2.30% 4.20% 0.41% 9.15% (0.77)% 8.34% RATIOS TO AVERAGE NET ASSETS d Expenses ....................................... 1.15% 1.16% 1.16% 1.16% 1.16% 1.16% Net investment income .......................... 3.73% 3.74% 3.79% 3.83% 3.96% 3.95% SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $ 53,935 $ 59,127 $ 68,922 $ 78,038 $ 77,169 $ 85,698 Portfolio turnover rate ........................ 6.94% 6.77% 5.75% 3.87% 12.21% 9.79%
a The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. b Based on average daily shares outstanding. c Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. d Ratios are annualized for periods less than one year. e Amount rounds to less than $0.01 per share. 36 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
---------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED JUNE 30, CLASS C (UNAUDITED) 2007 2006 2005 2004 2003 ---------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 12.60 $ 12.55 $ 12.97 $ 12.34 $ 12.93 $ 12.41 ---------------------------------------------------------------------------------- Income from investment operations a: Net investment income b ..................... 0.24 0.48 0.48 0.49 0.50 0.50 Net realized and unrealized gains (losses) .. 0.06 0.04 (0.43) 0.63 (0.60) 0.52 ---------------------------------------------------------------------------------- Total from investment operations ............... 0.30 0.52 0.05 1.12 (0.10) 1.02 ---------------------------------------------------------------------------------- Less distributions from net investment income .. (0.24) (0.47) (0.47) (0.49) (0.49) (0.50) ---------------------------------------------------------------------------------- Redemption fees ................................ -- e -- e -- e -- e -- -- ---------------------------------------------------------------------------------- Net asset value, end of period ................. $ 12.66 $ 12.60 $ 12.55 $ 12.97 $ 12.34 $ 12.93 ================================================================================== Total return c ................................. 2.36% 4.17% 0.40% 9.19% (0.78)% 8.39% RATIOS TO AVERAGE NET ASSETS d Expenses ....................................... 1.15% 1.16% 1.16% 1.16% 1.16% 1.16% Net investment income .......................... 3.73% 3.74% 3.79% 3.83% 3.96% 3.95% SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $ 147,165 $ 139,476 $ 133,560 $ 129,156 $ 120,610 $ 136,674 Portfolio turnover rate ........................ 6.94% 6.77% 5.75% 3.87% 12.21% 9.79%
a The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. b Based on average daily shares outstanding. c Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. d Ratios are annualized for periods less than one year. e Amount rounds to less than $0.01 per share. Semiannual Report | The accompanying notes are an integral part of these financial statements. | 37 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 94.7% MUNICIPAL BONDS 94.7% CALIFORNIA 94.7% ABAG Finance Authority for Nonprofit Corps. COP, Lincoln Child Center Inc., California Mortgage Insured, 6.125%, 11/01/24 ............ $ 1,950,000 $ 1,993,680 Lytton Gardens Inc., Refunding, California Mortgage Insured, 6.00%, 2/15/30 ......... 3,500,000 3,546,515 Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 ....................... 5,000,000 5,061,650 ABAG Finance Authority for Nonprofit Corps. Revenue, Poway Retirement Housing Foundation Housing Inc. Project, Series A, California Mortgage Insured, 5.375%, 11/15/25 ................................................ 5,145,000 5,308,096 Sansum-Santa Barbara, Refunding, Series A, California Mortgage Insured, 5.60%, 4/01/26 ........................................................................... 2,750,000 2,861,100 Acalanes UHSD, GO, Capital Appreciation, Election of 2002, Series A, FGIC Insured, zero cpn., 8/01/25 .................................................................... 9,045,000 3,735,585 Alameda Corridor Transportation Authority Revenue, AMBAC Insured, zero cpn. to 10/01/12, 5.25% thereafter, 10/01/21 .......................................................... 64,660,000 54,295,649 5.45% thereafter, 10/01/25 .......................................................... 25,000,000 20,572,500 Alameda Power and Telecommunication Electric System Revenue COP, Refunding, Series A, MBIA Insured, 5.75%, 7/01/30 .......................................................... 3,305,000 3,529,244 Alhambra City Elementary School District GO, Capital Appreciation, Election of 1999, Series B, FGIC Insured, zero cpn., 9/01/27 .. 3,035,000 1,116,971 Series A, FSA Insured, Pre-Refunded, 5.60%, 9/01/24 ................................. 2,065,000 2,173,887 Antelope Valley UHSD, GO, Series A, MBIA Insured, 5.00%, 2/01/27 ......................... 5,000,000 5,191,800 Arcadia USD, GO, Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn., 8/01/29 ............................................................................. 5,110,000 1,684,614 8/01/33 ............................................................................. 11,690,000 3,113,865 8/01/39 ............................................................................. 9,620,000 1,838,767 8/01/46 ............................................................................. 27,665,000 3,595,897 Arcata Joint Powers Financing Authority Wastewater Revenue, FSA Insured, 5.80%, 12/01/22 .............................................................................. 1,080,000 1,114,733 Atascadero CDA Tax Allocation, Redevelopment Project, XLCA Insured, 5.00%, 9/01/34 ....... 4,315,000 4,399,962 Bakersfield City School District GO, Series A, FSA Insured, 5.00%, 11/01/27 ............................................................................ 2,415,000 2,558,837 11/01/28 ............................................................................ 2,535,000 2,679,977 Baldwin Park RDA Tax Allocation, Refunding, FSA Insured, 5.70%, 9/01/25 .................. 4,000,000 4,334,800 Baldwin Park USD, GO, Election of 2006, FSA Insured, 5.00%, 8/01/31 ...................... 5,440,000 5,749,264 Beaumont USD, COP, Refunding, Series A, FSA Insured, 5.80%, 1/01/21 ...................... 1,500,000 1,536,840 Brea and Olinda USD, GO, Series A, FGIC Insured, 5.60%, 8/01/20 .......................... 1,000,000 1,056,530 Brentwood Infrastructure Financing Authority Infrastructure Revenue, Refunding, Series A, FSA Insured, 5.00%, 9/02/32 ........................................................... 3,800,000 3,917,040 Cabrillo Community College District GO, Capital Appreciation, Election of 2004, Series B, MBIA Insured, zero cpn., 8/01/39 .. 12,570,000 2,329,849 Series C, AMBAC Insured, Pre-Refunded, 5.375%, 5/01/26 .............................. 5,400,000 5,786,478 California Community College Financing Authority Lease Revenue, Grossmont Palomar and Shasta, Series A, MBIA Insured, 5.125%, 4/01/31 ....................................... 3,030,000 3,172,349 California Educational Facilities Authority Revenue, Pomona College, Series B, Pre-Refunded, 5.50%, 7/01/29 .............................. 4,455,000 4,664,920 Stanford University, Refunding, Series O, 5.125%, 1/01/31 ........................... 24,705,000 24,992,319 California Health Facilities Financing Authority Revenue, Asian Community Center, Series A, AMBAC Insured, 5.00%, 4/01/37 ..................... 10,550,000 10,808,158 Catholic Healthcare West, Refunding, ACA Insured, 5.00%, 7/01/28 .................... 10,000,000 9,974,500
38 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) California Health Facilities Financing Authority Revenue, (continued) Catholic Healthcare West, Refunding, Series A, 5.00%, 7/01/28 ....................... $ 12,995,000 $ 12,961,863 Catholic Healthcare West, Series A, Pre-Refunded, 5.00%, 7/01/28 .................... 2,005,000 2,045,762 Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 .. 1,095,000 1,133,719 The Help Group, Refunding, California Mortgage Insured, 5.40%, 8/01/22 .............. 5,000,000 5,095,700 Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 .................................... 15,400,000 15,753,584 Kaiser Permanente, Series B, ETM, 5.00%, 10/01/18 ................................... 5,000,000 5,127,450 Kaiser Permanente, Series B, ETM, 5.00%, 10/01/20 ................................... 4,000,000 4,098,960 Marshall Hospital, Refunding, Series A, California Mortgage Insured, 5.30%, 11/01/28 .......................................................................... 3,325,000 3,354,360 Northern California Presbyterian, Refunding, 5.40%, 7/01/28 ......................... 5,000,000 4,938,950 Orange County Health Facility, Series A, California Mortgage Insured, 6.20%, 11/01/24 .......................................................................... 3,435,000 3,512,116 Senior Living, Aldersly, Series A, California Mortgage Insured, 5.25%, 3/01/32 ...... 2,000,000 2,051,580 Sutter Health, Refunding, Series A, MBIA Insured, 5.00%, 8/15/19 .................... 1,585,000 1,628,683 Sutter Health, Refunding, Series A, MBIA Insured, 5.00%, 8/15/38 .................... 3,735,000 3,795,208 Sutter Health, Series A, MBIA Insured, Pre-Refunded, 5.00%, 8/15/19 ................. 115,000 119,671 Sutter Health, Series A, MBIA Insured, Pre-Refunded, 5.00%, 8/15/38 ................. 265,000 275,764 True to Life Children's Services, Series A, California Mortgage Insured, 5.625%, 9/01/25 ........................................................................... 1,250,000 1,295,275 UCSF-Stanford Health Care, Series A, FSA Insured, Pre-Refunded, 5.00%, 11/15/28 ..... 9,530,000 9,798,746 California HFAR, Home Mortgage, Series N, AMBAC Insured, zero cpn. to 2/01/10, 6.30% thereafter, 8/01/31 ............................................................. 240,000 212,611 California Infrastructure and Economic Development Bank Revenue, Bay Area Toll Bridges, first lien, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/33 ..................... 8,460,000 9,236,882 California PCFA, PCR, Southern California Edison Co., Refunding, Series C, MBIA Insured, 5.55%, 9/01/31 ........................................................................ 4,800,000 4,991,184 California Public School District Financing Authority Lease Revenue, Southern Kern USD, Series B, FSA Insured, ETM, 5.90%, 9/01/26 ............................................ 1,615,000 1,916,682 California State Department of Water Resources Central Valley Project Revenue, Water System, Refunding, Series Q, MBIA Insured, 5.375%, 12/01/27 ........................... 365,000 367,497 California State Department of Water Resources Water Revenue, Central Valley Project, Refunding, Series AD, FSA Insured, 5.00%, 12/01/26 .......... 2,170,000 2,273,835 Refunding, Series W, FSA Insured, 5.125%, 12/01/29 .................................. 5,000,000 5,186,800 System, Central Valley Project, Refunding, Series AC, MBIA Insured, 5.00%, 12/01/26 .......................................................................... 3,575,000 3,746,993 California State GO, FGIC Insured, 5.375%, 6/01/26 ....................................................... 1,350,000 1,361,799 FSA Insured, Pre-Refunded, 5.50%, 9/01/29 ........................................... 34,500,000 36,263,985 MBIA Insured, 6.00%, 8/01/16 ........................................................ 210,000 210,460 MBIA Insured, 6.00%, 10/01/21 ....................................................... 65,000 65,459 MBIA Insured, Pre-Refunded, 5.00%, 8/01/29 .......................................... 19,520,000 20,329,690 Pre-Refunded, 5.00%, 10/01/27 ....................................................... 30,790,000 31,574,837 Pre-Refunded, 5.125%, 6/01/31 ....................................................... 24,705,000 26,310,578 Refunding, 5.125%, 6/01/31 .......................................................... 295,000 300,381 Refunding, MBIA Insured, 5.00%, 8/01/29 ............................................. 730,000 749,790 Various Purposes, 5.00%, 11/01/32 ................................................... 22,500,000 22,759,875 California State Local Government Finance Authority Revenue, Marin Valley Mobile, Senior Series A, FSA Insured, 5.80%, 10/01/20 ......................................... 3,770,000 3,853,468
Semiannual Report | 39 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) California State Public Works Board Lease Revenue, Department of Mental Health Hospital, Series A, AMBAC Insured, 5.00%, 12/01/21 ............................................................................ $ 4,100,000 $ 4,276,423 12/01/26 ............................................................................ 5,675,000 5,823,515 California State University Foundation Revenue, Monterey Bay, MBIA Insured, Pre-Refunded, 5.35%, 6/01/31 ........................................................................ 2,000,000 2,145,760 California State University of Los Angeles Auxiliary Services Inc. Revenue, MBIA Insured, Pre-Refunded, 5.125%, 6/01/33 ......................................................... 3,200,000 3,410,112 California State University Revenue and Colleges Revenue, Systemwide, Refunding, Series A, AMBAC Insured, 5.00%, 11/01/33 ........................................................ 22,000,000 22,624,580 California Statewide CDA, COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 ............................... 12,250,000 11,760,122 COP, Kaiser Permanente, ETM, 5.30%, 12/01/15 ........................................ 9,700,000 10,357,466 COP, MBIA Insured, 5.00%, 4/01/18 ................................................... 3,000,000 3,038,880 COP, Refunding, California Mortgage Insured, 5.75%, 8/01/21 ......................... 9,585,000 9,924,021 COP, Refunding, FSA Insured, 5.50%, 8/15/31 ......................................... 7,000,000 7,319,760 MFHR, Silver Ridge Apartments, Mandatory Put 8/01/21, Series H, FNMA Insured, 5.80%, 8/01/33 ........................................................................... 2,785,000 2,898,962 California Statewide CDA Revenue, COP, John Muir/Mt. Diablo Health System, MBIA Insured, 5.125%, 8/15/22 .............. 5,000,000 5,108,050 Hospital Monterey Peninsula, Series B, FSA Insured, 5.25%, 6/01/23 .................. 2,000,000 2,124,420 Lodi Memorial Hospital, Series A, California Mortgage Insured, 5.00%, 12/01/27 ...... 15,000,000 15,034,200 Refunding, California Mortgage Insured, 5.00%, 8/01/21 .............................. 2,035,000 2,075,558 St. Ignatius College Preparatory, AMBAC Insured, 5.00%, 6/01/37 ..................... 7,215,000 7,449,776 California Statewide CDA Water and Wastewater Revenue, Pooled Financing Program, Refunding, Series A, FSA Insured, 5.00%, 10/01/32 ................................... 9,320,000 9,568,378 Refunding, Series B, FSA Insured, 5.75%, 10/01/29 ................................... 1,465,000 1,522,911 Series B, FSA Insured, Pre-Refunded, 5.65%, 10/01/26 ................................ 2,400,000 2,556,408 Series B, FSA Insured, Pre-Refunded, 5.65%, 10/01/26 ................................ 1,020,000 1,083,230 Campbell USD, GO, FSA Insured, 5.00%, 8/01/27 ............................................ 7,150,000 7,401,108 Castaic Lake Water Agency Revenue COP, 1999 Project, Refunding, AMBAC Insured, 4.50%, 8/01/26 .............................. 7,700,000 7,604,289 Series A, MBIA Insured, 5.00%, 8/01/29 .............................................. 8,000,000 8,168,000 Chabot-Las Positas Community College District GO, Capital Appreciation Bonds, Series C, AMBAC Insured, zero cpn., 8/01/35 ............................................................................. 10,000,000 2,363,500 8/01/36 ............................................................................. 10,000,000 2,205,900 8/01/37 ............................................................................. 15,045,000 3,147,715 Chaffey Community College District GO, Refunding, Series A, FSA Insured, 5.00%, 7/01/27 .................................... 270,000 282,922 Series A, FSA Insured, Pre-Refunded, 5.00%, 7/01/27 ................................. 5,480,000 5,946,732 Charter Oak USD, GO, Election of 2000, Series D, FGIC Insured, 5.00%, 8/01/30 ............ 3,115,000 3,224,679 Chico PFAR, Merged Redevelopment Project Area, MBIA Insured, 5.125%, 4/01/24 ............. 2,790,000 2,926,012 Chino Basin Regional Financing Authority Revenue, Municipal Water District, Sewer System Project, Refunding, AMBAC Insured, 6.00%, 8/01/16 ..................................... 2,000,000 2,004,700
40 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Chula Vista Elementary School District GO, Election of 1998, Series F, MBIA Insured, 5.00%, 8/01/28 ........................................................................ $ 2,685,000 $ 2,799,381 Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 ...................... 3,265,000 3,367,292 Compton USD, GO, Election of 2002, Series B, MBIA Insured, Pre-Refunded, 5.00%, 6/01/29 ............................................................................... 2,000,000 2,193,680 Corona-Norco USD, COP, Refunding, FSA Insured, 5.125%, 4/15/25 ........................................ 5,355,000 5,529,573 COP, Refunding, FSA Insured, 5.125%, 4/15/29 ........................................ 2,540,000 2,620,010 GO, Capital Appreciation, Refunding, Series B, FSA Insured, zero cpn., 3/01/25 ...... 1,400,000 622,482 GO, Capital Appreciation, Series B, FSA Insured, zero cpn., 9/01/23 ................. 2,320,000 1,124,342 GO, Capital Appreciation, Series B, FSA Insured, zero cpn., 9/01/24 ................. 2,620,000 1,200,563 GO, Capital Appreciation, Series C, FGIC Insured, zero cpn., 9/01/25 ................ 4,655,000 1,952,912 GO, Capital Appreciation, Series C, FGIC Insured, zero cpn., 9/01/26 ................ 6,080,000 2,410,720 GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/26 ......................... 1,605,000 1,713,145 GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/27 ......................... 2,000,000 2,129,880 Coronado CDA Tax Allocation, Community Development Project, MBIA Insured, 5.375%, 9/01/26 ............................................................................... 2,700,000 2,880,819 Cucamonga County Water District COP, FGIC Insured, 5.00%, 9/01/29 ........................ 5,070,000 5,179,461 Culver City USD, GO, MBIA Insured, Pre-Refunded, 5.125%, 8/01/37 ..................................................................... 650,000 664,866 5.20%, 8/01/38 ...................................................................... 3,285,000 3,431,314 Delano USD, COP, Refinancing Project, MBIA Insured, 5.125%, 1/01/22 ...................... 1,620,000 1,788,188 East Bay MUD Water System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 ............... 14,000,000 14,862,960 El Centro Financing Authority Wastewater Revenue, Series A, FSA Insured, 5.25%, 10/01/35 .............................................................................. 6,200,000 6,578,572 El Monte City School District GO, Election of 2004, Series A, FGIC Insured, 5.00%, 5/01/30 .............................................. 4,500,000 4,638,825 Series B, FSA Insured, 5.00%, 8/01/32 ............................................... 5,535,000 5,845,181 El Monte Water Authority Revenue, Water System Project, AMBAC Insured, Pre-Refunded, 5.60%, 9/01/34 ........................................................................ 1,800,000 1,951,902 Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured, 5.125%, 9/01/30 ............................................................................... 3,770,000 3,856,635 Escondido USD, GO, Series A, FSA Insured, Pre-Refunded, 5.00%, 8/01/26 ................... 11,665,000 12,572,304 Eureka USD, GO, FSA Insured, 5.00%, 8/01/25 .............................................. 4,145,000 4,360,084 Fairfield Suisun USD, GO, Election of 2002, MBIA Insured, 5.00%, 8/01/25 ...................................... 4,185,000 4,387,721 MBIA Insured, 5.00%, 8/01/27 ........................................................ 12,000,000 12,490,560 Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A, MBIA Insured, 5.00%, 3/01/33 .......................................................... 5,000,000 5,147,950 Folsom COP, Central Business District Fire Station, MBIA Insured, 5.125%, 10/01/26 ....... 2,030,000 2,120,579 Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, MBIA Insured, zero cpn., 1/15/17 ................... 20,000,000 12,804,600 Capital Appreciation, Refunding, MBIA Insured, zero cpn., 1/15/18 ................... 25,000,000 15,105,750 Capital Appreciation, Refunding, MBIA Insured, zero cpn., 1/15/19 ................... 5,970,000 3,396,333 senior lien, Refunding, Series A, MBIA Insured, 5.00%, 1/01/35 ...................... 66,735,000 67,629,916
Semiannual Report | 41 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Franklin-McKinley School District GO, Election of 2004, Series A, FGIC Insured, 5.00%, 8/01/29 ............................................................................... $ 5,280,000 $ 5,454,557 Fresno USD, GO, Refunding, Series B, MBIA Insured, 5.00%, 2/01/21 .............................................. 2,860,000 3,109,363 Series C, MBIA Insured, 5.90%, 2/01/20 .............................................. 2,065,000 2,247,505 Series C, MBIA Insured, 5.90%, 8/01/22 .............................................. 3,000,000 3,271,740 Fullerton School District GO, Capital Appreciation, Series A, FGIC Insured, zero cpn., 8/01/23 ............................................................................... 3,030,000 1,429,918 Fullerton University Foundation Auxiliary Organization Revenue, Series A, MBIA Insured, 5.75%, 7/01/25 ............................................................................. 1,250,000 1,338,238 7/01/30 ............................................................................. 1,000,000 1,069,100 Gilroy USD, GO, Election of 2002, FGIC Insured, 5.00%, 8/01/30 ........................... 8,650,000 8,924,724 Glendale USD, GO, Series C, FSA Insured, 5.50%, 9/01/24 .................................. 2,750,000 2,883,732 Glendora PFAR Tax Allocation, Project No. 1, Refunding, Series A, MBIA Insured, 5.00%, 9/01/24 ............................................................................... 5,000,000 5,184,000 Grossmont UHSD, COP, FSA Insured, Pre-Refunded, 5.75%, 9/01/26 ...................................... 2,250,000 2,336,782 GO, Capital Appreciation, Election of 2004, FSA Insured, zero cpn., 8/01/24 ......... 5,110,000 2,350,702 Hartnell Community College District GO, Election of 2002, Series B, FSA Insured, 5.00%, 6/01/31 ............................................................................... 5,000,000 5,255,400 Hollister RDA Tax Allocation, Community Development Project, Refunding, AMBAC Insured, 5.125%, 10/01/32 ...................................................................... 19,815,000 20,505,156 Huntington Beach City and School District COP, MBIA Insured, Pre-Refunded, 5.25%, 7/01/29 ............................................................................... 1,795,000 1,890,261 Huntington Beach UHSD, GO, Election of 2004, FGIC Insured, 5.00%, 8/01/35 ................ 3,000,000 3,091,980 Jefferson San Mateo County UHSD, GO, Refunding, Series A, MBIA Insured, 6.45%, 8/01/25 ............................................................................. 3,045,000 3,477,573 8/01/29 ............................................................................. 3,075,000 3,510,389 Jurupa Community Services District Special Tax, CFD No. 2, Series A, AMBAC Insured, 5.00%, 9/01/32 ........................................................................ 7,000,000 7,154,070 Jurupa USD, COP, FSA Insured, 5.625%, 9/01/24 ............................................ 1,600,000 1,701,888 Kern Community College District COP, Refunding, MBIA Insured, 5.00%, 1/01/25 ............. 7,800,000 7,878,000 Kern High School District GO, Election of 2004, Series C, FGIC Insured, 5.00%, 8/01/33 ............................ 7,535,000 7,779,209 FSA Insured, ETM, 6.625%, 8/01/14 ................................................... 1,535,000 1,833,404 FSA Insured, ETM, 6.625%, 8/01/15 ................................................... 1,400,000 1,699,250 Lancaster Financing Authority Tax Allocation Revenue, Subordinated, Redevelopment Projects No. 5 and 6, Series B, FGIC Insured, 5.00%, 2/01/35 .......................... 5,775,000 5,896,044 Lancaster School District GO, Capital Appreciation, Election of 1999, MBIA Insured, zero cpn., 8/01/25 ............................................................................. 5,495,000 2,354,827 7/01/26 ............................................................................. 5,965,000 2,428,173 Las Virgenes USD, GO, Series A, FSA Insured, 5.00%, 8/01/28 .............................. 5,245,000 5,544,385 Lodi COP, Wastewater Treatment Project, Refunding, AMBAC Insured, Pre-Refunded, 6.70%, 8/01/26 ............................................................................... 8,575,000 8,727,721
42 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Lodi Electric Systems Revenue COP, Series A, MBIA Insured, Pre-Refunded, 5.50%, 1/15/32 ............................................................................... $ 4,000,000 $ 4,143,200 Lodi USD, GO, MBIA Insured, 5.00%, 8/01/23 ............................................... 2,150,000 2,229,916 Lodi USD School Facilities Improvement District No. 1 GO, Election of 2006, FSA Insured, 5.00%, 8/01/30 ............................................................................. 6,450,000 6,827,067 8/01/32 ............................................................................. 8,220,000 8,680,649 Lompoc USD, GO, Election of 2002, Series C, FSA Insured, 5.00%, 6/01/27 ............................................................................. 3,020,000 3,213,310 6/01/32 ............................................................................. 3,000,000 3,165,720 Long Beach Bond Finance Authority Lease Revenue, Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/19 ............ 4,000,000 4,200,880 Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/26 ............ 11,000,000 11,360,690 Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.25%, 11/01/30 ............ 2,000,000 2,090,440 Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/26 ................... 6,780,000 6,987,400 Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/31 ................... 10,500,000 10,765,965 Long Beach Bond Finance Authority Tax Allocation Revenue, North Long Beach Redevelopment Projects, Series A, AMBAC Insured, 5.00%, 8/01/25 ...................................................................... 7,015,000 7,231,413 5.00%, 8/01/31 ...................................................................... 3,135,000 3,210,773 Pre-Refunded, 5.00%, 8/01/25 ........................................................ 6,535,000 7,043,292 Pre-Refunded, 5.00%, 8/01/31 ........................................................ 8,865,000 9,554,520 Long Beach University School District GO, Election of 1999, Series C, MBIA Insured, 5.125%, 8/01/31 ....................................................................... 13,870,000 14,206,764 Los Angeles Community College District GO, Series A, MBIA Insured, Pre-Refunded, 5.00%, 6/01/26 ................................ 4,000,000 4,258,000 Series B, FSA Insured, 5.00%, 8/01/27 ............................................... 4,000,000 4,193,920 Los Angeles COP, Municipal Improvement Corp. of Los Angeles, Program AW Certificates, AMBAC Insured, 5.00%, 6/01/27 .................................................................... 5,895,000 6,086,293 Real Property Program, MBIA Insured, 5.00%, 2/01/27 ................................. 9,890,000 10,175,722 Los Angeles County COP, Antelope Valley Courthouse, Series A, AMBAC Insured, Pre-Refunded, 5.25%, 11/01/27 ............................................................................ 2,500,000 2,649,775 11/01/33 ............................................................................ 2,500,000 2,649,775 Los Angeles County Public Works Financing Authority Lease Revenue, Master Refunding Project, Refunding, Series B, FGIC Insured, 5.00%, 9/01/31 ............................ 7,600,000 7,749,340 Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Projects, District No. 14, Sub Series B, FGIC Insured, 5.00%, 10/01/29 .......................... 6,460,000 6,634,743 Los Angeles Department of Water and Power Waterworks Revenue, System, Sub Series A-2, AMBAC Insured, 5.00%, 7/01/44 ......................................................... 25,000,000 25,723,250 Los Angeles Mortgage Revenue, Refunding, Series I, MBIA Insured, 6.50%, 7/01/22 .......... 755,000 756,925 Los Angeles USD, GO, Election of 2002, Series C, FSA Insured, 5.00%, 7/01/32 ............. 19,000,000 19,906,680 Los Angeles Wastewater System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 ........... 10,000,000 10,363,500 Los Angeles Water and Power Revenue, Power System, Refunding, Series A, MBIA Insured, 5.00%, 7/01/24 ..................... 12,000,000 12,213,840 Power System A-1, Series A, AMBAC Insured, 5.00%, 7/01/37 ........................... 20,000,000 20,891,200
Semiannual Report | 43 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Lynwood PFA Tax Allocation, Project Area A, Refunding, Series A, FSA Insured, 5.85%, 9/01/18 ............................................................................... $ 1,765,000 $ 1,861,034 Lynwood PFA Water Revenue, Water System Improvement Project, MBIA Insured, 5.85%, 6/01/22 ...................................................................... 665,000 696,455 5.90%, 6/01/29 ...................................................................... 3,105,000 3,253,543 Madera PFA Water and Wastewater Revenue, Refunding, MBIA Insured, 5.00%, 3/01/36 ......... 2,000,000 2,066,160 Marin Municipal Water District COP, Financing Project, AMBAC Insured, 5.00%, 7/01/29 ..... 1,200,000 1,245,072 Mendocino County COP, Public Facilities Corp., MBIA Insured, 5.25%, 6/01/30 .............. 2,680,000 2,834,073 Merced Irrigation District Electricity System Revenue, Refunding, XLCA Insured, 5.00%, 9/01/26 ............................................................................... 10,000,000 10,332,800 Millbrae COP, Police Department Expansion, AMBAC Insured, 5.875%, 3/01/24 ................ 1,025,000 1,079,510 Modesto Irrigation District COP, Capital Improvements, Series A, FSA Insured, 5.00%, 7/01/26 ............................................................................. 5,000,000 5,138,200 7/01/31 ............................................................................. 8,285,000 8,474,229 Monrovia USD, GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/31 ................ 4,915,000 5,170,236 Montebello Community RDA Tax Allocation, Montebello Hills Redevelopment Project, Refunding, MBIA Insured, 5.60%, 3/01/19 ............................................... 2,460,000 2,469,496 Montebello COP, Capital Improvement Project, Refunding, FSA Insured, 5.375%, 11/01/26 .............................................................................. 8,715,000 9,347,622 Moreno Valley USD, GO, Election of 2004, Series A, FSA Insured, 5.00%, 8/01/26 ........... 4,000,000 4,396,400 Morgan Hill USD, GO, FGIC Insured, Pre-Refunded, 5.50%, 8/01/25 .......................... 3,840,000 4,111,642 Mount Diablo USD, GO, Election of 2002, FGIC Insured, 5.00%, 7/01/25 ........................................................ 6,025,000 6,244,250 MBIA Insured, 5.00%, 6/01/28 ........................................................ 1,465,000 1,534,148 MBIA Insured, 5.00%, 6/01/29 ........................................................ 1,590,000 1,660,946 Murrieta Valley USD, COP, MBIA Insured, 5.00%, 8/01/27 ................................... 2,380,000 2,465,299 Natomas USD, GO, FSA Insured, 5.00%, 9/01/26 ............................................. 2,535,000 2,650,342 Nevada Joint UHSD, GO, Election of 2002, Series B, FSA Insured, 5.00%, 8/01/30 ............................. 5,125,000 5,371,564 Series A, FSA Insured, 5.00%, 8/01/26 ............................................... 1,295,000 1,349,157 Newark USD, GO, Capital Appreciation, Series B, FGIC Insured, zero cpn., 8/01/24 .......................................... 9,905,000 3,882,265 Series C, FSA Insured, zero cpn., 8/01/22 ........................................... 2,165,000 1,031,449 Series C, FSA Insured, zero cpn., 8/01/23 ........................................... 2,465,000 1,101,066 Series C, FSA Insured, zero cpn., 8/01/24 ........................................... 2,560,000 1,077,862 Series C, FSA Insured, zero cpn., 8/01/25 ........................................... 2,705,000 1,073,533 Norco RDA Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured, 5.625%, 3/01/30 ............................................................................... 1,000,000 1,066,640 Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded, 7.50%, 7/01/23 ............................................................................... 3,200,000 4,288,160 Oakland Revenue, 1800 Harrison Foundation, Series A, AMBAC Insured, Pre-Refunded, 6.00%, 1/01/29 ........................................................................ 10,000,000 10,571,800 Oceanside COP, AMBAC Insured, 5.20%, 4/01/23 ............................................. 2,500,000 2,624,750 Orange County Sanitation Districts COP, FGIC Insured, 5.00%, 2/01/33 ..................... 8,000,000 8,159,440 Orinda COP, City Offices, AMBAC Insured, 5.00%, 7/01/30 .................................. 2,155,000 2,250,747 Palm Springs Financing Authority Lease Revenue, Convention Center Project, Refunding, Series A, MBIA Insured, 5.00%, 11/01/25 ............................................... 2,295,000 2,374,591
44 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Pasadena Area Community College District GO, Election of 2002, Series A, FGIC Insured, 5.00%, 6/01/28 ........................................................................ $ 4,000,000 $ 4,348,640 Pasadena USD, GO, Series B, FGIC Insured, Pre-Refunded, 5.25%, 7/01/24 ................... 1,000,000 1,043,490 Patterson Joint USD, GO, Capital Appreciation, Series A, FGIC Insured, zero cpn., 8/01/22 .......................................... 1,900,000 951,729 Series A, FGIC Insured, zero cpn., 8/01/24 .......................................... 2,075,000 924,143 Series A, FGIC Insured, zero cpn., 8/01/25 .......................................... 2,170,000 914,134 Series A, FGIC Insured, zero cpn., 8/01/26 .......................................... 2,265,000 901,787 Series C, FGIC Insured, zero cpn., 8/01/23 .......................................... 1,985,000 936,761 Peralta Community College District GO, Election of 2000, Series B, MBIA Insured, 5.25%, 8/01/32 ............................................................................... 8,450,000 8,862,613 Perris CFD No. 93-1 Special Tax, Series A, AMBAC Insured, 5.125%, 8/15/23 ................ 4,000,000 4,223,360 Plumas County COP, Capital Improvement Program, Series A, AMBAC Insured, 5.00%, 6/01/33 ............................................................................... 3,280,000 3,381,352 Pomona PFA Lease Revenue, Series AN, AMBAC Insured, 5.00%, 10/01/30 ............................................................................ 5,190,000 5,374,868 10/01/35 ............................................................................ 6,635,000 6,849,377 Porterville COP, Sewer System Refining Project, Refunding, AMBAC Insured, 5.25%, 10/01/23 .............................................................................. 3,000,000 3,065,130 Poway RDA Tax Allocation, MBIA Insured, Pre-Refunded, 5.75%, 6/15/33 .......................................... 9,250,000 10,131,710 Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 ........................ 9,195,000 9,437,656 Refunding, MBIA Insured, 5.75%, 6/15/33 ............................................. 2,225,000 2,416,617 Rancho Cucamonga RDA Tax Allocation, Rancho Redevelopment Project, Refunding, FSA Insured, 5.25%, 9/01/20 ........................................................... 2,500,000 2,604,500 Redwood City School District GO, FGIC Insured, 5.00%, 7/15/27 ............................ 3,000,000 3,089,310 Rescue USD, GO, Election of 1998, MBIA Insured, 5.00%, 9/01/30 ........................... 7,015,000 7,285,709 Ripon RDA Tax Allocation, Community Redevelopment Project, MBIA Insured, Pre-Refunded, 5.85%, 11/01/30 ....................................................................... 3,975,000 4,352,545 Rohnert Park Community Development Commission Tax Allocation, Redevelopment Project, Series R, FGIC Insured, 5.00%, 8/01/37 ................................................ 5,000,000 5,030,050 Roseville Financing Authority Revenue, senior lien, Series A, AMBAC Insured, 5.00%, 9/01/25 ............................................................................... 5,675,000 5,896,892 Rowland USD, GO, Series A, FSA Insured, Pre-Refunded, 5.25%, 9/01/25 ..................... 5,685,000 6,061,802 Sacramento Area Flood Control Agency Revenue, Consolidated, Capital AD, Refunding, Series A, FGIC Insured, 5.00%, 10/01/32 ............................................... 5,000,000 5,084,500 Sacramento Area Flood Control Agency Special Assessment, Subordinated, Capital AD No. 2, FGIC Insured, 5.80%, 11/01/16 ......................................................... 1,000,000 1,012,170 Sacramento City Financing Authority Revenue, Capital Improvement, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/26 ......... 8,395,000 8,912,468 Capital Improvement, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/32 ......... 21,500,000 22,825,260 City Hall and Redevelopment Projects, Series A, FSA Insured, Pre-Refunded, 5.00%, 12/01/28 .......................................................................... 10,000,000 10,830,200 Sacramento County Sanitation District Financing Authority Revenue, Sacramento Regional County Sanitation District, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/35 .... 10,000,000 11,035,700 Salida Area Public Facilities Financing Agency CFD, Special Tax, No. 1988-1, FSA Insured, 5.75%, 9/01/30 ........................................................................ 3,435,000 3,711,724
Semiannual Report | 45 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Salida USD, COP, Financing Project, AMBAC Insured, 5.375%, 5/01/26 ....................... $ 1,645,000 $ 1,648,043 Salinas UHSD, GO, Election of 2002, Series B, MBIA Insured, 5.00%, 6/01/31 ............... 5,000,000 5,180,300 San Bernardino City USD, GO, Election of 2004, Series B, FSA Insured, 5.00%, 8/01/28 ..... 14,170,000 14,898,621 San Bernardino County COP, 1997 Public Improvement Financing Project, MBIA Insured, 5.25%, 10/01/25 ....................................................................... 7,000,000 7,151,970 San Bernardino County SFMR, Capital Appreciation, Series A, GNMA Insured, ETM, zero cpn., 5/01/22 ............................................................................... 28,405,000 13,288,143 San Buenaventura Public Facilities Financing Authority Lease Revenue, FSA Insured, 5.75%, 6/01/14 ............................................................................... 2,250,000 2,276,933 San Carlos School District GO, MBIA Insured, Pre-Refunded, 5.50%, 10/01/24 ............... 2,110,000 2,242,192 San Diego Public Facilities Financing Authority Sewer Revenue, Series B, FGIC Insured, 5.25%, 5/15/27 ........................................................................ 2,950,000 2,984,603 San Francisco BART District Sales Tax Revenue, 5.00%, 7/01/28 ...................................................................... 2,795,000 2,837,093 FGIC Insured, Pre-Refunded, 5.50%, 7/01/26 .......................................... 6,500,000 6,806,280 FGIC Insured, Pre-Refunded, 5.50%, 7/01/34 .......................................... 12,000,000 12,565,440 San Francisco City and County Airports Commission International Airport Revenue, Refunding, Second Series 28A, MBIA Insured, 5.125%, 5/01/24 ............................................................................. 9,745,000 10,016,008 5/01/27 ............................................................................. 16,575,000 16,963,849 San Francisco City and County Public Utilities Commission Water Revenue, Refunding, Series A, FSA Insured, 5.00%, 11/01/31 ................................................ 3,885,000 3,999,064 San Francisco Community College District GO, Series A, FGIC Insured, 5.00%, 6/15/26 ...... 6,000,000 6,195,180 San Francisco State University Foundation Inc. Auxiliary Organization Housing Revenue, MBIA Insured, 5.00%, 9/01/31 .......................................................... 13,415,000 14,419,113 San Gabriel USD, GO, Capital Appreciation, Election of 2002, Series C, FSA Insured, zero cpn., 8/01/30 ......................... 5,635,000 1,876,737 Election of 2002, Series C, FSA Insured, zero cpn., 8/01/31 ......................... 5,870,000 1,853,570 Election of 2002, Series C, FSA Insured, zero cpn., 7/01/32 ......................... 6,115,000 1,837,435 Series A, FSA Insured, zero cpn., 8/01/26 ........................................... 3,530,000 1,457,325 Series A, FSA Insured, zero cpn., 2/01/27 ........................................... 1,850,000 741,628 San Joaquin Delta Community College District GO, Election of 2004, Series A, FSA Insured, 5.00%, 8/01/29 ...................................................................... 520,000 545,704 Pre-Refunded, 5.00%, 8/01/29 ........................................................ 4,530,000 5,010,361 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, Series A, MBIA Insured, zero cpn., 1/15/26 ......... 13,155,000 5,333,695 Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 .................................. 18,075,000 18,288,827 Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 ................................... 11,860,000 11,999,118 senior lien, MBIA Insured, 5.00%, 1/01/33 ........................................... 10,035,000 10,050,655 San Jose Airport Revenue, Refunding, Series B, AMBAC Insured, 5.00%, 3/01/33 ............. 12,135,000 12,502,812 San Jose Financing Authority Lease Revenue, Civic Center Project, Series B, AMBAC Insured, 5.00%, 6/01/27 ........................................................................ 10,000,000 10,290,100 San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 ......... 3,500,000 3,589,495 San Juan USD, GO, Election of 1998, Series A, MBIA Insured, 5.00%, 8/01/28 ............... 5,115,000 5,290,649 San Leandro COP, Library and Fire Stations Financing, AMBAC Insured, Pre-Refunded, 5.75%, 11/01/29 ....................................................................... 5,000,000 5,345,250
46 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3, Series A, MBIA Insured, Pre-Refunded, 5.75%, 10/01/29 ..................................................................... $ 5,340,000 $ 5,821,882 5.80%, 10/01/30 ..................................................................... 7,800,000 8,462,220 San Marino USD, GO, Series A, MBIA Insured, zero cpn., 7/01/25 ........................... 6,080,000 2,616,042 San Mateo County Community College District GO, Election of 2001, Series C, 5.00%, 3/01/31 ............................................................................... 3,760,000 3,920,890 San Mateo GO, Library Improvement Project, Series A, AMBAC Insured, 5.25%, 8/01/30 ....... 5,790,000 6,135,952 Santa Ana USD, COP, Capital Appreciation Financing Project, FSA Insured, zero cpn., 4/01/24 ............................................................................... 14,245,000 6,603,555 Santa Clara COP, Refunding, AMBAC Insured, 5.00%, 2/01/27 ................................ 5,555,000 5,725,316 Santa Clara County Financing Authority Lease Revenue, Refunding, Series A, AMBAC Insured, 5.00%, 11/15/22 ....................................................................... 3,950,000 4,034,964 Santa Monica PFA Lease Revenue, Civic Center Parking Project, XLCA Insured, 5.00%, 7/01/33 ............................................................................... 11,050,000 11,332,990 Santa Rosa Wastewater Revenue, Series B, FGIC Insured, Pre-Refunded, 5.125%, 9/01/31 ............................................................................... 4,000,000 4,270,920 Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement, AMBAC Insured, 6.00%, 7/02/15 ......................................................... 2,000,000 2,217,180 Shasta Tehama Trinity Joint Community College District GO, Election of 2002, Series B, FSA Insured, 5.00%, 8/01/30 ........................................................... 9,070,000 9,554,247 Sonoma CDA Tax Allocation, Redevelopment Project, MBIA Insured, 5.70%, 12/01/30 .......... 3,455,000 3,677,260 South Gate COP, Series A, AMBAC Insured, 5.00%, 9/01/24 .................................. 3,155,000 3,288,930 South San Francisco COP, Conference Center Financing, 5.00%, 4/01/29 ..................... 2,000,000 2,030,920 Southern California Public Power Authority Power Project Revenue, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/33 ................................................. 29,000,000 31,564,180 Southern Kern USD, COP, Capital Appreciation, Building Program, Series B, FSA Insured, 5.625%, 9/01/26 ....................................................................... 2,250,000 2,309,872 Southern Mono Health Care District GO, Series A, MBIA Insured, 5.00%, 8/01/24 ............ 3,005,000 3,109,093 Southern Mono Health Care District Revenue, Capital Appreciation, Series A, MBIA Insured, zero cpn., 8/01/28 ............................................................................. 2,340,000 833,602 8/01/29 ............................................................................. 2,440,000 821,499 8/01/30 ............................................................................. 2,550,000 812,685 8/01/31 ............................................................................. 2,660,000 802,176 Stanislaus County Board of Education COP, FSA Insured, 5.70%, 9/01/24 .................... 2,000,000 2,104,000 Stockton Revenue COP, Wastewater System Project, Refunding, Series A, MBIA Insured, 5.00%, 9/01/23 ........................................................................ 6,500,000 6,679,335 Susanville PFAR, MBIA Insured, 5.70%, 6/01/30 ............................................ 3,000,000 3,223,620 Tahoe-Truckee USD, GO, ID No. 2, Series A, FGIC Insured, Pre-Refunded, 5.75%, 8/01/20 .... 4,340,000 4,569,760 Truckee PFA Lease Revenue, Series A, AMBAC Insured, Pre-Refunded, 6.00%, 11/01/30 ........ 1,990,000 2,080,048 Turlock Auxiliary Organization Revenue COP, California State University, Stanislaus Foundation, MBIA Insured, 5.875%, 6/01/22 ............................................. 1,850,000 1,871,331 Turlock PFA Sewer Revenue, FGIC Insured, 5.50%, 9/15/29 .................................. 6,855,000 7,174,580 Union City CRDA Tax Allocation Revenue, Community Redevelopment Project, AMBAC Insured, Pre-Refunded, 5.75%, 10/01/32 ......................................................... 14,100,000 14,908,635
Semiannual Report | 47 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Union Elementary School District GO, Capital Appreciation, Series A, FGIC Insured, zero cpn., 9/01/24 .......................................... $ 2,000,000 $ 887,120 Series B, FGIC Insured, zero cpn., 9/01/25 .......................................... 5,500,000 2,307,415 Series B, FGIC Insured, zero cpn., 9/01/26 .......................................... 5,850,000 2,319,525 University of California Revenues, Multiple Purpose Projects, Series K, Pre-Refunded, 5.00%, 9/01/23 .............................................. 3,160,000 3,235,113 Series M, FGIC Insured, Pre-Refunded, 5.125%, 9/01/30 ............................... 8,720,000 9,113,272 Vacaville PFA Tax Allocation Revenue, Vacaville Redevelopment Projects, FSA Insured, 5.00%, 9/01/31 ........................................................................ 5,095,000 5,186,608 Vacaville USD, GO, Election of 2001, MBIA Insured, 5.00%, 8/01/30 ........................ 7,425,000 7,684,949 Vista USD, GO, Capital Appreciation, Series A, FSA Insured, zero cpn., 8/01/26 ..................... 7,150,000 2,951,806 Capital Appreciation, Series A, FSA Insured, zero cpn., 2/01/27 ..................... 4,795,000 1,922,220 Series A, FSA Insured, 5.25%, 8/01/25 ............................................... 5,000,000 5,321,100 Washington Township Health Care District Revenue, Refunding, 5.00%, 7/01/18 ...................................................................... 2,000,000 2,037,320 5.125%, 7/01/23 ..................................................................... 450,000 456,957 Washington USD, GO, Yolo County, Election of 1999, Series A, FGIC Insured, 5.375%, 8/01/25 ............................................................................... 2,045,000 2,187,250 Weaver USD, GO, Election of 2006, Series C, AMBAC Insured, zero cpn., 8/01/47 ............ 18,685,000 2,288,726 West Basin Municipal Water District Revenue COP, Refunding, Series A, MBIA Insured, 5.00%, 8/01/24 ............................................................................. 2,500,000 2,597,150 8/01/30 ............................................................................. 5,745,000 5,913,558 Western Placer USD Financing Corp. COP, Pre-Refunded, 5.55%, 11/01/30 .................... 6,930,000 7,666,174 Westlands Water District Revenue COP, MBIA Insured, 5.00%, 9/01/29 ........................................................ 11,775,000 12,077,382 Series A, MBIA Insured, 5.00%, 9/01/35 .............................................. 1,460,000 1,486,265 Series A, MBIA Insured, 5.00%, 9/01/37 .............................................. 4,340,000 4,409,874 Woodland Finance Authority Lease Revenue, Capital Projects, Refunding, XLCA Insured, 5.00%, 3/01/32 ........................................................................ 6,340,000 6,500,592 Woodland Finance Authority Wastewater Revenue, second senior lien, MBIA Insured, 5.00%, 3/01/33 ............................................................................. 3,870,000 3,977,547 3/01/35 ............................................................................. 2,590,000 2,660,370 Woodside Elementary School District GO, Election of 2005, MBIA Insured, Pre-Refunded, 5.00%, 10/01/29 ....................................................................... 4,435,000 4,928,527 ---------------- TOTAL LONG TERM INVESTMENTS (COST $1,878,923,559) ........................................ 1,988,537,590 ---------------- SHORT TERM INVESTMENTS 4.0% MUNICIPAL BONDS 4.0% CALIFORNIA 3.7% a Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Series B, AMBAC Insured, Weekly VRDN and Put, 3.22%, 4/01/29 ........................ 1,700,000 1,700,000 Series B, AMBAC Insured, Weekly VRDN and Put, 3.22%, 4/01/39 ........................ 1,840,000 1,840,000 Series B-1, AMBAC Insured, Weekly VRDN and Put, 3.22%, 4/01/45 ...................... 1,430,000 1,430,000
48 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- SHORT TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) a California Infrastructure and Economic Development Bank Insured Revenue, Rand Corp., Series B, AMBAC Insured, Daily VRDN and Put, 3.57%, 4/01/42 ........................... $ 575,000 $ 575,000 a California Infrastructure and Economic Development Bank Revenue, J. Paul Getty Trust, Series B, Daily VRDN and Put, 3.50%, 4/01/33 .......................................... 525,000 525,000 a California State Department of Water Resources Power Supply Revenue, Refunding, Sub Series F-3, Daily VRDN and Put, 3.53%, 5/01/21 ....................... 2,000,000 2,000,000 Refunding, Sub Series F-5, Daily VRDN and Put, 3.54%, 5/01/22 ....................... 450,000 450,000 Refunding, Sub Series G-3, FSA Insured, Weekly VRDN and Put, 3.28%, 5/01/16 ......... 1,900,000 1,900,000 Series B-1, Daily VRDN and Put, 3.53%, 5/01/22 ...................................... 3,800,000 3,800,000 Series B-2, Daily VRDN and Put, 3.54%, 5/01/22 ...................................... 1,500,000 1,500,000 Series B-3, Daily VRDN and Put, 3.50%, 5/01/22 ...................................... 2,225,000 2,225,000 Series B-4, Daily VRDN and Put, 3.57%, 5/01/22 ...................................... 2,200,000 2,200,000 Series B-5, Daily VRDN and Put, 3.52%, 5/01/22 ...................................... 1,400,000 1,400,000 Series C-7, FSA Insured, Weekly VRDN and Put, 3.28%, 5/01/22 ........................ 21,100,000 21,100,000 a California State Economic Recovery GO, Series C-1, Daily VRDN and Put, 3.52%, 7/01/23 .... 800,000 800,000 a California State Economic Recovery Revenue, Series C-2, Daily VRDN and Put, 3.52%, 7/01/23 ...................................... 450,000 450,000 Series C-3, Daily VRDN and Put, 3.52%, 7/01/23 ...................................... 7,900,000 7,900,000 Series C-4, Daily VRDN and Put, 3.53%, 7/01/23 ...................................... 3,500,000 3,500,000 Series C-16, FSA Insured, Weekly VRDN and Put, 3.28%, 7/01/23 ....................... 625,000 625,000 a California State GO, Daily Kindergarten University, Refunding, Series A-2, Daily VRDN and Put, 3.50%, 5/01/34 ........................................................................... 2,800,000 2,800,000 Kindergarten-University, Refunding, Series A-1, Daily VRDN and Put, 3.45%, 5/01/34 .. 400,000 400,000 Kindergarten-University, Refunding, Series B-3, Daily VRDN and Put, 3.27%, 5/01/34 .. 400,000 400,000 Kindergarten-University, Series A-5, Daily VRDN and Put, 3.52%, 5/01/34 ............. 400,000 400,000 Series A-1, Daily VRDN and Put, 3.55%, 5/01/33 ...................................... 1,500,000 1,500,000 Series A-2, Daily VRDN and Put, 3.52%, 5/01/33 ...................................... 1,500,000 1,500,000 Series A-3, Daily VRDN and Put, 3.52%, 5/01/33 ...................................... 2,100,000 2,100,000 a Daly City HFA, MFR, Refunding, Weekly VRDN and Put, 3.31%, 10/15/29 ...................... 500,000 500,000 a Irvine 1915 Act Special Assessment, AD No. 93-14, Daily VRDN and Put, 3.50%, 9/02/25 ............................................................................... 500,000 500,000 a Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series D, AMBAC Insured, Weekly VRDN and Put, 3.28%, 8/15/21 .......................... 6,800,000 6,800,000 a Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Daily VRDN and Put, 3.27%, 7/01/35 .................................................... 1,000,000 1,000,000 a Los Angeles Water and Power Revenue, Refunding, Sub Series B-1, Weekly VRDN and Put, 3.28%, 7/01/34 ........................................................................ 1,200,000 1,200,000 a Metropolitan Water District of Southern California Waterworks Revenue, Refunding, Series B-3, Daily VRDN and Put, 3.52%, 7/01/35 ........................... 400,000 400,000 Series B, Weekly VRDN and Put, 3.28%, 7/01/27 ....................................... 200,000 200,000 Series C-2, Daily VRDN and Put, 3.57%, 7/01/36 ...................................... 1,000,000 1,000,000 a Orange County Sanitation District COP, Daily VRDN and Put, 3.50%, 2/01/36 ................ 500,000 500,000 ---------------- 77,120,000 ----------------
Semiannual Report | 49 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- SHORT TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) U.S. TERRITORY 0.3% a Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series A-3, FSA Insured, Daily VRDN and Put, 3.27%, 7/01/29 ......................... $ 2,100,000 $ 2,100,000 Series A-4, FSA Insured, Daily VRDN and Put, 3.27%, 7/01/31 ......................... 4,600,000 4,600,000 ---------------- 6,700,000 ---------------- TOTAL SHORT TERM INVESTMENTS (COST $83,820,000) .......................................... 83,820,000 ---------------- TOTAL INVESTMENTS (COST $1,962,743,559) 98.7% ............................................ 2,072,357,590 OTHER ASSETS, LESS LIABILITIES 1.3% ...................................................... 27,546,409 ---------------- NET ASSETS 100.0% ........................................................................ $ 2,099,903,999 ================
See Selected Portfolio Abbreviations on page 71. a Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end. 50 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
--------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED JUNE 30, CLASS A (UNAUDITED) 2007 2006 2005 2004 2003 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............ $ 11.33 $ 11.30 $ 11.68 $ 11.36 $ 11.74 $ 11.41 --------------------------------------------------------------------------------- Income from investment operations a: Net investment income b ...................... 0.22 0.43 0.43 0.43 0.44 0.44 Net realized and unrealized gains (losses) ... 0.10 0.04 (0.39) 0.32 (0.38) 0.34 --------------------------------------------------------------------------------- Total from investment operations ................ 0.32 0.47 0.04 0.75 0.06 0.78 --------------------------------------------------------------------------------- Less distributions from net investment income ... (0.21) (0.44) (0.42) (0.43) (0.44) (0.45) --------------------------------------------------------------------------------- Redemption fees ................................. -- e -- e -- e -- e -- -- --------------------------------------------------------------------------------- Net asset value, end of period .................. $ 11.44 $ 11.33 $ 11.30 $ 11.68 $ 11.36 $ 11.74 ================================================================================= Total return c .................................. 2.89% 4.13% 0.37% 6.67% 0.50% 6.92% RATIOS TO AVERAGE NET ASSETS d Expenses ........................................ 0.66% 0.67% 0.66% 0.67% 0.67% 0.68% Net investment income ........................... 3.79% 3.76% 3.74% 3.67% 3.76% 3.80% SUPPLEMENTAL DATA Net assets, end of period (000's) ............... $ 486,952 $4 58,146 $ 463,545 $453,335 $384,196 $ 414,558 Portfolio turnover rate ......................... 9.55% 11.25% 13.28% 4.17% 17.36% 9.56%
a The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchase of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. b Based on average daily shares outstanding. c Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. d Ratios are annualized for periods less than one year. e Amount rounds to less than $0.01 per share. Semiannual Report | The accompanying notes are an integral part of these financial statements. | 51 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
-------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED JUNE 30, CLASS C (UNAUDITED) 2007 2006 2005 2004 f -------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............ $ 11.36 $ 11.32 $ 11.70 $ 11.37 $ 11.73 -------------------------------------------------------------------- Income from investment operations a: Net investment income b ...................... 0.19 0.37 0.37 0.36 0.37 Net realized and unrealized gains (losses) ... 0.09 0.05 (0.39) 0.33 (0.36) -------------------------------------------------------------------- Total from investment operations ................ 0.28 0.42 (0.02) 0.69 0.01 -------------------------------------------------------------------- Less distributions from net investment income ... (0.18) (0.38) (0.36) (0.36) (0.37) -------------------------------------------------------------------- Redemption fees ................................. -- e -- e -- e -- e -- -------------------------------------------------------------------- Net asset value, end of period .................. $ 11.46 $ 11.36 $ 11.32 $ 11.70 $ 11.37 ==================================================================== Total return c .................................. 2.51% 3.68% (0.18)% 6.15% 0.11% RATIOS TO AVERAGE NET ASSETS d Expenses ........................................ 1.20% 1.20% 1.20% 1.22% 1.22% Net investment income ........................... 3.25% 3.23% 3.20% 3.12% 3.21% SUPPLEMENTAL DATA Net assets, end of period (000's) ............... $ 28,540 $ 27,025 $ 25,173 $ 19,082 $ 9,142 Portfolio turnover rate ......................... 9.55% 11.25% 13.28% 4.17% 17.36%
a The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchase of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. b Based on average daily shares outstanding. c Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. d Ratios are annualized for periods less than one year. e Amount rounds to less than $0.01 per share. f For the period July 1, 2003 (effective date) to June 30, 2004. 52 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS 98.5% MUNICIPAL BONDS 98.5% CALIFORNIA 96.6% ABAG Finance Authority for Nonprofit Corps. COP, Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/15 ............................................ $ 3,000,000 $ 3,045,540 ABAG Finance Authority for Nonprofit Corps. Revenue, San Diego Hospital Assn., Series C, 5.125%, 3/01/18 ........................................................................ 2,695,000 2,715,320 5.25%, 3/01/19 ......................................................................... 2,315,000 2,332,988 ABAG Revenue, Refunding, Series A-E, 5.40%, 9/15/14 ....................................... 2,455,000 2,477,291 ABAG Water and Wastewater Revenue, Pooled Financing Program, Refunding, Series A, FSA Insured, 5.00%, 10/01/10 ............................................................ 1,905,000 1,968,494 Alameda Corridor Transportation Authority Revenue, Capital Appreciation, sub. lien, Refunding, Series A, AMBAC Insured, zero cpn., 10/01/17 ................................. 10,000,000 6,664,000 Alameda-Contra Costa Transportation District COP, Refunding, AMBAC Insured, 4.375%, 8/01/14 ................................................................................. 1,330,000 1,370,113 Antelope Valley UHSD, GO, Series A, MBIA Insured, 4.50%, 8/01/13 ......................................................................... 1,230,000 1,298,462 4.625%, 8/01/14 ........................................................................ 1,250,000 1,321,238 Arcadia USD, GO, Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn., 8/01/22 ................................................................................. 4,065,000 2,021,728 Bakersfield Wastewater Revenue, Series A, FSA Insured, 5.00%, 9/15/21 ................................................................................ 5,000,000 5,394,150 9/15/22 ................................................................................ 2,595,000 2,795,256 Banning Utility Authority Water Enterprise Revenue, Refunding and Improvement Projects, FGIC Insured, 5.00%, 11/01/21 ........................................................... 1,080,000 1,141,474 Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Refunding, Series F, 5.00%, 4/01/21 .......................................................................... 10,000,000 10,724,600 Burbank Electric Revenue, MBIA Insured, 4.00%, 6/01/11 ................................................................................ 1,000,000 1,025,610 6/01/12 ................................................................................ 1,000,000 1,029,300 Burbank USD, GO, Capital Appreciation, Election of 1997, Series C, FGIC Insured, zero cpn., 8/01/15 ..... 4,600,000 3,382,518 Capital Appreciation, Election of 1997, Series C, FGIC Insured, zero cpn., 8/01/16 ..... 4,670,000 3,256,111 Election of 1997, Series C, FGIC Insured, 4.00%, 8/01/12 ............................... 2,500,000 2,568,350 Burbank Water and Power Electric Revenue, MBIA Insured, 4.00%, 6/01/11 .................... 5,045,000 5,061,648 California Educational Facilities Authority Revenue, Stanford University, Refunding, Series R, 4.00%, 11/01/11 .................................................... 1,000,000 1,033,290 California Health Facilities Financing Authority Revenue, The Episcopal Home, California Mortgage Insured, 4.625%, 2/01/12 ....................... 1,350,000 1,396,805 The Episcopal Home, California Mortgage Insured, 4.75%, 2/01/13 ........................ 1,200,000 1,245,840 Kaiser Permanente, Series B, ETM, 5.25%, 10/01/13 ...................................... 5,000,000 5,130,550 Kaiser Permanente, Series B, ETM, 5.25%, 10/01/14 ...................................... 2,000,000 2,051,780 Kaiser Permanente, Series B, ETM, 5.25%, 10/01/16 ...................................... 3,850,000 3,947,944 Paradise Valley Estates, Refunding, California Mortgage Insured, 3.875%, 1/01/09 ....... 1,555,000 1,556,275 Paradise Valley Estates, Refunding, California Mortgage Insured, 4.125%, 1/01/10 ....... 1,000,000 1,011,150 Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/11 ........ 1,480,000 1,537,409 Paradise Valley Estates, Refunding, California Mortgage Insured, 4.375%, 1/01/12 ....... 1,000,000 1,026,700 Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/13 ........ 1,815,000 1,919,943 Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/14 ........ 1,635,000 1,721,917
Semiannual Report | 53 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) California HFA, SFM Purchase Revenue, Class III, Series A-1, MBIA Insured, 5.70%, 8/01/11 ................................................................................. $ 240,000 $ 242,578 California Municipal Finance Authority COP, Community Hospitals of Central California, 5.00%, 2/01/18 ......................................................................... 2,185,000 2,129,261 5.00%, 2/01/19 ......................................................................... 4,590,000 4,434,537 5.00%, 2/01/20 ......................................................................... 2,325,000 2,227,257 5.00%, 2/01/21 ......................................................................... 2,000,000 1,900,380 Refunding, 5.00%, 2/01/17 .............................................................. 4,025,000 3,955,770 California State Department of Water Resources Central Valley Project Revenue, Water System, Refunding, Series S, 5.00%, 12/01/19 ............................................ 1,915,000 1,937,080 California State Department of Water Resources Power Supply Revenue, Series A, 5.50%, 5/01/12 ......................................................................... 2,000,000 2,168,340 Pre-Refunded, 5.125%, 5/01/18 .......................................................... 2,500,000 2,716,725 California State Economic Recovery Revenue, Series A, 5.00%, 7/01/15 ...................... 10,670,000 11,579,297 California State GO, 5.25%, 6/01/16 ......................................................................... 515,000 518,507 Pre-Refunded, 5.00%, 11/01/12 .......................................................... 1,335,000 1,426,768 Refunding, 4.00%, 2/01/10 .............................................................. 6,900,000 7,013,988 Refunding, 5.00%, 11/01/12 ............................................................. 665,000 703,078 Refunding, 5.25%, 2/01/14 .............................................................. 4,000,000 4,341,080 Refunding, MBIA Insured, 5.00%, 2/01/18 ................................................ 1,175,000 1,187,949 Various Purposes, 5.00%, 11/01/22 ...................................................... 4,675,000 4,866,207 Veterans, Refunding, Series B, 5.25%, 12/01/15 ......................................... 2,310,000 2,365,579 California State Municipal Finance Authority Revenue, Loma Linda University, 5.00%, 4/01/24 ................................................................................. 1,180,000 1,200,886 California State Public Works Board Lease Revenue, Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 ................. 1,325,000 1,345,100 Various California Community College Projects, Refunding, Series C, 5.50%, 9/01/09 ..... 1,555,000 1,573,551 California Statewide CDA, COP, Kaiser Permanente, ETM, 5.30%, 12/01/15 ................................................ 2,000,000 2,135,560 St. Joseph Health System Obligation Group, 5.25%, 7/01/11 .............................. 1,005,000 1,023,130 California Statewide CDA Revenue, Daughters of Charity Health, Refunding, Series G, 5.25%, 7/01/13 ....................... 1,000,000 1,028,780 Insured Health Facility, Jewish Home, California Mortgage Insured, 5.00%, 11/15/18 ..... 3,000,000 3,115,560 Kaiser Permanente, Mandatory Put 6/01/12, Series C, 3.85%, 11/01/29 .................... 10,000,000 9,991,700 Lodi Memorial Hospital, Series A, California Mortgage Insured, 5.00%, 12/01/22 ......... 8,000,000 8,200,800 Mission Community, California Mortgage Insured, 4.40%, 11/01/10 ........................ 1,100,000 1,125,168 Mission Community, California Mortgage Insured, 4.50%, 11/01/11 ........................ 1,145,000 1,180,644 Viewpoint School, Refunding, ACA Insured, 4.50%, 10/01/17 .............................. 460,000 436,273 Viewpoint School, Refunding, ACA Insured, 4.75%, 10/01/18 .............................. 480,000 461,213 Carlsbad USD, GO, Election of 2006, Series A, MBIA Insured, 5.00%, 8/01/22 ................................................................................ 1,510,000 1,606,836 8/01/24 ................................................................................ 1,665,000 1,759,655 Cathedral City 1915 Act Special Assessment, Limited Obligation, Cove ID 04-02, 5.00%, 9/02/24 ................................................................................. 1,000,000 916,200
54 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Central California Joint Powers Health Financing Authority COP, Community Hospitals of Central California, Pre-Refunded, 5.125%, 2/01/13 ........................................................................ $ 1,375,000 $ 1,469,380 5.25%, 2/01/14 ......................................................................... 1,435,000 1,538,722 5.75%, 2/01/16 ......................................................................... 1,585,000 1,722,641 Central Valley Financing Authority Cogeneration Project Revenue, Carson Ice General Project, Refunding, MBIA Insured, 5.00%, 7/01/17 ........................................ 2,000,000 2,033,660 Cerritos PFAR Tax Allocation, Redevelopment Project, Refunding, Series A, AMBAC Insured, 3.00%, 11/01/11 ......................................................................... 2,585,000 2,550,154 Chaffey Community College District COP, Pre-Refunded, 5.10%, 9/01/13 ...................... 1,860,000 1,923,910 Clovis MFR, Mandatory Put 11/01/10, Refunding, FNMA Insured, 5.10%, 11/01/30 .............. 4,105,000 4,172,774 Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, FGIC Insured, zero cpn., 8/01/17 ................................................................................. 5,235,000 3,467,088 Coalinga COP, Custody Facility, Refunding, 4.25%, 4/01/10 ................................. 1,000,000 1,014,050 Coast Community College District GO, Election 2002, Series B, FSA Insured, 5.00%, 8/01/22 ................................................................................. 5,000,000 5,386,100 Compton COP, Civic Center and Capital Improvement, Refunding, Series A, 5.00%, 9/01/08 ......................................................................... 1,520,000 1,535,732 5.50%, 9/01/15 ......................................................................... 1,180,000 1,206,928 Conejo Valley USD, GO, Election of 1998, Series C, FSA Insured, zero cpn., 8/01/17 .............................................. 2,500,000 1,695,000 Series D, FGIC Insured, 4.50%, 8/01/19 ................................................. 4,000,000 4,109,840 Contra Costa Community College District GO, Election of 2002, FGIC Insured, 4.75%, 8/01/18 ................................................................................. 2,450,000 2,536,411 Corona-Norco USD, PFA Special Tax Revenue, Series A, 5.25%, 9/01/25 ....................... 2,235,000 2,048,914 Duarte RDA Tax Allocation, Merged Redevelopment Project Area, Pre-Refunded, 5.125%, 10/01/16 ................................................................................ 1,790,000 1,852,757 Fairfax School District GO, Election of 2000, Series A, FGIC Insured, 5.00%, 11/01/17 ..... 830,000 885,419 Fairfield-Suisun Sewer District Sewer Revenue, Refunding, Series A, FGIC Insured, 5.00%, 5/01/12 ................................................................................. 600,000 628,182 Folsom PFA Lease Revenue, City Hall and Community Center, Refunding, FSA Insured, 5.00%, 10/01/17 ................................................................................ 1,275,000 1,358,283 Foothill/Eastern Corridor Agency Toll Road Revenue, Refunding, MBIA Insured, 5.00%, 1/15/16 ................................................................................. 1,000,000 1,041,070 Fresno USD, GO, Election of 2001, Series D, MBIA Insured, 5.00%, 8/01/21 .................. 1,355,000 1,446,408 Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement Project, 5.00%, 4/01/12 ................................................................. 2,390,000 2,439,808 Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%, 9/01/12 ................................................................................. 1,955,000 2,013,513 Garden Grove Agency Community Development Tax Allocation, Garden Grove Community Project, Refunding, AMBAC Insured, 4.25%, 10/01/13 ...................................... 2,025,000 2,117,239 Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue, Asset-Backed, ETM, 5.00%, 6/01/12 .......................................................................... 1,500,000 1,601,880 Huntington Beach PFAR, Lease Capital Improvement Refinancing Project, Refunding, Series B, AMBAC Insured, 4.125%, 8/01/14 ........................................................................ 2,140,000 2,210,449 4.25%, 8/01/15 ......................................................................... 2,080,000 2,150,886
Semiannual Report | 55 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 ..................................... $ 785,000 $ 821,864 Inland Empire Tobacco Asset Securitization Corp. Revenue, Series A, 5.00%, 6/01/21 ........ 12,500,000 12,379,125 Irvine 1915 Act GO, AD No. 03-19, Group 2, Refunding, 4.875%, 9/02/16 ........................................................................ 1,000,000 971,460 5.00%, 9/02/18 ......................................................................... 1,000,000 959,940 5.125%, 9/02/19 ........................................................................ 1,000,000 958,060 Irvine 1915 Act Special Assessment, AD No. 00-18, Group 2, 4.375%, 9/02/10 ............................................................... 885,000 884,628 Group 2, 4.70%, 9/02/12 ................................................................ 1,475,000 1,460,324 Group 2, 4.80%, 9/02/13 ................................................................ 1,175,000 1,160,618 Group 2, 5.125%, 9/02/17 ............................................................... 1,705,000 1,646,911 Group 3, 4.75%, 9/02/15 ................................................................ 1,000,000 959,290 Group 3, 5.00%, 9/02/17 ................................................................ 1,000,000 963,140 Irvine USD Financing Authority Special Tax, Series A, 4.70%, 9/01/15 ......................................................................... 1,095,000 1,054,671 4.80%, 9/01/17 ......................................................................... 1,400,000 1,335,292 4.875%, 9/01/18 ........................................................................ 1,570,000 1,495,189 5.00%, 9/01/20 ......................................................................... 1,150,000 1,088,935 Kings River Conservation District Pine Flat Power Revenue, Refunding, Series E, 5.125%, 1/01/18 ................................................................................. 1,735,000 1,779,000 Lake Elsinore PFA Tax Allocation Revenue, Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.40%, 9/01/08 ............ 330,000 330,617 Series A, 5.00%, 9/01/09 ............................................................... 645,000 654,591 Lake Elsinore School Financing Authority Revenue, Refunding, 6.00%, 9/01/11 ............... 1,000,000 1,013,740 Lancaster COP, School District Project, Refunding, FSA Insured, 5.125%, 4/01/14 ........... 2,000,000 2,049,520 Lemon Grove CDA Tax Allocation, 1998, Refunding, 5.20%, 8/01/08 ........................... 215,000 216,580 Loma Linda Hospital Revenue, Loma Linda University Medical Center, Series A, 5.00%, 12/01/19 ................................................................................ 5,000,000 4,911,800 Lompoc USD, GO, Election of 2002, Series C, FSA Insured, 5.00%, 6/01/22 ................... 1,340,000 1,451,810 Long Beach Bond Finance Authority Natural Gas Purchase Revenue, Series A, 5.00%, 11/15/17 ................................................................................ 3,950,000 4,011,264 Long Beach Community College District GO, Election of 2002, Series B, FGIC Insured, 5.00%, 5/01/17 ................................................................................. 1,000,000 1,074,720 Los Altos School District GO, Refunding, AMBAC Insured, 5.00%, 8/01/22 .................... 5,000,000 5,311,300 Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series A, AMBAC Insured, 3.00%, 8/15/12 ........................................................... 4,525,000 4,480,610 Los Angeles County MTA Sales Tax Revenue, Proposition A, first tier senior, Refunding, Series A, AMBAC Insured, 5.00%, 7/01/19 .......................................................... 7,410,000 7,925,143 FSA Insured, 5.00%, 7/01/15 ............................................................ 5,345,000 5,529,456 Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Project, Refunding, Series A, FSA Insured, 5.00%, 10/01/17 ....................................... 1,000,000 1,076,280 Los Angeles USD, GO, Refunding, MBIA Insured, 5.25%, 7/01/13 ........................................................... 3,500,000 3,829,210 Series A-1, FGIC Insured, 5.00%, 7/01/21 ............................................... 10,895,000 11,550,770 Lynwood PFAR, Water System Improvement Project, 6.15%, 6/01/08 ............................ 155,000 155,383
56 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) M-S-R Public Power Agency San Juan Project Revenue, Refunding, Series I, MBIA Insured, 4.25%, 7/01/11 ......................................................................... $ 5,055,000 $ 5,220,551 5.00%, 7/01/18 ......................................................................... 1,000,000 1,042,210 Marina Joint Powers Financing Authority MFHR, Abrams B Apartments Financing, Mandatory Put 11/15/16, FNMA Insured, 3.90%, 11/15/36 ........................................................................ 3,540,000 3,475,537 3.95%, 11/15/36 ........................................................................ 1,460,000 1,434,216 Metropolitan Water District of Southern California Waterworks Revenue, Series A, 5.00%, 7/01/26 ................................................................................. 7,790,000 8,311,385 Montebello USD, GO, Capital Appreciation, FGIC Insured, zero cpn., 8/01/18 ................................................................................ 1,455,000 915,442 8/01/19 ................................................................................ 1,480,000 883,205 Moreno Valley USD, GO, Capital Appreciation, Refunding, MBIA Insured, zero cpn., 8/01/24 ...................... 7,500,000 3,394,725 Election of 2004, Series A, FSA Insured, 5.00%, 8/01/17 ................................ 2,000,000 2,198,200 Election of 2004, Series A, FSA Insured, 5.00%, 8/01/18 ................................ 2,300,000 2,527,930 Moulton-Niguel Water District GO, Consolidated, Refunding, AMBAC Insured, 5.00%, 9/01/16 ................................................................................. 3,520,000 3,795,088 Murrieta COP, Road Improvement Project, ETM, 6.00%, 4/01/08 ............................... 245,000 246,833 Nevada County COP, Refunding, MBIA Insured, 4.125%, 10/01/12 .............................. 1,040,000 1,069,921 Orange County CFD No. 86-2 Special Tax, Rancho Santa Margarita, Refunding, Series A, 5.375%, 8/15/12 ......................................................................... 1,500,000 1,511,655 Orange County CFD No. 2002-1 Special Tax, Ladera Ranch, Series A, 4.60%, 8/15/14 ......................................................................... 1,000,000 973,820 4.75%, 8/15/15 ......................................................................... 1,000,000 973,790 4.90%, 8/15/16 ......................................................................... 1,285,000 1,252,348 Orange County CFD No. 2003-1 Special Tax, Ladera Ranch, Series A, 4.90%, 8/15/17 ......................................................................... 1,000,000 956,700 5.10%, 8/15/18 ......................................................................... 1,000,000 960,290 Orange County CFD No. 2004-1 Special Tax, Ladera Ranch, Series A, 4.70%, 8/15/18 ......................................................................... 1,765,000 1,659,276 4.80%, 8/15/19 ......................................................................... 1,945,000 1,825,985 4.85%, 8/15/20 ......................................................................... 2,000,000 1,870,640 Orange County Recovery COP, Series A, MBIA Insured, ETM, 6.00%, 7/01/08 ................... 1,500,000 1,523,115 Oroville Hospital Revenue, Oroville Hospital, Series A, California Mortgage Insured, 5.125%, 12/01/12 ................................................................................ 1,435,000 1,437,382 Oxnard Harbor District Revenue, Series A, 5.10%, 8/01/14 .................................. 1,000,000 1,015,950 Pajaro Valley USD, GO, Election of 2002, Series A, FSA Insured, Pre-Refunded, 5.00%, 8/01/16 ................................................................................. 1,500,000 1,634,430 Palm Desert Financing Authority Tax Allocation Revenue, Project Area No. 1, As Amended, Series A, MBIA Insured, 5.00%, 4/01/23 ................. 7,690,000 8,059,735 Refunding, MBIA Insured, 4.75%, 8/01/18 ................................................ 1,050,000 1,101,293 Pomona RDA Tax Allocation, Mountain Meadows Redevelopment Project, Refunding, Series X, 5.35%, 12/01/16 ......................................................................... 1,000,000 1,079,290 Rancho Mirage Joint Powers Financing Authority Revenue, Eisenhower Medical Center, Series A, 5.00%, 7/01/16 ................................................................................ 1,420,000 1,517,171 7/01/21 ................................................................................ 1,695,000 1,750,613
Semiannual Report | 57 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Redlands USD, GO, Election of 2002, FSA Insured, 5.00%, 7/01/19 ........................... $ 1,000,000 $ 1,065,600 Richmond Joint Powers Financing Authority Revenue, Multiple Redevelopment Projects, Series B, ETM, 5.35%, 5/15/13 ........................................................... 2,000,000 2,081,420 Riverside County COP, Capital Improvement, Family Law, Refunding, Series A, FGIC Insured, 5.00%, 11/01/18 ............................................................................... 1,540,000 1,631,892 11/01/19 ............................................................................... 1,615,000 1,703,615 Riverside USD, GO, Election of 2001, Series A, FGIC Insured, 4.00%, 2/01/13 ............... 1,000,000 1,023,980 Sacramento City USD, GO, Election of 1999, Series D, FSA Insured, 5.00%, 7/01/19 .......... 1,465,000 1,564,869 Sacramento County Sanitation District Financing Authority Revenue, Sacramento Regional County Sanitation District, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/18 ...... 9,155,000 10,103,183 Sacramento MUD Financing Authority Revenue, Cosumnes Project, MBIA Insured, 5.00%, 7/01/21 ................................................................................. 3,305,000 3,523,791 San Bernardino County COP, Medical Center Financing Project, Refunding, 6.00%, 8/01/09 .... 1,335,000 1,383,180 San Carlos School District GO, Election of 2005, Series A, MBIA Insured, 5.00%, 10/01/22 .. 3,215,000 3,418,284 San Francisco BART District GO, Election of 2004, Series B, 5.00%, 8/01/23 ................ 9,505,000 10,294,010 San Francisco City and County GO, Refunding, Series 1, FGIC Insured, 5.00%, 6/15/12 ....... 3,650,000 3,718,109 San Joaquin County COP, General Hospital Project, Refunding, MBIA Insured, 5.00%, 9/01/17 ...................... 1,000,000 1,032,210 Solid Waste System Facilities Projects, MBIA Insured, 5.00%, 4/01/17 ................... 1,340,000 1,417,653 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, Series A, 5.60%, 1/15/16 ..................................................... 3,000,000 3,079,890 San Jose Airport Revenue, Refunding, Series B, AMBAC Insured, 5.00%, 3/01/24 ................................................................................ 3,490,000 3,654,274 3/01/25 ................................................................................ 3,665,000 3,829,082 3/01/26 ................................................................................ 3,850,000 4,010,583 San Jose MFHR, Countrybrook Project, Refunding, Series A, FNMA Insured, 4.95%, 4/01/12 ................................................................................. 4,190,000 4,239,442 San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3, Series A, MBIA Insured, ETM, 5.10%, 10/01/09 ................................................................... 515,000 533,993 Pre-Refunded, 5.30%, 10/01/11 .......................................................... 350,000 377,472 Sanger USD, GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/19 ................................................................................ 1,325,000 1,462,667 8/01/20 ................................................................................ 1,510,000 1,658,705 Santa Ana USD, GO, Election of 1999, Series B, FGIC Insured, zero cpn., 8/01/14 ........... 3,125,000 2,411,656 Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.25%, 9/02/11 ...... 1,410,000 1,435,422 Santa Monica-Malibu USD, COP, Series C, MBIA Insured, 4.00%, 5/01/12 ......................................................................... 525,000 534,807 4.25%, 5/01/14 ......................................................................... 840,000 860,370 4.25%, 5/01/15 ......................................................................... 875,000 893,463 4.25%, 11/01/15 ........................................................................ 670,000 683,085 South County Regional Wastewater Authority Revenue, Regional Wastewater Facilities Project, Refunding, FSA Insured, 3.25%, 8/01/11 .................................................. 1,000,000 1,005,020 South Gate PFA Tax Allocation Revenue, South Gate Redevelopment Project No. 1, XLCA Insured, 5.00%, 9/01/16 ............................................................ 1,845,000 1,963,855
58 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) South Gate PFA Water Revenue, Refunding, Series A, FGIC Insured, 5.45%, 10/01/08 .......... $ 1,040,000 $ 1,058,803 Southern California Public Power Authority Natural Gas Project Revenue, Project No. 1, Series A, 5.25%, 11/01/19 ............................................................... 1,500,000 1,560,270 Stockton Health Facilities Revenue, Dameron Hospital Assn., Refunding, Series A, 5.35%, 12/01/09 ................................................................................ 385,000 391,399 Stockton Revenue, O'Connor Woods Housing Corp., Series A, 5.375%, 11/01/11 ................ 840,000 849,324 Tobacco Securitization Authority Northern California Tobacco Settlement Revenue, Asset-Backed Bonds, Series B, ETM, 4.25%, 6/01/09 .................................................................... 880,000 895,893 ETM, 4.375%, 6/01/10 ................................................................... 1,665,000 1,716,981 ETM, 4.50%, 6/01/11 .................................................................... 1,540,000 1,609,192 Pre-Refunded, 4.60%, 6/01/12 ........................................................... 1,760,000 1,844,726 Pre-Refunded, 4.70%, 6/01/13 ........................................................... 1,500,000 1,577,025 Pre-Refunded, 4.80%, 6/01/14 ........................................................... 725,000 764,556 Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%, 6/01/12 ..... 1,000,000 1,048,970 University of California Revenues, Limited Project, Series B, FSA Insured, 5.00%, 5/15/21 ................................. 5,000,000 5,311,800 Multiple Purpose Projects, Series N, FGIC Insured, 4.00%, 9/01/12 ...................... 1,380,000 1,406,248 Vista USD, GO, Election of 2002, Series C, FSA Insured, 5.00%, 8/01/22 ................................................................................ 1,755,000 1,903,596 8/01/25 ................................................................................ 1,395,000 1,493,557 West Contra Costa USD, GO, Series B, FSA Insured, 4.00%, 8/01/12 .......................... 1,875,000 1,942,369 Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital, ETM, 5.00%, 6/01/11 .................................................................... 1,060,000 1,122,879 ETM, 5.00%, 6/01/12 .................................................................... 2,225,000 2,385,556 Pre-Refunded, 5.00%, 6/01/13 ........................................................... 2,335,000 2,523,761 Yucaipa Valley Water District Water System Revenue COP, Series A, MBIA Insured, 5.00%, 9/01/15 ......................................................................... 1,080,000 1,174,090 5.25%, 9/01/20 ......................................................................... 1,325,000 1,433,782 ---------------- 497,866,755 ---------------- U.S. TERRITORIES 1.9% PUERTO RICO 0.6% Puerto Rico Commonwealth GO, Public Improvement, FSA Insured, 5.25%, 7/01/16 .............. 2,500,000 2,778,250 ---------------- VIRGIN ISLANDS 1.3% Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 .................................. 4,150,000 4,223,497 Refunding, Series A, 5.30%, 10/01/11 ................................................... 1,000,000 1,017,800 Virgin Islands Water and Power Authority Water System Revenue, Refunding, 5.00%, 7/01/09 ................................................................................. 1,500,000 1,532,865 ---------------- 6,774,162 ---------------- TOTAL U.S. TERRITORIES .................................................................... 9,552,412 ---------------- TOTAL LONG TERM INVESTMENTS (COST $497,695,534) ........................................... 507,419,167 ----------------
Semiannual Report | 59 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ SHORT TERM INVESTMENTS 0.4% MUNICIPAL BONDS 0.4% CALIFORNIA 0.4% a California State Economic Recovery Revenue, Series C-2, Daily VRDN and Put, 3.52%, 7/01/23 ......................................... $ 950,000 $ 950,000 Series C-16, FSA Insured, Weekly VRDN and Put, 3.28%, 7/01/23 .......................... 400,000 400,000 a California State GO, Kindergarten-University, Refunding, Series A-3, Daily VRDN and Put, 3.55%, 5/01/34 ..... 200,000 200,000 Kindergarten-University, Refunding, Series B-2, Daily VRDN and Put, 3.50%, 5/01/34 ..... 200,000 200,000 Series A-3, Daily VRDN and Put, 3.52%, 5/01/33 ......................................... 200,000 200,000 a Metropolitan Water District of Southern California Waterworks Revenue, Series C-2, Daily VRDN and Put, 3.57%, 7/01/36 ........................................................... 100,000 100,000 a Orange County Sanitation District COP, Daily VRDN and Put, 3.50%, 2/01/36 ................. 100,000 100,000 ---------------- TOTAL SHORT TERM INVESTMENTS (COST $2,150,000) ............................................ 2,150,000 ---------------- TOTAL INVESTMENTS (COST $499,845,534) 98.9% ............................................... 509,569,167 OTHER ASSETS, LESS LIABILITIES 1.1% ....................................................... 5,922,647 ---------------- NET ASSETS 100.0% ......................................................................... $ 515,491,814 ================
See Selected Portfolio Abbreviations on page 71. a Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end. 60 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND
-------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED JUNE 30, CLASS A (UNAUDITED) 2007 2006 2005 2004 f -------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ................ $ 9.86 $ 9.80 $ 9.94 $ 9.91 $ 10.00 -------------------------------------------------------------- Income from investment operations a: Net investment income b .......................... 0.14 0.27 0.21 0.15 0.11 Net realized and unrealized gains (losses) ....... 0.06 0.06 (0.14) 0.03 (0.10) -------------------------------------------------------------- Total from investment operations .................... 0.20 0.33 0.07 0.18 0.01 -------------------------------------------------------------- Less distributions from net investment income ....... (0.14) (0.27) (0.21) (0.15) (0.10) -------------------------------------------------------------- Redemption fees ..................................... -- -- -- -- e -- -------------------------------------------------------------- Net asset value, end of period ...................... $ 9.92 $ 9.86 $ 9.80 $ 9.94 $ 9.91 ============================================================== Total return c ...................................... 2.05% 3.45% 0.74% 1.81% 0.06% RATIOS TO AVERAGE NET ASSETS d Expenses before waiver and payments by affiliates ... 1.41% 1.26% 1.10% 1.05% 1.20% Expenses net of waiver and payments by affiliates ... 0.50% 0.50% 0.50% 0.50% 0.50% Net investment income ............................... 2.84% 2.74% 2.10% 1.48% 1.30% SUPPLEMENTAL DATA Net assets, end of period (000's) ................... $13,596 $12,044 $11,149 $16,318 $16,244 Portfolio turnover rate ............................. 2.92% 17.44% 24.19% 5.43% 7.42%
a The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. b Based on average daily shares outstanding. c Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. d Ratios are annualized for periods less than one year. e Amount rounds to less than $0.01 per share. f For the period September 2, 2003 (commencement of operations) to June 30, 2004. Semiannual Report | The accompanying notes are an integral part of these financial statements. | 61 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 61.8% MUNICIPAL BONDS 61.8% CALIFORNIA 50.3% a Alameda-Contra Costa Transit District COP, FHR Computer System Project, 4.00%, 8/01/12 ... $ 600,000 $ 604,980 Brea and Olinda USD, GO, Election of 1999, Series A, FGIC Insured, 2.60%, 8/01/09 ........ 120,000 118,871 California Educational Facilities Authority Revenue, Santa Clara University, Refunding, Series A, FSA Insured, 2.625%, 9/01/09 ................................................ 100,000 99,355 California Health Facilities Financing Authority Revenue, Catholic Healthcare West, Series G, 5.00%, 7/01/09 .............................................................. 750,000 770,175 California State Economic Recovery GO, Series A, 5.00%, 1/01/09 ...................................................................... 415,000 423,009 5.25%, 7/01/13 ...................................................................... 200,000 218,602 California State GO, Refunding, FSA Insured, 5.25%, 2/01/10 .............................. 445,000 464,531 California Statewide CDA Revenue, Viewpoint School, Refunding, ACA Insured, 3.50%, 10/01/08 .............................................................................. 320,000 317,357 Foothill-De Anza Community College District GO, Election of 1999, Series B, 2.60%, 8/01/08 ............................................................................... 100,000 99,765 Glendora PFAR Tax Allocation, Project No. 1, Refunding, Series A, MBIA Insured, 2.125%, 9/01/08 ............................................................................... 105,000 104,197 Hercules RDA Tax Allocation Revenue, Series A, AMBAC Insured, 5.00%, 8/01/14 ............. 500,000 542,170 Lodi USD, COP, Capital Projects, Refunding, FSA Insured, 3.00%, 2/01/08 .................. 110,000 109,999 Long Beach Bond Finance Authority Natural Gas Purchase Revenue, Series A, 5.00%, 11/15/09 .............................................................................. 400,000 406,952 Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Project, Refunding, Series A, FSA Insured, 4.00%, 10/01/08 ..................................... 500,000 504,100 Lynwood USD, GO, Election of 2002, Series A, FSA Insured, 4.00%, 8/01/10 ................. 100,000 102,409 Manteca USD Special Tax, CFD No. 89-1, AMBAC Insured, 2.50%, 9/01/08 ..................... 250,000 248,982 North Orange County Community College District GO, Election of 2002, Series B, FGIC Insured, 2.125%, 8/01/08 .............................................................. 500,000 496,505 Poway RDA Tax Allocation, Paguay Redevelopment Project, Series A, MBIA Insured, 3.00%, 6/15/09 ............................................................................... 100,000 99,985 Rio Linda Unified Elementary School District, Election of 2002, Series A, FSA Insured, 4.00%, 8/01/10 ........................................................................ 100,000 102,409 Sacramento Power Authority Cogeneration Project Revenue, Refunding, AMBAC Insured, 4.00%, 7/01/08 ............................................................................... 1,000,000 1,005,040 ---------------- 6,839,393 ---------------- U.S. TERRITORIES 11.5% GUAM 1.9% Guam International Airport Authority Revenue, Series A, MBIA Insured, 2.375%, 10/01/08 ... 250,000 247,757 ---------------- PUERTO RICO 9.6% Puerto Rico Commonwealth GO, Public Improvement, Mandatory Put 7/01/08, Refunding, Series C, MBIA Insured, 5.00%, 7/01/28 ................................................ 370,000 372,372 Puerto Rico Commonwealth Government Development Bank Revenue, senior notes, Series B, 5.00%, 12/01/08 ....................................................................... 600,000 606,828
62 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) U.S. TERRITORIES (CONTINUED) PUERTO RICO (CONTINUED) Puerto Rico PBA Revenue Guaranteed, Mandatory Put 7/01/17, Refunding, AMBAC Insured, 5.50%, 7/01/35 ........................................................................ $ 300,000 $ 327,813 ---------------- 1,307,013 ---------------- TOTAL U.S. TERRITORIES ................................................................... 1,554,770 ---------------- TOTAL LONG TERM INVESTMENTS (COST $8,398,908) ............................................ 8,394,163 ---------------- SHORT TERM INVESTMENTS 40.6% MUNICIPAL BONDS 40.6% CALIFORNIA 37.7% b Anaheim COP, Refunding, Weekly VRDN and Put, 3.33%, 8/01/19 .............................. 300,000 300,000 b Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Series B-1, AMBAC Insured, Weekly VRDN and Put, 3.22%, 4/01/45 ...................... 100,000 100,000 Series C, AMBAC Insured, Weekly VRDN and Put, 3.22%, 4/01/45 ........................ 200,000 200,000 b California HFAR, MFH, Series D, Daily VRDN and Put, 3.52%, 2/01/31 ....................... 500,000 500,000 California Municipal Finance Authority COP, Community Hospitals of Central California, 5.00%, 2/01/08 ........................................................................ 250,000 250,078 b California State Department of Water Resources Power Supply Revenue, Series C-7, FSA Insured, Weekly VRDN and Put, 3.28%, 5/01/22 .......................................... 400,000 400,000 b California State Economic Recovery Revenue, Series C-16, FSA Insured, Weekly VRDN and Put, 3.28%, 7/01/23 ............................................................... 200,000 200,000 b Irvine 1915 Act Special Assessment, AD No. 93-14, Daily VRDN and Put, 3.50%, 9/02/25 .................................... 400,000 400,000 AD No. 97-16, Daily VRDN and Put, 3.27%, 9/02/22 .................................... 300,000 300,000 b Irvine Ranch Water District Revenue, Consolidated Bonds, Daily VRDN and Put, 3.47%, 8/01/16 ............................................................................... 600,000 600,000 b Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series D, AMBAC Insured, Weekly VRDN and Put, 3.28%, 8/15/21 .......................... 100,000 100,000 b Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Daily VRDN and Put, 3.27%, 7/01/35 .......................................................... 100,000 100,000 b Los Angeles Water and Power Revenue, Refunding, Sub Series B-1, Weekly VRDN and Put, 3.28%, 7/01/34 ........................................................................ 100,000 100,000 b Metropolitan Water District of Southern California Waterworks Revenue, Refunding, Series B-3, Daily VRDN and Put, 3.52%, 7/01/35 ........................................ 100,000 100,000 b Orange County Sanitation District COP, Refunding, Series B, Daily VRDN and Put, 3.28%, 8/01/30 ............................................................................... 600,000 600,000 b Riverside County Asset Leasing Corp. Leasehold Revenue, Southwest Justice Center, Series B, MBIA Insured, Weekly VRDN and Put, 3.34%, 11/01/32 .......................... 300,000 300,000 b Southern California Public Power Authority Power Project Revenue, Palo Verde Project, Refunding, Series C, AMBAC Insured, Weekly VRDN and Put, 3.34%, 7/01/17 ............... 450,000 450,000 b Westminster COP, Civic Center Refunding Project, Series B, AMBAC Insured, Weekly VRDN and Put, 3.35%, 6/01/24 ................................................................... 125,000 125,000 ---------------- 5,125,078 ----------------
Semiannual Report | 63 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------------------------------------- SHORT TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) U.S. TERRITORY 2.9% PUERTO RICO 2.9% b Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series A-3, FSA Insured, Daily VRDN and Put, 3.27%, 7/01/29 .................................................... $ 100,000 $ 100,000 b Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue, Series A, AMBAC Insured, Weekly VRDN and Put, 3.30%, 7/01/28 .......................... 300,000 300,000 ---------------- 400,000 ---------------- TOTAL SHORT TERM INVESTMENTS (COST $5,525,186) ........................................... 5,525,078 ---------------- TOTAL INVESTMENTS (COST $13,924,094) 102.4% .............................................. 13,919,241 OTHER ASSETS, LESS LIABILITIES (2.4)% .................................................... (323,463) ---------------- NET ASSETS 100.0% ........................................................................ $ 13,595,778 ================
See Selected Portfolio Abbreviations on page 71. a A portion or all of the securities purchased on a when-issued or delayed delivery basis. See Note 1(b). b Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end. 64 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
-------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED JUNE 30, CLASS A (UNAUDITED) 2007 2006 2005 2004 2003 -------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------------------------------------------------------------------------- Income from investment operations - net investment income ......................... 0.015 0.029 0.023 0.012 0.004 0.007 Less distributions from net investment income .... (0.015) (0.029) (0.023) (0.012) (0.004) (0.007) -------------------------------------------------------------------------- Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========================================================================== Total return a ................................... 1.50% 2.97% 2.33% 1.20% 0.38% 0.71% RATIOS TO AVERAGE NET ASSETS b Expenses ......................................... 0.55% 0.55% 0.55% 0.56% 0.56% 0.56% Net investment income ............................ 2.93% 2.94% 2.30% 1.22% 0.38% 0.71% SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $ 723,536 $658,903 $610,593 $688,121 $631,895 $671,392
a Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. b Ratios are annualized for periods less than one year. Semiannual Report | The accompanying notes are an integral part of these financial statements. | 65 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ SHORT TERM INVESTMENTS 99.6% MUNICIPAL BONDS 99.6% CALIFORNIA 98.6% a Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Series A, AMBAC Insured, Weekly VRDN and Put, 3.22%, 4/01/36 ........................... $ 12,500,000 $ 12,500,000 Series B, AMBAC Insured, Weekly VRDN and Put, 3.22%, 4/01/39 ........................... 15,400,000 15,400,000 Series B-2, XLCA Insured, Weekly VRDN and Put, 3.22%, 4/01/45 .......................... 2,000,000 2,000,000 a Butte County Housing Authority MFR, Pine Tree Apartment Project, Weekly VRDN and Put, 3.38%, 12/01/10 ......................................................................... 827,000 827,000 California Communities Note Program Note Participation Revenue, Series A-3, TRAN, 4.50%, 6/30/08 ................................................................................. 15,000,000 15,062,952 a California Health Facilities Financing Authority Revenue, Catholic Healthcare West, Refunding, MBIA Insured, Weekly VRDN and Put, 3.31%, 7/01/16 .............................................................................. 3,955,000 3,955,000 Pooled Loan Program, Series B, FGIC Insured, Weekly VRDN and Put, 3.45%, 10/01/10 ...... 1,700,000 1,700,000 Scripps Health, Refunding, Series A, MBIA Insured, Weekly VRDN and Put, 3.14%, 10/01/22 ............................................................................. 3,200,000 3,200,000 a California Infrastructure and Economic Development Bank Revenue, California Independent System Operator, Series A, AMBAC Insured, Weekly VRDN and Put, 3.30%, 2/01/10 ....................................................................... 20,775,000 20,775,000 Goodwill Industries Orange County, Weekly VRDN and Put, 3.25%, 3/01/31 ................. 2,000,000 2,000,000 Independent System Operating Corp. Project, Refunding, Series B, MBIA Insured, Weekly VRDN and Put, 3.25%, 4/01/08 ......................................................... 1,600,000 1,600,000 Independent System Operating Corp. Project, Refunding, Series C, MBIA Insured, Weekly VRDN and Put, 3.40%, 4/01/09 ......................................................... 4,500,000 4,500,000 J. Paul Getty Trust, Series B, Daily VRDN and Put, 3.50%, 4/01/33 ...................... 800,000 800,000 San Francisco Ballet Assn., FGIC Insured, Daily VRDN and Put, 3.53%, 7/01/36 ........... 7,650,000 7,650,000 a California PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C, Daily VRDN and Put, 3.45%, 11/01/26 .................................................................... 7,500,000 7,500,000 California School Cash Reserve Program Authority COP, 2007-2008 TRAN, Series A, 4.25%, 7/01/08 ................................................................................. 12,000,000 12,036,239 a California State Department of Water Resources Power Supply Revenue, Refunding, Sub Series F-1, Daily VRDN and Put, 3.27%, 5/01/19 .......................... 3,400,000 3,400,000 Refunding, Sub Series F-5, Daily VRDN and Put, 3.54%, 5/01/22 .......................... 1,500,000 1,500,000 Refunding, Sub Series G-8, MBIA Insured, Weekly VRDN and Put, 3.35%, 5/01/18 ........... 2,100,000 2,100,000 Series B-4, Daily VRDN and Put, 3.57%, 5/01/22 ......................................... 1,095,000 1,095,000 Series B-5, Daily VRDN and Put, 3.52%, 5/01/22 ......................................... 1,000,000 1,000,000 Series C-5, Weekly VRDN and Put, 3.35%, 5/01/22 ........................................ 5,500,000 5,500,000 Series C-8, Weekly VRDN and Put, 3.25%, 5/01/22 ........................................ 7,600,000 7,600,000 Series C-9, Weekly VRDN and Put, 3.30%, 5/01/22 ........................................ 300,000 300,000 Series C-10, Weekly VRDN and Put, 3.31%, 5/01/22 ....................................... 23,000,000 23,000,000 Series C-12, Weekly VRDN and Put, 3.28%, 5/01/22 ....................................... 6,700,000 6,700,000 Series C-15, Weekly VRDN and Put, 3.30%, 5/01/22 ....................................... 5,000,000 5,000,000 a California State Economic Development Financing Authority Revenue, KQED Inc. Project, Refunding, Weekly VRDN and Put, 3.35%, 4/01/20 .......................................... 810,000 810,000 a California State Economic Recovery Revenue, Series C-2, Weekly VRDN and Put, 3.52%, 7/01/23 ........................................ 2,300,000 2,300,000 Series C-11, Weekly VRDN and Put, 3.25%, 7/01/23 ....................................... 1,155,000 1,155,000
66 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ SHORT TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) a California State GO, Kindergarten-University, Public, Refunding, Series A-6, Weekly VRDN and Put, 3.30%, 5/01/34 .............................................................................. $ 1,500,000 $ 1,500,000 Kindergarten-University, Public, Refunding, Series B-4, Weekly VRDN and Put, 3.30%, 5/01/34 .............................................................................. 2,100,000 2,100,000 Kindergarten-University, Refunding, Series A-3, Daily VRDN and Put, 3.55%, 5/01/34 ..... 3,800,000 3,800,000 Kindergarten-University, Refunding, Series B-2, Daily VRDN and Put, 3.50%, 5/01/34 ..... 1,625,000 1,625,000 Kindergarten-University, Series A-5, Daily VRDN and Put, 3.52%, 5/01/34 ................ 8,700,000 8,700,000 Kindergarten-University, Series A-10, Weekly VRDN and Put, 3.25%, 5/01/34 .............. 2,800,000 2,800,000 Refunding, Series B, Sub Series B-7, Daily VRDN and Put, 3.45%, 5/01/40 ................ 500,000 500,000 Series A-3, Daily VRDN and Put, 3.52%, 5/01/33 ......................................... 6,700,000 6,700,000 Series B-1, Weekly VRDN and Put, 3.30%, 5/01/33 ........................................ 5,000,000 5,000,000 Series C-2, Weekly VRDN and Put, 3.28%, 5/01/33 ........................................ 6,700,000 6,700,000 California State RAN, 4.00%, 6/30/08 ...................................................... 18,000,000 18,055,063 California State University Institute Revenue, TECP, 3.36%, 1/09/08 ....................... 10,000,000 10,000,000 a California Statewide CDA Revenue, Museum of Art Project, Series C, FGIC Insured, Weekly VRDN and Put, 3.33%, 12/01/34 .... 8,650,000 8,650,000 North Peninsula Jewish, Daily VRDN and Put, 3.47%, 7/01/34 ............................. 3,000,000 3,000,000 a Carlsbad USD, COP, School Facility Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 3.28%, 9/01/14 ..................................................................... 400,000 400,000 a Chico MFMR, Webb Homes Project, Monthly VRDN and Put, 3.60%, 1/01/10 ...................... 770,000 770,000 a Chino Basin Regional Financing Authority Revenue, Inland Empire Utilities, Series A, AMBAC Insured, Weekly VRDN and Put, 3.33%, 6/01/32 ...................................... 2,500,000 2,500,000 a East Bay MUD Wastewater System Revenue, Refunding, Sub Series 2, XLCA Insured, Weekly VRDN and Put, 3.65%, 6/01/38 ............................................................ 9,765,000 9,765,000 a Eastern Municipal Water District Water and Sewer Revenue COP, Refunding, Series B, MBIA Insured, Weekly VRDN and Put, 3.28%, 7/01/33 ....................................... 2,265,000 2,265,000 a Elsinore Valley Municipal Water District COP, Series A, FGIC Insured, Weekly VRDN and Put, 3.28%, 7/01/29 .......................................................................... 15,000,000 15,000,000 a Fremont PFA, COP, Weekly VRDN and Put, 3.35%, 8/01/30 ..................................... 5,100,000 5,100,000 a Fresno Sewer Revenue, sub lien, Refunding, Series A, FGIC Insured, Weekly VRDN and Put, 3.28%, 9/01/25 .......................................................................... 1,900,000 1,900,000 a Grant Joint UHSD, COP, School Facilities Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 3.28%, 9/01/34 .............................................................................. 4,900,000 4,900,000 Various Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 3.28%, 7/01/37 ....... 10,000,000 10,000,000 a Hillsborough COP, Refunding, Series A, Weekly VRDN and Put, 3.37%, 6/01/30 ............................... 800,000 800,000 Water and Sewer System Project, Refunding, Series B, Weekly VRDN and Put, 3.37%, 6/01/30 .............................................................................. 4,000,000 4,000,000 Imperial Irrigation District Revenue, TECP, Series A, 3.40%, 2/07/08 ...................... 10,000,000 10,000,000 a Irvine 1915 Act, AD No. 94-15, Refunding, Daily VRDN and Put, 3.27%, 9/02/20 .............. 2,774,000 2,774,000 a Irvine 1915 Act Special Assessment, AD No. 00-18, Series A, Daily VRDN and Put, 3.27%, 9/02/26 ............................. 3,027,000 3,027,000 AD No. 03-19, Series A, Daily VRDN and Put, 3.27%, 9/02/29 ............................. 274,000 274,000
Semiannual Report | 67 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ SHORT TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) a Irvine 1915 Act Special Assessment, (continued) AD No. 03-19, Series B, Daily VRDN and Put, 3.47%, 9/02/29 ............................. $ 904,000 $ 904,000 AD No. 05-21, Series A, Daily VRDN and Put, 3.47%, 9/02/31 ............................. 5,900,000 5,900,000 AD No. 93-14, Daily VRDN and Put, 3.50%, 9/02/25 ....................................... 1,456,000 1,456,000 AD No. 94-13, Daily VRDN and Put, 3.27%, 9/02/22 ....................................... 9,200,000 9,200,000 AD No. 97-13, Daily VRDN and Put, 3.27%, 9/02/23 ....................................... 4,554,000 4,554,000 AD No. 97-16, Daily VRDN and Put, 3.27%, 9/02/22 ....................................... 9,500,000 9,500,000 a Irvine Ranch Water District GO, Consolidated ID, Daily VRDN and Put, 3.40%, 6/01/15 .................................... 2,275,000 2,275,000 District Nos. 105 140 240 and 250, Daily VRDN and Put, 3.50%, 1/01/21 .................. 4,500,000 4,500,000 a Irvine Ranch Water District Revenue, District Nos. 140 240 105 and 250, Daily VRDN and Put, 3.27%, 4/01/33 .......................................................................... 1,400,000 1,400,000 a Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series D, AMBAC Insured, Weekly VRDN and Put, 3.28%, 8/15/21 ...................................... 2,000,000 2,000,000 a Los Angeles COP, Kadima Hebrew Academy, Series A, Weekly VRDN and Put, 3.35%, 8/01/35 ................................................................................. 1,300,000 1,300,000 Los Angeles County GO, TRAN, 4.50%, 6/30/08 ............................................... 20,000,000 20,083,936 a Los Angeles Department of Water and Power Waterworks Revenue, Refunding, Sub Series B-4, Weekly VRDN and Put, 3.30%, 7/01/35 ......................... 6,650,000 6,650,000 Sub Series B-2, Daily VRDN and Put, 3.27%, 7/01/35 ..................................... 16,550,000 16,550,000 a Los Angeles MFR, Casden Project, Series K, Weekly VRDN and Put, 3.30%, 7/01/10 ............ 145,507 145,507 a Los Angeles USD, COP, Administration Building Project, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 3.45%, 10/01/24 .................................................... 3,350,000 3,350,000 a Los Angeles Wastewater System Revenue, Refunding, Sub Series A, FGIC Insured, Weekly VRDN and Put, 3.28%, 12/01/31 ....................... 4,880,000 4,880,000 Sub Series B, FGIC Insured, Weekly VRDN and Put, 3.31%, 12/01/31 ....................... 12,700,000 12,700,000 Sub Series B-1, XLCA Insured, Weekly VRDN and Put, 3.60%, 6/01/28 ...................... 4,550,000 4,550,000 a Los Angeles Water And Power Revenue, Refunding, Sub Series B-2, Weekly VRDN and Put, 3.30%, 7/01/34 .......................................................................... 1,300,000 1,300,000 a M-S-R Public Power Agency San Juan Project Revenue, sub. lien, Refunding, Series F, MBIA Insured, Daily VRDN and Put, 3.53%, 7/01/22 .................. 8,635,000 8,635,000 Series E, MBIA Insured, Weekly VRDN and Put, 3.30%, 7/01/22 ............................ 3,100,000 3,100,000 a Metropolitan Water District of Southern California Waterworks Revenue, Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 3.25%, 6/01/23 ................ 8,605,000 8,605,000 Refunding, Series B-3, Daily VRDN and Put, 3.52%, 7/01/35 .............................. 900,000 900,000 Refunding, Series B-4, Weekly VRDN and Put, 3.33%, 7/01/35 ............................. 7,000,000 7,000,000 Refunding, Series C-1, Weekly VRDN and Put, 3.25%, 7/01/30 ............................. 3,000,000 3,000,000 Series C, Weekly VRDN and Put, 3.28%, 7/01/28 .......................................... 13,200,000 13,200,000 a Northern California Public Power Agency Revenue, Hydroelectric Project No. 1, Refunding, Series A, MBIA Insured, Weekly VRDN and Put, 3.34%, 7/01/23 ............................. 8,700,000 8,700,000 a Oakland COP, Capital Equipment Project, Weekly VRDN and Put, 3.35%, 12/01/15 .............. 4,800,000 4,800,000 a Orange County Sanitation District COP, Daily VRDN and Put, 3.50%, 2/01/36 ..................................................... 11,800,000 11,800,000 Refunding, Series A, Daily VRDN and Put, 3.28%, 8/01/29 ................................ 900,000 900,000 Refunding, Series B, Daily VRDN and Put, 3.28%, 8/01/30 ................................ 300,000 300,000 a Pajaro Valley USD, COP, School Facility Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 3.28%, 9/01/31 ................................................................. 700,000 700,000
68 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ SHORT TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) a Richmond Wastewater Revenue, Refunding, Series B, AMBAC Insured, Weekly VRDN and Put, 3.35%, 8/01/37 .......................................................................... $ 12,300,000 $ 12,300,000 a Riverside County Asset Leasing Corp. Leasehold Revenue, Southwest Justice Center, Series B, MBIA Insured, Weekly VRDN and Put, 3.34%, 11/01/32 ...................................... 5,000,000 5,000,000 a Riverside County COP, Riverside County Public Facilities, ACES, Series B, Weekly VRDN and Put, 3.28%, 12/01/15 .................................................................... 1,400,000 1,400,000 Riverside County Teeter Obligation Revenue, TECP, 3.26%, 3/06/08 .......................... 11,900,000 11,900,000 a Sacramento County COP, Administration Center and Courthouse Project, Weekly VRDN and Put, 3.35%, 6/01/20 .......................................................................... 14,470,000 14,470,000 Sacramento County GO, TRAN, 4.50%, 7/09/08 ................................................ 10,000,000 10,042,546 a Sacramento County Sanitation District Financing Authority Revenue, Series C, Weekly VRDN and Put, 3.35%, 12/01/30 ................................................................ 28,600,000 28,600,000 a San Jose RDAR, Merged Area Redevelopment Project, Series A, Weekly VRDN and Put, 3.31%, 7/01/26 ................................................................................. 5,400,000 5,400,000 a Santa Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding, Series A, FNMA Insured, Weekly VRDN and Put, 3.33%, 12/15/25 ............................ 5,000,000 5,000,000 a Santa Clara Valley Transportation Authority Sales Tax Revenue, Refunding, Series C, AMBAC Insured, Weekly VRDN and Put, 3.25%, 6/01/26 ...................................... 2,195,000 2,195,000 a South Placer Wastewater Authority Wastewater Revenue, Series B, FGIC Insured, Weekly VRDN and Put, 3.25%, 11/01/35 ................................................................ 15,900,000 15,900,000 a Southern California Public Power Authority Power Project Revenue, Palo Verde Project, Refunding, Series C, AMBAC Insured, Weekly VRDN and Put, 3.34%, 7/01/17 ................. 700,000 700,000 a Southern California Public Power Authority Transmission Project Revenue, Southern Transmission, Refunding, AMBAC Insured, Weekly VRDN and Put, 3.34%, 7/01/19 .................................... 12,615,000 12,615,000 Series A, FSA Insured, Weekly VRDN and Put, 3.28%, 7/01/23 ............................ 4,000,000 4,000,000 Series B, FSA Insured, Weekly VRDN and Put, 3.30%, 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, 3.45%, 1/01/10 ........... 2,400,000 2,400,000 a Turlock Irrigation District COP, Capital Improvement and Refunding Project, Daily VRDN and Put, 3.53%, 1/01/31 ..................................................................... 1,900,000 1,900,000 Turlock Irrigation District Revenue, TECP, 3.00%, 1/17/08 ................................. 3,000,000 3,000,000 a Tustin 1915 Act Special Assessment, Reassessment District No. 95-2, Series A, Daily VRDN and Put, 3.27%, 9/02/13 ................................................................. 16,569,000 16,569,000 a Union City MFR, Housing Mission Sierra, Refunding, Series A, FNMA Insured, Weekly VRDN and Put, 3.33%, 7/15/29 ................................................................. 2,000,000 2,000,000 University of California Regents Revenue, TECP, 3.30%, 1/17/08 ............................ 6,900,000 6,900,000 a Vallejo Housing Authority MFR, FNMA Insured, Weekly VRDN and Put, 3.28%, 5/15/22 .......... 1,985,000 1,985,000 a Vernon Natural Gas Financing Authority Revenue, Vernon Gas Project, Series B, MBIA Insured, Weekly VRDN and Put, 3.34%, 8/01/21 ............................ 9,435,000 9,435,000 Series C, MBIA Insured, Weekly VRDN and Put, 3.34%, 8/01/21 ............................ 735,000 735,000 a WateReuse Finance Authority Revenue, FSA Insured, Weekly VRDN and Put, 3.35%, 5/01/28 ................................................................................. 17,075,000 17,075,000 a Western Placer Union School COP, Facilities Project B, Weekly VRDN and Put, 3.35%, 8/01/23 ................................................................................. 4,600,000 4,600,000 ---------------- 713,131,243 ----------------
Semiannual Report | 69 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------ FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------------------------------------------------------ SHORT TERM INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) U.S. TERRITORY 1.0% PUERTO RICO 1.0% Puerto Rico Commonwealth GO, Public Improvement, Mandatory Put 7/01/08, Refunding, Series C, MBIA Insured, 5.00%, 7/01/28................................................................. $ 5,000,000 $ 5,039,752 a Refunding, Series A-4, FSA Insured, Daily VRDN and Put, 3.27%, 7/01/31..................................................................... 2,400,000 2,400,000 ---------------- 7,439,752 ---------------- TOTAL SHORT TERM INVESTMENTS (COST $720,570,995) .......................................... 720,570,995 OTHER ASSETS, LESS LIABILITIES 0.4% ....................................................... 2,964,856 ---------------- NET ASSETS 100.0% ......................................................................... $ 723,535,851 ================
See Selected Portfolio Abbreviations on page 71. a Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end. 70 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (UNAUDITED) SELECTED PORTFOLIO ABBREVIATIONS 1915 ACT - Improvement Bond Act of 1915 ABAG - The Association of Bay Area Governments ACA - American Capital Access Holdings Inc. ACES - Adjustable Convertible Exempt Security AD - Assessment District AMBAC - American Municipal Bond Assurance Corp. BART - Bay Area Rapid Transit CDA - Community Development Authority/Agency CFD - Community Facilities District 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 Assurance Inc. GNMA - Government National Mortgage Association GO - General Obligation HFA - Housing Finance Authority/Agency HFAR - Housing Finance Authority Revenue ID - Improvement District MBIA - Municipal Bond Investors Assurance Corp. MFH - Multi-Family Housing MFHR - Multi-Family Housing Revenue MFMR - Multi-Family Mortgage Revenue MFR - Multi-Family Revenue MTA - Metropolitan Transit Authority MUD - Municipal Utility District PBA - Public Building Authority PCFA - Pollution Control Financing Authority PCR - Pollution Control Revenue PFA - Public Financing Authority PFAR - Public Financing Authority Revenue RAN - Revenue Anticipation Note RDA - Redevelopment Agency/Authority RDAR - Redevelopment Agency Revenue SFM - Single Family Mortgage SFMR - Single Family Mortgage Revenue TECP - Tax-Exempt Commercial Paper TRAN - Tax and Revenue Anticipation Note UHSD - Unified/Union High School District USD - Unified/Union School District XLCA - XL Capital Assurance The accompanying notes are an integral part of these financial statements. | 71 Semiannual Report | Franklin California Tax-Free Trust FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES December 31, 2007 (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 ............................................ $ 1,962,743,559 $ 499,845,534 $ 13,924,094 $ 720,570,995 ========================================================================== Value ........................................... $ 2,072,357,590 $ 509,569,167 $ 13,919,241 $ 720,570,995 Cash ............................................ 921,113 671,690 55,332 784,224 Receivables: Capital shares sold ............................. 6,212,169 1,017,450 135,036 1,725,470 Interest ........................................ 28,065,480 6,853,149 127,892 3,585,437 Affiliates ...................................... -- -- 15,633 -- -------------------------------------------------------------------------- Total assets .................................. 2,107,556,352 518,111,456 14,253,134 726,666,126 -------------------------------------------------------------------------- Liabilities: Payables: Investment securities purchased ................. -- -- 604,218 -- Capital shares redeemed ......................... 3,750,421 1,728,214 28,216 2,616,049 Affiliates ...................................... 1,334,209 323,230 -- 309,455 Distributions to shareholders ................... 2,470,401 535,135 9,821 100,774 Accrued expenses and other liabilities ............ 97,322 33,063 15,101 103,997 -------------------------------------------------------------------------- Total liabilities ............................. 7,652,353 2,619,642 657,356 3,130,275 -------------------------------------------------------------------------- Net assets, at value ........................ $ 2,099,903,999 $ 515,491,814 $ 13,595,778 $ 723,535,851 ========================================================================== Net assets consist of: Paid-in capital ................................... $ 1,989,655,025 $ 508,722,232 $ 13,800,526 $ 723,576,378 Undistributed net investment income (distributions in excess of net investment income) ............. (399,848) 38,971 4,694 -- Net unrealized appreciation (depreciation) ........ 109,614,031 9,723,633 (4,853) -- Accumulated net realized gain (loss) .............. 1,034,791 (2,993,022) (204,589) (40,527) -------------------------------------------------------------------------- Net assets, at value ........................ $ 2,099,903,999 $ 515,491,814 $ 13,595,778 $ 723,535,851 ==========================================================================
72 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) December 31, 2007 (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 .............................. $ 1,898,804,263 $ 486,952,072 $ 13,595,778 $ 723,535,851 =========================================================================== Shares outstanding ................................ 151,541,446 42,583,199 1,370,921 723,566,408 =========================================================================== Net asset value per share a ....................... $ 12.53 $ 11.44 $ 9.92 $ 1.00 =========================================================================== Maximum offering price per share (net asset value per share / 95.75%, 97.75%, 97.75% and 100%, respectively) ............................ $ 13.09 $ 11.70 $ 10.15 $ 1.00 =========================================================================== CLASS B: Net assets, at value .............................. $ 53,934,962 ================ Shares outstanding ................................ 4,283,171 ================ Net asset value and maximum offering price per share a .................................... $ 12.59 ================ CLASS C: Net assets, at value .............................. $ 147,164,774 $ 28,539,742 ====================================== Shares outstanding ................................ 11,628,014 2,490,336 ====================================== Net asset value and maximum offering price per share a .................................... $ 12.66 $ 11.46 ======================================
a Redemption price is equal to net asset value less contingent deferred sales charges, if applicable, and redemption fees retained by the Funds. Semiannual Report | The accompanying notes are an integral part of these financial statements. | 73 Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF OPERATIONS for the six months ended December 31, 2007 (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 --------------------------------------------------------------------------- Investment income: Interest ........................................... $ 50,073,751 $ 11,228,922 $ 205,786 $ 12,027,544 --------------------------------------------------------------------------- Expenses: Management fees (Note 3a) .......................... 4,737,942 1,260,553 30,789 1,682,727 Administrative fees (Note 3b) ...................... -- -- 12,316 -- Distribution fees: (Note 3c) Class A ......................................... 927,550 238,328 8,877 -- Class B ......................................... 183,172 -- -- -- Class C ......................................... 463,808 87,880 -- -- Transfer agent fees (Note 3e) ...................... 246,044 82,915 17,057 133,601 Custodian fees ..................................... 15,055 3,618 90 5,056 Reports to shareholders ............................ 47,352 12,533 239 17,428 Registration and filing fees ....................... 4,917 3,188 3,343 2,709 Professional fees .................................. 29,911 13,177 12,396 13,594 Trustees' fees and expenses ........................ 27,018 6,413 269 8,931 Other .............................................. 66,323 29,318 4,005 27,736 --------------------------------------------------------------------------- Total expenses ............................... 6,749,092 1,737,923 89,381 1,891,782 Expenses waived/paid by affiliates (Note 3f).. -- -- (58,591) -- --------------------------------------------------------------------------- Net expenses .............................. 6,749,092 1,737,923 30,790 1,891,782 --------------------------------------------------------------------------- Net investment income .................. 43,324,659 9,490,999 174,996 10,135,762 --------------------------------------------------------------------------- Realized and unrealized gains (losses): Net realized gain (loss) from investments .......... 4,408,518 415,103 -- (5,363) Net change in unrealized appreciation (depreciation) on investments ................... 3,974,826 3,927,357 69,972 -- --------------------------------------------------------------------------- Net realized and unrealized gain (loss) ............... 8,383,344 4,342,460 69,972 (5,363) --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ..................................... $ 51,708,003 $ 13,833,459 $ 244,968 $ 10,130,399 ===========================================================================
74 | The accompanying notes are an integral part of these financial statements. | Semiannual Report Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND --------------------------------------------------------------------------- SIX MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2007 YEAR ENDED (UNAUDITED) JUNE 30, 2007 (UNAUDITED) JUNE 30, 2007 --------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .......................... $ 43,324,659 $ 84,814,026 $ 9,490,999 $ 18,092,055 Net realized gain (loss) from investments ...... 4,408,518 479,220 415,103 (824,806) Net change in unrealized appreciation (depreciation) on investments ............... 3,974,826 6,157,833 3,927,357 2,493,355 --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ............. 51,708,003 91,451,079 13,833,459 19,760,604 --------------------------------------------------------------------------- Distributions to shareholders from: Net investment income: Class A ..................................... (39,783,565) (77,084,097) (8,928,232) (17,341,633) Class B ..................................... (1,059,579) (2,440,278) -- -- Class C ..................................... (2,637,859) (5,080,702) (438,914) (884,836) --------------------------------------------------------------------------- Total distributions to shareholders ............... (43,481,003) (84,605,077) (9,367,146) (18,226,469) --------------------------------------------------------------------------- Capital share transactions: (Note 2) Class A ..................................... 81,019,030 53,086,761 24,580,213 (6,879,252) Class B ..................................... (5,408,810) (10,190,789) -- -- Class C ..................................... 7,099,316 5,455,724 1,268,386 1,795,959 --------------------------------------------------------------------------- Total capital share transactions .................. 82,709,536 48,351,696 25,848,599 (5,083,293) --------------------------------------------------------------------------- Redemption fees ................................... 6,271 2,737 5,255 2,856 --------------------------------------------------------------------------- Net increase (decrease) in net assets .... 90,942,807 55,200,435 30,320,167 (3,546,302) Net assets: Beginning of period ............................... 2,008,961,192 1,953,760,757 485,171,647 488,717,949 --------------------------------------------------------------------------- End of period ..................................... $ 2,099,903,999 $ 2,008,961,192 $ 515,491,814 $ 485,171,647 =========================================================================== Undistributed net investment income (distributions in excess of net investment income) included in net assets: End of period .................................. $ (399,848) $ (243,504) $ 38,971 $ (84,882) ===========================================================================
Semiannual Report | The accompanying notes are an integral part of these financial statements. | 75 Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA LIMITED-TERM TAX-EXEMPT TAX-FREE INCOME FUND MONEY FUND --------------------------------------------------------------------------- SIX MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2007 YEAR ENDED (UNAUDITED) JUNE 30, 2007 (UNAUDITED) JUNE 30, 2007 --------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income .......................... $ 174,996 $ 301,122 $ 10,135,762 $ 19,267,011 Net realized gain (loss) from investments ...... -- (8,600) (5,363) -- Net change in unrealized appreciation (depreciation) on investments ............... 69,972 80,065 -- -- --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ............. 244,968 372,587 10,130,399 19,267,011 --------------------------------------------------------------------------- Distributions to shareholders from net investment income ......................................... (174,998) (305,975) (10,135,762) (19,267,011) Capital share transactions (Note 2) ............... 1,481,487 828,517 64,637,867 48,310,312 --------------------------------------------------------------------------- Net increase (decrease) in net assets .... 1,551,457 895,129 64,632,504 48,310,312 Net assets: Beginning of period ............................... 12,044,321 11,149,192 658,903,347 610,593,035 --------------------------------------------------------------------------- End of period ..................................... $ 13,595,778 $ 12,044,321 $ 723,535,851 $ 658,903,347 =========================================================================== Undistributed net investment income included in net assets: End of period .................................. $ 4,694 $ 4,696 $ -- $ -- ===========================================================================
76 | The accompanying notes are an integral part of these 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 (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as a diversified, open-end investment company, consisting of four funds (Funds). The classes of shares offered within each of the Funds are indicated below. Each class of shares differs by its initial sales load, contingent deferred sales charges, distribution fees, voting rights on matters affecting a single class and its exchange privilege.
--------------------------------------------------------------------------------------------------------------- CLASS A CLASS A & CLASS C CLASS A, CLASS B & CLASS C --------------------------------------------------------------------------------------------------------------- Franklin California Limited-Term Franklin California Intermediate-Term Franklin California Insured Tax-Free Tax-Free Income Fund Tax-Free Income Fund Income Fund Franklin California Tax-Exempt Money Fund The following summarizes the Funds' significant accounting policies.
A. SECURITY VALUATION Municipal securities generally trade in the over-the-counter market rather than on a securities exchange. The Trust may utilize independent pricing services, quotations from bond dealers, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Trust's pricing services use valuation models or matrix pricing, which considers information with respect to comparable bond and note transactions, quotations from bond dealers or by reference to other securities that are considered comparable in such characteristics as rating, interest rate and maturity date, to determine current value. Securities in the Franklin California Tax-Exempt Money Fund are valued at amortized cost which approximates market value. This method involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. The Trust has procedures to determine the fair value of individual securities and other assets for which market prices are not readily available or which may not be reliably priced. Methods for valuing these securities may include: fundamental analysis, matrix pricing, discounts from market prices of similar securities, or discounts applied due to the nature and duration of restrictions on the disposition of the securities. Due to the inherent uncertainty of valuations of such securities, the fair values may differ significantly from the values that would have been used had a ready market for such investments existed. Occasionally, events occur between the time at which trading in a security is completed and the close of the NYSE that might call into question the availability (including the reliability) of the value of a portfolio security held by the fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services. All security valuation procedures are approved by the Trust's Board of Trustees. Semiannual Report | 77 Franklin California Tax-free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 U.S. income taxes because it is each fund's policy to qualify as a regulated investment company under the Internal Revenue Code and to distribute to shareholders substantially all of its income and net realized gains. 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. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividends from net investment income are normally declared daily and distributed monthly to shareholders. Distributions to shareholders are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods. 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 of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense. 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. Differences in per share distributions, by class, are generally due to differences in class specific expenses. 78 | Semiannual Report Franklin California Tax-free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. INSURANCE The scheduled payments of interest and principal for each insured municipal security in the Trust are insured by either a new issue insurance policy or a secondary insurance policy. Some municipal securities in the Funds 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 or paid by a third party. F. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates. G. REDEMPTION FEES A short term trading redemption fee will be imposed, with some exceptions, on any fund shares that are redeemed or exchanged within seven calendar days following their purchase date. The redemption fee is 2% of the amount redeemed. Such fees are retained by the funds and accounted for as an addition to paid-in capital. H. GUARANTEES AND INDEMNIFICATIONS Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, 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. Currently, the Trust expects the risk of loss to be remote. Semiannual Report | 79 Franklin California Tax-free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST At December 31, 2007, there were an unlimited number of shares authorized (without par value). Transactions in the Franklin California Tax-Exempt Money Fund's shares were at $1.00 per share. Transactions in the Funds' shares were as follows:
---------------------------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND ---------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------- CLASS A SHARES: Six Months ended December 31, 2007 Shares sold ............................ 14,439,384 $ 180,456,786 5,141,337 $ 58,588,601 Shares issued in reinvestment of distributions .................... 1,825,884 22,805,113 490,138 5,582,892 Shares redeemed ........................ (9,781,531) (122,242,869) (3,473,773) (39,591,280) ---------------------------------------------------------------- Net increase (decrease) ................ 6,483,737 $ 81,019,030 2,157,702 $ 24,580,213 ================================================================ Year ended June 30, 2007 Shares sold ............................ 17,455,918 $ 220,629,858 7,640,775 $ 87,751,826 Shares issued in reinvestment of distributions .................... 3,462,745 43,770,823 934,758 10,732,062 Shares redeemed ........................ (16,721,698) (211,313,920) (9,185,930) (105,363,140) ---------------------------------------------------------------- Net increase (decrease) ................ 4,196,965 $ 53,086,761 (610,397) $ (6,879,252) ================================================================ CLASS B SHARES: Six Months ended December 31, 2007 Shares sold ............................ 7,236 $ 90,584 Shares issued in reinvestment of distributions .................... 54,506 684,087 Shares redeemed ........................ (492,829) (6,183,481) --------------------------------- Net increase (decrease) ................ (431,087) $ (5,408,810) ================================= Year ended June 30, 2007 Shares sold ............................ 7,839 $ 99,798 Shares issued in reinvestment of distributions .................... 125,167 1,589,956 Shares redeemed ........................ (935,605) (11,880,543) --------------------------------- Net increase (decrease) ................ (802,599) $ (10,190,789) ================================= CLASS C SHARES: Six Months ended December 31, 2007 Shares sold ............................ 1,275,869 $ 16,105,195 330,135 $ 3,769,012 Shares issued in reinvestment of distributions .................... 125,245 1,579,807 20,579 234,863 Shares redeemed ........................ (838,926) (10,585,686) (240,066) (2,735,489) ---------------------------------------------------------------- Net increase (decrease) ................ 562,188 $ 7,099,316 110,648 $ 1,268,386 ================================================================ Year ended June 30, 2007 Shares sold ............................ 2,114,348 $ 27,009,041 687,478 $ 7,915,490 Shares issued in reinvestment of distributions .................... 232,714 2,969,972 43,530 500,866 Shares redeemed ........................ (1,922,826) (24,523,289) (575,151) (6,620,397) ---------------------------------------------------------------- Net increase (decrease) ................ 424,236 $ 5,455,724 155,857 $ 1,795,959 ================================================================
80 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
----------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA LIMITED-TERM TAX-EXEMPT TAX-FREE INCOME FUND MONEY FUND ----------------------------------------------- SHARES AMOUNT AMOUNT ----------------------------------------------- CLASS A SHARES: Six Months ended December 31, 2007 Shares sold ...................................... 331,237 $ 3,278,552 $ 319,200,707 Shares issued in reinvestment of distributions ... 11,631 115,050 10,221,480 Shares redeemed .................................. (193,406) (1,912,115) (264,784,320) ----------------------------------------------- Net increase (decrease) .......................... 149,462 $ 1,481,487 $ 64,637,867 =============================================== Year ended June 30, 2007 Shares sold ...................................... 446,382 $ 4,398,181 $ 541,175,032 Shares issued in reinvestment of distributions ... 20,692 203,904 19,212,287 Shares redeemed .................................. (383,029) (3,773,568) (512,077,007) ----------------------------------------------- Net increase (decrease) .......................... 84,045 $ 828,517 $ 48,310,312 ===============================================
3. TRANSACTIONS WITH AFFILIATES Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors of the following subsidiaries: -------------------------------------------------------------------------------- SUBSIDIARY AFFILIATION -------------------------------------------------------------------------------- Franklin Advisers, Inc. (Advisers) Investment manager Franklin Templeton Services, LLC (FT Services) Administrative manager Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter Franklin Templeton Investor Services, LLC (Investor Transfer agent Services) A. MANAGEMENT FEES The Franklin California Insured Tax-Free Income Fund and the Franklin California Intermediate-Term Tax-Free Income Fund pay an investment management fee to Advisers based on the month-end net assets of each of the funds and the Franklin California Tax-Exempt Money Fund pays an investment management fee to Advisers based on the average daily net assets as follows: -------------------------------------------------------------------------------- ANNUALIZED FEE RATE NET ASSETS -------------------------------------------------------------------------------- 0.625% Up to and including $100 million 0.500% Over $100 million, up to and including $250 million 0.450% Over $250 million, up to and including $10 billion 0.440% Over $10 billion, up to and including $12.5 billion 0.420% Over $12.5 billion, up to and including $15 billion 0.400% Over $15 billion, up to and including $17.5 billion 0.380% Over $17.5 billion, up to and including $20 billion 0.360% In excess of $20 billion Semiannual Report | 81 FRANKLIN CALIFORNIA TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) A. MANAGEMENT FEES (CONTINUED) Effective January 1, 2008, the Franklin California Insured Tax-Free Income Fund, the Franklin California Intermediate-Term Tax-Free Income Fund and the Franklin California Tax-Exempt Money Fund will pay fees based on the average daily net assets of the funds as follows: -------------------------------------------------------------------------------- ANNUALIZED FEE RATE NET ASSETS -------------------------------------------------------------------------------- 0.625% Up to and including $100 million 0.500% Over $100 million, up to and including $250 million 0.450% Over $250 million, up to and including $7.5 billion 0.440% Over $7.5 billion, up to and including $10 billion 0.430% Over $10 billion, up to and including $12.5 billion 0.420% Over $12.5 billion, up to and including $15 billion 0.400% Over $15 billion, up to and including $17.5 billion 0.380% Over $17.5 billion, up to and including $20 billion 0.360% In excess of $20 billion The Franklin California Limited-Term Tax-Free Income Fund pays an investment management fee to Advisers based on the average daily net assets of the fund as follows: -------------------------------------------------------------------------------- ANNUALIZED FEE RATE NET ASSETS -------------------------------------------------------------------------------- 0.500% Up to and including $100 million 0.450% Over $100 million, up to and including $250 million 0.425% Over $250 million, up to and including $500 million 0.400% In excess of $500 million B. ADMINISTRATIVE FEES The Franklin California Limited-Term Tax-Free Income Fund pays an administrative fee to FT Services of 0.20% per year of the average daily net assets of the fund. Under an agreement with Advisers, FT Services provides administrative services to the Funds, except the Franklin California Limited-Term Tax-Free Income Fund. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the funds. C. DISTRIBUTION FEES The Funds' Board of Trustees has adopted distribution plans for each share class pursuant to Rule 12b-1 under the 1940 Act. Under the funds' Class A reimbursement distribution plans, the funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each fund's shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. 82 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) C. DISTRIBUTION FEES (CONTINUED) In addition, under the funds' compensation distribution plans, the funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each fund's shares up to the maximum annual plan rate for each class. The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
------------------------------------------------------------------ FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM LIMITED-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------ Reimbursement Plans: Class A ....................... 0.10% 0.10% -- Compensation Plans: Class A ....................... -- -- 0.15% Class B ....................... 0.65% -- -- Class C ....................... 0.65% 0.65% --
D. SALES CHARGES/UNDERWRITING AGREEMENTS Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds' shares for the period:
------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------- Sales charges retained net of commissions paid to unaffiliated broker/dealers ....................... $218,139 $10,303 Contingent deferred sales charges retained............ $ 47,117 $ 2,218
------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA LIMITED-TERM TAX-EXEMPT TAX-FREE INCOME FUND MONEY FUND ------------------------------------------- Sales charges retained net of commissions paid to unaffiliated broker/dealers ....................... $ 547 $ -- Contingent deferred sales charges retained ........... $ -- $60,160
E. TRANSFER AGENT FEES For the period ended December 31, 2007, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
------------------------------------------------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM LIMITED-TERM FRANKLIN CALIFORNIA TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND INCOME FUND MONEY FUND ------------------------------------------------------------------------------------- Transfer agent fees ........... $160,022 $50,468 $1,512 $88,204
Semiannual Report | 83 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) F. WAIVER AND EXPENSE REIMBURSEMENTS FT Services and Advisers have agreed in advance to waive all or a portion of their respective fees and assume payment of other expenses through October 31, 2008 for the Franklin California Limited-Term Tax-Free Income Fund. Total expenses waived or paid are not subject to reimbursement by the fund subsequent to the fund's fiscal year end. After October 31, 2008, FT Services and Advisers may discontinue this waiver at any time upon notice to the Fund's Board of Trustees. 4. INCOME TAXES For tax purposes, capital losses may be carried over to offset future capital gains, if any. At June 30, 2007, the capital loss carryforwards were as follows:
-------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND -------------------------------------------- Capital loss carryforwards expiring in: 2008 .......................................... $ -- $ 69,184 2009 .......................................... 2,249,572 321,166 2010 .......................................... -- 112,465 2011 .......................................... -- 145,149 2012 .......................................... -- 865,726 2013 .......................................... -- 421,949 2015 .......................................... -- 1,083,972 -------------------------------------------- $ 2,249,572 $ 3,019,611 ============================================
-------------------------------------------- FRANKLIN CALIFORNIA LIMITED-TERM FRANKLIN CALIFORNIA TAX-FREE TAX-EXEMPT INCOME FUND MONEY FUND -------------------------------------------- Capital loss carryforwards expiring in: 2008 .......................................... $ -- $ 9,293 2009 .......................................... -- 21,840 2012 .......................................... -- 2,466 2013 .......................................... -- 1,565 2015 .......................................... 204,589 -- -------------------------------------------- $ 204,589 $ 35,164 ============================================
For tax purposes, realized capital losses occurring subsequent to October 31, may be deferred and treated as occurring on the first day of the following fiscal year. At June 30, 2007, the Franklin California Insured Tax-Free Income Fund and the Franklin California Intermediate-Term Tax-Free Income Fund deferred realized capital losses of $1,071,213 and $388,514, respectively. 84 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 4. INCOME TAXES (CONTINUED) At December 31, 2007, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
--------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND --------------------------------------------- Cost of investments ........................... $1,961,864,290 $ 499,808,022 ============================================= Unrealized appreciation ....................... $ 113,714,815 $ 12,452,279 Unrealized depreciation ....................... (3,221,515) (2,691,134) --------------------------------------------- Net unrealized appreciation (depreciation) .... $ 110,493,300 $ 9,761,145 =============================================
--------------------------------------------- FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA LIMITED-TERM TAX-EXEMPT TAX-FREE INCOME FUND MONEY FUND --------------------------------------------- Cost of investments ........................... $ 13,924,094 $ 720,570,995 ============================================= Unrealized appreciation ....................... $ 17,629 $ -- Unrealized depreciation ....................... (22,482) -- --------------------------------------------- Net unrealized appreciation (depreciation) .... $ (4,853) $ -- =============================================
Net investment income differs for financial statement and tax purposes primarily due to differing treatments of bond discounts and premiums. Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales and bond discounts and premiums. 5. INVESTMENT TRANSACTIONS Purchases and sales of investments (excluding short term securities) for the period ended December 31, 2007, were as follows:
------------------------------------------------------------------ FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM LIMITED-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND ------------------------------------------------------------------ Purchases ..................... $ 138,430,432 $ 79,861,791 $ 2,303,710 Sales ......................... $ 165,462,646 $ 47,240,294 $ 205,000
6. CONCENTRATION OF RISK Each of the Funds invests a large percentage of its total assets in obligations of issuers within California. Such concentration may subject the Funds to risks associated with industrial or regional matters, and economic, political or legal developments occurring within California and U.S. Territories. Semiannual Report | 85 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 7. REGULATORY AND LITIGATION MATTERS As part of various investigations by a number of federal, state, and foreign regulators and governmental entities, including the Securities and Exchange Commission ("SEC"), relating to certain practices in the mutual fund industry, including late trading, market timing and marketing support payments to securities dealers who sell fund shares ("marketing support"), Franklin Resources, Inc. and certain of its subsidiaries (collectively, the "Company"), entered into settlements with certain of those regulators and governmental entities. Specifically, the Company entered into settlements with the SEC, among others, concerning market timing and marketing support. On June 6, 2007, the SEC posted for public comment the proposed plan of distribution for the market timing settlement. Once the SEC approves the final plan of distribution, disbursements of settlement monies will be made promptly to individuals who were shareholders of the designated funds during the relevant period, in accordance with the terms and conditions of the settlement and plan. In addition, the Company, as well as most of the mutual funds within Franklin Templeton Investments and certain current or former officers, Company directors, fund directors, and employees, have been named in private lawsuits (styled as shareholder class actions, or as derivative actions on behalf of either the named funds or Franklin Resources, Inc.). The lawsuits relate to the industry practices referenced above. The Company and fund management believe that the claims made in each of the private lawsuits referenced above are without merit and intend to defend against them vigorously. The Company cannot predict with certainty the eventual outcome of these lawsuits, nor whether they will have a material negative impact on the Company. If it is determined that the Company bears responsibility for any unlawful or inappropriate conduct that caused losses to the Trust, it is committed to making the Trust or its shareholders whole, as appropriate. 8. NEW ACCOUNTING PRONOUNCEMENTS The Funds adopted Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (FIN 48), on December 31, 2007. FIN 48 clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return. FIN 48 provides guidance on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. The Funds have reviewed the tax positions for each of the three open tax years as of June 30, 2007 and have determined that the implementation of FIN 48 did not have a material impact on the Funds' financial statements. 86 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 8. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED) In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement" (SFAS 157), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Trust believes the adoption of SFAS 157 will have no material impact on its financial statements. Semiannual Report | 87 Franklin California Tax-Free Trust SHAREHOLDER INFORMATION PROXY VOTING POLICIES AND PROCEDURES The Trust has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust's complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at 1-954/527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Trust's proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission's website at sec.gov and reflect the most recent 12-month period ended June 30. QUARTERLY STATEMENT OF INVESTMENTS The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's website at sec.gov. The filed form may also be viewed and copied at the Commission's Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800/SEC-0330. 88 | Semiannual Report Literature Request LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT 1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE, WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING TONE. FRANKLIN TEMPLETON FUNDS INTERNATIONAL Mutual European Fund Templeton BRIC Fund Templeton China World Fund Templeton Developing Markets Trust Templeton Emerging Markets Small Cap Fund Templeton Foreign Fund Templeton Foreign Smaller Companies Fund 1 GLOBAL Mutual Discovery Fund Templeton Global Long-Short Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund 1 Templeton Growth Fund Templeton World Fund GROWTH Franklin Capital Growth Fund Franklin Flex Cap Growth Fund Franklin Growth Opportunities Fund 2 Franklin Small Cap Growth Fund II 3 Franklin Small-Mid Cap Growth Fund VALUE Franklin All Cap Value Fund Franklin Balance Sheet Investment Fund 1 Franklin Equity Income Fund Franklin Large Cap Value Fund Franklin MicroCap Value Fund 1 Franklin MidCap Value Fund Franklin Small Cap Value Fund Mutual Beacon Fund Mutual Qualified Fund Mutual Recovery Fund 4 Mutual Shares Fund BLEND Franklin Balanced Fund Franklin Convertible Securities Fund Franklin Focused Core Equity Fund Franklin Growth Fund Franklin Rising Dividends Fund SECTOR Franklin Biotechnology Discovery Fund Franklin DynaTech Fund Franklin Global Communications Fund Franklin Global Health Care Fund Franklin Global Real Estate Fund Franklin Gold and Precious Metals Fund Franklin Natural Resources Fund Franklin Real Estate Securities Fund Franklin Technology Fund Franklin Utilities Fund Mutual Financial Services Fund ASSET ALLOCATION Franklin Templeton Corefolio(R) Allocation Fund Franklin Templeton Founding Funds Allocation Fund Franklin Templeton Perspectives Allocation Fund Franklin Templeton Conservative Target Fund Franklin Templeton Growth Target Fund Franklin Templeton Moderate Target Fund Franklin Templeton 2015 Retirement Target Fund Franklin Templeton 2025 Retirement Target Fund Franklin Templeton 2035 Retirement Target Fund Franklin Templeton 2045 Retirement Target Fund INCOME Franklin Adjustable U.S. Government Securities Fund 5 Franklin Floating Rate Daily Access Fund Franklin High Income Fund Franklin Income Fund Franklin Limited Maturity U.S. Government Securities Fund 5 Franklin Low Duration Total Return Fund Franklin Real Return Fund Franklin Strategic Income Fund Franklin Strategic Mortgage Portfolio Franklin Templeton Hard Currency Fund Franklin Total Return Fund Franklin U.S. Government Securities Fund 5 Templeton Global Bond Fund Templeton Income Fund Templeton International Bond Fund TAX-FREE INCOME 6 NATIONAL FUNDS Double Tax-Free Income Fund Federal Tax-Free Income Fund High Yield Tax-Free Income Fund Insured Tax-Free Income Fund 7 LIMITED-TERM FUNDS California Limited-Term Tax-Free Income Fund Federal Limited-Term Tax-Free Income Fund New York Limited-Term Tax-Free Income Fund INTERMEDIATE-TERM FUNDS California Intermediate-Term Tax-Free Income Fund Federal Intermediate-Term Tax-Free Income Fund New York Intermediate-Term Tax-Free Income Fund STATE-SPECIFIC Alabama Arizona California 8 Colorado Connecticut Florida Georgia Kentucky Louisiana Maryland Massachusetts 7 Michigan 7 Minnesota 7 Missouri New Jersey New York 8 North Carolina Ohio 7 Oregon Pennsylvania Tennessee Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust 9 1. The fund is closed to new investors. Existing shareholders and select retirement plans can continue adding to their accounts. 2. Effective 11/1/07, Franklin Aggressive Growth Fund changed its name to Franklin Growth Opportunities Fund. The fund's investment goal and strategy remained the same. 3. The fund is closed to new investors. Existing shareholders can continue adding to their accounts. 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. An investment in the fund is neither insured nor guaranteed by the U.S. government or by any other entity or institution. 6. For investors subject to the alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable. 7. The fund invests primarily in insured municipal securities. 8. These funds are available in two or more variations, including long-term portfolios, portfolios of insured securities, a high-yield portfolio (CA) and limited-term, intermediate-term and money market portfolios (CA and NY). 9. The funds of the Franklin Templeton Variable Insurance Products Trust are generally available only through insurance company variable contracts. 12/07 Not part of the semiannual report [LOGO](R) FRANKLIN TEMPLETON One Franklin Parkway INVESTMENTS San Mateo, CA 94403-1906 o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL? Eligible shareholders can sign up for eDelivery at franklintempleton.com. See inside for details. SEMIANNUAL REPORT AND SHAREHOLDER LETTER FRANKLIN 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 Authorized for distribution only when accompanied or preceded by a prospectus. Investors should carefully consider a fund's investment goals, risks, charges and expenses before investing. The prospectus contains this and other information; please read it carefully before investing. To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be identified by the presence of a regular beeping tone. CAT S2007 02/08 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 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant has an audit committee financial expert serving on its audit committee. (2) The audit committee financial expert is John B. Wilson, and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A ITEM 6. SCHEDULE OF INVESTMENTS. N/A ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY Holders. There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein. ITEM 11. CONTROLS AND PROCEDURES. (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant's management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant's management, including the Registrant's principal executive officer and the Registrant's principal financial officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures. Based on such evaluation, the Registrant's principal executive officer and principal financial officer concluded that the Registrant's disclosure controls and procedures are effective. (B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR. ITEM 12. EXHIBITS. (a)(1) Code of Ethics (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura F. Fergerson, Chief Financial Officer and Chief Accounting Officer (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura F. Fergerson, Chief Financial Officer and Chief Accounting 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/GALEN G. VETTER ------------------ Galen G. Vetter Chief Executive Officer - Finance and Administration Date February 27, 2008 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/GALEN G. VETTER ------------------ Galen G. Vetter Chief Executive Officer - Finance and Administration Date February 27, 2008 By /S/LAURA F. FERGERSON --------------------- Laura F. Fergerson Chief Financial Officer and Chief Accounting Officer Date February 27, 2008